WEEK 41 TOP 5: DISRUPTION TO SUPPLY CHAIN WATCHLIST No.207

- (Following No.206) The Israeli Defense Forces (IDF) have seized territory in an undisclosed area of southern Lebanon to prevent direct attacks by Hezbollah on northern Israel, aligning with Israel’s objective of securing safe conditions for Israeli civilians in border regions.

Iranian-backed Iraqi militia group Kataib Hezbollah threatened to launch an “energy war” on October 10, underscoring Iran’s influence in pressuring the United States to limit Israeli retaliation. Iran’s foreign minister warned senior Saudi officials of possible attacks on Saudi energy assets if Saudi Arabia backs an Israeli offensive against Iran. Gulf countries have reportedly urged the U.S. to restrain Israel from targeting Iranian energy sites, fearing Iranian retaliatory strikes on their own infrastructures. Since September 30, Brent crude oil prices have surged from $71 to nearly $79 per barrel as of October 10.

The Israeli security cabinet convened on October 10, opting to delay a vote on countermeasures for Iran’s recent ballistic missile attack on October 1, reportedly to better synchronize timing between decision and execution. Additionally, the Iranian parliament suggested a potential withdrawal from the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) in anticipation of a possible Israeli strike.

On October 10, a series of missiles targeted the tanker OLYMPIC SPIRIT (IMO 9327097) in the southern Red Sea. While damage to the vessel is reported, all crew members are safe, and the vessel remains operational.

Freight rates continue to decline, though at a slower rate than previously observed. The Shanghai Containerized Freight Index (SCFI) dropped by 3.4%, a reduction from the 9.8% decline before China’s National Day holiday. Drewry’s World Container Index decreased by 4%, reaching $3,349 per 40ft container this week.

Disruption: risk to oil infrastructure in the Gulf region, potential spikes in oil prices, and possible rebound in ocean freight rates due to heightened volatility and geopolitical instability

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- This week, the EVG rail union began new wage negotiations with non-federal railways, seeking full inflation compensation, a 7.6% pay raise, and the option for employees to exchange wage increases for additional time off. The union is also pushing for flexible work-hour arrangements, similar to those recently agreed upon with Deutsche Bahn (DB), offering employees a choice between 35- and 40-hour workweeks.

On October 9, DB Cargo reached a critical agreement with its central works council to address significant financial losses, including a €260 million deficit in the first half of 2024. The restructuring plan includes a voluntary redundancy program instead of enforced layoffs, providing a path for DB Cargo to stabilize amid rising costs and inflation pressures.

Disruption: low risk of further rail strikes

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- (Following No.205) The Port of Montreal Longshoremen’s Union (CUPE 375) initiated an indefinite overtime strike starting on October 10, signaling a “pressure tactic” as wage and working condition negotiations with the Canadian Maritime Employers Association (MEA) remain deadlocked.

The union demands a 20% wage increase over four years and improved job security, including the automatic transition to permanent roles after three years of employment. In response, the MEA urged the union to rescind the overtime strike notice, warning that reduced overtime could severely disrupt essential operations. Current MEA offers have been deemed inadequate by the union, citing concerns over potential setbacks for dockworkers’ rights.

Disruption: increasing congestion and delays due to reduced productivity

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-? The China Maritime Safety Administration (MSA) issued new directives on October 7 concerning the import, export, and transshipment of dangerous goods through Ningbo, effective immediately.

All bookings destined for or transiting via Ningbo now require a Dangerous Goods Declaration (DGD) and a Material Safety Data Sheet (MSDS) for compliance.

Key Requirements:

• Import and Transshipment via Ningbo: DGD must be in color, stamped, and signed by the declarant, with an MSDS mandatory for all shipments, including UN 3166 (vehicles).
• Transshipment Only via Ningbo: MSDS is mandatory, while the DGD may follow a standard format.
• Exports from China through Ningbo: A color DGD with a stamp and signature, plus an MSDS in English and Chinese, is required for each UN number. Multiple UN numbers require separate MSDS documents per item.

Disruption: increased control over dangerous goods movements to/from and through Ningbo Port

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- Starting November 12, 2024, U.S. Customs and Border Protection (CBP) will enforce stricter cargo description requirements for all air cargo entering the U.S. Aimed at enhancing data accuracy and security, these requirements mandate that carriers and other parties submitting ACAS data must include either a precise description of goods or a six-digit Harmonized Tariff Schedule (HTS) code.

A warning period, ending November 11, will precede enforcement. During this phase, CBP will send daily emails to the designated ACAS contact, flagging vague descriptions such as "gifts," "daily necessities," "accessories," and "parts." Following the warning period, vague descriptions will trigger rejections with error code MISSING_CARGO_DESC.

Disruption: additional information requirements, particularly impacting e-commerce shipments.