Textile Troubles: Why southeast Asian supply chains are slowing

Companies seeking relief from China Section 301 tariffs, as well as seeking to take advantage of lower-cost labor, made the move to more developing nations in hopes of diversifying their supply chains pre-pandemic. While an idea with merit, the relocation of factories or component manufacturers requires a trained workforce, factories and more importantly, the means to get goods to buyers.

For textile and apparel manufacturers, countries like Vietnam and Bangladesh held – and still do hold – great promise. However, with decreased passenger travel and another wave of Delta racing around the globe, these countries are also over-exposed to risk while their populations are woefully under-vaccinated.

According to data from the World Health Organization, as of September 27th a little over 26% of Vietnam’s population had received at least one vaccination dose and only 22% of the country is fully vaccinated. Bangladesh is even lower, with 14% having received one dose and 9% being fully vaccinated. Companies seeking relief from China Section 301 tariffs, as well as seeking to take advantage of lower-cost labor, made the move to these developing nations in hopes of diversifying their supply chains.

The low vaccination percentages mean that governments have only one recourse to restrict the spread of the virus – extreme lockdowns similar to what western countries imposed in early 2020 when there was little knowledge about how the virus was spread.

That knowledge is today informing how countries, cities or states take action to protect their populations from further exposure and from overrunning their health care capacity. For Vietnam’s textile manufacturing sector, measures taken in and around Ho Chi Minh meant a third of the factories were unable to operate.

The lockdowns, slated to end mid-September, now run through the end of the month. This shutdown came at a time when Vietnam passed Bangladesh for the second spot on the WTO’s list of largest textile exporters. Small to medium-sized brands aren’t the only ones feeling the pressure. Global companies such as Nike have disclosed that they lost ten weeks of apparel and footwear production in Vietnam and it will take several months to return to full output.

Of course, these countries do not possess the huge network of containers, infrastructure and deep-water ports to command direct calls from vessels that are being held up in San Pedro here in the United States and increasingly at Chinese ports as well. So for the factories which are operating, securing equipment and space is even more difficult than in other, more developed parts of the Asian supply chain.

For exporters from countries like Vietnam, Cambodia and Bangladesh, this means adapting supply chains to prioritize high-value, most in-demand products and utilizing air freight when and where possible. Future Forwarding is focused on continuing to monitor the situation in these countries which are important to the textile and apparel sector and delivering important updates on rates, capacity and options for our customers’ supply chains.

The FMC Wants to Hear from You

Submit comments to the FMC about demurrage, detention, and service issues

The National Customs Brokers and Forwarders Association of America has reached out to member companies like ours imploring us to have shippers, both importers and exporters, submit written comments to the Federal Maritime Commission on the shipping practices of carriers during the pandemic.

If you are an importer or exporter who holds a direct contract with a line, you’ve had first-hand experience begging, imploring, likely shouting and finally relenting in the face of the take-it-or-leave-it approach to negotiations that carriers have adopted over the past year or so. For everyone else, Future Forwarding and companies like ours have been the ones doing all this on behalf of all of our shippers, putting us in some very uncomfortable positions trying to advocate for all while jeopardizing none.

We can – and will – submit our own written comments to the agency about our experiences which have been on both transatlantic and transpacific routes – inequity, it seems, isn’t playing favorites.

The FMC, for its part, is increasing its engagement and involvement, as are other government agencies like the Surface Transportation Board with jurisdiction over the charges, actions, and practices of railroads.

On August 4th

The agency announced an expedited inquiry into the timing and legal sufficiency of these charges. This inquiry is being led by the agency’s Bureau of Enforcement and demonstrates their interest in taking action, if and when warranted.

FMC Commissioner Rebecca Dye submitted an interim report with a number of suggestions, including Congressional actions, to strengthen and hold carriers accountable for their behavior towards shippers.

Please submit comments to the Federal Maritime Commission.

Here’s how to do it.

If you have a specific complaint you want to file for a monetary loss or dispute, start here, on the agency’s page for “Filing a Shipping Act Complaint”.
If you wish to submit a letter to the FMC for a specific shipment or shipments include details such as carrier name, master bill of lading number(s), container number(s), the violation or offense that took place and what attempts you have made, if any, to mitigate or resolve the matter with the carrier.
If you wish to submit a general letter to the FMC as a shipper who has been affected, that’s acceptable as well. Be sure to include details about your experiences, the economic and commercial impact, the impact on jobs or the health of the company, and if you have been able to find any alternate solutions to problems surrounding rates, service failures, surcharges, or other supply chain breakdowns.

The letters can be emailed to the Secretary of the FMC at secretary@fmc.gov.

The agency’s interest as well as that of other associations such as the National Retail Federation, the US Chamber of Commerce, and others means that the more voices raising the issue impress upon the agency the urgency to help the shipping public. We are happy to review and share feedback on your letters to the agency.

While we cannot envision things improving overnight, a persistent drumbeat of pressure on steamship lines and railroads to deliver service and not profiteer in the time of a crisis that is partially real and partially manufactured is a good first step towards improvement.

Feds respond to supply chain woes

Multiple federal agencies scrutinizing supply chain performance, costs.

As shippers ponder whether or not today’s freight rates will remain this way into next year and panic over Drewry’s analysis showing container port capacity may remain this constrained until 2025, shippers are making tough choices when it comes to their supply chain and what cargo to ship and what to leave behind – or cancel altogether. This, coupled with the checks they are writing for demurrage and detention penalties to marine terminal operators, carriers, and railroads have had consequences ranging from jeopardizing end-to-end domestic supply chains to denying service to exporters.

With July drawing to a close and the traditional peak season on the transpacific slated to begin in earnest, cargo owners who have felt taken advantage of for the past year or so are taking note of the federal government’s stepped-up interest and actions in ocean shipping and railroad practices. While they’ve not noticeably intervened yet, a few of the more notable actions they’ve taken, plus potential Congressional action, should be on the minds of our customers hoping that maybe this time the phrase, “I’m from the government, I’m here to help,” will mean something for their supply chains.

The Federal Maritime Commission has jurisdiction over ocean shipping. They regulate companies like ours who require a license to offer ocean transportation services as well as the carriers who operate the vessels. Last year, the FMC opened a Fact-Finding into the demurrage and detention practices of ports when containers were trapped on terminals unable to be recovered but cargo owners were nonetheless being charged.

The situation escalated when American exporters were unable to secure equipment because carriers were sending empties back to Asia to load with more profitable cargo rather than repositioning boxes.

These activities became the subject of a subcommittee hearing in the House of Representatives.

Earlier this month, the President signed an Executive Order focused on competitiveness and targeted industries that were exhibiting monopolistic and antitrust behavior. Called out specifically were ocean lines and Class 1 railroads, both of whom the Executive Order directed regulatory agencies to investigate. For carriers, the FMC, for railroads, the Surface Transportation Board.

That was on a Friday. The following Monday, the FMC announced the signing of their first-ever interagency MOU with the Justice Department to announce shared resources and initiatives to investigate antitrust behavior by shipping carriers. Then, they unveiled their plan to audit the demurrage and detention practices of the nine largest carriers by market share.

The Surface Transportation Board then announced their intention to force railroads to open their books to investigate their charging practices, especially given the fact that in some cities the time to recover a container was measured in weeks, not days, and they were collecting thousands of dollars in fees per box.

As if both sets of companies didn’t have enough to worry about with this sudden interest in their practices and record profitability, Congress is drafting legislation that would rewrite the US shipping laws and curb the ability to assess these record-level punitive charges.

Is the cloud over the horizon the thundering hooves of the cavalry, or just another dust storm of bluster and little else? At this point, it’s hard to tell. But for those who’ve been in the logistics business for a few decades, the early 00’s saw the Justice Department indict, prosecute, and send to prison air cargo executives from global airlines for price-fixing of surcharges. They’ve gone after other industries before, and given the precipitous decline in the number of carrier and rail choices because of mergers and consolidation, a handful of companies are all comporting themselves in identical fashion – a behavior that could cost them sometime in the future.

Biden’s Europe Trip Eases Trade Pains with Allies

This month, President Biden traveled to the UK, Brussels and Geneva on his first international trip since taking office in January. Among other purposes, the trip was billed as resolving transatlantic trade disputes, mending alliances, an affirmation of the American commitment to NATO, a chance to meet with the country’s closest political and economic partners and working to begin to create a coalition focused on investments G-7 member countries and elsewhere to counter China’s global ambitions in Asia, Africa and elsewhere.

His US Trade Representative, Katherine Tai, has been busy working with those member countries of both the G-7 and NATO (of which there is some overlap) on trade issues which have been simmering from both prior to and during the previous administration and were hampering efforts to forge this coalition.

Of greatest note for American importers and exporters are the suspended imposition of duties in the Digital Services Tax investigation and the suspension of duties in the large aircraft dispute, also known as the Boeing-Airbus subsidy – tit-for-tat tariffs that were imposed by both the US and EU on each other.

In January 2021, following comprehensive investigations USTR determined that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies.

The US was set to impose Section 301 duties on these six countries, but suspended the planned implementation for 180 days after a consensus was reached that the G20 and the Organization for Economic Co-Operation and Development (OECD) would take up the matter of minimum tax levels so as to prevent corporations from seeking the lowest taxation haven to the detriment of other countries around the world.

The lists of products from the UK would have included consumer items such as handbags, shoes, cosmetics and clothing to name just a handful. The suspension gives all parties the breathing room to complete a global agreement and, hopefully, the ending of this investigation and no need to move forward with the planned punitive 25% tariffs.

In advance of President Biden’s trip to Brussels, USTR Tai traveled out ahead of him and met with her European and UK counterparts. Within days came news that the US agreed in principle on both a way forward and a five-year suspension on the large aircraft subsidy duties in the Boeing vs. Airbus case from the World Trade Organization.

Of bigger interest to U.S. companies should be the reaffirmation of The New Atlantic Charter agreed-to between President Biden and Prime Minister Boris Johnson. Both US and UK companies can look to this as the cornerstone for future transatlantic trade agreements, including a potential bilateral agreement directly between the two nations.

As an industry-leader providing eastbound and westbound logistics between the United States and United Kingdom, Future Forwarding is poised to take advantage of any improvements and strategic deals reached between these two nations. If your company does business between the US and UK or EU, speak to us today to learn more about our history and organization that features our own offices on both sides of the Atlantic benefits companies in the Southeast and the rest of the United States.

Unwelcome supply chain surprises: Withhold Release Orders

Importers need to add one more worry to their supply chains: detention orders issued by CBP for issues surrounding withhold release orders. Just as companies should perform due diligence before importing a shipment to look for antidumping or countervailing duties, questions should be asked of foreign suppliers whether or not the finished goods or component parts are the subject of withhold release orders and findings that would prohibit entry.

Every finished product begins with a bill of materials. The finished product, depending upon origin and parts, could need to undergo substantial transformation or meet minimum regional value contents to qualify for reduced or duty-free treatment under a bilateral or regional free trade agreement.

What happens, though, when one of those components turns out to be prohibited for entry? Importers of FDA regulated merchandise know about automatic detentions – if a product contains an ingredient deemed not safe for humans or animals, the agency detains and denies entry for consumption. CPSC regulated merchandise is the same. Fish & Wildlife prohibits improperly documented endangered species.

Importers of goods from China and other countries are becoming increasingly familiar with Withhold Release Orders – a determination made by CBP that goods from a country, manufacturer, or region are produced using forced or prison labor. When an entry is presented for release, Customs places the merchandise on hold and refuses to allow the importer to clear and receive the goods.

Recently, an apparel importer filed a protest challenging an exclusion of goods subject to a WRO. CBP excluded a shipment, claiming the cotton came from Xinjiang Production and Construction Corporation (“XPCC”) and its subordinate and affiliated entities who are the subject of a WRO.

CBP denied the protest.

The importer provided documentation showing the raw cotton was sourced from entities in the U.S., Australia and Brazil. What CBP demanded, and the importer could not produce despite the number and different types of records they presented, was no affirmative determination that at any point in the production forced labor was not used.

CBP maintains a list of active Withhold Release Orders that spans countries such as China, Brazil, India, Malaysia and others. Impacted industries include fishing, photovoltaic cells and even tomatoes.

Future Forwarding strongly encourages our clients to familiarize themselves with CBP’s Informed Compliance Publication on Forced Labor (available here) and also encourages requiring written answers about component sourcing and final point of manufacture locations. Companies should also lay out the expectation with vendors that production records can and will be produced on demand for either an internal compliance audit by the importer or in response to an inquiry from Customs and Border Protection.

For more information about Withhold Release Orders and whether your imports could be subject to this increasingly-used program by CBP, contact your Future Forwarding representative today.

FCL Not Available? Think LCL Instead.

Scheduled LCL as a viable option when FCL is unavailable

In the days of plentiful containers, on-time schedules and fluid ports, the decision whether or not to pay a flat rate for a full container versus per cubic meter for less than container load was never in doubt for most logistics managers. Now, with rates spiraling out of control and space allocations being how most cargo gets moved, the advantages to LCL shipping are outweighing the disadvantages.

If you’re new to contemplating LCL, we should probably start with what is LCL before moving on to why LCL is a better choice in today’s market environment.

Ocean freight moves in containers. What is inside those containers falls into one of three groups:

A full container that is loaded at a single origin factory for a single recipient at the destination.
A buyer’s consolidation in which freight from multiple suppliers is consolidated into that container for a single buyer or recipient at the destination.
A groupage container in which cargo from multiple shippers for multiple consignees is combined and shipped together.

Future Forwarding provides weekly scheduled LCL service between the United Kingdom and the United States, keeping our customers’ cargo moving on a stable, somewhat reliable schedule.

Each week, we commit to receive cargo until the closing date, the date that we stop accepting freight to load into the container. We then take all of the cargo in our possession, play a three dimensional game of Tetris to determine the optimal loading to maximize the space inside the container and give the loaded container to a steamship line.

That container with multiple cargo owner’s merchandise sails to the United States where it is taken to a deconsolidation warehouse to be separated into the same lots that were given to us at origin. Each of those shipments separately clears Customs and can be delivered after it is released and available.

We have discovered across our network that the cargo which moves the most reliability at this point is regularly scheduled less than containerload cargo. We have weekly confirmed bookings and equipment based on contracts and commitments we established and, by and large, carriers are honoring those contracts.

Unlike FCL, which comes with flat rate costs for ocean freight, bunker and terminal charges, the shipping costs and handling charges for less than container load are based on the weight, the volume or some combination of both. The extra handling that comes with loading and unloading the cargo containers at origin and destination adds cost, as well as the cargo being priced per cubic meter of space inside the container versus buying the entire container.

Future Forwarding has offices in both the United States and United Kingdom and are currently offering fixed-day weekly sailings for cargo between the United Kingdom and the United States.

We close out every week on Tuesday evening, sail on Friday and approximately seventeen days later, the cargo arrives in Atlanta via Wilmington, North Carolina.

For importers who order a monthly full container, working with their suppliers to ship whatever is produced weekly via LCL means a steady stream of cargo into their supply chains, avoiding additional weeks of delay after readiness waiting for equipment, a sailing or both. For companies who are unable to secure air freight capacity or for whom delays at origin or destination are causing gaps, LCL is a viable alternative.

At Future Forwarding, we understand that less than containerload may not be your first choice. It may not be your best option. It might, in all honesty, be your least worst option until rates, equipment and services have stabilized and become predictable and easier to demand forecast. Regardless of your reason for investigation less than container load, Future Forwarding is here to help.

For more information about our weekly LCL consolidation rates and schedule, fill out the contact form below and we’ll be in touch.

FUTURE FORWARDING AND REVERSE LOGISTICS

Because shipments are now leaving warehouses for consumers rather than exclusively distribution centers or retailers, the need to have a process for managing customer-level returns is of increasing importance to e-Commerce sellers. An entire association has in fact come into being because of this need. Reverse logistics management is one of the most rapidly growing sectors of e-Commerce management and fulfillment.

The buying and return management needs of goods owners in sectors such as footwear and apparel are far different because their customers are buying differently than a company selling home furnishings or consumer electronics. Garment and footwear importers and cargo owners cannot rely on a one-size-fits-all returns solution offered by just any provider. The specific returns management solutions that Future Forwarding offers differentiate us from the competition.

As detailed in this recent BBC article, consumers who are choosing not to go to stores – or who pre-pandemic were already purchasing these items online – may be unsure of the size they need. Instead of buying one, they may buy two, three or even five versions of the same garment or shoe, bracketing a range of sizes to find the one that fits just right.

For the seller, it means carrying additional inventory and carefully forecasting their selling price to accommodate the inherent cost of processing a return of 50 – 80% of the initial shipment.

For the logistics company, it increases the number of picks for a single order and creates a bidirectional flow of freight into and out of their warehouse, including designing a process to inspect, repackage and prepare a product to leave the warehouse for a second or perhaps even third time.

Future Forwarding has at its core deep experience in handling reverse logistics for garment and footwear importers. We have designed systems that involve inventorying, picking and shipping seasonal orders to traditional brick and mortar stores operated by department stores as well as the brands themselves. At the end of a season, items may be returned to be cleaned, hung, have small repairs made and bide their time to go back out the next year.

The same systems that we use to send and receive these large pick-and-ship orders are immediately translatable to individual e-Commerce orders destined directly for the purchasers.

We maintain comprehensive on-hand and inbound inventory visibility at style, size and SKU level. This ensures accuracy for online stories and also helps the cargo owners determine whether or not a single or multiple shipments will be required to fulfill a single order.
Future Forwarding has designed and optimized our warehouses and deployed technology for our employees that allows them to receive, prioritize and fill orders using rules that we or our customers have set.
Our locations in the Atlanta metropolitan area put us within immediate reach of a significant percentage of our customers’ audiences in as little as three days for most ground-based parcel services.
We have garment-on-hanger and footwear specific racking.

There are warehouses who talk about e-Commerce fulfillment and their ability to pick and pack for garment and footwear companies – and then there is Future Forwarding.

Contact us today for a virtual or in-person tour of any of our buildings or to learn how we can become your e-Commerce fulfillment provider on the back of our strength in return logistics management.

Future Forwarding Featured in Business View Magazine

When Business View focused on supply chain and logistics in its February 2019, two of our vice presidents had a chance to speak about the ways our company boosts the efficiency of our clients. Based on interviews with Pam Brown and Shannon Whitt, the article highlighted Future Forwarding’s vision, history and growth, emphasizing our customized approach to every stage of the supply chain.

“We’re not everything to everyone, and we don’t try to be,” Whitt told the magazine. “We customize, whether that be import, export, warehousing, or domestic. We provide options to our clients, but we’re still very focused on doing what we do best. And we make sure we can handle it properly and economically before we commit.”

Read the Entire Article

Category: News

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