Global Supply Chain Update (Sep 24): Sea Freight Costs, Dropshipping, and U.S. Strikes

Discover the recent decline in ocean freight costs, the impact of US port strikes, and the effect of Mexican customs enforcement on Chinese goods. Kate also discusses new US regulations affecting dropshipping and the consequences of the recent port explosion in Ningbo.

Plus, get a sneak peek into the upcoming Global Sources Consumer Electronics Fair in Hong Kong, where the Sofeast team will have its own booth.

Stay informed and navigate the complexities of global trade with our expert insights. Don’t miss this episode!

Listen to the audio here.

Here’s a summary of some of the main points, listen for the full episode…

Decline in Ocean Freight Costs and Transit Time

The discussion opens with good news about a steady decline in ocean freight costs. Due to increased shipping capacity (more ships and new shipping lines), rates have fallen.

- Key Figures:
  - Shanghai to U.S. transit times are down to six weeks.
  - 40-foot containers now cost about $6,000 (West Coast) and $8,500 (East Coast).
  - Freight to Europe/Mediterranean has dropped by around 5%.

However, this trend could reverse as the holidays approach and other factors like strikes come into play. (00:46)

Potential Impact of U.S. East Coast Strikes

Ongoing labor negotiations on the U.S. East Coast, which could result in strikes that severely disrupt shipping in key ports (e.g., New York, New Jersey).

Possible Effects:

- - Delays in transatlantic shipments.
  - A bottleneck of critical goods.
  - Higher shipping costs and longer transit times.

Businesses are advised to plan ahead and consider alternative routes (e.g., using West Coast ports). (03:07)

Piracy in the Red Sea and Seizure of Chinese Goods in Mexico

Piracy around the Red Sea still affects global shipping, though less severely than before.

Chinese Goods Seizure: A significant seizure of Chinese goods by Mexican authorities, valued at 153 million yuan (~$21 million USD), due to insufficient documentation. This could impact trade relations between China and Mexico and raise the prices of goods in Mexico. (05:04)

U.S. Sanctions on Chinese and Russian Entities

The U.S. has added 123 entities, including 42 Chinese companies, to its sanctions list. This means companies dealing with these entities must comply with U.S. export regulations, which could impact global supply chains.

Businesses need to ensure their partners comply with U.S. export laws. (07:06)

Impact of Strikes and Congestion in the U.S. and Canada

Strikes in the U.S. and Mexico, along with congestion in southern U.S. ports and Canadian tariffs, are expected to increase freight rates and affect shipping schedules. Importers are advised to “ship now” to avoid the upcoming surge in costs. (09:09)

Dropshipping Regulatory Changes in the U.S.

Dropshipping businesses face increased customs inspections as the U.S. tightens regulations to prevent tax avoidance on low-value shipments (under $800).

Impact:

- - Delays in shipments due to more inspections.
  - Possible additional duties for dropshippers if their shipments are flagged.

The changes will affect both large companies (e.g., Shein) and smaller businesses. Dropshippers may need to consider alternatives, like consolidating shipments through 3PL services. (10:09)

Port Explosions and Dangerous Goods Documentation

A recent explosion in Ningbo port, China, involving hazardous goods (likely batteries), has prompted stricter regulations for dangerous goods passing through ports. Businesses need to ensure they have proper documentation for hazardous materials to avoid fines and delays.

Advice: Make sure that suppliers have certifications in place for shipping hazardous items like batteries, liquids, and powders. (14:04)

Upcoming Event: Global Sources Consumer Electronics Fair

The hosts mention their participation in the Global Sources Consumer Electronics Fair in Hong Kong, from October 11th to 14th. Listeners are invited to visit their booth to discuss topics like manufacturing, supply chain management, and logistics. (17:04)

Conclusion

Summary of the major updates and reminding listeners to tune in to future episodes for more insights on global trade and logistics. (21:00)

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