The international freight transport insurer said it is calling for increased vigilance to ensure secure and safe lithium battery supply chains following a number of recent fire incidents affecting container transport, ro-ro ships and air cargo movements allegedly involving lithium batteries.

E-commerce consumer demand for a wide variety of rechargeable products is driving increased shipments of lithium batteries, but these batteries now carry more energy, and aren’t always being tested.

However, the company added that revised regulatory restrictions regarding the carriage by air of lithium batteries, which took effect from April 1, may result in greater volumes being transported by surface modes.

“Understanding the risks is crucial,” commented TT’s risk management director, Peregrine Storrs-Fox. “As with many successful technologies, market demand has outpaced the development of safety regulations. Since the mid-1980’s lithium batteries have been classified under dangerous goods regulations for transport based on the weight of lithium contained in the cells or batteries and the potential hazard presented by a given battery is also related to the amount of lithium it contains.

“However, as technology has advanced, the amount of energy derived from the active material has increased by up to 50%, leading to regulatory mismatch where provisions are essentially framed around mass and energy output.”

Lithium batteries are required to be certified to an international standard involving a rigorous series of tests performed by an approved independent testing laboratory, to ensure they can both withstand everyday use through their expected lifetime and the rigours of transport, explained TT Club.

Responsibility for testing and achieving certification rests with the shipper and/or manufacturer. The sharp rise in demand has been accompanied by supply of cheaper, poorer quality and untested batteries, including refurbished and even homemade power banks. E-commerce platforms have facilitated a global trade in potentially lethal products, often circumventing global standards and regulations.

Throughout their intermodal journey the primary risks exist when batteries are poorly manufactured, untested or defective; these have a higher propensity to malfunction.

However, supply chain risk – at any point of handling, storage and transport – is compounded by used, fully or partially charged batteries. As such the reverse logistics of batteries must be carefully managed; damaged and faulty products being returned or shipped as waste for disposal or recycling present increased risk.

The consequences of lithium fuelled fires can be more extensive than others.  They are very difficult to extinguish, prone to thermal runaway and present an explosion risk. Due to the heat generated, re-ignition once a fire has been extinguished is an additional risk.

The UK government’s Zero Emission Flight (ZEF) Delivery Group recently confirmed it aims to make use of battery and hydrogen technology to make zero-emissions flights feasible.

US ULD manufacturer Satco also recently opened a $10m air cargo safety research centre (ARC) for Unit Load Devices (ULD) featuring a fire safety test facility, in response to the increase in products using lithium-ion batteries.

And Qatar Cargo recently invested in Safran Cabin’s new Fire Resistant Containers (FRC) as it aims to take a lead in countering the risk posed by lithium battery shipments.

Source: www.aircargonews.net

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The world’s three largest container shipping lines, Denmark’s Maersk, France’s CMA CGM and Swiss-based MSC, have suspended their bookings to and from Russia after Moscow sent troops into Ukraine on Feb. 24, sparking a flurry of Western sanctions.

The exit of major container shipping companies — which transport most manufactured goods around the world and are essential to international trade — is expected to cause a major decline in shipments if no alternatives to these firms are found soon, according to the head of Delo Group, Russia’s largest container operator.

“We expect the drop in shipments (to and from Russian ports) in the northwestern region to be around 90% to 95% starting in May if no alternatives appear on the market,” said Delo Group CEO Dmitry Pankov. He was referring to container terminals at Russian ports including those in St. Petersburg and Ust-Luga.

Pankov said ports in the Russian Far East, the Black Sea and Sea of Azov would suffer less from the exit of mayor container shipping companies because their share of cargo traffic was smaller than that of northwestern Russia and because new players in those regions were beginning to emerge.

He did not name those companies, but said some came from Turkey.

Alexander Isurin, chief executive of TransContainer, predicted the exit of container shipping companies would result in a shortage of containers in circulation on the Russian market.

“The market will need to find a replacement for some 300,000 twenty-foot equivalent units (TEU),” said Isurin. TransContainer expects about 30% of containers on the Russian market to be withdrawn from circulation.

“The Russian transport market will most likely not be able to make up for everything and replace the largest container lines in the world that suddenly decided to no longer work here.”

Isurin suggested Russia might have no choice but to work with smaller regional container shipping companies new to the Russian market.

“There are Chinese, Japanese and Korean companies that can choose their position,” he said. “I think that many of them have taken a wait-and-see position that will depend on how the situation develops.” (Reporting by Reuters; editing by Guy Faulconbridge).

Source: www.reuters.com

Image: www.pixibay.com

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Global lead times are now stretching six to nine months out. In the U.S. Census Small Business Pulse survey, held from May 31 to June 6, 2021, 36% of businesses reported delays with domestic suppliers. The problem is exacerbated further due to manufacturers seeing their workforce diminish rapidly and failing to rebuild it to full strength. Additionally, raw materials are taking a lot longer to reach manufacturers, and they are also becoming more expensive, particularly in the electronics industry.

If manufacturers need to make better use of what raw materials they do have, then gathering and analyzing real-time data from sensors on production lines can significantly reduce how much raw material is necessary to get products out the door. This can additionally decrease reliance on the global supply chain if products can be made from existing inventory.

Not only do advanced analytics reduce the supply of materials needed for a factory, but also help to find alternative vendors for materials that are in short supply. Let’s take a closer look at the key impact that these industry 4.0 technologies can have in easing the burden on the global supply chain.

Reducing scrap to better utilize raw materials

To stop the overproduction of scrap and allow more time to be spent on improving the uptime on the production line, manufacturers should rely on intelligent manufacturing. With factories having limited capacity at the moment, they need all the help they can get—smart sensors can track data and produce real-time analysis, allowing workers to identify issues such as poor quality and scrap earlier so the restricted raw materials are harnessed properly.

Communication on inventory status

Manufacturers should aim to use real-time communication for multiple reasons. But in the case of improving supply chain issues, it can allow the tracking of inventory from a number of different vendors if they are connected with the factory with real-time communication channels. Visual Slack messages updating an inventory status are also suited to the remote conditions of a supply chain.

Agent-based modeling

Agent-based modeling, a computational model for simulating the actions and interactions of autonomous agents, is often used to track how different nodes within a network can affect something that doesn’t appear to have any correlation. In the case of a steel company looking into where to source their materials from, agent-based modeling could be used to track who has better supply more effectively.

For example, if supplier A has made X number of shipments in the past few weeks, and supplier B has completed 30% fewer shipments, we can conclude that supplier A has a better inventory level. So, using machine learning tools in this scenario utilizes data over many months to give predictive insights on these future shipment patterns.

Factory managers around the world can use the supply chain upheaval to take a completely fresh look at their supply networks and understand how smart solutions can make them more robust to factors seemingly out of their control. Smart sensors, improved communication channels, and modeling can all enable manufacturers to harness precious raw materials better and utilize the best suppliers.

Source: www.inboundlogistics.com

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That goal was clear in recent remarks by current Acting Assistant Attorney General Richard Powers. In discussing the Division’s criminal enforcement trends, Powers noted that last fiscal year saw the most corporate fines and penalties of the past five years and the most open grand jury investigations in the last decade, and that the Division’s current number of indicted cases (17) across 14 different investigations is the most in modern history, and reaffirmed the Division’s ongoing objective to hold individual executives accountable for antitrust crimes.[2]

Now more than ever, companies must be vigilant in ensuring compliance with competition laws. While the new executive order focuses on industry consolidation amongst the largest carriers and alliances that may hinder competition and increase prices, historically, the Division has repeatedly pursued conduct cases against firms suspected of cartel activity such as price fixing, market allocation, and bid rigging conspiracies, and clients should expect that enforcement focus to continue.

The Division has an array of tools at its disposal for uncovering anticompetitive conduct. It relies heavily on its leniency program to encourage self-reporting of antitrust violations by providing strong incentives to cooperators,[3] but also employs traditional investigative resources such as the grand jury, search warrants and subpoenas, consensual monitoring such as audio or video tape recordings, wiretaps, and the like. The Division also coordinates with other federal agencies and its international counterparts in monitoring, investigating, and prosecuting cartel activity. Cooperation with international antitrust enforcers—most of which have leniency programs of their own—includes tactics such as coordinated searches or dawn raids, information and evidence sharing, and extradition agreements, as well as broader coordination of international enforcement strategy through organizations like the International Competition Network. As such, firms with global operations must ensure compliance with the antitrust regimes of multiple jurisdictions.

In the United States, antitrust violations carry the threat of substantial corporate criminal fines—sometimes running into the hundreds of millions of dollars—as well as prison sentences for individual executives and employees, and this extends to foreign corporations and foreign nationals.[4] Firms also can face enormous private civil class action litigation exposure, as such cases typically follow announcement of criminal antitrust investigations within days, even without guilty pleas or convictions. Mere allegations of a possible antitrust violation can be enough to spur costly litigation. Thus, implementation of a robust, effective corporate antitrust compliance program is critical to educate employees and avoid problems before they arise.[5]

This article provides a brief overview of recent criminal antitrust enforcement in the transportation sector, focusing on international air and ocean shipping, to exemplify likely areas of scrutiny and potential consequences of misconduct.

Air transportation
President Biden’s recent executive order directs the Department of Justice (DOJ) and the Department of Transportation to coordinate on competition issues in air transportation, with particular attention to anticompetitive practices impacting passenger travel, but also more broadly to ensure improved competition with respect to market entry and improved service and capacity. Historically, the industry has been monitored closely by global antitrust enforcers and has been the subject of numerous investigations, and that level of attention is expected to continue.

In 2006, the Division commenced an international investigation of the air carrier industry in coordination with European authorities.[6] Leniency was granted to Lufthansa and Virgin Atlantic in exchange for their cooperation, revealing far-reaching conspiracies to fix fuel surcharges for cargo shipments and for passenger tickets.[7] The conspiracy was carried out through meetings and other communications in which the participants discussed and agreed to fix certain rates and surcharges, as well as to monitor and enforce them after implementation. British Airways and Korean Air Lines soon pleaded guilty to price fixing of the surcharges on both cargo and passenger flights, each paying $300 million in criminal fines, and also agreed to cooperate in the investigation. In all, 22 airlines and 21 executives have been charged in the DOJ investigation, more than $1.8 billion in criminal fines have been imposed, and eight executives have been sentenced to prison. Just last year, the DOJ obtained extradition of an air cargo executive, a Dutch national, who had been apprehended in Italy after nearly 10 years as a fugitive. She pleaded guilty and was sentenced to 14 months in prison (with credit for time held by the Italian government pending extradition) and ordered to pay a $20,000 criminal fine.

Antitrust authorities’ attention to the air transport industry extends beyond large carriers alone. The market for air freight forwarding services also has been the subject of international enforcement activity. Between 2010 and 2013, the Division charged 16 freight forwarders with multiple conspiracies to fix and to impose on shippers certain freight forwarding service fees, including fuel surcharges and various security fees, for services provided in connection with international air freight forwarding during 2002–2007. The companies either pleaded or agreed to plead guilty and paid criminal fines totaling more than $120 million.[8]

Ocean shipping
With respect to the market for maritime transport, the Division shares enforcement duties with the Federal Maritime Commission (FMC). The FMC monitors the effects of ocean carrier alliances on competition and can bring civil actions in court to enjoin agreements if they are likely, by a reduction in competition, to result in unreasonable price increases or service reductions, or to substantially lessen competition in purchasing covered services.[9] The FMC Bureau of Enforcement investigates potential violations and can negotiate settlements and informal compromises of civil penalties, or may engage in formal FMC proceedings. The Biden Executive Order encourages the FMC to cooperate with DOJ on enforcement efforts—focusing on the significant fees imposed on U.S. exporters by increasingly consolidated foreign shipping conglomerates—pursuant to which the agencies signed a Memorandum of Understanding in July 2021 to enable regular collaboration and review of shipping industry competition issues. It thus seems likely that market participants can expect increased attention to the pricing practices of alliances of large ocean carriers.

Most recently, ocean carriers engaged in transportation of “roll-on/roll-off”[10] cargo to and from the U.S. and elsewhere have been the target of a major international criminal investigation into a worldwide conspiracy from as early as 2006 through 2012, affecting hundreds of millions of dollars in commerce. Beginning in 2014, DOJ has brought charges in Maryland federal court—the most recent filed in 2018—against five carriers based in Japan, Norway, and Chile, plus 13 individual employees, for price fixing, bid rigging, and allocation of customers and routes. The court has ordered the carriers to pay a total of more than $255 million in criminal fines. To date, four individuals of those charged have pleaded guilty and been sentenced to prison terms ranging from 14 to 18 months plus a $20,000 fine. Others remain fugitives.[11]

The deep-sea container shipping industry has been the subject of investigation as well. As a recent example, the Division raided the biannual “Box Club” meeting in 2017, serving subpoenas on CEOs of the major lines concerning potential price fixing. According to several carriers, the investigation concluded in 2019 without any charges or fines. This followed an earlier investigation by the European Commission’s Directorate-General for Competition (DG Comp), which opened formal proceedings in 2013 against several container shipping companies, concerned that their practice of publicly announcing intended price increases allowed them to exchange information on future pricing intentions. In 2016 the Commission accepted, and made legally binding, commitments by the companies to alter their pricing announcements to ensure transparency to customers and avoid competition concerns.

As was the case in the air cargo industry, freight forwarding services for ocean shipping have been the subject of investigation as well. The Division recently investigated and charged a nationwide conspiracy to fix prices for international ocean freight forwarding services during 2010–2015, resulting in guilty pleas in 2018 and 2019.

The Division also pursued a domestic shipping conspiracy to allocate customers, rig bids, and fix rates and surcharges levied on purchasers of coastal water transportation of freight (e.g., heavy equipment, perishable food items, medicine, and consumer goods) between the continental United States and Puerto Rico during the period 2002–2008, leading to charges against three companies and seven individuals. Between 2008 and 2013, the companies received fines ranging from $14–17 million each, and executives received prison sentences ranging from 7–60 months plus fines of $20,000 each.

Importantly, on top of the criminal fines and prison sentences, each of the antitrust investigations in the air and ocean transportation markets that resulted in criminal penalties quickly spawned private plaintiff class action lawsuits seeking treble damages, costing the companies involved millions of dollars in defense and settlement costs.

The best defense, as noted above, is for companies to educate their executives and employees about common antitrust traps and competitor interactions to avoid through implementation of a well-crafted, comprehensive, and effective antitrust compliance program. In the current antitrust enforcement climate, transportation industry clients can expect increased scrutiny of shipping rates, fees, and surcharges, as well as any action or conduct that may result in reduced competition among carriers. Companies are strongly encouraged to consult with experienced antitrust counsel before pursuing any strategy or course of action that could raise a red flag.

The authors
William E. Lawler III is a Partner, White Collar Defense & Investigations at Blank Rome.

Kierstan L. Carlson is a Partner, Maritime at Blank Rome.

1. See Briefing Room, The White House, Executive Order on Promoting Competition in the American Economy (July 9, 2021), whitehouse.gov/
briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
2. See U.S. Dep’t of Just., Antitrust Div., Remarks by Richard A. Powers, Criminal Antitrust Enforcement: Individualized Justice in Theory and
Practice (July 21, 2021), justice.gov/opa/speech/acting-assistant-attorney-general-richard-powers-delivers-remarks-symposium-corporate.
3. Among these incentives are that the first company to come forward and admit involvement in an antitrust conspiracy, if granted amnesty,
is given full immunity from criminal prosecution in exchange for its cooperation in the investigation (and this immunity extends to covered
cooperating executives and employees), and will be individually liable for only actual, not treble, damages in any related civil litigation in which
it cooperates. See Leniency Program Page, U.S. Dep’t of Just., Antitrust Div., justice.gov/atr/leniency-program. Even if a company is not the first
in the door, it may still benefit in other ways from admitting involvement and providing cooperation, such as through a deferred prosecution
agreement.
4. To date, non-U.S. corporations have accounted for more than 80% of criminal fines of $10 million or more obtained by the Antitrust Division.
See U.S. Dep’t of Just., Antitrust Div., Sherman Act Violations Resulting in Criminal Fines & Penalties of $10 Million or More,
justice.gov/atr/sherman-act-violations-yielding-corporate-fine-10-million-or-more (updated July 16, 2021).
5. Indeed, the Antitrust Division now evaluates and may credit well-designed, comprehensive, and effective compliance programs carried out in
good faith at both the charging and sentencing stages of an investigation. See Press Release, U.S. Dep’t of Just., Antitrust Division Announces
New Policy to Incentivize Corporate Compliance (July 11, 2019), justice.gov/opa/pr/antitrust-division-announces-new-policy-incentivizecorporate-
compliance; U.S. Dep’t of Just., Antitrust Div., Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations (July
2019), justice.gov/atr/page/file/1182001/download.
6. The European Commission’s Directorate-General for Competition (DG Comp) opened its air cargo investigation following Lufthansa’s
application for leniency in December 2005. It found that the carriers coordinated pricing for airfreight services from, to, and in some cases
within, the European Economic Area, with respect to fuel and security surcharges, and refused to pay commission to freight forwarders on
surcharges, between 1999–2006. The Commission imposed fines totaling nearly 800 million Euro on 12 carriers in 2010 (Lufthansa received full
immunity, and most other carriers received reduced fines for cooperation). Related enforcement actions by competition authorities around the
world, including Japan, Korea, Canada, and Australia, have led to imposition of additional fines.
7. Other ancillary air passenger fees, such as those for baggage, changes, or cancellations, are a focus of attention in the recent Biden Executive
Order.
8. The Japan Fair Trade Commission (JFTC) had in 2009 imposed cease and desist orders and surcharge payment orders totaling over
nine billion yen on 12 freight forwarders, and found two additional companies to have committed violations. DG Comp also investigated after
Deutsche Post first reported the cartel, and in 2012 fined 14 corporate groups a total of 169 million Euro for their participation (Deutsche Post,
including subsidiaries DHL and Exel, were granted full immunity).
9. Large international ocean carriers generally belong to alliances, of which three major ones currently exist and together account for more
than 80% of the global container shipping trade. These alliances—themselves cooperative agreements among competitors—historically have
enjoyed a limited antitrust exemption for certain maritime shipping agreements filed with the FMC, but that limited exemption does not
preclude enforcement actions against unreasonable competitive restraints or criminal cartel conduct. Moreover, the Antitrust Division has
repeatedly taken the position that the exemption is no longer justified. See, e.g., U.S. Dep’t of Just., Antitrust Div., Comments on The Alliance
Agreement, FMC Agreement No. 012439 (Nov. 22, 2016), justice.gov/atr/page/file/913521/download; U.S. Dep’t of Just., Antitrust Div.,
Comments on the OCEAN Alliance Agreement, FMC Agreement No. 012426 (Sept. 19, 2016), justice.gov/atr/file/909131/download. The similar
maritime exemption from EU competition law was repealed in 2008, except for shipping consortia falling below a designated market share
threshold.
10. “Roll-on/roll-off” refers to non-containerized cargo that literally rolls on wheels onto or off of the shipping vessel—generally, cars, trucks, and
construction or agricultural equipment.
11. DG Comp concluded its ocean vehicle carriage inquiry in 2018 with a decision imposing fines totaling nearly 400 million Euro on four carriers,
with a fifth receiving immunity for its initial report of the conspiracy in 2012. The Commission found that, during 2006–2012, the carriers
engaged in meetings and/or other communications through which they agreed to coordinate pricing, allocate customers, and/or reduce
capacity through coordinated scrapping of vessels, and followed a “rule of respect” whereby carriers would refuse to bid or bid high such that
certain business would remain with an incumbent carrier. Numerous other international enforcers

Source: www.marinelink.com

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Speaking exclusively to Air Cargo News, Hung said the shortage is worst on the transpacific trade and is the result of the knock-on effects of general supply chain disruption causing hold ups in transport operations.

“Airlines are finding it’s taking much longer for assets to be delivered back to US warehouses after collection by the consignee,” Hung said.

“Backlogs in warehouse operations for both airlines and freight forwarders, combined with transportation issues such as driver shortages and capacity constraints, are also impacting the availability of ULD pallets and containers.”

Hung added that ULD manufacturers are backlogged and despite running at maximum capacity they can’t fulfil the current demand.

Lead times for delivery of new ULDs is at least four to six months.

“Exacerbating the shortage, freight forwarders are running out of warehouse space and keeping ULDs as supplementary storage outside of their warehouses,” Hung added.

“Airlines are trying to combat the challenges by leasing more units, offering incentives for faster turnarounds in the US and expediting repairs.”

Airlines are also struggling to have enough pallets on hand due to delays in their return from customers.

“It’s also difficult for airlines to secure pallets from ULD leasing companies, even though many are willing to pay a premium for pallets,” added Hung.

“The shortage of pallets is going to continue to delay shipments, which will have an impact on the entire supply chain.”

Asked how long the shortage could last, Hung said it was very “extremely difficult” to predict given the uncertainty regarding future lockdowns – especially given the Omicron variant – and the impact that could have on air cargo.

Hung recommended that airlines utilise tracking technology and software, such as that offered by Descartes, to monitor ULDs and automate the demurrage process.

“[Tracking technology] helps carriers optimize the use of the ULD assets they do have by changing the behaviour of agents so they return ULDs on time.

“This provides visibility into the exact location of ULD assets and whose custody they are in at any time, and traces ULD movements easily to clarify any discrepancies.

“Technology also drives better forecasting and planning so airlines can identify ULD shortages before they occur and take proactive action as necessary, such as leasing or purchasing new assets.”

Descartes is not the only company to have noted a shortage of ULDs over recent weeks.

In November, Cathay Pacific director of cargo Tom Owen also noted a shortage of ULDs on the transpacific.

“Backlogs in both our and consignee warehouses, along with shortages of trucks and labour issues, are combining to make this very challenging,” he said.

Source: www.aircargonews.net

Image: www.pexels.lv

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