Weekly highlights

Ocean Rates – Freightos Baltic Index

• Asia-US West Coast prices (FBX01 Weekly) increased 5% to $5,540/FEU.    
• Asia-US East Coast prices (FBX03 Weekly) fell 13% to $5,165/FEU.
• Asia-N. Europe prices (FBX11 Weekly) fell 1% to $3,489/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) fell 12% to $3,451/FEU.

Air Rates – Freightos Air Index

• China – N. America weekly prices increased 28% to $6.94/kg.
• China – N. Europe weekly prices increased 1% to $3.86/kg.
• N. Europe – N. America weekly prices increased 9% to $2.02/kg.

Analysis

Asia – Europe ocean rates closed October 30% lower than at the end of September as Red Sea diversions that led to an early peak season meant the post-peak/pre-Lunar New Year demand lull started early this year too. 

Prices of $3,500/FEU to both Europe and the Mediterranean have reached the floor set during the previous demand lull this year in March and April, though these rates are still about double long-term averages as sailings around the Cape of Good Hope continue to absorb capacity.  

Some carriers have announced blanked sailings in November as demand lags, but the usual Lunar New Year volume and rate rebound may start earlier than usual as the holiday begins in late January instead of early February this year, and as shippers may start increasing orders early to accommodate longer sailing times as well. 

Congestion from the three-day port worker strike at US East Coast and Gulf ports has overall dissipated, and did not seem to put pressure on transpacific rates as prices have only eased through the month. West Coast rates fell 19% in October to $5,540/FEU and are 32% lower than their July peak as demand eased post an early peak season for N. America as well.

Prices to the East Coast have also continued to fall and at $5,165/FEU are 41% lower than in September. Front loading of volumes to the East Coast in September may have been stronger than to the West Coast due to the rush to beat the October 1st strike deadline. This factor may explain the sharper drop of East Coast rates over the last few weeks. It may also explain the very unusual occurrence of East Coast rates – typically about $1,000/FEU higher than West Coast prices – dipping below West Coast levels. Rates to both coasts, however, are still $1,000 – $1,500/FEU above their April lows.

Strike-driven congestion may have impacted transatlantic rates which increased 32% month on month in October to $2,533/FEU first due to expectations of strike-caused congestion, and then from some delays at US ports. But prices may be staying elevated due to some congestion at European hubs and some capacity dips at European origins due to delays from the strike.

Ex-Asia rates will likely keep sliding unless carriers work to reduce capacity and until demand increases ahead of Lunar New Year. For N. American trade, though, there are a couple of other wildcards to keep in mind, each of which may already be contributors to transpacific rates staying above April levels: 

First is the January 15th deadline for the ILA and USMX to finalize a new contract or face renewed East Coast and Gulf port strikes. This week the sides announced that they will begin negotiating face to face in November.  Port automation remains the major sticking point, and if there’s no progress in the coming weeks anxious shippers may start increasing orders again ahead of another possible strike.

The other wildcard is the outcome of the presidential election. If Trump wins, his promise of sharp tariff increases may be enough to push many shippers to start buffering their inventories even before he enters office or officially announces tariff hikes.  As was the case in 2018, looming tariffs will lead to increased ocean volumes and climbing rates as shippers rush to beat new tariff roll outs.

You can read our article on tariffs and their impact on ocean rates and volumes here.

In other labor news, port workers in Montreal staged a one-day strike on Sunday after rejecting a government proposal for a special mediator.  The union has announced another one day strike for two of the port’s terminals for Thursday. Sunday’s action, as well as an early-month three day strike and an ongoing overtime strike have so far not caused significant disruptions to operations. In 

Chittagong, a trucker strike is causing delays and challenges to container flows.
Reports of recent increases of air cargo volumes out of Asia suggest that air’s peak season is getting underway.  Freightos Air Index China – N. America rates were just below $7.00/kg last week, well above the $5.00 – $6.00/kg level seen for most of the year and into September. Prices to Europe of $3.86/kg are 12% higher than in September but have not started a sharp climb just yet.

Weekly highlights

Ocean Rates – Freightos Baltic Index

• Asia-US West Coast prices (FBX01 Weekly) fell 5% to $5,294/FEU.    
• Asia-US East Coast prices (FBX03 Weekly) fell 13% to $5,935/FEU.
• Asia-N. Europe prices (FBX11 Weekly) fell 3% to $3,523/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) fell 5% to $3,927/FEU.

Air Rates – Freightos Air Index

• China – N. America weekly prices were level at $5.43/kg.
• China – N. Europe weekly prices were level at $3.81/kg. 
• N. Europe – N. America weekly prices increased 2% to $1.85/kg.

Analysis

Some minimal congestion – caused by the three day strike at the beginning of the month – remains at US East Coast and Gulf ports though operations have mostly recovered. Some observers anticipate that the strike will still lead to some capacity and equipment shortages at Asian origins in early November.

For now the pull forward of peak season demand to earlier than usual in the year is leading to easing volumes in October and into November and container rates are falling as a result. Transpacific spot prices to the West Coast are 35% lower than their July peak and 38% lower to the East Coast. But even with easing demand and volume projections for the coming months lower than those in Q2, transpacific rates above $5,000/FEU are still $1,500 – $2,000/FEU higher than during the previous Red Sea crisis-era lull in demand back in April.  

Meanwhile, prices for Asia – Europe containers eased to about $3,500/FEU last week, which is 60% lower than the peak in July and about even with the April floor on for this lane. Asia – Mediterranean rates fell 3% to $3,927/FEU last week, which is 50% lower than in July and $400/FEU lower than in April. At the same time, Red Sea diversions’ drain on capacity are still keeping these prices about triple their level a year ago.

Nonetheless, with rates sliding on lower demand carriers have started to increase the number of blanked sailings on Asia – Europe lanes. Ports in Hamburg and Felixstowe are still dealing with some congestion, and some vessel bunching persists in Shanghai, though waits at Qingdao and Ningbo have decreased.  There is also anticipation that the pre-Lunar New Year demand increase could have an early start in November as European shippers still have to factor in longer transit times around the Cape of Good hope. 

These factors have some carriers hopeful that rates could rebound soon as MSC announced a November GRI to push Asia – Europe rates up to $5,000/FEU with other carriers also rolling out increases. 

Though ocean volumes are past their peak for the year, the typical Q4 air cargo peak season should heat up soon. Freightos Air index data shows Middle East – N. America rates have increased 35% since mid-September to $3.17/kg, a level last seen in March, suggesting that sea-air peak season may already be getting underway.  

China – N. America and Europe rates remain elevated but do not seem to be increasing yet on peak season demand. B2C e-commerce volumes have kept ex-China demand and rates strong throughout much of the year, doing away with typical seasonality in the market so far this year. And expectations are that when demand increases in Q4 rates could spike even higher and space will be very difficult to secure. 

But the e-commerce impact on rates and availability this year may have pushed many forwarders and shippers to plan ahead for peak season either by building up inventories earlier than usual or reserving air capacity in advance. As a result some observers think that space will be tight and rates high during Q4, but will not be as extreme or disruptive as many are anticipating.

Weekly highlights

Ocean Rates – Freightos Baltic Index

• Asia-US West Coast prices (FBX01 Weekly) fell 3% to $5,565/FEU.    
• Asia-US East Coast prices (FBX03 Weekly) climbed 1% to $6,787/FEU.
• Asia-N. Europe prices (FBX11 Weekly) fell 11% to $3,625/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) fell 8% to $4,118/FEU.

Air Rates – Freightos Air Index

• China – N. America weekly prices decreased 23% to $5.43/kg.
• China – N. Europe weekly prices fell 1% to $3.80/kg. 
• N. Europe – N. America weekly increased 2% to $1.82/kg.

Analysis

Hurricane Milton battered the west coast of Florida last week. Power disruptions kept the Port of Tampa Bay closed until Monday, while ports in Miami and Jacksonville resumed operations before the end of last week.

The Port of Savannah, which was still facing a backlog from Hurricane Helene in September, will require another two weeks to restore full fluidity as the three-day ILA port strike added to the number of waiting vessels.  Ships are waiting more than two days for a slot in Savannah, with the other major East Coast ports also reporting waits of one to four days at some terminals due to the strike, representing significant but not extreme congestion as the backlogs get cleared. 

Some carriers have announced blanked sailings in response to the congestion, but may also be adjusting capacity to the lower, post-peak season volumes.

Transpacific ocean rates are now 30% below their July peaks, and with the early end to peak season we should expect rates to continue easing. Rate levels of $5,500/FEU to the West Coast and $6,700/FEU to the East Coast are still several thousand dollars higher than typical levels even for peak season and are also still about $1,000/FEU higher than the Red Sea-adjusted floor hit in April. As long as Red Sea diversions continue to absorb capacity on an industry level, prices may not fall much further than seen back in April. 

Asia – Europe and Mediterranean trades – that, due to longer lead times for sailings around the Cape of Good Hope, had to have peak season goods moved out of Asia before Golden Week to receive them in time for Q4 consumer events – seem to be even further past peak demand than the transpacific. Rates on these lanes fell further last week and, at about $3,600/FEU to Europe and $4,000/FEU to the Mediterranean, are already just about at April levels.

In air cargo, Freightos Air Index data shows that transpacific air cargo rates that had jumped to $7.07/kg with some ocean to air shift at the start of the ILA strike, fell back to $5.43/kg last week. But even at $5 – $6/kg, rates are elevated well above typical levels even ahead of air’s Q4 peak season on the continued surge of e-commerce volumes out of China.

The importing of low-cost goods directly to consumers by high cost air cargo is mostly facilitated by the de minimis exception which exempts small imports from customs costs and rigorous and expensive filing requirements. 

In September the White House announced plans to significantly reduce access to the de minimis exemption, with e-commerce imports from China a main target. 

Actual rule changes will be a ways off and final versions could be quite different from those proposed. Because of the lack of movement since September, e-commerce air cargo volumes are expected to increase along with other types of goods soon and through early December, making space even tighter and pushing rates higher. 
If significant changes to de minimis do eventually go through though, they could result in a shift in strategy by e-commerce platforms like Temu and Shein, and a possible shift away or reduction in use of air cargo for these types of goods.

Weekly highlights

Ocean Rates – Freightos Baltic Index

• Asia-US West Coast prices (FBX01 Weekly) fell 15% to $5,760/FEU.    
• Asia-US East Coast prices (FBX03 Weekly) fell 22% to $6,744/FEU.
• Asia-N. Europe prices (FBX11 Weekly) fell 20% to $4,075/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) fell 13% to $4,476/FEU.

Air Rates – Freightos Air Index

• China – N. America weekly prices increased 20% to $7.07/kg.
• China – N. Europe weekly prices fell 4% to $3.83/kg. 
• N. Europe – N. America weekly prices increased 3% to $1.79/kg.

Analysis

The ILA port worker strike ended last Thursday after the union accepted the USMX offer of a 62% wage increase over the next six years, and agreed to extend the expired contract until a January 15th deadline to resolve the remaining sticking points, with the role of port automation chief among them. 

Some speculate that the USMX will try to leverage its wage concession toward a compromise on automation. But even after the wage agreement last week the union remained vocally opposed to any automation or semi-automation that would eliminate ILA jobs, so the new deadline is now marked on many calendars. But with the wage issue settled and the sides heading back to face-to-face negotiations for the first time since June, there is reason for some optimism.

The end of the strike meant ports reopened on Friday, but the three day shutdown was enough to create a significant backlog of containers at ports with estimates of between 45 and 60 vessels waiting at anchor across East Coast and Gulf ports.

Many industry experts estimate the three day backlog could take two or three weeks or more to clear. The Port Authority of New York and New Jersey, however, didn’t think the short closure and the 19 waiting ships were much worse than backlogs typical following winter storm shutdowns, and was optimistic that operations could recover by as early as the end of this week. 

In the meantime, shippers with containers at the ports or on vessels at anchor or due to arrive soon will likely continue to experience delays, while the level of disruption for arrivals further out will depend on how soon ports can restore fluidity. With ports reopening carriers have resumed reefer export bookings and have restarted the clocks for detention and demurrage charges too.

Carriers introduced rate increases for transatlantic containers in anticipation of the strike and last week prices were 44% higher than in early September at $2,331/kg. In addition to the capacity being absorbed by East Coast backlogs from the strike, several European hubs, including Hamburg, are experiencing significant congestion which is also restraining supply and putting some upward pressure on rates. Carriers are also planning to reduce deployed capacity on this lane later in the month in the hope of preventing rates from falling back to the $1,600 – $1,800/FEU level they had maintained for much of the year. 

Transpacific ocean rates to both coasts had been easing in the lead up to the strike, and continued to do so during the closures, with last week’s rates more than 30% below highs reached in July. Ocean carriers had announced surcharges ranging from $1,000/FEU to $4,500/FEU in anticipation of disruptions due to the strike. But as most of these would only have gone into effect in mid-October or later they hadn’t impacted spot rates yet, and carriers have now suspended these new charges. 

With the strike over and peak season demand largely behind us from a significant pull forward of volumes in the last couple months, transpacific container rates should continue to ease on the seasonal lull in volumes between peak season and Lunar New Year. East Coast congestion caused by the strike, however, may slow the pace of the decline for these lanes if operations take several weeks to recover. 

As long as Red Sea diversions continue to absorb capacity across the market though, we should not expect rates to fall much below the floor reached back in April when transpacific rates fell to $3,000/FEU to the West Coast and $4,000/FEU to the East Coast – about double typical levels.

The early start and now early end to peak season for Asia – Europe trade, necessary to account for the longer lead times caused by Red Sea diversions, has led to a 53% drop in rates since mid-July, though at $4,075/FEU last week prices are still above the $3,300/FEU floor hit in April.  Prices to the Mediterranean have decreased 42% from their July peak, but at $4,476/FEU are just about back to their April level. 

The strike did lead to some ocean to air shift reflected in climbing rates on some lanes, and we  

may see some continued pressure on air cargo rates as long as some importers continue to expedite shipment of some essential inventories until stuck containers are received and ocean operations stabilize. 

Freightos Air Index data shows Europe – N. America air cargo rates have increased 4% to $1.79/kg since early September, possibly reflecting some shift of transatlantic ocean volumes to air.  

Transpacific air cargo rates did not climb much in the lead up to the strike, but once the strike started China – N. America rates jumped to $7.07/kg from $5.91/kg the previous week. Rates on this lane have not been at or above $7/kg since peak season last year, and only briefly. So rates may be increasing on an increase of transpacific demand due to the strike and are climbing from an already elevated floor due to the surge of e-commerce volumes out of China that have kept rates around $6/kg for most of the year.  

Meanwhile, rates to Europe – still well above typical levels for this time of year due to e-commerce volumes – were about level last week at $3.83/kg, which may indicate that the price increase to N. America is strike driven. 

Middle East – N America air cargo rates were up to $3.06/kg last week, which is 30% higher than in mid-September and may reflect some ocean to sea-air shift due to the East Coast strike as well.

Weekly highlights

Ocean Rates – Freightos Baltic Index

• Asia-US West Coast prices (FBX01 Weekly) fell 1% to $6,816/FEU.    
• Asia-US East Coast prices (FBX03 Weekly) fell 3% to $8,693/FEU.
• Asia-N. Europe prices (FBX11 Weekly) fell 6% to $5,074/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) fell 3% to $5,142/FEU.

Air Rates – Freightos Air Index

• China – N. America weekly prices increased 9% to $5.91/kg.
• China – N. Europe weekly prices increased 8% to $3.97/kg. 
• N. Europe – N. America weekly prices increased 1% to $1.73/kg.

Analysis

The long-anticipated ILA port worker union strike across US East Coast and Gulf ports began Monday night at 12:01am after the ILA and USMX failed to come to an agreement before the deadline. 

In the last few days the White House and other government officials had been urging both sides to return to the negotiating table, with USMX leadership reportedly meeting with the Biden administration late last week. 

The USMX made a last minute 50% wage increase offer, which the ILA rejected as the union is reportedly seeking a 77% increase. The USMX filed an unfair labor practice charge with the National Labor Relations Board against the ILA last week, which, if accepted, would force the ILA back to the negotiating table, though the approval process could take several weeks. 

In the last days before the strike logistics providers were hastening steps to minimize the impact of a strike as much as possible. Trucking firms were working to pull containers out of impacted ports before the shutdown. Carriers including ONE, Hapag-Lloyd, and MSC had some vessels omit East Coast port calls scheduled too close to the strike deadline, instead offloading all imports at other East Coast stops or in Mexico or Canada, though so far there haven’t been reports of outright diversions to unscheduled East Coast alternatives or to the West Coast. 

Some carriers have stopped accepting new reefer bookings for the East Coast and many are rolling out significant surcharges for new dry container bookings in October, which are likely to push East Coast rates up even while the ports are closed. Several carriers have announced they will stop the clock on detention and demurrage charges for containers stuck on container yards during the strike, with the FMC also warning against unfair D+D charges.

Though container and intermodal capacity limits at alternative ports in Mexico and Canada do not make them viable options for a full-scale shift of impacted volumes, a three-day labor strike at two of the Port of Montreal’s five container terminals, is not helping matters either.

It remains to be seen if the ILA will implement a sustained wide scale strike or some alternative – like strikes only at some key ports, only on certain days, or a slow down of operations at some or all ports – instead.  Some observers think that due to the economic implications of a prolonged full-scale strike and the political pressure it would place on the Biden administration, the ILA may prefer more limited actions and reduce the likelihood of government intervention. 

In any case, there are reportedly about 40 vessels slated to arrive just at the Port of New York/New Jersey this week, and the large majority will likely arrive and wait if the ports are shut down. Congestion and backlogs from a strike will cause delays for shippers with containers at the ports or on those or additional arriving vessels and – as already reflected in carrier surcharges – will push freight rates up. 

Demand had already shifted somewhat to the West Coast in the last few months, and a prolonged shutdown will intensify that trend. Demand increases or actual diverted vessels to the West Coast will likely push rates up there as well despite a projected overall decrease in import container volumes to the US in October. 

The Ports of LA/Long Beach, as well as ports in the Pacific Northwest report fluid operations and preparedness for a sudden increase in volumes. But a prolonged strike and a significant shift of demand and port calls to the West Coast could eventually overwhelm the ports and lead to congestion that would further slow down operations, tie up capacity and push rates up. 

A long-enough strike on the East Coast would eventually be felt in capacity and empty container shortages in Europe, and significant enough congestion on the West Coast could likewise impact equipment availability at Asian origin hubs, affecting intra-Asia and Asia – Europe shipping as well.

The anticipation of the strike has already pushed some shippers, especially of perishable goods, from ocean to air cargo. Freightos Air Index data for Latin America – N. America and N. America – Europe rates don’t reflect an uptick in air cargo prices yet, though Europe – N. America rates have increased 4% to $1.73/kg since early September. 

China – N. America air rates increased 9% last week to $5.91/kg. This climb could reflect the beginning of air peak season, with prices already above typical peak season levels from the ongoing surge of e-commerce volumes. Though hubs in China are not reporting operational slow downs yet, some congestion is forming in Singapore and Vietnam, with the Philippines experiencing severe backlogs. 

Weekly highlights

Ocean Rates – Freightos Baltic Index

• Asia-US West Coast prices (FBX01 Weekly) increased 1% to $6,875/FEU.    
• Asia-US East Coast prices (FBX03 Weekly) fell 4% to $8,952/FEU.
• Asia-N. Europe prices (FBX11 Weekly) fell 17% to $5,412/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) fell 10% to $5,277/FEU.

Air Rates – Freightos Air Index

• China – N. America weekly prices decreased 6% to $5.43/kg.
• China – N. Europe weekly prices fell 2% to $3.67/kg. 
• N. Europe – N. America weekly prices increased 2% to $1.72/kg.

Analysis

Less than five days remain before the ILA’s current contract expires and, most likely, a large-scale strike begins. The ILA and USMX have not met face to face since June and remain far apart on key issues like wage increases and port automation.

Multiple shipper associations have reached out to the White House asking it to intervene. The vocally pro-union administration has stated that it does not intend to end a strike via the Taft-Hartley Act. At the same time, with the economic impact of a port shutdown estimated at several billion dollars per day and election day approaching, the administration will also be under pressure not to allow a strike to stretch on too long.

In expectation of a strike starting Monday night, ports, carriers and regulators are getting ready. 

An ILA strike on the East Coast and Gulf would completely shut down many ports and could effectively paralyze some that employ both ILA and non-union labor, while other hybrid ports will be able to keep some terminals running. 

Many of the major container hubs have extended their gate and terminal hours, including over the final weekend before the strike. Ports and rail operators are also setting deadlines for final pick-up and drop-offs, with particular concern for reefer shipments getting moved from the ports or loaded on vessels before the deadline to avoid going unattended on container yards. 

Some ocean carriers have stopped accepting new export bookings in anticipation of the strike.  Hapag-Lloyd announced that containers already en route to affected ports will not be rerouted, and many carriers have rolled out surcharges ranging from $400 to $3,000/FEU for all East Coast and Gulf containers starting in October.

During the pandemic, many shippers accrued significant storage charges on containers they were unable to move off container yards due to extreme port congestion. In anticipation of stuck containers during a strike the FMC has issued an advisory this week warning carriers and operators against unfair charges this time, with some already announcing they will stop the clock on detention and demurrage charges during the strike. 

Though many containers and vessels will be stuck on the East Coast and Gulf until operations resume, others will be diverted or shifted to West Coast services. Despite a record number of containers arriving at West Coast hubs last month, operations remained smooth. Operators attribute some of this success to lessons learned during the pandemic – including increased warehouse capacity, better chassis management, and off-site container yards – which should allow them to handle a sudden volume surge reasonably well in the event of a strike.

But with ILA ports accounting for roughly half of all US container traffic, a prolonged shutdown would still result in West Coast port congestion and delays, which would contribute to additional upward pressure on rates alongside the increase in demand. A prolonged strike would also eventually impact vessel and container availability at origin ports in Europe and Asia, which could spread the strike’s impact beyond North America causing delays and rate increases for all lanes out of those hubs.

Weekly highlights

Ocean Rates – Freightos Baltic Index

• Asia-US West Coast prices (FBX01 Weekly) stayed level at $6,819/FEU.    
• Asia-US East Coast prices (FBX03 Weekly) climbed 2% to $9,309/FEU.
• Asia-N. Europe prices (FBX11 Weekly) fell 4% to $6,508/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) fell 3% to $5,837/FEU.

Air Rates – Freightos Air Index

• China – N. America weekly prices stayed level at $5.80/kg
• China – N. Europe weekly prices increased 9% to $3.75/kg. 
• N. Europe – N. America weekly increased 2% to $1.69/kg.

Analysis

With two weeks left before the deadline and the sides not talking to each other, the prospect of an ILA strike at East Coast and Gulf ports on October 1st continues to grow. 

The union and the USMX port operators remain at odds over wage increases and port automation, and East Coast ports are already taking steps to wind down operations. There is speculation that a strike could target Maersk terminals in Mobile, Alabama, that have introduced automation despite ILA objections. But even in the event of a limited strike, USMX bylaws would require a lockout across their ports. 

The ILA president has hinted that ILWU members at West Coast ports could strike or decline to service diverted vessels from the East Coast in solidarity. But as the ILWU’s recently-signed contract makes intentional labor actions illegal, observers think that operators could quickly end such actions though injunctions.

Another question is how the White House might respond to a strike. Especially in an election year, the vocally pro-labor administration may be hesitant to end a strike via the Taft-Hartley Act. But the economic impact of a prolonged shutdown is something the White House likely also wants to avoid, leading many to imagine that an ILA strike would, one way or another, not be allowed to last more than a week. 

At the same time, the ILA has implied that, if forced back to work, union members could continue to disrupt operations through intentional work slow-downs similar to those employed by the ILWU last year.

In ocean operations, the powerful Typhoon Bebinca battered Shanghai on Monday, temporarily closing ports in Shanghai and Ningbo. Vessel delays – already at 24-60 hours before the storm – are expected to get worse as the ports recover.

In air cargo, the surging volume of e-commerce packages out of China has been the biggest driver of strong demand, tight capacity and elevated rates for much of the year. Some carriers are shifting capacity from lower volume regions like South America, South Asia and Africa to the transpacific and Asia – Europe lanes – which will reduce capacity and could push rates up on those secondary lanes as a result – in anticipation of an extremely busy Q4 as demand for both e-commerce and more typical goods increases during air’s peak season. 

This new trend of e-commerce goods moving cross-border directly to consumers on a massive scale – and its implications for air cargo – has really been facilitated by use of the de minimis exception. These low-value e-commerce goods can quickly be shipped via high cost air cargo because platforms like Temu and Shein are able to import them under the de minimis exception, which exempts low-value imports from tariffs and significant customs costs and reporting requirements.

This week though, the White House announced plans to issue new rules by executive order that would close the de minimis exception to any goods subject to certain US tariffs, covering about 40% of all imports and about two-thirds of all goods from China. 

In a recent Freightos interview with Adam Lewis, President of customs broker Clearit, Chinese goods make up about 70% of all de minimis imports, and the changes laid out by the White House would “really turn everything on its head.”  

Tariffs for these goods range from 7.5% to 25% of the value of the import, but the bigger blow to exporters would be in the radically more extensive filing requirements and processing costs that regular imports face. These costs would explode from eight to fifteen cents per package under de minimis to $15-$50. Additional time needed to clear customs would mean delivery times would go from a week or less to two to three weeks, additionally challenging the viability of sending low-value goods directly to customers from abroad.

Lewis speculates that ultimately the changes to de minimis may not look exactly like those proposed by the White House. And these would only go into effect in Q1 of next year at the earliest as even once the White House officially announces the new rule, the review process – which will likely include challenges, possibly in the courts – could take two to four months.

This timeline would mean that e-commerce will still likely put significant pressure on air cargo capacity and rates this Q4 – and that pressure could even be intensified by shoppers increasing orders before the changes limit this e-commerce channel. After that, though, changes to de minimis that approximate those proposed last week could dramatically reduce the number of cross-border e-commerce packages entering the US and have serious implications for air cargo volumes, capacity availability and rates. 

You can watch the full interview here.