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Key Takeaways:
According to data from the United Nations Conference On Trade and Development (UNCTD), there’s been an increase in global trade for quarter one (Q1) of 2024. Global trade for quarterly goods and services began a steep decline in 2022 and continued through 2023.
The good news is that that trend is finally showing some signs of reversing. Data shows that trade in goods and services have grown by 5% in Q1 2024. While it’s not recovered to pre-decline levels, it’s a sign of improvement. Given the results of current data, UNCTD predicts the increase in global trade for goods and services will continue for Q2 as well.
Currency fluctuations impact international trade. The strength or weakness of the U.S. dollar against our trade partners should be considered when planning for future imports and exports.
Both the Euro and Pound are performing quite well against USD. This means exporters from these countries are still likely to make a good profit when selling to U.S. importers.
The dollar also continues to outperform the currency markets in both China and Japan. The power of the dollar in China, especially, keeps importers going back even as trade relations between them and the U.S. continue to face challenges.
The strength of the dollar as tracked by the U.S. Dollar Index (DXY) has grown significantly, which sounds like a great thing, but comes at a cost.
For one, it’s a sign of the continuing high inflation in the U.S., which impacts domestic markets. While it means that importers get a better price purchasing goods from overseas, selling within the U.S. may be a challenge.
For a more global perspective on currency value, we’ve also provided performance indexes for other currencies, some of which, like the Chinese Yuan (CNY), don’t factor into the formula used to calculate DXY. These are the results for Q1 2024.
The USD continues to strengthen, largely due to high interest rates. While this attracts more foreign investment, it’s not always great for anyone vested in U.S. stocks.
By contrast, the Japanese yen is very weak due to extremely low interest rates. This is largely due in part to the Bank of Japan’s (BOJ) commitment to a relaxed monetary policy.
In Europe, there’s also concern over the EU’s budget and energy changes that will be made due to the European Green Deal. The Chinese Yuan started to decline in December 2024 and has continued through Q1 of 2024.
Many traders attribute the decline to an expectation of easing monetary policy when the People’s Bank of China (PBOC) hinted at reducing bank reserve requirements.
The British Pound fell to a one-month low in March 2024 after data showed UK consumer spending stagnated in the previous month. In addition to this, the Bank of England (BOE) has suggested plans to cut interest rates.
International cargo moves primarily by ocean and air. Growth in these shipping sectors indicate ongoing trade. However, sharp increases or declines are likely to indicate rapid changes in pricing.
To clarify, the 13% increase in air cargo demand applies to January and February 2024. This percentage is compared against demand for the same period of the previous year. Ongoing concerns over the situation in the Red Sea may be driving certain air cargo sectors higher.
While the 9.3% increase for ocean freight demand is only an estimate, it’s still a good sign that shippers are using this mode of transport to move their cargo more than the previous year.
Geopolitical events can impact the effectiveness of the global logistics industry. Numerous incidents and growing trends between January and March 2024 are still unfolding. Some are extensions of conflicts that precede the time period.
These events should be monitored to determine what kind of impact they have on international trade and logistics.
Notable events in this quarter include:
We’ll discuss each of these events to help you understand their impact on logistics.
The conflict between Ukraine and Russia goes back several years, ultimately escalating on February 24, 2022, when Russia invaded mainland Ukraine.
The ongoing nature of this conflict has resulted in the disruption of critical commodities like oil and natural gas due to sanctions and price caps imposed on Russia by several nations, including the U.S. and Canada.
The measures taken against Russia continue to impact sectors like energy, aerospace, and defense.
Beyond the effect to Russia, trade within Europe has seen significant changes, especially with the flow of goods in and out of Ukraine.
Other notable events that have stemmed from this conflict include the expansion of the North Atlantic Treaty Organization (NATO) from new members. On March 7, 2024, Sweden was officially ratified as the 32nd member.
Considering that the U.S. is a member of NATO as well, there exists the possibility of increased trade between the two nations, especially in the field of military trade and spending.
The Red Sea is a vital trade route that’s used by ocean carriers using the Suez Canal.
In November 2023, Houthi rebels in Yemen began launching missiles and drones at cargo vessels traversing this body of water.
To circumvent the dangers still plaguing the Red Sea, a number of ocean carriers began rounding through the Cape of Good Hope instead. This route is 3,500 miles away, and the inconvenience of using it is why the Suez Canal was initially constructed.
Ships started taking the alternate route in the last weeks of December 2023, with more rerouting after attacks escalated in January 2024. Major companies opting to use the route around the Cape of Good Hope include:
Although CMA CGM started to use the Red Sea route once again in March, it is not for all shipments.
In either case, shippers face challenges that need to be accounted for. For shipments on vessels routing under Africa, expect the following:
Goods that are shipped via the Suez Canal and the Red Sea have improved transit times, but at a cost.
U.S. importers may find more success in securing shipments that travel across the Pacific, avoiding either the Red Sea or the Cape of Good Hope routes entirely.
Mexico’s trade relationship with China has grown substantially since 2023. Shipments of TEUs from China to Mexico increased by almost 60% from January 2023 to 2024 according to Xeneta, a freight analytics firm.
Given the strained relationship between China and the USA, the Asian country redirected much of its business to our neighbor to the south over the course of 2023. In the same span, Mexico also surpassed China to become the number-one exporter to the United States in that time period. The following data, which is accurate up to November 2023, reflects that change.
There is strong evidence to suggest that the increase in goods from Mexico is largely due to the imports from China. Some officials in the U.S. see this as evidence that Mexico is essentially acting as a back door for restricted Chinese imports in order to avoid tariffs.
This further highlights the need for importers to thoroughly vet the country of origin for any goods they bring into the U.S. from Mexico. The increase also impacts the ground shipping lanes between Mexico and U.S. and has led to even greater activity at the main border crossings, such as:
Increased security and tensions over illegal migrants continue to impact the movement of freight through the major corridors. U.S.-based businesses relying on cross border trade should continue to monitor the situation closely.
Importers and exporters in the U.S. have to keep constant vigilance over customs regulations and compliance. However, exporters in countries that conduct frequent trade with the U.S. also face regulations set by their governments.
On March 19, 2024, use of the National Organic Program (NOP) import certificate became mandatory for all organic imports.
The steps for getting this document includes:
The DOP certificate can be used for either single shipments or for multiple shipments that will arrive in the U.S. within a specific frame of time.
CBP has also made changes to Entry Type 86 (ET 86). The ET 86 is an informal entry type that’s used by importers to electronically submit entries with limited data.
On February 15, 2024, CBP changed the filing deadline for ET 86. It now must be submitted prior to or upon arrival of the imported shipment.
Previously, the ET 86 had to be filed 15 days before cargo arrived. The update made by the CBP will give importers more time to submit this filing.
CBP is also increasing the amount of scrutiny they place on ET 86, which includes checking:
To reinforce accountability and traceability of shipments, CBP also requires importers to use Power of Attorney to file entries.
CBP has implemented a new cargo messaging system to notify importers their entry summaries might be noncompliant for anti-dumping and countervailing duties (AD/CVD).
This change was implemented on January 16, 2024. CBP will be focusing on two specific AD/CVD mistakes on entry summaries.
These include:
Filers can take actions to correct these mistakes. That said, the cargo messaging is meant to serve as an informational system. Importers aren’t required to take immediate action after receiving one.
Exporters can face a variety of challenges in their home country. This can make it difficult for importers in the U.S. to obtain the products they want. We’ll cover the most notable challenges that exporters face so far in 2024.
China started restricting exports of gallium and germanium, which are used for the production of semiconductors and fiber optic products.
The restrictions started late during Q3 of 2023, but the impact has been felt in Q1 of 2024. Chinese exports of these products to the U.S. and other Western countries have plummeted.
On December 1, 2023, China also started restricting the export of graphite. This material is used for batteries and cables. Due to the closeness of these restrictions to Q1 of 2024, not much is known about the impact of these measures.
That said, experts suggest that prices for this material will begin to rise the longer these restrictions are in place.
The Mexican government implemented the Complimento Carta Porte (CCP), which is a Bill of Lading Compliment. A CCP provides supplemental information regarding an exported shipment. This document accompanies Digital Tax Receipt by Internet (CFDI).
Benefits of the CCP include:
There have been two previous iterations of the CCP and a 3.0 version was scheduled to be implemented on January 1st, 2024. However, the rollout date was pushed back to March 31, 2024.
This change applies to Mexican companies that have Mexican Tax IDs. A U.S. individual or company that doesn’t have a permanent presence in Mexico is permitted to offer cargo transportation services for foreign and national goods.
However, they’ll need to follow documentation requirements laid out by Mexican Customs Law.
On December 19th, 2023, the EU adopted their 12th package of Russian sanctions. Article 12 of Regulation 833/2014 of the package requires exporters to include wording in contracts for certain goods that prohibits the re-export of the items to Russia.
The regulations dictate all contracts that conclude on or after December 19, 2023, will need to have a “no re-export to Russia” clause by March 20, 2024.
EU exporters will need to include this clause when selling, supplying, transferring, or exporting their goods to a third country, or non-member state.
The European Commission published five new initiatives in its Economic Security Package on January 24th, 2024. One of these initiatives is the adoption of White Paper on EU Export Controls.
This paper emphasizes the importance of EU Member States to discuss the adoption of dynamic and unified export controls for dual-use technology that can impact EU security.
Currently, the White Paper on EU Export Controls is only a proposal for new regulations, not implementation.
The United Kingdom’s (UK) Export Control Joint Unit (ECJU) announced on March 11, 2024, that amendments would be made to the Export Control Order 2008. These amendments will implement new controls for the export of military goods and dual-use emerging technologies.
Items that fall into this category include:
The ECJU is also making amendments to the Council Regulation No 428/2009 (Retained Dual-Use Regulation).
Changes include:
The goal of these changes is to bring UK export controls in line with countries that have similar regulations.
As green initiatives within countries and companies continue to shape new policies, the logistics and transportation sectors are uniquely affected. From packaging materials to fuel consumption, logistics is often viewed as a significant contributor to resource waste and global emissions.
We examine the impact these initiatives have within the industry, as well as some of the latest steps being taken to adopt sustainable practices.
A study conducted by McKinsey & Company and released in March 2024, has resulted in some educated projections about the demand for, and cost of, green logistics over the next several years.
By 2030, they project that global demand for green logistics solutions will rise to $350 billion, or 15% of total logistics expenditures. This is a substantial jump from their projections for 2025, which were $50 billion with a two percent share of overall spending.
The study goes on to show projected percentage differences between renewable and non-renewable fuel prices in 2030.
Some other valuable statistics from this study are as follows:
Companies with high-value, high-margin products, such as automobiles, are among those most willing to spend a little more to position themselves as leaders in eco-friendly business practices.
A report published by Reuters and sourced from Ethical Corporation Magazine in January 2024, listed sustainability practices being used by different logistics companies and consulting services in the European Union and USA. They include:
The International Maritime Organization’s commitment to reduce greenhouse gas emissions to zero by 2050 is a key driver of these and other sustainability solutions.
Technologies used by the above companies are expanding throughout the logistics industry. Aside from the impact to the environment, many companies are hoping that such technology improves overall efficiency within the supply chain to reduce overhead costs in the long-term.
As businesses across the globe work to reduce emissions, the search for cleaner alternatives to fossil fuels becomes more and more important. This is especially true of oceangoing freight vessels, the largest of which can go through 63,000 gallons of fuel in a day’s journey.
Green ammonia, which is produced using renewable energy, may be the solution to reducing carbon emissions from container vessels. In a study published to IOPscience in January 2024, researchers have laid out a plan that could decarbonize maritime shipping by the year 2050.
This plan is designed to align with goals set by the International Maritime Organization (IMO) in 2018 to reduce man-made greenhouse gas emissions by the middle of the century.
In order to meet the projected demand for green ammonia, billions of dollars worth of development would be required between now and 2050. The study estimates that green ammonia could make up 43 to 99% of shipping fuel by the target date, which is well over the 180 million tons produced per year of gray ammonia.
Moving goods from one end of the earth to the other is bound to come with some challenges. The routes and methods used to move commodities impacts both cost and time.
Disruptions to major trade lanes, such as we’ve seen recently, present become a global economic concern.
Ocean-going freight vessels continue to face delays due to issues affecting two key maritime trade routes:
The Red Sea Conflict has forced carriers to divert around the Cape of Good Hope, adding 12 to 14 days to their overall travel time and thousands of gallons of fuel, the costs for both of which are passed on to clients in raised costs. Businesses relying on shipments passing through the canal should carefully monitor their average shipping and cargo insurance costs.
In Panama, a drought has forced officials to place strict restrictions on how many ships can pass through the canal in a day, significantly slowing down the shipping process in the Western Hemisphere.
Aside from increasing the general congestion around the entrances of the canal, the delays are causing some carriers, especially those with time-sensitive cargos, to pay to jump the wait line. At the height of the drought, bids to jump the line went as high as $4 million USD, but have since dropped to about $269K.
With the Red Sea in turmoil due to Houthi attacks, shipping companies moving goods in between Europe and Asia face significant delays detouring around Africa. For some countries, an alternative route may be available soon: the NSR.
Historically, this Arctic shipping route hasn’t been a favorable choice for shippers due to its limited accessibility outside summer months. However, climate change has extended the route’s window of viability.
The route’s location along the northern coast of Russia means that, for geographical and political reasons, the number of countries that can directly benefit from its use is limited. Aside from Russia, they include:
Russia has reached out to India to discuss a joint effort to further develop the route as well as other Arctic shipping lanes. Part of this effort would include the production of additional icebreaker ships to bring the fleet up to 14 vessels by 2030.
While the NSR does present a useful alternative for certain countries, trade restrictions and sanctions on Russia have prompted other European and Asian nations to seek methods of bypassing the world’s largest country.
One alternative route that is growing in popularity with shippers is the Trans-Caspian International Transport Route (TITR), also known as the Middle Corridor. The route primarily passes through the following countries.
The corridor’s multi-modal setup connects the Black Sea terminals to those in the Caspian Sea. Rail transport can move cargo along this corridor from China to Europe in approximately 25 days or less.
Streamlining the route has been a slow process, as there are many connections needed. The next major advance to capitalize on this route’s potential comes from Azerbaijan President Illham Aliyev’s approval of a plan to develop the corridor’s infrastructure over a two-year span from 2024 to 2026.
In an effort to improve the efficiency of trade routes to Africa, Europe, and other parts of Asia, the People’s Republic of China introduced the BRI in 2013. The last decade has seen China invest the equivalent of over one trillion USD toward developing infrastructure in participating countries within its trade network.
These include new and refurbished railways, international airports, and other structures critical to global trade and logistics.
By late 2023, over 150 countries had signed Memorandums of Understanding (MoUs) to take part in this initiative. At this point, the list of influential trade powers that aren’t involved is far shorter than the ones that are. They include:
Part of the initiative’s goal is to standardize operations among participating countries, which would lead to smoother trade and an increase in China’s influence on global commerce. Considering the USA’s tumultuous relationship with China and Russia (who is part of the BRI), importers must increase their due diligence when determining where their commodities were made.
Even individual components sourced from trade-restricted areas can render a seemingly compliant product off-limits for importing to the USA.
Following the collapse of the Francis Scott Key Bridge and subsequent cessation of vessel traffic into and out of the Port of Baltimore, importers and exporters who depend on this east-coast port were forced to alter their shipping arrangements.
The impact of the port’s unavailability has been particularly significant in the automotive and farm equipment sectors. While relatively small compared to ports like Los Angeles and New York/New Jersey, Baltimore boasts the largest roll on/roll off (RORO) facility in the United States, making it a vital hub in the importing of cars and trucks. The port processed 847,158 vehicles in 2023 alone.
The Port of Baltimore is also vital to exporting coal. In 2023, 6,091 metric tons of coal were shipped out of the port, a 25.1% increase over 2022.
By the end of March, the following carriers had canceled logistics arrangements with customers after the delivery of containers diverted to new ports due to the bridge collapse:
Alternate ports across the East Coast have stated that they can handle the increased workload and demand while workers attempt to clear the Port of Baltimore for commercial use.
In Sri Lanka, union action has caused 5,000 containers to be stuck at the port of Colombo. This action was suspended on March 19, and workers are now clearing containers.
Geethanjana Madapatha, Vice President of the Sri Lanka Custom Officers’ Association, asserts that the union’s actions will resume if certain demands are not met. The Sri Lankan government must find a satisfactory solution to concerns regarding its takeover of a fund that was previously overseen by the Director General of Customs.
As India looks to become another strong contender within the export market, having well run customs and port facilities is a must.
California’s ports in the San Pedro Bay, the Port of Long Beach and the Port of Los Angeles, continue to be the main conduit of imports into the United States. LAX, the nation’s busiest port, released the following statistics on March 18.
The Executive Director of the port, Gene Seroka, spoke highly of the workforce handling these increased shipments and pointed out that a long-term contract with those workers is in place.
The YoY increase also serves as evidence that traffic that was once diverted from the port due to issues with congestion in years past, is now returning.
Air cargo services are the backbone of the expedited logistics industry and of several unique and valuable commodities. Demand has increased steadily, especially with two major trade routes for ocean vessels being affected by political and environmental factors.
January saw international demand for air cargo increase 19.8% internationally over the same month in 2023. This percentage was determined based on the total number of cargo tonne-kilometers and is the highest annual growth for this metric since 2021.
This increase is broken down into regional markets in the table below.
Total capacity for air cargo was also up year over year, a 14.6% increase on an international level over 2023. As a number of global conflicts continue intensifying, and often affect nearby port operations, air cargo is likely to continue to steadily rise.
Several cargo pilots were present for a three-day Air Line Pilots Association, International (ALPA) conference this past January. Some of the key talking points of this symposium include:
A representative from air cargo consulting company, Cargo Facts, shared estimates about the growth of air cargo from now until 2024. Their projections indicate that the growth of e-commerce on a global scale will necessitate expanding the global fleet of cargo planes to 3,900 total. Currently, that fleet stands at 2,420.
Import companies based in the U.S. must keep truck of the domestic logistics industry to ensure a smooth transition from port to market. Here we’re reviewing trends in drayage and ocean port services.
Once imports enter the U.S. via vessel, there is still the matter of removing them from port. Despite bottlenecks along several West Coast ports, mainly due to a jump in incoming volumes from Lunar New celebrations, chronic issues with congestion have been avoided so far.
Drayage services continue to serve a vital role in maintaining a steady movement of containers out of major ports.
Current averages are highest in highly congested areas. Short hauls to metropolitan areas around Houston, Los Angeles, and Newark currently demand the highest rates per mile.
Negotiations between the United States Maritime Alliance and the International Longshoremen’s Association (ILA) officially began in February 2024. There is hope it can conclude by the May 17 cutoff date set by the ILA.
However, there have been added tensions in various East and Gulf Coast ports as many of the gains made during 2022 and 2023 are at risk. Between the drought affecting passage through the Panama Canal and the continued conflict around the Red Sea straits, major ocean carriers are once again routing through West Coast ports.
Because ILA longshoremen receive additional royalties, or tonnage bonuses, based on how much is processed at their home port, a drop in ship traffic is worrying.
While some fear a strike if negotiations are unable to conclude on time, the ILA has been historically more stable than its West Coast counterpart. As of now, the last strike by the ILA along the East and Gulf port workers was in 1977.
Goods entering the U.S. via import, regardless of entry port or method, still need additional attention to arrive at their next destinations. Current trends in domestic ground shipping reveal growing capacity among carrier and warehousing companies, driving down spot rates in many instances.
While regional averages continue to differ, especially along the West Coast, this trend is holding true among dry van and reefer shipments. Flatbed rates remained the steadiest throughout the quarter.
As more carriers end up exiting the market, mostly due to decreased demand from the peaks seen during the height of the pandemic, prices should even out further.
Between the latest items going viral on social media, to the impact of weather on the world’s agricultural zones, tracking trends is an on-going process. As inflation continues to affect domestic spending, importers need to examine what is and isn’t selling.
After having leveled out somewhat in Q4 of 2023, U.S. import prices increased overall during both January and February.
If we focus on non-fuel imports, the U.S. price index advanced 0.9% the first two months of the year. The commodities with the greatest impact on this index were:
Growth in both import and export indexes also reveal the growing popularity of certain trade partners. Year-over-year growth for both imports for the top 5 countries or regions are provided below.
Exports to some areas increased as well, but were more often marked by a decrease due to the growing strength of the US Dollar in comparison to international currencies.
The rapid drop in export price indexes in places like China and Japan may be indicative of ongoing issues with trade relations. China, in particular, has seen U.S. companies moving operations out of the country and opting instead to nearshore manufacturing and production in places like Mexico.
Businesses of all sizes often source their e-commerce products from overseas. To sell them domestically, many have turned to popular social media apps. In recent years, the fastest growing platform for many has been TikTok, owned by the Chinese company ByteDance.
However, recent concerns over the security of the app came to a head this March in the U.S. Congress. The House of Representatives approved a bill that states that the owner of the platform must either sell or face a government ban.
The impact for many businesses advertising and selling directly through the app would be significant. Businesses targeting the Gen Z consumer market would likely see the greatest impact.
For those using Amazon as a selling platform, the effect could be greater due to the wide popularity of the hashtag #amazonfinds. The opportunity to have real people showcasing products, whether as paid advertisements or on their own, has brought success to many.
The first quarter of 2024 has come and gone. Amid continuing conflicts in Europe and the Middle East, the U.S. import market is remaining steady. A strong dollar and the rising popularity of regional suppliers, especially Mexico, is helping.
Efforts to ease inspection congestion by reducing errors in import documents has led the CBP to extend certain filing deadlines. Importers who must manage anti-dumping and countervailing duties can now receive cargo notification messages that inform them of potential errors before final filing.
Drayage rates continue to fluctuate as numerous changes impact ports on both sides of the country. Rising volume at the San Pedro ports in California, and the overflow of diverted cargo into Norfolk and New York/New Jersey after a collapsed bridge blocked access to the Port of Baltimore, are among the latest events.
However, importers in need of further domestic shipping after initial arrival can benefit from decreasing spot rates across most of the country.
Moving into the second quarter of the year, we’ll keep tracking major events and economic indicators impacting global trade. Over the next three months, we’ll continue tracking potential concerns, such as the East Coast ILA negotiations.
To discuss how any of the major changes to regulations may impact you, schedule a 1-on-1 consulting session with one of our licensed customs brokers.
Call us today at (855) 912-0406 or reach out with a direct query online.
Bureau of Labor Statistics, U.S. Import and Export Price Indexes — February 2024, 2024
International Air Transport Association, Air Cargo Demand Up 18.4% In January, 2024
Junhua Zhang, What Is the Future of China’s Belt and Road Initiative?, GIS Reports, 2024
Times Now, Amid Red Sea Crisis, India and Russia Turn To Northern Sea Route, Microsoft Start, 2024
The Drayage Directory, Map of the United States, 2024
DAT Freight & Analytics, Trendlines, 2024
Joe Weaver, Baltimore Bridge Collapse: Options for Rerouting Shipments, USA Customs Clearance, 2024
UNCTAD, Global Trade Update (March 2024), 2024
X-Rates, Currency Calculator and Monthly Average, March 2024
Market Watch, Japanese Yen, 2024
U.S. Census Bureau, U.S. International Trade In Goods and Services, January 2024, March 2024
Amanda Cooper, Pound Hits One-Month Low as BOE drops More Rate Cut Hints, Reuters, 2024
Reuters, China Yuan Slides To Four-Month Low, State Banks Step In, 2024
AviTrader, Air Cargo Demand Up 13% In First Two Months of 2024, 2024
Resilinc, Keep These 6 Geopolitical Supply Chain Risks On Your Rader In 2024, 2024
EY, Top 10 Geopolitical Developments for 2024, 2023
Politico, By the Numbers: How Conflict In the Read Seas Disrupts Global Trade, Political, 2024
Sheila Chiang, China Could Face More Chip Restrictions In 2024, Analysts Say, CNBC, 2024
Eduardo Baptista, China Bets On Open-Source Chips As U.S. Export Controls Mount, Reuters, 2024
CBP, Cargo Systems Messaging Service, 2024
CBP, Updated Timing of Entry Type 86 Release Messages (1c) In Air Environment (Non-Express), 2023
ITA, Mexico Carta Porte Changes for 2024, 2024
Dentons, Impact of the EU’s New “No Re-export To Russia” Clause, 2024
Cooley, UK Introduces Export Controls for Emerging Technologies, 2024
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