Market Newsletter - March 2025
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Welcome to the March Market Update.
While shifts in USA trade policy continue to dominate headlines, it might be reassuring to consider that four of Australia’s top five import and export sources are much closer to home. According to Australian Bureau of Statistics data, in the 2023-24 financial year, the top three destinations for Australian exports were China, Japan and South Korea, the USA was at fourth place, and India came in at number five. For imports, the US comes in at number two as a source country behind China, while Japan, South Korea and Singapore are not far behind.
Keep in mind a large proportion of the US trade – both imports and exports – is in the form of services such as travel services (education travel in particular), financial services and digital services. None of these are likely to be affected by any changes to customs or duty that apply to physical goods.
If you are concerned about the potential ramifications of the fluctuating trade scenarios with the USA, the best course of action is to have a conversation with your Client Service Specialist or Client Success Manager to gain greater visibility of how it may affect your business, or other businesses in your supply chain.
For trading in our local Asia-Pacific region, the outlook is currently relatively calm. Rates remain soft, congestion continues to ease at the major transshipment nodes and no equipment shortages are being reported.
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It’s the slow season in North Asia now that both the summer rush and the Chinese New Year shutdown are behind us. No GRI was announced in February, and while some key carriers have announced a GRI of USD 200 per TEU from March 1st, our local intel says this is unlikely to succeed. Demand is still at a low level, and there’s no space shortage to justify a price rise, instead the carriers are now competing to secure their share of consignments.
They are continuing to blank some sailings, though not as frequently as in previous months, and we consider this tactic is still being retain a supply and demand balance in the carriers’ favour. Some experts are saying the carriers will need to cut capacity further if they look to push rates up again with GRIs, however, at this stage no obvious moves are afoot to do so. Instead, there’s been an announcement from ANL that it is planning to increase capacity on A3 consortiums in the second half of this year, which will increase the level of competition on rates.
Another bright note in this market is the integrity of sailing schedules to Australia from the main North Asia ports has improved markedly, and the operations landside from factories to wharf are all running smoothly and efficiently.
On the air freight front, a drop in eCommerce volumes is seeing both rates and space availability ease.
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Terminal conditions at Singapore and Port Kelang are continuing to improve as congestion eases and sailing schedule integrity starts to improve. This has a flow-on effect for reliability and the general level of confidence in the market. Blank sailings are still an ongoing factor, as the carriers are trying to retain some control over rates.
Because demand remains somewhat subdued with the advent of the slow season for consumer goods, no GRI has been announced for March. Air freight is also remaining stable in terms of both rates and service availability.
There may be some change coming to this market, with any easing of geopolitical conditions in the Red Sea region. We will be watching this closely to see what the positive effects may be for shipping activities and freight costs if the lines are able to revert to using this route instead of the Cape of Good Hope workaround.
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The recent prolonged industrial unrest in Bangladesh has had enormous impact not only on the nation’s key export sector of garment manufacturing, but also on conditions at its key ports. The railway strikes, for example, halted both passenger and freight services and worsened the existing congestion at the Chittagong and Dhaka inland container depots.
In mid-February, both were over capacity, while out on the water, at one point there were 18 container vessels queuing offshore at Chittagong Port due to a strike by dock workers at the start of the month.
International customers have taken note, with many buyers now looking to switch to suppliers from India to avoid the ongoing risks of delays and disruption due to the nation’s political instability.
Meanwhile, the Bangladesh government is looking to return to sovereign shipping capacity with a 12-ship deal by the Bangladesh Shipping Corporation. The BSC aims to purchase 12 new container vessels each with a capacity of 2,500 to 3,000 TEUs.
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One nation’s challenge is another’s opportunity, as major global fashion brands eye India’s garment sector as an alternative to sourcing from Bangladesh. There are some challenges to navigate, however, including any constraints around production capacity, lead times, limited availability of synthetic fabrics, and the four-day lead times for customs processing.
A new brand has been established for the nation’s garment trade – Bharat Tex – amidst calls for increased government support to rapidly scale up production of ready-made garments for export. Supply chain efficiency is also an area that needs addressing.
One aspect that is already getting attention is the matter of ships. The government is committed to revitalise the shipbuilding industry, with a suite of measures including policy reforms, international collaborations and financial investments. A Maritime Development Fund has been established with an initial tranche of approximately US$3 billion to support the ship building and ship repair sectors.
Air cargo meanwhile is growing rapidly, with a 19% year-on-year surge in 2024, driven largely by exports including pharmaceuticals, e-commerce and perishables. Improvements in infrastructure, network expansions and increased capacity have all contributed to enabling this growth.
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Canadians are responding to recent events with a surge of consumer demand for locally-made goods and services, vastly reducing the quantity of goods of US origin moving off the shelves. The flow-on effects of this on rail, haulage and ocean shipping in the North American region are as yet unknown.
Meanwhile in the USA, the rush to import ahead of potential customs duty hikes that clogged ports and rail is no longer making news, instead the focus is on air freight. On February 1st, an Executive Order by the President ended the de minimis exemption for all goods from China. This exemption allowed goods and parcels valued at less than USD 800 to come into the country without paying import duties. It’s a well-established international trade principle and has benefits for both shippers and carriers in terms of reducing administration and costs.
In response to the new Executive Order, the United States Postal Service announced it would no longer accept packages from China or Hong Kong, due to lack of resourcing to administer the new tariff. As a result, there was a backlog of parcels – particularly e-commerce – and many unhappy customers.
The administration then responded with a temporary reversal of the rule for goods of Chinese origin, to give UPS time to establish appropriate systems. This reprieve is only temporary, however, and the US Customs and Border Protection (CBP) has proposed a new rule that may tighten the de minimis duty exemption for a range of low-value shipments, not necessarily only those from China.
For many businesses, the whole situation is concerning, as many supply chains include low-value goods procured in small quantities from outside the US.
More broadly, proposed tariffs on goods from specific trading partners including potentially the EU and UK, along with extremely high product-based tariffs for steel and aluminium imports, have many manufacturers now examining their supply chains to understand their vulnerabilities. Logistics companies and carriers will all need to maintain a close eye as policies move from idea to action and be prepared to navigate increased complexity and costs.
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In good news for UK air freight, the UK Government has announced the go-ahead for a third runway at Heathrow Airport. Financed entirely through private capital, the expansion will lift capacity from 480,000 to 740,000 flights annually. It is expected to be operational by the late 2030s, which is just over a decade away, and as part of the massive construction effort there will be significant upgrades to existing terminal buildings and infrastructure. Transport connections to the airport are also expected to be improved, which will significantly benefit efficiency and speed for goods transport.
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There’s an air of calm across all Australian ocean ports, with a pause on industrial action and no significant equipment breakdown incidents reported. There have also been no recent fee hikes proposed by any of the container terminal operators, which allows for some respite for importers and exporters in terms of predicting costs for the rest of Q1.
For air freight, only one minor recent glitch occurred, which was a temporary shutdown of Qantas air freight operations at Sydney international terminal on February 24th due to unscheduled and urgent machinery repairs. This resulted in some restrictions on freight collections that had arrived prior to shutdown and not yet been processed. Qantas extended collection hours after normal operations resumed to minimise inconvenience
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Transparency and visibility of shipments is a tremendous asset for everyone in the supply chain, which is why the International Air Transport Association is urging all parties to onboard with the IATA OneRecord standard for data sharing in the air cargo industry.
The standard aims to create a single end-to-end record of a shipment, shared via a standardised API, to facilitate communication between air cargo stakeholders.
If you use air freight, speak with your Client Success Manager or Client Service Specialist to understand how OneRecord may be relevant in your supply chain.
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Herding Cats: Managing Import Documentation and Vendor Compliance
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In the article below, written by AXIMA National Customs Manager Gary Brasher, he explores the shift from Letters of Credit (L/Cs) to direct payment arrangements in international trade. This change has led to new challenges for importers, particularly with suppliers withholding critical shipping documents, causing delays and compliance risks.
Having worked at the forefront of import customs clearances since the early 1980s, I've observed significant changes in how international trade is conducted. One of the shifts occurred 10 to 15 years ago when import contracts essentially moved away from banking Letters of Credit (L/Cs) in favour of direct payment arrangements with overseas suppliers.
L/Cs are designed to protect contract parties by ensuring that agreed-upon goods are shipped before payment is made. They require suppliers to meet specific contractual conditions, including product, quality, quantity, price, documentation, and shipment before transferring funds. Once payment is made, the importer receives the original bill of lading, which is necessary for the freight forwarder to release the goods.
Today, however, the dynamic has shifted in favour of suppliers. Many now demand large deposits and full payment before the shipment arrives, which has led to an increasing number of challenges. A concerning trend is the withholding of crucial shipping documents, including Free Trade Agreement (FTA) certificates of origin and fumigation certificates until payment is received. This not only causes delays but also creates compliance risks.
For example, if an importer claims FTA duty-free status but lacks the necessary certification at the time of customs clearance, Australian Border Force (ABF) may impose penalties. In many cases, importers are forced to pay the 5% duty upfront to gain the release of their goods, only to go through the costly and time-consuming process of applying for duty refunds once the vendor finally provides the missing documents. Suppliers know this and use the withholding of key documents against final payment for the goods.
Ensuring Smooth Import Processes
We strongly recommend that importers set clear expectations regarding documentation requirements with their suppliers to avoid these pitfalls. As an example, every order should specify that the following documents be provided:
- Copy of the bill of lading
- Supplier's invoice(s)
- Supplier's packing list(s)
- Valid Free Trade Agreement certificate of origin
- Packing Declaration
- Fumigation certificate (if required)
- Manufacturer's quarantine declaration (if required)
- Other…
We recommend that as part of any agreement, suppliers be required to email the complete set of documents to both the importer and docs@axima.com.au within seven calendar days of the shipment's "Shipped on Board" date (or the first business day after flight departure). This should be a standard condition for every shipment. No more X days before ETA; it should be Y days after shipment.
Addressing Vendor Withholding Practices
Some suppliers attempt to withhold critical documents—such as FTA certificates of origin and fumigation certificates until full payment is received. However, withholding these documents serves no legitimate purpose other than to create unnecessary costs and delays for importers. The original bill of lading is the only document required to control the release of the shipment (or the suppliers' authority to release), and this has long been the industry standard.
Importers should also remember that unless they purchase under Ex Works (EXW) incoterms, obtaining an FTA certificate of origin is the supplier's responsibility. The cost of this certificate is already factored into the purchase price. If a supplier does not provide the certificate, importers should insist on a "below the line" credit adjustment for the savings that the supplier is effectively withholding.
Need Help with Free Trade Agreements?
If your supplier struggles to meet FTA requirements, perhaps due to components from a non-FTA country origin, reach out to our Customs team. Australia is a signatory to multiple FTAs with different preference criteria for the same countries. We can often suggest alternative free trade agreements that may better suit your product.
Building Strong Supplier Relationships
While it's important to set clear expectations with new suppliers, it's also important for them to recognise that trust is a two-way street. A supplier may initially be wary dealing with a new importer, implementing stricter payment and documentation conditions as a precaution. However, as a business relationship matures and trust develops over multiple shipments, importers should insist on these rigid conditions being relaxed and not remain as the “norm”.
Your continued business demonstrates reliability, and your supplier should reciprocate that trust by streamlining processes, ensuring timely documentation, and offering more flexible payment terms. Open and transparent communication is key, proactively discussing expectations and you both understanding the benefits of a long-term partnership can help transition from rigid initial conditions to a smoother, more collaborative trading arrangement.
By fostering strong supplier relationships and maintaining clear documentation standards, importers can achieve greater efficiency, reduce compliance risks, and create a more predictable supply chain.
For further assistance, contact our National Customs Manager at garyb@axima.com.au
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Alliances in the spotlight
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The Freight and Trade Alliance has been suggesting that all Australian importers and exporters consider the potential implications of trade-related international policy shifts. This means understanding where the links are, and what your contingency plans could be if things change in ways that impact your ability to fulfil your customer’s needs while protecting your bottom line.
Ultimately, trade is all about alliances. It’s not just goods, services and money that flow around the world, it’s also trust, ideas, opportunity and reward we are circulating through our global and local supply chains. Alliances are how we ensure those intangibles continue to deliver benefits for everyone involved, including your customers. At AXIMA our strong partnerships across the industry mean we can always bring solutions to the table when you come to us with either concerns and challenges or ambitious plans for growth and business progress.
Your Client Success Manager or Client Service Specialist is always on your side, so stay in touch and let’s ensure your supply chain is nimble, cost-effective and resilient.
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Navigating your future together,
Matt Ward
COO International
AXIMA Pty Ltd
www.axima.com.au
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