Biden reportedly won’t block ILA strike
Reuters quoted a Biden administration official as saying, “We’ve never invoked Taft-Hartley to break a strike and are not considering doing so now.”
That must be making shippers incrementally more concerned. For all the threatening words from representatives of the International Longshoremen’s Association (ILA) that they will strike on Oct. 1 without a contract, many industry observers have suggested that it ultimately may not matter to supply chains because the president would intervene. In the past, administrations have invoked the Taft-Hartley Act, which gives the president the power to order workers back to work (before or after a strike commences) for an 80-day cooling-off period while negotiations continue. It’s logical to expect that the current administration wouldn’t want the public to be angry about supply chain disruptions as they head to the polls. Yet, it’s also logical for the administration to want to appear to be on the side of American (well-paid) bluecollar workers who are negotiating with foreign entities.
Now, it’s worth revising estimates of the impact of the strike, as provided by Sea-Intelligence:
- A one-day strike would take five days to clear.
- A one-week strike would cause supply chain slowdowns until mid-November.
- A two-week strike wouldn’t be cleared until 2025.
Biden administration moves to target de minimis exemption
A week and a half ago, Grace Sharkey and I recorded this episode of the Stockout, which can be viewed here. The answer to the title seems more like a “yes” since then – at least in the exemption’s current form and for most apparel and textile imports. (Image: FWTV)
Late last week, the Biden administration issued a Notice of Proposed Rulemaking (NRPM) that would include major alterations in the de minimis exemption, making it impossible to claim the exemption on most apparel and textiles. In addition, as part of the NPRM, the administration proposed additional reporting requirements, such as a mandate to identify the person on whose behalf the exemption is being claimed. The administration also called upon Congress to pass legislation this year to reform the de minimis rule in a comprehensive manner, which would speed up the process as well as impose certain additional requirements that are outside the administration’s purview.
I recommend this article that Maggie M. Barnett, CEO of LVK Logistics, published on Thursday on our site. She believes that major reforms to the de minimis exemption for apparel and textiles are afoot regardless of the outcome of the November elections. Demands to overhaul the exemption are coming from both parties even as their reasons for that conclusion differ.
The elimination of the rule would impact the parcel and airfreight industries in addition to retailers. In its most recently completed quarter, UPS generated outsize growth in volume in its SmartPost segment, a lower-priced service offering preferred by the Chinese e-commerce companies. That segment carries a lower margin than the rest of the company’s service portfolio. UPS’ results also showed that the parcel carriers currently do not have much pricing power. The elimination of the de minimis exemption, which may reduce e-commerce demand, could mean that the market is looser for longer.
As far as airfreight is concerned, the elimination of the exemption on apparel could return the market to more seasonal patterns rather than the unusually tight conditions experienced in recent quarters.
Inbound U.S. air cargo tonnage has grown, largely as a result of Chinese apparel imports. That demand has caused rates, at times, to be higher than normal during nonpeak periods. (Chart: SONAR)
Congressional interest in fighting retail crime
Retail theft has evolved in recent years – what used to be brushed off as petty one-off shrinkage is now often the work of organized crime rings with methods in place to liquidate the stolen goods. As reported by my The Stockout show co-host Grace Sharkey, a bipartisan letter from members of Congress asks the Department of Homeland Security to take action against the growth in organized retail crime. In the letter, the group requests the creation of an Organized Retail Crime Coordination Center at the Department of Homeland Security. I speculate that it’s bipartisan because the victims go beyond shareholders and also extend to employees, who may experience unsafe work conditions, and average consumers, who suffer from undue inflation and/or store closures. Interestingly, Homeland Security estimates that theft costs the average American family $500 annually in higher goods costs.
See Sharkey’s article here.
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