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|The Advocate - September 2017|
The Advocate - September 2017
The Advocate is tailored for NWPCA members and affiliates, and provides the latest information on what’s happening with the public policy issues and meetings that have the potential to impact you - or are impacting the day-to-day tasks and operations of the pallet industry. These government affairs updates strive to "Give you a heads-up, while you're putting the hammer down.”
August and September have been very busy months for the NWPCA advocacy team. We learned that there has been a push to pass language in New York State that would hamper, or outright ban, the import of wooden pallets and containers. This would be especially harmful to recyclers who need cores as an integral part of their business. NWPCA’s Vice President of Advocacy and External Affairs, Patrick Atagi, visited with New York State Plant Board Director to educate them on the issue and provide the perspective from the wooden pallet and container industry.
Fortunately, Atagi was also planning on attending the annual meeting of the National Association of State Departments of Agriculture (NASDA) and met with the New York State Department of Agriculture Commissioner in New Orleans the week of September 11-15, 2017. Atagi took the opportunity of the NASDA meeting to talk to the Commissioner of the New York State Department of Agriculture and Markets. NWPCA continues to work the issue and is partnering with the New York Empire State Forest Products Association. We are planning a meeting of forest product businesses, including NWPCA members, in late October. Please be on the lookout for that announcement and agenda.
August 13-19, 2017. NWPCA’s Patrick Atagi attends National Plant Board meeting in Savannah, Georgia. Makes contact with New York State Plant Board Director.
August 22-24, 2017. NWPCA Patrick Atagi attends New York Invasive Species Council/Committee meeting.
September 8, 2017, NWPCA met at The Nature Conservancy corporate office. It was a productive meeting with both sides agreeing to work together in the future. TNC also noted they would not be pushing for the TreeSMART trade initiative, which is asking to use ‘pest free packaging’ for pallets.
September 8, 2017, reached out to House Agriculture Committee follow-up with Stacy Revels, Professional Staff. Reached out to Jeff Bishop, Senior Legislative Assistant, Congressman John J. Faso (NY-19). NWPCA understanding that Jeff is drafting legislative language that supports USDA-APHIS funding and plant pest interdiction.
First and foremost, we are glad to hear that NWPCA members in the path of Irma and Harvey are safe, as well as their families. While there have been reports of property damage, people are safe, and for that we are thankful.
Concerning Hurricanes Harvey and Irma, employers have many priorities to juggle when a hurricane hits. Safety and security are, of course, the foremost concerns for everyone. The Federal Emergency Management Agency (FEMA) has information available concerning Hurricane Irma, as well as general storm and disaster recommendations. Below are links to sites that might be useful references:
When facing a natural disaster, employers must deal with a series of unexpected challenges. Questions may arise, for example, about how to pay employees (exempt and nonexempt) if a work day is cut short or if all work is suspended for a few days. Depending on the severity of the damage, some employers may want to voluntarily continue paying employees their wages (full or partial), which requires some forethought and potentially tax planning.
Now that the storm has passed, employers may see a surge in employee requests for time off, leaves of absence, or reasonable accommodations. For example, employees that have suffered a serious injury or illness—or who have a family member who did—may be entitled to leave under the federal Family and Medical Leave Act (FMLA). State or local leave laws additionally may apply to certain employees. Dade County, Florida has its own family and medical leave ordinance, for example and in South Carolina, an employer may not terminate an employee who serves as a volunteer firefighter or EMT and who responds to a declared state of emergency in lieu of coming to work.
In addition to addressing these requests from existing employees, employers might also face questions related to employees who are displaced from their positions due to Hurricane Irma and Harvey. Employees may become eligible for unemployment compensation, depending on their circumstances, applicable state law, and the terms of any federal disaster declaration.
While we certainly hope Hurricane Irma does not necessitate such an outcome—employers that decide to close a facility or implement a mass layoff must evaluate whether notice will be required under the federal Worker Adjustment and Retraining Notification Act (WARN). While some states have similar plant closing statutes modeled after WARN, Florida and Georgia are not among them. Nonetheless, employers operating in the region also must be mindful that notice may be required to the state unemployment agency in the event of certain types of mass separations, as in Alabama and Georgia.
IRS Issues Post-Hurricane Waivers, Advice & Warnings
The federal Internal Revenue Service has issued a variety of bulletins following Hurricanes Harvey and Irma, warning of fake charity scams, offering relief from certain tax filings by those in the areas affected, and information for tax preparers with clients in those areas. For details on these items and more, in both English and Spanish, see online. At least some of the states with hurricane emergencies can also be expected to grant waivers and extensions for certain tax filings.
Employers preparing to tackle Hurricane Irma and these associated issues are encouraged to consult the resources mentioned above and may also wish to review hurricane recovery information provided by the Department of Labor (DOL). The DOL offers basic information about Disaster Unemployment Assistance, Unemployment Insurance, National Dislocated Worker Grants, and safety and health issues.
We hope that our friends and clients stay safe, and we are prepared to help as best we can throughout the recovery from Hurricane Irma.
Harvey is estimated to have ruined 300,000 to 500,000 cars, with some estimates even higher. Automotive damage alone is expected to come in at $2.7 billion to $4.9 billion. For comparison, Sandy destroyed about 250,000 vehicles and Katrina claimed about 200,000 – so if the higher estimates are true, Harvey’s damage will be more than that of Sandy and Katrina combined. As the rebuilding phase for Houston and other affected areas begin, the upside to the tragedy is that a significant amount of freight will be generated once insurance claims are paid and relief aid comes from Congress. From construction-related freight to replacing goods such as electronics and automobiles, there will be a boost in trucking freight. These severe storms reduce economic growth initially, but generate more economic activity during the rebuilding phase.
Post Hurricane Legal with Customers
Much of the southern United States faces months—if not years—of cleanup and reconstruction following Hurricanes Harvey and Irma. As transportation providers begin to recover from the immediate disruption and delays caused by the hurricanes, the greater domino effect of the hurricanes on supply chains will begin to appear.
Early data shows that most supply managers believe that Hurricane Harvey, which caused widespread destruction in south Texas and the closure of the Port of Houston, will impact supply chains in coming months. The Institute for Supply Management (ISM) recently released the results of a special survey to assess how Hurricane Harvey impacted six key metrics. ISM’s survey found that the majority of responding supply managers believe input materials pricing will be somewhat negatively impacted and the majority of respondents believe supplier deliveries will be at least somewhat negatively impacted over the next three months.
Often, supply chain and procurement executives and managers will be able to work collaboratively with other supply chain partners that have been similarly impacted by the storms to reach amicable resolution of delays and disruptions that follow a hurricane. For example, as a matter of good business and goodwill, a supply chain partner may be willing to overlook delays or adjust the cost of materials to offset the impact of the supply chain disruption. Still, it is imperative to give early and critical thought to the potential lasting effects of a hurricane on an organization’s supply chain so that the organization can effectively communicate with its supply chain partners, utilize insurance coverage and address potential contract concerns.
First, as most supply chain and procurement executives and managers have already experienced, communicating early and often to supply chain partners can help alleviate the impact of storms on the supply chain. Such communications foster transparency and can help businesses on the providing and receiving sides to better prioritize tasks that must be completed (such as the shipment of particular goods) in the wake of such extensive supply chain disruption. Effective communication should help enable effective collaboration.
Next, it is important that an organization consider the potential reach of the consequences of a hurricane so that the organization can review all of its available insurance coverage to determine whether any coverage may be available. For example, if an organization experiences long and costly supply chain delays, such as shortages of raw materials, that ultimately impact its ability to adequately and timely manufacture goods, the organization will want to consider the availability of insurance coverage. Then, the insured will need to carefully review its policy to understand what is covered and what is not.
In addition to considering the coverage available, the organization will need to ensure that it manages its operations in a manner that mitigates damages since acting to protect and preserve property from loss or damage, or mitigation of damages, may be required under an applicable policy. As a review of the effects of a hurricane continues, and an insured considers potentially available insurance coverage, it will also be crucial to understand notice requirements and calendar applicable deadlines.
In the days following Hurricane Harvey (and now, likely, in the days following Hurricane Irma), many businesses have received notices of force majeure from supply chain partners. Like all supply chain contracting matters, whether and to what extent a business disruption that constitutes force majeure for an upstream or downstream supply chain partner will most likely depend upon the underlying contract. For example, if a transportation provider that was to pick up raw materials from the Port of Houston could not pick up such materials because the port was closed and the provider’s fleet was damaged, such provider would likely be able to assert force majeure to excuse at least some performance, or all performance for some period of time, in its contracts with its customers. However, the transportation provider’s customers would not necessarily be able to assert force majeure under their contracts with their customers, unless the definition of force majeure is broad enough to include a range of events beyond such party’s reasonable control.
Following past large scale natural disasters, force majeure provisions have moved from traditional contract boilerplate—with little review or negotiation—to key provisions that are thought out, negotiated and thoroughly documented. However, such attention on force majeure provisions is only recent, meaning that many supply chain contracts are likely to address force majeure in only a cursory manner (if at all). In other circumstances, parties may lack any contract and rely upon purchase orders or other short forms of documentation. In such circumstances, it is possible that applicable laws may provide some help to affected parties, but it will be important for impacted organizations to carefully consider disruptions following hurricanes to explore all possibilities.
Ultimately, the nature and scope of supply chain interruptions following Hurricanes Harvey and Irma are highly dependent upon a large number of factors, including how quickly impacted supply chain partners are able to recover their operations. Still, assembling a team that can plan for potential consequences—rather than react after the fact—is likely to benefit affected organizations and permit them to maximize strategies that will lessen the impact of the hurricanes on their businesses.
Finally, Hurricanes Harvey and Irma will serve to strengthen supply chain relationships and documentation moving forward, as businesses both recover and build new ways to respond to widespread and far-reaching disruptions. Suzie Trigg is a partner in the Dallas office of international corporate law firm Haynes and Boone.
Schedule: Congress is quickly clearing its to-do list for September, setting up time this fall to tackle priorities such as tax reform and, possibly, a farm bill.
The Senate on September 14th, passed a $15 billion package of hurricane relief that averts a government shutdown on Oct. 1 by extending government spending authority to December and increasing the debt ceiling for three months as well.
The temporary debt-ceiling extension is being viewed in some quarters as a defeat for the House Freedom Caucus, the group of hard-line conservatives that could be an obstacle to passing a new farm bill. But a House GOP veteran, Tom Cole, R-Okla., says the three-month extension is a better deal for the Freedom Caucus than the much longer extension that Republican leaders wanted. “This is a relatively short period of time,” Cole said.
Tax Reform Developments
Reuters (9/14) reports, in a story on Republican tax reform efforts, that House Ways & Means Chairman Kevin Brady (R-CA) on Thursday responded “probably not that specificity” when asked if the tax reform framework expected on September 25 “would include target tax rates for individuals and U.S. corporations.” Reuters quotes Brady adding, “You’re going to see clear approaches on where we want to go on business rates. You’ll see where we’re going on individual rates.” Reuters (9/14, Morgan) reports that Senate Finance Committee Chairman Orrin Hatch said his committee would not be “anyone’s rubber stamp” on tax reform. The article quotes Sen. Hatch saying, “The group – some have deemed us the Big Six – will not dictate the direction we take in this committee. The Finance Committee will not be bound by any previous tax reform proposal or framework when we start putting our bill together.” Politico (9/14, Eckert) quotes Treasury Secretary Steven Mnuchin saying “the administration isn’t backing down from its ambitious timeline of getting tax reform done by the end of the year.”
Speaker Ryan Says Growth Most Important Goal Of Tax Reform. In an interview with The AP (9/14, Werner), House Speaker Paul Ryan (R-WI) said that “the most important goal of an overhaul is economic growth.” The article quotes Ryan saying, “We want pro-growth tax reform that will get the economy going, that will get people back to work, that will give middle-income taxpayers a tax cut and that will put American businesses in a better competitive playing field so that we keep American businesses in America. That is more important than anything else.”
GOP To Release Tax Reform Framework Week Of September 25. The Hill (9/13, Jagoda) reports that “key Congressional Republicans and administration officials are planning to release a ‘consensus’ tax-reform framework the week of Sept. 25, House Ways and Means Committee Chairman Kevin Brady (R-Texas) told his colleagues Wednesday.” Speaking to reporters after a GOP conference meeting, Brady said the framework will outline the “core elements of tax reform.” In addition, the article quotes House Speaker Paul Ryan (R-WI), saying that the framework will represent “the beginning of a very important process to achieve for the first time in a generation overhauling our tax system and giving middle-class families a much deserved break.”
Trump Administration Emphasizes Need For 15% Corporate Tax Rate
Several news outlets report ongoing actions by the Trump Administration to advance tax reform. Fox Business (9/13, Wisner) reports that President Trump’s goal of a 15% corporate tax rate has been questioned by legislators of both parties, but OMB Director Mick Mulvaney was quoted in an interview Wednesday saying, “We’ll go to whoever will help us get it down to 15%. The president and I just talked not 15 minutes ago and he’s adamant about this 15% rate.” Mulvaney adds that with such a reduction, “You switch from a system that encourages businesses to leave the United States to one that encourages businesses to come here. And that has an impact not on just things like the trade balance but on employment, on economic growth.”
Reuters (9/12, Morgan, Lawder) reports that “the president is cranking up a publicity campaign to build public support for his general goals of lower and simpler taxes.” Monday night, the article adds, President Trump “held a dinner at the White House with the six senators,” as well as “Vice President Mike Pence, White House economic adviser Gary Cohn and Mnuchin.” Reuters writes that “Pennsylvania Republican Senator Pat Toomey, one of the attendees, said on a conference call later that Trump talked about competitive business taxes, ending taxation of U.S. corporations’ foreign profits, and a middle-class tax cut.”
On September 15, 2017, PPQ will retire the Canadian Border Agricultural Clearance Manual (CBM) and remove it from the PPQ Manuals web page. Retiring the manual will improve efficiency by reducing duplicate content. The following manuals and their reference documents contain the requirements for importing commodities from Canada:
You can find these manuals and reference documents here.
August turned out to be yet another record month for the Port of Virginia. The nation’s sixth-largest container port last month moved 240,605 containers, measured in standard 20-foot units or TEUs, the port world’s benchmark for gauging container volume. That’s a gain of 2.2% from the same month a year ago, making it the port’s best August ever.
If it seems like you’re reading the same story about the port, month after month, it’s because you are, for the most part. The trend really kicked in in August 2016, continuing through this year. For seven of the last eight months – the only exception appears to be February, by a hair – the port has posted record-setting monthly container volumes. May was its best-ever month, period.
While one might assume that all this good fortune is unique to Virginia, a look at other ports shows a bigger trend. “Growing imports at the nation’s major retail container ports set an all-time monthly record this summer, and 2017 is expected to reach a new yearly record,” according to the monthly “Global Port Tracker” report, released Sept. 8 by the Washington-based National Retail Federation and Hackett Associates, a consulting firm. “Consumers are buying more, and retailers are scrambling to import more merchandise to keep up with the demand,” Jonathan Gold, federation vice president for supply chain and customs policy, said in a statement. “Docks have been busier than ever as ships unload cargo headed for store shelves, and that’s a good sign both for retail sales and the nation’s economy.”
Other ports haven’t announced their August numbers yet, but it has been the same story at other’s: Savannah, Ga., and Charleston, S.C., on the East Coast; and Los Angeles and Long Beach, Calif., on the West Coast, the No. 1 and No. 2 ports in the nation.
The Port of New York and New Jersey – the nation’s third-largest port – posted its best June ever and its second-highest month on record. It reported in late July that its volumes were on record pace for 2017. As it turned out, TEU volumes in July at New York and New Jersey grew 8.4%, to nearly 577,000 units.
Charleston, the ninth-largest port in the nation, posted consecutive monthly TEU-volume records from January through July; Savannah, the fourth-largest U.S. port, did the same, with the exception of March and April.
So what’s going on?
About five years ago, ports all along the East Coast were jockeying for position to deepen channels and improve landside infrastructure before the expanded Panama Canal’s opening in 2016. Because the expanded canal would be able to handle ships 2½ times bigger than before, the thinking at the time was that shippers would shift more Asian cargo away from West Coast ports to East Coast ports through the canal. Yet the theorized big diversion of cargo from West Coast to East Coast apparently hasn’t been playing out. “Since the opening of the expanded Panama Canal, the main shift we’ve seen is from (Asia-U.S. East Coast) services via Suez switching to (Asia-U.S. East Coast) via Panama,” Neil Davidson, a senior ports and terminals analyst at London-based Drewry Maritime Advisors, said in an email. There really hasn’t been a marked shift from the U.S. West Coast to East Coast so far, he added.
Davidson said a number of U.S. ports that posted significant percentage growth figures got a boost from comparisons to a weak 2016 period. He cited New York and New Jersey, Savannah, and Charleston on the East Coast, “but not Virginia where the volumes held up well in 2016 and so the 2017 (year-to-date) percentage growth is more ‘real,’ ” adding, “that said, all of the major (East Coast) ports have recorded significant absolute volume growth so far in 2017.” Statistics from New York and New Jersey, Savannah, and Charleston show that the January-July 2016 period used to generate year-over-year percentage growth figures with this year included at least five months in which volumes had dropped from the same period in 2015. Virginia had only three months in that 2016 period in which volumes had dropped from the previous year.
Davidson said Drewry’s global port-growth tracking shows its rolling annual average growth rate has been climbing for the last year and hit 5% in the second quarter of 2017. Import-loaded TEUs in August at the Port of Virginia were up 5.5% from the same month a year ago, while export-loaded units fell 10.7%. Empty outbound TEUs were up 25% and empty inbound units fell nearly 49%.
The Freight Transportation Services Index (TSI), which is based on the amount of freight carried by the for-hire transportation industry, reached an all-time high, rising 1.4 percent in July from June, after a one month decline, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS). The July 2017 index level (128.2) was 35.4 percent above the April 2009 low during the most recent recession.
The level of for-hire freight shipments in July measured by the Freight TSI (128.2) reached its all-time high, 0.7 percent above the previous high reached in May (127.3). July was the third month in 2017 in which the freight index reached an all-time high. During the first seven months of 2017, the freight index averaged 2.9 percent higher than the first seven months of 2016. BTS’ TSI records begin in 2000. See historical TSI data.
The June index was revised to 126.4 from 126.2 in last month’s release. Monthly numbers for April and May were revised up slightly.
The Freight TSI measures the month-to-month changes in for-hire freight shipments by mode of transportation in tons and ton-miles, which are combined into one index. The index measures the output of the for-hire freight transportation industry and consists of data from for-hire trucking, rail, inland waterways, pipelines and air freight. The TSI is seasonally-adjusted to remove regular seasons from month-to-month comparisons.
Analysis: The July increase in the Freight TSI was driven by gains in trucking, pipeline and water, while rail carloads decreased and air freight and rail intermodal were stable. The increase took place against a background of growth in several other indicators in July. Employment and Personal Income both increased, while the Federal Reserve Board Industrial Production index grew by 0.4 percent, with gains in mining and utilities even as the manufacturing index was down. The Institute for Supply Management’s Purchasing Managers’ Index showed positive but slowing growth. However, housing starts declined in July.
Trend: The Freight TSI reached a new all-time high of 128.1 in July –1.4 percent above the previous month, 0.7 percent higher than the previous all-time high set just two months earlier in May, and 2.7 percent above the level of July 2016, the highest level prior to 2017. July was the third month in a row in which the Freight TSI exceeded the level of all months prior to 2017, and the fourth month in 2017 when it did. Since July 2016, the Freight TSI has reached or exceeded the level of 124.3 (which it did not reach until July 2016) in nine months out of 13, and in all months from December 2016 on. The July index was 35.4 percent above the April 2009 low during the most recent recession. For additional historical data, go to TSI data.
Index highs and lows: For-hire freight shipments in July 2017 (128.2) were 35.4 percent higher than the low in April 2009 during the recession (94.7). The July 2017 level reached its all-time high.
Year to date: For-hire freight shipments measured by the index were up 2.8 percent in July compared to the end of 2016.
Long-term trend: For-hire freight shipments are up 13.2 percent in the five years from July 2012 and are up 17.9 percent in the 10 years from July 2007.
Same month of previous year: July 2017 for-hire freight shipments were up 2.7 percent from July 2016 (124.8), which had been the all-time high prior to 2017.
The TSI has three seasonally-adjusted indexes that measure changes from the monthly average of the base year of 2000. The three indexes are freight shipments, passenger travel and a combined measure that merges the freight and passenger indexes. See Seasonally-Adjusted Transportation Data for numbers for individual modes. TSI includes data from 2000 to the present. Release of the August index is scheduled for Oct. 12.
Passenger Index: The TSI for passengers did not change from June to July. The Passenger TSI July 2017 level of 127.5 was 2.3 percent above the July 2016 level. The index is up 11.2 percent in five years and up 9.7 percent in 10 years. The passenger TSI measures the month-to-month changes in travel that involves the services of the for-hire passenger transportation sector. The seasonally-adjusted index consists of data from air, local transit and intercity rail.
Combined Index: The combined freight and passenger TSI rose 1.0 percent in July from its June level. The combined TSI July 2017 level of 128.1 was 2.6 percent above the July 2016 level. The combined index is up 12.6 percent in five years and up 15.3 percent in 10 years. The combined TSI merges the freight and passenger indexes into a single index.
Revisions: Monthly data has changed from previous releases due to the use of concurrent seasonal analysis, which results in seasonal analysis factors changing as each month’s data are added.
BTS research has shown a clear relationship between economic cycles and the Freight and Passenger Transportation Services Indexes. See a study of this relationship using smoothed and detrended TSI data. Researchers who wish to compare TSI over time with other economic indicators, can use the FRED database, which includes freight, passenger and combined TSI, and which makes it possible to easily graph TSI alongside the other series in that database.