October 23, 2013
Air Freight Market Trends
The International Air Transport Association (IATA) released figures at the end of the first half of 2013 showing a 1.2 percent year-over-year expansion in global air freight demand. Although this is weak, it was an improvement in comparison to the previous months and to the average growth realized over the first half of the year. Thomas Kuhles, Vice President of Air Freight at DHL Global Forwarding helped us gain some insight on the upcoming market trends.
"Based on various market analysis reports, global air freight volumes have started to show signs of renewed growth and are at their highest since mid-2011. Nonetheless, the global economic environment is still weak and the basis for further acceleration appears to be fragile," explained Kuhles. "During 2013, the key driver of global volume growth was worldwide Asian exports, but we experienced an increase on the Europe – Middle East & Africa, domestic North and Central America, and domestic Asia Pacific routes as well. The trends I have seen are a reduction in the weight of shipments, although the number of the shipments is moderately increasing. I can see a consistent shift from air freight to ocean freight aligned with tremendous cost savings. Last but not least, I see change in the production distribution and in the transit time requirements. Between 2014 and 2015, speculations show an average 4 percent increase in volumes," Kuhles concluded.
In terms of capacity, there is a moderate increase, but the load factors are still low. Capacity continued to outpace demand growth in the first half of 2013, driven primarily by increasing belly capacity, which is roughly 40 percent of the global air cargo transportation method. "There are routes though which we are observing capacity tightening, like on transpacific routes. On these routes, if the capacity tightening trend continues over the next couple of weeks, logistics providers will be forced to issue a General Rate Increase (GRI) on lanes out of Asia to the Americas, "added the Vice President.
"In terms of price level, the improving consumer expectations and the demand forecasts are expected to keep freight rates stable in the short to medium term. The falling trend of the air freight price level stopped in July. Moving forward, I expect a moderate increase and additional charges. It is not related though to the ordinary peak season going from September to December, as the peak season itself almost disappeared during the past years due to the balance of supply and demand. During the past years, a new trend line was born marking several shorter seasons throughout the year," Kuhles continues. "Some of our carriers have already announced rate increases and some changes in their base calculations for the coming months, moving from actual to chargeable weight. I expect the same from the rest of the airlines soon. Customers with volumetric freight might face additional increases in their surcharges, but to mitigate this impact on our customers, DHL Global Forwarding will continue to explore alternative options and routings or alternative freight forwarding solutions."
DHL Global Forwarding is the leading logistics provider worldwide and in the US air freight market. In the US, more than 700 air freight experts support DHL Global Forwarding customers to provide high quality services to and from more than 150 countries. "DHL Global Forwarding operates six multinational gateways and all these features enable us to provide excellent services at competitive prices for our customers," noted Kuhles. "In addition to our core services (scheduled flights, charters, etc.), we are continuously working on new and innovative solutions to make our customers satisfied and ensure we provide the most competitive service in the air freight market."
CBP Sets Oct. 28 Enforcement Date for Entering IITs w/ Residue - CBP Will Begin 'Residue Entry' Pilot
After a four year delay, US Customs & Border Protection (CBP) will begin enforcing entry requirements on container residue on 10/28/13. CBP is also launching a pilot on the same date that will allow for simplified filing of "residue entries". To qualify for residue entry, the residue must fall under thresholds for weight or volume, and must not have any commercial value. Residue entries will be released under modified procedures for low value shipments. Participation in the pilot is not required. Those that don't participate must enter the container residue under normal entry procedures.
CBP is setting the threshold for "residue" at seven percent of container capacity for rail cargo, five percent for air cargo, three percent for ocean and truck cargo. This may be measured by weight or volume, depending on the commodity. CBP will consider containers with cargo that falls at or under those thresholds to contain "residual cargo."
If the residual cargo has no commercial value (i.e., the container will either be cleaned with the residue destroyed, or refilled for export), then CBP will allow a "residue entry" to be filed as follows:
- CBP will accept the declaration of the carrier, or the importer of record if other than the carrier, that the residue has no commercial value ($0) and the country of origin is the country from which the container is arriving
- The type of residue must be described at the six-digit Harmonized Tariff Schedule level
- A residue entry will be required that says the residual cargo has no commercial value
If a residue entry is filed, CBP will release the cargo under the low value mechanism, so no merchandise processing fee (MPF) will be due. Under the residue test, normal CBP regulations on low value shipments won't apply. Carriers will have the right to make the residue entry, and the entry can be made off the manifest with no further document requirements.
If a residue entry is not filed, the importer will have to enter the cargo under normal entry mechanisms (i.e., formal or informal consumption entry). For containers with cargo that exceeds the above referenced thresholds, the cargo must be manifested and entered for consumption.
Click here to view the Federal Register notice on this subject. If you have any questions, please contact your DHL Global forwarding representative or chb.consulting@dhl.com .
Paul Vroman
Manager, Regulatory & Compliance Consulting
DHL Global Forwarding
US
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