The Obama administration has been gradually ratcheting up pressure on the Chinese government to make changes in the valuation of the Yuan.  On September 16, Secretary of the Treasury Tim Geithner called for faster appreciation of the Yuan.  While testifying before the Senate Banking Committee he stated, “China needs to allow significant, sustained appreciation over time to correct this undervaluation and allow the exchange rate to fully reflect market forces. It is past time for China to move.”

A member of the Chinese government’s monetary policy committee responded on September 20 stating that “China will not go down the path that Japan did and give it to foreign pressure on the Yuan's exchange rate.”  This was a reference to currency interventions by Japan and the US during the mid 80’s to control trade deficits. The strong yen ultimately attracted huge investments in the Japanese economy which led to the infamous asset bubble in 1990.

Meanwhile with the Japanese yen approaching 80 yen per dollar, the Bank of Japan took action on September 15 to intervene in currency markets to devalue the yen.  According to Bank of Japan official Masaaki Shirakawa, “We have to pay more attention than before to the downside risk of the economy.  We are ready to implement appropriate action in a timely manner if judged necessary.”  His reference was to a struggling export market in Japan that is creating an enormous drag on the domestic economy. 

Last week Democratic leaders in Congress made plans to move ahead with a bill allowing retaliation against China for currency manipulation which escalated the issue further.  Later the Chinese Premier, Wen Jiabao, responded.  “The conditions for a major appreciation of the renminbi do not exist. If the renminbi were suddenly to rise by a large degree against the dollar, we cannot imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs, and how many migrant workers will return to the countryside... China would suffer major social upheaval”.

The stakes are enormously high for the global economy.  As the currencies of the top three global economies, the value positions of the dollar, yen, and Yuan have a huge impact on the flow of international trade.  Often one of the threats considered to counter currency valuation issues are punitive tariffs. In fact on September 25, the U.S. House Ways and Means Committee adopted a measure to seek tariffs on Chinese imports into the USA.  A vote in the House is currently set for next week.  In a politically charged campaign season, it is difficult to predict what may happen next.  If the bill is passed, it remains to be seen how China would retaliate and how changes might impact Japan and other APAC economies. 

On Saturday August 7 two ships collided off the Mumbai coast and the port has been closed for several days.  The Port of Nhava Sheva handles 60% of India’s container traffic. The accident appears to have been caused by failure to follow standard communications protocol between the vessels and the port traffic controllers.

In addition to delays already caused by the monsoon season, the port shutdown will create severe congestion for India ocean freight.  Delivery dates for ocean shipments routing through Mumbai will most likely be delayed, and the overflow of time sensitive cargo may impact air capacity into India as well.  Import customers may have to pay additional charges for rerouting of containers to alternate ports in India.

Additionally the Port of Mumbai banned shipment of hazardous goods on August 11.  This ban will become effective on September 6.  It was triggered by a recent chlorine gas leak at the port docs that hospitalized over 100 people.

According to the port authority, “It has been decided that dangerous goods listed under the International Maritime Dangerous Goods Code will not be accepted/handled at Mumbai Port.” The movement of “relatively less” hazardous goods, which include sulphur and calcined petroleum coke, will be permitted on direct delivery basis, subject to a 15-day advance clearance.  The list of cargo allowed to be shipped will be modified depending upon the degree of hazard and quantum.”

The sudden decision has prompted protests from the local trade community. The restrictions will further restrict freight capacity in and out of India. 

For more information on how this may impact your supply chain please contact your local NNR office.

The global recession has forced many shipping lines to drastically reduce their capacity. As was reported by industry watch dogs, at their lowest point shipping lines cut capacity by 11%. But as the effects of the financial crisis are easing, ocean lines are reporting a surprising increase in the demand for cargo capacity.

According to the senior VP Asia-Europe for CMA CGM, Nicolas Sartini, the demand figures are “a little bit incredible”. He went further in commenting on the expectations, and suggested that the demand is going to remain strong causing space to be a bit “tight”. According to Sartini, there are several factors in play when it comes to capacity and container shortages, and one of them is the lack of available credit. CMA CGM expects demand to remain strong and warns that lack of capacity will force the ocean lines to increase rates. The company has already announced a third-quarter rate increase on the Asia-Europe trade of $250 per teu, and is planning to introduce a peak season surcharge of $200 per teu.

While everyone is concerned about the situation in the Eurozone and in particular the Greek financial situation, it seems that the recovery is on a strong path toward rebound. A recent report by AXS Alphaliner highlights the positive changes that have been taking place in recent months. According to the report, China has recorded its highest ever level of exports at $137.4 billion with a 44% year-over-year increase. European exports reached a 21 month high, while the US exports topped $25.5 billion.

Many industry executives are concerned by the potential bottleneck effects of increased demand, and are urging shipping lines to increase capacity. Sunny Ho, Director of the Hong Kong Shippers’ Council, announced that the availability of containers was a “big problem”, but the situation has improved somewhat in recent months. But according to Paul Tsui, Chairman of the Hong Kong Association of Freight Forwarding and Logistics, shortages of some specialist high-cube equipment are still a problem.

While shipping lines are cautious in increasing capacity, retailers and manufacturers seem to be more aggressive in the recovery process. According to the industry reporters, peak season is expected to bring more problems and delays on the Asian routes. Capacity is going to be scarce, and the retailers and manufacturers will be willing to pay a “top dollar” for the available space.

We at NNR Global Logistics have anticipated the potential shortages, and have been rapidly expanding our ocean freight capacity. Currently we have contracts with several key Asian carriers, and offer capacity on the majority of Asian lanes. Due to the fact that we have planned ahead for the upcoming season, we can offer competitive rates on both FCL and LCL shipments.

For more information on our ocean services, please visit our website at www.nnrusa.com or contact one of our multiple worldwide locations. Contact information and further details are available on our website.

The devastating effect of the 2008-2009 world financial crisis has been hard felt in the logistics industry. Global logistics volumes fell dramatically and the financial stability of many large common carriers became questionable. Ocean carriers cut significant capacities, airlines reduced flights and road transport carriers were forced to park their fleets in the hope that global trade would rebound. The good news is that this rebound may be upon us now. Macro economic data and trade volumes have been indicating a gradual recovery from the dismal results of 2008 and 2009. Many industry experts are forecasting a very gradual recovery in logistics volumes.  Several carriers are already seeing increases in shipment activity.

According to HIS Global Insight, the economic recovery is expected to generate a significant growth in the shipping volumes around the world with APAC to North America routes leading the way. In 2010 the average global growth rate is expected to reach 8.5% and hit 10% for APAC to North America bound cargo volumes. For 2011 the growth rate is expected to be slightly lower, but it is still expected to be around 7.8% mark.

However the recovery is not going to be equally strong in all regions. According to HIS report, the strongest growth is expected on Trans Pacific Routes while Trans Atlantic volumes are only expected to rebound to 2007 levels by 2013. APAC to Europe volumes are expected to build on the previous year’s growth, but Europe to APAC shipments are expected to take a little longer than previously expected.

All signs of recovery are present; market indexes are up, currencies have stabilized and orders for durable goods are steadily increasing. Global demand is rising and the world’s leading shipping lines are eager to restore the pre crisis level capacities that they had to cut when the world trade collapsed.

APL is reporting a 32% volume increase in handling of the 40’ containers with an average of 12% increase in revenues per shipped container. According to the information released by the company, it handled 204,400 equivalent units for the period of 4 weeks; period ending on April 2. This is an 8% increase from the previous 4 week period and represents a 32% increase on year to year bases. Capacities of bulk (liquid and dry) shipping are expected to reach pre crisis levels by the end of the year, experiencing on average 9% growth in 2010 and staying stable for the foreseeable future.

The situation is also improving for air cargo. According to the director general of IATA, Giovanni Bisignani, the volume of the airfreight handled on year to year basis has increased by 28.1% worldwide. However, according to the report released by the organization, the effects of the global economic crisis have not fully disappeared. Passenger and cargo volumes are still down by 1% from the highs of 2008. Even though the economic collapse has hit hard the air freight industry, almost all regions of the world have shown a steady pace of recovery, with the Latin America emerging as a leader with an impressive 47.9% growth rate followed by the US, with an average of 32.2% increase in shipments.

We have come a long way from the low points of late 2008 and early 2009. It was an unprecedented challenge to the logistics industry globally. While the process of the full recovery is not going to be an easy one, we remain very optimistic that international trade volumes and logistics volumes will continue their recover to pre-recession levels.

This year has been turbulent for European markets. Just as the EU commission was preparing to start discussions on Iceland’s acceptance in to the economic bloc of 27 nations, the volcano erupted and caused the lock down of an entire European airspace.

Nobody could have predicted the event but the consequences were enormous. Thousands of passengers were stranded in airports unable to get to their places of destination, air cargo sat in warehouses waiting for the airspace to be opened and thousands of manufacturers were forced to close the assembly plants due to the lack of vital manufacturing components. Among them was one of the best known auto manufacturers in the world, BMW.

According to the director general of IATA Giovanni Bisignani, airlines have been the most affected, with an estimated loss of $1.7 billion during the 6 day lock down. He applauded the decision of the EU governments to compensate the airlines and stressed the urgent need to reform the EU travel system. He highlighted the need of creation of a “single European sky”, that envisions a European network manager, functional air space blocks and a unified framework to maintain efficient operation of the system. The measure is expected to save $5 billion in overall operational costs and reduce the carbon emissions by 16 million tons a year.

Besides the unified management system, he highlighted the need for the contingency plans and systems of communication and transportation in the events similar to the Icelandic volcano. According to Bisignani, the volcanic eruption exposed the inability of the current transportation system to deal with the natural disasters.

The April standstill in the European skies highlighted the importance of the aviation industry in the everyday lives of Europeans. It showed that it is a vital lifeline for the economic and social well being of the citizens of more than 3 dozen countries, and it is in a desperate need of reforms to make sure that the events of April 2010 will never be repeated.

In the age of globalization, air cargo has become a vital component of successful economic performance. Today’s consumers demand higher quality goods and they want them delivered faster than ever before. Delayed flights and grounded airplanes mean that companies that rely on fast shipping can no longer deliver goods and services and are forced to forfeit the revenues.

This situation has highlighted key challenges the EU must grapple with to address future disasters in a coordinated way. Unlike the USA which has straightforward control over its own airspace, EU member countries must work together in concert to manage theirs. EU transport ministers will be meeting on May 4^th to discuss creation of new regulations to improve the air traffic management of the EU airspace. If the system is created successfully, North American and Asian countries are expected to follow the example and synchronize their systems for improved efficiency.

Even though the new air traffic management system represents a major challenge that the European countries will try to confront, it is expected to bring a much needed effectiveness and efficiency that current EU system critically lacks.

On Wednesday JAL announced many revisions to its flight schedule which will occur during the second half of 2010. Analysts are predicting that JAL could post an operating loss of about US$1.7 billion for the current fiscal year which ends on March 31, 2010.  JAL hopes by restructuring its flight capacity it can return to profitability as swiftly as possible.

JAL has decided to discontinue services on 15 international routes with 86 weekly roundtrip flights.  Overall, international passenger capacity will be reduced by 40% compared to fiscal year 2008.  Previously JAL had also announced discontinuation of its freighter service.  These combined reductions will have a significant impact on Asia Pacific air freight capacity.

Additionally JAL will be increasing the number of international flights operating out of the Haneda Airport in Tokyo. Haneda is closer to metropolitan Tokyo than Narita.  Currently 5 international flights are operating in Haneda and this will be increased to 14.

For details on which flights are affected, please see Japan Airline’s official press release here: http://press.jal.co.jp/en/release/201004/001531.html

Much has been written about the world economy, its major players and emerging markets. Speculators have been losing money and making fortunes based on the steps developed nations are taking to avoid another devastating blow to the world’s economic activity. Even after global recession, there is still no competitor to the USA in terms of economic volume and influence in today’s world. It has a 14 trillion dollar economy, which accounts for 25% of world GDP.

But the picture is gradually changing. China continues to grow as a world leader in manufacturing with economy of 4.32 trillion. India’s economy is experiencing strong growth along with its population which has now reached 1.2 billion people. Brazil, the largest economy in South America, is also becoming an economic force to be reckoned with. These key emerging markets are creating new opportunities for well positioned companies to harvest the benefits of the “new era of global markets”.

China is viewed as one of the major challengers of US dominance. Its GDP has been growing 6% a year, even when the world was in standstill. Part of the reason why China has enjoyed this unprecedented growth is its smart but very unpopular monetary strategy that keeps its currency undervalued and makes goods produced in China more attractive to US and EU consumers. It is simply cheaper to manufacture in China than it is in US or EU. In addition to manufacturing advantages, China is the biggest US debt holder and it is the country that holds world’s largest foreign currency reserves, mainly in USD. The Chinese and US economies are vitally linked and need each other to continue their growth.

In terms of world trade, in India and China there are close to 2.5 billion people that are willing to work for much lower prices than workers in the US and EU. This presents an enormous opportunity for manufacturers and the logistics industry. As long as the goods are cheaper to manufacture in Asia, global freight demand will most likely recover. As China and India’s domestic GDPs climb, it creates new demand for US and European products. Thus signs are positive that the gradual global economic recovery will continue to stimulate trade and increase logistics volumes.

The logistics industry has long enjoyed the benefits of globalization and the effects of open markets. Changes that are taking place today are opening new windows of opportunity for multinational supply chains. Improving social and economic conditions in different parts of the world, will only contribute to a stronger demand and increased cargo flow.

After the unprecedented shut down of Europe air traffic due to an ash plume in Iceland, flights are finally resuming.  Eurocontrol estimates that by Wednesday April 21, 75% of normally scheduled flights will be operational again.  However it will take weeks for the enormous backlog of air freight to clear up.  Some airlines are still placing restrictions on the type of cargo they are moving. IATA estimates that the flight bans have cost the airlines more that $1.7 billion as of April 20.

This form may be used pursuant to 19 CFR 103.31, which allows importers, consignees, and shippers to file certifications for confidential treatment for certain inward and outward vessel manifest information, such as importer and/or shipper names and addresses. In addition to electronically filing certifications, certifications can be mailed to: Disclosure Law Officer, Headquarters, U.S. Customs Service, 1300 Pennsylvania Avenue N.W., Washington, DC 20229.

According to 19 CFR 103.31, there is no prescribed format for a certification; however, the certification shall include the importer's/consignee's/shipper's Internal Revenue Service (IRS) Employer Number, if available.

Confidential Treatment May be Requested for Inward and/or Outward Manifests

With respect to inward vessel manifests, 19 CFR 103.31 provides that an importer or consignee (or their authorized employee, attorney, or official) may submit a certification for confidential treatment of:

· the importer or consignee names and addresses (including marks and numbers which reveal these names and addresses); and

· the names and addresses of all of the shippers to such importer or consignee.

For information appearing on the outward manifest, 19 CFR 103.31 allows a shipper (or their authorized employee or official) to submit a certification for confidential treatment of the shipper's name and address.

Fields That Need to be Completed on CBP’s New Web Form

CBP’s web form can be used for inward and/or outward vessel manifest confidentiality requests. The web form requires the following fields to be completed:

· requestor’s name, address, phone number, email address, and role

· relationship of party making request: first party, on behalf of self or company, or third party representative or agent

· date of submission

· the type of confidentiality requested (inward, outward, or both)

· whether the requestor is an individual importing personal effects or household goods, or other

· the tax ID number

· variations of names to be protected

Certifications Valid for Two Years Only

Both initial and renewal certifications are valid for a period of two years only. Renewal certifications should be submitted at least 60 days prior to the expiration of the current certification.

Info Covered by Certification May Not Be Published by the Press/Included on CDs Sold to the Public

Although 19 CFR 103.31 allows accredited representatives of the press, including newspapers, commercial magazines, trade journals, and similar publications, to examine, copy, and publish certain vessel manifest and summary statistical information on imports and exports, any information covered by a confidential certification may only be examined and copied by the press; it cannot be published. In addition, information covered by a confidential certification will not be included on the CD-ROMS of Automated Manifest System (AMS) data that are sold to the public.

Confidentiality web form:

http://www.cbp.gov/xp/cgov/trade/automated/automated_systems/ams/vessel_manifest_confid_form.xml

For additional information and guidance, please feel free to contact  your local NNR representative.

On March 25, 2010 Japan Airlines announced that it will discontinue all freighter service by October 2010.  JAL will move toward a new cargo business model which solely utilizes cargo belly space on JAL’s passenger flights.  JAL currently operates 10 747-100 freighters and plans to remove these aircraft from it’s fleet.

JAL is the sixth-largest air freight carrier in Asia, and this move will undoubtedly further impact air freight capacity in the Asia Pacific region.  JAL had been seeking to merge it’s cargo operations with Nippon Yusen, but merger talks ended early in March.