China Fines International Shippers

Sadie Keljikian, Express Trade Capital

After a year of investigations, China announced fines for eight international shipping companies for violating price fixing laws. The fines represent the most significant attempt by authorities to crack down on colluding in a sudden enforcement of an eight year old anti-monopoly law.

According to the National Development and Reform Commission, or NDRC, the companies had coordinated with one another to raise prices on cars, trucks, and construction equipment over the next four years.

Among those fined were South Korean Eukor Car Carriers, Inc., which was ordered to pay 284 million yuan (just under $44 million), the largest single fine in this case.  Other guilty parties included Wallenius Wilhelmsen Logistics in Oslo, which was fined 45 million yuan (just under $7 million) and Mitsui O.S.K. Lines Ltd in Japan, which was fined 38 million yuan (just under $6 million).

Several of business groups as well as US officials have complained that China selectively began enforcing the law against foreign companies. China, however, has dismissed such concerns, insisting that domestic companies have also come under scrutiny.

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Giving Data Credit Where Credit Is Due

Drew Cohen, Express Trade Capital

The nascent, burgeoning big data lending industry shows few signs of abating. For the foreseeable future, it will continue to complement, rather than supplant, traditional lenders. In the next five years, competition, as well as new oversight in the form of state and federal regulations and the expectant slew of fair lending class actions suits, will begin to winnow the number of big data industry players just as it has for every major American industry from the early days of the oil refinery boon 150 years ago to the telecom industry.

It will take years, however, for lenders to determine which specks and footprints of online information are ultimately useful, yet non-discriminatory. This iterative discovery for the holy grail of accurate, predictive data will be slowed given the constant flux of consumer’s online behavior. The ever-present specter of the next Facebook or Snapchat belching out new types of data will continually force the industry to pivot and recalibrate its models.

Just as the rise and variety of online data tracking tools has been big data’s raison d’etre, the consumer’s recent clamoring for anti-tracking software provides some reason for pause. As a possible harbinger of changing expectations, and to the publishing industry’s chagrin, Apple’s new iOS9 operating software released in September includes robust ad-blocking apps.

In the near term, however, the big data credit industry will continue to make aggressive inroads, and be a boon for potential borrowers with little or no payment history, such as students and new business owners. Expect the splintering of lending verticals to intensify as alternative underwriting firms aggressively expand from peer-to-peer to business-to-business ventures, as general proof of the data-mined lending concept is verified.

Download the full article by Drew F. Cohen published in The Secured Lender

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Vietnam Climbs Garment Supply Chain

Sadie Keljikian, Express Trade Capital

After a prolonged malaise, Vietnam’s manufacturing industry has re-emerged as a significant player in the global clothing supply chain. For years, the Vietnamese garment industry has suffered a shortage of local raw materials stymieing opportunities for growth. For instance, its garment economy requires 400,000 tons of cotton for production per annum yet only 3,000 of it is supplied by the local market. As such, the industry has had to rely costly imports.

Previously, Vietnamese manufacturers focused on developing and showcasing their specific strengths in the field, rather than devoting to develop a competitive advantage in the field. As a result, a combination of a lack of raw materials and minimal systematic assistance led to underwhelming profits and very little business growth.

No more. Industry analysts have proclaimed that Vietnam’s manufacturers have entered the “cutting and sewing  stages of the global supply chain, meaning that the need to import raw materials will no longer limit the growth of the local garment industry. Supply chain integration will allow Vietnam to join other countries in the process of turning raw cotton, wool, etc. into finished garments while diminishing costs.

Several new factories and sewing plants will be built to accommodate the newly expanding industry, but it will be quite costly. The plan will, in all likelihood be easier to accomplish if the Trans-Pacific Partnership is fully passed, as the deal promises to eliminate or dramatically diminish tariffs and other trade-barriers among members.

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A Warm Start to Winter Leaves Apparel Retailers Out in the Cold

Sadie Keljikian, Express Trade Capital

This past weekend marks the highest December temperatures in 142 years, so naturally, consumers are not overly eager to buy winter coats, boots and gloves. As a result, many clothing retailers are suffering massive drops in cold weather apparel sales.  Among them is Stuart Greenberg’s Corniche Furs in Manhattan, which has seen a 30% drop in sales this month. In a recent New York Times article Greenberg said, “For the first 10 years of our business, we never even paid attention to the weather. It always just got cold.”

The warm weather is even impacting businesses like Macy’s, the Gap, and Nordstrom. All predict the need to offer winter wear at steep discounts to move surplus merchandise as the season goes on, but a company like Corniche Furs relies on the winter and, specifically, the holiday season to bolster its profits for the entire year. Many of the suffering businesses stocked particularly large quantities of boots, coats, and winter accessories at the start of the season, expecting a long and cold winter like last year, but weather analysis company Planalytics says that the volatile temperatures of the last few years cannot be expected to repeat themselves.

Companies like Zara and H&M have done reasonably well so far this season, largely due to their ”fast-fashion” approach. Fast-fashion retailers, or those which receive small shipments at a time and have a higher rate of turnover, have a much easier time adjusting when circumstances are less than favorable.

If temperatures drop dramatically in the next week, fortune may smile on retailers who rely on cold weather apparel. Otherwise, they may need to adjust their merchandise to accommodate the ever-changing weather patterns.

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East Africa Gains Traction in the Garment Industry

Sadie Keljikian, Express Trade Capital

East Africa is slowly becoming a popular location for apparel sourcing. Two years ago, European companies including H&M, Primark, and Tesco began sourcing some of their casual wear from Ethiopia. Others in the industry quickly followed suit. East Africa recently gained additional attention due to the African Growth and Opportunity Act (AGOA), which granted some sub-Saharan countries duty-free access to the US market. While East Africa’s growth as a destination for manufacturing is still nascent, the availability of land for development and access to low-cost labor force are promising for the region’s potential for growth as a competitor in the international textile and apparel industry, provided that governments, buyers, and manufacturers work together to improve business conditions in transportation, labor skill, and technological development.

Although Bangladesh leads the race to take over the apparel industry from China, the massive quantities of cheap and available labor in Ethiopia and Kenya are particularly drawing attention from global buyers. According to projections from the UN, the sub-Saharan region will have the highest growth in working-age population globally in the next 20 years. By 2035, that number will equal China’s working population today, with more than 900 million people. However, the relative lack of manufacturing experience (as opposed to seasoned veterans in apparel manufacture in Southeast Asia and Central/South America), is a major difficulty that requires further time and attention to address. Naturally, as investment and interest in the region grows, competency and manufacturing capabilities are sure to increase.

Beyond labor and available land, Ethiopia has cost advantages like cheap hydroelectric power and labor, and a rich supply of natural resources, but it still lags in production efficiency. In contrast, Kenya has high production efficiencies such as sources for bulk quantities of apparel basics like t-shirts and trousers, but has comparatively high labor costs and lacks a local upstream industry for raw materials, requiring the import or fabrics. While initial outlooks and projections for East Africa’s potential for progress are encouraging, countries in the region have a number of hurdles to conquer before closing the gap enough to challenge countries like China, India, Bangladesh, and Vietnam.

At present, East African apparel manufacturing is still a niche market and does not yet have the stability that many of its competitors have established over years and decades of trial and error and government investment. While East Africa still contributes only a small portion of apparel manufacturing, if businesses and governments confront the deficiencies aggressively, Ethiopia, Kenya, and other surrounding countries have the potential to grow into a major players in apparel sourcing and to forge a new standard for the garment industry.

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CBP Begins Third Phase of New GSP

U.S. Customs and Border Protection (CBP) has entered the third phase of its renewed Generalized System of Preference (GSP) Retroactive Refund Processing. The system was enacted on July 29th, 2015 and remains in effect through December 31, 2017.

During the third phase, importers can now initiate requests for refunds and submit them to CBP ports.