Annual Review and Outlook

In a world turned upside down in 2020, it is incumbent on the entire global trade industry to try to step away from the prevailing noise and take a rational view of the path forward, not just for 2021, but for the much longer journey that awaits. From the perspective of container ship owners and operators, the impact of the COVID-19 pandemic will be felt for a considerable time; it will not only change behavior going forward but arguably change our views on forecasting and predictions. Nothing will ever be quite the same again. The container shipping market is to a large extent driven by consumer demand, which has for the most part been on a steady upswing but has turned negative twice in the last two decades: first during the 2008–09 global financial crisis and again during the early days of the pandemic. Going forward, making predictions is extremely dangerous; even now at the time of writing, the “second wave” of the pandemic is decimating parts of Europe while governments wrestle with whether the economic pain of the “cure” is worse than the suffering caused by the illness itself. As such, the economic recovery will be lopsided at best and will likely occur in waves that build and then recede. Restocking of inventories was an early driver of the recovery that seems to have peaked for now, but in several key trade lanes, spot freight rates are at all-time highs and, in many cases, there is no spare ship capacity. All the ships over 5,000 TEU are gainfully employed, and even in the smaller sizes, demand is easily outstripping supply. For the liner companies, business is picking up and the storms appear to have passed for now. Maersk recently raised its earnings forecast for the year by over 10 percent, Ocean Network Express recorded a fourfold year-over-year increase in profit for the third quarter, and COSCO saw its net profit rise 210 percent year over year for the quarter. So where does this take us in the year ahead? For the carriers, we expect to see a continued emphasis on the ownership of large vessels. OOCL recently expanded its March order from five 23,000-TEU ships to 12 such vessels. With a length of about 400 meters and a breadth of 24 container rows, these ships cost roughly $157 million each. But OOCL is not alone; Mediterranean Shipping Co. (MSC) also ordered five similarly sized vessels at a cost of about $152 million per ship. The current global fleet of vessels over 18,000 TEU comprises 129 ships with a total capacity of 2.6 million TEU. A further 28 ships are on order that will increase that total by more than 20 percent. By comparison, the rest of the large vessel fleet — i.e., ships with capacities of 7,500 to 18,000 TEU — numbers just under 1,000 ships with only 65 new vessels on order. The trend lines are clearly pointing toward larger ships, and this will continue in the coming year. And as the ships plying major trades get larger, parallel growth in the feeder ship market will continue as well. We have seen a significant recovery in ship sales after activity plummeted during the height of the pandemic to levels not seen since the financial crisis of 2008. In fact, almost 200 transactions have taken place so far in 2020, with considerable activity in the larger vessel sizes. Panamax vessels have seen their prices rise by as much as 25 to 30 percent as charter rates for such vessels have hit levels not seen since 2011. Interestingly, the average age of ships sold has also risen from about 11 years to over 13 years. With the firming of charter rates and a continued reduction in the inactive fleet, which stood at just 1.6 percent of total capacity as of late November, prices should continue to increase as the appetite of the tramp owners — i.e., non-liner companies — increases and the need for ships accelerates. But booms follow busts and busts follow booms, so inevitably, the liner companies will not be able to sustain the profit level trajectory now in place. Still, they will have the capacity to handle sustained growth if it returns in earnest.

More than ever before, ClearMetal is helping shippers differentiate the customer experience they provide in the supply chain, largely through our supplier and customer portal. While ClearMetal first began by offering global visibility for exception management and then expanded with dynamic transport planning for improved freight procurement and gains in on-this-day delivery (OTD), the importance for shippers to differentiate through a digital customer experience has only been growing. It was for this reason that we developed our CDX Connect Portal that provides procurement teams with inbound visibility from suppliers and sales teams using a portal that enables customers to self-serve by receiving real-time status of orders and shipments in transit, globally. Today this is being used on the order of tens of thousands of times, enabling consignees to gain the reliable service expected from suppliers and enabling shippers to differentiate by providing the digital experience customers expect. The value is tremendous as we see companies actually keep less buffer stock and shift order volumes based on supplier reliability, as well as retain revenue in a competitive and zero-sum market — not to mention seeing an increase in ratings from their customers based on the unprecedented digital experience they’re providing downstream. Capacity will continue to be tight into 2021, no doubt. Shippers should be doing two things. First, they should equip themselves with dynamic transport planning capabilities so that, rather than setting promise dates and procuring freight based on outdated transit tables, data intelligence can be used to determine the optimal mode, carrier, and routing for reliable delivery to customers and to procure freight more flexibly. Second, shippers should provide their customers with portals that display real-time and accurate status of shipments in transit, so that even if shipments are delayed due to capacity constraints, customers are aware, benefiting from this enhanced experience, and self-serving (versus burdening logistics and customer service teams asking, “Where’s my stuff?”). ClearMetal offers its CDX Transport Planning and Customer Portal applications, respectively, to solve customer demands despite network capacity.

As the world says good riddance to the year 2020, we reflect on lessons learned from an unprecedented year wrought by the effects of COVID-19, turning to 2021 with cautious optimism that the global economy and shipping industry can more wholly rebound and prosper over the next twelve months. While many containerized commodities and select bulk and breakbulk commodities have recovered from the initial COVID-19 economic downturn, critical industry segments such as the energy sector remain depressed (as of mid--November 2020). From 2020’s January high, crude oil prices are still down 37 percent. As goes the demand for oil and gas, so goes a large segment of the world’s economy. If recently announced coronavirus vaccines are dispensed soon, there is high hope for the global economy that our “new normal” will more closely resemble our “pre-COVID-19 normal” in the coming months. The pandemic reminded us of the importance of diversification as a hedge against economic downturns. We’ve witnessed firsthand how the digital transformation occurring in our industry can provide for safer and more efficient operations. Even in a world equipped with readily available video conferencing and virtual communication tools, we still recognize the pivotal role that in-person relationships continue to play in our businesses and industry. Finally, COVID-19 served as an important reminder that our economy stands on the shoulders of the millions of men and women who operate our terminals, vessels, trains, aircraft, and trucks. While many office-based personnel have been able to work from home, it was the bravery of our critical infrastructure, front-line workers, and the unrelenting sacrifice of their families, that kept our economy moving in 2020 and that will continue to do so in 2021 and beyond.

We have been reminded again that communication is the key, both internally with employees and management, but also with clients. Good communication, transparency and having a mutual understanding of each other’s point of view are very important. I have also been encouraged to see that the BBC organization is ready and prepared to weather any storm, and to cherish the hard work that is put in by our employees worldwide every day. We as well appreciate the crew on board the vessels even more than we did before. Crews went through a hard time during the pandemic, and they deserve our highest respect and gratitude. Last but not least, we learned that one cannot appreciate a superb IT department enough! We will need to put even more focus on environmental aspects, emissions, sustainability, and -integrity in the future and follow the lead of other segments in our industry. The MPV/heavy-lift segment needs more investments in modern and energy-efficient vessels. However, that comes at a cost, and the industry needs to be valued (and paid) better in order to justify those investments. With regard to ocean transportation on MPV/heavy-lift vessels, shippers should try to secure space in advance. The supply of MPV/heavy-lift ships is stagnant or shrinking, and the demand, in terms of cargo volumes and demand for more renewable energy, will increase.

VIRUS: The causative agent of infectious disease. In 2020, the port industry faced down the causative virus SARS-CoV-2, officially known as COVID-19. As if tariffs, applied technology, carbon footprint reductions, workforce challenges and global market uncertainty were not enough, ports had to confront head-on a global pandemic to maintain operations and keep commerce moving. Jobs, supply chains, fair trade, and efficient cross-border transportation solutions serve as the cornerstones of economic prosperity. COVID-19 taught us the value of rapid reaction followed by decisive and consistent action. Early on, ports pulled on their emergency ops plans, but ports also had to mask up and quickly adjust their plans and business practices to reduce risk, ensure continuity of service, and remain relevant in an ever-changing market. Carefully crafted organizational structures are key to running multi-dimensional ports, but structure must be paired with better, faster, consistent performance. Imagine how the markets will look if we all practice what COVID-19 forced us to learn.

Resilience, adaptation, perspective, and diversification are among the watchwords that come to mind when reflecting on the unprecedented year we have all just been through. These will also be important guideposts in 2021 and beyond, as we adapt to new ways of working and living that will have lasting effects well beyond the time when the pandemic is thankfully fully in our rearview mirror. Consumer behavior and the explosion of e-commerce have reinforced the critical importance of being as close to your customer as possible, both literally and figuratively. Supply chains are being transformed; as for ports, their proximity to distribution centers serving large markets has proven crucial for last-mile delivery. Industrial real estate expansion and investment is red-hot in those regions to meet consumer expectations that packages get delivered in hours, rather than days. The ability to work remotely has accentuated demographic shifts as people relocate to regions based on cost of living, weather, and other quality-of-life factors. These trends are accentuating the advantages already enjoyed by Port Tampa Bay as we continue to experience record growth in our container business, fueled by rapidly expanding distribution center capacity along the Tampa Bay/Orlando I-4 Corridor: Florida’s Distribution Hub. Companies in this region now enjoy significant savings in their supply chain distribution costs as truckers make as many as three to four round-trip deliveries per day from Port Tampa Bay to their distribution centers, which then service the entire state and reach into markets throughout the Southeast and beyond. To keep pace with this rapid growth, the Port is busy expanding terminal capacity with additional paved storage, extended berths, cranes and equipment, and new transload warehouse facilities. The most recent expansion saw the addition of 25 acres of paved storage, bringing the total to 67 acres, with plans to add another 30 acres. Work has also begun on the addition of a third berth, which will bring the total to over 4,500 linear feet, allowing three large ships to be worked at the same time. Construction will soon begin on a new container gate, and the bid process is underway to acquire two additional gantry cranes.

Across the globe, 2020 has presented world--changing events that have dramatically affected every industry, including international container freight. The COVID-19 pandemic has changed the way businesses operate, and the virus will impact the global economy well into 2021. Like so many other organizations, TRAC Intermodal faced unprecedented challenges throughout 2020. The majority of our employees quickly shifted their workplace from our offices to their homes. We endured unprecedented low demand for our chassis in the early stages of the pandemic and were faced with storing a significant portion of our fleet. Then came a huge influx of activity, with many ports and gateways experiencing the highest volumes ever recorded. Virtually overnight, we had to ramp up to maximum capacity to serve our customers’ rapidly escalating needs. We had to be nimble, stay agile, and quickly produce innovative solutions when challenges emerged. I’m extremely proud of all our team — we met the challenge, and TRAC has proven we can rise above such difficulties by working in partnership, holding ourselves accountable to deliver, and committing to keeping our link in the supply chain moving seamlessly. In 2021, we will build on what we’ve learned. We will focus on teamwork, innovation, and operational efficiency, while continuing our investment in high-quality upgraded equipment. Collaboration across all intermodal stakeholders will be crucial to ensure industry readiness for cargo volume fluctuations. We believe additional data sharing by all intermodal stakeholders is critical to maximizing the output of the entire supply chain. During this unprecedented health crisis, it is important to remember that global trade has endured challenges in the past but remained strong and focused on its key objective — keeping the flow of goods moving. From major geopolitical events to weather disruptions to seasonal trade cycles, global trade has always prevailed. I have no doubt that our collective future is bright.

The combination of significant business and personal impacts of COVID-19 forced Werner to be more nimble, flexible, and creative in all aspects of our business, to challenge our internal processes and rethink all aspects of how we do business. During normal operations, we create mode-neutral capacity solutions for seasonal events or customer product launches. During the pandemic, our Werner EDGE technology platform tools played a critical role in allowing us to minimize empty miles and service impacts in our network caused by fluctuations in freight volumes and flows. On the management side, we adjusted the team’s routine to conduct shorter, more frequent meetings throughout the day to facilitate faster decisions. Tactical customer communication changed out of necessity, resulting in quick and solid decision-making. We performed mode conversions, pop-up fleets, and relays to expedite shipments, and we shifted dedicated fleet drivers among sites. We also found both parties were able to create quick and simple commercial agreements that were easy to bill and collect. We implemented a remote working strategy to minimize exposure and allow our associates flexibility to balance the personal challenges presented by school closings. Our team quickly learned that individuals were just as productive — in certain cases more so — at home. And by opening key roles to remote working, we now have the potential to access talent that previously wasn’t available. Werner has had a pandemic plan for our drivers in place since 2009, following the H1N1 outbreak. In the very beginning of the COVID-19 pandemic, professional drivers found themselves struggling to find resources for their basic needs while out on the road. Werner shipped hand sanitizer and other needed supplies to all of our terminal locations for distribution to drivers and reached out to our vendors, customers, truck stops, restaurants, and other partners urging them to help. They responded without hesitation, and with the designation of truckers as “essential” personnel by the Department of Homeland Security, drivers started to see more necessities available while on the road. Even prior to the COVID-19 pandemic, the industry was experiencing capacity and demand imbalances that were more severe and frequent than in the past. We believe longer-term agreements, coupled with a diversified portfolio, are optimal for addressing and managing this market volatility. For shippers, changing suppliers frequently can result in negative impacts on inventory, service, workforce planning, and even strategic initiatives such as sustainability. For providers, changing customer relationships can drive cost into networks in the form of empty miles and poor asset utilization. Creating and standing behind longer-term agreements works when both parties are committed at all levels. This is critical since, depending on where we are in the cycle, one party must resist the pressure to “take advantage” of the market and stay focused on the long-term relationship. The use of shorter-term agreements, such as mini-bids, can also bring great value to address impacts such as seasonality and vendor/sourcing changes, but shippers and carriers all must be careful not to overcorrect to what — hopefully — will be a once-in-a-lifetime set of circumstances in 2020.

COVID-19 deeply affected the global supply chain and illustrated the critical role railroads play in transporting America’s goods. It taught us several lessons as we worked through its disruptive impacts. We learned how different people adapt in times of crisis, including our employees and customers and consumers who are critical to the economy. Every Union Pacific employee was touched, either directly or indirectly, by the pandemic. Lower volume meant less work and furloughs. The disruption to schools meant parents had to find ways to look after children of all ages while continuing to work and keep America’s supply chains moving. All of our employees had to create new habits — wearing a mask, social distancing, working remotely, meeting in smaller groups — and it all added to the stress. I expect several impacts to last. First, COVID-19 is not under control and likely won’t be until next year, which means our safety protocols will remain in place. Second, the shift in consumers using e-commerce is likely here to stay. Third, the industrial economy needs consumers to feel confident enough to buy big things, and while they have been coming back, it’s at a slower pace than before COVID-19 struck. Union Pacific is focused on the things we can control or impact. We’re relentlessly pursuing a safer, more reliable, and more efficient operation. We’re constantly enhancing the customer experience and developing business aggressively. Additionally, we are constantly reminding ourselves to act with grace and patience when it comes to each other. Now more than ever, we need to build relationships, lean on each other, and trust that there is a back side of COVID‑19, and it will arrive.

This past year underscored the need for reliable carriers amid unprecedented supply chain challenges. In a year where we saw significant service disruptions, asset-based carriers should continue to find ways to add value to the shipping process. That need for added value can be met with investment in digital transformation, capacity, and a demonstration of shipping expertise. Digital transformation has become a significant priority because of the rapid rise of e-commerce, further compounded by the impacts of the pandemic. We live in an on-demand economy where businesses want to know where their product is and when it will arrive. Investments in technology, such as track and trace capabilities, present an opportunity to differentiate carriers. Shippers increasingly need a complete understanding and visibility over their supply chain as we have seen a shift to a just-in-time inventory model, more freight requiring an appointment, and dynamic in-transit upgrades or changes. But with investments in digital transformation must come investments in capacity. As we saw in 2020, carriers must be flexible and responsive to prevent serious roadblocks within the supply chain. At Old Dominion Freight Line (OD), we regularly invest in our service center network, our fleet, and our people. Having sufficient capacity allows us to grow with our customers and continue providing the quality service experience to which they have grown accustomed when shipping with OD. Finally, knowledge is power, and it is critical to be a trusted advisor to shippers as they navigate the increasing complexity of their supply chain.

As providers of essential transportation services in the US and Mexico, it’s our duty to ensure the continuity of business operations while protecting the health and wellbeing of our employees and others. With that in mind, our company acted quickly in March to protect our employees and customers. We created a COVID-19 working group of senior leaders from across the organization to discuss matters related to safety protocols, business continuity, stakeholder communication, and the transition to work-from-home operations for a portion of our workforce. Many of the protocols that we implemented in response to the pandemic have been incorporated into our permanent business continuity planning framework. In addition to the health and safety challenge, the entire North American rail network was faced with a dramatic volume decline, followed quickly by an unprecedented volume rebound. This carload “roller coaster” presented a challenge unlike anything we have faced, along with an opportunity to make structural changes to service design that will provide lasting improvements to our operations and customer service. As long as the pandemic lasts, we will continue the advanced safety measures that we implemented in March and provide enhanced support to our employees working in the field, the office and at home. Additionally, we will leverage what we have learned during the pandemic to improve our business continuity plan and organizational safety protocols. Finally, I want to recognize the essential frontline workers of the transportation industry who remain focused and dedicated to safely providing freight transportation services. They are responding admirably to this unprecedented challenge.

As you read this you may still be focusing on how glad you are that 2020 is finally over. Unfortunately, the lasting effects on families, businesses, economies, and global trade will be with us for years to come. The Institute of International Container Lessors (IICL) is the leading trade association of the marine container leasing and chassis provider industry. Our member companies lease marine cargo containers to ship operators and others on a broad international basis or as intermodal chassis providers, accommodating the needs of motor carriers, ship operators, and cargo owners. As the global pandemic progressed last year, sudden shifts in trade volumes caused by COVID-19-related lockdowns resulted in very low cargo levels, accompanied by ocean carriers canceling voyages (blank sailings). And then there were enormous surges in the late summer and fall, intensified by the incredible size of container vessels bunching up in ports. Our members were stretched to the limit attempting to provide containers and chassis when and where needed. The container manufacturers also felt the pinch, and it drove up the cost of new-built containers and pushed back availability by several months. Critical to moving goods around the world, we realized, is improving information sharing. In 2021, the IICL and its members will expedite communication and supply chain visibility efforts to more effectively manage future huge cargo volume fluctuations. A standing committee, established last year, will concentrate on blockchain technology, as well as other electronic information sharing platforms, across multiple aspects of the leasing industry and its interface with lessees, vendors, BCOs, regulators, other trade associations, and many other supply chain participants. This commitment to explore and develop best practices will help our members and in turn facilitate enhanced global trade visibility and communication.

For years, consumers have demanded faster, freer, more frictionless delivery across the board, thanks to groundwork laid by Amazon. The pandemic put that trend on steroids. An entirely new, broad demographic of consumers has switched to shopping online, looking for home delivery for groceries, household staples, and goods of all kinds. Many retailers have struggled to adapt. Those with robust e-commerce platforms have most successfully met the surge; meanwhile, thousands of other retailers rushed to build them, and then had to figure out how to get products to consumers sheltering at home. The result is a retail business model that flipped completely, almost overnight, and is still evolving today. Home delivery for anything and everything isn’t a new idea. Years ago, we used to have visits from the milkman, the iceman, the egg man…all showing up on our doorsteps. You could argue that modern e-commerce systems are simply an updated version of an old model, one that worked for decades. But the most important — and intuitive — business lesson from the pandemic is this: Once consumers experience the convenience of e-commerce ordering and home delivery, they’re more likely to continue it. No one expects consumer buying behavior to revert completely to pre-pandemic habits. The same goes for demand for fast and easy same-day delivery. COVID-19 took same-day delivery from a “nice-to-have” offering to a “must-have” for all sorts of goods. It’s also brought into sharp relief the power of crowdsourced delivery networks, which, unlike traditional fixed-asset models, can flex and adapt as business surges. This distributed model has fewer points of failure, can scale rapidly, and ultimately enables retailers to be more resilient and responsive to consumer needs. Crowdsourced platforms like Roadie can reliably solve the hardest part of that journey — covering that last mile, the very same day.

To say that 2020 was a difficult year would be the understatement of the decade. The upheaval in our supply chain has proven two things. First, we are incredibly fragmented and fragile. We have so many vulnerabilities that are created by the competing business interests of the stakeholders in the supply chain ecosystem. Second, we are extremely resilient. Speaking for the truckers, we have the unique ability to rise to occasions that most industries would never be able to even dream of. 2021 will be a year of change. Two major issues will start to become clearer as we say goodbye to 2020. For the first time in my six years as CEO of the HTA, misclassification was not the top issue the industry must deal with, according to our board of directors. The biggest issue has been port productivity and stopping unreasonable detention and demurrage charges. Next year, we will see if the FMC can hold ocean carriers accountable and establish a more equitable and fairer playing field for detention and demurrage. We will also start to discuss whether Congress feels that the Shipping Act is in need of modernization due to the many changes in the industry since 1984. Will the ocean carriers come to the table, or will truckers and shippers pursue other solutions? This remains the biggest question that 2021 should start to answer. For truckers in California, the effort to create a zero-emissions supply chain by 2035 looms large. While the HTA believes the best way to fight climate change is by attracting cargo to the world’s cleanest ports, the state is trying to mandate equipment that is unproven, unavailable, and lacking supporting infrastructure. Will a more pragmatic approach be implemented with a real strategy? Time will tell.

Certain North American freight traffic is likely always to be rail-centric, such as bulk commodities moving across the continent. But an increasing share of freight is up for grabs, with shippers more often than not leaning toward trucking instead of rail. To the extent that society and investors are pressuring industries to reduce greenhouse gas emissions, rail continues to offer the most immediate returns, with the dual benefits of a lower carbon footprint per ton moved and reduced pressure on congested highways, creating benefits for commuters and lowering future infrastructure costs. So why are railroads struggling to capture their fair share of freight growth? Oliver Wyman recently interviewed two dozen large shippers across seven key industries to understand how emerging supply chain shifts and a rising sense of frustration among shippers are impeding greater use of rail within today’s supply chain networks. According to this research, rail is losing the battle for freight share for three main reasons. First, the new supply chain has different needs and requirements. Shippers resoundingly confirmed that reliable transit schedules and accurate delivery windows are a must for highly engineered, cost-competitive supply chains, with trucking consistently outperforming rail in this area. As such, railroads must look for new ways to stay relevant as shippers move closer to their customers, tighten up on precision, and further economize their supply chains. As it is, rail sidings and delivery doors are being repurposed for “higher-value activities” at existing facilities, and new facilities are being built without rail access or intermodal service being explicitly considered. In addition, shippers and receivers are increasingly looking at a much more robust version of total landed cost models when evaluating shipping modes. Accessorials, damages, claims, tender rejections, timeliness and accuracy of shipment data, transport failures and delays, and problem resolution and recovery costs are now being formally accounted for in the decision-making process. Even when cheaper on the tariff rate or direct transportation charge, rail is not necessarily the lower-cost option when total costs are considered. On-time delivery also is a large lever in this equation. Second, shippers said, the origin-to-destination shipping experience of intermodal rail must improve. Outside of price, respondents ranked transport reliability, shipment visibility, and equipment/capacity as the most important attributes for transportation service. They also rate rail as substantially inferior to trucking on all three of those attributes. The Class I railroads have roughly five years of precision scheduled railroading (PSR) under their belt, and while PSR has delivered impressive cost reductions and capacity dividends, rail is not yet at the point of delivering an acceptable — i.e., reliable, transparent, and responsive — door-to-door transport product for customers when compared to trucking. Lastly, shippers said, railroads need to adopt a more customer-centric approach, particularly to support shippers that actively want to use rail more. It is not a sustainable strategy to expect customers to invest in the deep expertise and time required to navigate the mysteries of doing business with railroads. Both individually and as a network of interdependent providers, railroads must create an environment that makes it easy for customers to transact business. This is now a world of mobile apps and near real-time solutions, and railroads need to keep up. On-time performance in the 70 percent range, which is common among the Class Is, will not win the day in supply chains that demand on-time performance in the high 90s. And when things do go wrong, shippers want carriers to be accountable and proactively resolve problems. For truck-competitive freight, railroads will be held to the standard of the truckload offering, the bar for which continues to rise. There are many easy changes that railroads could adopt to improve customer perceptions. When rail handling clearly causes damages, for example, railroads could pay the claim quickly rather than forcing the customer to jump through hoops or take formal action. When there is an interchange mix-up, railroads could solve the problem among themselves, rather than making the customer arbitrate. If a needed car is buried in a side-track, railroads could dig it out right away and proactively give the customer a new ETA, rather than waiting days or even weeks. These types of problems happen way too frequently with railroads, according to shippers, who consistently cite a lack of alacrity and proactivity as major pain points. Throughout their history, railroads have proven to be resilient and determined, and the industry has solved many difficult challenges. This next chapter will be no different. Railroads can successfully grow their share of freight again if they are willing to understand the new supply chain imperatives. That means zeroing in on delivering high reliability, shipment visibility, and proactive problem resolution and creating a truly customer-centric mindset that rebuilds trust and lowers frustration among customers.

Our lives have changed in so many ways during 2020. Business is no exception, as we have seen the shift to e-commerce and online shopping expand from retail to almost everything we purchase. This shift was already taking place in our lives, materializing naturally over the course of the last several years. Fast forward to this year, and the change accelerated in less than a few short months. Supply chain and logistics are no different. The themes and common chords that run through our businesses remain, but the speed at which we adapt is separating companies very quickly. Those with a foundational culture of continuous improvement, flexibility, technology investment, and listening to the needs of their customers will excel. Those without must adapt quickly. Container visibility within the supply chain and connectivity across multiple platforms have never been more in demand. As a leading container drayage company, Gulf Winds continues to be tasked with delivering more data, more reporting, and more analytics to meet the ever-increasing needs of our clients. Our exception-based tools are online, in real time, and customizable to connect. Volatility across all market sectors and lack of forecasting remains. Pressure will continue to increase for all transportation providers to step up with technology solutions. These solutions, particularly in container drayage, require investment, experience, and forward thinking. Simply scaling old models will not work in the new norm of container drayage. This has always been true, but the new business environment will demand more from our industry.

What is a “black swan” event”? The term was coined in the second century AD, when a black swan was described as a bird so rare that it did not exist. In 2007, Nassim Nicholas Taleb modernized the definition, referring to a black swan event as a truly unprecedented outlier, outside of the realm of regular expectations, extreme in its impact, and rationalized in hindsight as predictable. In 2020, COVID-19 is often described as a black swan event due to the outsized impact that it has had on human lives, world economies, and global trade activities. However, looking back just one century to when the Spanish Flu took approximately 50 million lives and caused untold pain and economic disruption, we realize COVID-19 is not without precedent. Neither is the supersized slump and surge of cargo and commerce that are a byproduct of the pandemic’s impact on today’s global trade. Resilience, quick response, and adaptability are attributes that must be scaled up to meet today’s challenges of the ever-growing trade levels. The knowledge and experience gained from COVID-19’s impact must be shared with the next generation of individuals pursuing careers in international trade through education and advice. CII, through its world-renowned scholarship program, in partnership with its ever-growing community of sponsors and educational institutions, is committed to continuing its support of students pursuing education in international trade. With the inevitability of future change, including more Black Swan events, CII will adapt to and thrive in the ever-evolving trade environment and will continue to support and invest in worthy students in the future.

At IMC Companies we asked our team to share their wisdom on lessons learned from the COVID-19 pandemic. Their comments are so true: Stay calm in the face of adversity, honor and value your relationships, be prepared to pivot and adjust your thinking, and — the message from our chairman — believe in international trade! IMC Companies is the largest drayage provider in the United States, and moving through the pandemic we realized our customers needed more from us. Our shippers had a drastic surge in capacity needs, and so we responded with technology enhancements targeting driver recruitment and retention through faster pay and optimization of loads. Moving forward, IMC’s ongoing growth in driver capacity, coupled with our growth objectives through acquisition, will bring great value to the United States supply chain. Our coast-to-coast storage and terminals will offer shippers critically needed storage options through peak season and surges, shielding our shippers from heavy detention and demurrage charges. Our privately owned chassis in key markets that allow choice will continue to provide relief in times of shortage. IMC Companies’ expedited services will deliver an inland service to customers seeking value in transit and priority delivery. Most importantly, we offer continued confidence to our shippers that when the supply chain is disrupted, IMC Companies works creatively to find solutions that keep goods moving. Capacity through first quarter 2021 is projected to be tight. Shippers should be working with their valued supply chain partners and offering solid forecasts to ensure priority and capacity are in place. Market conditions for motor carriers should take into consideration the value of the driver, drivers’ wait time factors at our port terminals and rail hubs, the overall shortage of drivers, and capacity surges. Contracted freight will be prioritized, and rates should fairly reflect the market conditions. I believe annual contracting offers both shipper and service provider a solid foundation and a stronger relationship. But shipper volume commitments should have reasonable contracting provisions that do not hold the service provider hostage to a contract that is not mutually beneficial in good times and in bad. If the deal seems too good to be true, then it is indeed too good to be true. Someone is getting squeezed, and the extra dollar saved will come back to haunt you when your freight is left on the docks. Transportation service providers seek relationships that offer steady volumes, growth opportunity, and fair margins. The biggest challenge the container shipping industry faces in 2021 is the continued uncertainty in the market. The timing and distribution of a long-awaited vaccine, consumer spending, alternative sourcing of goods, and capacity consolidation by our ocean carriers are all challenges that we face as we enter 2021.

2020 saw the most pronounced swing in trucking capacity in recent memory. The broad shutdown of economic activity in April and May caused trucking demand, as measured by Michigan State University’s For-Hire Truck Ton-Mile Index, to decline far more than trucking employment, as measured by the Bureau of Labor Statistics, on a percentage basis, creating a capacity glut. As lockdowns lifted, demand for truck transportation rebounded more rapidly than trucking employment (see Figure 1), resulting in a level of capacity tightness that has equaled or exceeded the bull market of late 2017 through summer 2018 (see Figure 2). This capacity tightness has resulted in record spot market prices (as measured by DAT Solutions). Data as of mid-November suggest capacity tightness has reached peak levels, which should dampen further upward movement of spot market prices. Click to enlarge Click to enlarge For shippers planning for 2021, it is crucial to recognize that tight capacity in 2020 has a different cause than in 2017–2018. The 2017–2018 bull market was driven by strong demand outstripping the pace at which carriers could add capacity, whereas tight capacity in 2020 was primarily the result of supply not returning once initial lockdowns lifted. As carriers rebalanced their freight networks to accommodate shippers whose demand soared due to COVID‑19, tender rejections were expected to abate, a dynamic that will be reinforced by contract rates adjusting upwards due to very high spot prices. Widespread vaccine distribution in late spring and summer is likely to cause consumers to transition away from goods to services. As durable goods manufacturing is down substantially relative to a year ago, per data from the Federal Reserve, and is unlikely to rebound quickly following vaccine distribution, this suggests capacity conditions for shippers will improve by mid-2021.

Chassis provision has been a topic of discussion for several decades, but most acutely over the past five years. CCM was created by the ocean carriers to drive efficiency into the management of their combined chassis fleets. This was achieved by creating the Inter-Operable Gray Pool (IOGP) concept, where significant synergies were introduced, creating value by saving tens of millions of dollars while also improving service delivery surrounding international chassis provision. The value CCM brought to the supply chain with its cost-efficient operations and high-quality service features became a hallmark of CCM. While the IOGP model is often considered the preferred chassis provision choice among industry professionals, evolving market dynamics compel us to look through a wider lens and recognize chassis provision’s role in a more broad and rather complex intermodal supply chain. Over the past several years, CCM has recognized this changing dynamic and has been assessing how to contribute value to the supply chain while evolving its business model to meet new demands. Driven by its ability to deliver high-quality service via an efficient and transparent cost model, CCM’s success has been propelled by its core competencies — technology and organizational expertise — which will serve as the key factors in shaping the future of CCM and its product and service offerings that will add significant value to the supply chain. Looking ahead, in addition to managing IOGP pools, CCM will expand its footprint as well as its value proposition by building on its foundation of state-of-the-art technology and unmatched operational knowledge and expertise. As such, we are looking forward to 2021 as we redefine the value we bring to the supply chain by introducing new technology-driven products and services that leverage our strengths, elevate our role within the supply chain, and drive CCM’s evolution.

The running joke in IT is that COVID-19 drove digital transformation forward five years in less than five months. It has done the same for the truckload trucking industry. Several years’ worth of market cycles have occurred since March 2020 — peaks and valleys of demand that were unevenly distributed across industries, companies, and lanes. While there is always some level of variability in volume and rates, they have never been as unbalanced as in this current period. The silver lining, however, seems to be a growing consensus amongst shippers, carriers, and 3PLs that transportation procurement needs to evolve. Holding annual reverse auctions for contract rates that are then fed into static routing guides, while acceptable during stable time periods, has failed during the volatility of the pandemic. In a fast-changing environment, shippers need to include more dynamic procurement methods in their transportation portfolios. Shorter contracting periods, index-based contracts, tiered based pricing, and other innovative contractual forms need to be added to a shipper’s portfolio, which should already include dedicated and spot. The rate of change and disruption does not look to be slowing down in 2021. Therefore, shippers need to adopt these more dynamic procurement methods and incorporate better visibility into how their networks are performing. All lanes are not the same and should not be procured or managed the same. Shippers must be able to analyze and segment their networks according to their own characteristics. For example, volume consistency and cadence on a lane have more of an impact on carrier pricing and behavior than does the total volume. Only if shippers have the ability to identify, monitor, and analyze networks can they effectively manage their transportation portfolios during volatile times — such as we are seeing now and expect to see going forward into 2021.

For all that’s changed in this pandemic year, the things that have remained the same stand out to me. We still depend on farmers to grow the food we put on our family tables. We still need building products to improve our cities and towns, consumer goods for our homes, and groceries to stock our pantries. As a result, the ships, trucks, and trains that carry these goods have had to maintain their state of perpetual motion. More people than ever before recognize that the people who move goods across North America and around the world are essential workers. Their hard work has helped to feed the world and sustained us all through the struggles of 2020. I have had the pleasure of working in a group of railroaders with a conviction that they would deliver in the face of whatever challenges arose. Their ongoing success testifies to their grit and determination. I’m certain others in the transportation industry have seen this among their employees. It’s something we should continue to celebrate. Leading into 2021, we must persist in listening to public health authorities and putting their guidance into practice. We must clearly communicate our actions, plans, and measures with others in the supply chain and with our employees to ensure they understand what we’re doing and why we’re doing it. In doing this, we protect our employees and their families, we protect our businesses, and we strengthen the bonds that hold us together. If we’re successful, those bonds will remain long after COVID-19 retreats from our everyday lives. The pandemic has proven the resilience of the supply chain. We need to remain steadfast in our commitment to deliver for each other, our customers, and our communities and carry this momentum into 2021 and beyond.

Trucking companies are feeling pretty bullish about the market. A strong rate environment from 2020 is expected to hold and perhaps even strengthen into the new year. And while capacity remains tight, carriers have continued investing, providing a better service product for most customers. Yet one of the industry’s most persistent priorities, professional drivers, remain a key area for trucking and shippers to collaborate. Rather than lose out on capacity and rates, shippers can control their destiny better when they meet trucking companies in the middle to support drivers. What can shippers do? First and foremost, respect the driver’s time. When a driver waits hours to load or unload, that takes money out of their pocket. Time is money, and efficient utilization of that time is key. That’s become even more important during the pandemic as drivers request more home time with their families. Shippers of choice are better at getting drivers processed and back on the road quickly and efficiently. Second, provide a safe haven for drivers to park and rest. If you’re a shipper with a big lot, why not offer a portion of your secured area for incoming drivers to park? Your load can rest on location, secure and on-time. You are protecting the driver’s safety and that of your product. Again, it’s about utilizing a finite asset — the driver’s time. If lack of local parking causes a driver to stop four hours away from the destination, instead of onsite or nearby, that’s four hours of wasted time. Third, walk the talk. Carriers today know down to the minute how much time drivers spend at shipper docks. That data, along with driver input, goes into shipper scorecards. If a shipper truly wants to be a partner in the driver experience, do the right thing. Turn them quickly. Provide restroom access. Treat them with respect. The shipper who does best by the driver is rewarded with reliable, consistent capacity.

COVID-19 has affected every sector of our business, including our people, operations, and customers, and we’ve had to adapt accordingly by taking all necessary steps to protect our employees and the communities in which we operate as well as customer supply chains, vendors, and partners. This is not the first time in history that CN’s resilience has been tested. In response to the unprecedented challenges associated with the coronavirus, we were able to continue running a solid operation to safely serve our customers, keeping the economy and cross-border trade moving, by deploying our multi-phase Pandemic Plan in early March. Our employees bravely kept physically coming to work and demonstrated yet again how essential they are to the economy. Both in the field and at home, we’ve adapted our way of working and doing business. Disinfection regimens were enhanced and amplified, travel was restricted, and employees not required on-site were strongly encouraged to work from home. At this time, we continue to operate very efficiently, and our network is extremely fluid. From where we stand, we can see that the economic recovery is underway. Q3 was a quarter of sequential recovery starting in July. We have been able to bring back many of our employees to active service, and we have added train starts and frequency of local first-mile services. Despite the pandemic, we are pursuing our long-term strategy and continuing to deploy technology as the next driver of value to CN and our strong pipeline of CN-specific growth opportunities. We also made some permanent changes and adjustments during the pandemic, and we will continue to be on the lookout for cost savings opportunities. The future looks good, and we are focused on delivering long-term sustainable profitable growth. We have been able to generate solid free cash flow, which has allowed us to weather the storm, and we continue to manage our business efficiently while being sensitive to any new opportunities. We are obviously keeping a close watch on how the current wave of cases goes, but we are ready for 2021 and we are ready to keep moving the economy.

As BNSF looks to 2021 and beyond, we are experiencing a significant shift, escalated by COVID-19, as the rate of e-commerce growth accelerates. There is no doubt that consumers’ desires to have their goods faster than ever before will continue to have a big impact on the future of supply chain logistics, and we recognize how essential it is that retailers be able to rely on their supply chain partners to deliver reliable service. This starts with our positioning in the global supply chain and superior speed-to-market that comes from leveraging the US West Coast ports. Not only does the West Coast provide a shorter route from most major Asia ports, but it also has more frequent sailings connecting retailers quickly to the markets they need to reach. As the largest gateway between Asia and North America, the West Coast has more capacity than the other North American ports combined. Through our sustained capital investments and leveraging of advanced technology such as automation, we have ensured that we are positioned for growth opportunities across all of the markets we serve and that our customers’ cargo is transported as safely, reliably, and efficiently as possible. One of the best examples of our long-term commitment to expand capacity is our 2,200-mile Southern Transcon route, which creates a seamless supply chain between the West Coast ports and the nation’s biggest and fastest-growing inland markets. As we look beyond the pandemic, we anticipate that retailers will continue to count on the benefits that the US West Coast has to offer as they look for ways to further optimize their supply chain. As our nation’s largest intermodal network, BNSF is well prepared to be their rail partner of choice, so they are able to effectively serve key markets well into the future.

Most of the world is relieved to have 2020 in their rear-view mirror. Politics, lives lost and disrupted from the pandemic, hospitalization crises, and a generational economic meltdown dominated headlines. Among all of those challenges, one previously underappreciated, vital American strength shone through, with some of its catchphrases being used at kitchen tables and on network news. Our nation’s incredibly resilient, increasingly customized, and complex supply chains literally kept us fed and kept lifesaving supplies rolling through it all. From the folks who strategically design and implement technological processes to the frontline truck drivers and warehouse workers, our supply chain and logistics heroes deserve a round of applause. America and much of the world have seen supply chains battle-tested in ways many of us thought were previously unimaginable. In contemplating 2020’s epilogue, one might try to envision the opportunities for 2021: the hopes for a quick economic turnaround and return to a relatively normal lifestyle. But those hopes hinge entirely on how successful America can be in two areas: our respect for science, including preventative social distancing guidelines, and the distribution of vaccine and therapeutics. The latter will stress-test our supply chain once again, and in novel ways. Think: cold chain transport at –80° Celsius to every inch of the planet. The sooner we solve the COVID-19 puzzle, the sooner the global economy gets back fully online, and the sooner millions of out-of-work Americans get back to work. Those of us in the supply chain will have a front row seat for all of it. As a nation, the United States has always counted on truck drivers to be on the front lines of natural disasters, and they have never failed to show up. However, the risks truckers confronted in 2020, and continue to face, is nothing short of heroic. When New York City was considered a hotbed of infection, and we were far less certain about how the virus spread, truckers rallied to bring life-saving supplies to those in need. When Pennsylvania unwisely made the short-lived decision to shut down rest stops, allowing no respite from the road, truckers didn’t let that deter them from delivering their shipments. Looking to 2021, the year could go at least one of two ways. If every single American does what it takes to curtail COVID-19 infections, we have a great chance to rebound strongly in 2021. If we as Americans direct our efforts toward competing on the world stage in reducing transmissions, seeking to be among the best countries in controlling transmission and keeping the economy open, while we distribute the vaccines effectively, we could see a sharp V economic recovery. Alternately, if we continue allowing the virus to freely wash over the population, and we don’t socially distance, our hospitals and our morgues will be overrun. People will die from both COVID-19 and non-COVID-19 related illnesses who require surgeries and hospitalizations, and more states may need to shut down greater parts of their economies. As of late November 2020, morgues are beginning to be overrun. In early 2020, our economy was strong after a 10-year record run. Today, our economy is much more fragile, with millions of jobless Americans. Nobody wants to see a recession in 2021. The choice is clear, and it’s up to us. I hope and believe that we are up to the challenge. Frontline workers and the most at-risk communities should see vaccinations in December into January, with additional populations beginning to be vaccinated in larger quantities as the first quarter proceeds. Production should ramp up quickly, and we’ll need all of it and all makes of safe vaccines. Operation Warp Speed leaders and those of us involved in vaccine distribution expect vaccines to reach the majority of Americans by mid-to-late second quarter into third quarter. These are best guesses, and we all hope it’s sooner. One thing is certain — we should begin preparing for regular uncertainty. Why? It’s obvious. The freight market shifted more often in the past decade than ever before. In the past 40 years, there have been five capacity crises, four of them in the last six years. Nobody is big enough to control a $1T U.S. freight market, but each of us should better prepare our organizations for today’s rapidly shifting marketplace. Smart shippers are reexamining budgets, embracing flexibility, and using brokers strategically, to prepare for each twist and turn. Vaccines will tighten historically tight reefer capacity, as capacity is siphoned from cold chains and shifted to serve this extraordinary humanitarian effort. The World Health Organization has estimated that more than 50 percent of vaccines may lose their efficacy globally every year due to temperature control, logistics, or shipment-related issues. Hopefully, the American supply chain will be far more effective than that, but developing countries will have major challenges. Expect much more attention paid to those of us in supply chain management in 2021 as the vaccine challenges and successes are made public. What remains to be seen is how many trucking companies and owner-operators are able to weather all of these storms, in order to assist in the nation’s recovery. In just the last 6 months of 2020, we lost nearly 150,000 drivers from the smallest American fleets. We need trucking to be vibrant if we wish to see that V-shaped recovery materialize. That’ll require shippers to utilize brokers as regular, peer-to-peer partners with their best core carriers, to prop up those smaller fleets. If our past is any indicator, we’ve got a hardy stock of drivers willing to put it all on the line to ensure America keeps moving. And we can’t wait to be able to give them a high five at close range when this is all over.

The fourth quarter of 2020 was very busy for cross-border operations. Laredo, Texas, was one of the hottest markets in the entire US toward the end of the year, and Load To Truck Ratio (LTT) spiked to more than 20–1. Market conditions remained extremely challenging as we closed out the year, and they are anticipated to remain the same through much of 2021. While the increase in southbound volumes, driven by a strong retail quarter, has provided additional US equipment in Mexico, the imbalance between northbound and southbound volumes remains a big concern. Capacity out of Mexico and the border is very tight; that, coupled with border crossing delays and a shortage in linehaul drivers, resulted in premium shipping costs and longer transit time for cross-border shipments. Border crossing times at the World Trade Bridge @ Laredo, TX have considerably increased creating a bottle neck at the border and causing delayed deliveries. There is no indication that border crossing times will improve going into Q121. In the last two weeks of December, we did a lot of advance planning. These are some of the variables we took into account, all of which remain on the table in 2021: Repositioning fees remain in place for deadheading empty equipment from the border or other regions in Mexico in order to secure equipment, and they need to be reconsidered. Plan for a potential increase of three to four days over your normal cross-border, door-to-door transit time. Provide service providers with advance load-planning notice and request equipment as far in advance as possible in order to secure equipment needed. If the nature of product allows, consider transloading at the border to allow connection with a wider carrier network in the US side. Direct US equipment for cross-border operations, on both directions, will come at a high premium with low equipment availability. Outlook for 2021 is that market conditions will remain challenging, with the prevalent cross-border disruptions in 2021 having bled into this year. Freight volumes will rise as shippers are expected to bring production levels back to 100 percent, driving an increase in transportation rates.

The year 2020 has been unlike any other. The efforts of all maritime personnel on ships and shoreside who kept the cargo moving remind us of the critical importance of ocean supply chains and the need to remove barriers between origins and destinations. Regulations can be as much of an obstacle to the efficient movement of cargo as any physical barrier. As such, the Federal Maritime Commission (FMC) has sought to reduce regulatory requirements that can impede the fluidity of commerce. A regulatory review process commenced four years ago has led to several changes benefitting both industry and consumer. The commission delivered relief to industry last spring when we provided temporary authority for carriers to file service contracts up to 30 days after they became effective. This COVID‑19--related relief was well received, and after additional analysis, the FMC has initiated a rulemaking to make this a permanent regulatory change. Keeping store shelves stocked and materials delivered to manufacturers brought attention to the fundamentally essential nature of ocean cargo to our nation’s economy. Ocean carrier agreements are beneficial to US shippers and consumers. They help to maintain competition and choice in the marketplace. However, alliances require close monitoring due to their potential for anticompetitive behavior. The unusual circumstances and challenges created by the COVID-19 pandemic have increased the Commission’s scrutiny of capacity reductions by global alliances. The FMC receives and examines exhaustive amounts of information from regulated entities to determine trends in the marketplace and the potential for illegal behavior. Any indication of carrier behavior that may violate the law will be immediately addressed. If necessary, we will seek an injunction to halt further operation of such alliance agreement. Whether during normal times or during a pandemic, the Federal Maritime Commission is firmly committed to ensuring competition and integrity for America’s ocean supply chain.

2020 saw a monumental step in reducing the environmental impact of shipping, as the 0.5 percent cap on sulfur emissions from marine fuel entered into force. Thorough preparations by ocean carriers, bunker providers and regulators ensured a smooth implementation, testament to the industry’s ability to make big changes for sustainability. Addressing climate change by reducing and eventually eliminating our industry’s carbon emissions is the next big step, and 2021 will be a pivotal year. One critical step will be the establishment of an -IMO-supervised international research and development effort as proposed by the WSC and industry co-sponsors. The road to zero-emission fuels and technologies is hard for deep-sea shipping, and current research is not adequate to get us far enough, fast enough. The $5 billion industry-financed International Maritime Research and Development Board would provide research and development at scale, accelerating development to put zero-emission ships on the water in the 2030s. The industry is committed to making the necessary change, and technological development and investment certainty will jump-start the switch. 2021 will also be the year where we hope to see the world recovering from the heavy human toll and economic impact of the pandemic. The plight of seafarers, stuck at sea due to national restrictions, is a close-to-home example of the humanitarian toll of COVID-19. To exchange crews, shipping lines reroute vessels and charter aircraft, and organizations and governments have developed innovative solutions to mitigate the problem. But in the end, the solutions depend on actions by individual national governments. Ship crews must be recognized as essential workers and measures put in place by governments to enable crew changes. Anything less ignores the contributions of and hardships faced by seafarers and puts the distribution of vaccines, medical equipment, food, and other essential goods at risk.

While US President-elect Joe Biden is widely expected to improve diplomatic relations with China and tone down the harsh rhetoric used by the Trump administration, the tariffs on $370 billion in Chinese imports are not likely to be changed early in his administration, due to the growing distrust of China among the public and members of both parties in Congress. But Biden’s advisors have indicated a willingness to relax the tariffs, especially where US manufacturers have been hurt. Biden also sees the mending of relations with our European allies as a way to increase pressure on China. The early lifting of the 232 tariffs on steel and aluminum from most countries that Trump imposed based on “national security” grounds, for example, is likely to facilitate such united efforts, with respect not only to China’s economic policies but also to their flagrant human rights violations against the Uyghurs in Xinjiang, following reports of detention camps and forced labor. With very few exceptions, almost every US industry has had to bear the increased costs, lost profits, employee layoffs, and other dislocations occasioned by the Trump administration’s unilateral trade war against China in the form of increased tariffs up to 25 percent. There is no question that for many years China has engaged in sustained unfair trade practices in the form of intellectual property theft, forced joint venture arrangements, massive state subsidies to targeted industries, and limited market access. Ever since China joined the World Trade Organization in 1991, there has always been skepticism that China would live up to its obligations to operate by fair and transparent trading rules. However, as China’s economy grew and became the world’s primary manufacturing center, companies in the United States and most other Western nations became increasingly dependent on the lower costs and efficiencies in sourcing virtually everything from bedroom slippers to heavy equipment there. The political will to deal with China on a macro basis was thus tempered by this increasing economic reality. In reaction to increasing imports, job losses to outsourced manufacturing, and shifts in US production capacity, individual industries launched a barrage of antidumping and countervailing duty cases against imports from China, usually resulting in additional duties of more than 300 percent. There are currently antidumping and countervailing duty orders outstanding on 142 products from China, everything from steel to chemicals to pencils to paper clips. This piecemeal approach to fighting China’s trade practices has been seen as ineffective in stopping the Chinese regime’s more egregious policies. The Obama administration engaged in negotiation of the Trans-Pacific Partnership (TPP), a multi-party free trade agreement, as a counterweight to the growth of Chinese economic strength among its Asian neighbors, but the agreement hit a brick wall in Congress. President Trump’s campaign to reverse all trade policies of his predecessors and return the country to its early-twentieth century protectionist and isolationist postures won him election and support among a large segment of the US population. However, the blunt force instrument of punitive tariffs, borne directly by US importers and indirectly by US manufacturers, downstream distributors, and consumers, exacerbated by the explosion of the COVID-19 pandemic in the US, has been questioned by many as the best policy for dealing with China’s behavior. While China’s exports to the US by 2019 declined to their lowest level since 2012 in the face of the tariffs, US exports to China also declined when China retaliated against US imports of soybeans, oil, and motor vehicles. The escalating trade war caused economic pain on both sides and led to trade flows away from both China and the United States. For example, with tariffs cutting into their bottom lines, manufacturers have relocated operations to countries like Vietnam, Indonesia, and Mexico. A spokesperson for the American Farm Bureau stated that “farmers have lost the vast majority of what was once a $24 billion market in China.” This notwithstanding Trump’s relatively paltry financial subsidies to the US farm industry. As the trade war dragged on, China lowered its tariffs for its other trading partners as it reduced its reliance on the US market. Trump lauded his “historic” phase one trade deal with Beijing at the end of 2019, which largely resembled the offer China had made from the start — i.e., increased agriculture purchases plus commitments on improved intellectual property protection, currency, and forced technology transfer, which due to the pandemic-induced recession have not yielded promising results. However, missing from the deal was any movement on state subsidies and China’s use of industrial policies to advantage its own firms over foreign competitors, and market access outside the financial sector. Progress on these issues was put off for a “phase two” negotiation that Trump said was not under consideration.

The value of global trade professionals around the country spiked on Nov. 4, 2020. We all know the simple truth that every time a new administration moves into the White House, there has been a shift in trade policy. President-elect Joe Biden did not spend much campaign time laying out his plans for new trade policy initiatives, but we know his victory will have especially significant consequences. The change is not only a new party affiliation, as has occurred during the last six presidencies, but the replacement of an aggressive president who was very comfortable branding his trade relationships and negotiations a “war.” The strategy and tactics that Biden will employ remain to be seen. But we know this about employment opportunities within the global trade community the past few decades: Change is job security, and change creates new career paths. Every trade professional will be tasked with keeping their firm compliant with US import/export trade policy and able to take advantage of our free trade agreements. We will also soon see the details of Biden’s $700 billion campaign pledge to “buy American.” Luckily, policy change provides high-visibility, career--invigorating opportunities for trade professionals to advise their corporate brain trusts and to navigate the confusion of new trade agreements, revised regulations, tariff battles, and China and EU trade relationships. Biden and his former boss were big proponents of the Trans-Pacific Partnership (TPP). Trump walked away from the negotiations the first week in office, and TPP has since been renamed CPTPP. Get used to using that acronym. Expect the US to become active partners in this trade partnership. With every shipper in need of a team of experts to recalibrate supply chain strategies to account for the inevitable trade policy changes, 2021 will be a year of job security and career opportunities.

In 2021, the global customs community will unite around the WCO theme of “Recovery, Renewal and Resilience for a sustainable supply chain.” Customs administrations will be invited to further digitize processes at borders, adopt collaborative approaches, and enhance stakeholder preparedness in these ways: Recovery by reinforcing collaboration: Enhanced coordination with other national agencies, together with the promotion of collaborative actions and partnerships with the private 0sector, will be at the heart of customs’ approaches to smooth the path towards global recovery in the wake of the COVID-19 pandemic. To this end, coordinated border management and Authorized Economic Operator (AEO) programs, supported by WCO reference documents such as the AEO Compendium and Mutual Recognition Arrangement/Agreement Strategy Guide, will be instrumental. Renewal by harnessing technology: The way customs administrations clear goods at borders should be considered from a fresh perspective. Clearance processes could be further digitized by integrating technology into the performance of customs missions. The benefits offered by the use of blockchain, artificial intelligence, the Internet of Things, and other technological advances should be maximized. Single-window environments and electronic payment solutions should also be developed to a greater extent. In support of technological deployment, the WCO will promote the implementation of its key instruments, such as the Harmonized System Nomenclature 2022 Edition (HS 2022), the Revised Kyoto Convention, and the Framework of Standards on Cross-Border -E--commerce, to ensure the seamless flow of goods across borders. Resilience by heightening stakeholder preparedness: In order to build resilience, customs will be called upon to strengthen -intelligence-sharing capabilities with other customs administrations as well as with other partners in order to facilitate legitimate trade while effectively fighting against the whole gamut of illicit trafficking, including drugs, fake or counterfeit medical products and supplies, endangered species, and IPR infringements. To conclude, resilience cannot be achieved without integrity, professionalism, diversity, and inclusion.

Ocean importers continue to experience high demand for products in the aftermath of the 2020 worldwide commerce shutdown due to COVID‑19. The demand for import products joined with limited supply on ocean carriers will be a major factor in 2021. Economic shutdowns decreased import volume for most of 2020. The resulting lower revenue for ocean carriers caused vessel alliances to opt for reduced (blank) sailings as a way to offset costs. The reduced capacity from blank sailings eventually collided with increased demand for space as the world’s economy started to replenish seriously depleted inventories. Add to that new demand for PPE, vaccines, and related equipment, and importers are challenged to move cargo rapidly. Ocean carriers are incapable of increasing supply on short notice fueled by sudden surges in demand. Blank sailings are expected to continue into 2021 until supply and demand have a chance to balance. Meanwhile, the import shipping boom is adding much-needed revenue to the ocean liners’ coffers, depleted in recent years while their infrastructures suffered from cost cuts. Ocean liners may not be too eager to increase capacity any time soon. Even if the worldwide economy returns to normal in 2021, what incentive is there to return to excess supply and big deficits? Blank sailings may be a post-COVID-19 “new normal,” at least for the near future. The industry has seen ebbs and flows in supply and demand over the years, but 2021 will offer a dynamic not seen before in shipping: Peak seasons will be replaced by peak years. In these circumstances, the NVO’s role becomes more valued and continues to offer importers ways to meet the challenges of space, equipment, and pricing concerns during a shipping boom.

The COVID-19 pandemic has been testing the resilience of logistics supply chains across the globe. But the crisis has also demonstrated the crucial role that transport plays, with interrupted transport and logistic routes across all modes hitting our value chains and economies. Some have questioned the role of trade, calling for more sovereignty or near-shoring, but it is clear that having sources of supply outside one’s country is critical to reduce vulnerability. Europe’s recent experience has shown that international trade is a strength, not a weakness; the EU was blessed to be able to tap into the manufacturing capacity of the rest of the world to buy urgently needed medical goods from abroad during the pandemic. We have also learned from the pandemic that the concepts of resilience and contingency planning should become enshrined in all future EU transport and logistics policies, with an eye toward avoiding any similar supply chain disruptions in the future. In addition to its importance in increasing the resilience of individual countries, trade policy is equally important in addressing key global challenges such as climate change, sustainable development, or the transition to digital services. With this in mind, European forwarders look forward to the announced uptake of EU–US trade relations and welcome the announcement that the EU will soon seek to re-energize trans--Atlantic relations and reinforce political dialogue with the new US presidential administration, especially on fighting the COVID-19 pandemic and soothing trade tensions. It is also time to reverse the trend of weakening multilateral organizations, such as the World Trade Organization. President-elect Biden’s promise to rejoin the Paris Climate agreement would likewise be meaningful. Europe is proposing to increase the 2030 target for greenhouse gas (GHG) emissions reduction from 40 percent to at least 55 percent. This will put the EU on track to reach climate neutrality by 2050 and to meet its Paris Agreement obligations. The Carbon Border Adjustment mechanism, which measures the carbon intensity of products imported into the EU, will help ensure that others follow Europe’s lead. European forwarders are prepared to actively contribute to the substantial reduction of GHG emissions from transport and logistics operations through smart and innovative solutions. The new European policies should support the transition toward the carbon-neutral transport system in the EU by introducing specific instruments and incentives that reinforce sustainable logistics-focused strategies and initiatives undertaken by the industry. These measures must be designed in a smart and proportionate way, with the least possible impact on trade and the free movement of goods in the EU. Ultimately, appropriate funding, both public and private, will be key to realizing the proposed measures and supporting investments in new technologies, most notably sustainable alternative fuels and the infrastructure to deliver them, without which the ambitions of the EU Green Deal will not be reached. The Green Deal and the EU’s economic recovery plan go hand and hand, and this is a sound approach that hopefully will be mirrored in other parts of the world such as the United States. In times of global crisis, it is more important than ever to keep supply chains flowing and to allow maritime trade and cross-border transport to continue. It was for this reason that forwarders called on governments to keep the world’s ports open to ensure landlocked countries would continue to have access to food and medical supplies via neighboring countries’ seaports, especially during the first wave of the pandemic. But for forwarders, keeping freight moving has proven difficult as reliability and predictability of service have eroded while prices increased, allowing carriers to make record profits at a time when much of European industry was in a serious crisis. The US Federal Maritime Commission (FMC) has been closely monitoring blank sailings, utilization of equipment, and “revenue trends” in the current volatile environment in the eastbound trans-Pacific and recently increased its reporting requirements for the carrier vessel-sharing alliances. EU policy makers are calling for a similar initiative, as the speed of any rebound in world trade will rely heavily on the ability of freight forwarders of all sizes to keep global supply chains running smoothly, but also on the abilities of other parties such as carriers to build increased resilience, visibility, and sustainability into those supply chains.

The incoming 46th president of the United States of America will come to office at a pivotal moment in world history. With a global economy ravaged by the impacts of the COVID-19 pandemic, an unstable supply chain, and the pandemic continuing to sweep the globe, it will be ever more crucial that his messages of unity and hope are also reflected in the US’s trade policies. This includes unifying all actors across the transportation and logistics sectors to ensure well-functioning and fluid supply chains that can continue to move goods, including essential goods, in a reliable manner to where they are most needed. By doing so, the US will have the opportunity to set a leading example on the world’s stage for economies all around the globe. The US Federal Maritime Commission (FMC) has in recent years taken important steps toward ensuring a more level playing field for all actors in the supply chain. Its comprehensive six-year investigation into demurrage and detention practices, resulting in its final rule, Docket No. 19-05, Interpretive Rule on Demurrage and Detention under the Shipping Act, was a welcome development for bringing clarity on the reasonableness of such charges to ensure they are proportionate to their intended purposes of incentivizing orderly movement through ports and terminals. In addition, FIATA has welcomed the FMC’s inquiry into carriers’ definition and application of “merchant” clauses in their bills of lading, which will be important to determining the correctness and fairness of liability allocation. As a leading global economy, the US’s trade policies have a critical global influence. The FMC’s work and findings are valuable and relevant not only for the US, but for the whole world. For example, FIATA has already called for governments worldwide to follow the FMC’s example in increasing scrutiny of demurrage and detention practices. It is hoped that the next US administration will make this a key priority when President-elect Biden takes office in January 2021. This will be critical to ensuring the much-needed economic recovery in these difficult times.

In late 2019, I predicted 2020 would be the year of data, and I still see data as being the key to 2021. How the data that is attached to trade transactions moves, who sends it, who needs it, who sees it, and when it becomes available, and to whom, will continue to dominate our discussions in 2021. In addition to collecting and using data to facilitate trade, data is also being used to predict future activities based on trends and more complex analysis and modeling. Traders should ask, how can we make all this data work for us? How will this assist us in our decision-making about where to trade and with whom? Governments are also asking the same questions, but for different purposes. Regardless of the change in administration in 2021, I expect we will still see a heavy focus on trade enforcement in general. As USMCA is fully implemented, expect to see verifications in early 2021 continuing throughout the year. As with any free trade agreement, knowing the country of origin, once a more straightforward determination, has become increasingly complex, yet so much depends on a proper origin determination. With global trade and global sourcing of components, when does a good substantially transform to become a product of one country? How will USMCA, trade remedies, anti-dumping, and countervailing duties be applied to products that consist of components from various countries? Do additional duties apply based on sourcing of component parts? How does the somewhat subjective origin determination become more predictable and uniform? As tariffs, quotas and trade wars continue, in addition to origin -determination, proper -classification and valuation are of utmost importance. Intellectual property right protections and forced labor concerns will add to the increased complexities of who is responsible and accountable. CBP and all agencies with import and export oversight are getting better and better at using the vast amount of data they currently receive to both help facilitate compliant importers and exporters, and ferret out those who, wittingly or unwittingly, are not following all these complex rules. As we move into increased automation and data visibility, new concerns will be: Who provides the data? Where does it come from? Who’s responsible for the accuracy and correctness of the data? Who suffers the consequences when the data is fraudulent? In the US, Customs and Border Protection and partnering government agencies are reliant on the advanced transmission of data to make their decisions. Who will they hold accountable if the data they use to make their decisions turns out to be misleading or just plain false? Will other parties to the transaction be held accountable as the Importer of Record now is under the Customs Modernization Act? Will we see a new Customs Modernization Act in 2021, recognizing the new business patterns we are now seeing, especially those emerging with e-commerce? Will more information be available to the enforcement agencies earlier in the supply chain to monitor sourcing, pricing, and product classification? Who is in control? Prepare for a future around data. Know the importance of your data, know who has it, and how it is being used. Is more information about your imports and exports shared with the government going to help facilitate your shipments, or create more questions? You are your data. Do you know where your data is now?

Prior to the COVID-19 pandemic, our transportation systems were already facing a large investment backlog. According to the American Society of Civil Engineers, the nation faces a $2 trillion investment gap through 2025. Failure to act means the disposable income each U.S. household currently loses each year due to deficient infrastructure could grow to over $5,000 from 2026 to 2040. The pandemic has only accelerated those losses. Yet despite the clear need, Washington has been slow to act. Even with trillion-dollar proposals coming from both the administration and Congress, neither branch was able to resolve partisan concerns to pass infrastructure or a second round of financial stimulus legislation. So how do we ensure action at a time when our nation desperately needs it? For one, there has to be bipartisan support. If Republicans retain control of the Senate, negotiations with a majority-weakened House may enable a compromise. If there is a 50–50 Senate split, the focus will shift to convincing possible swing votes from the Democratic members, particularly Senators Manchin and Sinema. Another thing is to assure that infrastructure investments qualifying for support reflect a mix of funding including public, private, and joint public–private financing. Doing so would enable the demand for federal dollars to be prioritized for projects not likely to be funded by pension and other institutional investors. In order to build broad support — especially for transportation infrastructure — Washington should empower states, cities, and metropolitan areas through more direct funding and project selection authority. They should be allowed to experiment with market mechanisms and develop truly integrated transportation, land use, and economic development plans. Now is the time for transformative leadership. Our executive and legislative leaders need to hear from all of us.

With a raging pandemic and cargo volumes dipping in the first half of 2020, the outlook seemed bleak for liner operators. Then, almost magically, the lights were switched on! Retailers rushed to replenish dwindling inventory and manufacturing plants in China and elsewhere worked overtime to meet demand. This time, the carriers had a new appreciation for the word “restraint,” as opposed to their normal tendency to shoot themselves in the foot. Carrier consolidation over the past few years, coupled with three stable alliances, undoubtedly played a positive role. Carriers managed capacity judiciously and didn’t lose much time in increasing rates in rapid succession, doubling and even or tripling rates compared to the same period in 2019. The trans-Pacific trade, often a quagmire for many carriers, turned into a gold mine. What looked like a perfect storm when the pandemic unfolded turned into a pretty rainbow with a likely booty of around $ 11 billion at the end of it. Will such levels of profitability carry through to 2021? The New Year is likely to start quietly with volumes ebbing somewhat compared to the fourth quarter of 2020 , which saw a peak season that seemingly never ended. The continuing need for PPE stocks should offset some of the softness in popular retail items in the early months of 2021. With only a minor uptick in new capacity and no predictable reason for the decline in consumer demand despite the second and third waves of COVID-19, 2021 should offer carriers a scenario that is similar to what they experienced during the second half of the preceding year. Contract rates will be set from a much higher threshold, which should offset any weakening of spot market rates. For governments that propped up national liner operators such as HMM ( South Korea), Yang Ming ( Taiwan), PIL (Singapore), and CMA CGM (via a relatively less impactful loan guarantee by France), their intervention would appear to be vindicated. Similarly, liner operators that in the recent past had undertaken mergers and acquisitions — Maersk/Hamburg Sud, COSCO/CSCL/OOCL, Hapag Lloyd/CSAV/UASC — must feel that these decisions are paying dividends. A word of caution to the liner industry — don’t push your luck too far — the antitrust watchdogs have not exactly gone to sleep. They should also resist the penchant to nickel-and-dime their customers. That could unleash a concerted pushback. A strong liner industry is paramount to sustain the world’s supply chain. Profitability is key. The operators and their alliances must, however, step up to improve service quality compared to 2020. As the iconic Gucci slogan says, “Quality is remembered long after the price is forgotten.”

Although America’s ports support more than a quarter of the US economy and 31 million American jobs, these front-line facilities still haven’t received federal funding to deal with the impact of the COVID-19 pandemic, despite emergency relief for other transportation sectors. That may change with passage of the Maritime Transportation System Emergency Relief Act (MTSERA). Introduced in July, MTSERA was later included as an amendment to the House’s National Defense Authorization Act (NDAA). The American Association of Port Authorities (AAPA) urged Congress to pass this proposal as soon as possible. The House voted to approve the act Dec. 8, and the Senate was expected to vote any day as this issue of The Journal of Commerce went to press. MTSERA authorizes the US Maritime Administration (MARAD) to provide grants to ports to cover pandemic-related costs, including emergency response, cleaning, staffing, workforce retention, paid leave, procurement of personal protective equipment, and debt service payments. AAPA has steadfastly requested $1.5 billion in COVID-19 relief for ports since the outset of the pandemic. Long-term, following a hurricane, earthquake, tsunami, flood, pandemic, or other disaster, MSTERA enables Congress and MARAD to provide crucial emergency grants. This will help America’s seaports maintain an adequate state of readiness to meet the requirements of US manufacturers, shippers, employers, farmers, and consumers. AAPA also urged $1 billion in supplemental funding to augment MARAD’s Port Infrastructure Development Program (PIDP) in the FY21 Transportation, Housing, and Urban Development Appropriations bill. These funds, in addition to $300 million proposed in the FY21 PIDP appropriation, would be instrumental in modernizing port infrastructure nationwide. Every day, America’s seaports deliver critical goods and materials to communities fighting COVID-19. Essential port personnel, who aren’t able to work remotely, ensure that consumer goods get to the doorsteps of millions of Americans who are safely working from home. It’s vital that Congress provide America’s ports with the resources necessary to address the challenges posed by COVID-19, and to ensure the long-term strength and resilience of our country’s transportation infrastructure.

At the end of 2019, when we submitted our outlook for 2020, we made the following statement: “In the years to come, e-commerce volumes will create new growth opportunities for the air cargo industry and alter trade patterns forever.” Little did we know the impact of the COVID-19 global pandemic on the world’s demand for e-commerce. In 2019, Alibaba’s November 11 Singles Day sales event resulted in a staggering gross merchandise sales value of US $38.3 billion. Alibaba announced that during the 2020 Singles Day event, the volume of goods sold nearly doubled, reaching approximately $75 billion. Alibaba’s service provider, Cainiao Logistics, predicted 700 air cargo charter flights would be needed to deliver the parcels to destinations outside of China. E-commerce sales now have topped a whopping 15 percent of total retail, according to The Wall Street Journal. The demand for e-commerce facilities, logistics, last-mile, and processing technologies is still in the infant stage of global development. But there is still more work to do as airports, already transformed by the COVID-19 pandemic, struggle to find the necessary lift and infrastructure to process and move these goods into a last-mile delivery system. Smaller international cargo airports in Columbus, OH; Huntsville, AL; Rockford, IL; and Greenville-Spartanburg, SC, represent locations where new logistics centers can be created specifically for the purpose of receiving and processing these international parcel volumes. Looking forward to the new administration and potential changes in trade, tariffs, and protectionism, forward-thinking cargo owners, developers, third-party logistics providers and airports will take the opportunity to review the Foreign-Trade Zone program, which provides users with advantages over their competitors in terms of supply chain velocity and duty benefits.