In a year of uncertainty marred by huge unrest in everybody’s favorite gateway, Hong Kong, we asked Mike White, President of USA-based Cargo Network Services (CNS) to share some thoughts that might also act as a beacon for many of us in transportation trussed up in tariffs and an otherwise tough (to the point of being even a nasty awakening) business year.
     So, pour a coffee if you are at work, or an adult beverage if it is after hours, pull up a chair, take this in, and then maybe call up a colleague and have the story read (if they have not seen it) so you can both help widen the school of thought, as 2019 slogs along.
     We like that the world has an organization like CNS that has named someone who has his finger on the transportation pulse, and his heart and soul into lifting air cargo and helping everybody.
     Dare we say it again:
     We like Mike.
     Since we know Mike as one of the smartest guys, who not only knows something, but he also is always listening, we share his thoughts with you right now.

FT:  What impact has Hong Kong unrest having on cargo to and from China & Intra Asia Pacific?
MW: The unrest in HKG has caused of course some very limited issues for the short term. What hasn’t been discussed as much is the growth of other carriers from the region which are expanding service from the manufacturing areas within China.
     For instance SF Airlines from Hangzhou (HGH) and New York (JFK) and Uni-Top Airlines from Wuhan (WUH) to Chicago (ORD) with freighters are new routes not seen. We are also seeing new additional service from China with recent articles talking about how United will enter the San Francisco (SFO) to Guangzhou (CAN) sector, as well as new additional service to HKG. There is a lot of capacity growth in the China market.

FT:  Also, what do you think will be the impact for the traditional Christmas rush?
MW: The recent backing off by President Trump on tariffs from China until the end of the year will cause most likely a short-term demand for electronics and smaller priced goods for the Christmas rush. The concern is, will there be a drop-off after Christmas, if the tariffs do kick in? This may cause a stocking of goods early, to beat the tariffs.

FT:  What other impacts?
MW: The discussion by U.S. government officials is the impact of raising the de minimis value of goods for U.S. customs clearance to $800. This has somewhat opened issues on how cargo is shipped into the U.S. A lot of these types of cargo that are under the $800 value. This means a lot more shipments being sent in smaller or single quantities. CBP has reported a 30% increase in the number of house waybill shipments. Many of these shipments are being sent via the postal systems, especially those being shipped from China Post to USPS. CBP has also increased crackdown on electronic data for the shipments and a higher increase of screening to reduce illicit and counterfeit shipments.
     The other issue is the global impact is Europe. With the recent political issues in Italy and the upcoming EU budget deadline may have further impact on the balance of Europe. There of course is the concern over what issues BREXIT may bring on.
     Overall, sanctions and tariffs are causing things to become somewhat more difficult for shippers and brokers to be in compliance.

FT:  Near and long term? What should shippers do?
MW: Shippers must become more and more knowledgeable of staying regulatory compliant. It is not a time to back off from automation. Paperless export in the CBP Automated Commercial Environment (ACE) is in pilot stage with all transport carriers. It is expected that ACE Export will be coming sooner than we think, and forwarders, shippers and carriers must not slow down on moving to a paperless environment.

FT:  Any other thoughts about this year, tariffs? Do you expect an easing of tariffs? Our take is that Trump has loosened up a bit as markets took a big hit last week.
MW: As we all know, the Trump administration can change in a minute. The President has backed down some and it something to watch as to how the Administration deals with, not just China, but other areas as well.
     High-value goods that travel by air were to be the last of the tariff-covered imports, but it now appears that they are to be part of the mix. If the White House reduces the de minimis values, this could have more impact on air cargo than the tariffs themselves.

FT:  Stocks are at times flat in summer but 800 points in one day recently was an eye opener about possible recession.
MW: In the CNS Summer 2018 Air Cargo Focus I wrote about the factors of an upcoming “Perfect Storm”. It is a concern that the storm is coming and here is what I said. There are several factors that must be watched that could cause this perfect storm. These include airport facility constraints, price of oil, truck driver shortages, trade sanctions and geopolitical issues. We have seen most of these issues already taking place. Question will be, how does air cargo take these into consideration when planning their network and fleets?
     For CNS we are focusing on airport constraints and have begun initial steps on looking at JFK. We are seeing some ideas already being developed and have had good discussions with the Port Authority on their development of new air cargo facilities.
     We have also begun discussions with airlines, forwarders and ground handlers to get their views of those in the know. Can we find some best practices, improved communication or other areas that we can identify to improve upon?      We plan on learning more, and sharing that with members of our CNS Advisory Board and discussing what we as an industry can do to improve our industry.
Geoffrey