Lee Smith, global trade attorney at Baker Donelson, reviews the top economic, regulatory and geopolitical concerns of supply chain executives for the coming year.
The first item on shipping executives’ agenda this year is cost, Smith says. It’s climbing on multiple fronts, including the need to divert ships from the Red Sea to around the Cape of Good Hope to avoid missile attacks by the Houthis, higher insurance costs associated with security issues, and internal management expense arising from the need to rethink global supply chain design.
Specific regulatory and trade issues affecting shipping include potential actions by the U.S. against Chinese shipbuilding and maritime logistics, by way of fees imposed under Section 301 of the Trade Act of 1974. They include the possibility of assessing punitive docking fees on Chinese ships calling U.S. ports — an action that has no recent precedent, Smith says.
In addition, the U.S. is concerned about China amassing a huge database of information about shipping and trade patterns, through its National Public Information Platform for Transportation and Logistics, known as Logink. It gives China the ability to monitor and influence the international logistics market, and has the potential to boost the nation’s expertise in artificial intelligence. “Data is the food that feeds AI,” Smith says.
Because ships and software don’t fall into the category of physical goods that are regularly subject to import duties, the U.S. must find a creative way to punish China for alleged unfair trade practices. Smith says the U.S. Trade Representative is likely to be sympathetic to a complaint filed by American labor unions.
In addition, Smith says, ocean carriers are faced with the prospect of having to eliminate controversial demurrage fees, imposed on shippers for cargo that’s delayed at the port. The charges are unfair, shippers say, because they have no control over such delays, which are the result of port congestion, tighter regulatory oversight by U.S. Customs and Border Protection, and a shortage of inspectors on the docks.
