Category: Supply Chain & Logistics

Dive Brief:

• The Port of Long Beach is equipped to handle an uptick in cargo if a labor strike at the East and Gulf Coast ports occur, CEO Mario Cordero said in a press conference on Thursday.
• Cordero said lessons learned during the COVID-19 pandemic and data and operations developments have put the San Pedro Bay port complex in “good” position to meet shipper expectations.
• “Our terminal operators are also prepared to flex their gate hours as necessary and our overflow site — our [Short Term Overflow Resource yard] facility at Pier S — is open and has available capacity,” COO Noel Hacegaba said. The STOR facility opened in 2020 to streamline cargo movements during peak season.

Dive Insight:

The Port of Long Beach saw cargo volumes rise 34% in August and is prepared to handle additional capacity if needed, port executives said during a Thursday press conference.

“We are handling just as much cargo as we did in 2021 and 2022 but without any of the backlogs, delays or congestion that characterized the pandemic-induced supply chain crisis,” Hacegaba said at the press conference.

Total cargo volumes processed at the port reached 913,873 total TEUs as retailers moved cargo ahead of tariff increases and potential labor strife at East and Gulf Coast ports.

Negotiations between the International Longshoremen’s Association and the United States Maritime Alliance remain halted as the two sides continue to disagree about port automation as a Sept. 30 contract expiration date nears. The union recently shared a strike mobilization plan with its members during wage scale meetings on Sept. 5, gesturing toward a possible strike.

The Port of Long Beach’s container terminals are currently at 74% capacity, with container dwell times at four to eight days.

“We’re prepared for the uptick in shipments and continued growth through the rest of the year with a dedicated waterfront workforce, modern infrastructure and plenty of capacity across our terminals,” Cordero said.

Less than a month after a work stoppage shut down Canada’s main rail carriers, both companies say operations on their respective networks are back to normal.

“All of our metrics, they’re normalizing now,” Keith Creel, president and CEO of Canadian Pacific Kansas City, said Wednesday during the annual Morgan Stanley Laguna Conference. “So, we’re two weeks out of the strike and the network essentially is caught up.”

Creel’s comments echoed Canadian National, which on Tuesday said its operations have recovered from months of labor uncertainty and a complete shutdown of its Canadian network. The rail carrier said planning for potential shutdowns “enabled a swift network recovery following the labor stoppage.” 

The initial work stoppage began Aug. 22 but lasted less than a day. Canadian National and CPKC then scrambled following an Aug. 24 order by the Canada Industrial Relations Board to resume operations. The board enforced a request by Canada’s Minister of Labour and Seniors Steven MacKinnon to impose final binding arbitration to get the rail carriers and nearly 10,000 Teamsters Canada Rail Conference workers back to work by Aug. 26.  

The government’s intervention has prevented Canada’s main rail networks from shutting down either by a work stoppage or employee lockout. However, days after returning to work, the Teamsters mounted a legal challenge to the binding arbitration order. The move does not supersede the government’s action.

Avoiding a lengthier shutdown has been a relief for logistics managers who are now focused on looming strikes at ports on the East Coast and Gulf Coast in the U.S.

Paul Brashier, VP of global supply chain for ITS Logistics, in the company’s September Port Rail Ramp Index said, “with the labor issues in Canada subdued, operations in North America are mostly stabilized.”  

Creel credited the rapid recovery of CPKC’s network to preparations made ahead of a possible late May strike by the Teamsters, which also was averted by government intervention. However, bulk freight, including coal, has yet to fully normalize, despite some indicators of recovery.

“We expected the strike to occur in May but that got delayed a bit,” Creel said. The earlier experience put CPKC in better position to plan for the August work stoppage, he added. Both CPKC and Canadian National implemented freight embargoes to limit shipments on its network once it appeared the railroads and union would not reach new labor deals prior to the August work stoppage date to replace agreements that expired last December.  

While trains are running again, Creel acknowledged CPKC lost money from the brief disruption, as shippers diverted freight to trucking carriers, though he didn’t offer specifics. 

“There’s some revenue we won’t get back,” he said.

Canadian National said the labor disruption and weaker demand for forest products and metals contributed to its revised full-year financial guidance. The rail carrier estimates that labor uncertainty and wildfires in Alberta, Canada, led to a quarter-to-date impact of around 20 cents per share.     

CKPC’s task now is winning back lost business and ensuring shippers of no further service disruptions. Creel said bulk freight, including commodities like coal, has “not yet normalized” but that too is beginning to recover.  

Creel said he was optimistic the binding arbitration process would lead to a new labor deal by year’s end or by early 2025 and is focused on finishing the year strong.  

“As far as pent-up demand, we’ve got strong demand,” he said. “We’ve bounced back very quickly and think we’re getting back into a very good rhythm.” 

Dive Brief:

• The Biden-Harris administration plans to limit the types of goods that can be shipped via the de minimis exemption while enhancing information collection for such shipments, according to a Friday announcement.
• Although not yet officially issued, through multiple notices of proposed rulemaking, the administration would exclude shipments containing products covered by certain tariffs from using the de minimis exemption while requiring additional data, such as tariff classification numbers and the filing of Certificates of Compliance, at time of entry.
• The administration also urged Congress to pass reform legislation by the end of this year, specifically calling for the exclusion of import-sensitive products like textiles and apparel from de minimis eligibility.

Dive Insight:

The actions being taken by the Biden-Harris administration come after more than a year of mounting pressure to reform or eliminate the de minimis exemption. Most recently, House democrats in a letter asked President Joe Biden to use executive authority to update policy related to the exemption.

According to the administration, Section 301 tariffs make up roughly 40% of U.S. imports. Its proposed rulemaking would eliminate de minimis eligibility for such shipments, as well as those covered by Section 201 and 232 tariffs.

“Improving compliance obligations these new rules will ensure that foreign businesses cannot exploit the de minimis privilege, protecting American consumers and disadvantaged American companies,” the Retail Industry Leaders Association said in a statement emailed to Supply Chain Dive. The organization noted it still opposes section 301 tariffs on consumer goods.

”We also believe that as long as such tariffs remain in place, they should be applied evenly and fairly,” the RILA said.

In terms of enhanced information collection on de minimis shipments, the Biden-Harris administration is proposing the inclusion of 10-digit tariff classification numbers and the name of the person claiming the exemption with each shipment. Such action “will improve targeting of de minimis shipments and facilitate expedited clearance of lawful de minimis shipments,” per a fact sheet from the administration.

Another element of the actions announced Friday would require consumer product importers to file certificates of compliance electronically with U.S. Customs and Border Protection and the Consumer Product Safety Commission when a shipment — de minimis eligible or otherwise — enters the U.S.

“American workers and businesses can outcompete anyone on a level playing field, but for too long, Chinese e-commerce platforms have skirted tariffs by abusing the de minimis exemption,” said U.S. Secretary of Commerce Gina Raimondo in a statement. “With these new actions, the Biden-Harris Administration is standing up for American consumers and cracking down on Chinese companies’ efforts to undercut American workers and businesses.”

The Biden-Administration said that “further comprehensive de minimis reforms are needed,” specifically by congressional action. Beyond formalizing many of its proposed rules in legislation, the administration is also calling on Congress to pass previously proposed de minimis reforms related to fentanyl shipments.

To date, multiple pieces of legislation have been introduced in both chambers, including The Import Security and Fairness Act in June 2023, the End China’s De Minimis Abuse Act in April and the Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains for America Act (Fighting for America Act) in August. However, no legislation has been passed by either the House or the Senate.

The de minimis exemption, which currently allows companies to avoid duties and taxes for imports below $800, has been part of U.S. trade law for nearly 100 years, but its use by e-commerce giants like Temu and Shein has pushed it into the spotlight. The exemption has buoyed air cargo and parcel delivery demand, but its impact on other sectors has been more muddied.

For example, manufacturers are split over the impact of the exemption on U.S. production. While groups like the National Association of Manufacturers have espoused the benefits of de minimis, other parties, particularly those in the textile and apparel sector, are less convinced.

The Biden-Harris administration specifically noted the deleterious impact the de minimis threshold is having on U.S. textile and apparel manufacturers. As part of its proposed reforms, the administration announced its intention to increase procurement from U.S. sources and to continue to prioritize enforcement efforts against illicit textile and apparel imports.

“This is an important, common-sense reform and critical first step,” said Kim Glas, president and CEO of the National Council of Textile Organizations, which has been a vocal supporter of eliminating the de minimis exemption, in a statement. “We amplify the need to expedite rulemaking to the fullest extent possible and appreciate [the administration’s] strong engagement with our industry.”

Dive Brief:

• La-Z-Boy is consolidating its cut and sew operations in Mexico to optimize costs, President and CEO Melinda Whittington said in an August earnings call.
• The furniture maker said in a recent securities filing that it would permanently close its leased cut and sew facility in Parras, Mexico, by the end of Q1 of fiscal year 2025, which ended July 27.
• The furniture maker is also shifting upholstery production from Ramos, Mexico, to its other upholstery plants. Products will return to Ramos to be cut and sewn, per the filing.

Dive Insight:

The focus on plant efficiencies in Mexico is part of La-Z-Boy’s larger strategy to build a more dynamic supply chain, according to Whittington. She added that the furniture maker considers its North American manufacturing footprint as a “key differentiator” for production.

“As we mentioned in last quarter’s call, we are prudently managing the consolidation of our cut and sew operations in Mexico to optimize costs, while ensuring no service disruptions,” the CEO told analysts. However, there have been some delays related to the work La-Z-Boy is doing down in Mexico, particularly when it comes to securing labor from a quality and productivity perspective, SVP and CFO Bob Lucian said during the call.

More than half of the company’s cover materials are purchased from suppliers in countries like China and the U.S., before being cut and sewn in its Mexico facilities, according to the securities filing. As of April 27, La-Z-Boy operates four facilities in Mexico to support its “speed-to-market and customization strategy.”

La-Z-Boy has also looked to optimize staffing levels across the company’s Mexico operations. The furniture maker’s number of full-time equivalent employees dropped from 10,500 at the end of fiscal year 2023 to 10,200 the following year, per the filing.

The consolidation comes after active efforts to build its production network in Mexico. In 2022, La-Z-boy expanded its North America operations with several new factories in the country after having to make structural changes to its supply chain to shorten lead times and tackle backlog. At the time, the furniture maker had opened at least two leased manufacturing plants in Mexico.