Welcome to our latest eCommerce and logistics news roundup!
This week, we’re continuing our analysis of how global companies are reacting to the spread of the COVID-19 pandemic. Couriers around the world are suspending service guarantees and implementing temporary surcharges; global air freight capacity has fallen for the first time in three years; and the US is offering a 90-day import tariff suspension to protect the local economy.
And, in case you missed our last logistics roundup, you can still read it by heading over here!
Couriers Implement Guarantee Suspensions and Temporary Surcharges, Cite Coronavirus Impact
By now, you’ll have heard that the COVID-19 pandemic has wreaked havoc on the world’s supply chains. Those effects have extended to global couriers and national postal services, who have been forced to suspend services and delay shipment times. A number of carriers have also been forced to suspend their service guarantees (due to delays in shipments) and introduce temporary surcharges. Here are some updates you should know about.
- On March 24, FedEx suspended its global Money Back Guarantee until further notice. The suspension applies to all FedEx Express, FedEx Ground, FedEx Freight, and FedEx Office services.
- At the same time, UPS announced that it would suspend its service guarantee indefinitely for all global services. The courier also said that air services would also experience delays.
- The UK’s Royal Mail announced that it would no longer be able to honor its 1 PM time guarantee for Special Delivery amidst the pandemic. It has also suspended service in over 30 countries.
- USPS will no longer stand by their guarantee of Priority Mail Express International mail sent to China and Hong Kong. The carrier has also suspended services in over 15 countries.
- Aramax is imposing temporary emergency surcharges in APAC.
- DHL has also introduced temporary surcharges globally - these are already being factored into Easyship’s rate calculations.
- UPS is also charging temporary surcharges which are being reflected in Easyship rates.
Easyship’s Take: Shipping is facing serious challenges thanks to the coronavirus pandemic. However, many couriers have declared themselves to be essential services and are trying to maintain normal operations as far as possible. To facilitate this, most couriers have been forced to implement a temporary emergency surcharge that will help them continue operating.
In addition, because of delays, government restrictions, and low cargo capacity, most couriers have also been forced to suspend their service guarantees because they simply aren’t able to meet delivery deadlines. Despite this, it’s admirable that they’re trying to ensure that goods are still getting around the world. If you’re looking for updates on courier operations, we’ve got dedicated pages for APAC, the US, and Europe.
Global Air Freight Capacity Falls for First Time Since 2017
The global air freight capacity has fallen for the first time in three years thanks to coronavirus impacts. Capacity fell 4.4% year-on-year in February, largely driven by flight cancellations in the APAC region which were caused by the COVID-19 pandemic. This drop was matched by a 1.9% year-on-year decrease in air freight capacity in the same month.
The drop can be seen largely in the Asia-North America trade lanes, which were down 2.4% year-on-year in February. Many airlines also cut their routes to Mainland China by up to 90%, which resulted in a significant drop in capacity. However, this can be attributed to factory closures (especially in China) and significant delays in warehouses and airports around Asia.
This drop in capacity has resulted in a big spike in air freight rates, particularly in China-US and Europe-US routes, as production began ramping up again in March. Rates rose by a massive 27% in March. The shipping price between China and the US rose from $3.49/kg to $5.83/kg - a huge 67% increase - in the space of a month.
Easyship’s Take: Air freight has become a serious concern in the face of the COVID-19 pandemic. With deep cuts to capacity and big spikes in rates, many companies are struggling to get their goods around the world - even Apple and Jaguar have been affected.
Unfortunately, this situation probably won’t be resolved until we see a resumption in passenger flights, which often carried significant belly capacity. However, many airlines are now using passenger planes for cargo flights, so we’re hopeful that there will be some mitigation of these effects soon.
US Suspends Import Tariffs Due to COVID-19 Pandemic
The Trump administration has announced its intention to temporarily suspend the collection of import tariffs. The 90-day suspension will apply to certain imports, including some clothing and light trucks, though details are still thin on the ground. However, what is clear is that the tariffs will be delayed rather than completely canceled - businesses will be required to repay them at a later date that’s yet to be determined.
This move follows the previous tariff exemptions that were applied to medical supplies and personal protective equipment that are much needed in American hospitals as they battle the coronavirus.
The move is intended to lessen the economic impact of the virus on American businesses by giving them more liquidity at this time. For example, apparel and footwear companies are often required to pay import tariffs that can range between 15%-30%. By delaying the payment of these tariffs, the companies would be able to use the ready cash now, potentially to keep people in jobs and pay overheads.
Easyship’s Take: The coronavirus pandemic has wreaked havoc on the American economy, and this tariff suspension will - hopefully - go some way to keeping American companies in business. During the first week of April, nearly 7 million people filed for unemployment in the US, a clear indicator that businesses are struggling to make ends meet in the current climate.
The idea of the tariffs is that, in the short term, companies may be able to use their cash reserves to keep employees on the payroll, pay rent on commercial properties, and take care of other overheads.
In theory, it’s a good idea, but it's hard to say what the effect of this tariff suspension will be. It also remains to be seen when and how the government will expect businesses to pay back the tariffs. It certainly won’t be immediately after the 90-day suspension lifts since it will take a while for businesses to get back on their feet.
For more coronavirus updates, see here.