<div class="phx-topic abstract-wrapper">Total Terminals International informed the ILWU on Monday it intends to automate its Long Beach terminal, as the union urges port and city officials to consider the loss of jobs that results from automation.</div>

Total Terminals International informed the ILWU on Monday it intends to automate its Long Beach terminal, as the union urges port and city officials to consider the loss of jobs that results from automation.

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<div>Total Terminals International’s (TTI's) decision this week to automate its 385-acre Pier T terminal in Long Beach sets up a classic struggle between terminal operator employers and the International Longshore and Warehouse Union (ILWU). The union opposes the project on the grounds it will eliminate some dockworker jobs, but employers say automation is needed to increase capacity and keep the ports of Long Beach and Los Angeles competitive. “As the Long Beach Harbor Commission, the mayor of Long Beach, and the executive director of the Port of Long Beach consider TTI’s request, we ask that it carefully weigh the impacts...

Total Terminals International’s (TTI's) decision this week to automate its 385-acre Pier T terminal in Long Beach sets up a classic struggle between terminal operator employers and the International Longshore and Warehouse Union (ILWU). The union opposes the project on the grounds it will eliminate some dockworker jobs, but employers say automation is needed to increase capacity and keep the ports of Long Beach and Los Angeles competitive. “As the Long Beach Harbor Commission, the mayor of Long Beach, and the executive director of the Port of Long Beach consider TTI’s request, we ask that it carefully weigh the impacts that continued automation would have on American jobs and our local communities,” Danny Miranda, president of ILWU Local 94, said in a statement Wednesday. Jim McKenna, president of the Pacific Maritime Association (PMA), which represents West Coast terminal operators in negotiating and administering the coastwide labor contract, told JOC.com the additional capacity brought by automating TTI Long Beach is crucial to stemming cargo diversions to other ports. “In Southern California you’re almost at capacity.” McKenna said. “When you can’t handle cargo, the cargo leaves.” Marine terminal automation, which involves replacing manually operated yard stacking cranes, yard tractors, and other cargo-handling equipment with driverless machines, is the most contentious issue facing longshore unions on the West and East coasts of North America. It will almost certainly be an issue again next spring when the ILWU and PMA launch negotiations to replace the current contract that expires on July 1, 2022. The road to automation TTI would become the fourth automated terminal in Southern California. Long Beach Container Terminal (LBCT) and TraPac in Los Angeles are fully automated, meaning all cargo-handling functions in the container yards — but not ship-to-shore cranes — are conducted with driverless equipment. APM Terminal’s Pier 400 project involves automation of 100 acres at the 440-acre facility through the use of automated straddle carriers that shuttle containers within that portion of the facility. ILWU Local 10 in 2019 tried unsuccessfully to convince the city of Los Angeles to block a construction project for the APM Terminals automation project. TTI was not immediately available for comment, but its project will be a fully automated facility on the scale of LBCT, according to people familiar with the project who asked to remain anonymous. As required by the coastwide contract when an individual employer decides to automate, TTI met Monday with leaders of the three ILWU locals in Southern California to lay out the details of its automation plan. The locals will now provide their input, observations, and suggestions on the plans, but according to the terms of the coastwide contract that was signed in 2008, the ILWU cannot block the project, McKenna told JOC.com Wednesday. However, the coastwide contract calls for an exchange in which both parties have certain obligations they must meet to make a path forward for automation, said Frank Ponce De Leon, ILWU coast committeeman. “Absent adherence to that quid pro quo, there is no outright, one-way grant of automation to the employers,” he told JOC.com. McKenna said the PMA was represented at Monday’s meeting, even though all decisions on automating TTI will be made at the local level. McKenna said the ILWU representatives listened closely to the plans and “a lot of good questions were asked.” Past experience in Southern California demonstrates that automated cargo-handling equipment can eliminate 40 to 70 percent of existing jobs . However, automation also creates new jobs associated with the installation and maintenance of electrified equipment, programming, and related functions that are not present in a manual environment. If the project moves forward, the ILWU is expected to claim jurisdiction over the newly created jobs. McKenna also emphasized that cargo volumes will continue to grow at the largest US port complex, and experience has shown that will result in increased jobs. “If you handle twice as much cargo, that’s a lot of cargo and a lot of jobs,” he said. Higher volume and more coming The Los Angeles-Long Beach port complex handled more than 17.3 million laden and empty TEU in 2020, according to figures provided by the ports. The busiest US container gateway has handled an average of 854,802 TEU of imports from Asia in each of the past 10 months, up from an average of 636,424 TEU in the previous 10 months, according to PIERS, a JOC.com sister product within IHS Markit. Retailers and freight forwarders project similar volumes at least through the summer–fall peak shipping season this year. Larry Nye, vice president of port planning at the infrastructure advisory firm Moffatt & Nichols told JOC.com Wednesday that based on conservative growth projections of about 4 percent per year, Los Angeles-Long Beach will reach its full capacity of about 23 million to 25 million TEU per year by 2027–28, unless terminals densify their operations. In this context, densification is synonymous with automation, which enables the terminals to stack containers higher and wider without compromising efficiency, he said. For example, the fully automated LBCT facility later this year will complete the third and final phase of its expansion, giving it an annual throughput capacity of 3.4 million TEU, according to LBCT, which is one of six container terminals in Long Beach. The entire port handled 8.1 million laden and empty TEU last year, according to Port of Long Beach statistics. Not all terminals will choose to densify. Rather, those that do will balance the high costs associated with automation — $1.4 billion in the case of LBCT — and the efficiencies and reduced labor costs inherent in automation, Nye said. However, whereas LBCT had the luxury of beginning its project a decade ago on a large parcel of vacant land, TTI will be challenged by installing automation while it continues to handle large cargo volumes each day. TTI will have to automate in phases, which means taking 40 to 50 acres out of use during each phase, a process that could take 10 years, Nye said. Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo .

Marine terminals

Latest Long Beach terminal automation draws ILWU backlash

<div class="phx-topic abstract-wrapper">Extended voyages around southern Africa are currently tying up both refrigerated equipment and vessel capacity, making reefer shippers particularly vulnerable to disruptions. </div>

Extended voyages around southern Africa are currently tying up both refrigerated equipment and vessel capacity, making reefer shippers particularly vulnerable to disruptions.

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<div class="phx-topic">The big picture: Amid increased demand for equipment and projected market growth, the refrigerated (reefer) container market is positioned to see increased competitiveness in 2025. With the looming threat of operational interruptions from ongoing port labor negotiations, time-sensitive reefers could bear the brunt of work stoppage impacts. Meanwhile, extended transit times around Africa are putting further pressure on equipment availability.<div class="wrapper-narrow"><img src="/images/phoenix/5910624_0.1.png"></img></div>A look back: The reefer market experienced some upward support in 2024 as global trends put pressure on the cold chain. Analysts noted an increase in demand for reefer cargo during the year, particularly for agriculture exports from South America. US reefer imports from South America grew 11.8% year over year in the first nine months of 2024, including a 17.6% jump in August, according to PIERS, a sister product of the Journal of Commerce within S&amp;P Global. In addition to increases in demand for fresh cargo, the cold chain market has been supported by the growing pharmaceutical and chemicals sectors. Meanwhile, the diversion of vessels away from the Red Sea and resulting longer transits have tied up sought-after reefer equipment. The threat of labor stoppages at US East and Gulf coast ports also led some to shifts in shipping patterns, as concerns about time-sensitive cargo being abandoned at ports during a strike prompted shippers to consider alternative solutions before the initial Oct. 1 negotiation deadline. The brief strike by the International Longshoremen’s Association (ILA) had marginal ripple effects on equipment availability as cargo was delayed during the interruption. Other port stoppages were brought on by severe weather in Asia, including several typhoons that have impacted vessel flows. A look ahead: Reefer shippers using US East and Gulf coast will be keeping a close eye on the next ILA strike deadline on Jan. 15, as perishable cargoes are particularly vulnerable to spoilage during delays of any kind. Also of concern will be the impacts of sweeping tariffs threatened by US President-elect Donald Trump. Those tariffs, if enacted, could result in shifting sourcing patterns for dry goods, but this may not be an option for certain reefer shippers, who would be forced to either eat the additional costs or raise prices to pass those costs on to their customers. Weather patterns are always a factor in reefer trade, and as climate patterns become increasingly unpredictable, shifted harvest timelines could further strain equipment availability in 2025. Still, analysts expect the market to remain largely stable in the coming year, with equipment availability easing as South American beef exports wane. The next inflection: As in dry container trade, one of the biggest unknowns going forward for reefer shippers is when the Red Sea will become safe enough for carriers to resume transiting the Suez Canal. Extended voyages around southern Africa are currently tying up both reefer equipment and vessel capacity, and a resumption of the Suez Canal routings would immediately release that supply back into the market, putting downward pressure on rates. email: <a href="laura.robb@spglobal.com ">laura.robb@spglobal.com</a></div>

The big picture: Amid increased demand for equipment and projected market growth, the refrigerated (reefer) container market is positioned to see increased competitiveness in 2025. With the looming threat of operational interruptions from ongoing port labor negotiations, time-sensitive reefers could bear the brunt of work stoppage impacts. Meanwhile, extended transit times around Africa are putting further pressure on equipment availability. A look back: The reefer market experienced some upward support in 2024 as global trends put pressure on the cold chain. Analysts noted an increase in demand for reefer cargo during the year, particularly for agriculture exports from South America. US reefer imports from South America grew 11.8% year over year in the first nine months of 2024, including a 17.6% jump in August, according to PIERS, a sister product of the Journal of Commerce within S&P Global. In addition to increases in demand for fresh cargo, the cold chain market has been supported by the growing pharmaceutical and chemicals sectors. Meanwhile, the diversion of vessels away from the Red Sea and resulting longer transits have tied up sought-after reefer equipment. The threat of labor stoppages at US East and Gulf coast ports also led some to shifts in shipping patterns, as concerns about time-sensitive cargo being abandoned at ports during a strike prompted shippers to consider alternative solutions before the initial Oct. 1 negotiation deadline. The brief strike by the International Longshoremen’s Association (ILA) had marginal ripple effects on equipment availability as cargo was delayed during the interruption. Other port stoppages were brought on by severe weather in Asia, including several typhoons that have impacted vessel flows. A look ahead: Reefer shippers using US East and Gulf coast will be keeping a close eye on the next ILA strike deadline on Jan. 15, as perishable cargoes are particularly vulnerable to spoilage during delays of any kind. Also of concern will be the impacts of sweeping tariffs threatened by US President-elect Donald Trump. Those tariffs, if enacted, could result in shifting sourcing patterns for dry goods, but this may not be an option for certain reefer shippers, who would be forced to either eat the additional costs or raise prices to pass those costs on to their customers. Weather patterns are always a factor in reefer trade, and as climate patterns become increasingly unpredictable, shifted harvest timelines could further strain equipment availability in 2025. Still, analysts expect the market to remain largely stable in the coming year, with equipment availability easing as South American beef exports wane. The next inflection: As in dry container trade, one of the biggest unknowns going forward for reefer shippers is when the Red Sea will become safe enough for carriers to resume transiting the Suez Canal. Extended voyages around southern Africa are currently tying up both reefer equipment and vessel capacity, and a resumption of the Suez Canal routings would immediately release that supply back into the market, putting downward pressure on rates. email: laura.robb@spglobal.com

Container lines

Container Shipping News

Reefer market growth in 2025 filled with risk

<div class="phx-topic abstract-wrapper">Despite a glut of capacity on the water, Suez Canal diversions and healthy volumes will keep container shipping vessel supply tight, analysts predict. </div>

Despite a glut of capacity on the water, Suez Canal diversions and healthy volumes will keep container shipping vessel supply tight, analysts predict.

<div class="phx-topic"><div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5910621_0.1.png"></img></div>The big picture: Container carriers remain in robust financial health after a highly profitable year, and that profitability looks set to continue through 2025, with a series of geopolitical factors soaking up supply and driving demand. Despite a glut of capacity on the water, Suez Canal diversions and healthy volumes — especially on the trans-Pacific — will keep vessel supply tight, and analysts predict this will lift annual fixed-rate agreements above 2024 levels on the major east-west trades out of Asia. A look back: At the end of 2023, the container shipping industry was staring at a bloated order book, as well as excess inventory, rising inflation and a cost-of-living crisis in major destination economies, all of which pointed to a drop in demand for imports from Asia in 2024. But longer transits around southern Africa to avoid attacks on commercial ships in the Red Sea quickly absorbed excess tonnage, and shippers began advancing orders and building up safety inventory, which led to early peak seasons on both the trans-Pacific and Asia-Europe trades. Bottlenecks at hub ports in Asia and Europe consumed additional capacity, and as space tightened further, carriers began to cut weekly space allocations, pushing shippers to the spot market, where short-term rates hit levels not seen since the COVID-19 pandemic. Carrier profitability soared and maritime consultancy Drewry has estimated container shipping will report a pre-tax profit of $50 billion this year, up from $28 billion in 2023. While it is a fraction of the $298 billion recorded in 2022, the carriers will enter an uncertain 2025 in solid financial health. The steep rise in profit was not accompanied by a corresponding improvement in service levels, however. Port congestion was a key issue through much of the year even as the Red Sea diversions became baked into Asia-Europe and Asia-US East Coast routes, with schedule reliability averaging just over 50% in the first 10 months of the year, according to data from Sea-Intelligence Maritime Analysis. A look ahead: The threat of higher US import tariffs and a potential second strike by dockworkers on the East and Gulf coasts are expected to drive additional frontloading of US-bound cargo, while an early Jan. 29 start to Lunar New Year festivities in Asia and ongoing Red Sea diversions will likely prompt EU importers to advance orders. In other words, all signs point to continued strong demand and capacity constraints on the major east-west trades that will keep rates elevated, virtually guaranteeing carriers a strong first quarter and potentially setting up an early peak season similar to 2024. Container shipping analyst Clarksons estimates nominal fleet capacity growth will slow from over 10% in 2024 to 5% in 2025 against an estimated 18% increase in TEU-mile demand in 2024 and 3% growth in 2025. Still, carriers have had a lot of practice flexing capacity to match demand in the past few years, so cargo owners can expect tight space on ships out of Asia and an elevated spot market to push up contract rates. Banking and financial services firm HSBC said it expects trans-Pacific and Asia-Europe contract rates to rise significantly in 2025, a dynamic that is likely to once again test shipper-carrier relationships. For shippers, however, building flexibility into those annual contracts to withstand the volatile markets will be crucial. The next inflection: On top of ongoing uncertainty, cargo owners will navigate an extensive shakeup in carrier operations from early 2025. In February, Maersk and Hapag-Lloyd will exit the 2M and THE alliances, respectively, to officially launch the Gemini Cooperation, former 2M member Mediterranean Shipping Co. will commence its own standalone network, and the remaining members of THE will rebrand as the Premier Alliance, leaving only the Ocean Alliance unchanged. The Gemini partners have promised 90% on-time vessel performance in their new hub-and-spoke network, a standard that, if delivered, would be a significant improvement from the abysmal service levels seen in recent years and introduce a welcome competitive element to carrier negotiations. Contact Greg Knowler at <a href="greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

The big picture: Container carriers remain in robust financial health after a highly profitable year, and that profitability looks set to continue through 2025, with a series of geopolitical factors soaking up supply and driving demand. Despite a glut of capacity on the water, Suez Canal diversions and healthy volumes — especially on the trans-Pacific — will keep vessel supply tight, and analysts predict this will lift annual fixed-rate agreements above 2024 levels on the major east-west trades out of Asia. A look back: At the end of 2023, the container shipping industry was staring at a bloated order book, as well as excess inventory, rising inflation and a cost-of-living crisis in major destination economies, all of which pointed to a drop in demand for imports from Asia in 2024. But longer transits around southern Africa to avoid attacks on commercial ships in the Red Sea quickly absorbed excess tonnage, and shippers began advancing orders and building up safety inventory, which led to early peak seasons on both the trans-Pacific and Asia-Europe trades. Bottlenecks at hub ports in Asia and Europe consumed additional capacity, and as space tightened further, carriers began to cut weekly space allocations, pushing shippers to the spot market, where short-term rates hit levels not seen since the COVID-19 pandemic. Carrier profitability soared and maritime consultancy Drewry has estimated container shipping will report a pre-tax profit of $50 billion this year, up from $28 billion in 2023. While it is a fraction of the $298 billion recorded in 2022, the carriers will enter an uncertain 2025 in solid financial health. The steep rise in profit was not accompanied by a corresponding improvement in service levels, however. Port congestion was a key issue through much of the year even as the Red Sea diversions became baked into Asia-Europe and Asia-US East Coast routes, with schedule reliability averaging just over 50% in the first 10 months of the year, according to data from Sea-Intelligence Maritime Analysis. A look ahead: The threat of higher US import tariffs and a potential second strike by dockworkers on the East and Gulf coasts are expected to drive additional frontloading of US-bound cargo, while an early Jan. 29 start to Lunar New Year festivities in Asia and ongoing Red Sea diversions will likely prompt EU importers to advance orders. In other words, all signs point to continued strong demand and capacity constraints on the major east-west trades that will keep rates elevated, virtually guaranteeing carriers a strong first quarter and potentially setting up an early peak season similar to 2024. Container shipping analyst Clarksons estimates nominal fleet capacity growth will slow from over 10% in 2024 to 5% in 2025 against an estimated 18% increase in TEU-mile demand in 2024 and 3% growth in 2025. Still, carriers have had a lot of practice flexing capacity to match demand in the past few years, so cargo owners can expect tight space on ships out of Asia and an elevated spot market to push up contract rates. Banking and financial services firm HSBC said it expects trans-Pacific and Asia-Europe contract rates to rise significantly in 2025, a dynamic that is likely to once again test shipper-carrier relationships. For shippers, however, building flexibility into those annual contracts to withstand the volatile markets will be crucial. The next inflection: On top of ongoing uncertainty, cargo owners will navigate an extensive shakeup in carrier operations from early 2025. In February, Maersk and Hapag-Lloyd will exit the 2M and THE alliances, respectively, to officially launch the Gemini Cooperation, former 2M member Mediterranean Shipping Co. will commence its own standalone network, and the remaining members of THE will rebrand as the Premier Alliance, leaving only the Ocean Alliance unchanged. The Gemini partners have promised 90% on-time vessel performance in their new hub-and-spoke network, a standard that, if delivered, would be a significant improvement from the abysmal service levels seen in recent years and introduce a welcome competitive element to carrier negotiations. Contact Greg Knowler at greg.knowler@spglobal.com .

Trans-Atlantic

Forwarding

Asia-Europe

Trans-Pacific

Continued volatility to keep container line profits on course in 2025

<div class="phx-topic abstract-wrapper">With volumes likely to increase again in 2025, new port infrastructure across the region should help maintain fluidity throughout the coming year.</div>

With volumes likely to increase again in 2025, new port infrastructure across the region should help maintain fluidity throughout the coming year.

<div class="phx-topic">The big picture: US Gulf Coast ports have seen higher-than-expected container volumes as consumer spending remained resilient during 2024 and shippers brought in cargo ahead of the deadline for a longshore labor strike. With volumes likely to increase again in 2025, new port infrastructure across the region should help maintain fluidity throughout the coming year. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5910620_0.1.png"></img></div>A look back: The Port of Houston continues to be the region’s preferred gateway, with containerized imports rising 9.3% in the first 11 months of 2024, according to PIERS, a sister product of the Journal of Commerce within S&amp;P Global. That year-to-date growth has significantly outstripped the 1% total volume growth forecast in Port of Houston’s 2024 operating budget, as well as the 7.9% growth rate for the Gulf Coast region as a whole. Despite a hurricane and a CrowdStrike outage, both of which shut the port down for several days, and a three-day coastwide dockworker strike, Houston’s two marine terminals remained fluid, evidenced by low container dwell and truck turn times throughout the year. The ports of Mobile and New Orleans saw container imports grow 4.2% and 4.8%, respectively, through November. Amid the import growth, ocean carriers have added more container services to the US Gulf Coast. Zim Integrated Shipping Services also added its first north-south container service to the Gulf Coast, with calls at Houston and Mobile. A look ahead: Houston has already started testing its first appointment system for drayage drivers, and the port hopes to increase voluntary participation to over 70% before mandating its use sometime in 2025. Houston’s container handling capacity is set for a boost with the expected mid-2025 completion of the first half of Project 11, a widening of the port’s shipping channel that will allow an additional 1,400 vessels of all types to call the port each year. The completion of a major phase of Project 11 coincides with the installation of three new cranes at Houston’s Bayport terminal, with another eight on order for a new berth. Mobile will be able to handle increased volumes in 2025 with the addition of two new cranes at its container terminal last year. The port is also furthering its intermodal access, with plans announced in 2024 for the development of the North Alabama inland port, served by CSX Transportation and catering to the state’s manufacturing sector. Mobile also plans to open another inland port in Montgomery, Alabama, early this year. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="1a3cc60a-ab27-40f6-b828-ca14a4f96ca6"></dynamic-object></div>The next inflection: Mobile will also increase vessel capacity in mid-2025 with the end of its harbor modernization project, which will deepen the port to 50 feet and allow easier passage for large vessels. Mobile also announced the fourth expansion of its container terminal, which will eventually bring its capacity to over 1 million TEUs per year. New Orleans will also start work this year on its new terminal, the 2 million-TEU Louisiana International Terminal, after receiving $300 million in federal grants, with a goal of receiving its first ships in 2028. Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com">michael.angell@spglobal.com</a>. </div>

The big picture: US Gulf Coast ports have seen higher-than-expected container volumes as consumer spending remained resilient during 2024 and shippers brought in cargo ahead of the deadline for a longshore labor strike. With volumes likely to increase again in 2025, new port infrastructure across the region should help maintain fluidity throughout the coming year. A look back: The Port of Houston continues to be the region’s preferred gateway, with containerized imports rising 9.3% in the first 11 months of 2024, according to PIERS, a sister product of the Journal of Commerce within S&P Global. That year-to-date growth has significantly outstripped the 1% total volume growth forecast in Port of Houston’s 2024 operating budget, as well as the 7.9% growth rate for the Gulf Coast region as a whole. Despite a hurricane and a CrowdStrike outage, both of which shut the port down for several days, and a three-day coastwide dockworker strike, Houston’s two marine terminals remained fluid, evidenced by low container dwell and truck turn times throughout the year. The ports of Mobile and New Orleans saw container imports grow 4.2% and 4.8%, respectively, through November. Amid the import growth, ocean carriers have added more container services to the US Gulf Coast. Zim Integrated Shipping Services also added its first north-south container service to the Gulf Coast, with calls at Houston and Mobile. A look ahead: Houston has already started testing its first appointment system for drayage drivers, and the port hopes to increase voluntary participation to over 70% before mandating its use sometime in 2025. Houston’s container handling capacity is set for a boost with the expected mid-2025 completion of the first half of Project 11, a widening of the port’s shipping channel that will allow an additional 1,400 vessels of all types to call the port each year. The completion of a major phase of Project 11 coincides with the installation of three new cranes at Houston’s Bayport terminal, with another eight on order for a new berth. Mobile will be able to handle increased volumes in 2025 with the addition of two new cranes at its container terminal last year. The port is also furthering its intermodal access, with plans announced in 2024 for the development of the North Alabama inland port, served by CSX Transportation and catering to the state’s manufacturing sector. Mobile also plans to open another inland port in Montgomery, Alabama, early this year. The next inflection: Mobile will also increase vessel capacity in mid-2025 with the end of its harbor modernization project, which will deepen the port to 50 feet and allow easier passage for large vessels. Mobile also announced the fourth expansion of its container terminal, which will eventually bring its capacity to over 1 million TEUs per year. New Orleans will also start work this year on its new terminal, the 2 million-TEU Louisiana International Terminal, after receiving $300 million in federal grants, with a goal of receiving its first ships in 2028. Contact Michael Angell at michael.angell@spglobal.com .

Port News

North American ports

Maritime

US Gulf Coast ports expanding to handle continued volume growth

<div class="phx-topic abstract-wrapper">The action, announced last week, is likely to result in US e-commerce brands shifting their fulfillment back to the US or switching to fulfillment providers in Asia, sources have told the Journal of Commerce.</div>

The action, announced last week, is likely to result in US e-commerce brands shifting their fulfillment back to the US or switching to fulfillment providers in Asia, sources have told the Journal of Commerce.

<div class="phx-topic">Mexico has ended a program that enabled US apparel and textile importers to avoid paying duties while using Mexican warehouses as fulfillment hubs for low-cost finished products sourced outside Mexico that are sent directly to US consumers. The action, announced last week, is likely to result in US e-commerce brands shifting their fulfillment back to the US or switching to fulfillment providers in Asia, sources have told the Journal of Commerce. Neither option comes without cost, or risk. “How impactful would this be to US-based e-commerce as whole?” said Matthew Hertz, founder and CEO of Third Person, a platform that helps e-commerce brands find and connect with fulfillment partners. “There will be companies that suffer.” Using US-based third-party logistics providers (3PLs) that fulfill from US locations translates to higher labor costs, which would be somewhat offset by shorter delivery times to customers, Hertz said. Switching to fulfill directly from Asia, while cost-effective for US brands sourcing in Asia, would subject importers to the risk of further regulatory upheaval if a US program that allows single shipments of $800 or less per day to be imported to the US duty-free is changed in 2025. The Mexican decree, unveiled Dec. 19 by President Claudia Sheinbaum, essentially stops the use, for whole categories of apparel and textiles, of Mexico’s so-called IMMEX program, which allows companies to defer duties on the import of raw materials and components used in the production of goods destined for export. Mexico-focused fulfillment 3PLs will also be affected, as their business has effectively been wiped away by the changes. Sheinbaum’s action also increased tariffs to 35% — up from 20% to 25% — on 121 apparel products and textiles. Another category of textiles will see tariff levels increase to 15% from the current 10%. “These increases aim to level the playing field for Mexican industries facing competition from lower-priced imports, particularly from countries without free trade agreements with Mexico, and they will remain in effect until April 23, 2026,” trade law firm Sandler, Travis, &amp; Rosenberg said in a note to clients Tuesday. The e-commerce import volumes affected by the decree will now be up for grabs among more diversified fulfillment-focused 3PLs that aren’t overly exposed to Mexico, as well as global 3PLs that have fulfillment services for e-commerce in the US. ”We’ve been talking about this forever,” Hertz said of the ability of US e-commerce apparel and textiles brands to import to the US via Mexico to avoid duties. “It’s a loophole. Loopholes are good until they’re not available anymore.” He said he’s already hearing of 3PLs offering relief on transition costs for e-commerce brands that will need to move inventory out of Mexico. His conservative estimate of the value of 3PL services now in play to move back to the US is $10 billion. “That’s a lot of absorb and it’s going to happen quickly,” Hertz said. <h3>Duty-free uncertainty </h3>Sheinbaum’s decree comes amid a changing landscape for so-called US Section 321 shipments, also known as “de minimis.” The Biden administration in September announced it would be ending duty-free treatment on all shipments that would ordinarily be subject to 25% Section 301 tariffs on Chinese imports, tariffs originally implemented during the first Trump administration. While that rule would wipe away the $800 duty-free threshold on most shipments from China, there has yet to be a timeline for implementation of that rule. “As of right now the timeline and exact implementation remain uncertain, but most close to the situation have understood that brands probably had [until] April to make the transition,” Flexport CEO Ryan Petersen wrote in a comment on X Monday. “Most brands were already planning an exit from Mexican fulfillment centers and reshoring that work as soon as the details become more clear.” Contact Eric Johnson at <a href="mailto:eric.johnson@spglobal.com">eric.johnson@spglobal.com</a>. Journal of Commerce Research Analyst Cathy Morrow Roberson contributed to this report. </div>

Mexico has ended a program that enabled US apparel and textile importers to avoid paying duties while using Mexican warehouses as fulfillment hubs for low-cost finished products sourced outside Mexico that are sent directly to US consumers. The action, announced last week, is likely to result in US e-commerce brands shifting their fulfillment back to the US or switching to fulfillment providers in Asia, sources have told the Journal of Commerce. Neither option comes without cost, or risk. “How impactful would this be to US-based e-commerce as whole?” said Matthew Hertz, founder and CEO of Third Person, a platform that helps e-commerce brands find and connect with fulfillment partners. “There will be companies that suffer.” Using US-based third-party logistics providers (3PLs) that fulfill from US locations translates to higher labor costs, which would be somewhat offset by shorter delivery times to customers, Hertz said. Switching to fulfill directly from Asia, while cost-effective for US brands sourcing in Asia, would subject importers to the risk of further regulatory upheaval if a US program that allows single shipments of $800 or less per day to be imported to the US duty-free is changed in 2025. The Mexican decree, unveiled Dec. 19 by President Claudia Sheinbaum, essentially stops the use, for whole categories of apparel and textiles, of Mexico’s so-called IMMEX program, which allows companies to defer duties on the import of raw materials and components used in the production of goods destined for export. Mexico-focused fulfillment 3PLs will also be affected, as their business has effectively been wiped away by the changes. Sheinbaum’s action also increased tariffs to 35% — up from 20% to 25% — on 121 apparel products and textiles. Another category of textiles will see tariff levels increase to 15% from the current 10%. “These increases aim to level the playing field for Mexican industries facing competition from lower-priced imports, particularly from countries without free trade agreements with Mexico, and they will remain in effect until April 23, 2026,” trade law firm Sandler, Travis, & Rosenberg said in a note to clients Tuesday. The e-commerce import volumes affected by the decree will now be up for grabs among more diversified fulfillment-focused 3PLs that aren’t overly exposed to Mexico, as well as global 3PLs that have fulfillment services for e-commerce in the US. ”We’ve been talking about this forever,” Hertz said of the ability of US e-commerce apparel and textiles brands to import to the US via Mexico to avoid duties. “It’s a loophole. Loopholes are good until they’re not available anymore.” He said he’s already hearing of 3PLs offering relief on transition costs for e-commerce brands that will need to move inventory out of Mexico. His conservative estimate of the value of 3PL services now in play to move back to the US is $10 billion. “That’s a lot of absorb and it’s going to happen quickly,” Hertz said. Duty-free uncertainty Sheinbaum’s decree comes amid a changing landscape for so-called US Section 321 shipments, also known as “de minimis.” The Biden administration in September announced it would be ending duty-free treatment on all shipments that would ordinarily be subject to 25% Section 301 tariffs on Chinese imports, tariffs originally implemented during the first Trump administration. While that rule would wipe away the $800 duty-free threshold on most shipments from China, there has yet to be a timeline for implementation of that rule. “As of right now the timeline and exact implementation remain uncertain, but most close to the situation have understood that brands probably had [until] April to make the transition,” Flexport CEO Ryan Petersen wrote in a comment on X Monday. “Most brands were already planning an exit from Mexican fulfillment centers and reshoring that work as soon as the details become more clear.” Contact Eric Johnson at eric.johnson@spglobal.com . Journal of Commerce Research Analyst Cathy Morrow Roberson contributed to this report.

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Mexico curtails duty-free fulfillment option for apparel, textile importers

<div class="phx-topic abstract-wrapper">The market’s normal tranquility is threatened by President-elect Donald Trump’s promise to raise imports tariffs, as well as a potential second strike by the International Longshoremen’s Association.</div>

The market’s normal tranquility is threatened by President-elect Donald Trump’s promise to raise imports tariffs, as well as a potential second strike by the International Longshoremen’s Association.

<div class="phx-topic">The big picture: After a steep decline in 2023, westbound trans-Atlantic trade volumes came roaring back in 2024. Still, the accompanying rise in rates was marginal compared with the huge increases seen in the main trades out of Asia, as excess capacity depressed prices until carriers began shifting vessels to the more lucrative ex-Asia lanes. Going into 2025, the supply-demand balance appears to have been reasserted, and cargo owners can expect greater rate stability, with more predictable disruption-driven price hikes. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5910620_0.1.png"></img></div>A look back: By the time Auld Lang Syne heralded the start of 2024, average spot rates from Europe to North America had sunk to record lows of close to $500 per FEU, according to rate benchmarking platform Xeneta. But after a weak January, US import demand began to pick up, with year-over-year growth recorded in eight of the following nine months on the North Europe-US trade and Mediterranean-US volumes rising in every month of 2024. Through November, imports from North Europe and the Mediterranean rose 7.7% and 13.6%, respectively, from the 2023 period, according to PIERS, a sister product of the Journal of Commerce within S&amp;P Global. The rising volume lifted average North Europe-US East Coast spot rates through April, but even with steady demand during the historically slow summer months, excess capacity dragged down pricing. It was only when carriers closed several services and transferred capacity to the more lucrative trades out of Asia and shippers began frontloading cargo in the buildup to the International Longshoremen’s Association (ILA) strike on the US East and Gulf coasts that rates began to rise again, reaching a 2024 peak of about $2,700 per FEU in early October, according to Platts. But even with the removal of 91,100 TEUs in capacity from the trade in the first 10 months of 2024, an 8.2% year-over-year drop, according to Alphaliner, that peak was short-lived. By mid-November, average short-term pricing had fallen to $2,200 per FEU. A look ahead: With supply and demand largely in balance, the westbound trans-Atlantic trade lane has returned to its traditionally stable state. But that tranquility is threatened by US President-elect Donald Trump’s promise to raise imports tariffs, as well as a potential second strike by the ILA. The products moved on the trans-Atlantic are dominated by industrial equipment, vehicles, pharmaceuticals and wine and spirits, limiting the ability for US importers to frontload on a large scale. But with the removal of capacity by the carriers, any advancement of orders to avoid disruption will quickly fill all available space and raise rate levels. And if rising volume meets labor action at US East and Gulf coast terminals, bottlenecks will soon build at the busy import gateways, tying up capacity, extending transit times and exerting additional upward pressure on pricing. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="42a85896-984c-42cb-aa81-dc67689a6055"></dynamic-object></div>The next inflection: The trans-Atlantic trade over the past few years has seen a disconnect in the traditional supply-demand balance, with excess capacity offsetting rising volume and curbing rates. But carriers have grown cannier at flexing capacity to cater to volatility in demand, and with the shifting of vessels to the trades out of Asia and replacement of larger ships with smaller units, cargo owners can expect their fixed-rate commitments to go up in annual contract talks and any disruption on the westbound trade to be quickly reflected on the spot market. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com.</a></div>

The big picture: After a steep decline in 2023, westbound trans-Atlantic trade volumes came roaring back in 2024. Still, the accompanying rise in rates was marginal compared with the huge increases seen in the main trades out of Asia, as excess capacity depressed prices until carriers began shifting vessels to the more lucrative ex-Asia lanes. Going into 2025, the supply-demand balance appears to have been reasserted, and cargo owners can expect greater rate stability, with more predictable disruption-driven price hikes. A look back: By the time Auld Lang Syne heralded the start of 2024, average spot rates from Europe to North America had sunk to record lows of close to $500 per FEU, according to rate benchmarking platform Xeneta. But after a weak January, US import demand began to pick up, with year-over-year growth recorded in eight of the following nine months on the North Europe-US trade and Mediterranean-US volumes rising in every month of 2024. Through November, imports from North Europe and the Mediterranean rose 7.7% and 13.6%, respectively, from the 2023 period, according to PIERS, a sister product of the Journal of Commerce within S&P Global. The rising volume lifted average North Europe-US East Coast spot rates through April, but even with steady demand during the historically slow summer months, excess capacity dragged down pricing. It was only when carriers closed several services and transferred capacity to the more lucrative trades out of Asia and shippers began frontloading cargo in the buildup to the International Longshoremen’s Association (ILA) strike on the US East and Gulf coasts that rates began to rise again, reaching a 2024 peak of about $2,700 per FEU in early October, according to Platts. But even with the removal of 91,100 TEUs in capacity from the trade in the first 10 months of 2024, an 8.2% year-over-year drop, according to Alphaliner, that peak was short-lived. By mid-November, average short-term pricing had fallen to $2,200 per FEU. A look ahead: With supply and demand largely in balance, the westbound trans-Atlantic trade lane has returned to its traditionally stable state. But that tranquility is threatened by US President-elect Donald Trump’s promise to raise imports tariffs, as well as a potential second strike by the ILA. The products moved on the trans-Atlantic are dominated by industrial equipment, vehicles, pharmaceuticals and wine and spirits, limiting the ability for US importers to frontload on a large scale. But with the removal of capacity by the carriers, any advancement of orders to avoid disruption will quickly fill all available space and raise rate levels. And if rising volume meets labor action at US East and Gulf coast terminals, bottlenecks will soon build at the busy import gateways, tying up capacity, extending transit times and exerting additional upward pressure on pricing. The next inflection: The trans-Atlantic trade over the past few years has seen a disconnect in the traditional supply-demand balance, with excess capacity offsetting rising volume and curbing rates. But carriers have grown cannier at flexing capacity to cater to volatility in demand, and with the shifting of vessels to the trades out of Asia and replacement of larger ships with smaller units, cargo owners can expect their fixed-rate commitments to go up in annual contract talks and any disruption on the westbound trade to be quickly reflected on the spot market. Contact Greg Knowler at greg.knowler@spglobal.com.

Restabilized trans-Atlantic facing dual strike, tariff threats

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The world of LTL is slow to embrace change. Business anachronisms permeate current supply chain processes. These vestiges of the way things used to work define the LTL freight transportation procurement process of many modern shippers.David Knuth, logistics specialist at IEWC, a global supplier of cable and wire based in Wisconsin, is happy to have modernized the RFP process, automating the entire LTL bidding procedure with Bid$ense, SMC³’s automated truckload and LTL freight transportation sourcing solution. But when prompted, he can still recall what once was.In his previous job, a large part of his duties were consumed by creating an intermodal bid package for carriers. In a spreadsheet, Knuth detailed the company’s volumes lane by lane, taking care to delete any errant keystrokes or misleading data. He would then email out the information to each carrier, taking time to respond to detailed technical questions about the spreadsheet data. Finally, he had to compile all the results, create an algorithm that would compare the carriers on each lane, and award the business.“It was a huge undertaking. It took about four months to do,” Knuth said of the old process. “It was almost a full-time job for that part of the year, every year.”In his new job at IEWC, he sat down with Bid$ense on day one and was amazed at the capabilities. Knuth had never before used a bid tool. SMC³’s latest versions of Bid$ense automate the process even further, taking truckload and LTL RFPs entirely online. The tool draws on RFP best-practices protocols to streamline the bidding communication process, enabling bidding carriers to respond accurately and promptly to shipper requests. The solution also does all the distribution work automatically, electronically submitting shipper bid data to carriers based on their actual service capabilities and performance records. Carriers are alerted with timely prompts for RFP deliverables, so shippers aren’t waiting by the phone for responses.Another benefit of automating the process is the data-cleansing assistance. When Knuth sent spreadsheets to carriers, data errors might cloud the bidding process; he might have to resend data or simply accept a price that did not truly reflect the costs of doing business. Data cleansing is incredibly beneficial, he said.The spreadsheet technique also made bidding analysis an onerous task. Since Bid$ense automates and streamlines the entire RFP process, intensive examination is now simple. SMC³ knows that each bid has more than one best outcome. With uniform responses from each carrier, shippers can quickly rank results and create an unlimited quantity of what-if scenarios to make the optimal procurement decision.Jesse Burnett of Central Garden &amp; Pet experiences many of the same benefits. Founded in 1980, Central Garden &amp; Pet has spent the last three decades growing from a small garden supply company to a provider of a range of products from dog chews and bird seed to soil supplements and natural insecticides. For much of its life, the company shipped these disparate goods via LTL and truckload carriers to retailers throughout the country, relying on each business unit to negotiate directly with their freight transportation providers. This arrangement worked fairly well for a small company, but as Central Garden &amp; Pet expanded, leadership decided to consolidate decision making.Burnett helped centralize the transportation decision making in 2015 with SMC³’s Bid$ense. Before Bid$ense, every business unit operated independently as far as negotiating with carriers.“There were a lot of different things just floating around,” he said. “We didn’t have master agreements in place; no national pricing at all. The pricing from carriers was just all over the place, depending on where you were.”The transformations he saw with Bid$ense were immediate. Burnett has been using the tool about every other year since its implementation at the company. Central Garden and Pet’s $19.6 million 2019 LTL bid saved the company just more than 9 percent when compared to its historical average. For Burnett, though, bid automation extends far beyond savings.“We knew that we weren’t getting the best pricing offer from our carriers just because nothing was centralized,” he continued. “We knew that if we combined everything from all these business units and paired it with one corporate offering, then it would drive some cost benefit with it.”When the company initially decided to centralize bid procurement, executives researched a number of different methodologies and technologies. In the end, though, Burnett found that Bid$ense was both widespread and well known, and that his carrier partners already knew how to use the application. Burnett also highlighted the data-cleansing process as a major benefit, saying the rigorous process ensures that carriers always return the best price.“It definitely has helped drive savings,” he said. “Any time you go out there and you drive that competitiveness with the carriers and they know they’re in a bid environment, it seems to sharpen their pencils.”Transportation procurement is an integral part of the modern supply chain. With Bid$ense, shippers can develop a strategic implementation plan that saves them time and money, but also helps them create strong relationships with their carrier partners. These carriers appreciate the solution’s data-cleansing process; when carriers receive a complete shipment history and future volume forecast, they don’t have to guess on pricing. Carriers that receive more data from shippers get a complete picture of that shipper’s freight, allowing them to accurately plan instead of simply preparing for the worst-case scenario. Clean data presented through an automated system can lead to both bigger shipment savings and a lasting partnership between carrier and customer.Whether customers are looking to streamline over-the-road transportation bidding by automating the RFP process or create an entirely new, centralized sourcing process, Bid$ense has the analytical horsepower to get the job done.SMC³ 2020 Customer Case Study

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Shippers save money, time with automated transportation bidding tools

If there’s one immutable truth in the world of logistics, it’s this: LTL is an inherently complex form of transportation. Tariffs, rates, DIM weights, transit times — it’s enough to confuse even seasoned logistics professionals. The solution to this knowledge gap has historically been on-the-job training or university supply chain education, but for a variety of reasons there is now a pressing need for third-party, remote LTL training that prepares logistics workers for transportation success. Global Scope Can Overlook Local Intricacies In the past, professionals looking to move into a supply chain career learned about the basics of supply chain from universities. However, many of these college supply chain programs are now global in scope, focusing on worldwide supply chain management instead of the intricacies of specialized domestic transportation. And even these programs, which used to be widespread, are becoming less common. LTL is not an industry of broad-brush strokes; supply chain professionals really need a pointillistic understanding of the logistics of LTL in order to excel in the industry. Accelerating Need for Dedicated LTL Education This lack of specified training put the onus on employers to prepare new hires with the LTL knowledge needed to do their jobs. Dedicated LTL study is a necessity, not a luxury. At the same time, changes in LTL and the broader supply chain world are accelerating. The reliance on e-commerce has ballooned since the start of the pandemic, and last-mile LTL shipments and related e-commerce strains on the supply chain won’t diminish once social distancing abates. That genie isn’t going back into the bottle. So supply chain employers need logistics workers that are fully versed in all aspects of the industry, ready to solve unique shipping and delivery problems based on their extensive supply chain knowledge But why care about LTL? It’s been reported that some shippers in today’s world are no longer concerned with what mode is used to ship their goods. A Multimodal Approach Ensures On-Time Delivery This mode agnosticism means supply chain stakeholders have to be well versed in all modes of transportation. As unforeseen weather events and other disruptions, such as protests, become more common, savvy logistics employees will need to be armed with familiarity of all modes, not just the most popular, to ensure that freight is delivered on time, without damage, and in the most financially expedient way possible. Offerings like SMC³’s LTL online education courses cover a wide range of topics from LTL basics and operations to more advanced concepts like pricing analytics and transportation law. The company also has plans to continually refresh content, adding new expert presenters and taking the feedback of students to make the courses even better as time goes on. Learn more about&nbsp;<a href="https://logisticstrainingcenter.com/smc3-courses/" rel="noreferrer" class="joc_admin__link">SMC³’s LTL Online Education program</a>&nbsp;and view the 2021 hybrid schedule, featuring live industry experts,&nbsp;<a href="https://www.smc3.com/onlinelearning2021/" rel="noreferrer" class="joc_admin__link">here.</a>

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