Northern International Export Limited (Nortex)

Due to unforeseen circumstances the date has changed to Tuesday 04.10.2016

LATEST INFORMATION ON HANJIN FAILURE Congestion at the Port of Felixstowe We enclose a communication that you may have already seen from the Felixstowe Port Users Association. The content is self-explanatory and it is clear that users will continue experience problems for some days to come. BIFA is also aware that the return of container deposits (£2000 per container) that the Port undertook to repay in seven working days has suffered unacceptable delays and we have raised this matter with the CEO today. FPUA Message follows There is no doubt that every Port User is painfully aware of the present service issues at the Port and my Council colleagues and I have been in dialogue with the Port’s most senior management over the issue. Essentially, recent events such as regular off slot vessels; an imbalance between inbound and outbound container flow; and limited capability to flex labour to meet demand during the holiday period, have all conspired to the point where the Port’s container storage yards are over-full, leading to a dramatic drop in service levels. Unprecedented traffic levels The Port’s container yards are at the core of what the port does; supporting quayside, rail and road operations. On a normal day the Port is capable of handling up to 20,000 container moves into, out of and within the yards but the rate at which the Port can handle these moves is completely dependent on the density of containers in the yard. At the moment, because of the events I have already described, there is an unprecedented number of containers in the yards and this is severely impacting container flows through the Port. Restricting container levels As a consequence, the Port has been forced to take the perhaps unpopular decision to stop the container density increasing, by refusing to accept containers from those carriers who are above their agreed storage levels, and to bring about a reduction in the number of containers in their yards over time, as empty containers are removed from the Port on export vessels. The Port has also implemented a number of other initiatives to address the prevailing problems, by removing empty Hanjin units from the yards, by extending their opening hours for road vehicles and by employing external traction to supplement their own tugs, for example. Port apologises I can assure members that the Port’s most senior managers are acutely aware of the damage they are causing to their customer’s and their ultimate customers, and have apologised profusely for the prevailing situation, but they are, meanwhile, working tirelessly to reverse the damage already done and to bring their operations back to normal. As ever, the FPUA Council continue to liaise with the Port over these matters and, whilst we are hopeful that the actions that have been taken already will quickly return their operations to normal, we will continue to urge them on. We will keep members updated of progress as further information comes to hand.

HANJIN BANKRUPTCY - THE FALL OUT. The news that the worlds 7th largest line ceased trading at the beginning of September dropped a bombshell into the international trade market with rates increasing by 50% in some markets. There are short and long term implications. Short Term - There are likely to be significant disruptions in the supply lanes of some of the worlds largest manufacturers who rely on the "just in time" principal of supply. Thousands of containers around the world are stranded on Hanjin vessels either impounded in ports or anchored at sea, fearful of the same fate if they dock. To compound this many ports and terminals are owed significant amounts by Hanjin leading them to introduce large surcharges before releasing containers with the distinct possibility of legal wrangles further delaying their release. There is also a short term capacity problem with some trade lanes losing up to a quarter of their capacity resulting in pressure on the remaining carriers and consequently an immediate hike in rates. Long Term - Capacity problems are likely to ease as there is overcapacity in most markets but it will take a little time for this extra capacity to be built into shipping lines schedules. Perhaps the biggest consequence is likely to be a hardening of freight rates. Hanjins demise is to a large degree the consequence of the introduction of the mega container vessels with capacities of over 18000 containers which led to a dramatic increase in capacity particularly on the major trade lanes between China and the Far East with the rest of the world. This lead to huge downward pressure on freight rates resulting in a continuous cyclical round of general rate increases (GRI) and their subsequent erosion over the following weeks as lines competed for the available cargo. Obviously as Hanjins demise demonstrates this is an unsustainable business model and it is likely that freight rates will not drop to some of the levels seen over recent years for some considerable time. It is anticipated that the cyclical nature of the general rate increases will continue but at a higher starting point and dropping far less than previous trends. In conclusion this has been a major shock to the worlds shipping industry with significant short term problems but with capacity still high in many markets no long term affects apart from increased freight rates in most areas of trade.

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Shipping Line Certificates and Letters of Credit Many letters of credit from the Indian sub-continent and Gulf countries call for shipping line certificates regarding the vessels age and safety certification. These are not required in the clearance process and are in many cases a throwback to the days when tramp steamers and dhows were the principal form of transport in these regions. We have recently found that shipping lines have started issuing these with standard wording that they will not amend and which often does not comply with the credit wording resulting in an unavoidable discrepancy. When we have the opportunity to view a draft L/C in advance we have for very many years been having these clauses removed. However this new stance by the shipping lines emphasises the importance of having all letters of credit checked well in advance of shipment.

Canadian Low Water Surcharge Due to very low water levels on the St Lawrence River the intake of vessels for Montreal has been restricted. As a result most lines have investigated an LWS (Low Water Surcharge) which varies between lines but is on average $150/100 per TEU.

New Safety of Life at Sea (Solas) Regulations Come Into Affect This new regulations will affect all companies who export goods by sea requiring all shipment containers to have a verified gross mass (VGM) which in essence means that the total weight of the goods and the container must be known before loading onto a vessel. This is a safety measure being introduced to ensure that container weights are correctly stated to allow the shipping line to stow them safety on the vessel. There are two methods that the VMG can be calculated. Method 1 This is primarily for full containers and can be arranged at the port but at an additional cost (there is no standard charge for this as each port is setting their own tariff). Method 2 This primarily concerns groupage or part load shipments and requires the exporter or their export packer to be authorised by the maritime and coastguard agency. In either instance the shipper shown on the bill of lading is responsible for the correct weight being declared. Nortex International are approved under these new regulations and can advise and assist on the implications of this legislation. Stephen Sadler – 01282 410500 / Stephen@nortexint.co.uk

Temporary Imports HMRC have changed the rules in respect of the above. Previously when importing goods which are for re-export outside of the E.U. you were able to defer payment of import duty and VAT. This was achieved by a specific CPC code being used on the import entry which was then cancelled by a matching CPC code when the goods were re-exported. The new system requires the full VAT and import duty to be paid prior to customs release by the importer, directly to HMRC. This payment is the reclaimed when the goods are re-exported outside of the E.U. again using a specific CPC code on the export customs entry and the completion of a BOD3 form. It is obviously of paramount importance that you advise your freight forwarder of this requirement when arranging the re-export.

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