NZCCO meets with ICLC re congestion issues
NZCCO executive committee members met with representatives of the International Container Lines Committee (ICLC) last Friday for an update on developments with the continuing supply chain issues and how best for shippers to manage the situation, particularly in the face of the coming export season. We previously met with ICLC on this matter in mid-October and the situation has continued to deteriorate since then.
ICLC reiterated that low productivity at POAL combined with high levels of import cargoes has seen delays at POAL now stretching out to 12-14 days (even waiting 17 days for a berth). Several vessels have changed rotations to try to manage schedules. All are working hard to use every piece of spare capacity they can find but recognise that this isn’t a long term solution for a problem that looks likely to extend into the second quarter of 2021. ICLC’s focus right now is to come up with a reliable schedule that provides NZ shippers with some measure of certainty in the face of this unprecedented supply chain disruption. We expect to hear more on this in the next week or so.
They continue to advise that the best approach for shippers is detailed forecasting of requirements: provide lines with as much visibility as possible about what capacity you’re going to need and where you need it.
Although the cascading issues throughout the NZ supply chain underlines the fragility of our supply chain we’re by no means the only country experiencing disruption. Congestion spikes and equipment shortages on the back of a massive swing in change in consumer spending habits are being felt all around the globe – with reports of maritime supply chains at breaking point and little clarity on when the situation will improve.
In news just to hand ANL and Hapag-Lloyd have announced the re-routing of a vessel to Marsden Point/Northland terminal on 6th December instead of 22nd December. Details below:
2nd December – Press Release (ANL to Provide a Proactive Solution to New Zealand Customers)
Customer News – Hapag-Lloyd NZ Service (NZX) Change of Terminal in Auckland
The World Shipping Council is recently reported as saying that right now lines face global demand for containerised shipping beyond anything that anyone could predict. “The pandemic has severely disrupted patterns of demand and supply all over the globe, putting extreme stress on every part of the system. The fact is that there is a finite amount of equipment available. The faster that equipment is loaded, moved, emptied, and returned, the better it is for everyone. Unfortunately for those who offer simplistic solutions, the system is more complicated than that, and it will take willingness to collaborate and think in new ways from everyone in the supply chain to resolve the current situation.”
For further insight into the issue from the lines perspective check out this Radio NZ interview with the Head of Market at Maersk Oceania:
FTA/APSA WEBINAR Australia/NZ Shipping Update Wednesday 9 December 12 pm AEDT/2pm NZ
The Australian Peak Shippers Association / Freight Trade Alliance have extended an invitation to all NZCCO members and affiliates to join their free webinar at 12PM AEDT/ 2PM NZ on Wednesday 9 December when they speak with My Therese Blank (Head of Oceania Export Market, Regional Ocean Management, Maersk, on the current status of Australia/NZ shipping and projections for the months ahead.
Digitalisation of Export Documentation webinar – presentation materials
Our thanks to Rachel Harvie from MPI for her recent presentation to NZCCO on MPI’s progress and plans for digitalisation of export documentation. A copy of her presentation can be found here :Digitalisation of Export Processes – MPI
If you missed the webinar and would like to view a recording, it is available here: Passcode: %VL*83D5
Trade Update
Back in November all eyes were on the US election. Were we going to have four more years of America First and a challenge to the international rules-based system that is so fundamental to New Zealand interests, or were we going to get a more multilateralist and normal US Administration under a President Biden? Well it seems we will have President Biden.
It is early days and his full team has yet to be identified. However we do know that he is proposing to nominate Antony Blinken as Secretary of State. Blinken is a strong supporter of multilateralism and has publicly supported TPP and other trade agreements. So this is a good start. Biden is, himself, of very similar view.
However, while the tone of the new Administration may change back to something more like US Administrations pre-Trump we should not expect all the tensions in the global trade environment to disappear. The US will still have concerns about the operation of the WTO Dispute Settlement system. The US will still be wanting other WTO reforms. And concern about China will not disappear.
An early test of the new Administration will be how it deals with the issue of the WTO Director-General. The Trump Administration has, in effect, vetoed the candidate most likely to achieve a consensus – Dr Ngozi Okonjo-Iweala from Nigeria (but also a US citizen). Will the US move its support from their preferred candidate Yoo Myung-hee from Korea and support Okonjo-Iweala? Or will the US demand a re-opening of the process? At this stage we do not know the answer to these questions. But they will be sitting there for President Biden on 20 January 2021. It is critical that if we are to return full functionality to the WTO that the next Director-General has the full confidence of the United States.
The FTA negotiations between the US and Kenya and the US and UK will be worth watching also. Expect big delays in these.
The big question for New Zealand is whether the Biden Administration will be wanting to return the US to the TPP (now CPTPP) family? It is too early to answer this. Biden and Blinken are TPP supporters but there are varying attitudes to TPP in the President-elect’s Party and we still don’t know the final make-up of the Senate. We also don’t know what the Republican Party is going to think about trade policy without Trump in the White House. Is is going to be Trumpist and protectionist or is it going to revert to the position it occupied since WW2? What we do know is that the new Administration will take some time to settle down and determine its priorities. It too will be watching the make-up of House and Senate closely and it will be testing attitudes of the Republicans.
Meanwhile the rest of the world moves on….
New Zealand has new Trade and Foreign Ministers
Hon Damien O’Connor has been appointed Minister for Trade and Export Growth and Hon Nanaia Mahuta has been appointed Minister of Foreign Affairs. Both are experienced Ministers. Minister O’Connor was Minister of State for Trade and Export Growth for the past three years. He had specific responsibility for the RCEP negotiation. Hon Phil Twyford takes on the role of Minister of State for Trade and Export Growth. At this point his exact responsibilities are unclear. We welcome this new Ministerial team.
RCEP
As we have been predicting for some time the Regional Comprehensive Economic Partnership was signed in mid-November but without India. Signatories are New Zealand, Australia, China, Korea, Japan and the 10 members of ASEAN (Brunei, Indonesia, Cambodia, Laos, Indonesia, Vietnam, Thailand, Singapore, Malaysia and the Philippines). The absence of India reduces the value of the agreement to New Zealand (as New Zealand already has FTAs with all the participants) but the Agreement is good news. There are new market access gains into Indonesia for goods exporters and there are improved services commitments by Thailand for New Zealand. But the real gains will be simplified rules of origin, increased certainty for exporters, and the impact the agreement has on the regional economy. This is the first FTA linking China, Japan and Korea.
The Agreement needs to be ratified before it comes into force. Many are hopeful that sufficient ratifications are achieved to allow it to enter into force by early 2022.
NZ-UK FTA
The Third Round of negotiations between New Zealand and the UK was due to be held prior to Christmas. But there has been some slippage into January. This is going to be an important round as it will see the first exchange of market access offers – always a key moment in a FTA negotiation. We believe that the delay reflects the reality that the UK will be unable to make an offer to New Zealand on agriculture until the Brexit process is finalized.
NZ-EU FTA
The ninth round of negotiations with the EU began on 24 November. The previous round ended inconclusively with the EU being unable to improve its hugely deficient market access offer. We are not expecting to see much progress this round as the EU has still not been able to improve on this offer. The reason is the same as that mentioned above. The EU can’t move for New Zealand until the terms of the Brexit deal are finalized.
Brexit
There is growing optimism that negotiations between the EU and UK will conclude shortly. We know that legislation is being drafted in the UK to implement the deal and that plans are being put in place for it to be passed under urgency – before the end of the year. What we do not know is the detail.
We recommend that all exporters to the UK and EU monitor the MFAT and NZTE websites for the latest advice on this situation.
A new Economic and Technology Sector Update for Taiwan, prepared by the New Zealand Commerce and Industry Office in Taipei has been published.
It includes details on:
– Economic developments in Taiwan
– Consumption and production trends
– Investments by large technology companies in Taiwan
It is also available as a PDF: Taiwan-Economic-and-technology-sector-update-28-November-2020-PDF
You are welcome to share, distribute, re-use and re-publish this report as you see fit, as long as no substantive changes are made, and it continues to be attributed to the Ministry. You can view the complete list of market reports published to date here: http://www.mfat.govt.nz/market-reports/
International News
Brexit deadline looms
With just a few weeks left until the end of the Brexit transition period, concern is continuing to rise that the UK ports, terminals, and the services that support the operations are not ready. Increasingly there are predictions of the consequences ranging from delays and backlogs to disruptions and chaos for the vital flow of goods into and out of the UK, while the government continues to issue assurances.
According to the current timetable, on January 1, 2021, the first of the border controls are due to go into effect between the European Union and the UK. Operators around the UK report that critical tests on the systems required to manage the flow of goods have yet to be done leading to the fears that they will not be ready at the deadline.
Despite the assurances, many remain unconvinced that the ports and companies operating in the ports are prepared. The BBC reports that the Irish truckers’ association is the latest to predict upwards of six months of disruption based on where preparations stand today. They are citing the Holyhead port in Wales, which is the second busiest ro-ro port behind Dover. There are fears that the lack of preparation at Holyhead could disrupt the Irish short-sea trade for upwards of six months. The Irish Road Haulage Association the BBC and other media outlets report said the first six months of 2021 would be “terrible” due to the lack of preparations with fears of “mayhem.”
The UK’s busiest ports have already been scrambling to manage a rapid rise in cargo. With businesses seeking to restock and rebound from the earlier impacts of the pandemic, many ports are already experiencing heavy volumes. Adding to the challenges is a rush to get supplies across the borders before the deadline and new lockdowns due to efforts to control the latest wave of the virus.
The Port of Felixstowe, the UK’s biggest and busiest container port, has been especially challenged in recent weeks, leading many to call the situation unacceptable and forecasts that the port could become paralyzed. Compounding the problems are reports that the government stockpiled 11,000 containers of PPE supplies at the port.
With the ports already struggling to manage the current volumes, fears are only growing over what might happen in January when the new systems are due to go into effect.
IMO approves draft new regs to cut carbon intensity of existing ships
The IMO Marine Environment Protection Committee (MEPC) held its 75th session in virtual format from November 16th – 20th, during which draft new mandatory regulations to cut the carbon intensity of existing ships were approved. These build on current energy efficiency requirements to further reduce greenhouse gas emissions from shipping and would require ships to combine a technical and an operational approach to reduce their carbon intensity.
The draft amendments would bring in two new measures: a new Energy Efficiency Existing Ship Index (EEXI) for all ships; and an annual operational carbon intensity indicator (CII) and its rating, which would apply to ships of 5,000 gross tonnage and above.
The IMO states that this is in line with the ambition of their initial GHG Strategy, which aims to reduce carbon intensity of international shipping by 40% by 2030, compared to 2008.
The draft amendments will now be put forward for formal adoption at MEPC 76 session, to be held during 2021. The MARPOL treaty requires draft amendments to be circulated for a minimum six months before adoption, and they can enter into force after a minimum 16 months following adoption.
In recent discussion with the Global Shipping Forum NZCCO was advised that the GSF is watching this development closely as these measures have the potential to have a significant impact on global shipping costs in the medium term and yet again raise the spectre of slow steaming. We will continue to monitor and advise of developments in this space.
US regulator expands scope of investigation into detention and demurrage
The US Federal Maritime Commission has stepped up its efforts to find a resolution to the congestion problems and equipment shortages affecting US container terminals and shippers. The regulator has expanded the scope of its fact-finding mission into detention and demurrage to investigate the carriers operating in alliances and calling at Long Beach, Los Angeles and New York/New Jersey.
Commissioner Rebecca Dye has advised that the commission has a “compelling responsibility” to investigate the situation and was concerned that the practices of carriers and terminal operators may be “amplifying the negative effect of bottlenecks” at the ports. “Removing the obstacles to port performance allows ocean carriers, ports and marine terminals, drayage truckers, American importers and exporters, and every other business engaged in freight delivery to grow and prosper.
US exporters have welcomed the news of the expanded investigation. There is support too from the British International Freight Association (BIFA) which has joined The International Federation of Freight Forwarders Associations (FIATA) in calling for governments to support the key considerations laid out by the US Federal Maritime Commission in its Final Rule on Demurrage and Detention and investigate the reasonableness of these practices in the container shipping sector. BIFA said that freight forwarders and the shippers they work for are reeling from unjust demurrage fees linked to congestion in ports around the world: “They should not be penalised by demurrage and detention practices when circumstances are such that they cannot retrieve containers from, or return containers to, marine terminals because, under those circumstances, the charges cannot serve their incentive function.” BIFA has noted that “If the FMC has identified demurrage and detention practices that are likely to be considered as unjust for the USA, these practices are also unjust and unreasonable for the rest of the world. It is wrong for container shipping lines not to respect the interpretative rule introduced by the FMC in May that sought to govern conflicts on the issue of demurrage and detention fees.
“Governments must, therefore, have greater scrutiny over demurrage and detention practices to ensure that they are considerate and reasonable for the good of their own economies. It is crucial to ensure fluidity and good function of the supply chain, in unprecedented times as illustrated by COVID-19 and the chaotic state of international container shipping at present.”
BIFA, along with FIATA, is encouraging policymakers to consider the FMC’s non-exclusive list of factors for consideration when assessing the reasonableness of demurrage and detention fees.
Their statement underlined that such guidance “will promote fluidity in freight delivery systems by ensuring that demurrage and detention serve their purpose of incentivising speedy cargo delivery; and that the interpretive rule will also mitigate confusion, reduce and streamline disputes, and enhance competition and innovation in business operations and policies.”
BIFA is also urging decision makers “to ensure a level playing field for all actors in the supply chain of the reasonableness of demurrage and detention charges.” This includes consideration of the extent to which demurrage and detention practices are serving their intended purposes as financial incentives to promote freight fluidity.
The organisation concluded: “All international maritime supply chain stakeholders should also benefit from transparent, consistent and reasonable demurrage and detention practices that improve fluidity in global ports and terminals for the benefit of fair, reasonable and ethical interactions between stakeholders in the maritime supply chain. The FMC rule is, therefore, intended to stop unreasonable and unjust practices to which shippers and freight forwarders alike have been exposed to for years.”
