Iranian Crude Oil Surges

Sadie Keljikian, Top Billion Finance

At least twenty-six Asian and European tankers are shipping Iranian oil, according to Reuters.

International sanctions on Iran were lifted in January, allowing foreign importers to once again take advantage of the country’s vast supply of crude oil. “Charterers are buying cargo from Iran and the rest of the world is OK with that,” said Odysseus Valatsas on the matter. Valatsas is the chartering manager at Dynacom Tankers Management, which has fixed three of its supertankers to carry Iranian oil.

While the 26+ tankers already in service have the capacity to carry more than 25 million barrels of oil, traders still face regulatory obstacles. Many carriers are still quite reluctant to handle Iranian oil, largely due to remaining US restrictions on Tehran, which tightly restrict trade in dollars or involvement of US firms, including re-insurers and banks.

Despite this relative freedom, Iran was still struggling to find partners to ship its oil until a recent temporary insurance fix, known as “fall-back” reinsurance protection, was established to allow foreign carriers to handle Iranian oil. The fix is designed to offset any shortfall in payments from U.S. re-insurers and work around remaining restrictions.  As a result, nearly a third of Iran’s shipments of crude oil are being handled by foreign vessels.

The fall-back protection does not, however, account for larger accidents such as collision and cargo liabilities, meaning that shippers must undertake a risk that, should there be an oil spill, could potentially cost billions of dollars. Reports earlier this month confirm that exports of Iranian oil have nearly reached pre-sanction levels, with about 2.5 million barrels shipping out daily.

Despite the complicated nature of the recently lifted sanctions, it appears that Iranian oil may once again be a massive contributor to international energy markets.

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CPB and OTR Working on MPF Restructuring

U.S. Customs and Border Protection (CBP) and the Office of the U.S. Trade Representative (OTR) are working to restructure the Merchandise Processing Fee (MPF) due to the Trans-Pacific Partnership (TPP). Further information has been provided regarding the proposed plan for restructuring the way we currently calculate MPF.

Rather than being calculated on an ad valorem basis, which is prohibited under TPP, the MPF would be a charged as a flat fee based on the value of the shipment. The MPF is currently calculated at 0.3464 percent of entered value for entries above $2,500, with a minimum fee of $25 and capped at $485 per entry. This restructured MPF would affect all formal entries imported into the U.S. with the fee breakdown being as follows:

  •  Minimum $30 MPF on entries valued between $2,501 and $20,000
  • $120 MPF on entries valued from $20,001 to $55,000
  • $260 MPF on entries valued from $55,001 to $130,000
  • Maximum $500 MPF on entries valued at more than $130,000

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China Fines International Shippers

Sadie Keljikian, Top Billion Finance

After a year of investigations, China announced fines for eight international shipping companies for violating price fixing laws. The fines represent the most significant attempt by authorities to crack down on colluding in a sudden enforcement of an eight year old anti-monopoly law.

According to the National Development and Reform Commission, or NDRC, the companies had coordinated with one another to raise prices on cars, trucks, and construction equipment over the next four years.

Among those fined were South Korean Eukor Car Carriers, Inc., which was ordered to pay 284 million yuan (just under $44 million), the largest single fine in this case.  Other guilty parties included Wallenius Wilhelmsen Logistics in Oslo, which was fined 45 million yuan (just under $7 million) and Mitsui O.S.K. Lines Ltd in Japan, which was fined 38 million yuan (just under $6 million).

Several of business groups as well as US officials have complained that China selectively began enforcing the law against foreign companies. China, however, has dismissed such concerns, insisting that domestic companies have also come under scrutiny.

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CBP Begins Third Phase of New GSP

U.S. Customs and Border Protection (CBP) has entered the third phase of its renewed Generalized System of Preference (GSP) Retroactive Refund Processing. The system was enacted on July 29th, 2015 and remains in effect through December 31, 2017.

During the third phase, importers can now initiate requests for refunds and submit them to CBP ports.

International Carriers Anxious about Paris Climate Talks

Sadie Keljikian, Top Billion Finance
The international shipping industry is preparing for a PR backlash and new rounds of taxes in the aftermath of the upcoming Paris Climate conference. The annual United Nations summit, which is set to take place November 30th through December 11th, seeks to analyze new data regarding climate change and propose policies to reduce global temperatures.

Carriers are weary that any attempt to limit gas emissions would result in higher taxes for an industry that transports 90% of world trade. The latest report from the International Maritime Organization (IMO) showed that between 2007 and 2012, shippers reduced emissions from 2.8% of the world total to 2.2%, a promising step. However, the same study projected a 50% increase in emissions by 2050.

John Kornerup Bang of Maersk, owner of the world’s largest container shipping line, commented on the summit: “We are keen to emphasize that it has to be global, flag neutral and reward early movers. It is obvious to everybody that rates are low and there are structural challenges in the industry… we all suffer from that.”

Second Explosion Contaminates Exports in Tianjin

Officials warn that a second explosion at the port in Tianjin, China on October 12th could have contaminated goods scheduled for export.

The FDA is requiring importers to submit entry and shipping documents for all human and animal food products, human and animal drug products, and medical devices that were originated from, stored in, or transmitted through the Binhai New Area industrial center or Xiditou Township of Beichen District in Tianjin. The FDA is taking these precautions due to the large quantities of hazardous materials stored in the area. The agency requires importers to report where exactly products were stored, how they were packaged and what testing is being done to ensure that they are not contaminated.

Delays & Disruptions Due to Visit From the Pope

Due to the Pope’s visit to the U.S., FedEx, UPS, and USPS have all announced expected delays and disruptions to delivery services to the Washington, D.C., New York, NY and Philadelphia, PA

Pope Francis prays during his weekly general audience in St Peter's square. AFP PHOTO / FILIPPO MONTEFORTEFILIPPO MONTEFORTE/AFP/Getty Images
Photo: Getty Images

metro areas between September 22nd and September 27th. Based on the disruption to service of these National carriers, expect similar delays and disruptions to Regional carrier service in the areas as well.

Gibraltar Port Gains Edge

Sadie Keljikian, Top Billion Finance

The Honorable Albert Isola, Gibraltar’s Minister for Shipping, hosted a working breakfast at Gibraltar House in London recently to draw attention to the ongoing work being done to make Gibraltar a more attractive port to international clients. The gathering was held in honor of London International Shipping Week and included discussions on the port’s new cargo handling facilities, on-site towage companies, and added cruise accommodations.

The Gibraltar Ship Register, a member of the Category I Red Ensign Group of the United Kingdom and United Kingdom dependency registers, represents nearly every type of commercial vessel. The port, constructed in 2005, is strategically situated to take advantage of Mediterranean transit.

“It is hugely helpful to have face to face and open communication with our major suppliers and to work through directly with them [to] improve the Gibraltar proposition, for the benefit of all those who work with and service clients of the port,” said Isola.

Peak Season for Asia-Europe Trade Falls Short

Sadie Keljikian, Top Billion Finance

Q3, often the most profitable season for the Asia-Europe trade lane, has been decidedly lackluster thus far. Analysts largely attribute the decline to the recent Russian economic downturn.  Merchandise for the winter holiday season typically begins to ship now as retailers and carriers alike in Europe and the US prepare for their busiest time of the year.

In anticipation of the holiday uptick and subsequent overcapacity, Asia-Europe carriers often use intentionally cancelled sailings within a journey, also referred to as void or blank sailings, to increase freight rates and avoid exceeding capacity.  In other words, a carrier will cancel certain legs of a journey opting for the most direct route to its destination.  Such route reductions are being applied more permanently to compensate for the significant decrease in activity this holiday season.

Qatar’s Ports Add Security Systems

Sadie Keljikian, Top Billion Finance

Qatar is bolstering efforts to root out illicit goods at both its sea and land ports. The Committee of Security Agencies in Ports of Entry into Qatar has signed an agreement with the Chinese company Nyuktk to develop and install modern security systems to detect radiation.

The new systems will significantly increase the efficiency of border patrols; a welcome improvement for a country which is set to begin operating a massive new container port spanning 26.5 square kilometers early next year.