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Shippers eye ocean transport as US-Mexico tensions rise    04/06/2019
Shippers have been investigating new options to move freight between Mexico and the United States, including all-water routes, during a period of political uncertainty and threats from Washington ranging from sealing the southern border to a 5 percent tariff on all imports beginning this month.

The recent tensions between US President Donald Trump and Mexico has only increased the interest in these all-water options. Gridlock in April on the US-Mexico border, as Trump threatened to seal the border over immigration issues, is still fresh in the mind of shippers because there’s no guarantee it won’t suddenly happen again.

William Taylor, CEO of TransGulf, said this has bolstered interest in ocean options.

“Our first sailing from Tampa starts [June 4] for the Tuxpan Express where we will focus on Tuxpan, Mexico and Tampa. Volumes for our first northbound voyage are healthy,” he told JOC.com.

Shippers might also pull forward freight to beat a 5 percent tariff scheduled to go into effect on June 10 on all Mexican imports, which would rise to 25 percent by October. If the effects of tariffs on cargo volumes from China last year is any indicator, beneficial cargo owners (BCOs) will move as much as possible to save on duties and stick inventory in warehouses, putting pressure on storage space and lease rates.

In addition, there is no guarantee the Mexican legislature will approve the US-Mexico-Canada Agreement (USMCA) now that the president has put tariffs on Mexican imports back on the table. Trump has yet to send the NAFTA replacement deal to the US Congress for ratification but said recently he may do so soon. Democratic lawmakers have said the deal needs stronger enforcement provisions and protections for workers before it can be ratified.

Craig Mygatt, CEO of SeaLand, told JOC.com there has been an uptick in shipper inquiries lately and more discussion around contingency plans for US-bound freight from Mexico.

 

“That said, very little has actually switched over [to ocean]. We believe shippers will wait until they can no longer bear it, prior to making the switch. We have some experience here with the ‘Atlántico’ service and changing modes of transport seems to be very difficult,” he said.

Ocean services have ticked up in the past few years on routes connecting ports in Veracruz, Altamira, Morelos, Tampico, and Yucatán to the US, particularly connections to Tampa and Miami, Florida. CMA CGM, Hapag Lloyd, OOCL, SeaLand (a division of Maersk Group), and TransGulf have all bolstered their Mexico-to-US offerings in the past 18 months, and other ocean carriers are paying close attention to modal shifts within North America.

Tensions hit growing US-Mexico trade

According to the US Chamber of Commerce, approximately $1.7 billion of goods cross into the US from Mexico every day, and nearly 70 percent of those goods are hauled by truck, US Bureau of Transportation Statistics (BTS) data show. More than 6.3 million trucks crossed the border with freight in 2018, according to BTS, which is up nearly 17 percent in the last five years.

US imports from Mexico grew another 5.4 percent year over year in the first quarter of 2019, according to BTS, putting them on pace to reach $365 billion for the year. A 5 percent tariff on all Mexican goods would therefore represent an impact of $18.25 billion to the US economy — paid either by importing companies or end consumers in the form of price hikes. If the Trump administration were to increase those tariffs to 25 percent, as the president has threatened, that impact balloons to $91.25 billion.

Port Tampa Bay, for example, said cargo to and from Mexico doubled in 2018, to 25,509 TEU from 13,016 TEU in 2017, largely due to cargo on the TransGulf route from Tuxpan.

PortMiami handled nearly 15,000 TEU from Mexico in 2018, with imports including refrigerated goods, such as juices; appliances; and exports of flowers, beer, and electrical goods. Import containers are being sent inland to Titusville — an hour east of Orlando — on Florida East Coast Railway, a Class II regional railroad owned by the same company as Mexico’s Ferromex rail consortium.




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