With the holidays quickly approaching, it is not surprising to see surging demand driving up freight rates in ocean and air modes of transportation due to capacity constraints. This is now snowballing into all other modes with chassis shortages, and available warehouse space nowhere to be found. Many shippers and freight managers are getting inventive with shipping lanes, temporarily importing goods into Canada or the US where they have secured vessel capacity, or switching modes to get their hands on whatever space they can find, no matter the cost. With giant buyers such as HomeDepot and Walmart chartering entire vessels just to get their store shelves filled, what’s a smaller shipper to do? In this blog, we will look at some insider tips and recommendations on how to navigate this shipping crisis.
Tip 1: Switch From Ocean To Air
If you are purchasing finished goods or raw materials in small quantities from overseas and need to secure space, switch to air transport.
Here is what one of our ocean freight representatives suggests:
“We usually recommend using air freight to transport very small parcels, high-value products, limited shelf life products or shipments with deadlines with no buffer. However, there is no competitive advantage from a cost perspective other than the transit time. Since serious delays in ports have had a negative effect on ship schedules, we have been introducing the air freight option to our customers more.”
Air freight rates are expected to increase significantly as many more shippers make the switch from ocean freight; therefore, it’s a good idea to budget for this expense.
Air rates are currently quite high from China, Australia and New Zealand as the container congestion in those ports has caused a large influx on the air freight from those countries. Airlines are increasing the rates 50-75% above normal. With peak season fast approaching the rates are certainly not going to ease anytime soon.
Europe rates are starting to ease back down. They are approx 20-25% higher than normal but they have dropped in the last 30 days.
Here is what one of our air freight representatives suggests:
“What we would say to all customers is if you need something quick or even partial shipments, move by air freight and the balance, move by ocean if you can afford to wait for the shipments by sea.”
Tip 2: Look For Alternative Sources
If you are sourcing your goods from overseas, and are finding it challenging to find cost-effective shipping options, perhaps look for an alternative supplier south of the US.
A recent study produced by Auburn University’s Center for Supply Chain Innovation, and release at the Council of Supply Chain Management Professionals (CSCMP) EDGE conference, companies are looking to prioritize supply chain stability. It seems as though the current shipping crisis has wreaked enough havoc for companies to look at investing in new supplier partnerships, enhancing current relationships, staff and managing overall risk while optimizing supply-chain costs. (source)
Here is what one of our air freight representatives find:
“Air rates from Mexico and South America are quite a bit lower and clients may want to purchase goods from there if possible.”
An additional benefit of purchasing goods from Mexico to be imported in the US or Canada is the reduction of elimination of import duties with the use of the US-Canada-Mexico Free Trade Agreement known to each country as USMCA/CUSMA/T-MEC respectively.
A customs broker can help you determine your overall import costs of purchasing from a foreign supplier, including considerations for FTA use, protective taxes and surcharges and quota requirements.
Tip 3: Get Your Carriers Bonded
One of the trickle-down effects of the container crisis is the effect felt in North American ports and the ground transport carriers that work them. Dozens of vessels are stacking up outside of ports in the US and Canada waiting for available space to offload. Warehouses are so full that they are turning away storage requests for damaged containers. However, with a shortage of equipment, warehouse space and drivers, space is limited and containers are sitting. Additionally, goods intended for overseas buyers are also stuck. Shippers are scrambling to find available space in vessels leaving North America, which is causing them to think outside the box and look to move their shipments inbound through Canada or vice versa when available space in foreign ports comes available.
However, if you have successfully found space on a vessel out of North America, and then found a free chassis, only to be stopped in your tracks because you can’t find a bonded carrier, we can help.
Here is what one of our ground freight representatives suggest:
“We are helping many clients move their goods out of the US and into Canada, using a bonded carrier to move it, in order to reach a vessel in Canada with available space. Because we are both a customs broker and freight manager, we are able to offer unbonded carriers single trip bonds, find a bonded carrier OR, help the client get their chosen Carrier bonded.”
This is a relatively painless process:
- If the goods were made in the US, an Automated Export System (AES) export filing will need to be made before leaving the US.
- The bonded carrier will then request an A8A bond to allow the goods to travel through Canada to their exit destination without having to import them.
- The shipping line will cancel the A8A.
- No CERS will be required out of Canada.
As you can see, you have options. Speaking with a customs broker can help you determine costs in alternative sources and a Freight Manager can help you find inventive ways to get your goods from point A to point B.