A Fall Preview

By Nate Herman

We had an interesting summer as an industry. Despite many headaches for our customers, travel this summer returned with a vengeance. And everyone went back-to-school in person this fall, leading to brisk sales of backpacks and related gear. This great news remains tempered, however, by ongoing congestion issues, high tariffs caused by Congress’ failure to renew GSP and the ongoing trade war, and more recently, the threat of growing inflation.

So, where do we stand as we enter fall and the critical holiday shopping season?

With 99% of all travel goods sold in the U.S. today being imported, our industry’s 100,000 American workers depend on a smooth supply chain. However, over the last two years, we have paid 3-5X more to experience a severe deterioration of service and an explosion of unjust and exorbitant fees.

While spot rates have fallen recently, they are still 2-3X what they were only two years ago. And many importers have not benefitted from the decline because they had contracts negotiated last spring locking in rates before this summer’s decline. Further, the decline in rates has been made up for by the imposition of multiple new fees and the continued excessive use of detention and demurrage fees, charged even when the importer is physically unable to remove the loaded container or return the empty container because of congestion.

Further, while the backlog of ships at the Ports of LA/Long Beach had declined, the backlog of ships at alternate ports on the East, Gulf, and West Coasts had surged. Meanwhile, importers’ continued inability to access their loaded containers or return their empty containers means congestion still reigns at the Ports of LA/Long Beach, along with the daily detention and demurrage fees that go with them.

And now, as if the deterioration of service the last two years wasn’t enough, because of declining spot rates, carriers have announced a series of blank sailings on key routes for September and October, worsening congestion and delays at a time when we can least afford it as we head into the all-important holiday season.

But Congressional passage of the TGA-supported Ocean Shipping Reform Act (OSRA) this summer has strengthened the FMC and put the spotlight on carriers, giving hope that the situation will slowly improve.

On the trade side, our industry still faces the 25% Section 301 tariffs on our imports from China. Regrettably, those tariffs show no signs of going away. And 20 months after it expired, Congress has still taken no action to renew the Generalized System of Preferences (GSP) program, which provides duty-free access for U.S. travel goods imports from developing countries like Cambodia, Myanmar, Thailand, Pakistan, Indonesia, and Sri Lanka. Over 17% of all U.S. travel goods imports now come from GSP-eligible countries.

While the opportunity for GSP renewal this year remains dim, there is a new push in Congress to provide a refund of duties paid on U.S. travel goods imports from GSP countries. The purpose is to keep small and medium companies, like those in our industry, whole as Congress continues to debate GSP renewal. Congressional passage of the GSP refund bill would give our industry a huge infusion of cash at a time when we need it most. TGA will push hard for Congressional passage of this bill before the end of the year.

As always, stay tuned.