MSC Vessel

MSC Gayane Released from U.S. Custody

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Global Vigilance VSS notified us on Saturday night at 9:19PM EDT that the MSC Gayane, a one year old, new panamax container ship with a capacity of 11,000 TEUs, departed the Port of Philadelphia.  It made mainstream news headlines over the last three weeks for being caught transporting 19.76 tons of cocaine (US$1.3 billion) inside of seven containers[1], which also contained wine, paperboard, vegetable extracts and dried nuts[2]. That was the largest cocaine seizure in the history of U.S. Customs and Customs and Border Protection (CBP)[3].

J.P. Morgan has received most of the public backlash as all major news outlets identified it as the company who owns the “drug ship”[4] in headline after headline. That generated attention but failed to accurately inform the public of the company directly responsible.

Due to the complex nature of shipping and costs to own, operate and insure a vessel, there are seven levels of direct ownership with seven distinct roles fulfilled by one company or multiple companies – related or unrelated. Concerning the MSC Gayane, Mediterranean Shipping Company (MSC) and its subsidiaries have those responsibilities. However, as the group beneficial owner and operator of it, MSC has direct control. J.P. Morgan, more specifically J.P. Morgan Asset Management, only has an indirect, financial stake in the MSC Gayane on behalf of its pension fund customers.

Copyright 2019 Global Vigilance. All rights reserved.

On July 4th, 16 days after finding the record load, CBP seized the MSC Gayane at the direction of William M. McSwain, the U.S. Attorney for the Eastern District of Pennsylvania, and subjected it to possible forfeiture to the United States[5]. That decision seemed indefinite based on his comments, but McSwain released the ship nine days later after an agreement with MSC was reached[6]. Global Vigilance VSS immediately alerted us when the MSC Gayane departed the Port of Philadelphia en route to Rotterdam, Netherlands.

Using Global Vigilance VSS, you can monitor port movements and create alerts to notify you when vessels arrive, depart or declare they are en route. And as vessels have seven levels of direct ownership, you can also create alerts that notify you when a controlling entity meets the same criteria.  In addition to the MSC Gayane, we are tracking other seized ships worldwide.

For more information, contact us about how we can help you track vessels.


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    References

    1. “Ship in Record Cocaine Bust Seized, Anchored in Delware Bay.” nbcpalmsprings.com. July 8, 2019. Retrieved July 15, 2019.
    2. “REVEALED: How JPMorgan’s stodgy asset management division came to own a ship that was seized in Philadelphia carrying 20 tons of COCAINE worth $1.3billion”. dailymail.co.uk. July 10, 2019. Retrieved July 15, 2019.
    3. “Cargo ship owned by JPMorgan Chase seized by US with 20 tons of cocaine”. edition.cnn.com. July 10, 2019. Retrieved July 15, 2019.
    4. “JPMorgan Might Lose a Drug Ship”. bloomberg.com. July 10, 2019. Retrieved July 15, 2019.
    5. “Commentary: Vessel forfeiture.” americanshipper.com. July 12, 2019. Retrieved July 15, 2019.
    6. McSwain, William. (USAttyMcSwain). “Progress on our MSC Gayane ship seizure: Today, my office secured $10 million in cash and a $40 million surety bond from the owner and operator of the vessel in exchange for its temporary release pending a final resolution in this case. #MSCGayane”. 13 July 2019, 1:26PM. Twitter Post.

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    Vietnam – A Trade War Winner?

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    “Understanding the potential impact of the U.S. tariffs on China, we were asked whether there has been any impact on Vietnam. Using Global Vigilance VSS, we were able to quickly analyze data across Vietnamese ports to determine if there was any material growth.”

    Vietnam, home to 97 million people[1], is the 47th largest economy in the world[2].  Occupying the eastern part of Mainland Southeast Asia with its coastline along the South China Sea, Vietnam is located proximate to China by both sea and land routes.  As GDP growth has been above 6% on average year-over-year since recovering from the global financial crisis that swept across Asia almost a decade ago and is expected to accelerate through the 2020s according to Standard Chartered[3], over US$2 billion (VND 50 trillion) has been invested into the latest major port infrastructure changes to improve operations by increasing accessibility and capacity.

    Ports of Vietnam. Global Vigilance.

    Its largest three ports, Saigon, Danang and Haiphong – representing the southern, central and northern regions, respectively – are helping fuel the continued growth of Vietnam’s economy.  Saigon Port, comprised of a network of small urban ports along the Saigon River, is being relocated to Hiep Phuoc Port, farther outside of Ho Chi Minh City.  Danang Port completed a two year upgrade in mid-2018 that increased its cargo capacity by 5 million tons per year[4].    Haiphong Port is under development to expand the cargo capacity of its Lach Huyen International Gateway by 24 million tons[5].  Completion of Saigon Port is expected to happen in 2020[6] followed by Haiphong Port in 2022[7].

    Starting in February 2018, the U.S. implemented a near global tariff for all countries except Canada on all solar panel and washing machine imports, which was followed by the implementation of another near global tariff on all steel and aluminum imports one month later.  China, in reaction to the U.S.’s aggressive, new tariff regime, imposed tariffs directly on U.S. goods, such as agriculture, automobiles and steel and aluminum products.  These events led to souring relations between the U.S. and China since then and, as a measure to negate higher tariffs imposed by China on U.S. goods, restricted market access and other grievances, the U.S. imposed additional tariffs on over $200 billion worth of Chinese goods and raised tariff rates from 10% to 25%.

    A tariff is a tax imposed by a government on goods imported from other countries that serves to increase the price and make imports less desirable, or at least less competitive, versus domestic goods[8] or goods sourced from lower-cost countries.  The tariffs imposed by the U.S. on Chinese goods increase their price making them less desirable to U.S. consumers as compared to similar goods.  As many listed under the latest tariffs are also manufactured either domestically or by companies in other countries, Chinese businesses are affected by adverse demand, especially those selling products more sensitive to price elasticity.  U.S. and foreign businesses fighting to keep price-conscious U.S. consumers are minimizing their exposure to China by buying similar goods from other countries or moving their operations elsewhere.

    Understanding the potential impact of the U.S. tariffs on China, we were asked whether there has been any impact on Vietnam.  Using Global Vigilance VSS, we were able to quickly analyze data across Vietnamese ports to determine if there was any material growth.  Though our analysis included many factors, let’s just focus on container ship traffic and total TEU capacity.  TEU, or twenty-foot equivalent unit, is a standard measure for a container for transporting goods that’s used to calculate how many containers a ship can carry[9].

    We queried several years of data and noticed that container ship traffic and total TEU capacity largely remained constant with expected year-to-year increases through February 2019 despite the completion of Lach Huyen International Gateway Phase 1 in May 2018, which increased its total TEU capacity by 300,000, Danang port expansion in July 2018, which added two new piers doubling TEU capacity and partial relocation of the Saigon Port network from 2016 to 2018.  However, starting in March 2019, Vietnam had significant gains in container ship traffic and total TEU capacity.  This trend has continued to date.

    VSS - Vietnam TEU Capacity and Container Traffic 2019

    Through the first three months of 2019, the average TEU capacity of container ships entering Vietnamese ports was 505,000 TEUs.  Over the next three months, the average capacity increased by 16% to 586,000 TEUs.  In support, through the first three months of 2019, 419 container ships entered Vietnamese ports and, over the next three months, that number increased by 14% to 479.  Compared to the same period in 2018, there was a 10% increase in average TEU capacity and 15% increase in container ship traffic.

    We are seeing that container ship traffic and TEU capacity in Vietnam significantly increased along with the heightening trade tensions between the U.S. and China despite port upgrades from 2016 to 2018.  Vietnam realized expected gains year-to-year prior to 2019; however, over the first six months of this year, material gains are seen.  One can conclude there is a positive correlation between trade relations in the world’s top two largest economies and Vietnam based on this data alone, but we always encourage our customers to do more analysis. The Global Vigilance VSS supports their decisions and helps them proactively adapt to the changing world and new threats.

    The Global Vigilance VSS helps our customers identify trends in real-time as it quickly analyzes millions of data points to not only measure vessel risk, but also find anomalies.  Contact us for more information on how we can help you.

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      References

      1. “Economy of Vietnam”. Wikipedia.com. July 1, 2019. Retrieved July 8, 2019.
      2. “The World Bank in Vietnam – Overview”. Worldbank.org. April 24, 2019. Retrieved July 8, 2019.
      3. Yen, Hai. (May 13, 2019). “Vietnam’s GDP per capita to increase 4-fold by 2030”. Hanoitimes.vn. Retrieved July 8, 2019.
      4. “Da Nang completes second-stage upgrading of Tien Sa port”. Nhandan.org. July 28, 2018. Retrieved July 8, 2019.
      5. “Lach Huyen International Gateway Port, Haiphong”. Ship-technology.com. Retrieved July 8, 2019.
      6. “Ports along Sai Gon River to be relocated”. Vietnamnet.vn. June 28, 2018. Retrieved July 8, 2019.
      7. “Made in Vietnam”. CNBC. June 25, 2019.
      8. “Tariff”. Shopify.com. Retrieved July 8, 2019.
      9. “TEU”. Dictionary.cambridge.org. Retrieved July 8, 2019.