When the trade war arose between China and the US in 2016, everyone expected the worst. A fear that was practically doubled when the government introduced a number of import tariffs that made it exponentially more expensive to import Chinese-made goods into America.
At the time, a loss of trade, a decline in employment, and the economy taking a huge hit seemed unavoidable.
And those at the most risk?
Flight operators across the nation.
In short, flight operators working the trade routes between China and the US were looking down the barrel of unemployment. A marked reduction in trade meant a marked reduction in work, all of which created a palpable sense of fear across the entire industry.
But as you may be aware, this didn’t pan out as expected.
In fact, many people highlight this incident as the driver for a period of unbelievable industry-wide growth.
And here’s why.
The De Minimis Threshold, Section 321, and Type 86
The De Minimis threshold describes the maximum dollar value an overseas shipment can be imported into the US without incurring import duties and tariffs — a threshold that was increased from 200 USD to 800 USD at the end of the 2016 fiscal year.
Interestingly, around this time the De Minimis Threshold was also published within a list of Section 321 exemptions created by US customs and border control. Section 321 describes a specific type of overseas shipment that sits below the 800 dollar De Minimis value.
With this in mind, it opened the door for US businesses to import products from China completely free of the import tariffs introduced by Trump.
Now, it should come as no surprise that consumers and entrepreneurs across the nation were quick to take advantage of this system, with US Customs currently receiving more than 1.8 million packages per day under Section 321 classification.
This is a whopping 50% higher than the 1.2 million they were receiving in 2017.
It is important to note that anyone bringing Section 321 onto American soil would typically have to submit a bill of landing that contains a list of every shipment on board, which is commonly called release on manifest process.
As one could imagine, due to the time-consuming nature of this process, it became extremely challenging for the US Customs and Border Protection Agency to handle the volume of packages entering the country under Section 321 in an effective manner.
In response, they implemented a new informal type of shipment classification during September 2019, known as a Type 86 — a shipment classification that covers low-value Section 321 shipments.
Section 321 Type 86 shipments can be made by any mode of transport and allow a more efficient and less complicated entry process, as the cargo can be released using an electronic system that supports remote filing to expedite clearance.
And this has become an absolute boon for Air Flight operators working routes between China and the US.
Newfound Growth
Between September 2019 and January 2021 there were approximately 120 million Section 321 data filings. And as large as this number appears, it pales in comparison to the 200 million Type 86 filings that occurred in the same period.
According to Laurie Dempsey, director for trade policy and programs for the US Customs and Border Protection Agency, the Type 86 shipments have resulted in over 90 percent fewer shipping holds, and markedly reduced clearance times.
All of which are yielding significant time and cost savings.
It is also important to note that while the increased efficiency of getting Chinese made goods and products across the border is part of the equation, America has also seen an absurd amount of growth in online purchasing.
Online retail sales in the US increased from 598 billion dollars in 2019 to 792 billion dollars in 2020, and are projected to increase even further — up to a whopping up to 908 billion dollars — in 2021.
Brenda Smith, executive assistant commissioner for US Customs and Border Protection Agency Office of Trade, has highlighted the increase in online consumers as a main driver for the development of faster shipping times.
At this point, were seeing close to 2 million small packages a day; thats a volume that weve never seen before.
In short, the demand for pilots and air freight have never been higher — and the entire industry is reaping the rewards.
In a recent interview, Neel Jones Shah (the global head of air freight at Flexport) stated that With most planes spoken for, demand for air charters is at a level never seen before. There’s no capacity left, it almost would take a miracle for you to find a charter between now and the end of November, early December.
After which he went on to say that one-way charter flights now cost anywhere between $1.2 and $1.5 million US dollars, versus an approximate cost of $500,000 prior to the Section 321 boom that occurred over the last few years.
And it doesn’t seem to be slowing down.
Parcels arriving in the United States that fall under Section 321 are forecast to increase 15% year on year to 880 million shipments in 2021 (estimated by Cargo Facts Consulting).
And considering the speed of shipment demanded by American consumers, and the need to keep orders under 800 USD (which is simply not possible on shipping containers), air freight is the obvious choice.
There has literally never been a better time to be a flight operator working between China and the US.
