Sent Items #157: Sunday, June 2, 2024

Happy Sunday! Hope you are having an enjoyable weekend.

This time next week I’ll be in Vegas getting ready to see Dead and Co at the Sphere. I’m not a Dead Head, nor did I care all that much to go to the Sphere, but put them together and it felt like a no-brainer.

Before I get into it, quick shout out to Beehiiv, the newsletter platform I use to write this email. I have been a supporter and advocate since migrating from Mailchimp back in early 2023. It’s a fantastic platform, particularly for those who seek easy to design templates and themes. As an early adopter I was able to participate in their latest Series B round. I jumped at the opportunity - a nice hedge against my mostly logistics tech investments (…and baseball cards) 😆

Only a few articles this week, mostly to do with China - China marketplaces, China tariffs, China shipping containers. Like it or hate it, China will continue to play a dominant role in the U.S. economy and ultimately the success (or demise) of many U.S. brands.

Let’s begin with some levity. I’ve written a lot about Chinese fast fashion companies such as Shein and Temu. Well recently it captured the attention of the writer’s at SNL. You know something is big when SNL spoofs it. Among the rare funny things I’ve seen SNL produce since Will Ferrell and Chris Farley were holding court:

Amazon Is Reviving Its Logistics Expansion and Reshaping Its U.S. Distribution (link)

• Amazon so far this year has leased, bought or announced plans for more than 16 million square feet of new warehouse space in the U.S. That adds to the company’s existing footprint of roughly 413 million square feet of industrial real estate across North America as of last year.

• Some of the new sites are massive facilities of more than 1 million square feet meant for storing large quantities of inventory, while others are less than 100,000 square feet and used to stage packages for final delivery to customers.

• The changes are meant to accelerate delivery to get more packages to customers within a day or even hours, while cutting spending on transportation. Amazon said it increased the number of orders delivered on the same day or the next day in the U.S. by more than 65% in the fourth quarter of 2023 compared with the previous year.

• Amazon has been leasing more warehouses in rural areas to use as delivery stations. Those buildings, which are typically under 100,000 square feet, help Amazon minimize its final-mile transportation costs.

• Amazon has also said it plans to double its number of same-day fulfillment sites, which stock a more narrow assortment of popular items that are prepared for delivery within hours to customers in dense population centers.

• The Information is reporting that certain importers like SEKO Logistics, which processes millions of these parcels monthly, sent a note to customers last week that customs officials had suspended its participation in the Entry Type 86 program, which speeds up how fast low-valued packages can clear customs.

• In a statement, CBP (link) stated that they had “…suspended multiple customs brokers from participating in the Entry Type 86 Test after determining that their entries posed an unacceptable compliance risk, and are taking action to ensure compliance and minimize the exploitation of the small package, or de minimis, environment.”

• The Entry Type 86 program enables brokers to use a new electronic entry type to import, without paying duties and taxes, small shipments where the aggregate fair retail value in the country of shipment of such articles imported by one person on one day and exempted from the payment of duty does not exceed $800.

• The CBP went on to explain that “When businesses fail to comply with U.S. law, it can have far-reaching effects on the integrity of our trade system and the people reliant on the goods that flow through our ports every day. For example, bad actors are exploiting the de minimis environment to move materials used to produce synthetic drugs -- like fentanyl and its analogues -- and other contraband into the United States.”

• I find this reasoning a little hard to believe. I suspect fentanyl and its analogues are a very, very small percentage of the tens of millions of parcels that brokers like SEKO are importing on a monthly basis. If authorities examined every domestic parcel shipped I suspect they’d find a lot more bad stuff in our domestic mail stream being shipped across states. But nonetheless, the dynamic is about to change, and in many ways. Between the “crackdown” on Chinese marketplaces, potential changes to the de minimus rule, rising container costs, and an upcoming election, brands who are connected to China in one way or another (just about all!) must take notice, prepare and begin creating some contingency in their supply chains.

In issue #156 (link) I shared the following:

Global shipping rates starting to pick back up again - Shipageddon 2.0 is coming!

This trend keeps getting worse for shippers. According to my friend Izzy Rosenzweig from Portless (side note: a fascinating business model and 3PL), containers out of northern China are becoming increasingly hard to get hold of. Rates have almost doubled YTD (link). I suspect this has at least some to do with the previous article - shippers trying to get freight imported before new de minimus rules come into play.

Have a great week!

- Matt

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