Customer Advisory - Trans-Pacific Update

(Florham Park, NJ)…Your supply chain well-being is our top priority. We at Hamburg Süd aim to provide you the most relevant and up-to-date information to help you navigate this period of heightened volatility.

Key Notes:

• Expanding omicron lockdowns in China further disrupt supply chain: Chinese health authorities announced that there were more than 29,000 new covid infections, the highest daily tally since the pandemic began. Stemming from China’s zero-Covid approach, WSJ reporting states that at least 45 Chinese cities with a combined population of 373 million people accounting for roughly 40% of China’s economic output had experienced some form of lockdown as of 11 April. Dozens of manufacturers have halted production in Shanghai and nearby Jiangsu province to comply with local rules. (See “Ocean Demand and Outlook” for more).

• Shanghai port runs out of space for refrigerated containers as vessel queues grow: The impact of the recent lockdown has resulted in significant reefer and dangerous cargo yard congestion in the Shanghai terminals. For the Greater China Area, as of April 14th, Hamburg Süd stopped all new reefer/dangerous cargo bookings of IMO 2.2 and IMO 3 into Shanghai, though it expects to resume booking acceptance shortly. Drewry Shipping Consultants reported key routes Shanghai to Los Angeles and Shanghai to New York are down 17% and 16% respectively since the beginning of the year.

• ILWU negotiations set to begin May 12: The contract for the International Longshore and Warehouse Union’s 22,000 workers employed at 29 U.S. West Coast ports expires July 1st. Both sides are confident they will reach an agreement, though industry reporting reflects uncertainty as to what may be in store. Meanwhile, U.S. Labor Secretary Marty Walsh expressed optimism after consulting with multiple parties to the negotiations and stated that he is ready to get involved as needed (see ILWU Negotiations for more).

• Progress in Pacific Southwest: Vessels en route to San Pedro Bay number 45 with wait times down to 23 days at Long Beach and 16 days at Los Angeles. The ports continue to delay consideration of the “Container Dwell Fee” given that the two ports have seen a combined decline of 42% in aging cargo on the docks since the program was announced on October 25th.

• Congestion continues in Vancouver: PIERS data in the Journal of Commerce stated that the West Coast’s share of U.S. containerized imports from Asia fell to a record low of 58.2% in January and February, down from 60% in all of 2021 and over 77% back in 2005. Meanwhile, the East Coast’s share of imports from Asia reached a record high 34.7% for January and February. Gulf Coast ports likewise handled a record-high percentage of imports from Asia in January-February, increasing the share to 6.8%. Meanwhile,vessel waiting times and yard density at key east coast ports such as Newark and Charleston continue to increase.

Transportation Insights

Ocean Demand Outlook and Capacity

Hamburg Süd’s import volume into North America remains strong despite the challenges surrounding Russia/Ukraine and the COVID lockdowns in China. Customers are seeking to clear their backlog of cargo at origin and increase their inventory levels at destination.

Customers are highlighting supply chain difficulties in China with the degraded ability of vendors to deliver the cargo. Extended closures of warehouses in certain areas and the ongoing requirements necessary for the landside operations have proven problematic. China’s truck traffic has dropped 40% since mid-March while truck movement around Shanghai has reduced 15% from its normal level. Given current demand levels, thissituation could potentially lead to further operational constraints when the upstream legs become more normalized and the significant backlog is brought forward.

In the U.S., container availability for export demand remains at healthy levels with the exception of the South Atlantic and Gulf region, where equipment is at much tighter levels. Strong focus remains on the evacuation of empties to support terminal fluidity. Import dwell continues to be extremely high, therefore customers are asked to return their empty import boxes as quickly as possible and let us know if they run into any issues at terminals when doing so.

Below is our latest updated sailing schedule for the coming weeks.

Service 4/25-5/1
Asia to US West Coast                
TP1 gap x gap gap x gap x gap
TP2 gap x x x x gap x x
TP3 x gap x gap x x gap x
TP6 gap x x x gap x x x
TP7 x x x x gap x x x
TP8 gap x gap x x x gap delay
TP9 x gap x x gap x gap x
TPX x x x x x x x x
XL/GL - x x - - - - -
Asia to US East Coast                
TP10 x x x x x x gap gap
TP11 gap x x x x x x x
TP12 x x x x x gap x gap
TP16 x x x delay x x x x
TP17 x x x x x x x x
TP18 x x gap x x x x gap
TP20 gap x x x x x x x
TP23 x x x x x x x gap
TP28 x x x x x x x x
TP88 x delay x x x x gap gap
XL/GL x - - - - - - -

*TPA service has shifted to TP7. The TP Alaska service is no longer available.

Gap : No Sailing based on current Schedule, things may change over time

TBA : No sailing based on current schedule, possible solution is immininent

Delay: Sailing appear within 1 week after due to delays

Advance : Sailing appear within 1 week before due to imbalanced delays

Hamburg Süd Air Freight

On March 30, 2022, Hamburg Süd introduced air freight as an additional solution to meet tight deadlines or avoid production downtimes. You can react flexibly with the right combination of different modes of transportation – whether by air, sea or land.

In a world that is constantly changing, you need more than just reliability – as flexible and fast solutions are in increasing demand. That’s why we are now offering you air freight transport in addition to our well-proven sea and land transports. This allows you to avoid storage congestion and the high costs involved with that.

With our global reach and experts wherever you are located, we are there for you – to advise you on all aspects related to air freight. By using our own planes and drawing on cooperations with other international partners, we are able to make sure that your cargo takes off safely and is tracked in real time. But, most importantly, it will arrive securely where no other means of transport would be able to take it.

Milestones and Viewpoints

ILWU Negotiations (cont’d from Key Notes) Among the many scenarios in play, negotiations extending beyond June 30th do not necessitate major disruptions. Given the urgency of current events, one scenario among many is that union members opt to continue working while negotiations are ongoing to keep the ports moving.

Given all the uncertainties of the current operating environment, Customers should review their supply chains and consider whether having continuity plans working in advance makes sense for their businesses, such as:

• Expedite critical imports prior to July 1st

• Postpone what can be postponed

• Consider alternative gateways • Strategically use air freight

• Use off-dock depots for full container storage needs • Plan and secure inland capacity for rail, trucks, and chassis

“Uyghur Forced Labor Prevention Act” set to go into effect in June

President Biden signed “The Uyghur Forced Labor Prevention Act” in December, which bans all goods made in the Xinjiang region unless the importer can demonstrate to the U.S. government that its supply chains are free of forced labor. The State Department estimates that the Chinese government has detained more than one million people in Xinjiang in the last five years, including Uyghurs, Kazakhs, Hui and other groups. China refutes U.S. claims.

In the coming months, Biden administration officials will produce lists of entities and products of concernthat could reach into the thousands. Many businesses that rely on Chinese factories might realize that at least some part or raw material in their supply chains can be traced to the Xinjiang region. The region is the source for a wide variety of products and raw materials, from solar products, textiles, and tomatoes to coal, petroleum, aluminum and gold.

Many companies have been conducting their due diligence regarding ties to Xinjiang, but lack of access to the region makes it difficult too. Congress has appropriated $27.5 million this year to carry out the act, including imposing sanctions or criminal charges on individuals and entities determined to be breaking the law.

Customers looking for insights on how to analyze the risk and/or address the impact of illegal transshipmentscan reach out to their Hamburg Süd customs services representative for more information. Hamburg Süd’s parent company A.P. Moller - Maersk will also be hosting a webinar entitled, “Forced Labor Prevention Act

- Importer Pain Points: Learn how to protect your supply chain” on May 12th to help customers navigate the challenges associated with the legislation while also previewing a tool that can help access information and documentation through various tiers of the supply chain.

Please contact your Hamburg Süd representative with any questions that you may have.