Canadian Rail Carriers’ Recovery from Work Stoppage May Take Weeks
Canadian rail operations are gradually resuming following a lockout of union workers at Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) that began on August 22. The lockout prompted rail carriers to implement shipping embargoes to manage hazardous cargo and prevent unattended shipments.
Despite the restart of operations after government intervention, experts caution that full recovery of the rail networks may take weeks or even months. The reactivation of freight movement is complicated by substantial backlogs and the intricate process of reintegrating halted shipments.
According to Jason Miller from Michigan State University, the startup process is underway but will take time to stabilize. The initial wave of embargoed freight, such as hazardous chemicals, is particularly affected. Scott Shannon from C.H. Robinson Worldwide suggests it could take up to a week for each railroad to fully return to normal operations, though catching up with backlogged shipments might take longer.
Michael Taelman of Crowe consultancy notes that it may take weeks or even months for CN and CPKC to operate at pre-disruption levels due to accumulating freight and additional orders. Jay Cushing from Gimme Credit highlights that the volume pressure on both railroads will be significant during the third quarter. Furthermore, limited rail options and unresolved disputes with the Teamsters, who plan to challenge the government action in court, add to the complexities facing the rail industry.
LA-LB Rail Dwells on the Rise as Port Complex Enters Height of Peak Season
Rail container dwell times at the Ports of Los Angeles and Long Beach have nearly doubled compared to earlier this summer, reaching 5.66 days on average in July, up from 4.73 days in June. This increase is due to a surge in imports and concerns about potential delays as the peak shipping season approaches. Nearly 28% of rail containers at the Port of Los Angeles are experiencing dwell times of nine days or longer.
The Long Beach Container Terminal has seen average dwell times rise to six or seven days, almost double from the previous month. While operations at the ports remain generally fluid, with some terminals effectively managing the increased volume, there are worries about further delays if import volumes continue to rise and issues persist in other ports like Tacoma and Vancouver.
The average number of container ship arrivals is increasing, with nearly 55 ships per day expected, up from 45-49 earlier in the year. Chassis shortages are also being reported, though terminal operators maintain that most equipment is operational and available. The transportation community in Southern California is leveraging real-time data to manage these challenges and prevent significant backlogs.
Container Shipping Market Continues to be Reset by Ongoing Red Sea Crisis
The Red Sea crisis, triggered by the hijacking of the car carrier Galaxy Leader over nine months ago, has severely impacted global shipping. Over 100 merchant vessels have been attacked, with at least 39 damaged and two sunk. The crisis has led major container lines to reroute their services around southern Africa, creating opportunities for smaller, regional carriers to operate in the Red Sea. Carriers like FESCO, NewNew Shipping, CU Lines, and SeaLead are now offering services through this route, while others like X-Press Feeders and Unifeeder continue operations despite the risks.
CMA CGM has maintained some Red Sea services but primarily uses the Suez Canal, reflecting the ongoing political and economic complexities. Niche carriers benefit from the crisis by establishing a foothold in a lucrative market, which could strengthen their position in the wider intra-Asia market once the situation stabilizes.
Despite these operations, the risks remain high. As of late August, 61 vessels were in high-risk areas, with significant environmental threats such as the potential oil spill from the attacked Sounion oil tanker. This situation raises ethical questions for ship operators and shippers about their responsibilities in choosing routes and carriers amid ongoing dangers.
North American Cargo Crime Takes Big Jump as Thieves Get More Organized
Cargo theft in North America surged by 49% year-over-year in the first half of 2024, according to Overhaul, a supply chain risk management firm. The financial impact has also escalated, with average losses per incident rising 83% to $115,230. The report highlights that organized theft rings are increasingly targeting high-value goods, with electronics being the most commonly stolen item.
Southern California is a major hotspot for theft, accounting for 45% of incidents, with a “red zone” extending about 200 miles from shipment origins experiencing theft rates comparable to those in multiple other states combined. California’s share of U.S. cargo theft has increased significantly, and Texas is the second-highest state for cargo crimes.
Thieves are also targeting home and garden products, clothing, and food items, driven more by profit margins than the item’s value. Overhaul emphasizes the need for shippers to adopt comprehensive theft prevention strategies, including thorough vetting of carrier networks, as no single solution can address all issues.
US CBP Increasing Scrutiny of Customs Brokers as E-Commerce Exposure Rises
U.S. Customs and Border Protection (CBP) is increasing scrutiny on customs brokers as it faces a surge in e-commerce shipments, which typically have less detailed data compared to larger freight shipments. This scrutiny is part of a broader push to address forced labor, intellectual property infringements, and environmental violations.
Customs brokers are expected to have a deeper understanding of their clients, products, and compliance issues. New regulations are anticipated, including requirements for brokers to verify importers’ identities, which could be implemented as soon as November. This shift is prompting brokers to educate importers on their responsibilities and ensure compliance with CBP’s regulations.
The growing volume of de minimis shipments—duty-free shipments valued under $800—has exacerbated the issue. CBP’s limited resources are struggling to keep up, leading to increased legislative efforts to reduce de minimis thresholds. In response, CBP is delegating more oversight to the trade community, with a focus on monitoring Type 86 shipments (low-value e-commerce imports) more closely for compliance issues.
Brokers face challenges due to the limited data provided for these shipments and the need to meet a “reasonable care” standard. They are required to manage more detailed and accurate information about shipments while dealing with less transparency from clients, leading to potential difficulties in compliance and oversight.
Foreign Direct Investment Hits Record $31B in Mexico in First Half of 2024
Mexico attracted a record $31 billion in foreign direct investment (FDI) in the first half of 2024, a 7% increase from the previous year. Most of this investment, about $30 billion, came from companies with existing facilities in Mexico, while new investments exceeded $900 million.
U.S. companies were the largest investors, contributing $13.7 billion, followed by Germany, Japan, Canada, and Belgium. Notable new investments include Volvo’s $700 million truck manufacturing plant in Monterrey, chosen for its logistical advantages and proximity to the U.S. border. Other major automotive companies, such as Toyota, Honda, and Volkswagen, also invested in Mexico during this period.
The manufacturing sector was the largest recipient of FDI, accounting for 54%, with significant investments from companies like Anheuser-Busch, Coca-Cola, and Nestle. Nearly half of the FDI was concentrated in Mexico City, with additional investments in Nuevo Leon, Baja California, and the state of Mexico.
