Trump Pushes Next Tariff Increase Back Two Weeks | Carriers Begin Preparation for IMO 2020

Trump Pushes Next Tariff Increase Back Two Weeks

President Donald Trump has said the next Section 301 tariff increases won’t occur until Oct. 15. This is two weeks later than previously announced. He is quoted saying: “We have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars’ worth of goods (25% to 30%), from October 1st to October 15th.”

USTR Issues Product Exclusions Across First Three Tranches of Section 301 Tariffs

According to a report by the CBP; The Office of the U.S. Trade Representative issued three new sets of product exclusions from the 25 percent Section 301 tariffs on goods from China. These exclusions include products from the first three lists of Section 301 commodities. The new exclusions and updates from the first tranche include “310 specially prepared product descriptions” and cover 724 separate requests, according to the notice. The second tranche of exclusions include 89 product descriptions and covers 400 requests, while the third tranche exclusions include 38 product descriptions that cover 46 exclusion requests, the agency said.

The Federal Register went on to report, While the first two sets of exclusions apply for a year following publication in the Federal Register, the third tranche exclusions will expire on Aug. 7, 2020, the agency said. The USTR did that because allowing for a full year of those exclusions “would have resulted in disparities in the effective periods between exclusions granted early in the exclusion process and those granted later,” the agency said.

The product exclusions apply retroactively to when each tranche initially took effect. That was July 6, 2018, for the first tranche, Aug. 23, 2018, for the second tranche and Sept. 24, 2018, for the third.

Carriers Begin Implementing Fuel Surcharges in Preparation of IMO 2020

Changes ahead, as ocean carriers have begun to announce their transpacific trade lane low-sulfur fuel oil (LSFO) surcharges they intend to charge shippers starting in November and December – in attempt to phase compliant vessels into their fleets in order to meet International Maritime Organization LSFO requirements taking place January 1st.

The final two months of the year will likely be confusing for shippers because each carrier will have its own surcharges for spot and contract shipments based on how much LSFO their vessels consume during the interim period. Carriers can either burn higher-cost LSFO or marine gasoil or install scrubbers to continue using lower-cost high-sulfur fuel oil (HSFO).

According to the Journal of Commerce, cargo owners are increasingly under pressure to determine the scale higher fuel surcharges they must pay. A recent Drewry survey found that 16 percent of the respondents believe the cost impacts of the IMO 2020 regulation will be significant, and 6 percent say it will be extremely significant. Some 23 percent of the respondents were uncertain what the cost impact will be.

Shippers have been equally diverse as to how they are approaching the IMO 2020 mandate which limits bunker fuel to 0.5 percent sulfur content. The current acceptable sulfur level is at 3.5 percent. Most shippers have spoken with their ocean carrier representatives and asked questions but have yet to receive definitive answers as to what the final formulas will look like for the new LSFO.

According to a representative from Hapag-Lloyd, “The utilization of the compliant low-sulfur fuel oil comes along with an increase in fuel costs, which experts estimate to initially amount to $60 billion annually for the entire shipping industry. On the assumption that the spread between high-sulfur fuel oil and low-sulfur fuel oil will be $250 per ton by 2020, Hapag-Lloyd estimates its additional costs being around $1 billion in the first years.”

I.H.S. Markit forecasts the Q1 spread between VLFSO and HSFO will be $350 to $400 per metric ton, double what it was at mid-year this year.

The above originally reported by the JOC: