Episode Transcript
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[00:00:35] Speaker B: You are listening to the Freight Buyers Club a home for those interested in international trade, shipping, procurement, logistics and air freight. In fact all things supply chain in the Americas, Asia and beyond.
[00:00:50] Speaker C: Hello. Today we're zooming in on one of the hottest questions in shipping and logistics. How shippers are responding to the latest US China tariff truce. Both right now, but also how they're planning in the long term. And we're doing this with the CEO of one of the world's leading forwarders.
[00:01:09] Speaker B: For the ocean it takes about place the order to make the product to deliver at least four to six weeks some product up to eight weeks unless the contract manufacturer or like a AI product, right? Or like a semiconductor I think they would be faster but for traditional product like an ocean product, back to school, the backpack, the stationary I think those it will take time to recover but because the 90 day and from the 125% down to 30% I think that's what people aiming for that.
[00:01:43] Speaker C: Welcome to the Freight Buyers Club insight podcast which as you heard there is brought to you by Ontegos Cloud. I'm your host Mike King. And just a quick announcement before we start. The Freight Buyers Club will be reporting From Transport Logistic 2025 and Air Cargo Europe in Munich at the start of June. Please ping me if you'd like to meet up for a coffee, a beer or a chat.
Now as trailed with us today is Jeffrey Shih, CEO of Demerco Express Group, which operates right at the intersection of the Asia Pacific and Asia US trades. We intend to do our best to break down how freight markets are shifting, what Demo's clients are actually doing on the ground and how you can prepare tactically and strategically for what's coming next. Jeffrey, welcome to the Freight Buyers Club.
[00:02:36] Speaker B: Good morning, good afternoon, good evening everyone. Yeah, my name is Jeffrey. I'm the CEO of the Temeco Express Group.
Currently I'm based in the Los Angeles, California United States. Thank you.
[00:02:48] Speaker C: You're very welcome Jeffrey, I. I'm very keen to start by getting your. Let's call it the. Well as you're in the States should we go with feet 30, 000 foot view?
How are both air and ocean freight markets reacting to this tariff pause on that Asia US trade or rather tariff pauses because we have two. We have a 90 day pause on non China countries that commenced in the second week of April and now as of the second week of May we have this US China tariff pause. Are we seeing a real acceleration now in volume as shippers bring orders forward as fast as they can before the end of this cutoff point?
[00:03:30] Speaker B: Yeah, I think let me start from the air freight first effective the May 14th. You know once China and USA reached certain consent which is the first thing the dismantling is $800 being removed and then they add on the 54% of the Baron duty or the $100 per package. I think that's one of the impact.
Second from the demands because early April and the February they talk about try to remove this minute it's $800 actually you see the airfreight market drop the global chargeable weight down actually 1% down week over week compared with two weeks before. It's about 3% down as far as Asia Pacific to North America actually about 13% down but from China which is 10% down week over week and 27% down year over year.
The reason behind of course the E Commerce is one of the big hit like I say because the current situation, the 90 days on hold air freight actually is dropping in the market and.
[00:04:45] Speaker C: Most of that's due to that loss of E Commerce due to the end of de minimis exemptions from the US that's from cargo shipped from Hong Kong and China, isn't it?
[00:04:54] Speaker B: That's right. As far as for the ocean actually in May there's about 8% of the cancellation and that's about 58 out of the 692 scheduled flight the vessel being canceled for the Trans Pacific eastbound particularly there's about 62% of the cancellation until they reach May 14th. The new consensus then we will see the continue before because two major parts, one is inventory recovery, the other I think in United States one of the peak season is they call the back to school holiday.
So right now we see that in June the peak season surcharge probably roughly more than $2,000 increase of the peak season surcharge. So that is good for the ocean.
[00:05:46] Speaker C: Services as you say we saw those ocean shipping freight rates surge in the first week after the announcement on that Trans PAC trade. We've also got new GRIs announced for that's general rate increases for anyone who isn't aware what GRIs are they're due from carriers at the start of June 1st. Well I think there's two questions here. Is there enough shipping capacity and boxes available for loading in Asia right now or are these rates speculative from carriers? I mean that's sort of two sides of the same coin perhaps.
[00:06:17] Speaker B: Yeah I think that like I said earlier you have the. The cancellation and the vessel try to reduce the speed. Right. The carbon regulation, all this of course now like I say before the end of the summer the back to school is one of the major volume for the United States market.
So we will see the vessel right now particularly from China to USA because they have the 90 day allowance until the August 13they have to ship. But in terms of the freight capacity of course they can ship back to for example like intra Asia then now back to the United States. I think this is what the steamship like try to plan for. That's why you see the we so called the peak season surcharge in post.
[00:07:08] Speaker C: Are we seeing a peak season early peak season though? Because it's not just the back to school market. People are also saying that some shippers are bringing in now for the holiday season later in the year as well which is what the normal peak season season would be.
[00:07:20] Speaker B: Yeah because again right for the ocean it take about from the place the order to make the product to deliver at least four to six weeks some product up to eight weeks Unless the contract manufacturer or like an AI product right. Or like a semiconductor I think they would be faster but for traditional product like an ocean product back to school, the backpack, the stationery I think those it will take time to recover but because the 90 day and from the 125% down to 30% I think that's what people aiming for that. So our team actually are also visiting United States to work with the customer to make sure we are on top of the to meet the customer requirement.
[00:08:08] Speaker C: Just on that tariff truce between the US and China. The headline numbers here are that the US is scaling back tariffs on Chinese goods from 145% to 30%. That 30% is 10% plus 20% tariff for fentanyl. China meanwhile has dropped duties on US imports from 125% to just 10%.
But the tariffs on Chinese imports to the US are a little different to the headline numbers. And just a note for listeners out there.
I'VE done a full visual explaining with multiple guests on this please check out episode 42 of the Freight Buyers Club. This points out in a lot more detail than we're going to go into here that these numbers are a little misleading. For many products the actual duty is higher than 30% due to tariff stacking up to 90% but 40, 70% is quite common. Jeffrey, how is Dimeco helping customers understand, calculate and mitigate exposure? Especially those unsure about how new rates could hit them? Maybe midstream or mid shipping.
[00:09:11] Speaker B: Yeah, I think the USA we provide we so called a tariff table and the tariff impact calculator to assist the customer. Because there's a section from China to United States you have the tariff under the section 301232 and also they call the IEEPA which is international Emergency Economic Program act because that relates to phenotype that's about 20%.
[00:09:42] Speaker C: It's like tariff spaghetti.
[00:09:45] Speaker B: Yeah, so that is something people are looking at. Right. Because a lot of product might be involved particularly those E commerce in the past. The other one we will provide we so called tariff impact calculator Basically all the export from major countries we all use in the HS code. But HS code might be different between origin and the destination.
For instance export from Asia could be under the 6 to 8 digit. But now because those are the impact calculator we need to go for more detail from 8 digit number to 10 digit number.
So DiMerico provide those we so called the tariff impact calculator based on the customer information. Then we will calculate exactly whether it's under 301 involved with the 232 or like a fenitel product in order to help customer to pay the actual cost. Then it may take somewhere between two to four business days to recalculate. And we also have the in house brokers to provide this kind of service to meet the customer to help customer to work together to avoid the extra duty or tax or terror.
[00:11:00] Speaker C: So Jeffrey, the China US truce. If you're shipping from China to the US what's the real cutoff date for shippers? There's been a lot of misreporting about this. So the 90 day postponement applies as far as I understand it to you're the expert though to the date cargo clears U.S. customs not the loading date. So when do people actually need to ship from China to be that 14th of August expiration?
[00:11:27] Speaker B: I think because the announcement already made by the May 14th. So initial 90 day window until the August 30th may change depend on the continued negotiation. However there's the eligible of the 10% duty depend on it day. Because USA is a big country. So you have a lot of the IT transfer, right? Then you talk about the entry summary date or like a first port of the landing into the United States.
Recently we have one case the swimmer arrived on the 8th of the May and the swimmer have to go in into the inland for the steamship line the inland transfer. But because of that, because of the May of the 8th is the first port of entry.
They will need to pay for the additional tariff. Then we provide some of the solution under the we so called the bonding warehouse. Then we can transfer inbound transfer to the Bundy warehouse. Then during the we so called the inbound export the ie become the after the 14th of the make. Then you can reduce the inbound the tariff down to like a 10%.
I say another one of the solutions.
But of course in order to do that before the August 13th because ocean from China at least you take two to three weeks on the transportation. If you talk about inland of the United States like I mentioned it, those are you have to meet the requirement.
So in order to have the better quality control for ocean you need to have like a two to three week for airframe every three to five days to avoid the arrival of the August 13th. So it better be arrived before that.
[00:13:17] Speaker C: Are you expecting an ocean crunch and then closer to that deadline maybe an air crunch?
[00:13:22] Speaker B: Yes.
[00:13:24] Speaker C: How are you advising clients?
Anything you're doing? What's the number one thing? Is there something tactical? Is it something strategic that you're the advice that people need? Or is it just about understanding when these dates are?
[00:13:36] Speaker B: Yeah, I think like as far as those concern Right now USA government is more concerned about the IEEPA the phenotype because that add on 20% of the tariff in order to do that. I think we need to be culture on that, right? Like I said earlier, have to based on the export declaration or export HS code to really verify that the other is a country of origin. Also the certificate of the country of origin to ensure the product either made in China or assemblies in other Southeast Asia country.
So I think this is something that is important.
Then of course talk about those geopolitical risk. The China plus one or China exit been going on in the market since 2018.
So when I was in Singapore back to 2016 to 2022 actually out from Singapore my office I can see one of the island called the Patan which belong to the Indonesia.
So at that time we already Moved some of the contract manufacturer from China into Patan because they are the country manufacturer. So they can do all kind of the manufacturer for the customer. Actually one of the well known company in United States which is one of our customers, they are doing a security camera which we all met in Indonesia because Indonesia is one of the major free trade zones. So they can save a lot of the import duty when the product come into the United States. And that back to the 20082019 before pandemic.
[00:15:17] Speaker C: Yeah, just for anyone who doesn't know that region. So Batam is directly it's in Indonesia, but it's right across the strait from obviously one of the biggest ports in the world at Singapore. So Jeffrey, have you seen any change from some of your customers in terms of that China plus one. Are people looking at Southeast Asia or India or is there just too many unknowns at the moment for people to make decisions on this?
[00:15:39] Speaker B: Yes, because China, you know in the last 20, 30 years they already built infrastructure of the manufacturer. However, I like to always add on the Taiwanese company which is the electronic semiconductor though the contract manufacturer. The top 10 I think at least five to six company including the number one Fastcon. Right. And some of the company like Inventech, Quanta and like Wishtren, PE they are all doing not only for the Apple but also for I other like a Dell computer, HP Computer. So they already ship from China into Southeast Asia country including typically like Vietnam and Thailand for the computer industry.
Right. And Pegatron. They also in the in the Vietnam they also doing some of the like I mentioned earlier, other than Vietnam they also set up in the Patan that back to 2018 is one of the largest investment at that time. Now you see more companies shipping from China into Southeast Asia, but it all depends on whether it's a Taiwanese company or Chinese company.
If you look at the USA market, consumer product could be electronic consumer could be the regular general product. I think general product probably will stay in in the Southeast Asia such as Malaysia, Thailand, Vietnam or even India market. But electronic I think that like I mentioned, other than that Thailand, Malaysia and Vietnam a little bit in India right now you see the Apple now The big investment 500 billion in India market.
[00:17:24] Speaker C: You said before we started this interview, I know you've been expanding your advisory capabilities.
This now extends to helping people moving into places like India and Southeast Asia, including factory relocation. Is that. Did I understand that correctly?
[00:17:37] Speaker B: Yes, actually like I said back to the 2016-2022 when I was in Singapore managing our Southeast Asia Activity at that time we already have the company moving from China to Vietnam, China to Malaysia.
[00:17:55] Speaker C: How do you move a factory?
[00:17:56] Speaker B: Or one thing you can move by the truck. I see a lot of people may not know into the. For example from Southern China to Vietnam you can using the cross border road freight and that can all the way down to Singapore for example. We have some of. Of course you will combine the ocean as well. We have a couple case. One is in Malaysia, Johor Balu. There's one company that set up like a 48 week transition for the factory location. We took about 36 weeks and we moved more than 40 of the 40 foot low bed and also the 91 open truck within the 36 weeks. Including those custom compliance, customs clearance. Because particularly in Malaysia all the customer only rely on three to five major custom broker to do the job there. So Temecula is one of them.
[00:18:53] Speaker C: And how does the customs brokerage how does that help your clients? Does it help them move goods faster? Does it help them have a more resilient or stable supply chain?
[00:19:03] Speaker B: I think one thing that because the complexity of the custom from the origin country and the destination country. The other is the safety transportation, how you navigate and managing the safety of the factory relocation.
Like I say Southeast Asia the Merkel have the well experience over 40 years compared with some of the international freight forward.
Because our office already set up since 1976 already from Malaysia and Philippines to Singapore. Singapore was established 1980. So with the experience with the well known of the people over there. Actually we have over 600 employees over there for over 40 years experience in the marketplace. So I have the opportunity to manage in that team. And I learned a lot, you know, because there are different culture, different behavior, right. Different mentality and same thing for the customer. You have to deal with that.
So that's a complexity of how we help to the customer.
[00:20:11] Speaker C: That 48 week relocation. Yeah quite amazing. I was just thinking, I think it was about 10 years ago that the Southeast Asia Asean. I think it was 2015. I might be wrong. Please forgive me if I'm wrong. Signed an FTA free trade agreement with China. So some of these things are quite easy to do in Asia. And those cross border barriers to trade between Southeast Asia and Asia have allowed China plus one to thrive. Actually I was making me think that when you were saying you move the factory across on trucks. If you tried to reshore from Mexico for example, wouldn't all the parts of the factory now be subject to like steel and aluminium tariffs and things like that? They would be wouldn't they? I don't know. It's just a flight of fancy of.
[00:20:53] Speaker B: Mine because the reassuring we also see some of the factory move from China into Mexico.
Actually I've been to Mexico since over 30 years ago. If you look at the Guadalajara for example all the contract manufacturer, the big name over there, right. Flectronic, JBL, those American companies. But if you look at the 20 to 25 years ago the Taiwanese contract manufacturer Fastcon in Chihuahua and some of the contract manufacturer Withron Pegatron, they are in the Morris which is the other side of the El Parcel. Some of the manufacturer used to be in the San Diego across the border called Hawtay Mesa. Those are over 20 years ago but today if you look at Trump administration they require the contract manufacturer move back to United States. That's why earlier I mentioned that the top 10 contract manufacturers including 506 Taiwanese company actually they already in Mexico or even border now they try to convert their the production into United States because they used to have the we so called after services so like a Quanta, Eventech, Packatron, fastcon now they all, all ship some of the production back to the United States because the AI product because semiconductor right. Because, because all the requirements. So I think the Taiwanese manufacturer they are ready to do that and they are committed to that.
[00:22:28] Speaker C: There's been some big investments by Taiwanese companies that help the CHIPS act was pushing that as well. I just don't know why. I just imagine some executive in Mexico from a big Asian company or a Mexican company or a big US Company going I'd like to reshore to the States but my factory is going to get tariffed for every single part to enter the US So we might have to stay in Mexico. I don't know, maybe that's wrong. I'm going to explore that on future episodes. Sticking with Latin America, Jeffrey, you mentioned before we started that you recently went on a trip to Brazil. What logistics patterns or opportunities are emerging there or across South America does that fit in to the broader diversification efforts we've been talking about here from your clients?
[00:23:14] Speaker B: Yeah. If you look at the global trade actually Before I return 2022 people talk about RCEP, right? Regional Comprehensive Economic Program which is under the 15 countries including Asia. 10 countries including China, India, then New Zealand, Australia, Japan and South Korea.
Then the last two years, last two to three years people refreshed again the BRICs now they add on South Africa.
So if you look at the India, China and Brazil because Brazil still in terms of the population they are one of the largest one in Latin American country.
So in late April I went down to visit some of the customer and our agent partner down there which they are doing the warehousing distribution as well as doing the development into Central and Latimer. And as you know the last two months when Trump had the new announcement, then some of the agriculture products actually import from Brazil into China. But because they are under the BRICS agreement, Chinese company also ship some of the product into Central America including Brazil. And one of the major port in Perlu also helped development by the Chinese company.
And they already established and completed last year in the port of Peru. A lot of the automation.
So actually usually I like to share the Chinese what build one road. Actually they already go outside of the United States. They try to have the well development. They become like they don't want to again United States, but at least they diversify their business opportunities. That's why China import to USA only. Very minimum of the impact to China Export maybe only 40% only, but USA import is probably over 40% of the product coming from China.
[00:25:15] Speaker C: Thanks Jeffrey. I was just checking then while you were explaining that.
So the China ASEAN FTA, there's been about five versions. One of them was updated in 2015. So I was sort of right. But they go back another 10 years, the first version. So different elements of it entered force. Maybe the 2015 version was when they opened up road transportation.
The Australia China FTA did start in 2015. Geoffrey, if we might. Let's rewind a little. You've been at Demurco for over 30 years now. Can you explain to everyone how you got into this industry and what has been the attraction or the challenge that has kept you here?
[00:25:51] Speaker B: I studied in the international trade when I was young in the college.
Actually I looking for the job, I can go abroad to learn. That's why I joined company 88. Then 1991 I have the opportunity to transfer to San Francisco. So I actually I stayed in San Francisco for 12 years. Then I moved down to Los Angeles. Then 2015 I went to New York for a couple of months and 2016 I transferred to Southeast Asia country, the regional office in Singapore.
So because our industry as an international freight forwarding, transportation logistics company, you got to have the experience in the different country.
Like I said earlier, different country have a different regulation, custom behavior, regulation. I think this is something I learned even though during the pandemic I didn't come back home for over 500 days. A lot of people were surprised, but the business, business Right. The family. Family. How you balance that? I think that then I try to learn one thing, separate the stress and the pressure. Because we all have the pressure when we work in the company. But don't let the pressure become your stress. Then I think that most of people can overcome that.
[00:27:10] Speaker C: How would you describe your approach to leadership? And has the type of leadership that people respond to, has that changed over the years or maybe it's changing now? How do you view it?
[00:27:21] Speaker B: I learned something from my founder back to the early 1991 before I transferred to the United States. I think one thing is very important.
Always think about how you create the value to your department, to your station, to your company, to your region. Right. So they always keep in my mind become my motto, personal motto. Because how to create the value. So today if I look back 30 years ago, until now, everywhere I transfer, I try to think about how I'm going to contribute and develop the value or contribute my value to the company. That's why today I have the opportunity to take this opportunity and hopefully can help company to move forward.
Because we are 54 years already.
Hopefully we can move forward like a Japanese company or the European company. Because the freight forwarder could be last for long. So that's something I like to share myself.
[00:28:23] Speaker C: Do you feel that freight forwarding is still about the human element or is technology taking more of a role here? How do those two things balance out in your view?
[00:28:34] Speaker B: I say two parts technology is very important.
Like at Demerco, we have owned our value plus, which we've been developed over three decades from the DOS version to Windows version to the web version. Now we also look into the AI capability internally we have the streamlined operation process, the RPA robotic process.
Then also we have the connectivity API, EDI with the customer for the connectivity. But the most important freight forwarder, I think the people is important because troubleshooting in our industry it happens everywhere, every day, right? So sometimes the AI still not able to cover that. But in terms of the synergy to win in our industry, I say you must have the advanced technology plus the well trend of the employee in order to meet the customer requirement.
[00:29:29] Speaker C: Where do you think technology in our industry is most advanced? By region, by mode. Is there more that could be done to use technology to reduce costs and friction? Take costs and friction out of supply chains or out of businesses that depend on supply chains?
[00:29:45] Speaker B: Yeah, in terms of the supply chain and logistics, if I look at the supply chain is the end to end solution which is including pickup, right? Including the old mode Trucking, custom brokerage, export by air, by ocean. Then also the transportation down to the destination by air freight, ocean freight warehouse and the last mile delivery. But for the freight forwarding company I think the Merkel adds an additional service we call the multimode transportation. Like I mentioned, we have the cross border transferred from China to Europe.
So how are you going to manage their supply chain including those material flow and the visibility?
We also handle the cross border road freight from China into Singapore and during the pandemic because the space constraint. We also handle the multimode transportation including air transportation from Southeast Asia countries through Singapore to United States to Europe.
We also handle the CL transportation during the Red Sea crisis. So I think the system beside the airfreight ocean freight, country logistics, basically the custom brokerage is one part of it. The other, the multimode transportation I think that's other than those transportation mode I mentioned. The multimode is also very very important.
[00:31:09] Speaker C: To meet the customer requirement the rest of 2025. What are your expectations and and how are you helping clients plan for them? Are you expecting more disruption? Maybe. I don't know. I'm going to be an optimist, maybe more stability. I mean we've got so many unknowns out there, haven't we?
[00:31:26] Speaker B: Yeah, I think number one the manufacturer shipping from China to Southeast Asia country I think it will maintain. The other is like a Chinese Taiwanese contract manufacturer shipping from China to Southeast Asia or even from Southeast Asia Taiwan into United States which I mentioned earlier. I think those will continue because the tariff requirement by the Trump government. Second, I think we so called trade compliance and the sustainability for the company, I think those are the important right. Like at the Merkel we have some agreement with carrier to provide the SAP. We also have the system to identify internal with the airline as well as the ocean carrier. I think those for the sustainability those are the important.
The other I think like I mentioned earlier trade component. How the trade tariff, the control and the compliance. Like I mentioned earlier we have the tariff impact calculator. Once the customer provides the information we can help them to identify what exactly they need to pay the other. We must be able to identify the coo the country of our region because those are the important to reflect the actual duty.
And we also can provide those with so called duty drawback. Because you probably can import into United States then re export then to get the duty drawback. The last one I think is important. Bundy warehouse or the free trade loan warehouse operation which is now in USA is very popular because 90 day, the tariff or future tariff issue. Those bonding warehouses I think will be helpful to reduce the tariff. So I think those major things will continue we will see in the second half of the 2025.
[00:33:22] Speaker C: We've sort of touched on this. But as a final question, I know DeMurco has long played in terms of trade across the Asia Pacific region and on that, particularly on that Asia US lane as that manufacturing base starts to decentralise, what role do you see for your company playing in that transition? Especially when we talk about what we mentioned earlier, near shoring or long term reshoring to the U.S.
the Merkels have.
[00:33:49] Speaker B: A long history in asia Pacific since 1971, although USA we have over 45 years experience.
That's why one thing when I transfer back to United States we got to build a branding but 80% of the network people are all located in the Asia Pacific. That's why our slogan Connecting Asia with the World is a new slogan in the last three years. We try to position ourselves to be competitive in the marketplace, not aiming for the biggest one, but must be the most competitive international freight forwarder and supply chain consultancy. I think this is the mission the founder gave to me. So I must carry continuously Connecting Asia with World to leverage our Asia network, the carrier relationship to continue to pursue in the marketplace and USA of course we want to continue grow because it's the number one or number two market in the global market.
[00:34:53] Speaker C: The message loud and clear for freight buyers. If you're trying to make smart decisions under this tariff shadow move, deliberately diversify smartly and maybe most of all, don't wait too long. This has been the Freight Buyers Club Insight Podcast sponsored by on Tegos cloud. Jeffrey Sheep, CEO of Jamaica Express Group. Thanks very much for joining me today.
[00:35:14] Speaker B: Thank you for the opportunity for this interview and share some of my personal viewpoint. Today's podcast. Yeah, thank you so much.
[00:35:24] Speaker C: Thanks the listening everybody. Big thanks to Karen Ball and Tom Matthews for all their hard work on this episode on Tegos Cloud for supporting independent journalism and you all for listening. We'll be reporting as I mentioned earlier, From Transport Logistic 2025 and Air Cargo Europe in Munich at the start of June. Please ping me if you'd like to meet up and do subscribe and follow the Freight Buyers Club wherever you get your content to keep up to the date on the latest from the worlds of shipping, supply chain and air freight. We'll be back soon.
