TIA and the Flattening, Digitizing World

Will Sehestedt | TRANSPORTATION INTERMEDIARIES ASSOCIATION

As technology continually makes commerce more global, TIA members are increasingly impacted by the international freight economy even if their core businesses remain focused on the North American or domestic U.S. marketplaces. More than half of TIA members offer at least one international freight service, whether that be cross-border, North American over-the-road or intermodal, ocean or air forwarding, or other value-added services.

Travel mania/Shutterstock.comWhile those freight services may not represent a significant part of the business portfolios of those companies, TIA is still working hard to improve regulations to make it easier to grow in those areas. TIA is also working to improve resources and foster discussions, so that the Association can better represent those companies before regulators in the U.S. and abroad.

TIA staff works on a variety of issues before U.S. Customs and Border Protection (CBP), the Federal Maritime Commission (FMC), and Congress. For example, expanding the eligibility requirements for the Customs-Trade Partnership Against Terrorism (C-TPAT) program is an ongoing struggle and will require additional language from Congress. TIA will continue working in the new Congress to ensure that more of its non-asset-based 3PLs have the opportunity to participate.

TIA is also one of the founding members of the Coalition for Fair Port Practices, a group of more than 20 associations representing shippers, intermediaries, and port drayage motor carriers. The Coalition filed a petition with the FMC in 2016 requesting formal guidance on what constitutes “just and reasonable” practices under the Shipping Act for levying of detention and charges. As a direct result of TIA and the Coalition’s efforts, in 2018 the FMC held a hearing and investigation on this issue to better understand the commercial practices around these charges and how those practices can be improved.

During its investigation, the FMC indicated it would focus moving forward on standardizing the definitions of what constitutes detention, demurrage, and free time (these definitions can vary between ports, terminals, and carriers); improving notifications on container availability; improving billing models between marine terminal operators, ocean carriers, and shippers/intermediaries; and establishing an FMC advisory and innovation team. These improvements should provide at least some measure of benefit for intermediaries and port users who have been subjected to major penalties and legal costs related to detention and demurrage.

TIA and its Coalition partners will work hard to ensure that this guidance is enacted in a way that simplifies commercial operations for port users and offers a means by which users can resolve unreasonable charges in a timely manner without substantial legal fees. As guidance is made available, TIA will also update its Guidelines on Best Practices for Demurrage and Detention in Container Shipping, which is available on the Members Only  section of the TIA website.

Unfortunately, a bad law abroad can quickly become a bad law here in the U.S., and companies throughout the supply chain can also suffer from confusion and inefficiency as a result of changes to international law by treaty.

Another major issue where TIA has joined a chorus of business industry voices is with regards to the renegotiation of the North American Free Trade Act (NAFTA). TIA supports updating the nearly 25-year old agreement, but agrees with other trade associations, shippers, carriers, and intermediaries that care should be taken to implement changes in a way that does not harm the flow of North American cross-border trade, which accounts for more than $1 trillion per year.

In October 2018, the Trump administration announced that it had reached an agreement with both Mexico and Canada that would keep the agreement trilateral – a key request of business interests including TIA. The new Agreement (U.S.-Mexico-Canada Agreement or USMCA) will update market-access provisions for autos and agricultural products and will also add new provisions to the agreement addressing issues like digital trade and intellectual property rights that the rise in digital commerce has made even more important than they were when NAFTA was originally implemented in 1994.

Congress anticipates receiving a list of required changes to U.S. law early in 2019, and will take up an expedited form of consideration for USMCA. This “fast-track” consideration of the trade bill will mean that the USMCA will receive its up-or-down vote early in the 116th Congress.

Outside USMCA and ports issues, TIA also monitors global regulatory developments. Unfortunately, a bad law abroad can quickly become a bad law here in the U.S., and companies throughout the supply chain can also suffer from confusion and inefficiency as a result of changes to international law by treaty. Examples of these international laws that can directly impact 3PLs are the implementation of data protection regimes (as regulators look to protect the data privacy of their citizens) or changes levied by international treaty and enforced by the International Maritime Organization (IMO) or International Civil Aviation Organization (ICAO).

In May 2018, the European Union implemented the General Data Protection Regulation, or GDPR, which is a sweeping reform of data protection and privacy laws for individuals in Europe. This new law sets requirements for processing and retaining personally identifiable data for those individuals, and its enforcement could potentially capture American companies doing business in Europe, or who process the personal data of individuals in Europe.

As technology continues bringing companies and individuals around the globe in closer contact, this rule could potentially impact TIA members or other North American 3PLs. This law is a framework that some states (such as California) are already seeking to replicate and bring to the U.S. TIA is closely monitoring those efforts along with the U.S. Chamber of Commerce and other business interest groups.

Additionally, TIA works to keep members informed about rules and potential liabilities created by changes at the IMO and ICAO. Examples of rules that forced adaptations by supply chain partners include the 2016 IMO rule mandating that the verified gross mass (VGM) of every packed shipping container be provided to the ocean carrier prior to vessel loading, or ICAO’s 2017 guidance on the transport of lithium batteries. Increasing awareness of those regulations helps intermediaries run their businesses while ensuring regulatory compliance and minimized risks.

An IMO rule that mandates the use of low-sulphur fuel by international shipping lines beginning in January 2020 will create additional economic pressures on global container shipping. In an increasingly consolidated and low-margin marketplace for ocean carriers, the increased costs of compliance with the low-sulphur rule are being passed down to customers through new “bunker adjustment factors.” Those bunker adjustment factors are being rolled out by shipping lines in 2019, one year in advance of the rule taking effect, and so will have an immediate impact on global commerce.

In the same way that excessive detention and demurrage chargers served as revenue generators for ocean carriers, these new bunker adjustment factors will increase costs for ocean transportation intermediaries and shippers that must be passed down to the end users in the supply chain.

TIA is fortunate to leverage the expertise of international association colleagues through FIATA, the International Federation of Freight Forwarders Associations. FIATA members span the globe, and its meetings provide a forum to discuss international regulations; pressures in international commerce as a result of technological innovations, emerging markets, and the rise of ecommerce; as well as best practices for global freight. Among its North American peers, TIA also works closely with the U.S. Chamber of Commerce, National Retail Federation, Retail Industry Leaders Association, and North American Strategy for Competitiveness to ensure that the voice of the intermediary is heard in policy debates.

TIA has regular members that are active in all modes and specialties for international freight, and many associate members that can provide expertise into the nuances of risk management, legal compliance, and more. The Association also has two policy committees – the International Logistics Conference and the Airfreight Logistics Conference – which focus on improving discussions and resources on these issues for all
TIA members.

Will Sehestedt is Director of Government Affairs for Transportation Intermediaries Association. He can be reached at sehestedt@tianet.org or 703-299-5713.