T P Chí American Shipper 282944-Apr 2014 PDF

Righting routed exports 20
Troubled transpacic trade 30

Reoating SeaLand brand 34
Mexico marine highway? 36
APRIL 2014
www.americanshipper.com
Obama puts agencies on notice to be team players,
join unified trade data system
Obama puts agencies on notice to be team players
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Mexico marine highway? 36
Global manufacturers are stampeding into Mexico to
take advantage of affordable, quality labor and
proximity to the U.S. market and no one is investing
more than the auto industry. Plants are springing up
around the country, but questions about whether there
is adequate rail
capacity for
finished vehicles
are prompting in-
terest in short-sea
services to U.S.
ports.
Countdown to the single window 6
In less than three years, many bureaucratic
headaches associated with importing and
exporting cargo could be minimized if the
U.S. government follows through on
implementing new information technology to
modernize how trade is processed, essentially
creating a one-stop shop for import and export
transactions in the eyes of the industry that
interacts with regulators.
LOGISTICS 6
Corralling automation 12
Kapow ties manual connections.
Shippers IT 15
Technology as enabler and divider.
Public compliance.
Executive IT Corner 16
Competitive case for logistics IT.
FORWARDING/NVOs 18
SFI dj vu.
COAC members value.
North American Trade Symposium.
Righting routed exports 20
BIS wants to define responsibilities.
Where are the shipping guys? 21
Ambrite asks if industry lost passion.
Eliminating drayage headaches 22
IT tool to help manage box transport.
TRANSPORT/AIR 26
The long EU ETS goodnight.
TRANSPORT/OCEAN 28
Folding containers.
TRANSPORT/PORTS 42
Slow-going Savannah harbor expansion
Georgia to step up with project funds.
DEPARTMENTS
Comments & Letters 2
Squaring-off optimization.
The Strategic View 14
Federal Reserves freight impact.
Shippers Law 44
Tackling a big case.
Corporate Appointments 46
On Second Thought ... 47
To add, or not to add, a DC?
Editorial 48
The ever-changing American Shipper.
On the Cover
April 2014 Vol. 56, No. 4
New life for old name 34
Earlier this year, Maersk Line announced it would spin
off its intra-Americas service into a new independent
unit and operate it under the SeaLand name, reviving
a brand of the company founded by container shipping
pioneer Malcom McLean. The new service will cater
to the regions shippers and NVOs, and offer feedering
to other carriers.
Troubled transpacific trade 30
At best, shippers and liner carriers in the transpacific
trade are faced with several difficult years,
according to industry analysts. The biggest challenges
barreling down on the trade are overcapacity, lackluster
rates, rising bunker fuel costs, terminal inefficiencies,
and potential labor unrest as a new ILWU contract is
negotiated for the U.S. West Coast ports.
American Shipper
content available at www.AmericanShipper.com
y q
Also read German auto-
makers driving transport
management, by Jon Ross,
on AmericanShipper.com.
+ WEB EXTRA
AMERICAN SHIPPER: APRIL 2014 1
Squaring-off optimization
For the past few years, the supply chain leadership mantra has been agility. The
economic downturn taught virtually every business, in every industry, the importance
of building speed and responsiveness into its end-to-end supply chain, enabling a
faster reaction to demand shifts.
As a result, weve seen impressive improvements in supply chain capabilities
across the board, but particularly in warehouse and transportation management
two functions that have historically been viewed as time- and cost-intensive. Its
easy to be nimble if youre willing to expedite shipments or work overtime in the
warehouse, but those activities are expensive. The real challenge is how to be agile,
while keeping costs low.
More and more leading companies are using advanced supply chain solutions
across their warehouses and transportation networks to achieve this goal in their
daily operations. Thus, the obvious question is: Whats next?
Once performance has been optimized within these two functions, the next supply
chain revolution will involve bringing them together and optimizing their shared
results. By tightly integrating all activities from the time an order reaches the ware-
house through customer delivery, companies in every industry can take agility and
cost control to an entirely new level.
Two functions, one perspective. The first step in achieving this ambitious
vision is ensuring that both warehouse and transportation managers have concur-
rent visibility to demand. The moment a customer order is generated, planners in the
warehouse and the transportation function should begin aligning cross-functional
resources to fill and deliver that order in the most timely, cost-effective way. Since
most companies currently base their warehouse and transportation operations on a
set of serial processes, this requires a huge change in mindset.
Ultimately, transportation planning should still drive warehouse execution for the
simple reason that warehousing is a location-specific function, while transportation is
a network-level function. An intelligent transportation plan comes up with dynamic
strategies for maximizing efficiencies across the entire network for example, by
scheduling a soft transfer to a distribution center (DC), picking up an order at the
DC and delivering it to the customer as a seamless process.
It only makes sense for the DC to base its processes on the capabilities of the
transportation network, so valuable time wont be invested picking and packing
orders that will be sitting on the loading dock, while trucks wait for other orders
that arent filled yet.
Intelligent transportation planning will always be the driver, but providing warehouse
planners with concurrent order visibility allows much more effective coordination
across these two functions.
Perfect load. Providing warehouse and transportation planners with simultaneous
visibility into orders, as well as network constraints, allows them to focus collabora-
tively on a concept called the perfect load.
What is the perfect load? Its the load that maximizes routing by aggregating
many different kinds of transportation demand including inbound, outbound
and inter-facility movements of inventory. By stitching together these moves in an
optimal way, perfect loads maximize transportation and warehouse efficiency, as
well as financial results.
The perfect load also maximizes the containerization, or load building, of products
all the activities from building cartons and pallets to loading onto the container.
U.S. phone (904) 355-2601
U.S. fax (904) 791-8836

CEO/ Hayes H. Howard
Publisher Jacksonville Ext. 16
Editorial Christopher Gillis, Editor
Washington Ext. 5
Eric Johnson,
Research Director & IT Editor
Washington Ext. 3
Eric Kulisch,
Trade and Transportation Editor
Washington Ext. 7
Chris Dupin,
Maritime and Intermodal Editor
New York Ext. 6
Jon Ross,
Air Cargo and Logistics Editor
Atlanta Ext. 8
Catie Fry, Editorial Assistant
Jacksonville Ext. 14
Research Francis Phillips
Analyst London +44 (0)7710743626
Benjamin Meyer
Vol. 56 No. 4 April 2014
American Shipper is published monthly. Published
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Corporate Ofces
U.S. Phone (904) 355-2601
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Editorial Board
Brian Amero
corporate trade compliance manager,
Teradyne Inc.
Timothy D. Brotzman Sr.
manager of international transport
and DG compliance,
McCormick & Co. Inc.
Joseph Burks
manager, global trade
Eaton
Brenda Chenault
import/export compliance consultant,
Pfizer
Joseph L. De La Luz
general manager, trade compliance,
NEC Corp. of America
David Fisher
director, global logistics,
Johns Manville
Rick Gabrielson
director of international transportation,
Target
Alison Leavitt
managing director,
Wine and Spirits Shippers Association
Doug Gray
general manager, International
Transportation Operations
Caterpillar Logistics, Inc.
Patrick Halloran
director, global trade logistics
Cardinal Health
Maryanna Kersten
global ocean procurement
and partner management,
global logistics regulatory
and compliance,
Hewlett-Packard Co.
Charles Smith
general manager of global
transportation, Interstate Batteries
Virginia Thompson
sr. director of import/export operations
and international trade compliance,
Euromarket Designs, Inc.
American Shipper welcomes letters from readers.
All letters become the property of American Shipper,
which reserves the right to edit them. Include your
name, position and company affiliation (if applicable),
location, a daytime telephone number and e-mail
address. E-mail letters to: letters@shippers.com
Press releases are welcome and may be e-mailed
to: releases@shippers.com
Letters to Editor/Press Releases
In addition, perfect loads take advantage of sophisticated order splitting and
scheduling strategies to further reduce costs whenever possible. Traditionally,
individual customer orders were considered inviolate and non-breakable, but to-
day transportation planners are recognizing that orders can often be strategically
split to maximize utilization of assets such as trucks or ocean containers. While
customer delivery commitments are still paramount, perfect loads increasingly
represent partial orders that are spread over multiple assets in order to create new
transportation and warehouse efficiencies.
Because perfect load building depends on managing constraints across the dy-
namic warehouse and transportation functions, its essential that these two areas
work together if companies are going to achieve the perfect load on a consistent,
day-to-day basis.
Iterative planning. Bringing the warehouse and transportation functions to-
gether under one umbrella allows the introduction of a new concept that maximizes
moment-by-moment agility: iterative planning.
Everyday, planners build the best-possible routes, pallets and containers from a
transportation perspective. But they may not consider that these plans could result
in warehouse inefficiencies for example, by sending employees across the facility
three times to pick different products. While multiple trips across the warehouse
arent necessarily a recognized constraint, they can represent an enormous loss
of productivity over the course of a year.
Cross-functional plans need to recognize these operational inefficiencies and work
around them. That means transportation planners need to have real-time visibility
into the warehouse configuration, so that workforce productivity is maximized.
When orders are packed, transportation planners also need to ensure they have
drivers, trailers and dock personnel ready to meet the loading schedule.
But, because conditions constantly change, these plans cannot be fixed. To truly
optimize warehouse and transportation management, plans need to be reiterated
and updated throughout the day. A dynamic, real-time view into warehouse load
states, order changes and disruptions enables real-time responsiveness across both
functions.
Technology as great enabler. Clearly, companies can achieve enormous
benefits from tightly integrating their warehouse and transportation plans. But how
can they achieve this ideal state?
The answer is improved supply chain planning solutions that enable real-time
information sharing and strategic process coordination, across both functions.
Technology tools can provide the critical linkages among warehouse and transpor-
tation capabilities, enabling cross-functional managers to view the same real-time
information about demand, constraints, resource availability, service targets and
performance metrics. Instead of acting as mutually exclusive functions, the ware-
house and transportation network can be knit together via advanced software to
create a new level of interactivity, interoperability, integration and collaboration.
Technology also supports the repetitive, iterative planning capabilities that are
needed to integrate these functions in real time. Instead of managing transporta-
tion and warehouse operations separately, tomorrows supply chain software will
transform both functions into a single engine and shared dashboard, focused on
continuous planning and execution that spans both capabilities and provides a net-
new view of logistics.
Fabrizio Brasca
Vice President of Global Logistics,
JDA Software
Toronto, Canada
Correction
In a March issue article about how NVOs are planning for the introduction of
the P3 carrier alliance, DHL Global Forwarding senior vice president and head of
ocean freight in the Americas Andreas Kruegers name was misspelled.
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I
n less than three years, many bureaucratic headaches
associated with importing and exporting cargo could
be minimized if the U.S. government follows through
on its goal of implementing new information technology for
modernizing how trade is processed to ensure it meets trade,
safety, security and environmental standards. At its heart,
the changeover is much more than a technological upgrade;
its a business process transformation that essentially creates
a one-stop shop for trade transactions.
President Obama in mid-February issued
an executive order setting a Dec. 31, 2016
deadline for four dozen federal agencies
to have their systems ready to regulate
import and export transactions through
a common, electronic, government-wide,
data-transmission pipeline.
The International Trade Data System
(ITDS), which has been in development for
more than a decade, is designed to stream-
line trade and save time for shippers and
the government by eliminating the filing of
redundant information to multiple agencies
with inspection, revenue-collection and
Obama puts agencies on notice to be team players,
join unified trade data system.
BY ERIC KULISCH
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843-971-4100
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LOGISTICS
statistical functions.
Equally important, according to Cus-
toms and Border Protection (CBP) officials
and trade professionals, is that the execu-
tive order institutionalizes, and expands,
a three-year-old inter-agency body, the
Border Interagency Executive Council
(BIEC), formed under CBPs leadership
for coordinating risk assessment and in-
spection activities. Previously, the BIEC
was limited to 10 agencies focused on
import safety.
CBP and partner agencies are responsible
for annually clearing more than 50 million
containers and $3.8 trillion worth of goods
across the border. But trade industry of-
ficials say delays are frequently caused by
agencies with a much smaller presence at
the border, even if Customs has approved
a shipment.
Ted Sherman, director of global trade
services for Target Corp. and chairman of
CBPs Commercial Operations Advisory
Committee (COAC), called the executive
order a watershed moment for the trade
community.
This is the first significant government-
wide attempt to create harmonization.
Basically it says, you have to come back
and create one way of facilitating trade,
Eugene Laney Jr., head of international
trade affairs for DHL Express in Wash-
ington, said in an interview. It prevents
agencies from going off in their own lab
and creating their own systems.
While a single-window data exchange
and one government point of contact is
expected to reduce paperwork and transac-
tion costs on both ends, the biggest benefit
international shippers will enjoy is predict-
able movement of freight as cargo release
decisions become faster and more con-
sistent, using an automated decision-tree
rather than manual checklists or random
inspections, Customs officials and industry
representatives say. Knowing when cargo
can be picked up at the port, or exported,
gives managers better ability to schedule
truck deliveries, deploy inventory and make
other supply chain decisions.
What this will do is expedite trade
through the supply chain, CBPs then-
Acting Commissioner Thomas Winkowski
said in a briefing for reporters.
ITDS depends on the completion by CBP
of its Automated Commercial Environment
(ACE), the next-generation enterprise
system for interacting with importers and
their agents, and automating internal data
analysis for inspection and enforcement
purposes. CBP plans to complete the transi-
tion from its legacy system and require all
transactions to be completed through ACE
by Oct. 1, 2016.
Customs is also re-engineering and
incorporating the Automated Export
System into ACE for all export manifests,
commodity, licensing, export control and
export-targeting transactions. Under cur-
rent practice, the export manifests filed by
carriers to CBP are usually on paper. For
a large container vessel the manifest can
be as thick as a stack of telephone books.
The modernized ACE export commod-
ity platform is scheduled to be launched in
April, providing a single window for CBP,
the Census Bureau and Commerce Depart-
ments Bureau of Industry and Security
to process export shipments and licenses.
The World Bank recently estimated that
automating customs processes can save
about $115 per container.
The 2006 SAFE Port Act requires a single
electronic data exchange for cross-border
trade once ACE is completed, but the execu-
tive order raises the urgency and creates
a roadmap for agencies to do their part.
There are 168 different forms that
agencies now collect from importers and
exporters, depending on the type of prod-
uct they buy or sell. The Fish and Wildlife
Service, for example, requires import and
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LOGISTICS
export permits for certain types of plant and
animal species. Many forms require much
of the same information, like an address,
with a few additional fields specific to an
agencys area of oversight. Information
will be transmitted through ACE and be
automatically sorted and distributed to
each relevant agency, or agencies can pull
the data from the ACE Data Warehouse
through a web-based interface.
The object is to enable traders to trans-
mit information once and have it used
multiple times.
Through ACE/ITDS, Customs will col-
lect the data required on forms, as well as
scanned documents via a document-imag-
ing system, if paperwork, such as a foreign
government stamp, must accompany an
import or export declaration.
Its basically taking the regulatory re-
quirements of 47 government agencies and
converting them to a capability that can be
collected through one pipe, Brenda Smith,
executive director of the ACE Business
Office, said at the press briefing.
Document imaging and the interface that
allows the transfer of data between CBP and
other agencies are two of the capabilities
that support ITDS. The third is the universal
message set data elements defined by the
agencies and an ITDS board that will
be collected, stored and shared, as well as
outbound codes participating agencies will
use to communicate back to CBP when they
make a decision to release cargo, hold it for
inspection or seek additional information
from the shipper.
Agreeing to a common set of data ahead
of time eliminates the need for shippers to
chase down a paper document to verify the
product while it sits at the port of arrival,
Laney said.
The standard message set continues to
be refined during the programming process
in close consultation with COAC and other
industry experts.
The trade community for more than a
dozen years has pressed the government
to step up the development pace for ACE
and a single window for reporting imports
and exports. ACE is years overdue and well
over budget, with an estimated final cost
of about $3.5 billion, but CBP restructured
its development team in 2011 and has since
made strong strides getting the program
on track.
The ITDS executive order, which was
in the works for more than a year, grew
out of the White Houses January 2012
National Strategy for Global Supply Chain
Security, which was co-developed with the
Department of Homeland Security. The
document sets a goal of integrating federal
efforts to promote the secure and efficient
Congress.
The single window is actually an interna-
tional principle or best practice. The United
Nations and World Customs Organization
are trying to push single-window harmoni-
zation around the world. Japan, Singapore,
and South Korea are among the countries
with a unified import/export data exchange.
In North America, Mexico already has
a similar system in place and Canadas
system is expected to go live by the end of
the year. Officials said President Obamas
executive order signals to trading partners
that they too should follow through on their
World Trade Organization commitments to
simplify trade. Just as ITDS standardizes
reporting requirements within the U.S. gov-
ernment, an international movement is try-
ing to standardize electronic data formats
and customs processes across countries.
Globally recognized international stan-
dards could reduce costs for traders who
now must use a different format for each
country and invest in different software
for reporting to each country.
Two agencies the Environmental Pro-
tection Agency and Food Safety Inspection
Service will begin testing transmissions
through ACE/ITDS this spring. More agen-
cies and users will be brought on board in
the spring of 2015, according to Homeland
Security officials.
Customs deployed the functionality for
the two agencies to receive data in ACE in
November, but they had to iron out some
operational issues before the pilot program
could start. The EPA will test processing
of data for two forms related to vehicle en-
gines and ozone-depleting substances at the
ports of Long Beach, Calif., and Newark,
N.J., while FSIS will accept certificates
in Houston, Philadelphia and Champlain,
N.Y., according to Smith.
Working with COAC, the EPA team was
actually able to weed out some questions
previously on its forms and reduce the
number of data elements it will collect,
Roy Chaudet, an EPA technology manager,
recently remarked at CBPs annual Trade
Symposium in Washington.
Industry and government sources say
EPA and FSIS are having trouble get-
ting companies to volunteer for the pilot
projects. The difficulty is partly because
of the limited scope of the demonstration
programs, Smith said. The commodity
types are relatively narrow the EPA
form, for example, basically involves
engine data for vehicles such as golf
carts and snowmobiles because most auto
manufacturers are exempt; FSIS is asking
for certifications on dairy and meat and
there are only a couple ports where those
goods can enter U.S. commerce. In addi-
movement of goods by developing similar
requirements, streamlined processes and
enhanced information-sharing practices.
The National Security Staff realized that
in order for the vision to become a reality,
agencies needed better, more timely data
to verify the contents of shipments without
causing unnecessary delays, Smith said.
CBP has been leading a One-Gov-
ernment-at-the-Border initiative to
develop an enterprise-wide approach to
risk assessment, cargo release and trusted
shipper programs, so that agencies with
release-and-hold authority use the same
decision-making criteria and tools for pro-
cessing international shipments. Customs
has even invited other government agencies
with border interests to use its automated
screening and targeting systems. ITDS
serves as the foundation for that strategy,
but getting other agencies to agree on a
common message set and invest in sys-
tems that talk with ACE has been a slow
process, according to current and former
CBP officials and industry representatives
advising the agency.
Trade advocates say other agencies often
ignored CBP, because it didnt have enough
authority beyond its own ACE program.
The National Security Staff jumped in
to direct agencies to work as a team and
with the private sector to minimize red
tape after Customs identified that the
inter-agency collaboration needed some
support, Smith said.
The order requires relevant agencies to
transition from paper-based to electronic
data collection, and provide greater trans-
parency into their progress by public post-
ing of implementation plans and schedules.
Customs stands ready to assist other
agencies with the transition, especially
smaller ones that process much smaller
shipment volumes, Winkowski said.
Some of the participating government
agencies are going to need some help. And
were willing to work with them. Weve
been in this business a long time with the
Automated Commercial System and with
ACE. And weve learned a lot over the
years about how to manage data and apply
it to risk models, he said. So we bring a
lot of expertise.
And I look at this way: If by December
2016 everybody is not up on the single
window then weve all failed, to be frank
with you.
Customs must sign a memorandum of
understanding with each agency spelling
out how they will share the data and ensur-
ing that proprietary data is protected before
they can get access to ITDS. Only a dozen
agencies have signed up so far, according
to the ITDS boards 2013 annual report to
LOGISTICS
tion, importers, or their customs brokers,
need to have software that has the new
electronic data requirements programmed
into their systems that communicate with
ACE, she added.
(The EPA and FSIS are among eight
agencies that now receive CBP-collected
data through an ACE interoperable web
service. The pilot addresses collection
of unique information required by those
agencies.)
ACE is the automation component of
the streamlining effort, but the BIEC is the
senior leadership body where differences in
policies and enforcement processes can be
ironed out so field inspectors are operating
from the same playbook. It is tasked with
developing risk management principles
for segregating cargo, ensuring efficient
processing of shipments, furthering auto-
mation and elimination of redundant tasks,
studying greater use of electronic payment
of duties and import fees, and undertaking
other trade facilitation measures.
Achieving the kind of broader trade
transformation [desired by industry] re-
quires enhanced cooperation among border
agencies, Timothy Skud, deputy assistant
secretary for tax, trade and tariff policy for
the Treasury Department, and chairman
of the ITDS board of directors, said at the
Feb. 20 quarterly COAC meeting.
The full benefits of ITDS will only be re-
alized if agencies are following a risk-based
approach in line with CBPs operating
model and the National Strategy for Sup-
ply Chain Security, which could result in
some release decisions being reduced from
days to hours or minutes, Ellen McClain,
deputy assistant secretary for trans-border
policy at DHS, added.
We see ITDS as being just as important
as ACE because companies run into delays
and incur costs primarily due to other gov-
ernment agencies, not Customs and Border
Protection, Marianne Rowden, president
and chief executive officer of the American
Association of Exporters and Importers,
said in a statement.
The problem is not limited to the United
States. According to the World Banks an-
nual survey of logistic professionals, they
typically are much more satisfied with
customs than other border management
agencies in a particular country. Customs
directorates often have employed IT sys-
tems to process declarations, use some form
of risk analysis to target inspections where
needed, recognize the need to balance con-
trol functions with keeping trade flowing
and are guided by international standards
developed by the WTO and WCO. But many
other agencies with border responsibili-
ties have not updated their processes and
procedures for the modern world.
Industry groups have complained that
the Food and Drug Administration, for
example, stops too much legitimate traffic
without good reason because its automated
screening engine has its filters set too high.
The PREDICT system assigns risk scores
to products based on factors such as their
source, type and history, but mismatched
information often triggers delays.
About 40 percent of FDA-regulated
products are held, mostly for administrative
reasons, an industry working group said
in a 2012 report to the agency.
Separately, the Express Association of
America representing the four large
integrated express carriers identified
52 percent of 16,000 regulated shipments
moving through member networks during
a one-week period that year were held for
review. One-third of those were subse-
quently released, usually within several
hours, without any further action by the
importer or communication from FDA,
such as a request for additional information.
Sixty-eight percent of the holds resulted
from requests for missing documents,
which resulted in release once they were
provided. Only 2 percent of the shipments
were actually inspected and only 0.2 per-
cent, or 14, of the 8,327 detained shipments
were refused entry because they violated
health or safety regulations. Non-compliant
shipments represented 0.1 percent of the
total volume of FDA-regulated goods
transported during the week, according to
the Express Association of Americas data.
The average delay for release was two
days.
Having agencies manage imports in
a way that is not compatible with CBPs
system creates confusion at the border,
Laney said. The executive order gets agen-
cies out of their silos instead of waiting for
Congress to pass a Customs reauthorization
bill, which has been stalled in the Senate
for four years, he added.
Where overlapping regulatory authori-
ties exist, so do opportunities to streamline.
Safe, compliant trade moved faster across
the border and across the country will
support a vibrant and resilient economy,
Winkowski said in his address to 800 in-
dustry representatives attending the Trade
Symposium.
ITDS makes it easier for agencies to
consider account-based processing instead
of scrutinizing every shipment, Laney said.
Several business groups are pushing to
create certified importer programs loosely
modeled on the Customs-Trade Partnership
Against Terrorism under which companies
that provide more commercial and security
information about their products and supply
chains would get their goods cleared faster.
For some within the trade community,
ITDS, while a nice step forward, is still
too focused on processing cargo by the sip.
Much work remains to achieve the vision
of One Government at the Border, those
involved in the effort say.
It is imperative that the trade commu-
nity and government agencies establish a
mutual understanding and expectations for
the future of data exchange and cooper-
ate to achieve the appropriate risk-based
standards that secure cargo movement and
facilitate trade at the speed of business,
COAC member Susan Hoeger, director
of global trade compliance and policy at
Abbott Laboratories, said.
One thing importers should bear in mind
with full automation is that brokers will
likely key in data now for forms that previ-
ously were completed by the shipper and
handed to the broker to deliver to Customs
with the entry, Susan Kohn Ross, a Los
Angeles-based trade attorney at Mitchell,
Silberberg and Knupp, said in an interview.
Brokers may start charging for that service
and there also could be normal data entry
errors, she explained.
M
exico is the first country in North
America to achieve a single win-
dow. The system has processed nearly
40 million transactions covering 215
procedures for nine different agencies
since commencing in October 2011,
Alejandro Chacn, the administrator
general of Mexican Customs, said March
7 at the U.S. Customs Trade Symposium
in Washington.
There was some initial reluctance
on the part of other agencies to
Mexicos single-window experience
share a common IT pipe, but they
eventually became partners through a
combination of rewards and penalties,
he said.
The system has made cross-border
shipping cheaper and allowed the gov-
ernment to conduct better risk analysis
of shipments, which allows companies
with a good compliance record to avoid
many inspections while regulators
focus on shipments from suspicious or
unknown firms, Chacn said.
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LOGISTICS
W
rangler Jeans has a shipment that
needs to go to Walmart, and as
a customer service employee
for one of the leading trucking companies
in the country, your job is to get the jeans
from point A to Z.
Once the electronic-data-interchange
request is sent to your system, you start
checking your companys web-based
portal to link up the request with an avail-
able pick-up time, enter the schedule into
your transportation management system,
and finally, go to Wranglers web portal
and enter in the shipment information.
To complete all these tasks, you might be
juggling your time between two computers,
one showing your companys green-screen
TMS, the other, a web portal to check rates
and availability. If a keystroke is missed in
this 30-minute process, you have to get on
the phone to correct the error.
Sounds exhausting. But for Stefan
Andreasen, founder and chief technology
officer of Kapow, a big data integration
company, this complicated, circuitous route
presented an interesting challenge. After a
bit of work, he struck upon an automated
solution.
The IT firm counts among its clients
Audi, C.H. Robinson, DHL, J.B. Hunt and
Swift, but Andreasen admitted the trans-
portation sector is still a somewhat new field
for the company. It has experienced great
success working with truckers, primarily,
but even some third-party logistics firms,
shippers and railroads.
Kofax, which acquired Kapow in July,
saw a huge growth potential with the firm.
It agreed to spend $46.1 million on the
company, which at the time boasted 72
employees and a 2013 revenue of $15.9
million. Andreasen said the acquisition has
provided Kapow with a substantial increase
in resources to make a broader push into
the transportation industry.
He added the customer service example
that takes 30 minutes to complete, without
follow up, was being repeated at companies
that have signed up with Kapow 2,500 times
per month. With automation, Kapow has
completely eliminated this work-time ex-
penditure. The only thing customer service
representatives have to do is monitor the
system, which, he said, can be built in less
than a day, and follow up on the rare errors.
try how it submits bids, gives out quotes
and tracks orders, it would say its done
manually.
The potential is definitely there [for
automation growth], he said, adding
Kapow will step up its sales effort. To that
end, the firm has just doubled the number
of sales people committed to spreading the
technology to transportation companies.
Andreasen is also attending a number of
conferences around the country to drum
up interest in the technology.
I think we can multiply the business
we get from this industry several times,
he said.
While automation of these customer ser-
vice processes is nothing new, Andreasen
still sometimes finds that carriers arent
familiar with the concept.
Were getting to the stage that its get-
ting close to mainstream but still very
unknown by many of the companies, he
said. Obviously, this is not a traditional
way of solving a problem.
Kapow also helps companies develop
web portals that allow customers who do not
have EDI interface with carriers that require
it. The IT firm does this by implementing
EDI behind the scenes on the portal.
While this is an important part of Ka-
pows business, and transportation compa-
nies are asking for this service, Andreasen
has his doubts about the viability of EDI
moving forward. He said its an aging
protocol that doesnt often transmit all the
information needed for daily business and
has a lot of weaknesses. EDI inefficiency
is leading companies to simply build web
portals by themselves and move away from
a pure EDI environment, he added.
The smart companies are altering or
expanding their scope with web-based
processes because it gives them more
opportunities and more possibilities, he
said, adding this doesnt mean EDI is on
its way out anytime soon. I think its be-
ing supplemented by the modern way of
interaction.
Regardless of what happens with EDI
and automation, Andreasen said trans-
portation companies have started making
the inexorable charge toward using more
technology-based methods of doing busi-
ness. This trend, he said, will only benefit
the industry in the end and help an increas-
ingly widening geographic scope get a little
more focused.
What were seeing in this industry is
what were seeing in many other industries
the world is getting bigger, he said.
There are more and more players that you
have to deal with because of globalization,
and the Internet makes it easier to interact
with more and more partners.
Corralling automation
Kapow hammers together manual connections
to different systems in the supply chain.
BY JON ROSS
There are more and
more players that you
have to deal with
because of globaliza-
tion, and the Internet
makes it easier to
interact with more and
more partners.
Stefan Andreasen
chief technology officer,
Kapow
Theres a shift in thinking here that
I need less people, and I need to do this
in an automated way. Its something that,
honestly, most of the companies never even
imagined could be automated because they
were just seeing this person sitting there
opening up email, opening up excel, go-
ing into a green screen how could you
possibly automate that? he said.
Andreasen added that if he asked nearly
any transportation company in the indus-
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Latin America, Russia and Middle East.
The Federal Reserves impact on freight movement
D
espite the severe winter weather, data shows that the
U.S. economy is indeed improving, which is why the
Federal Reserve feels it can reduce its efforts to keep
interest rates down.
The Feds focus has been on the interest
rate for U.S. Treasury 10-year maturity
bonds, because it is the benchmark on which
many corporate and consumer loans are
based. The Fed purchased large quantities
of Treasury bonds to drive their price up
and therefore their interest rate down. This
drove down interest rates on mortgages and
car loans, spurring demand and therefore
production. Employment in the United
States, which is a policy focus of the Fed,
has almost returned to its pre-recession
level. Thus the Fed has determined theres
less need to keep interest rates at historically
low levels. As interest rates rise, freight
flows and investment activity in the industry
will change. This month, the focus is on
the impact of rising interest rates on the
freight movement industry. For the May
issue, impacts on investment activity will
be discussed.
Impacts of freight flow patterns
Currency tends to strengthen as the
economy strengthens and this is reflected
in rising interest rates. Recently, the U.S.
dollar has weakened relative to European
currencies and strengthened against emerg-
ing market currencies. Europes economies
are still suffering from the financial crisis,
but there are signs of recovery and interest
rates are higher there. Emerging market cur-
rencies weakened because substantial sums
were borrowed to invest in infrastructure.
Those loans are mostly denominated in
U.S. dollars and rising U.S. interest rates
makes it more difficult for them to be repaid,
especially since emerging market exports
have slowed.
Some consequences of these trends for
the U.S. freight movement industry are:
Imported goods become cheaper and
will experience greater demand for faster
shipping times with less time spent on the
docks, in warehouses, or in transit.
The effect of these trends will be to
demand greater efficiency from each and
every link in the overall supply chain.
Farmers, manufacturers, marine terminals,
railroads, truckers, warehouses, intermodal
facilities, and bulk-handling facilities will
all experience direct demands for faster
and/or cheaper goods and services.
These trends have prompted many seg-
ments of freight movement to invest in
capacity expansion, and that prompts the
question: could it be that the recent travails
of the ocean carriers are about to be expe-
rienced by other links in the supply chain?
With all of these pressures it is not surprising
that experienced freight planners are in high
demand these days. The time to get access
to them is now, particularly before commit-
ting to significant supply chain contracts.
Anticipating change is the hallmark of the
global freight industry.
Kemmsies is chief economist at Moffatt &
Nichol, an infrastructure engineering firm.
He can be reached at (212) 768-7454, or
email at wkemmsies@moffattnichol.com.
exported goods become more expensive.
In the near-term this indicates that U.S.
imports will grow faster than exports.
Pricing pressures will be felt by domestic
farmers, processors, railroads and bulk-
handling entities.
Since 2008, movement of goods
produced and consumed domestically has
grown faster than that driven by interna-
tional trade. This should reverse in the
near-term.
As interest rates decreased, the cost
of holding inventory also decreased. Inter-
national shipments shifted from air freight
to sea. As interest rates rise some of those
shipments could shift back to air freight.
However, it is not clear that all of it will
because sea freight has become more reli-
able, offsetting some of the advantages of
tracked air freight. But all freight modes
Strategic View
With Walter Kemmsies
Short and long term interest rate trends: 1954 - 2014
Sources: U.S. Federal Reserve, National Bureau of Economic Research, Moffatt & Nichol.
Fed funds rate 10-yr bond yield Recession
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1
9
5
4
1
9
5
7
1
9
6
0
1
9
6
3
1
9
6
6
1
9
6
9
1
9
7
2
1
9
7
5
1
9
7
8
1
9
8
1
1
9
8
4
1
9
8
7
1
9
9
0
1
9
9
3
1
9
9
6
1
9
9
9
2
0
0
2
2
0
0
5
2
0
0
8
2
0
1
1
2
0
1
4
Technology as enabler and divider
I
was recently speaking with someone at one of the larger
U.S. freight brokerages when he mentioned in passing the
size of the companys IT department in terms of number
of employees.
My response: Youre dangerously close
to becoming an IT company.
Surely, I meant it as a joke, but the reality
is that modern brokerages have long been
morphing into entities far larger than that
limited descriptor.
They now offer third party logistics ser-
vices, international forwarding, visibility,
last-mile options, among other products.
The driving force behind these enhanced
offerings is technology. The top brokerages
have been investing millions of dollars in
their IT platforms, both to deliver accurate
rates and capacity instantly, but also to
empower these other business units. And
then, just as important, tie these business
units together for their customers.
The whole concept behind an asset-light
business model is to be financially nimble
enough to enter a market without the burden
of sprawling capital expenses. Brokers can
spend their capital on technology, not on
trucks or other hard assets.
And yet, in some sense, technology is
a double-edged sword. Building a basic
system is becoming easier by the day, and
with the software-as-a-service deployment
model, its even easier to attract and bring
on board customers.
Its what makes the truck brokerage mar-
ket so accessible for asset-light would-be
players. That low barrier to entry again,
building an IT platform with scale costs a
fraction of building a fleet with large scale
creates a situation where companies can
see business opportunities in a relatively
short period of time.
The truck brokerage market, in particu-
lar, has been very fragmented outside of one
or two large players at the top. But it is, in
the words of one domestic transportation
analyst, coagulating.
C.H. Robinson remains the top dog,
but XPO Logistics drive up the list of
the top brokerages has been emboldened
by the companys acquisition of the inter-
securing and selling capacity.
Now, those hires are just as likely to be
headed toward the IT department, helping
to build complex algorithms that identify
where capacity is, what it should be rated,
and the customers best suited to buy it.
Theyre just as likely to be involved in devel-
oping systems that branch these companies
outside of the realm of pure freight brokers
and into the more integrated forwarding
and transportation management worlds.
Technology the great enabler and
great divider.
Public compliance
Trade compliance software is inher-
ently an unsexy space except for those
compliance practitioners that live and die
by their global trade management system.
The question is whether the merits of
such a system are recognizable to a public
that has little time or inclination for customs
rules, much less the tools developed to help
companies comply with them.
We may soon get a test from Amber Road,
one of the leaders in the development of
browser-based compliance tools. In mid-
February, the company announced that it
has filed a Form S-1 statement with the
U.S. Securities and Exchange Commission.
Essentially, the filing signals Amber
Roads intent to go public, though the
number of shares to be offered and the
price range for the offering have not been
determined.
One blogger (http://bit.ly/NX9aex) said
Amber Roads potential valuation could be
affected by a number of factors steady,
but not explosive revenue growth for a SaaS
provider, and a mix of customers weighted
slightly toward the mid-market by number,
if not revenue.
But Amber Road is considered a best-
in-class solution and has started making
strong inroads on its robust transportation
management system solution. Ive spoken
in recent months to multiple Amber Road
customers that have arrived at the company
via their TMS solution, not their compli-
ance solutions. Is this an inflection point
for understanding of the companys full
range of tools?
The public offering, if it comes to pass,
might be another gauge, albeit from inves-
tors rather than industry practitioners.
Shippers IT l By Eric Johnson
modal provider Pacer. In the past, weve
chronicled how XPO, as well as other
emergent brokers like Coyote Logistics,
have laid the foundation for their growth
with state-of-the-art, scalable technology.
These companies in the top 10 or so of
freight brokerages have a huge head start in
terms of technology. So technology creates
this two-tiered effect for new entrants. It
makes it easier to enter, but harder to catch
up, as companies managing more capacity
and with larger revenue will inevitably
keep investing in their technology to retain
competitive advantage.
Its also important to state the role that
acquisitions play in this stratification.
XPO is the most noticeable in terms of
acquisitiveness, but C.H. Robinson greatly
expanded its reach in the forwarding busi-
ness by acquiring Phoenix International
in 2012.
Echo Global Logistics, now firmly in
the top-five brokerages by revenue, has
used acquisitions of small, like-minded
firms to build its more pure brokerage-
based business.
Acquisitions can often come with as-
sociated IT headaches; for example, mis-
matched systems, new geographies and
business units to incorporate, and different
IT cultures. For brokers looking to acquire,
the shape and state of the prospective
purchases IT systems is as important as
what that company might bring in terms of
market share or new business opportunities.
Again, the ability to invest in IT and
acquisitions with suitable systems is what
makes it hard for the lower rung brokers to
harbor hopes of catching up. The barrier
to entry is low, but the barrier to growth
is high.
So as I thought back to the broker with
the sizable IT headcount, it dawned on me
just how far this segment of the market has
come. The first, second, and third thing a
broker looking to hire would have done
in the past is put those hires on phones,
competitive tool and not simply a productiv-
ity opportunity. This is especially true of
the small-to-medium logistics companies
and forwarders that dont have access to
capital (funding or human resources) that
large multinationals do.
So what are the key areas to focus on
when it comes to creating competitive ad-
vantage through IT? Lets look at a handful:

Single point status for ship-
ments. Fifteen years ago, I worked on
a system that synchronized data between
freight forwarding agents in different parts
of the world so that statuses for all ship-
ments were available to all other agents
in the network at the same time. (The
term agents is used here to refer to owned
branch offices as well.) The key objective
then was to make sure that the information
was equally updated for all points in the
global network to answer local customer
phone queries.
But the advent of the web and related
technologies changed customer expecta-
tions. Today, logistics providers networks
need to provide a single point for the whole
global network where information is up-
dated continuously.
The requirement to make information
continuously available on one server
changes the competitive opportunities
for participants. A traditional operational
function involving the updating of supply
chains has now become part of a market-
ing and branding experience. Logistics
networks that realize this are creating an
entirely new type of customer experience.
To take advantage of this, logistics net-
works need to focus their IT energy and
dollars on the website first and foremost

Shared customer acquisition. With
the nature of international shipping trans-
actions and Incoterms governing the par-
ticular transaction coming into play, most
sales activity that generates a shipment is
conducted at both ends of the transaction.
Regardless of whether a shipment is prepaid
or collect, customer relationship activity
occurs at both ends of the transaction.
Consequently, it becomes necessary for
global logistics networks to collaborate in
customer acquisition. Companies that are
able to share leads, pricing, purchase order
tracking, and routing instructions are ahead
of the curve in acquiring customers. System
functionality needs to allow the sharing of
this information.
Unfortunately, logistics networks that
have effectively implemented systems to
enable the acquisition of customers on
a collaborative basis are rare and this is
an area of competitive opportunity for
networks of smaller agents to compete
against the larger companies. In return,
multinational companies can use this as a
way to broaden the gap.

Outsourcing (or other cost reduc-
tion opportunities) . It should be
required in 2014 for any new system plans
to be conceived and designed with an in-
tertwined outsourcing strategy. Logistics
networks, in particular, are global and
should be ideally placed to take advantage
of outsourcing. The majority of the logistics
industry is involved in outsourcing itself.
The three key areas where outsourcing
plays an integral role in conjunction with
IT are business process outsourcing (BPO),
data entry outsourcing and IT development
itself. Introducing a new system is the per-
fect opportunity to consider process rede-
sign. Unfortunately, too many organizations
consider system implementation in isolation
of this opportunity, leaving money on the
table for companies that are more nimble.
It is generally a bad idea, however, to un-
dertake a system change purely to enable
outsourcing.
This is no longer an area where multi-
national companies have advantage from
economies of scale and I believe this is an
untapped area of opportunity for logistics
networks, particularly those comprised
of agency relationships to coordinate and
compete.
Executive IT Corner l By Biju Kewalram
this is where competitive advantage
comes from.
Shared freight handling multiple
parties, multiple regions. Flowing
from the need to provide one point of status
for shipments worldwide, the next immedi-
ate need is for networks and branch offices
to establish a unified technology approach
to their internal operations systems. These
back office or operations systems should
be the primary source of status updates. If
they are not, they need to be changed, as
secondary systems for status tracking as
a separate function can impose up to a 30
percent overhead in transaction processing.
Debate often rages about whether or not
it is necessary for a logistics network (a
network of agents or owned offices) to be
on the same system worldwide. Contrary to
intuitive opinion, it is possible for different
countries to be on different systems and still
achieve the single point status required.
This is achieved through database-level
integration (the highest degree of difficulty)
or EDI type of connectivity (a lower degree
of difficulty, but still hard to achieve with
any degree of widespread participation).
However, implementing and, more im-
portantly, maintaining this on a continuous
basis can quickly become inefficient. While
harder for independently owned companies
in a global network to achieve a single sys-
tem, the availability of off-the-shelf systems
today that can cater to global requirements
should at least make the consideration of a
shared platform a high priority discussion
item for networks. Similarly, companies
that have one or more internal operational
systems in their global organizations should
look to consolidate those systems.
This month, American Shipper introduces a new column from logistics veteran Biju
Kewalram. Kewalram has spent decades in the freight forwarding and NVO industries,
taking a keen interest in how IT affects a wide variety of logistics organizations. His
monthly column will focus on IT from an executive point of view. Kewalram can be
reached at bijubase@gmail.com
Competitive case for logistics IT
G
lobal IT systems are a unique and increasingly crucial
part of the logistics industry. But many organiza-
tions fail to recognize that IT should be considered a
SFI dj vu
I
thought the Secure Freight Initiative had faded into the
past. Apparently not. At the annual Trade Symposium
in Washington on March 6-7, U.S. Customs and Border
Protection personnel in the exhibit area
were handing out brochures about SFI.
SFI was a limited-run pilot last decade
that was designed to test whether 100 per-
cent inspection of inbound containers could
be done at foreign ports. It essentially was
a tactic to forestall Congress from forcing
CBP to go ahead with implementation
of a new scan-all law by showing that it
was nearly impossible to do from a logis-
tics, financial, diplomatic, and technical
standpoint.
The program ran at several ports for a
year or so and then it ended with a report
to Congress. One site, Karachi, Pakistan,
however, remained in operation. Karachi is
a high-risk port because of terrorism and its
volumes to the United States are relatively
low, so CBP believes non-intrusive inspec-
tions of all containers makes sense. The
agency has an arrangement with Pakistani
officials for all containers to get routed
through X-ray imaging machines and the
images are uploaded to a secure website for
CBP analysts to look at. Pakistani customs
will open and inspect any containers that
appear to have contraband and CBP can
supervise the process by video.
CBP ultimately folded the Karachi
inspection program into its Container Se-
curity Initiative, which has CBP officers
stationed at 58 ports around the world.
Pakistan is too dangerous, so CBP does
joint inspections in a virtual environment.
Karachi is called CSI Plus. I guess the
folks passing out a five-year-old brochure
describing how the SFI pilot programs will
be set up didnt get the word.
COAC members value
The partnership between CBP and the
trade community, manifested through the
Commercial Operations Advisory Com-
mittee (COAC), has never been stronger.
CBPs culture has shifted during the past
four years to the point that it works to co-
create virtually all policies and programs
with the private sector.
continue to provide advice on the peren-
nial nuts-and-bolts issues so critical to
traders, including intellectual property
rights protection, focused assessments,
and anti-dumping.
Despite all the coziness in Washington,
there still is an undercurrent of concern
out in the field that Customs is ramping
up enforcement of trade laws in ways that
ensnares companies for technical viola-
tions. Hopefully, any disconnect between
headquarters and ports of entry will be
eliminated as the Centers of Excellence
and Expertise get fully implemented. The
CEEs have the industry experts that are
supposed to apply the trade regulations in
a more consistent fashion.
North American Trade Symposium
Ongoing progress between Mexican,
U.S. and Canadian authorities to integrate
border management policies and proce-
dures has led CBP to consider proposing
a tripartite conference, modeled on its
popular Trade Symposium, to update
industry about their joint efforts, Deputy
Commissioner Thomas Winkowski said.
In a briefing with reporters, Winkowski
laid out the possibility of expanding the
forum to Mexico and Canada to help get
the cooperation of businesses there and
exchange ideas for minimizing the regula-
tory burden on cross-border trade.
CBPs mission of securing and expedit-
ing trade can best be accomplished through
cooperation with international partners,
and the working relationship with Cana-
dian and Mexican customs authorities has
become especially tight in the past few
years, Winkowski said.
Although the NAFTA partners have
made good progress on thinning red tape
at the border for legitimate traders, I think
theres a lot more opportunity out there for
us to really make the globe even smaller
than it is today, he said.
In order to do that, I believe, you got
to get buy-in from the stakeholders. They
have to want to be part of this. And I think
theres no better forum than something
like [the Trade Symposium] for two-way
learning, Winkowski said.
The deputy commissioner suggested
the event could be sponsored by all three
customs administrations, with the location
rotating among the nations.
And COAC is working harder than ever to
keep CBPs feet to the fire on its ambitious
trade transformation initiative under which
it strives to become the lubricant at the
border for legitimate trade rather than the
sticking point that discourages companies
from engaging in global business.
The previous COAC began working at
a frenetic pace to support CBPs efforts.
COAC often was a discussion forum where
little got done, but since CBP began taking
it seriously it has risen to the task. The 13th
term of COAC members, whose term began
a year ago, has built on the momentum and
is providing a steady stream of recommen-
dations to CBP on multiple fronts.
Last year, COAC played a major role in
several initiatives, including improving
development of the Automated Commercial
Environment, the Air Cargo Advanced
Screening pilot, Centers for Excellence
and Expertise, new regulations for the
customs broker industry, automating
export reviews for the first time, the One-
U.S.-Government-at-the Border approach
towards trade, the International Trade Data
System, and modernizing trusted trader
programs.
That requires providing feedback on
systems, processes, security and many
other things that tie into these programs.
COAC members spend a lot of time
helping Customs. Between quarterly meet-
ings, they are engaged in countless other
meetings, conference calls, webinars and
subcommittee work all of which they do
on top of their day jobs.
In order to be effective, it continues to
be critical that CBP engage COAC early
and often, not just on operational issues,
but at the strategic level, COAC Chair-
man Ted Sherman, director of global trade
services for Target Corp., said at the Feb.
20 quarterly meeting.
Everyone is rowing in the same direction:
to get transaction costs down and increase
speed to market.
COAC members say they also will
Brokers, Forwarders & NVOs l By Eric Kulisch
Port Metro Vancouver is already
close to Asian markets. And with
unprecedented infrastructure
investment in our gateway, were
getting even closer.
Were building land-side projects
that boost rail and road efciency.
Were increasing our container
terminal capacity and reducing on-
dock dwell through collaboration
with supply chain partners. And
were operating with longshore
labour certainty to 2018.
As a result, weve taken up to
3 days out of your supply chain.
That brings your goods closer
to market and you closer to
your customers.
Fold to
Fold to
Fold to
VANCOUVER UVER
SHANGHAI
DALIAN
KAOHSI UNG
SHENZHEN
O
ENZHEN
HONG KONG
TOKYO
YOKOHAMA
D
K
G KO KO HH
TO O TOKY
SHEE
BUSAN
is better. Closer
FORWARDING / NVOs
N
avigating U.S. export control regu-
lations has always been a tricky
task and its not uncommon for
exporters and their freight forwarders to get
tripped up over regulatory language alone.
One of those trouble spots, which the
U.S. Commerce Departments Bureau of
Industry and Security hopes to smooth
out this year, involves developing a clearer
definition of responsibilities for routed
export transactions.
An export transaction typically involves
a U.S. seller, known in the Export Admin-
istration Regulations (EAR) as the U.S.
principal party in interest (USPPI), and an
overseas buyer, or foreign principal party
in interest (FPPI). In these cases, the USPPI
ships an item from the United States and
is responsible for obtaining the necessary
export clearances, including applying for
any federal export licenses.
In a routed export transaction, the FPPI
agrees to sales terms with the USPPI in which
it takes delivery of the items inside the United
States for delivery overseas. Since the FPPI
is not technically the U.S. exporter, which
is required by the EAR, it hires a U.S.-based
agent, such as a freight forwarder, to manage
these exports on its behalf.
However, the USPPI is still obligated to
ensure routed transactions are compliant
with the countrys export control regula-
tions by receiving written authorization
from the FPPI and its U.S. agent that they
are taking charge of the export and any
compliance obligations. Without this docu-
mentation, the USPPI remains the respon-
sible party in terms of export compliance.
In addition, the USPPI must provide the
FPPI in a routed transaction any information
that can effect a U.S. licensing determina-
tion or export product classification.
One of the key changes in the proposed
regulation, which BIS has referred to as
the foreign principal party controlled
export transaction, is the requirement
of the FPPI to provide the USPPI written
acknowledgement of its intent to assume
export compliance obligations and identify
its agent which will act as the exporter.
The FPPI must then provide a written
power of attorney to authorize this U.S.
agent, again in most cases a forwarder, to
act on its behalf and submit a copy of that
documentation to the USPPI before assum-
ing export control responsibility.
Through this new rule, there would be
no questioning the role of the parties to the
transaction, said Paul DiVecchio, president
of Boston-based consultancy DiVecchio &
Associates. This should give the agent a
clear understanding of what its role is in a
routed transaction.
It eliminates a lot of the fuzziness that
was there, said Michael Ford, vice president
of regulatory compliance and quality at for-
warder BDP International in Philadelphia.
It will force more record keeping. [The
U.S. agent] will have to have a good trail
of documentation.
Under the proposed rule, the USPPI, if
requested by the FPPI or its agent, must
provide the correct export control classifica-
tion number (ECCN) or sufficient technical
information to determine classification. The
USPPI must also pass along any information
to the FPPI or its agent that might affect the
licensing determination by the FPPI and its
agent. Upon request, the FPPIs agent must
provide the USPPI information such as the
date and port of export, country of ultimate
destination and destination port, method of
transport and specific carrier identification,
and export authorization details.
The requirement of a power of attorney
for agents already exists in the Census
Bureaus Foreign Trade Regulations and
assists that agency with collecting accurate
trade statistics from electronic export in-
formation filings in the Automated Export
System. However, it has not been applied
as a condition for compliance with routed
transactions covered by the EAR.
Many forwarders are concerned about
their potential accountability to EAR com-
pliance under BISs proposed changes to
the routed export definition. BIS penalties
for non-compliance can start at $250,000
per violation.
The National Customs Brokers and For-
warders Association of America raised its
concerns to the Commerce Departments
Regulations and Procedures Technical
Advisory Committee on June 11, shortly
after BIS issued a notice of inquiry for
the proposed rule. In its comments, the
Washington-based group warned that FPPIs
generally lack sufficient EAR understand-
ing and often choose to keep their U.S.
agents, namely forwarders, in the dark on the
full extent of their routed export transaction
agreements with USPPIs. The NCBFAA has
recommended BIS include in its proposed
rule a requirement that the FPPIs U.S.
agents confirm in writing their understand-
ing and acceptance of the responsibilities
related to the USPPIs delegation. This
language was not included in BISs Feb. 6
Federal Register notice. However, the as-
sociation is expected to press the issue in
comments to the agencys proposed rule by
the April 7 deadline.
Due to the trickiness of routed trans-
actions, some forwarders simply wont
handle them.
As a freight forwarder, we would never
assume responsibility for export classi-
fication or license determinations, said
Scott Barney, export compliance manager
with multinational forwarder Panalpina,
regarding the companys current policy.
Its too much responsibility and the risk
is really high.
Barney, who is also a member of the
NCBFAAs export compliance subcommit-
tee, said BISs proposed new routed trans-
action definition is on the right path, but
he hopes the agency will seriously consider
the industrys comments in formulating its
final rule.
I think its a noble effort by the front-
line agency to refine the rules and bring
responsible change to the market place,
but theres the potential of unintended
consequences, like for the forwarders, said
Ashley W. Craig, an attorney and co-chair
of Venable LLPs international trade group
in Washington.
He warned if forwarders push too hard on
the point of lacking visibility into the routed
transaction custody chain, BIS may impose
this requirement in a heightened way upon
the industry in its final rule.
DiVecchio said either way the final rule
will require forwarders to have a better
understanding of their compliance obli-
gations for routed exports and on how to
maintain this business in the future. For
those forwarders that have their act together
regarding export compliance, the clarified
routed transaction definition can be a good
marketing sell, he said.
BY CHRIS GILLIS
Righting routed exports
BIS wants to clearly define responsibilities
for these transactions.
FORWARDING / NVOs
G
lobalization has been a boon for
the shipping industry, resulting in
a huge increase in cargo volume.
But Robert Ambrite, vice president
of non-vessel-operat-
ing common carrier
activities at Hanjin
Logist ics, wor ries
about an accompany-
ing trend, the decline
of entrepreneurial,
t hi nk- out side-t he-
box-passion.
Just as some believe
the U.S. automobile industry lost its way
when leadership was passed from car guys
to finance guys in the 1980s, Ambrite
fears a similar change may be afflicting
air and ocean carriers.
Where are the shipping guys who
cared about building great freight carriers,
providing excellent service and creating
jobs worldwide? Most of these companies
are now managed by process and finance
people all very bright but all look-
ing to maximize that 90-day profit, reduce
costs and believing that the flow of cash
and information is more important than
the flow of cargo, he said.
Ocean carriers and large NVOs have
turned their services into a commodity, Am-
brite said, adding when price and service
are equal, relationships win the business.
Ambrite has more than 30 years of ex-
perience in freight transportation, working
at Maersk, K Line, the Port Authority
of New York and New Jersey, and FedEx
before joining Hanjin Logistics in 2004.
Hanjin Logistics was established in 2000
to provide value-added service to the core
customers of both Hanjin Shipping, Koreas
largest container carrier, and its affiliate
Korean Airlines. Customers requested from
the logistics operation services such as pur-
chase order management, customs broker-
age, insurance, transloading, consolidation,
warehousing, and door-to-door service for
less-than-container load shipments.
By 2005, Hanjin Logistics had become a
standalone organization and began signing
service contracts with other ocean carriers,
in addition to Hanjin Shipping, partnering
with other co-loaders, and expanding into
intermodal marketing, truck brokerage, and
warehouse management.
While it does business with other car-
riers, Ambrite believes theres big value
in Hanjin Logistics close relationship to
its sister liner company, especially when
capacity becomes tight.
After the economic downturn of 2008,
it was evident Hanjin Logistics needed to
find a new and better way to face the un-
certainties of the future, he said.
Ambrite said many 3PLs followed the
lead of deregulated airlines and large con-
tainer carriers in eliminating local offices
and replacing them with customer service
centers, sometimes located overseas. Elim-
ination of locally domiciled employees can
distance 3PLs from their core customer, so
one organization essentially supplies all of
the backroom services for everyone.
Hanjin Logistics wanted to make sure
their customers became loyal to their entire
organization rather than just to local sales
or customer service staff, he said.
Ambrite said Hanjin Logistics has taken
a number of steps to nurture partnership
with customers, including concentrating on
small to midsized importers and exporters
rather than on large volume beneficial-
cargo-owner accounts that usually maintain
their own ocean carrier contracts and have
international departments that are able to
provide some of the same services Hanjin
Logistics offers to smaller customers ship-
ping 10 to 1,000 containers per year.
He said the company takes a consul-
tative approach with all customers and
tailors solutions to meet their goals and
objectives. Hanjin Logistics offers a menu
of services, much as an insurance broker
offers different products.
The company has regionalized its North
America operations, so customers know who
they should contact, including senior manag-
ers, when they have questions or concerns.
American Shipper spoke with Ambrite
on a day that he had worked with an elec-
tronics retailer to reroute a container of
computer parts from an intermodal train
to a cross-dock facility where cargo could
be transloaded to a truck and sped to stores
in time for a sale. Hanjin Logistics opened
a new warehouse in Carson, Calif., where
cargo can be transloaded to domestic trucks.
By providing local staff and dedicated
personalized customer service, importers
and exporters alike know they are dealing
with individuals who are familiar with
their particular ocean terminal, inland in-
termodal hub, truck lines and rail services.
This inevitably saves customers time and
money, he said.
Ambrite said Hanjin Logistics has taken
the emphasis off of individual staff mem-
bers and placed it on the team. Local
offices operate without commissioned sales
personnel, so all staff, including those in
overseas offices, can concentrate on satisfy-
ing the customer.
He also said the company thinks long
term, noting global markets are cyclical.
Customers have choices, Ambrite said.
The only way to succeed is with regular,
return business. We value our margins as
much as any company, but we also realize
that a 90-day mentality for all products, in
all markets, is not realistic.
He said both communication with cus-
tomers should be simple and direct man-
ner including bills.
Ambrite highlighted several Hanjin
Logistics services, including a Fast-Ship
product where cargo is loaded last-on at
origin in Asia, then transits on one of Hanjin
Shippings direct services with 13- or 14-
day transits to the U.S. West Coast, and is
discharged first. Its attractive to shippers of
electronic and telecommunication products,
garments and some other general depart-
ment store merchandise, and is a lower cost
alternative to air freight.
Another is a Fragile LCL Intermodal
Product Services (FLIPS) for products
such as glassware, electronics and artwork.
Many of our customers who previously
shipped via air to avoid what they perceived
as potential damage to their cargoes are
now using FLIPS, Ambrite said.
In the past year, he said the company has
put a lot of effort into destination opera-
tions, especially in the Los Angeles-area
for major retailers.
The company has also increased the
volume of trucks it handles both within
the country and between the United States
and Mexico.
Ambrite said Hanjin Logistics does a
hot delivery service for urgent cargo and
offers a pre-pull service in Los Angeles
to help shippers avoid PierPass fees and
further reduce their costs.
BY CHRIS DUPIN
Where are the shipping guys?
Hanjin LogisticsAmbrite asks if industry
is losing its entrepreneurial passion.
Ambrite
FORWARDING / NVOs
T
he relationship between customers
and their drayage providers is un-
dergoing a shift, fueled by evolving
technology, which allows for greater vis-
ibility along the entire supply chain and in-
corporating increasing regulatory changes.
Add in the fact that many companies are
doing more work with fewer people, and
the market is ripe for the introduction of
Xenon Freight Solutions online drayage
management tool.
Xenon released its online booking por-
tal for drayage services, Xenon FS, last
November, a tool that emerged based on
a finding that the drayage management
process was inadequate for a specific
segment of the supply chain, according to
Xenon Freight Solutions director of key
accounts, Stacy Lange.
Xenons new tool contains a vast network
of compliant, screened carriers and allows
customers the flexibility to find the best
locations, providers and rates to fit the
ocean side of their supply chains.
The tool targets non-vessel-operating
common carriers and freight forward-
ers, because Xenon officials saw they
were a large sector of the market that
hasnt historically been well served by
drayage.
Lange explained the drayage industry
has difficulty managing the sporadic needs
of NVOs and forwarders, while large re-
tailers and other shippers, who know their
shipping volumes to distribution centers,
are much more straightforward to serve.
Retailers also generally have stronger
relationships with trucking companies.
The whole concept of Xenon FS was
born mostly out of frustration in the avail-
ability of simple and yet robust tools for
managing drayage, Lange said.
The technology has been on the market
for quite some time. However, by focusing
on NVOs and forwarders, Xenon has now
been able to create a drayage pool, of sorts,
that turns these customers drayage needs
from volatile to stable. The technology al-
lows NVOs and forwarders to consolidate
the steps of finding the correct vendor,
establishing credit, verifying pricing,
checking on compliance issues Xenon
pre-qualifies all its carriers and meets the
surety bond requirement laid out in the
MAP-21 legislation ordering, paying and
tracking the shipment. And it puts all these
were actually shocked when Xenon showed
them how many carriers that they used to
move containers. She said these companies
routinely use 200 to 300 different providers,
with some employing up to 700.
To follow the evolving drayage market,
Xenons IT model has also changed a bit.
Lange said the company started by provid-
ing a simple online database where custom-
ers could log on and book drayage moves.
Soon after that went live, Xenon started
hearing from customers who wanted more
integration from the drayage tool; they were
already running so many systems that they
wanted to add a drayage piece into their
existing programs.
Really, for them, the bigger benefit is
to be able to integrate with their existing
systems and make their systems more ef-
ficient and more end-to-end by offering this
capability that wasnt really part of their
solution before, Lange said. By linking
the drayage tool into their existing contract
management tools, she added, the Xenon
program solves one whole aspect of what
theyre trying to do on a day-to-day basis.
She added the integration piece is re-
ally where we can add more efficiencies
and really become stronger partners with
our customers.
This doesnt mean that Xenon has
abandoned its standalone Web program,
which served as the genesis for the entire
solution. Some customers still prefer to use
this tactic, Lange said, and the standalone
tool remains a method to expand to a wider
customer base.
In order to even start a relationship with
any of our customers, we need to prove
that weve got the services, so they do
generally start with the standalone portal
that we offer, she said. But then we do
generally find that where we can add the
greatest efficiencies to our customers is
when we integrate.
Visibility is at the heart of the Xenon
FS tool. When a customer books a drayage
move in the system, it receives constant
email updates for every change in status. At
first, Lange was unsure these users wanted
so many email alerts about their drayage
providers, but she found that customers
prefer it if Xenon is proactive instead of
making them log into the system to track
their moves.
Lange said the Xenon FS tool ultimately
allows customers to save time and drive
efficiency, while adapting to the new
drayage arena.
The thing that I hear the most when
Im talking with them is the fact that were
taking so much of the headache away
associated with the drayage process,
she said.
BY JON ROSS
Eliminating
drayage headaches
IT tool developed to help NVOs and forwarders
better manage box transport.
The whole concept
of Xenon FS was
born mostly out
of frustration
in the availability
of simple and
yet robust tools
for managing drayage.
Stacy Lange
director of key accounts,
Xenon Freight Solutions
drayage requests together in one place.
By pooling all of those volumes to-
gether for the NVO and freight forwarder
community you end up having a pool
that becomes less sporadic, that becomes
easier to plan and becomes much more
attractive to the providers in the drayage
community, Lange said.
Xenons tool also allows these customers
to stay up to date on compliance issues and
make sure every provider in their often vast
networks is also following the regulations.
Lange said many NVOs and forwarders
Your shortcut to the world.
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value to your supply chain.
2014 FedEx. All rights reserved.
ITS ALL ABOUT BIGGER SHIPS
Register Now at www.VAMaritime.com/event/symposium-2014
VMAs International Trade Symposium l May 08, 2014
Schedule of Events
7:00am Symposium Registration
& Continental Breakfast
8:00am Chairwomans Welcome: Lea Bogatch-
Genossar, President North America & Caribbean,
Zim Integrated Shipping Services
8:10am Ignite Session: Its All About Bigger Ships
Kicking off the symposium with a higher level of aware-
ness and energy, a rapid succession of six speakers, includ-
ing one from each of the days panels, will make 5-minute
slide show presentations designed to punctuate the issues to
be raised and tied together in Its All About Bigger Ships.
(Visit the symposium website to see who will be speaking.)
8:45am A Blueprint to Resiliency in Logistics
Management Supply chains are at constant risk of
coming to an abrupt standstill due to compliance setbacks,
infrastructure bottlenecks and natural disasters. Despite this
reality, most companies remain woefully unprepared. This
panel considers how shippers and logistics service providers
are factoring the threats and taking steps to keep their goods
flowing. (Visit the symposium website to see who will be
speaking.)
10:00am Networking Break
10:30am Mega Ship Math Determining a Winning
Formula As the bigger ships increase at East Coast
ports, the infrastructure of the supply chain will need
to adapt to shipping/receiving, processing, transporting
and loading/unloading a significantly greater number of
containers per ship call. With an emphasis on terminal
velocity and gate moves, panel speakers will be asked to
contrast East Coast with international and West Coast ports
more experienced with larger volumes per ship, and how all
parties should be preparing for change. (Visit the symposium
website to see who will be speaking.)

12:00pm Luncheon Keynote: The Impact of Super
Container Ships Todd Rives, Chief Commercial Officer,
CMA CGM America, LLC Mr. Rives will speak to the
challenges and responsibilities that come with the new super
vessels as well as the impact they will have on the industry.
1:30pm Agricultural Exports the Grain Game
The new dynamics of alliances and ship capacity, empty
container availability, rail service, West Coast labor
negotiations, transload capacity panelists will address
these and other issues on the minds of shippers seeking
to increase their agricultural exports to overseas markets.
(Visit the symposium website to see who will be speaking.)
3:00pm Closing Remarks
6:00pm Banquet Reception
7:00pm 94
th
Annual Maritime Banquet Keynote
Speaker: Honorable Terry McAuliffe, Governor of the
Commonwealth of Virginia
Maritime Mixer: To kick things off join symposium
presenters, guests, local dignitaries, and colleagues for a
pre-conference social and networking port tour aboard the
Spirit of Norfolk the evening of May 7.
Annual Banquet: This is the premier event for
Virginias maritime industry and the Port of Virginia.
We anticipate attendance of over 900 individuals with
a stake in the activities of the Port and the economic
wellbeing of Virginia.
Also Offered
Annual Golf Outing: Arnold Palmer Signature Golf Course
at Bay Creek
The 7,204 yard championship course pampers its golfers
with smooth A-4 greens and perfectly manicured Tifway
419 Bermuda fairways. Five strategically placed sets
of tees are guaranteed to make golf fun and challenging for
players of all skill levels. The course opened in 2001 and
earned Golf Digests Best Upscale Course award
in 2002.
www.VAMaritime.com/event/symposium-2014
Norfolk Waterside
Marriott Hotel l Norfolk, VA
Work the room before you are in it
Download the Bizzabo networking app today!
Visit the conference website regularly for an updated list of speakers
Thanks to our sponsors for your support!
STAYING A STEP AHEAD
& Leaving Small Footprints
Europes controversial aviation law,
which took effect in 2012, would tax airlines
traveling into or routing through Europe
starting in 2013. Now a vote by Parliament
on April 4 could extend a delay in the laws
implementation until the start of 2017.
While industry grumbling leading up to
that first implementation in 2012 was low,
officials from all corners of the world and
throughout the industry started voicing
forceful disapproval during the year. China
even threatened to hold back a $12 billion
Airbus order, while U.S. Sens. Claire Mc-
Caskill, D-Mo., and John Thune, R-S.D.,
worked together to bring a law into effect
that barred domestic airlines from partici-
pating in the EU tax.
Before the U.S. bill went to President
Obama for signature, the European Union
delayed the timeline for implementation
of the law for non-European carriers. The
delay was to allow time for the International
Civil Aviation Organization to figure out
a worldwide solution, EU officials said at
the time, not because of pressure from the
U.S. or other governments. In October,
at the ICAO General Assembly, the par-
ties agreed to work toward an emissions
regulation to be hashed out at the next
gathering in 2016. The new rules would
then be implemented in 2020.
The European Unions latest move on its
emissions-trading scheme is born from the
promise that significant progress will have
been made by 2016; only European-based
air carriers will fall under the emissions
regulation until the end of that year. The
move, officials say, will keep Europes
momentum toward cleaning up the skies,
while acknowledging ICAO will have a
worldwide emissions cap in place by 2020.
If that doesnt happen, however, all bets are
off, it seems.
Airline emissions are a serious problem
and some industry analysts applaud the
captured in the EU ETS scope for the years
2013 until 2016.
The organizations director general,
Sylviane Lust, said the European Union
has chosen to hurt its own interests in
order not to lose face.
Bill Hemmings, aviation manager at Eu-
ropean lobbyist Transport & Environment,
said the decision leaves long-haul flights to
Europe as unregulated polluters. In a press
release, the firm warned Europe is sending
a signal that it will bow to outside forces.
With this deal, European governments
have conceded again to international pres-
sure without getting anything meaningful
in return, let alone guarantees that soaring
international aviation emissions will one
day be tackled, he said. Shrinking the
aviation ETS to cover intra-EU flights ef-
fectively amounts to the dismantling of a
European climate law.
Hemmings asked members of the EU Par-
liament to reject the agreement. He added
this new deal is essentially a continuation of
the stop-the-clock development from 2012.
Transport & Environment did note, how-
ever, if ICAO doesnt achieve significant
progress by the end of the new agreement
period, the European Union would imple-
ment its original emissions trading scheme
plan starting in 2017.
While the path to sustainability has been
fraught with problems, International Air
Transport Association Director General
Tony Tyler said in a December op-ed in the
Hong Kong Economic Journal that progress
is being made. He wrote the industry is
committed to a 1.5-percent annual improve-
ment in fuel efficiency over the next six
years; carbon-neutral growth from 2020;
and chopping in half emissions by 2050,
when compared to 2005 levels.
No other industry has made similar
commitments. And, even more importantly,
we have a well-established strategy to
achieve them with improvements in tech-
nology, operations and infrastructure, he
wrote. These measures will deliver the
long-term solution for aviations sustain-
ability. But we also recognize that there will
be a need for a market-based measure to
fill any gap between what these measures
can deliver and our targets.
Air Integrators l By Jon Ross
scheme for its success in getting the inter-
national community to directly tackle the
emissions question. According to the Air
Transport Action Group, airlines produced
689 million tons of carbon dioxide in 2012,
accounting for 2 percent of all emissions.
When only transportation modes are taken
into consideration, airlines produce 12
percent of all emissions, while motorists
and truckers emit 74 percent of all carbon
dioxide.
McCaskill voiced approval for the Eu-
ropean Unions recent move to delay the
aviation tax scheme. Its a commonsense
notion that Americans shouldnt be forced
to pay a European tax when flying in U.S.
airspace, she said in a statement. Its
refreshing that common sense is prevailing
with our European allies.
The 30-member Association of European
Airlines also welcomed the news. The or-
ganization represents major cargo movers
like Cargolux, DHL, Lufthansa and TNT.
It suggested the European Parliament for-
mally accept the idea to encourage ICAO
to develop a global measure.
Athar Husain Khan, the organizations
chief executive officer, said while the
European Unions new outlook lets ICAO
build up its regulation, the international
body should work quickly and efficiently.
He added, however, AEA is disap-
pointed that the process took so long and that
the legislator has not provided planning for
airlines until 2020, when the global market-
based-measure is due to come into force.
Not everyone is happy about the latest
development. The International Air Car-
rier Association which represents Aer
Lingus, airberlin and 26 other carriers
expressed regret at the outcome of
the talks and said the scheme, as laid out
by European regulators, discriminates
between airlines, in the sense that only
emissions from intra-EU flights will be
The long EU ETS goodnight
A
fter a protracted battle and much hand wringing, the
European Unions plan of taxing foreign airlines for
emissions is officially deadat least for the time being.
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Folding containers
M
any container trades are lopsided, with great num-
bers of loaded boxes moving in one direction but
not the other.
Such imbalance has led some companies
to investigate the possibility of building
folding containers to reduce the cost of stor-
ing and transporting empty units. Several
say they have workable designs and are
seeking to ramp up production.
Simon Bosschieter, managing director
of Holland Container Innovations (HCI),
said his company has made about 10 of its
4FOLD containers, which gained ISO
approval and were recently tested by the
American Bureau of Shipping and Korean
Register of Shipping.
The containers have been used to carry
fertilizer between Rotterdam and Bilbao,
Spain, and tires between China and the
United States, he said.
HCI is affiliated with the container leas-
ing company CARU, and Bosschieter said
about 100 of its folding containers have
been ordered from a manufacturer in China.
When the 4FOLD containers are folded
flat, four of them can fit in a space normally
used by a single empty container. He said
the container can be folded using equipment
such as reach stackers.
A good example I like to use is from
Melbourne, Australia, to Tasmania. Theres
also an equipment imbalance there, but the
20s always tend to come back empty, he
said. Services to Caribbean islands, and
domestic markets, such as Hawaii, Guam
and Alaska, have similar characteristics,
he added.
You could free up the real estate they
occupy at the terminal, and also free up the
slots that the empties are occupying on what
are typically fairly small containerships,
Stitt explained. Theres often enough
demand for the slots that youre actually
opening up some slots to laden cargo.
Because several folded empties can be
lifted at once, collapsible containers might
reduce the number of lifts needed to load
and discharge a ship, and allow the vessel
to make faster turns.
Other companies working on folding
containers include Rotterdam-based Car-
goshell, which has developed a unit made
from composite material, and Compact
Cargo Solutions (CCS), based in Boca
Raton, Fla., which has developed a 40-foot
high-cube container.
Bosschieter estimates in a couple of years
the cost to make a folding container will
fall to about double that of a conventional
container, but said his company believes
economies associated with them will allow
the difference in price to be earned back
in 18 months.
Stitt said Staxxon believes at modest
volumes its container is going to cost about
30 percent more and the payback to an in-
vestor will be at least as fast for a standard
dry container, if not faster.
Ocean Transport l By Chris Dupin
For now HCI is focusing on 40-foot con-
tainers, but Bosschieter said the company
has had some discussions about building
53-foot containers for domestic use in the
United States.
In contrast, Montclair, N.J.-based
Staxxon has created a 20-foot container
that folds concertina-style left to right. Two
to five containers can be squeezed into the
space normally taken up by a single empty
container. Tom Stitt, marketing director
for Staxxon, said the company sees that
flexibility as being a major operational ad-
vantage for potential users of the containers.
Staxxon has made about seven of its
folding containers for testing. The product,
Stitt said, has been issued a CSC plate
to show compliance with the International
Maritime Organizations Convention for
Safe Containers.
I describe us as being past the proof
of concept stage, Stitt said, though not-
ing the containers have yet to be used to
transport cargo.
The company spent the second half of
last year perfecting its design, reducing the
empty weight of the container.
We think the 20 foot product is where
the sweet spot is initially, especially with
developing economies or other places where
container equipment tends to be highly
unbalanced, Stitt said.
The 4FOLD container
can be collapsed with
terminal equipment
such as a reach
stacker.
RIL 2014
such as reach stackers. l
e

t
d
c
u
Th 4FOLD t i
Rendering of Staxxon containers.
LE HAVRE
ROUEN
PARIS
High speed
PORT SYSTEM
@Haropaports
Follow us
HAROPA the French port system
connecting North American business
to the European market
www.haropaports.com
A
t best, shippers and liner carriers in the transpacific
trade are faced with several challenging years.
Neil Dekker, head of container research at the
London-based consulting firm Drewry, told attendees of the
Journal of Commerces TPM 2014 conference last month to
expect a couple of years of pain to get through before we
reach better times in 2016.
Orders for new ships have been aggressive (22 percent of
the existing world container fleet), particu-
larly in the last nine months, as carriers have
sought lower unit costs, he said.
Most orders are for big ships: 53 percent
with more than 10,000 TEUs of capacity
and another 29 percent with capacities of
8,000-10,000 TEUs.
Last year global container capacity grew
about 5.3 percent and Drewry is forecast-
ing growth of 5.7 percent this year and 6.3
percent in 2015.
The Transpacific Stabilization Agree-
ment, a discussion agreement for 15 con-
tainer shipping carriers that move more than
90 percent of Far East-U.S. trade, believes
capacity growth from Asia to the United
States will be 4-6 percent this year.
This is a lot of tonnage for carriers to
digest into their global service portfolios,
Dekker said, and particularly difficult for
trades where bigger ships may be deployed,
such as the transpacific.
While the world fleet of less than 8,000-
TEU vessels will increase just 2 percent
between 2010 and 2016, Drewry forecasts
the overall fleet with capacities of more
than 8,000 TEUs will climb 19 percent
during the same period.
Ron Widdows, chief executive officer
of Rickmers Group, said at TPM 2014 the
ordering continues even though it may
not be the healthiest thing, because the
people ordering ships today, with a couple of
exceptions, arent ordering ships for growth.
The industry does not need ships for
growth until 2016 or 2017. You are not or-
dering ships for growth; you are ordering
ships because they are so significantly more
efficient, so much less costly You have
to get a lower cost base, he said.
The economy of scale that big ships of-
fer, as well as their more efficient engines,
is critical to container carriers as bunker
fuel accounts for 60 percent of operating
costs, TSA said.
On top of the price of the regular bunker
fuel that carriers burn while transiting the
open sea, TSA members face additional
costs from the need to burn low-sulfur fuel
in Emission Control Areas in U.S. coastal
areas and for their ships to be equipped
with cold ironing equipment to receive
electric power while theyre docked in
Californian ports.
Nevertheless, Dekker said carriers have
handled the cascade of big ships into the
transpacific well. They seasonally reduced
capacity in the first and second quarters of
2013, and he expects them to do the same
again this year, but then ramp capacity back
up in the second half of 2014. He forecasts
the third quarter of 2014 will see an in-
crease in eastbound transpacific capacity
of only 1 percent over 2013. Carriers have
Troubled
transpacific
trade
Overcapacity, lackluster rates,
terminal inefficiencies and potential
labor disruption could upset liner carriers
performance into 2015.
BY CHRIS DUPIN AND ERIC JOHNSON
TRANSPORT / OCEAN
to learn that 87 percent load factor is not
bad, he said.
But Brian Conrad, TSAs executive ad-
ministrator, said its natural for shipping
lines to have different ideas about how full
their ships should be.
Youve got 15 different carriers in
the TSA different cultures, different
corporate structures, different financial
structures... What one company consid-
ers a good workable load factor is going
to be very different than that of another
company, he explained.
It would be nice if there was a more
consistent standard then everyone say-
ing well you know, we can live with 85
percent, he said. The problem is youve
got some carriers who have the patience to
live with 85-percent-full ships for several
weeks, but you also have carriers who feel
that unless theyre constantly above 90
percent they have to react. Its this lack of
consistency I think thats causing a lot of
the reaction from the carriers. And its an
understandable lack of consistency.
According to figures from BlueWater
Reporting, the average size of ships in the
Asia-to-U.S. West Coast trade grew from
6,095 TEUs at the end of 2011 to 6,308 TEUs
at the close of 2013. For ships moving from
Asia to the U.S. East/Gulf coasts via the
Suez Canal they grew in the same period
from 6,429 TEUs to 7,177 TEUs, and for
ships moving from Asia to the U.S. East/
Gulf coasts via the Panama Canal they fell
slightly from 4,586 TEUs to 4,467 TEUs.
Many shipping executives expect the
average size of containerships will nudge
into the 8,000-TEU range on West Coast
and trans-Suez services in the coming year.
Already some carriers are putting in
much larger ships: China Shipping, for
example, has deployed ships such as the
CSCL Spring with about 10,000 TEUs of
capacity in its AAC string and COSCO has
ships at both the 10,050-TEU and 13,092-
TEU range in its SEA service.
Container volumes in the transpacific
are expected to grow at a faster clip in
2014 when compared to 2013 as the U.S.
economy improves.
Conrad said he expects demand, which
grew about 3.3 percent last year, will grow
around 5 percent, perhaps even 5.5 percent.
TSA noted that private sector jobs,
housing, consumer spending, and durable
purchases are all up and businesses are
poised for restocking.
Wolfgang Freese, head of the Americas
region at Hapag-Lloyd, said his company
believes a forecast by Global Insight of
eastbound transpacific seeing 5 percent
growth and westbound transpacific growth
of 4.5 percent is on the dot. He added he
was confident there would be growth of
between 5 percent and 5.5 percent over a
three-year span, starting in 2015.
Howard Finkel, executive vice president
of COSCO Container Lines, said he be-
lieved trade growth will be about 1 percent
higher than it was last year and for 2015.
However, his company had hoped for import
growth of 6 percent.
These estimates, Finkel noted, are not
the double-digit of years gone, but it is a
steady increase, and while you are going to
see some capacity increase, you are going to
see that slow down a little bit so that supply
and demand will gradually come back to a
better balance.
I think our customers overall are fairly
bullish, a lot more than they were in 2013
and definitely more than in 2012, said Keith
Andrey, vice president of ocean services
at UPS. So, I think theres a confidence
with the customers and with some of our
services we offer in the supplier manage-
ment arena, we have some visibility into
purchase order forecasting and that looks
to be robust.
Weve got customers across all the
industry segments whether its retail,
high tech, manufacturing, automotive parts
suppliers Theyre looking forward to a
good 2014, which means theyre going to
have a lot of transportation needs, said
Eric Souza, director of product marketing
at UPS.
Andrey said UPS has also seen a sig-
nificant increase in interest by healthcare
and high-tech product shippers in moving
their cargo by ocean instead of air, because
it is less costly. Pharmaceuticals and medi-
cal devices are attractive export cargo for
ocean carriers, he added.
Shippers are looking at the their whole
supply chain, including their inventory
management piece, and theyre realizing
there is opportunity even with their existing
supply chain based on the air freight mode
that theres an opportunity to use ocean just
by realigning how much time their product
spends on a shelf in a warehouse versus in
a container on the ocean, Andrey said,
adding some customers have discovered
that despite the longer transit time, it does
not impact their end customer.
Rates. TSA acknowledged every major
carrier in the Asia-U.S. trade lane operated
at a loss in 2013; globally the top 15 con-
tainer lines posted combined net operating
losses of $1.1 billion for 2007-12, losing
$676 million in 2012 alone.
TSA members announced a half-dozen
general rate increases (GRIs) that go into
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effect between April 2013 and January 2014,
but rates were difficult to nudge higher. To
the West Coast, those increases ranged from
$200 to $400 per FEU (sometimes the GRI
was higher to the East Coast), and totaled
$2,100 per FEU.
Richard Ward, a container derivatives
broker and analyst at Freight Investor Ser-
vices in London, said transpacific carriers
over the past year have generally not been
able to achieve the full GRIs they proposed
and then watched them erode.
TSAs own revenue index for cargo mov-
ing to West Coast ports or inland points hit
its low point for 2013 in December.
The whole market really has been chal-
lenging for the TSA carriers for the last 24
months, Conrad said. You only have to
look at the fact that weve been able to take
the rates up, but then they come down a
few months later, even a few weeks later.
The latest $300 rate increase announced
by the TSA went into effect March 15, and
was reflected in the estimated spot rates
used to create the Shanghai Containerized
Freight Index (SCFI). On March 14, the
SCFI rose $147 to $1,931 per FEU on cargo
moving to the West Coast and rose $101 to
$3,287 per FEU on cargo to the East Coast.
One of the major changes in the ship-
ping business in recent years has been the
increased prominence of the SCFI.
Its the bane of our existence, because
everybody wants to leverage or benchmark
off of the spot rate, said David Brady, vice
president of transpacific eastbound trade
for Hyundai Merchant Marine. The spot
rate, in my mind, is really not an accurate
depiction of what is going on, because we
have a lot of different levels of services that
customers are looking for.
While some customers may just want
the lowest possible price, others need space
guarantees, especially during peak shipping
periods or for specialized services.
TSA recommended a GRI of $300 per
FEU on April 15 and further hikes in
2014-2015 contracts of $300 per FEU from
2013-2014 levels for West Coast cargo and
$400 per FEU for all other cargo. The vast
majority of shippers have contracts that run
from May 1 to April 30.
Brady believes the 2 percent gap be-
tween demand and supply of new ships, is
manageable unless carriers continue to be
driven by greed, instead on by conscience
and constraint. Thats been the real key for
us, trying to have more discipline on the
pricing sector to cover our cost of invested
capital.
Lars Jensen, chief executive officer of
SeaIntel Consulting, said he believes the
transpacific trade could see increased rate
volatility in 2014, much as the Asia-Europe
trade had during the past two years as in-
creasingly larger ships entered that trade.
Cascading vessels from Asia-Europe
routes means there is a very significant
risk that this is going to spill over into the
transpacific this year, Jensen said.
He also said the trade may see increased
numbers of skipped or blank voyages, where
carriers withhold a weekly sailing. This has
become a highly popular tool by carriers
to control capacity.
TSA warned low rates will prevent long-
term investment in container shipping.
Failure to take action on rates and return
carriers to profitability in 2014-15 contracts
threatens to freeze in place plain vanilla
operating models for years to come, with a
steady decline in service options, it said.
Theres a feeling among some smaller
shippers that theyre much more vulner-
able to volatile markets. In early 2010, in
the wake of steep financial losses the prior
year, carriers pulled ships out of service,
rolled cargoes, and left some shippers chas-
ing non-vessel-operating common carriers
for capacity.
Some large shippers have enough lever-
age that they can dictate service and rate
terms to a larger degree, and others are
seeing merit in turning to contracts longer
than one year, or linked to a rate index that
ensures neither carrier nor shipper faces too
much volatility.
Alliances. It seems likely the P3 and G6
carrier alliances will begin operating in the
transpacific trade during the second quarter
of this year, and COSCOs Finkel said the
new discussion alliance between the CYKH
carriers and Evergreen, while focused on
the Asia-Europe trade, could be expanded
to include a string that operates between
Asia and the U.S. East Coast.
Bruce Carlton, president of the National
Industrial Transportation League, wrote
to the U.S. Federal Maritime Commission
last year, stating the P3 Network planned
by Maersk, Mediterranean Shipping Co.,
and CMA CGM would have extraordinary
market reach and potentially enormous
concentration of market share.
The theory that further concentration of
liner alliances finally sets up the industry
to have rate stability is still an open ques-
tion, said Paul Bingham, an economist at
CDM Smith. The regulators in Europe
and the U.S. may not approve of some of
the behavior in rate-setting that would
result in stability, presumably at higher
average rates.
Hyundai is part of the G6 Alliance,
and Brady points out that its entry into
TRANSPORT / OCEAN
than they should to get in and out of ter-
minals. He even foresees challenges with
getting trains switched on and off terminal
as volumes increase.
In addition, DeNike said cranes at many
West Coast container terminals are not
large enough to handle the height of the
new ships and will have to be upgraded.
That will take cranes out of service, while
this work is done. He said his company has
terminals with 17-18 cranes which will have
to be raised and other terminal operators
have similar problems.
Stacks of containers will also be higher
and wider, and as a result were going to
lose our flexibility handling these contain-
ers if they are buried, he said.
ILWU-PMA talks. Andrey and Souza
of UPS said the possibility of a labor stop-
page at West Coast ports this year as the
International Longshore and Warehouse
Union and their employers negotiate a new
contract is a concern for shippers.
Shippers can mitigate risk by increasing
buffer stock, using alternative routings
through ports on the East and Gulf coasts
or in Mexico and Canada, and even shift-
ing transport modes and moving product
by air freight.
Ironically the operational problems at
the Port of New York and New Jersey and
the trucker strike at the Port of Vancouver
already this year prove that alternatives are
not without risks either, Bingham said.
Shippers could benefit by having plan-
ning and visibility of their orders through
supplier management tools, such as those
provided by UPS.
Determining the best course of action
varies from product to product and company
to company.
It comes down to a risk tolerance deci-
sion that the customer has to makehow
much of a disruption can they afford, versus
the cost of routing differently? Souza said.
While many shippers particularly re-
tailers are doing some contingency plan-
ning to prepare for a dock labor disruption,
some have said shifting volume from West
Coast to East Coast ports is less practical
than shifting in the opposite direction, as
some did in 2012 when the East and Gulf
coasts International Longshoremens As-
sociation negotiated its contract.
The amount of capacity on ships calling
alternative ports in locations such as Canada
and Mexico, or along the U.S. East and
Gulf coast, would be limited, and increased
transit times and cost of restructuring
supply chains may make those routings
unattractive.
If there was a strike or lockout, as there
was in 2002 when the ILWU and PMA could
not come to a contract agreement, it seems
unlikely that President Obama would let it
last long before using the Taft-Hartley Act
to declare a national emergency and send
the parties back to the bargaining table.
Of course shippers have to worry not only
about the length of a strike, but its aftermath.
It took weeks to get the West Coast ports
back to normal in 2002 when the lockout
closed container terminals for 11 days.

the Asia-West Coast trade will allow the
alliances members to ramp up the size of
their vessels much quicker than they could
have done individually and offer shippers
more service choices.
Its not clear if, for example, a larger
alliance like the G6 will help stabilize
freight rates. As Grand Alliance carriers,
for example, take space on strings formerly
operated by the New World Alliance, they
may or may not have to discount rates to
attract customers to new routes.
Jensen said the major East-West routes
will become increasingly commoditized,
and predicted there will be considerable
consolidation in the industry over the next
decade, so that instead of 20 global carriers
there will be six to eight.
He also predicted an increase in the num-
ber of schedule independent products,
such as the Daily Maersk service, where
a carrier gives a guaranteed transit time but
may route cargo in different ways or skip
sailings. Just as a FedEx shipper moving a
package may not know if his shipment is
flown through the companys Memphis,
Tenn. hub, or trucked overnight between
two cities, ocean shippers may not care
how a 40-foot container is routed from
China to Germany as long as it gets there
by a guaranteed day.
Andrey of UPS said his company was
taking a guarded, but positive view to-
ward the alliances, hoping they will help
the liner carriers improve their profitability.

Big ships, big impact. The use of
larger ships will mean a lot more bottleneck
effects and a lot more strain on port infra-
structure, because of the cargo concentra-
tion that will be loaded and discharged in a
short period of time at ports, Jensen said.
Ed DeNike, president of SSA Containers,
said at TPM that when ships increase in size
from 8,000 TEUs to 11,000-13,000 TEUs,
they will be worked differently.
The smaller ships generally take two and
a half days to work with six gangs, and the
West Coast terminals do not deploy long-
shoremen during the so-called hoot owl
shift from 3-8 a.m., because productivity
is low and costs are horrendous. But the
bigger ships will probably be worked around
the clock, with eight gangs and take three
days to process.
Because more longshoremen are needed,
there may be a dockworker shortgage,
DeNike cautioned, and this could affect
shippers who may need to wait longer for
their cargo.
He also said at many ports theres not
enough trucking capacity to handle the
larger ships. Trucking is not an attractive
job, he said, and drivers are waiting longer
Asia-U.S. services comparison by route
(Last week of the year)
2011 2012 2013
Source: BlueWater Reporting.
Asia to U.S. West Coast
Number of Vessels
Average Vessel Size
Weekly Nominal TEUs
Estimated Weekly Allocated TEUs
Asia to U.S. East/Gulf Coast via Suez Canal
Number of Vessels
Average Vessel Size
Weekly Nominal TEUs
Asia to U.S. East/Gulf Coast via Panama Canal
Number of Vessels
Average Vessel Size
Weekly Nominal TEUs
300
6,183
250,486
199,810
78
6,268
41,793
34,172
120
4,490
53,308
38,006

317
6,308
262,537
201,161
82
7,177
49,073
37,843
138
4,467
57,794
41,458

267
6,095
237,325
190,696
64
6,429
37,116
28,485
112
4,586
50,219
40,500
E
arlier this year, Maersk Line announced it would spin
off its intra-Americas service into a new independent
unit and operate it under the SeaLand name, reviv-
ing a brand of the company founded by container shipping
pioneer Malcom McLean.
Maersk acquired the international container business of
Sea-Land Service in 1999. (Maersk hasnt released a new
logo for the company, but has been referring to it as SeaLand,
without the hyphen in its press releases.)
Craig Mygatt, chief executive officer of
SeaLand, said in an interview in March
that SeaLand will operate throughout the
Americas, from Canada, the United States,
and Mexico, Central America and the Ca-
ribbean, down into South America, as far
south as Chile and Argentina.
SeaLand will offer commercial services
to shippers and non-vessel-operating com-
mon carriers and a feeder service to Maersk
and other liner carriers.
Initially, SeaLand expects to operate
30 ships, with 22 dedicated to feedering
cargo from services operating between
the Americas and Asia, Europe, and the
Middle East, with the remaining eight ships
dedicated to direct commercial service
between the United States and Central and
South America. The company also charters
space and swaps container slots with other
carriers.
Maersk deploys four ships each in its
South Atlantic Express service (with a ro-
tation of Savannah, Norfolk, Wilmington,
Santo Tomas, Puerto Cortes, Puerto Moin,
Manzanillo, Cartagena, Barranquilla, Santa
Marta, Manzanillo, Santo Tomas, Puerto
Cortes, and Savannah) and West Coast
Central America service (with a rotation of
Los Angeles, Ensenada, Lazaro Cardenas,
Puerto Quetzal, Acajutla, Balboa, Corinto,
Acajutla, Puerto Quetzal, Lazaro Cardenas,
and Los Angeles).
The company currently handles about
400,000 TEUs in the region on its commer-
cial services annually and another 250,000
TEUs on feeders.
While most of the feedering it does today
is for Maersk, Mygatt said SeaLand plans
to seek more of this business from other
carriers.
SeaLand will pursue all of the feeder
volumes that we can to get scale into some
of these smaller ports. We can work with
other carriers and offer a good consistent
service for them, he said.
With numerous services between the Far
East, Middle East, and Europe and Latin
America trades Maersk is a sizable player
in Central and South America. Maersks an-
nual report for 2013 stated it has a 16-percent
share of the Latin America business and
is the second largest carrier in the region.
While the intra-Americas business will
be handled by SeaLand, cargo moving
between Latin America and other parts of
the world, such as Asia and Europe, will
continue to move under Maersk bills of
lading.
Maersk said SeaLand will have a struc-
ture similar to its other regional carriers
MCC Transport, which operates in the
intra-Asia trade, and Seago Line, which
operates in the intra-Europe trade. The
carrier said in its annual report that it has a
6-percent share of the intra-Asia trade and a
12-percent share of the intra-Europe trade.
But in the trade between North America
and the Caribbean and Central and South
America will face stiff competition from
a slew of regional carriers. These include
companies such as Crowley, Seaboard
Marine, SeaFreight, Tropical, King Ocean
in Central America, the Caribbean, and the
northern part of South America.
Mygatt said the fact that SeaLands back
office activities will be handled by Maersk
Line out of its global service centers will
give it a good cost base and a strong posi-
tion in Central America, all the way south
into Panama and the north coast of South
America.
He said the company plans to leverage its
relationships with shippers there and also
New life for old name
SeaLand will be Maersks intra-Americas brand.
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with multinational companies that Maersk
serves globally.
Further south, the trade between the
United States and countries such as Brazil,
Argentina, Uruguay and Chile is dominated
by big global liner companies like Hamburg
Sd, CSAV, Hapag-Lloyd, and Mediter-
ranean Shipping Co.
Mygatt said today theres too much
capacity in the Brazil and Argentina
trade, while theres more opportunity on
South Americas west coast and in Central
America.
In 2012, Maersk decided to end its Spon-
dylus loop between South Americas west
coast and the U.S. East Coast after a year.
When you have these smaller ships and
go through the Panama Canal, you have to
make sure you have your product right,
Mygatt said. I think we just didnt have
all our ducks in a row.
David Ross, executive vice president for
SeaFreight Agencies, told Cargo Business
News Port Productivity Conference in
February that we think SeaLand will be
a formidable competitor.
We assume SeaLand will definitely
start with the base cargo of Maersk, which
today is given to many of the smaller feeder
operators ourselves and others, Ross
said. There certainly would be a segment
of the connecting carrier business that some
of us regional operators do today that will
be withdrawn from the market and they
will do it themselves. That in itself would
allow SeaLand to have a base to start calling
a number of ports throughout the region.
It will be another competitor and, un-
fortunately, the market typically reacts to
more tonnage coming into the trade with
rates falling. And lord knows we dont need
freight rates falling anymore, he added.
Mygatt said SeaLand wants to have an
organization in place by this July or August
and is looking at establishing an office in
South Florida, Texas or Panama. SeaLand
will have about 240 employees scattered
throughout the Americas, including about
50 staff at its headquarters.
The company plans to offer service under
a Maersk bill of lading through the end of
the year, starting the SeaLand brand on
Jan. 1, 2015.
Mygatt said SeaLand will use Maersk
Lines global service centers, but will have
different parameters about how we get
information and how quickly we have to
respond. It will also use Maersk services
for operational services, such as finance,
land-side operations, and human resources.
He said Maersk has found with MCC
and Seago that by emphasizing service it
has been able to build close connections
with customers.
SeaLand, like MCC and Seago, will of-
fer service on many shorter routes, where
carriers need to be quick responding to
concerns of customers, he said.
You need to be quick with prices. That
type of activity works much better with
a dedicated company. Theyre not look-
ing for answers in 48 hours. That doesnt
work. Theyre looking for an immediate
response, Mygatt said. You have to em-
power your front line to make decisions. So
you need a much different model than how
we operate on the East-West trades, he said.
Youre out on the water for three or four
days in a lot of cases. So you cant wait,
you have to have the immediate answer.
You want to have that for the East-West
customers, too, but you know the ship is on
the water for 14 days, or with Asia-Europe
its 21 days. So you have more time to work
through issues, he explained.
Having a trade management team
dedicated to a specific area means your
knowledge level increases incredibly, and
thats what the customer is looking for,
Mygatt said. Not only for sales activity
but theyre looking for people to consult
with them.
Drew Evans, executive vice president and
chief financial officer of AGL Resources,
the parent company of Tropical Shipping
which serves 25 ports in the Bahamas and
Caribbean, told investment analysts in
March that his company views shipping in
the region as a very high touch business
for shippers that are highly dependent on
ocean shipping services.
Mygatt said SeaLand sees an opportunity
to expand the size of the market it serves,
especially in moving refrigerated cargo such
as bananas, pineapples, melons, mangos
and avocados.
Refrigerated commodities amount to
about half the cargo moving out of the
west coast of South America and Central
America, Mygatt said, and SeaLand be-
lieves theres substantial opportunity to
convert cargo moving in breakbulk reefer
ships into containers.
He also said there may be opportunity
to convince multinational fruit companies,
such as Dole, Chiquita or Del Monte, to use
containers of liner companies to get product
closer to ultimate consumers. Some large su-
permarkets are in the process of developing
relationships with growers and looking at
buying fruit in Latin America and arranging
transportation of fruit themselves, he said.
In addition, theres potential for Sea-
Land to convert shipments moving region-
ally over-the-road to short-sea shipping.
Theres a lot of over the road between the
Central American countries and the U.S. and
were trying to tap into that, he said.
TRANSPORT / OCEAN
OPERATIONS
Vessel On-Time Performance
Asia-U.S. West Coast 100%
Asia-U.S. East Coast 92%
Transatlantic 53%
Asia-Europe 63%
AsiaMediterranean 100%
AsiaEast Coast
South America 87%
Asia-Mexico/West Coast
South America 67%
Intra Asia 83%
SAFETY
Long-Time
Operational Stoppage 2
ENVIRONMENTAL
**
Carbon Dioxide (CO2)
Emissions per TEU-Mile 10.4%
Nitrogen Oxide (NOx)
Sulfur Oxide (SOx)
OPERATIONS
In-Terminal Truck Turn Time
Jacksonville 17.0 min.
Los Angeles 17.0 min.
Oakland 22.0 min.
Missed Vessel Connections
Due to Rail Issues 10.3%
Intermodal Transit
On-Time Performance 56%
CUSTOMER SERVICE
Lost Calls 1.63%
Phone Wait Time 14 seconds
U.S. Export B/L
Documentation
Completion Rate 96.36%
Documentation Accuracy
U.S. Export 99.15%
Asia to U.S. 99.47%
EDI
Message Processing
Without Failure 97.5%
EDI Uptime 99.3%
Customer Setup Time 48-hrs
Customer Scorecard
Compliance 98.6%
G L O B A L
*
R E G I O N A L
J A N. 2 0 1 4
O C T. D E C . 2 0 1 3
J A N. 2 0 1 4
F Y 2 0 1 2 v s. F Y 2 0 1 1
O C T. D E C . 2 0 1 3
* Global KPIs are international; regional KPIs are
North American.
** MOL has also established a target to reduce CO2,
NOx and SOx emissions by 10% by FY2015 vs. FY2009.
J A N. 2 0 1 4
J A N. 2 0 1 4
G
lobal manufacturers are stampeding into Mexico
to take advantage of affordable, quality labor and
proximity to the U.S. market and no one is investing
more than the auto industry. Plants are springing up around
the country, but questions about whether there is adequate
rail capacity for finished vehicles are prompting interest in
short-sea shipping services to U.S. ports.
The crunch time is going to be 2015-2016. I dont think
[the railroads] can handle everything,
William Kerrigan, a Charleston, S.C.-
based logistics consultant with years of
experience in the auto industry, said in
an interview. I think manufacturers will
have to use some kind of hybrid services:
rail, short-sea and then rail to go inland.
Mexico is the eighth largest vehicle
producer in the world. There were nine
auto manufacturers in Mexico producing
42 brands at 20 manufacturing plants as
of 2012, according to the U.S. Commerce
Department, and the numbers are rapidly
growing. In 2012, according to the Mexican
Association of Automotive Industry, 2.8
million cars rolled off assembly lines and 83
percent of them were exported. Almost two-
thirds of those exports went to the United
States. The value of Mexican vehicles sold
in the United States topped $1.45 trillion
in 2012, while Mexico only imported $3.3
billion worth of U.S. vehicles.
Auto production in Mexico is forecast
to increase 35 percent to 4 million units
between 2013 and 2018, according to
Autocast.
Global economic forecasting and market
data firm IHS predicts auto production
through 2020 will rise 54 percent, or 1.6
million units, to 4.5 million vehicles, with
a compound annual growth rate of 6.5
percent.
In November, Nissan Motors inaugurated
its third plant in Mexico, this one in Aguas-
calientes, bringing its annual production
capacity to 825,000 from 650,000 vehicles.
It is supported by an adjacent supplier park.
Mazda Motor Corp. began the New Year
by starting production of the Mazda3 at a
new plant in Salamanca. It is exporting the
car to the United States, as well as other
countries in the Americas and Europe.
Mazda also has agreed to build a car for
Toyota there.
Honda is scheduled this spring to begin
mass production of the Fit at a new $800 mil-
lion plant in Celaya, near Guanajuato. The
facility has an annual capacity of 200,000
units. The company also built a transmis-
sion plant next to the assembly plant.
Last summer, General Motors an-
nounced it will invest $691 million to
Mexico marine highway?
Water route could support more finished
vehicle exports to the United States.
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increase capacity at its plants in Silao, San
Luis Potosi and Toluca.
And Audi is scheduled to open a plant
in San Jose Chiapa during 2016.
A key question is whether logistics ca-
pabilities allowing timely transport will
keep up with the expansion in production
capacity given existing constraints in the
system. Mexican plants arent the only ones
competing for rail equipment. Double and
tri-level railcars are expensive and demand
for them is also expected to grow in the
United States to support strong domestic
production and import volumes.
North American outbound flow is a
metric used by the industry to understand
capacity needs. It is defined as all the
vehicles produced in the North American
Free Trade Agreement zone for the NAFTA
market or other countries, plus all the ve-
hicles imported into the continent.
The flow of vehicles rapidly grew to 19.5
million vehicles last year from 13.4 million
in 2009 and is forecast to reach 21.5 million
units by 2017, according to IHS.
The challenge for the railroads is that
the finished vehicle trade in Mexico is one
way. Cars are transported north, but there
is little, if any, southbound traffic. That
means railroads have a lot of empty cars
in the wrong places. They can make non-
revenue bearing trips to reposition cars in
Mexico, or they can recirculate them within
their domestic network hauling to other
destinations and move them south when
they work their way closer to the border.
Returning equipment can take longer when
weather or other unforeseen events damage
tracks or cause network delays.
Kansas City Southern, through an acqui-
sition, has a 50-year concession to operate in
Mexico. The other major railroad in Mexico
is Ferromex, which is 49-percent owned by
the Union Pacific. Both interchange with
other Class I railroads in the United States.
Railroads claim they can handle the
increase out of Mexico, but original equip-
ment manufacturers are skeptical, and are
considering alternatives, Kerrigan, who
runs consulting firm KGI, said.
Spokespersons for several Class I rail-
roads only provided generic information
about their automotive franchises, without
much detail regarding Mexico operations.
Another constraint is trucking capacity.
Auto-hauling companies are having even
more difficulty finding qualified drivers
than truckload and less-than-truckload
carriers because of the specialized training
required. Drivers with multi-deck trailers
have to be able to load and unload vehicles
in all kinds of weather, in addition to safely
driving an 80,000-pound rig, Kerrigan said
in a presentation to an American Associa-
tion of Port Authorities mini-conference
in Tampa, Fla., earlier this year.
A potential relief valve, and protection
against increases in rail prices, would be
water-shuttle services between ports such
as Veracruz and Altamira on Mexicos
Gulf Coast and U.S. Gulf and East coast
ports, or between Mexicos Pacific ports of
Manzanillo and Lzaro Crdenas and U.S.
West Coast ports, but none exist.
After the tsunami in Japan three years
ago and the flooding in Thailand in 2012
crippled the supply chains of companies like
Toyota, Honda and Nissan, OEMs (original
equipment manufacturers) want options.
They dont want to be tied to one particular
route or mode of transport, Steven Rand,
president and chief executive officer of
Amports, said at the AAPA conference.
He predicted 10 to 20 percent of the U.S.-
bound vehicles from Mexico eventually
will be shipped by water.
During the past couple years, vehicle
manufacturers have induced pure car and
truck carriers with trans-oceanic schedules
to make extra stops in Mexico and deliver
the cargo to East Coast ports, but the deep-
sea services are sporadic and provide ir-
ALWAYS MOVING FORWARD www.toteinc.com
TRANSPORT / INLAND
regular capacity.
The carriers have been reluctant, so far,
to develop a scheduled marine highway
service because of the lack of backhaul
cargo, logistics professionals say.
Roll-on/roll-off carriers need to be inven-
tive, Kerrigan said, and explore the feasibil-
ity of a European short-sea model where
barge and specialty watercraft companies
share dedicated vessels to provide frequent
service. One option might be to add a third
leg to South America or Panama with U.S.
exports and then deadhead back to Mexico
to pick up another load.
And any short-sea service would prob-
ably need auto manufactures to collaborate
on co-loading finished vehicles on vessels,
he added.
Rand said auto makers could charter a
vessel for a fortnightly service.
Per Folkesson, president of the Americas
region for Hegh Autoliners, said for such a
service to be viable it would need to be lim-
ited to one or two load and discharge ports.
Ports can play a strategic role and bring
together all the potential actors manufac-
turers, truck, rail, vessels, and stevedoring
companies in the supply chain to leverage
their combined value instead of everyone
continuing to directly deal with each other
in separate silos, Kerrigan said. OEMs have
done an excellent job over many years op-
timizing their inbound supply chains, but
no one has fostered an intermodal approach
toward getting finished vehicles to dealers.
There is not a lot of communication between
the various parties and a big problem for
carriers is that manufacturers typically
dont share much forecasting information
with them.
Ports are kind of the fulcrum everybody
has to come through. They need to be think-
ing of ways to increase throughput without
adding more land, including potentially
building expensive multi-deck garages as
is done at the Port of Rotterdam and some
other European ports, Kerrigan said.
Thats what Port Tampa Bay is trying
to do. In December, the port authority
finalized an agreement with Amports, the
largest auto processor in North America in
terms of volume and processing acreage, to
develop and operate a new terminal dedi-
cated to handling imports and exports of
automobiles and other rolling stock.
High U.S. demand for Mexican cars
one in 10 cars sold in America today is made
in Mexico and Floridas large market
the state is soon expected to surpass New
York as the third most populous state
make Tampa an ideal location from which
to distribute imported cars throughout the
Southeast, the partners say. Auto haulers
could make dealer deliveries in Florida and
the rest of the cars could be shipped inland
by CSX Transportation, which has a track
G
lobal pure car and truck carriers
(PCTCs) have 63 vessels on order
for delivery between 2014 and 2017 and
65 percent of them are post-Panamax
size, according to Hegh Autoliners. The
number of new buildings is down a third
from the peak in 2008-2010, but the vessel
size is greater.
The Norwegian roll-on/roll-off carrier is
scheduled to take delivery of six Chinese-
built, post-Panamax vessels in 2015 and
2016. It ordered four vessels itself and will
operate two more under a 12-year charter
with shipowning company Ocean Yield
ASA. The new PCTCs are designed to
handle larger, heavier and more complex
project and breakbulk cargoes, such as oil
and gas drilling, mining and construction
equipment; cranes; and boats, which will
enable the carrier to expand its business
base.
The vessels will have among the highest
car-carrying capacities (8,500 units) in
the world fleet, 15 percent more than the
largest ships currently operated by Hegh,
according to the family-owned company.
Cars will be stored on 14 decks, five of
which will be adjustable.
Also featured are a new hull and propel-
ler design to improve fuel efficiency. The
main difference from older ships in terms
of cargo handling is their improved ramp
capacity and main deck height of 6.5 meters,
Per Folkesson, president of the Americas
region, said Jan. 23 in Tampa, Fla., at an
Ro/ro carriers go big
American Association of Port Authorities
workshop on changing trade patterns. The
ramp can handle equipment up to 250 tons.
Oslo-based Hegh operates about 60
PCTCs, with capacity ranging from 2,300
to 7,800 car equivalent units (CEUs), and
carries about 2 million CEUs per year.
There are a half-dozen global PCTC
operators and a host of regional carriers.
Overall, ro/ro carriers have a combined
fleet of 699 vessels with an average age
of 9.8 years.
Twenty-five years ago, the average
capacity of a ro/ro vessel was 3,000 units.
Today, some vessels are in the 10,000-unit
range.
About 82 million cars are produced
globally and about 15 million to 20 million
are delivered by sea, according to industry
experts.
The import penetration of light vehicles
sold in the United States has fallen from
about 28 percent in 2009 to about 21 per-
cent and is expected to stabilize at about
20 percent through 2018, according to
Hegh. But Folkesson said planned new
assembly plants in Asia will soon start
churning out hundreds of thousands of cars
for the U.S. market, which could raise the
import-to-sales ratio and benefit PCTCs.
Chinas auto industry mostly makes cars
for the domestic market, but is expected to
aggressively export finished vehicles in the
next five to 10 years, he added.
The greater vessel size and the need
to serve more ports as auto manufactur-
ers seeking local cost advantages and
proximity to markets spread their
manufacturing footprint around the globe
has put pressure on the car carrier industry.
As vessel operators add ports of call the
economic benefit of operating giant vessels
goes down and the logistics complexity
goes up, logistics consultant William Ker-
rigan said at the conference.
Ro/ro operations are much more complex
today. Each original equipment manu-
facturer dictates how frequently it wants
service, at which ports and expectations for
total transit time. Meeting those require-
ments becomes difficult with a static-fleet
size and multiple customers. Folkesson said
spreading the fleet among too many ports
creates legs where vessels are not as full
as needed to turn a profit.
The container sector gets around network
challenges to some degree by entering into
vessel-sharing alliances, which gives them
greater service flexibility. But car carriers
face service challenges because they dont
cooperate very often, Kerrigan explained
afterwards.
Transshipment, Folkesson said, is not
an option because the extra handling in-
creases the chance of damaging vehicles,
which, unlike containers, are expected
to be in pristine condition upon delivery.
And the feeder operations that do exist in
some areas have had a hard time making
money, he added.
BY ERIC KULISCH
TRANSPORT / INLAND
that runs through the port. They also envi-
sion the facility handling U.S. auto exports
to Latin America and the Caribbean, as well
as imports from Europe.
Amports is the exclusive auto proces-
sor at the port of Altamira and operates
an in-land rail facility in Toluca, Mexico.
Altamira and Veracruz, the largest ro/ro
port in North America, are two-and-a-half
days sailing distance from Tampa.
An impediment in Altamira is that the
tunnel height on the Kansas City Southern
de Mexico rail line from San Luis Potosi
and Aguascalientes is restricted. Cars from
the General Motors and Nissan plants are
trucked in for export.
Mexico is expanding port capacity for
finished vehicles.
Last year, Seattle-based marine terminal
operator SSA Marine received a permit to
operate in the public terminal at the Port of
Lzaro Crdenas and has been processing
vehicles there since October. A year earlier
it won the right to negotiate a concession to
construct and operate the first specialized
ro/ro terminal in Mexico, offering 600
meters of waterfront, two berths dedicated
to ro/ro vessels, 42 hectares of storage area
and capacity for handling up to 750,000
autos annually. The concession package
is expected to be finalized in the second
tinues to operate in Lzaro Crdenas under
a temporary permit, according to SSA. An
Amports official declined to comment on
the situation.
Amports and Port Tampa Bay are waiting
to secure a customer before fully develop-
ing their 75-acre property into an auto
terminal, but the berth, yard and buildings
that previously served as a passenger car
ferry terminal already exist, officials said.
Amports has already begun to convert the
quarter, SSA spokeswoman Lauren Of-
fenbecher said.
The current multi-use facility handles
Korean imports for GM, as well as exports
of Mexican-made cars to Latin America
and Cadillac SUVs to China, as well as
other brands.
SSA also provides stevedoring and ter-
minal services for automobiles in Veracruz,
Acapulco and Manzanillo.
Amports, the incumbent processor, con-
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warehouse space into an auto processing
center, with more improvements to follow.
We dont expect it to happen overnight,
but a lot of OEM officials who attended the
Short Sea Automotive Summit (co-hosted
by the port, CSX, terminal operator Ports
America and Amports) in late November
were intrigued by the concept, Rand said.
They liked the fact that theres additional
capacity. They liked the fact that someone
like us is investing capital, he said.
Rand predicted a contract wouldnt be
forthcoming until the new plants in Mexico
come fully online, other auto makers be-
come familiar with Tampas plan, and space
begins to tighten in ports like Jacksonville,
A
mports operates in eight seaports if
you include efforts to launch business
in Port Tampa Bay and two inland rail
ramps in Mexico (Toluca and Salamanca).
In two of those locations Baltimore on
the East Coast and Benicia in California
it owns, rather than leases, its land.
That essentially makes the auto proces-
sor a mini-port authority. The company is
responsible for dredging the berth area,
maintaining the berth, interfacing with the
carriers, publishing a tariff and collecting
wharfage and dockage fees.
The upside in those locations is that
Amports generates a dual revenue stream:
one as a port from carriers, and another as
a processor from auto makers.
In some locations, the Jacksonville,
Fla.-based company also makes money by
renting space for storage of used vehicles
and high-and-heavy equipment for con-
struction and other fields.
Auto processors are the buffer between
manufacturers and dealers. Amports
provides a host of services, including
vehicle washing, pre-delivery inspection,
installation of accessories and protective
coatings, body and mechanical repair,
painting, wrapping vehicles with protective
wrap, rail loading and unloading, warranty
claims, recalls, and more.
Amports has about 800 full-time em-
ployees and flexes its force with tempo-
rary labor because there is usually a lot
of downtime between vessel and truck
arrivals at ports, President and CEO Steve
Rand, explained during a Jan. 23 presenta-
tion at the American Association of Port
Authorities international trade workshop
in Tampa, Fla.
The auto processor is in the unique
position in Baltimore of leasing land at
the Maryland Port Authoritys Dundalk
Terminal on one side of the harbor and
operating its independent facility on the
other side.
Benicia, about 16 miles south of San
Francisco, is also unique. It is the only
port terminal where Amports also handles
bulk product, exporting petroleum coke
byproduct derived from the nearby Valero
refinery to China.
Also read German auto-
makers driving transport
management, by Jon Ross
on AmericanShipper.com.
+ WEB EXTRA
The business model is a bit different in
the ports of Brunswick, Ga., and Hueneme,
Calif. In both locations, Amports runs
dedicated facilities for BMW.
Amports was recently awarded the
contract in Salamanca, Mexico, where
Mazdas new plant is eventually expected
to produce 1.2 million cars per year. There
the company will perform services behind
the plant, such as marshalling vehicles,
loading cars on trucks and doing some
light accessory work, Rand said.
Fla., and Brunswick, Ga.
Auto yards at several U.S. ports are near
capacity, with few opportunities for expan-
sion, according to Rand and Kerrigan. Many
auto manufacturers like to use ports to store
inventory until its sold, which isnt always
good for throughput.
In order to compete for larger bids youve
got to have lots of land that is reasonably
close the pier, got to have buildings so
you can do accessorization work, and in
Brunswick available space for expansion is
on the other side of a highway, Rand said.
Amports is the largest tenant in Jackson-
ville in terms of acreage.
Tampas location is ideal for serving the
huge central Florida population without
cannibalizing the volumes from Brunswick
and Jacksonville, he said.
I think the industry is getting to the
point where we need this extra capacity,
Rand added.
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Profile: Amports
BY ERIC KULISCH
Artist rendering of Amports new terminal at Port of Tampa Bay.
TRANSPORT / PORTS
W
hen President Obama released
his fiscal year 2015 budget pro-
posal in March, a $3.9 trillion
request that would fuel the government for
next year, port officials in Savannah, Ga.,
were in for a bit of bad news.
They had been counting on $400 million
to go to the Savannah Harbor Expansion
Project to get the long-gestating develop-
ment started, but the money was nowhere
to be found. State government officials and
members of Congress viewed this lack of
funding in the White House budget proposal
as a bit of hypocritical politicking they
noted that Obama had said the Savannah
project was important to national com-
petitiveness but for port officials, this
appeared to be yet another bump in a very
long road.
The project calls for deepening the inner
harbor of the Savannah River to 47 feet and
the entrance channel to 49 feet, extending
the entrance channel by seven miles, and
expanding existing terminals.
In addition to federal funds, officials
are waiting on the 2013 Water Resources
Development Act to pass Congress to move
forward. The act contains a provision allow-
ing for the expansion by green-lighting the
Army Corps of Engineers to undertake the
project. Approval is needed because the cost
of the project has increased since Congress
initially approved the plan.
In November 2010, when the Corps first
got behind the project, the price tag was
expected to run $560 million, but would
bring $116 million in yearly benefits. With
the upward revision in costs, the benefits
have also increased, with the Corps estimat-
ing Georgia will see $174 million each year.
The Savannah River was last deepened
20 years ago (per the 1992 Water Resource
Development Act), bringing the channel
from a depth of 38 feet to 42 feet by 1994.
Port officials soon thereafter released
the Savannah Harbor Expansion Recon-
naissance Report. The report pointed out
problems with the channel that could be
remedied by digging deeper. The Georgia
Ports Authority completed a project feasibil-
ity study in 2008, coming to the conclusion
that 47 feet was the ideal depth. Since then,
the project has been about gaining various
approvals from government agencies and
waiting for the federal dollars to roll in.
After Obamas budget announcement,
Georgia Gov. Nathan Deal pledged the state
would move forward with some aspects of
the expansion. Deal will bankroll this with
the $266 million the state had previously
earmarked for the project as funds that
would be used in concert with the federal
governments contribution.
Weve dotted every i and crossed every
t, weve received every federal permit re-
quired, and weve already waited too long,
he said. Under the federal law recently
passed, we will begin dredging using state
funds until the federal government lives up
to its obligations in this partnership.
Vice President Biden promised in the
past year that wed get this project done come
hell or high water, he continued, but its
more accurate to say the administration is
going to put us through the former to get
to the latter.
Even though funding hasnt been ap-
proved, the project can move forward
because it has been labeled an on-going
construction project, according to a fed-
eral spending bill implemented in January.
Reports on the governors plans put these
initial funds being used for the acquisition
and preparation of land.
Sen. Johnny Isakson, R-Ga., called the
lack of federal funding a mind-boggling
failure. He praised Deals decision to move
the project forward without federal funds.
Governor Deal has shown real leader-
ship on this issue, and clearly understands
the importance of beginning construction
now, added Sen. Saxby Chambliss, R-Ga.
When we cant wait turned into we
cant fund, the governor was left with no
other option.
Giving an update on the project during
the Georgia Foreign Trade Conference
in February, Col. Thomas Tickner, the
Corps commander and district engineer
for the Savannah district, said the agency
has been focused for the past 15 years on
the Savannah expansion. He noted the
projects benefits are much greater than the
$174 million annual figure that the federal
government has tied to the development.
Georgia will see an increase in commerce
and the ability to stay competitive when the
project is complete, he said.
Ive been told that Im not authorized
to say [its ready to go], but Im very opti-
mistic that were going to hear something
soon and when that happens, Im sure well
all get together and celebrate because its
been a long, long time, Tickner told the
conference attendees.
Curtis Foltz, executive director of the
Georgia Ports Authority, had estimated in
2013 the Corps would roll out dredging con-
tracts during the second half of the year, but
federal funding holdups have dampened that
timeline. Before Obamas fiscal year 2015
budget was released, port officials talked
about getting dredging underway this June.
The Savannah project will move forward
this year. We are confident that the Corps
will be awarding contracts relatively soon,
Foltz said.
We still have a tremendous amount of
lifting that has to be done over the next three
or four years, but were about to finally
get started on this much-needed project,
he added.
GPA recently completed a 10-year strate-
gic plan to carry the port authority through
2024. In it, GPA pledged to spend $1.4 billion
on improved infrastructure and facilities
throughout the state, in addition to the $652
million needed for the expansion. These
investments, Foltz said, will continue to
make sure the port system in Georgia is as
advanced as it could possibly be.
Upgrading infrastructure will help the
state keep up with an anticipated popula-
tion increase in the near future. As people
move to the Southeast, and more trade is
focused in the region, a robust infrastructure
is important, Foltz said.
The Southeast needs its ports, not in-
dividual terminals, but its port system to
continue to grow. We need to have capacity
in Charleston, we need capacity in Savan-
nah, we need capacity in Jacksonville,
Foltz said. The Southeast demographic
growth, both on the manufacturing side and
the consumer side, is going to require all
the port capacity that we can possibly build
in the Southeast to service this continued
growth.
BY JON ROSS
Slow-going
Savannah harbor expansion
Georgia to step up with project funds,
despite White Houses proposed 2015 budget void.
SmartWay partners know about increased supply chain
efciency and environmental stewardship. This award
recognizes excellence in their achievements toward
helping the environment, incorporating sustainability
and reducing their carbon footprints.
Learn more at epa.gov/smartway
High Praise
for Going the
SmartWay.
Congratulations
to the 2013 SmartWay
Excellence Award Winners
The SmartWay Transport Partnership is
an innovative collaboration between the
U.S. Environmental Protection Agency
and the freight industry. The partnership
is designed to increase energy efciency
while signicantly reducing greenhouse
gases and air pollution.
Tackling a big case
P
lano Molding designs and manufactures plastic storage
boxes, including tackle boxes for fishermen. When it
needed steel molds for its Illinois factory it contracted
with CMT International, a company that
assists American customers that wish to
purchase products in Asia.
CMT solicited bids from manufacturers,
and Plano selected Kunshan, a Chinese
company, to fabricate the molds.
World Commerce Services was selected
to coordinate the transportation. The bill
of lading from World Commerce contained
a Himalaya clause that granted Worlds
subcontractors the warranties and indemni-
ties defined in the bill of lading.
World contracted with THI Group and
K Line to ship the molds from China to
Illinois, and K Line, in turn, subcon-
tracted shipping within the United States
to the Union Pacific Railroad.
The molds, which weighed a collective
25,000 pounds, were on a UP train mov-
ing through Oklahoma on April 21, 2005,
when they broke through the bottom of
the container they were being transported
in and fell onto the track while the train
was traveling at about 70 mph. The train
derailed, causing $4 million of damage to
UP and K Lines customers.
UP and K Line claimed the molds were
not properly secured and sought to hold
Plano liable for the damage.
Worlds bill of lading stated if any
party other than World packs the shipping
container, the merchant warrants that the
stowage and seals of the containers are safe
and proper and suitable for handling and
carriage and indemnifies [World] for any
injury, loss or damage caused by breach of
this warranty.
After the accident, complaints were filed
in the U.S. District Court for the Southern
District of New York by owners of cargo
damaged in the derailment and other par-
ties in the suit. K Line filed suit against
Plano and CMT in the U.S. District Court
for Northern Illinois, but it was consolidated
for pre-trial proceedings in the New York
district court with eight other actions. All
15, was a three-day affair that the court
characterized as a classic battle of the
experts. In the opinion of the plaintiffs
expert, the crates containing the molds were
loaded improperly so their weight was not
distributed sufficiently, and they were not
lashed, causing bouncing. The expert said
this caused stress on the cross-members of
the containers. Planos experts said the con-
tainer was defective, pointing to what they
said were poor welds on the container floor.
Neither side in the dispute presented
witnesses involved in loading the container,
and the court said it understood acquiring
such information from a foreign jurisdiction
can be difficult. It said the limited evidence
it had demonstrates that it is more likely
than not that the molds were secured within
the container.
The court ruled in Planos favor, find-
ing the derailment was caused when the
weakened welds of the containers cross-
members failed, allowing the crates with
the molds inside to fall through the floor.
It ruled the plaintiffs failed to prove
that Plano had breached the World bill of
lading. (Kawasaki Kisen Kaisha, Ltd., K
Line America and Union Pacific Railroad
v. Plano Molding. N.D. Ill. No. 07-5675.
Dec. 30, 2013.)
While K Line and UP suggested to
the extent there is any uncertainty about the
exact stowage of the molds, the court should
draw an adverse inference against Plano,
because it was in a better position to get
such information. The court declined to do
so, saying prior cases cited by the plaintiff
do not stand for the broad application of
such an inference in circumstances such
as these.
The dismissal of the claims under the
K-Line bill of lading wasnt just an im-
portant victory for our client, said Allen
Wasserman, a partner at Locke Lord, the
law firm that represented Plano. It was a
victory for all businesses and individuals
that ship goods under a bill of lading. As
the District Court and the Seventh Circuit
recognized, no business should be exposed
to liability under a bill of lading that it was
not a party to, or which its agent did not
enter into.
The decision has been appealed to the
7
th
Circuit.
Shippers Law l By Chris Dupin
other claims settled, leaving only the K
Line and UP suit against Plano, which the
New York district court transferred back to
its Northern Illinois counterpart.
On July 27, 2011, the Northern Illinois
district court granted Planos motion for
summary judgment on the plaintiffs breach
of contract and negligence claims, finding
because it was not a party to the K Line
bill of lading, nor a principal of a party to
the bill of lading, it could not be bound by it.
The plaintiffs appealed, and the 7
th
Cir-
cuit affirmed the decision regarding the
negligence claims and plaintiffs breach
of contract claims under the K Line bill
of lading. However, the 7
th
Circuit found
unresolved questions of fact material to
the determination of contract claims of the
plaintiffs based on Worlds bill of lading
and sent the case back to Illinois district
court. The 7
th
Circuit said in analyzing the
contention by K Line and UP that Plano
is bound by the terms of Worlds bill of
lading as a contracting party, we must
consider Planos role in obtaining World
as the freight forwarder for the molds
transportation. The 7
th
Circuit said this
question was important, because if Plano
engaged World to handle the shipment on
its own behalf, it could be found liable to
K-Line and Union by the plain terms of the
World bill of lading.
The 7
th
Circuit said the evidence sur-
rounding the Plano/CMT/World transaction
murky at best, requiring questions of
fact that required remand to the trial court.
Two trials were held:
After a one-day bench trial on June
24, 2013, the Illinois district court ruled
Plano could be found liable to K Line
and UP by the plain terms of the World bill
of lading. Before the second trial began,
the parties stipulated to referring the issue
of damages calculation, if necessary to a
magistrate judge.
The second trial, beginning Oct.
American Shipper www.AmericanShipper.com
ComPair Data www.compairdata.com
Alabama State Port Authority www.asdd.com
Atlantic Container Line www.ACLcargo.com
C. H. Robinson www.solutions@chrobinson.com
Critical Commodities Conference
www.criticalcommoditiesconference.com
EPA www.epa.gov/smartway
Fedex Trade Net. Trans. & Brok.
www.ftn.fedex.com/freightforward
Great American Insurance GRP.
www.greatamericanocean.com
Greyhound www.shipgreyhound.com
HAROPA www.haropaports.com
Hyundai Merchant Marine www.hmm21.com
INTERNET INDEX OF ADVERTISERS Check out these locations on the World Wide Web:
Corporate Appointments
(
800
)
874-6422, FAX (904) 791-8836, e-mail releases@shippers.com
Logistics
Tom Perry was promoted to chief technol-
ogy officer, and Mike Simpson was named
president of the retail logistics business
unit at GENCO.
Forwarding
The Los Angeles Customs Brokers and
Freight Forwarders Association elected
Mark Hirzel as president for 2014. Hirzel
is the director of global trade management
for MIQ Logistics.
Ocean
Michael Checchi was hired as vice presi-
dent of area operations at MOL (America).
He will lead equipment, intermodal ser-
vices, contract management and operations
administration groups for the United States
and Canada. Chechhi previously served
as director of intermodal operations for
OOCL.
Mark Johnson was named vice president
of global sales and marketing for Interma-
rine. He has nearly 30 years of industry
experience and held leadership roles at
Deutsche Post before joining Intermarine.
Air
DHL Express has chosen Mike Parra
as CEO of its U.S. express division. He
most recently served as senior vice presi-
dent of network operations for the DHL
Express Americas region. Parra replaced
Ian Clough, who was named managing
director for TNT Express international
Europe division.
Inland
Con-Way Inc. promoted Joseph M.
Dagnese to head its Con-Way Truckload
subsidiary, succeeding Saul Gonzalez.
Dagnese, a 31-year industry veteran, was
previously vice president of international
at Menlo Worldwide Logistics, Conways
logistics services and supply chain man-
agement arm based in the San Francisco
metropolitan area.
Ports
Michael DiVirgilio, a veteran NYK
Group/Ceres Terminals executive, will
retire April 1. Prior to joining Ceres in
2006, he spent 35 years with NYK Line
(North America).
International Cont. Term. Services Inc.
www.ictsi.com
Matson Logistics www.matson.com
Mediterranean Shipping Company (USA) Inc.
www.mscgva.ch
MOL (America) INC. www.CountOnMOL.com
Nordana Line USA www.nordana.com
OOCL (USA) INC. www.oocl.com
Port Metro Vancouver
www.portmetrovancouver.com
Port of Houston www.portofhouston.com/map
Port of Tacoma www.portoftacoma.com
TOTE Inc. www.Toteinc.com
Virginia Maritime Assoc.
www.VAMaritime.com/event/symposium2014
Yang Ming America www.yangming.com
Alabama State Port Authority
www.asdd.com
THE PORT OF MOBILE
Southern
comfort
MEETS
GLOBAL
TRADE.
To add, or not to add, a DC?
Y
our distribution center is maxed out with inventory
with no possibility for expansion. Its not in the most
strategic location. Customer service is declining.
Whats the answer? Add a new DC, right?
This seems logical, but its not neces-
sarily the correct path.
Todays business climate presents
companies with a challenge. Customers
are more demanding than ever, requiring
companies to skinny delivery times to meet
those needs. However, transportation costs
are spiking and capacity shortages are
cropping up daily, which means putting
a premium on customer service comes
with a price.
Adding a distribution center to your
network provides numerous benefits, but
it also creates issues that might offset any
advantages.
First, and most obvious, an additional
DC provided its in the appropriate
location means a faster delivery of
product to the end customer, provided your
fulfillment process and order-cut times
remain the same.
Second, you can leverage regional prod-
uct lines to improve customer service at a
lower operating cost.
The globalization of supply chains offers
another benefit. Companies that purchase
product from foreign countries can often
take advantage of East and West coast
port options.
Using regional carriers (parcel, less-
than-truckload, and truckload) to service
markets is a key consideration when your
network might be expanding. These carri-
ers, which serve specific regions, are ideal
for shippers with multiple DCs, especially
if theyre aligned to the regional carriers
delivery footprint. Optimal for final-mile
deliveries, regional carriers offer a better
cost structure, resulting in a lower cost
per unit.
An extra DC also provides a layer of pro-
tection in case of a natural disaster or power
interruption. If one center is temporarily out
of commission, the other can fulfill orders
in the interim. As the industry continues to
On Second Thought
With Tom Nightingale
deliver benefits as well.
A transportation makeover can entail
the following:
Utilize expedited service to meet the
needs of a select subset of your custom-
ers. Keep in mind that not every customer
needs to be expedited. Take care of your top
customers, and not only will you maintain
good service but this might outweigh the
incremental cost to add a DC.
Add consolidation options through
shipment density. One alternative is to use
pool or cross-dock operations to service
regions of the country. This methodology
takes advantage of a lower-cost truckload
mode to move smaller shipments into
regional markets for delivery.
Another option is multi-stop truckloads.
If youre currently shipping LTL coast to
coast, the drill is predictable and expen-
sive. Stops for cross-docking and stays in
bulk facilities clog the route from pickup to
final destination. With numerous touches,
the chance for damage increases greatly.
Being able to respond nimbly to changes
in the market or customer demand, or even
unforeseen shifts in the supply chain, is a
necessity in todays environment. Although
distribution networks are based in part on
educated assumptions about customers,
markets and inventory needs, volatility
often changes the game.
Your distribution strategy and its
moving parts must be flexible enough to
contain spiraling costs and meet customer
needs. Its not an either-or.
Where you have options is in what you
do with this agility. Will adding a DC
raise your competitive advantage, ensur-
ing that your customers receive shipments
more quickly? Or are you better served by
reconfiguring your transportation model to
capitalize on more-favorable cost structures
and efficiencies?
It might not be as simple as Out of
room = Add a DC. Look at your situation
holistically and make sure that the strategic
goal for your market is aligned with your
companys service strategy. And assess the
potential benefits, options and pitfalls of
such an important decision.
Nightingale is the president of GENCO
Transportation Logistics and can be
reached at tom.nightingale@genco.com.
improve supply chain resiliency, additional
DCs are a serious consideration.
Offsetting these pluses, though, are
some cautions.
For one, problems can crop up with
inventory management. Because of the
variability of markets and the inexact na-
ture of forecasting, companies could find
themselves in a bind if their safety stock dips
low and an inbound shipment is delayed.
The impact of multisite DCs is perhaps
felt most in the increased overhead and
subsequent boost in costs. Systems are
especially sticky when the facilities use
different warehouse management systems
(WMS) or if different versions of the same
system cannot be integrated. This can re-
quire modification or replacement of WMS.
With multiple DCs come forecasting
issues. Its easier to forecast an overall
network than region by region. With only
one center, you have the right product
mix. With a second facility, you have to
rationalize on how to split stock among
your locations.
Another consideration is the frequency
of shipments and ordering patterns. If you
have one DC and take weekly shipment of
a truckload of product and go through that
volume regularly, you can take advantage
of favorable truckload rates. However, with
a second DC, you might have to switch to
a more expensive mode of transportation
to maintain the same frequency and vol-
umes at each facility and ensure similar
service levels.
So now what? Weighing the pros and
cons of adding a DC might not tip the
scales decisively one way or the other. But
its critical due diligence companies need
to perform to make a solid decision that
delivers a return on investment and helps
to achieve your objectives.
Deciding not to add a DC, however,
doesnt mean you have to stay in limbo.
Changing your transportation strategy can
The ever-changing American Shipper
Nothing stays the same, and that also goes for American
Shipper.
The 62-year-old publishing company, based in Jacksonville,
Fla., has made a number of changes since the start of this year,
which we would like to share with you on this page.
For starters, we have expanded our editorial and research
staff, in addition to establishing partnerships with leading
industry research firms, to bring you more insightful and
data-rich analysis about freight transportation and supply chain
management trends and developments.
We have expanded our cooperation with BlueWater Report-
ing to bring you more information about ocean carrier service
changes, capacity and transits into American Shippers analysis
of this vital transportation sector. BWR has also developed a
new general rate increase database that enables shippers to more
efficiently follow those cost increases that carriers routinely
propose for various liner trades.
On our website, we are adding a new video feature, called
AS Insider, through which our editors will provide readers ad-
ditional details about current and pending industry coverage.
We will also continue to deliver enlightening content on the
latest industry issues through in-depth special reports and highly
attended webinars which include top industry representatives,
analysts and government officials.
In addition, we continue to assist with organizing selective
conferences, such as the Virginia Maritime Associations
annual International Trade Symposium, and our editors are
routinely asked to moderate panel discussions and speak before
industry groups.
To enhance American Shippers mobility and subscriber ac-
cess, we have launched both an iPad and Android application
to read our content on tablet devices. The applications can now
be downloaded from AmericanShipper.com, but will be avail-
able soon from the Apple and Android stores. While American
Shipper may be viewed on smartphones, we will also have
apps specifically tailored to these devices available this spring.
What hasnt changed at American Shipper is our foundational
commitment to accurate and in-depth reporting about the latest
freight transportation and supply chain management topics.
No matter how our content delivery to subscribers changes
with technological advances, you the readers can always
count on that quality of American Shipper to remain the same.
It all adds up to performance
you can count on.
Whats in a number? Its how you measure success. MOL publishes
our on-time arrival numbers quarterly so you can see how were
doing. Numbers can fluctuate for a variety of reasons but our target
is always 100%. We strive every day to meet your expectations so
you can be confident in our service.
See how we measure up in all areas at CountOnMOL.com.
100
%
92
%
OCTOBER - DECEMBER 2013
ASIA-U.S. WEST COAST ASIA-U.S. EAST COAST
VESSEL ON-TIME PERFORMANCE

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