The Red Sea crisis has captured headlines like no other supply chain news since the pandemic, but what is the true impact of the inability for vessels to transit through the Suez Canal, and how long might it last? Goods are still flowing around the world, just at a much higher cost, both financially and environmentally, but this is far from the new normal. While no industry watchers are ready to predict when ships can safely return to the Suez Canal, ocean shipping experts agree that it might be quite a while.
The transportation experts at 3rdwave are all about empowering international shippers to take control of their shipments and processes. Part of that control is being informed. We bet you knew that costs are up for both the vessel owners and shippers due to the Red Sea disruption, but did you also catch that new regulations are on the horizon? It’s true that the shipping world keeps changing, no matter the crisis at hand. You’ll read about it all in this newsletter.
With Maersk predicting that the rerouting of cargo vessels around the Cape of Good Hope could last for another year, the true impact of the Houthi rebels’ actions in the Red Sea is becoming clear: It’s costing a ton of money. To stay clear of the rebels, 90 percent of the Suez Canal traffic has been rerouted around the Cape of Goods Hope, adding anywhere from two weeks to 18 days to the journey. Estimates are that Maersk and other carriers spend $1 million extra per vessel to take the much longer African route.
Cargo is moving, carriers are quick to point out, and while the Red Sea crisis is costly, it’s far from a repeat of the total supply chain shutdown experienced during the early months of the COVID-19 pandemic. There is a current capacity issue due to the rerouting of ships, but experts say that should evaporate by the third quarter due to new builds and the use of previously underutilized cargo space.
Adding 4,000 miles onto an ocean journey is wreaking havoc on supply chain emissions targets. Since vessels can no longer move through the Suez Canal, each ship is adding significantly more distance to its standard route – from Asia to Northern Europe, the reroute adds 31 percent more mileage; vessels routing to the Mediterranean see a 66 percent increase. Experts say there is no way to mitigate the emissions from this increase, which in some cases can be 4,000 miles. That’s a lot of greenhouse gasses.
The U.S. government is asking the maritime industry to assess its risk profiles in a Qunit-Seal Compliance Note. There are no changes in regulations or sanctions imposed with the note, but the notice could be interpreted as laying out “U.S. government priorities with respect to investigating and enforcing sanctions and export controls.” The note “could reflect an expectation that companies involved in the transportation industry could play a role in helping identify evasion efforts.” The note contains a list of tactics to evade export controls and sanctions and then elaborates on how companies might thwart these efforts.
Lowering the monetary threshold for duty-free e-commerce imports and imposing tariffs on electronic transmissions like e-books and software are two new regulations that could be considered for e-commerce imports. These and other regulations being considered by the U.S. government and the World Trade Organization could ultimately make imported goods more expensive and complicate the simplified sanctions that currently govern e-commerce. The WTO wouldn’t actually impose new tariffs but simply stop the moratorium currently in place. The International Chamber of Commerce is among the agencies that think lifting the tariff pause would hurt e-commerce businesses worldwide that already operate on thin margins.
Saying it will lead to “more economic challenges for the poor masses” in Nigeria, the president of the Association of Nigerian Licensed Customs Agents is among those crying foul over the country’s decision to hike its import duty rate by nearly 50 percent. It all has to do with an increase in the dollar exchange rate used to figure out the import duty, and it takes immediate effect. Critics are calling for a reversal of the decision.
International trade is never static – there’s always a new disruption, another tariff or regulation, or a surprise duty to pay. 3rdwave helps shippers stay ahead of these regulatory changes with the following services and a reliable technology platform purpose-built for the modern supply chain:
Contact us to learn how 3rdwave can bring agility into your supply chain and streamline your customs processes — all in one platform.
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