In 2014, US imports continued to rise in sync with an improving economy. Economists say the US economy is the biggest factor lifting the tide of global trade but will other factors dampen the forecast. A rising tide lifts all boats. A half century ago a nautical adage President John F. Kennedy frequently deployed described the impact of rising economic activity on the general welfare of the nation. In recent years, the improving US economy has lifted US imports, especially consumer goods. In fact, the investment bank Goldman Sachs (GS) reported, “US recovery remains firm – still the primary engine driving global growth.” GS reported US GDP grew at 2.2% in 2014 and is forecasting a 3.3% growth for 2015. In comparison, the Euro zone was flat in 2014 and forecast to grow at only .09% in 2015, giving rise to talk of deflation. Even China whose export driven economy for decades regularly posted double digit growth is expected to grow at 7% or less. For the US, consumer imports are booming. November’s (2014) imports of consumer goods were the highest on record $48.5 billion. Overall for 2014, US imports of goods are estimated to top $2.3 trillion (2.17 through November), exceeding even a banner year in 2012. The import trade numbers are also reflected in teus (twenty-foot equivalent units). Zepol, a Minnesota-based compiler of trade data based on BLs (bills of lading), reported that in 2014, US importers accounted for 32.46 million teus - a significant increase on the 2013 tally of 30.48 million teus and considerably up from the 2012 figure of 29.77 million teus. A majority of the imported consumer goods fall into predictable categories: electronics, drugs, clothing, household goods, furniture and motor vehicles and related parts. However, the sourcing of imports is undergoing a shift. China is still the largest import nation at an estimated $470 billion in 2014 ($426 billion through November according to US Census) amounting to close to 20% of US imports. But more imports are coming from Southeast Asia and the ISC (Indian Sub Continent) as the shift from South China takes hold (see Matt Miller story on page 2). Further, near-shoring is also contributing to higher import volumes from US NAFTA neighbors Mexico, Canada and other Latin American nations. What’s in the Big Box? The Big Box retailers, mega chain store operators like Wal-Mart and Target, still dominate consumer imports. It’s not surprising as 33% of the world’s top 250 largest retail chains are based in the US. The Big Box retailers begin with the gigantic global enterprise, which is Wal-Mart. Wal-Mart imports around 1.1 million teus worth of goods annually into the US. The mega-box store’s global net sales in 2014 were $473 billion based on more than 11,000 retail units located in 27 countries. To put the size in perspective, if Wal-Mart were a country, it would have a GDP similar to Taiwan or Austria. A vast majority of the company’s products are still sourced from China/Hong Kong, although like many retailers, Wal-Mart’s sourcing from South Asia and Southeast Asia is growing. There has also been a very strong shift to Mexico. While virtually all North American Big Box retailers still employ a China first strategy, increasingly Mexico is figuring into the supply chain. There are a number of reasons for Mexico’s rapid rise. Part of the reason is a stronger US dollar favors closer sourcing. Time is money when it comes to selling consumer goods, and kinks in the supply chain all but squeeze out the narrow profit margins that are the hallmark of many consumer commodities. It is difficult to run a Just-In-Time enterprise when the transportation component rarely runs Just-In-Time. Transportation costs along with manufacturing costs have led to more direct investment from Chinese firms and their US counterparts into Mexico and Latin America. In a sense, Mexico (and Latin America) represents an extension of an established global trend: the shortening of supply chains. Transportation issues have figured importantly into the equation. Vessel rotations have been elongated with slower vessel speeds and changes in ports. SeaIntel, a Denmark-based maritime analysis firm reported, “On time performance decreased to 71.7% (based on 11,202 vessel arrivals) in December from 75.6% in November.” INTTRA figures were even more damning showing an on time performance of 58.2% for the same period based on three million movements. The West Coast labor problems have caused terminal slow downs and widespread port congestion for both ships and truckers. Physically shortening the routes by opening up more avenues, albeit by rail and road, changes in ports or even coasts, is one direct approach. Another is using technology to speed information and ultimately payments to effectively make the transaction process faster. Internet based companies like Amazon (34,261 teus) or QVC (The Home Shopping Network, 18,635 teus) are based as much on moving transactional speed as “speed-to-market” of a product. Within the structure of the supply chain the question then becomes, how important is the “middle man” to the transaction – the 3PL, freight forwarder or NVO [Non Vessel Owning Common Carrier]? A lot has been written that the middleman is less important in the supply chain now because of advanced IT and the product SaaS (Software as a Service) companies can offer to unravel twists in the supply chain to track movements right to the end user. But the advantages of “automating” the middleman are balanced against the need to build a resilient, supply chain on a global basis. The level of risk due to natural disasters, as well as political events, targets the weakest links in an elongated supply chain. There are numerous examples where one factory’s shutdown of producing one or two critical parts can bring the entire manufacturing process to its knees. It has been argued in a number of white papers that the trend of near-shoring is really a rebalancing of supply chains to make them more resilient than a change in strategy. Another element on the supply chain that couldn’t be imagined two decades ago is examining and quantifying the impact of environmental and social responsibility from end-to-end. Auditing these links from the original factory sourcing (and even back to the basic materials being used by the original manufacturer) requires a great deal of “hands on” management that is challenging for most importers and frequently falls to third parties Sector Analysis There are a number of sectors in the US economy besides consumer goods that are driving this new import boom. One prime example is the auto industry. The auto industry is a major contributor both to imports and exports. Motor Intelligence, a group that tracks auto production, said 2014 unit sales compared to 2013, for Automobiles were up 1.8% [7,918,601], Light Trucks, 10% [8,603,399], and SUVs 11.8% [5,381,431] making it one of the best years on record. The boom sales were reflected in vehicle related imports. In 2014, suppliers of auto parts, both OEM and for consumers were up as were tire imports. For example, in AJOT’s import survey Michelin Tire represented imports of over 50,000 teus, Hankook Tire in excess of 42,000 teus and Continental Tire around 34,000 teus. Three other tire companies imported more than 17,000 teus worth of product. From a country perspective, auto suppliers in Japan, South Korea and the rapidly emerging Chinese industry all showed improving sales to the US market. The auto suppliers are among the main industry sectors taking advantage of the proximity of Mexico to the US for imports. Another trade sector that has pumped up imports is home improvement and furnishings. Beneficiaries of a stronger housing market were companies like the two mega-home improvement chains Lowes and Home Depot. Lowes imported over 87,000 teus worth of goods while rival Home Depot tallied almost 97,000 teus. Other companies benefiting from the recovery in the housing sector were consumer oriented furnishing retailers like Pier 1 imports (22,000 teus,) Rooms-To-Go (50,180 teus) and Ikea (138,064 teus). Will Imports Continue to Rise? The tepid economic forecast for Europe in 2015/16, China’s focus on domestic oriented economic issues, the geo-politics of the Middle East and strained Russia-US relations over the Ukraine, all temper the outlook for trade in the near term. Still, the US recovery should continue to drive global trade, and as a result, imports should continue to rise. Is 35 million teus a possibility in the near term? The number doesn’t seem out of reach anymore with emerging nations, particularly in Latin America contributing more imports (and also exports) to the global tally. The challenges to global economic growth are clear, and the US is just one more boat (albeit a big boat) riding on a tide in a fickle sea.