Capital Beat

By Nate Herman

Everyone from President Biden to port directors and pundits have claimed that we are now seeing the other side of the shipping crisis, the very same shipping crisis that has led to exorbitant and unjust costs, empty shelves, and higher prices at the cash register for the travel goods industry this holiday season. But, in the immortal words of Monty Python, the shipping crisis is instead telling everyone “I’m not dead yet!”

The White House and pundits point to the lower number of ships waiting outside the Ports of Los Angeles and Long Beach, only 16 on December 15, the clearing of some cargo off docks, and slightly slower shipping rates as their evidence that the shipping crisis’ days are numbered.

Regrettably, the reality is anything but that.

First, the ship numbers. In November, the terminal operators, the ports, and the southern California air quality regulators agreed that dozens of ships sitting out in San Pedro Bay was not really good for the environment, or for optics either. So, they reached an agreement to stage ships waiting at anchor, waiting to enter the ports, as far as 150 or 300 miles out. The 16 ships at anchor only counts the ships within 25 miles of the ports. The reality is there are over 100 ships waiting at sea to enter the ports. Further, the average wait for those ships before they can berth at the ports has grown astronomically to record levels, with the Port of LA now reporting average wait times of 19.7 days and the Port of Long Beach reporting a whopping average 28.6 day wait time, a whole month.

Second, the clearing of cargo off docks. After the Ports of LA/Long Beach announced on October 25 that they would impose a so-called “super demurrage fee” on longstanding containers on docks, a fee that every ocean carrier said they would pass on to you, the shipper, there was an effort to move cargo off docks. Instead of that cargo going to you, a lot of that cargo was, in many cases, instead moved to off dock facilities. The ports, citing progress in reducing cargo on the docks, has repeatedly delayed the implementation of the fee. However, that progress has appeared to stall as the ports have cited the same 37% reduction in containers for three weeks, finally increasing to 47% on December 13.

Third, the decline in shipping rates has stalled and, on some routes, has started to increase again. The reality, however, is that even if rates continue to stay flat, or even decline slightly, those rates are still almost 4-8 times the rates you were paying last year.

And those pundits are ignoring the other “truths” you, the shippers, are now facing. On the U.S. side, terminal operators have started to charge shippers fees for missed appointments, and terminals around the country are now adopting the “temporary storage” fees for cargo stuck on the docks, all fees paid by us, the shippers, for situations that are completely out of our control.

Add to that China’s new data restrictions making it more difficult to track ships in China and new COVID lockdowns affecting Chinese product and ports – all leading to more delays and more confusion.

And, finally, the current labor contract for longshoremen at U.S. West Coast ports expires on July 1, 2022. The longshoremen have already rejected an extension of the current contract. And, if past is prologue, contract negotiations can lead to strikes, work slowdowns, or lockouts.

To paraphrase Monty Python, the shipping crisis looks to be very much alive and “feeling much better”.

But there are small signs of good news on the horizon. Thanks to the efforts of the Travel Goods Association (TGA), and many others, we now have the full attention of the White House and the press. We keep pushing the need to bring all of the stakeholders to the table and lock them in a room until they come up with real solutions to bring this crisis to an end. We keep calling for immediate relief for the travel goods industry by eliminating the China Section 301 tariffs and immediately renewing the Generalized System of Preferences (GSP) program.

And Congress is listening. In fact, on December 8, the House approved key TGA-supported legislation that will give the Federal Maritime Commission (FMC) real teeth over the ocean carrier industry to stop price gouging, contract violations, and unfair late (detention and demurrage) fees.

In the end, if we all work together, we can finally bring the shipping crisis to a quick and timely death.

By Nate Herman

It was a good summer. Travel surged and kids returned to in-person school. But, by the end of summer, serious cracks were ruining our industry’s pretty summer sunsets. Parents struggled to find backpacks for back to school and the luggage sections of stores looked like they were hit by the hurricanes that have devastated much of the country.

As we enter fall and creep towards the critical holiday season, one thing is clear. The #ShippingCrisis is only getting worse. And if no one acts soon, we are all going to be singing the holiday blues.

As I write this column:

• Shipping container rates continue to explode, achieving record highs week after week. Our members are reporting rates eight times what they paid this time last year and are now witnessing rates that exceed the value of product being shipped within the container.
• Shipping contracts are routinely ignored with many containers being knocked off ships despite payment of exorbitant fees. Our members have little recourse due to the concentration of power among carriers.
• Containers that are successfully shipped face significant and growing delays in getting into U.S. ports. For example, there have been over 40 ships at anchor for over a week waiting to get into the Ports of Los Angeles and Long Beach alone.
• After each of those seemingly impossible and costly challenges, our members face the final hurdle of significant (and spiraling out of control) delays to get containers out of ports or rail yards.

This #ShippingCrisis is doing serious, long-term damage to not just our industry but to the U.S. economy and all American businesses.

That is why the Travel Goods Association (TGA) is pushing President Biden to step up and take action now to end the #ShippingCrisis. President Biden must bring all stakeholders to the table immediately, and keep them there, to develop and implement short-term solutions to the #ShippingCrisis. Only when all stakeholders are forced to work together and lay everything on the table can we find a way out of the current crisis. Several creative ideas are already on the table, from increasing port hours and using the National Guard to unload cargo to using Naval ports to alleviate port congestion.

Aggressive enforcement of existing rules and regulations is essential. The Federal Maritime Commission (FMC) has conducted numerous inquiries on excessive and unjust fees. Those inquiries must now turn into enforcement actions to bring the scourge of excessive fees and contract breaches to an end.

The bottom line is that our industry, and our economy, cannot afford to wait any longer for President Biden to take action. And TGA will keep pushing for that action.

If you want to help, please tell President Biden, and your members of Congress, to act now to end the #ShippingCrisis at https://www.congressweb.com/aafa/takeaction#. It only takes a minute to do.

For more information, please contact TGA’s Nate Herman, nate@travel-goods.org, 301-775-7633.

By Nate Herman

The last year confronted the industry with unprecedented challenges. Not only did the economy drop off a cliff but travel came to a dead stop.

However, the past few months have given us some hope. The high vaccination rates and the subsequent reopening of the U.S. economy are looking to usher in a summer of travel, resulting in a positive change in sales for the first time in over a year.

But just as we are seeing light at the end of this very long tunnel, the tunnel seems to have suddenly become a lot longer.

Why? Because now that demand has returned, we have another, possibly even bigger problem. Getting the supply.

The shipping crisis that has brought our nation’s ports to a standstill threatens our industry’s recovery. Every month, the shipping crisis has only gotten worse, leaving critical industries without key inputs, creating significant delays that threaten to leave store shelves empty, and imposing significant new costs on our industry at a time when we can least afford it. Without action, the crisis will not abate until 2022, or beyond, calling into question whether we can provide the product consumers want, at the price consumers want, during our peak selling seasons – summer, back-to-school, Labor Day, and the all-important holiday shopping season.

How did we get here? The factors are many: lack of access to empty containers; labor shortages at ports caused by surges in COVID cases; carriers charging shippers 4-5 times contract rates and then still “rolling” them off ships; lack of available chassis to move containers; restrictions on truckers on when they can access containers at ports; limits on truckers’ ability to bring in empty containers and take out full containers (so called “dual transactions”); lack of capacity at ports to handle ever larger ships; lack of air cargo capacity; unreasonable and arbitrary fees on shippers at all points in the shipping process; and more.

Today, ocean carriers are announcing record profits and ports are announcing record shipments while you, the industry, are paying record prices and being charged excessive and unreasonable fees. Even if you pay these high prices, you are faced with immense uncertainty – delays of days or weeks to receive your cargo, if you are event able get the product on a ship in the first place. But this problem is much bigger than just our industry, negatively impacting every facet of the U.S. economy.

Yet, we have seen no action from the Biden administration or Congress to address any part of this crisis, much less working towards a solution to bring this looming disaster to an end.

We need action now. First, we need the U.S. government to enforce carrier contracts and stop unreasonable and arbitrary fees. Second, we need Congress and the Biden administration help us deal with these spiraling costs by removing the biggest cost on our industry – tariffs. We need President Biden to end the 25% punitive tariffs on China and we need Congress to renew the Generalized System of Preferences (GSP) program. And, finally, the U.S. government must bring all stakeholders together ASAP – carriers, port authorities, terminal operators, truckers, shippers, rail operators, etc. – to force them to sit down at the table and hash out solutions to bring this mess to an end.

The Travel Goods Association (TGA) will lead the industry’s advocacy by raising awareness of the impact of this crisis on our industry and driving policymakers to take action to end it.

For more information, please contact TGA’s Nate Herman at nate@travel-goods.org or 301-775-7633.

By Nate Herman

The atmosphere is finally changing. We can see signs of hope all around us. Families are booking summer trips, businesses are talking about in-person conferences and trade shows starting this fall, and President Biden has declared that, if we all work together, we can come together with family and friends to celebrate July 4^th at barbeques and parties. As President Biden put it, we will not only be celebrating our country’s independence but also our country’s independence from the coronavirus.

We believe summer will also bring good news for the industry on the trade front. With strong advocacy from TGA, we believe Congress will renew the Generalized System of Preferences (GSP) program before Congress goes on its August recess, if not earlier. We know GSP’s duty-free access for U.S. travel goods imports from Cambodia, Myanmar, Thailand, Indonesia, the Philippines, and other developing countries has been critical to help the industry move away from China, and the crippling tariffs on our industry caused by the U.S./China trade war. The January 1 expiration of GSP has hit the industry hard, at a time when we could least afford it. Any GSP renewal will be retroactive, which will enable the industry to get refunds of all of the import duties paid during GSP expiration.

As always, however, there are clouds on the horizon. And these clouds take the form of the shipping crisis facing the country. We need to be getting product into stores now so that product is there when families start shopping for their summer vacations and business people start shopping for their first business trip in over a year. Yet the delays at the ports could deny us our product just when we need it most.

That is why TGA is part of a growing coalition of businesses, shippers, truckers, and others urging Congress and the Biden administration to take action now. We need you and your colleagues to write your members of Congress to tell them to make sure the current crisis at the ports doesn’t stymie our long-sought economic recovery.

We have made it easy for you. Just go to https://truckeraction.com/campaign/detention-and-demurrage-is-breaking-our-supply-chain/. It only takes a couple of minutes.

Together, we will remove any barriers to the recovery of our industry and for the American economy.

For more information, please contact TGA’s Nate Herman at nate@travel-goods.org or 301-775-7633.

By Nate Herman

As we begin 2021, we say goodbye to a year that will likely go down in history as one of the worst for the industry – worse than 9/11 and worse than the 2008-2009 financial crisis.

Yet, we begin this year with a new hope. Two vaccines, and counting, are helping us see the light at the end of the tunnel. And, after eight long months of inaction, Congress finally approved a COVID relief package to help us get to the end of that tunnel, with an extension of the Paycheck Protection Program (PPP) and critical support for our customers, hardworking American families.

Obviously, we are not out of the woods yet. We begin this year facing some of the same challenges as last year, in the form of new lockdowns and new travel restrictions.

And we start the year facing new challenges. While Congress gives with one hand, they take with another, failing to renew the Generalized System of Preferences (GSP) program before they left for the holidays. Under GSP, U.S. travel goods imports from developing countries such as Thailand, Cambodia, Burma (Myanmar), Indonesia, Sri Lanka, the Philippines, and Pakistan enter the U.S. duty-free. U.S. travel goods imports from GSP countries now account for 15.3% of all U.S. travel goods imports. As a result of Congress’ inaction, GSP expires December 31, 2020, amounting to a huge tax increase on the industry at a time when we can least afford it. TGA is working hard to get the new Congress to retroactively renew GSP as soon as possible.

Meanwhile, the industry still faces 25% punitive tariffs on U.S. travel goods imports from China and the threat of 25% punitive tariffs on U.S. travel goods imports from Vietnam. But, while it may take time, the new Biden administration will likely take a different approach to trade, one that recognizes the importance of trade to the U.S. travel goods industry and our almost 100,000 American workers.

I know today appears bleak but, if we stay on target, we can have a new hope for a better tomorrow. And TGA will be here to help you every step of the way.

For more information, please contact TGA’s Nate Herman at nate@travel-goods.org or 202-853-9351.

By Nate Herman

As I write this, Labor Day is signaling the unofficial end of summer. A summer like no other. Usually at this time, we are capping off huge sales of all types of luggage for the annual surge in travel by air, land, and sea with a spike in sales in backpacks, totes, and other travel accessories for the back-to-school season.

Instead, this summer we have taken the road less traveled…literally. And don’t even get me started on air and sea.

The patchwork re-opening of retail has been half-baked, hamstrung by lack of a national mask mandate, with small travel stores, the cornerstone of our industry, taking the brunt of constantly changing rules and no relief on rent like their larger neighbors.

Demand has been slow to recover, with air travel just getting off the ground but greatly restricted, car travel picking up but for much different trips, and the cruise industry grounded altogether.

And then back-to-school took on a whole new meaning with over half the country starting the school year partially or completely online.

However, our industry has embraced this summer’s unprecedented challenge the same way the industry overcame 9/11 and the Great Recession. Our industry has adapted, tailoring our product and how we deliver it to meet the consumer’s changing needs and evolving situation.

During this pandemic, Americans have embraced the great outdoors like never before – camping, hiking, biking, kayaking, boating, etc. And who supplied them the gear they needed – our industry. As families packed up and went to the beach or to the lake in droves, we provided the gear to make that happen.

How did we deliver? We followed our customers online so they could find the travel goods they needed, and have that gear delivered right to their front door.

Moreover, this Labor Day weekend, my family went camping at a national park. Not only was our campground, and every campground in the park, sold out, but the park was packed the entire weekend. Meanwhile, I don’t know of a single colleague whose family did not go somewhere this weekend – down to the ocean, to the lake, or up to the mountains. Frankly, it was one of the few times I was happy to see crowded roads and slow traffic.

This road less traveled is not without its potholes. Our industry still faces 25% punitive tariffs from the main supplier of our product, with no end in sight. And the Generalized System of Preferences (GSP) program, one of the few bright spots for our industry, whose duty-free access for travel goods imports from countries like Cambodia, Burma (Myanmar), Thailand, and Indonesia, is due to expire at the end of this year. We at the TGA are fighting hard for GSP renewal, but nothing is guaranteed in Washington, D.C.

And finally, of course, is what happens next with the pandemic, which regrettably, only time will tell. But I believe that by embracing the road less traveled, our industry just might find its way to the other side of this pandemic.

For more information, please contact TGA’s Nate Herman at nate@travel-goods.org or 202-853-9351.

By Nate Herman

First, I must acknowledge the reality from which I am writing to you as we approach the end of May. The industry has suffered a quintuple indignity. Travel has stopped, retail has dropped off a cliff, the government’s bailout program has fallen short, and, as the small guys, we still have to pay our rent and all of our bills in full and on time, unlike many of our bigger competitors. Oh yeah, and we just passed the one-year anniversary of having to pay a 25% punitive tariff on the majority of products we sell.

But I am also writing to you the day before the unofficial launch of the summer travel season – Memorial Day weekend. And you know what? It isn’t all bad. Many people I know are traveling this weekend. People are also looking for any form of relief from “lockdown” cabin fever. I have seen a flood of pictures on social media of friends hiking, camping, and embracing the outdoors like never before.

If you look for it, really hard, there are positive signs elsewhere. Europe has begun to open up again to tourists, led by Italy. The cruise industry is talking about restarting this fall and bookings for 2021 are really strong.

And all of us have seen those pictures of crowded planes. While those pictures raise other serious questions, it does mean that people are ready to travel.

Travel might look different, and utilize different modes of transportation, but it’s there, and it’s growing slowly but surely.

In addition this week, the last of the states finally started to reopen retail, albeit slowly.

To butcher my metaphors, we are definitely not in Kansas anymore. But I do see some light at the end of this very long tunnel.

Through it all let’s not forget this is an industry that survived 9/11 and the Great Recession. With this glimmer of hope, I leave you with a quote from a not so famous movie that serves this industry well during this unprecedented time – “Never give up, never surrender.”

For more information, please contact TGA’s Nate Herman at nate@travel-goods.org or 202-853-9351.

By Nate Herman

I am writing at the end of a momentous week here in Washington, DC. President Trump signed the U.S./China Phase 1 trade deal in a big White House ceremony. And Congress overwhelmingly approved the U.S.-Mexico-Canada Agreement (USMCA), the successor to the North American Trade Agreement (NAFTA).

As I witness these historic events, I keep thinking to myself, “Where’s the beef?”

In addition to showing my age, the phrase succinctly captures the reality for the U.S. travel goods industry. To put it another way, as we approach an important holiday for some, the industry looks at these “landmark” agreements and asks, “Why is this week different than any other week?”

The answer, regrettably, is that it isn’t any different. When these agreements are implemented, absolutely nothing will change for the industry.

Our industry continues to pay 25% punitive tariffs on our imports from China, which supplies over 2/3 of all travel goods sold in the United States. Our industry still faces skyrocketing prices and crowding out by our 2nd largest supplier, Vietnam, as electronics, toys, furniture, clothes, and shoes rush in and steal our capacity. And the U.S. government is still aggressively reviewing (and pulling in some cases) the duty-free access of our third choice – developing countries benefitting under the Generalized System of Preferences (GSP) program. And the travel goods rules under USMCA…they are the same as NAFTA.

What was I doing this week? Testifying in opposition to the U.S. government’s proposal to impose up to 100% punitive tariffs on our imports from Europe over…wait for it…European subsidies for Airbus and France’s digital services tax.

And there is little relief in sight. Out of the hundreds of petitions for relief from the China tariffs reviewed by the U.S. government so far, they have granted relief for only one…yes…one petition on a travel goods item.

In short, there is no beef.

Yet, all hope is not lost. There remain options…and opportunities for the industry.

First, the U.S. government still has hundreds of travel goods petitions to review on the China tariffs. 

Second, the GSP program still provides tremendous opportunities for the industry to look at importing travel goods duty-free from Cambodia, Burma (Myanmar), the Philippines, Pakistan, Sri Lanka, and many other countries. And there are positive signs that the ongoing U.S. government reviews of GSP benefits for Thailand and Indonesia won’t impact duty-free benefits for U.S. imports of travel goods from those countries.

Third, the Miscellaneous Tariff Bill (MTB) process, which could temporarily reduce or eliminate tariffs on imports of certain products, continues to move forward. The MTB package, with dozens of travel goods products under consideration, is on pace to be approved by Congress by the end of this year.

Finally, just like Wendy’s offering the elusive beef in the commercials of yesteryear, TGA offers its members advice on other ways to mitigate the costs of the trade war.

For more information, please contact TGA’s Nate Herman at nate@travel-goods.org or 202-853-9351.

By Nate Herman

The U.S. travel goods industry faces an existential threat not seen in almost 20 years.

China, which supplies over 2/3 of all travel goods, is experiencing 25% punitive tariffs. The industry faces skyrocketing prices and crowding out in our second largest supplier, Vietnam, as electronics, toys, furniture, clothes, and shoes rush in and steal our capacity. And the U.S. government is aggressively reviewing (and pulling in some cases) the duty-free access of our third choice, the developing countries benefitting under the Generalized System of Preferences (GSP) program.

In the face of these seemingly insurmountable challenges, how can we dull the pain? No, I am not suggesting that everyone start drinking. Instead, I urge the industry to look at opportunities to mitigate the tariffs and rising costs.

Getting Exclusions from the Punitive China Tariffs

The Trump administration recently closed the portal for petitions requesting exclusions from the 25% punitive tariffs on China, receiving 30,327 petitions by the deadline. Of those petitions, 863 requested exclusions for travel goods. If any of those petitions are granted, anyone importing the product described in the petitions, not just the petitioner, will be excluded from (and rebated) the 25% punitive tariffs for a period of almost two years, from the inception of the tariffs back on September 24, 2018 until August 7, 2020.

But there is a catch. First, the process is moving excruciatingly slow. In the month since the portal closed, the Trump administration has only reviewed 2,174 petitions, or 7.2% of the 30,327 petitions submitted, and has granted exclusions for only 156 of those petitions (none for travel goods). Further, if/when a travel goods petition is granted, your product must meet the specific product description in the petition to get the benefits.

De Minimis

Under a little-known provision in U.S. customs law called “de minimis,” you can send a direct shipment to an end consumer duty-free if the value of the shipment is less than $800. This is great for e-commerce. The catch is that the shipment must go directly to the end consumer (no more than one shipment per consumer per day). Moreover, the shipment must come from outside the United States – either directly from the factory OR from distribution centers located in Canada or Mexico. Again, de minimis offers the potential for tariff savings, if you can meet the requirements.

Miscellaneous Tariff Bills (MTBs)

Through the Miscellaneous Tariff Bill (MTB) process, Congress allows importers to petition for the temporary reduction or elimination of tariffs on U.S. imports of certain products. Again, there is a catch. There can be no U.S. production of the product. In addition, the cost to the U.S. Treasury in lost tariffs must be less than $500,000 annually – a tall order for high-tariffed travel goods, but doable. The current process has just started, with petitions due by December 10. The process ends with Congress voting on a final package of MTB provisions in fall 2020, with the temporary tariff reductions going into effect January 1, 2021. While that might seem a far way off, TGA is working with companies NOW to participate in the MTB process, to get petitions in by the December 10 deadline.

I know the future looks bleak, but the industry does have options, and TGA is here to help.

For more information, please contact TGA’s Nate Herman at nate@travel-goods.org or 202-853-9351. 

By Nate Herman

To paraphrase one of my favorite TV shows, winter is coming – and it’s not just another cold spell for the U.S. travel goods industry, it has been a blizzard that kicked the industry’s butt. We all felt the chill. On May 10, ahead of the critical back-to-school and holiday shopping seasons, President Trump increased the punitive tariffs on U.S. travel goods imports from China from 10% to 25%. As noted previously, this 25% tariff is on top of the incredibly high 8%, 10%, 17.6%, 18.6%, and 20% tariffs we already pay on our imports of travel goods. With 82% of all U.S. travel goods imports coming from China, the situation is dire to say the least.

And any prospect for a quick resolution of the U.S.-China trade war seems to have gone out the window in the months since that announcement. Instead, the situation has gone from bad to worse.

Add to this dire situation the fact that on May 31 President Trump withdrew India from the Generalized System of Preferences (GSP) program. India is the third largest supplier of travel goods to the U.S. market.

The bottom line is that our industry is facing a generational shift in our supply chains not seen since the end of import quotas almost 20 years ago.

So, like the heroes from Game of Thrones, can our industry overcome this adversity and find its way to spring?

Let’s look at the options.

You can stay in China. Many of you have long-term relationships with your suppliers. And  production is hard to move, or can only be moved over a long period of time, at great cost. But how much of the 25% can you and your suppliers absorb? And will consumers still buy with higher prices during the upcoming holiday season?

You can move your production. It is hard, can be costly and it takes time. But where would you move?

Vietnam is the #2 supplier of travel goods to the U.S. market, but everyone is rushing to Vietnam. And not just our industry. Clothes, shoes, toys, electronics, etc. are headed there too. Even if you can get capacity, you could be paying a steep price for it.

What about the GSP countries – Cambodia, Indonesia, Burma (Myanmar), Thailand, Pakistan, Sri Lanka, etc.? You can import your travel goods duty-free from GSP countries,  a nice incentive that makes the investment of time and money more worthwhile.  But, as noted with India, President Trump can take away GSP benefits at a moment’s notice. In fact, both Indonesia and Thailand are under review right now. Further, the benefits are temporary. Congress has to renew the program before the GSP benefits expire at the end of 2020. They usually do, eventually, but nothing is for certain in the current environment.

What about this hemisphere? Under the CAFTA-DR Free Trade Agreement, U.S. imports from Central America and the Dominican Republic can enter the United States duty-free. These countries do produce travel goods today, though currently in small quantities. And what about the United States? Is it feasible to return production to a country most of you left decades ago?

Lots of questions, questions only you can answer.  Of course, TGA stands ready to help as your companies chart new paths in these uncertain times.

And I have confidence the industry can, and will, succeed. I have witnessed the industry overcome the adversity of 9/11, when travel came to a standstill. I have seen the industry weather the Great Recession. Today’s existential threat to the industry might be bigger but I have confidence the industry, like the heroes of Game of Thrones, will win the battle and live to fight another day.

For more information, please contact TGA’s Nate Herman at nate@travel-goods.org or 202-853-9351.