American Shipper Vol

FMC polls industry on OSRA 6 Nistevo: Collaboration for the cautious 22 H-P picks Schenker, Panalpina 62 Vancouver’s take-charge port 74 800-ACL-1235 www.ACLcargo.com

To HANDLE cARG American Shipper Vol. 43, No. 5 May 2001

LOGISTICS 18 Michelin keeps it simple 33 On the Cover E-survivors 18 FORWARDING / NVOs 36 The electronic commerce climate has changed Import industry sets tone for ERP 15 NACA, Ecu-Line form alliance 38 dramatically, with weaker players sent Fish & Wildlife wrestles with automation 40 packing, and the remaining competitors Customs lists textile rules violators 42 under increasing pressure to perform. Which Troy: Hands-on NVO 44 transportation, warehousing and supply chain Hi-Tech’s Jones finds a new way 46 Internet software providers will survive the TRANSPORT/OCEAN 48 shake-up ? Gordon Forsyth asks what may FMC polls industry on OSRA 6 be a more important question: Will the Internet Creel: Deregulation has its limits 8 live up to its initial promise to bring equality MarAd battle shifts to Congress 12 of information to companies of all sizes? How much bigger will boxships get? 50 Kent Line sharpens East Coast focus 52 SMA fixes shortened arbitration process 54 P&O Nedlloyd expands Down Under 55 Collaboration for the cautious 22 TRANSPORT/AIR 56 Kevin Lynch, chairman and CEO ofNistevo Corp, EU fines Deutsche Post $21.6 million 60 has been in the curl o f the collaborative logistics wave. H-P picks Schenker, Panalpina 62 Founded in 1997, the company’s chief goal was building Panalpina buys SwissGlobalCargo stake 63 software “which recognized that, at some point, packages BAX Global signs Airbus, Air France 63 were going to get smaller and move faster, so that more SAir Group reports loss 63 of a company’s product would be moving more often. ” Con-Way expands into air forwarding 63 What’s more, Nistevo protects its customers’ proprietary data in a collaborative environment. TRANSPORT/INLAND 64 STB hears final pleas 12 Truckers in slow gear with QP/WP 66 CN, Wisconsin Central file for merger 67 EGL wins MTMC logistics contract 26 Where the rail meets the water 68 U.S. military transportation strategists already believe Senate bill seeks to repeal railroad tax 71 that commercial logistics firms could do a better job Bill would back short-line railroads 71 at managing defense cargo movements, but they want MTMC adds fuel adjustment system 71 proof. Using the military’s U.S. Southeast logistics Rutter picked to head FRA 71 installations as the testing grounds, the Military Traffic Groups seek retrofit extension 71 Management Command, the surface transportation PORTS 72 logistics unit of the armed forces, awarded a one-year Wallenius Wilhelmsen’s terminal focus 72 contract to Eagle Global Logistics. Vancouver’s take-charge port 74

SERVICE ANNOUNCEMENTS OOCL expands Scan Baltic Express... CMA Power shifts in chartering 28 CGM takes slots on Hanjin’s services ... Edward Hanley and Rod Vulovic, executives with U.S. Lines form Asia/U.S. South America VSA Ship Management Inc., owner and bareboat charterer o f U.S.-flag containerships to Maersk Sealand, see ship DEPARTMENTS owners moving to larger containerships and longer Comments & Letters 2 charters. And, in a new wrinkle, larger shippers Shippers’ Case Law 34 are contemplating time chartering vessels on their own, Satish Jindel 58 as a more cost effective and more reliable alternative Theodore Prince 64 to booking their cargo with carriers. Corporate Appointments 77 Service Announcements 78 Editorial 80 Shippers’ NewsWire daily e-mail, only $60/year. Call 1-800-874-6422

AMERICAN SHIPPER: MAY 2001 1 American Shipper BT! INTERNATIONAL LOGISTICS I I m

Publisher Hayes H. Howard Jacksonville [email protected] Comments Editorial David A. Howard, Editor &------Jacksonville [email protected]

Gary G. Burrows, Managing Editor Jacksonville [email protected] Letters Philip Damas, International Editor London [email protected] Brokers’ services shouldn’t be a ‘giveaway’ Christopher Gillis, Deputy Editor Washington [email protected] This is in response to a Comments and Letters item in your April issue, “Giving away the business,” by Chris Gillis (page 4). Tony Beargie, Associate Editor Washington amshpdcl @aol.com While I agree with the writer that customs house brokers have long been giving away their expertise in many areas in order to make Robert Mottley, Associate Editor New York [email protected] minimal profits from entry fees, I do not agree with the last line of the comment, in which the writer eludes to a “good luck” attitude when it comes to now Gordon Forsyth, Contributing Editor New York [email protected] charging for a brokers’ expertise. I have long advocated to any broker, importer or exporter that would listen, that Francis Phillips, Shipping Research London [email protected] brokers are in a unique situation when it comes to counseling importers and exporters. The Customs Modernization Act of 1993 gave importers and exporters three experts Simon Heaney, Research Asst. London [email protected] to draw information from: trade lawyers, trade consultants and customs brokers. In this group it is the broker that is filing the entry and, therefore, has to have the most Michael Merrill, Electronic media Jacksonville mmerrill @ shippers.com information concerning how the importer is doing business, so that the broker make the correct assessment on both valuation and duty payment. Virginia Powers, Graphics Any broker who is worth his salt is expertly versed in both the Harmonized Tariff and Advertising Cathy Avolio, Advertising Manager U.S. Customs regulations. With this knowledge, the broker should have the same right and New York [email protected] Nancy B. Barry advantage to charge fees comparable to both lawyers and consultants. It is only when Jacksonville [email protected] brokers start to realize their worth that this “giveaway” attitude will finally disappear.

Circulation Karyl DeSousa Kerry Cowart Bill Julich Jacksonville [email protected] president, To subscribe call Delmar International 1 (800) 874-6422 Jamaica, N. Y.

New York (212)912-1077 Fax:(212)912-1244 Good times ahead for giants of the sky 5 World Trade Center, Suite 9259 New York, New York 10048 The Antonov Design Bureau’s goal to finish building the second world’s largest

London +44 (20) 8970-2623 commercial cargo plane is more than just a novelty for the Ukrainian aircraft manufacturer. Fax: +44 (20) 8970-2625 The AN-225 has a payload of250 tons and room on its back to handle a cargo “pod.” Empire House The first plane was designed and built in the late 1980s for the former Soviet Union Empire Way, Wembley North London HA9 0EW, England space program. The plane made its debut to the world’s airline industry in 1989 at the

Washington (202)347-1678 Paris Air Show. Fax: (202) 783-3919 The behemoth AN-225 caught the attention of air carriers, but lacked general market National Press Bldg., Rm. 1269 Washington, DC 20045 interest. It also fell victim to the economic devastation of Soviet Union’s collapse. A

Jacksonville (800) 874-6422 (904) 355-2601 second plane sat in pieces at the Antonov Design Bureau’s manufacturing plant in Kiev. Fax: (904) 791-8836 But all of that is about to change. The Antonov Design Bureau, along with financial 300 W. Adams St., Suite 600 P.O. Box 4728 support from British cargo airline Air Foyle, is assembling the second AN-225, named Jacksonville, FL 32201 the Mriya (Ukrainian for “Dream”), with the purpose to transport commercial cargo. wbpa The Russian heavy-lift air-transport business got its start with the AN-124, a former INTERNATIONAL ® Soviet military transporter with a 150-ton payload. The planes have become common- American Shipper is published monthly, except one place in the transportation of heavy, outsized cargo throughout the world. About 20 additional issue for the Southern Region only. Pub- lished on the 15th of each preceding month by Howard AN-124s are in commercial operations today. Publications, Inc., 300 W. Adams St., Suite 600, P.O. Box 4728, Jacksonville, Florida 32201. Periodical post- Executives of the airline industry’s three AN-124 operators, Volga-Dnepr Airlines, age paid at Jacksonville, Florida, and additional mailing Antonov Airlines (Air Foyle) and Polet, forecast steady growth not just for heavy-lift offices. Subscriptions $60 per year for 12 issues;$180 for air mail; $5.00 for single copies. Telephone (904) cargo but also for general hi-tech freight. 355-2601. Late last year, Sony found itself in a capacity crunch with traditional airline services American Shipper (ISSN) 1074-8350) as it planned for the delivery of its PlayStation II video game units to overseas markets. POSTMASTER: Send Change of Address Form 3579 Sony turned to Volga-Dnepr to charter AN-124s. Sony reportedly experienced a 5- to American Shipper, P.O. Box 4728, Jacksonville, Florida 32201. percent decrease in losses and damages to its cargo that it would have otherwise experienced with traditional airline services. Printed in U.S.A. Copyright © 2001 Howard Publications, Inc. The problems for the AN-124s and A-225s, however, will be increasingly restrictive

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STRUCTION CRANE SERVICES, INTERMARINE HAS runways and tighter cargo areas of airports. But here to, the time of debate over ocean shipping reform. However, as part of a may be right with former military air bases around the world compromise reached with the ocean liner industry, the NIT becoming the future commercial centers of tomorrow. (Chris League backed off on the issue and continues to stay out of the Gillis) debate — at least in the United States. Service contracts are flourishing and everyone is happy so far Bush promotes hemispheric trade bloc with the results of the Ocean Shipping Reform Act, the NIT President Bush told executives and government officials at a League says. meeting of the Organization of American States in Washington However, in Europe it’s a different story. The NIT League, April 17 that his administration backs the development of a like other shipper groups from around the world, supports the hemispheric trade bloc encompassing North and South America review currently underway before the Organization for Coop- and the Caribbean. eration and Economic Development. The U.S. government is working with 34 countries to de- Perhaps Bob Voltmann, executive director of the Transpor- velop the so-called Free Trade Area of the Americas. Negotia- tation Intermediaries Association hit the nail on the head, when tions on the FTAA are scheduled for completion in January he recently predicted that the antitrust issue, one way or another, 2005. “It will make our hemisphere the largest free trade area in will be resolved across the pond by the OECD before it is the world," Bush said. resolved by the U.S. Congress. (Tony Beargie) Industry groups with an eye to expand trade opportunities and to make cross-border cargo flows more efficient through- Are MarAd’s days numbered? out the hemisphere applaud the Bush Administration's commit- When the Bush administration proposed transferring the ment to the Free Trade Area of the Americas. U.S. liner program, known as the Maritime Security Program, “We welcome this policy from the administration, and we to the Department of Defense and slashing Title XI shipbuild- hope it continues to be backed by serious action,” said Fran- ing funding, many feared that this policy switch meant the end cisco X. Santeiro, managing director of global services in Latin of the Maritime Administration. America and the Caribbean for Federal Express, and chairman Officials are quietly talking over a smooth transition “just in of the customs committee for the Conferecia Latino Americana case” the Bush proposal prevails. de Companias Express (CLADEC). And Transportation Secretary Norman Mineta does not “We’re pleased with the progress that this is making and that it appear to be fighting to save MarAd for his department’s turf. is high on the president's priority list so early in the administra- Also, Mineta said he was having problems recruiting some- tion,” said Alan Atkinson, spokesman for the Joint Industry one to take over as the new Maritime Administrator. Group. “We have high hopes for a successful outcome for the MarAd officials insist the agency will survive. After all, MarAd FTAA.” would still have the Ready Reserve Fleet, U.S. cargo preference To help in the development of trade agreements, Bush is programs, the Jones Act, port and intermodal development, state pursuing fast-track authority to allow him to negotiate trade maritime schools and the U.S. Merchant Marine Academy under deals, which he would submit to Congress for vote. its roof. “Trade promotion authority gives our trading partners confi- Meanwhile, the industry is baffled over the proposed trans- dence that they can rely on the deals that they negotiate,” Bush fer, especially in light of Bush’s pro-maritime statements made said. “It allows us to seize opportunities to expand the circle of during the course of the presidential campaign. trade and prosperity.” They also may be counting on support from Bush chief of The president said his administration will also continue to staff Andrew Card, who played a role in getting the current pursue bilateral trade agreements with countries, such as Chile, Maritime Security Program off the ground, when he served as Singapore and Jordan. “My administration is committed to pursu- Secretary of Transportation under Bush’s father. (Tony Beargie) ing open trade at every opportunity,” he said. (Chris Gillis) Littered field OECD may take lead in antitrust issue In the aftermath of first-quarter reports, the logistics landscape Will it be just another year of huff and puff over the future of is strewn with the bodies of wounded or mortally stricken dot- ocean carriers’ antitrust immunity in the U.S. Congress? coms. Feverish deals are being struck every day, as remaining Rep. Henry Hyde, who represents hundreds of non-vessel- companies attempts to partner find few takers among possible operating common carriers in his Chicago-area congressional clients who have heard it all in the last year. district, is no longer the chairman of the powerful House For many companies, the carnage was self inflicted. It ’ s enough Judiciary Committee. to note one highly hyped dot-com that, at its peak, had 56 people Although Rep. F. James Sensenbrenner, the new chairman of on its payroll and not one revenue stream from a pay ing customer. the House Judiciary Committee, reintroduced legislation in this After the bubble burst, only a handful of executives remained to Congress to repeal the ocean carrier industry’s long standing dispose of the wreckage. The venture capitalists who underwrote right to discuss and agree on rates, the bill has failed to gamer the company had sat back while the dot-com stocked itself with political support. prominent industry names at six-figure salaries. Finally, their The general view is that the antitrust issue will be preempted patience over, the venture boys yanked the rug. by the Bush administration’s tax and budget proposals. This is hardly an isolated case. While one feels empathy for Shippers of the National Industrial Transportation League those who have lost their jobs, there is also a sense of incredulity continue to hold back on the issue, even though they were that anyone would have hired so many employees before a shred against continuing the antitrust exemption during the early days of profitable business came in the door. (Robert Mottley)

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tegic investment decisions. The ability to discuss and exchange trade information helps carriers improve business planning, encourages better capacity FMC polls industry on OSRA utilization and helps develop “rational pricing policies,” the WSC said. Shippers’ responses focus on discussion agreements, Guidelines suggested under discussion agreements are “completely voluntary,” the voluntary guidelines. Small lines see revenue losses. WSC said. Big chemical shipper DuPont said the B y T ony Bea r gie FMC needs to consider whether regulations “to protect shippers” are required for dis- hipper responses to the U.S. Federal cussion agreements operating in trades Maritime Commission’s analysis of “Those who still lament where members control more than 30 per- the Ocean Shipping Reform Act car- cent of the market. However, DuPont said it riedS a unanimous message: Keep a close about not knowing has not experienced problems nor gained watch over discussion agreements. benefits from discussion agreements. Despite this concern, shippers and carri- someone else’s ocean rates ers continue to see the two-year-old reform should consider calling, NVO Discrimination. Carlos Rodriguez, act as largely positive for the industry. representing the New York/New Jersey For- The National Industrial Transportation 1-800-get-a-life. ” eign Freight Forwarders and Brokers Asso- League, the nation’s largest shippers’ association, named four trades where ciation, said it is still too early to determine Thomas W. Craig non-vessel-operating common carriers have OSRA’s long-term impact on liner ship- general manager, suffered discrimination at the hands of dis- ping. But for it’s “working largely as in- LTD Shippers Association cussion agreements and conference carriers. tended and has led to significant benefits In the South American trades, NVOs were for both shippers and carriers.” targeted by both the East and West Coast of However, the NIT League questioned carriers “are overstepping their antitrust pro- South America Discussion Agreements dur- whether guidelines followed by carriers tection.” ing the 1999-2000 shipping season, Rodriguez over rates, surcharges and services “are Discussion agreement activities also stifle said. Discussion agreement members set truly voluntary,” or if they provide a tool to free-market pricing and contract negotia- NVO benchmark rates that were followed discipline the market. tions, Craig said. For instance, he charged during most of the shipping season, and While the NIT League has not heard a that members of the Transpacific Stabiliza- while rates eventually dropped, “they never shipper complain of a carrier’s refusal to tion Agreement have failed to develop one- should have been at the levels set by the negotiate on service contract terms, there is on-one pricing through direct negotiations. voluntary guidelines” because the trade was concern over the rising number of sur- “Instead, they have chosen to basically fol- and continues to be overtonnaged. “The mar- charges announced by carrier discussion low the announced TS A price guidelines in ketplace was distorted by the discussion agree- agreements and imposed by their members. their contract negotiations.” ment activities.” “For example, carriers operating under The first year of OSRA brought a $900 In the transpacific eastbound trade the discussion and conference agreements in the general rate increase and new surcharges, chaos eased in the 2000-2001 shipping sea- U.S. trades have recently sought to impose “all decided by the Transpacific Stabiliza- son, NVOs were again subject to voluntary surcharges for carrier-supplied chassis, con- tion Agreement,” said the Toy Shippers price and service conditions agreed to by tainer repositioning, issuance of bills of lad- Association. members of the Transpacific Stabilization ing, fuel and for peak season shipments,” the The National Customs Brokers & For- Agreement, Rodriguez said. NIT League said. “Many shippers view these warders Association of America said the In the transatlantic, members of the Trans- surcharges as inappropriate revenue enhanc- surcharges and rate increases seem to cut Atlantic Conference Agreement and non- ing mechanisms that bear no relation to the across all trades, but the problem is more conference lines imposed an equipment actual costs of the carriers.” acute in the Far East. repositioning surcharge in late 1999, The NIT League’s views reflect those of The NCBFAA said it would be hard to Rodriguez said. Though discussion agree- smaller shippers and transportation inter- see how shippers or ocean transportation ments are not permitted in the this trade, mediaries who took aim at discussion agree- intermediaries could benefit from discus- TACA and the independent carriers appear ments and voluntary guidelines, but at the sion agreements, since their purpose “is to to be acting as discussion agreement carriers, same time gave OSRA a passing grade. perpetuate cartel-type activities.” he said. “Discussion groups are dinosaurs that “Almost by definition, discussion agree- In the U.S./Mideast trades members of should go away,” said Thomas W. Craig, ments are intended to create market distor- the association report discussion agreement general manager of the LTD Shippers As- tions and the ‘voluntary guidelines interfere imposed surcharges during the first two sociation, Glenmoore, Pa. with a truly competitive marketplace,” the years of OSRA, Rodriguez said. Protected by antitrust immunity, carriers NCBFAA said. Rodriguez called for close monitoring of are able to publicly announce rate hikes and The Washington-based World Shipping discussion agreements by the FMC. The a wide variety of surcharges “That collusion, Council, a trade association of 42 liner carri- very nature of such agreements is “inher- while legal, is contrary to the spirit of OSRA ers which account for about 90 percent of the ently anticompetitive” when it comes to and of confidential contracting,” Craig said. U.S. ocean liner trade, said discussion agree- freight rate structures and add-on charges. He called for an FMC investigation to ments provide rate and trade stability and determine whether discussion agreement confidence in the carrier community for stra- Confidentiality. Craig, of LTD, rated 6 AMERICAN SHIPPER: MAY 2001 A ND SO ME C A RRIERS T H O U G H T

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And it's only available from API. NEWSFRONT the right to negotiate confidential contracts uidate damage terms, more appropriate APL service contracts have grown “dra- directly with ocean carriers “as perhaps the breach of contract terms and are able to matically” in all of APL’s U.S. trades. Ser- most positive change with OSRA. include a broader range of commodities, vice contract account for 80 percent of the “Confidentiality permits us to better meet the association said. carrier’s business in the transpacific, 75 our requirements, without all of the ‘me-too Lawrence E. Cosgriff, APL vice presi- percent in the transatlantic and 70 percent plagiarism’ that tainted the pre-OSRA ne- dent said that since OSRA went into effect in the Latin American trades. gotiations,” Craig said. Before OSRA, public pricing information “stifled creativity and placed false barriers into negotiations.” “That obsession on the price someone Creel: Deregulation has its limits else pays is something unique to maritime shipping,” Craig said. “Conference con- FMC chairman questions potential benefits tracting practices also fostered this obsession. Having to know other companies’ rates of total deregulation in ocean shipping. needs to die its own death if shippers and carriers are to move forward with creative LONDON empty slots produce no revenue. “Carri- contracting. Those who still lament about not Harold Creel, chairman of the U.S. ers are thus prone to bidding rates down knowing someone else’s ocean rates should Federal Maritime Commission, ques- to levels close to or below their costs,” he consider calling, 1-800-get-a-life.” tioned the potential benefits of “total said. “A degree of antitrust immunity The World Shipping Council said the deregulation” in liner shipping and allows carriers to engage in limited ‘self- shift from conference controlled, to one- warned against the risks of conflicts of regulation’ — through conferences or on-one confidential contracts has facili- international laws. discussion agreements — to keep rates tated more flexible and customer-responsive If a “totally deregulated market” is from sinking below compensatory lev- contracting. defined as one without els, or to attempt to stabilize rates when Global and multitrade contracts are ex- antitrust immunity for overcapacity ceases.” pected to grow, but most contracts are still conferences or agree- Creel added, however, that “the pur- confined to single trade lanes, the WSC ments among ocean pose of antitrust immunity is primarily to said. But the growth of global contracts common carriers, then ensure an adequate and efficient supply (containing foreign-to-foreign movements) a mo ve to a deregulated of ocean transportation services in a man- could be less common than multitrade con- market would create ner that best fosters the flow of ocean tracts, since most shippers appear to prefer problems and may not commerce.” Creel keeping their U.S. contracts separate from benefit the industry and Edward Emmett, president of the U.S. their foreign-to-foreign contracting arrange- its customers, Creel said at the recent National Industrial Transportation ments, the WSC said. Containerisation International conference League, told the London conference that Direct, confidential contracting has pro- in London. the climate between ocean carriers, ship- moted more customization of contract terms, Asked whether carriers or shippers pers and regulators has changed in the with shippers seeking service quality and would be the main beneficiaries of a last five years, including since OSRA carrier commitment terms, the WSC said. totally deregulated market, Creel said introduced deregulation in the U.S. liner Maersk Sealand said individual, confi- there is “no easy answer.” shipping trades. dential contracts have enabled the company “The question presupposes that both Five years ago, Emmett said he was to tailor contracts to shippers that would carriers and shippers will benefit under a “widely pilloried” by ocean carrier ex- otherwise be left out. This has allowed the totally deregulated market, but that one ecutives and staff of the FMC for pro- carrier to expand its customer base, and to sector may gain more than the other,” he moting deregulation. But OSRA has been accommodate niche shippers with special said. “I would contend, however, that successful and carriers now say that they market needs. total deregulation may not necessarily can work well under the law, he added. The carrier said it has seen an increase in benefit one sector over the other, and The NIT League has not called for the multitrade and global contracts under may in fact end up benefiting neither.” complete elimination of antitrust immu- OSRA, due to the ability to contract across Creel said large shippers will always nity in shipping. However, Emmett said trades without conference conflicts. have their ocean transportation needs met the issue has become less important. “I Also, the shipping line said it can more at prices with which they are generally think carriers will find that (common) readily accommodate shippers needing short- satisfied. “I am very concerned, how- price-setting is useless to them,” he said, term contracts or contracts for small vol- ever, about how a totally deregulated referring to discussion agreements and umes. transportation market will affect the small conferences. The NCBFAA agreed that service con- to medium-sized shipper.” But Emmett criticized discussion tracting has grown under OSRA largely “Antitrust immunity for ocean carriers agreements for continuing to announce because it is now easier to contract directly was considerably limited and circum- rate increases the same way conferences with the carriers, and that more carriers are scribed” by the Ocean Shipping Reform did in the past, describing this behavior now willing to sign contracts for smaller Act of 1998, he added. “Essentially, con- as out of step with OSRA and new one- volumes, and changes to contracts are now ference control over service contracts to-one contracting practices. “What I made more easily, the association said. has been eliminated.” don’t understand is why carriers con- More multitrade and global contracts are Creel said that, when faced with over- tinue to create such static (by announcing now being offered and contract terms have capacity, carriers tend to compete ag- joint annual rate increases),” he said. “It improved, the NCBFAA said. Shippers are gressively in order to fill their ships, as creates ill will.” now able to negotiate more reasonable liq-

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Global contracts have grown under ANZDL, which operates in the U.S./ kers and NVOs benefit from these effi- OSRA and now account for 48 percent of Australia/New Zealand trade reported an a ciency-enhancing agreements. APL’s service contract volume. 10-percent increase in service contracts “We benefit from all ... which further Prior to their merger, Maersk and Sealand whereby 85 percent of its business is now enables us to provide expanded transporta- participated in roughly 1,900 contracts dur- under contract. At the same time, the carrier tion services to our shipper-clients,” he ing the 1998 contracting season, with nearly reported a 40-percent drop in revenue over said. Such agreements should be imple- all being conference or group contracts. By the last two years. mented and developed without blanket an- 1999, contracts surged to some 3,400, with Such a revenue erosion is “significant in titrust immunity. less than 10 being conference or group con- any industry and in a capital intensive in- Removing conference authority over contracts. dustry such as shipping could be problem- tracting is also a positive development, atic,” said the Andrea Bolch, senior vice Craig said. “Conferences were artificial Horning In. Rodriguez argued that liner president for North America. pricing barriers in the marketplace. LTD, companies, by having the advantage of Contship Containerlines Ltd. reported a for one, has shed no tears over the demise of confidentiality, are expanding their services 30-percent drop in revenues in the U.S./ the conference system.” into areas traditionally reserved for for- Australia/New Zealand and U.S./Mediter- The NCBFAA, however, said that its warders, NVOs and brokers. Under confi- ranean under OSRA. members have reported problems securing dential contracts, ocean carriers are able to Americana, which operate between the space from carriers operating in space shar- bundle services, like warehousing, forward- United States and North Europe, the Medi- ing agreements. The association attributed ing, brokerage, consolidation and ocean terranean, both coasts of South America such problems to the loss of control over transportation in one single confidential and the Far East, have seen revenues drop space chartered by carriers. package. 30 to 35 percent in all trades, except the Over the long term DuPont feels that He pointed to the foreign owned “mega- South American trades. In the latter, the stronger carriers in operational alliances carriers” — such as Danish Maersk Sealand, carriers experienced a 10-percent increase will bring improved services. But, DuPont NOL-APL, CP Ships and P&O Nedlloyd “due to a strong market.” said a “big question” is whether over time, — have emerged over the past several years, The carriers are able to get “some infor- alliances or mergers would “lead to mo- providing point-to-point logistics and are mation” on contract rate levels “through nopolistic behavior.” directly competing with OTIs. These lines market intelligence and through discussions are all foreign-owned, yet they enjoy an held with other carriers under agreements,” NVOs, OTIs. Rodriguez used the survey extraordinary privilege — immunity from the two shipping lines said. to renew his complaints that NVOs are U.S. antitrust laws. At the same time, these Maersk Sealand, Columbus Line and APL disadvantaged by OSRA, including carrier companies enjoy all the benefits under said that breach of confidentiality was not a activities under discussion agreements and OSRA that OTIs are unable to claim. This problem for the lines. being left out of a major portion of the makes no sense to the thousands and thou- While COSCO North America said it confidential contracting system. He also re- sands of American-owned companies that had “no clear breach of confidentiality,” emphasized the industry’s stand against are OTIs and their customers.” “there have been some instances where we ocean carriers’ antitrust immunity. APL said ontracts with NVOs have in- have felt that our contract information had Because NVOs are not permitted to enter creased from 24 in 1998 to 208 in 2000. The been shared by shippers with other lines.” into confidential contracts with their ship- increase was attributed in part to APL’s APL has not solicited confidentiality per clients and are required to maintain expanded capacity in the transatlantic and measures in its contracts, but is open to public tariffs at the FMC, they have been Latin American trades. them if requested by its customers. Only 4 bumped from OSRA’s core reforms and percent of APL’s contracts contain confi- have been “left holding the common carrier No Secrets. Some carriers questioned dentiality provisions, and these have been bag,” Rodriguez said. whether confidential contracts with ship- triggered by shipper requests, APL said. Under OSRA, NVO’s must make all pers are truly confidential. Beaches of confidentiality have not been shipments publicly available through elec- Andrea Bolch, senior vice president for a problem, and in the few cases where there tronic tariffs, while liner carriers can keep North America for Australia-New Zealand may be a problem, APL reduces the number their information private under confiden- Direct Line, said it is not uncommon for the of participants in the negotiations. tial contracts, he said. shipping line’s customers to provide rate Maersk Sealand said virtually all of its The United States is the only country that information to other carriers. “This creates contracts contain a confidentiality clause. restricts NVO contracting with exporters a ‘rate shopping’ environment” to the point Shippers and carriers accept such clauses and importers, he added. where rates “are levered down to the lowest “as standard practice,” the carrier said. The NCBFAA continued to urge the FMC common denominator. This does lean in to provide guidance on whether forwarders favor of the customer since the carriers do Alliances. The move away from confer- can act as shippers in the contracting pro- not share rate information with each other.” ences has expanded carriers’ reliance on cess. The current environment, “where a “Shippers naturally attempt to shop for the global alliances and space sharing agree- forwarder would sign ... a service contract best deal and may use an offer from one ments. The World Shipping Council said only at the risk of prosecution is unreason- carrier as leverage to obtain a better offer these alliances produce operating efficien- able and inappropriate.” from other carriers, said Americana Ships, cies and help contain carrier costs, while The association also urged the FMC to which operates Lykes Lines and TMM Lines. creating and expanding efficient service consider eliminating tariff filing by NVOs. ANZDL, Lykes, TMM and Contship networks, the net result for shippers is more NCBFAA surveys show that tariff filing Containerlines Ltd. — all owned by CP port calls, added capacity, more frequent and enforcement carry few benefits and Ships — gave OSRA a “very negative” service, shortertransittimes and fewer trans- that 82 percent of those responding said rating and blamed the reform law for a drop shipments. they did not have a need to access either an in their revenues. Rodriguez agreed that forwarders, bro- ocean carrier or NVO tariff. ■ 10 AMERICAN SHIPPER: MAY 2001 Quick on the uptake

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commercial maritime industry,” he said. This function “is critical” to assuring DOD MarAd battle shifts to Congress total access to the liner industry’s global maritime network, he added. Bush administration’s decision to transfer MSP funding “DOD has other priorities, other functions and other responsibilities,” to Defense could spur Congressional battle. Graykowski said. “I think it is bad policy to merge commercial and military functions.” WASHINGTON for a retainer fee for 47 vessels subject to The transfer would separate the MSP U.S. maritime interests and the Bush annual (congressional) appropriations. It’s program from the Voluntary Intermodal administration face a tug of war over whether a lot more than that.” Sealift Program. “Rather than making the to place the nation’s commercial liner fleet John Graykowski, who served as deputy program more efficient, we would be divid- under the Maritime Administration — its maritime administrator from 1994 to 2000, ing their functions,” Graykowski said. traditional home for 65 years — or with the said the transfer would have to be approved Defense Department. by Congress. Title XI. Graykowski also challenged the Bush’s final fiscal year 2002 budget calls “You just can’t wave a wand and transfer Bush administration’s decision to slash for transferring the Maritime the program,” Graykowski said. “Congress funding for MarAd’s Title XI shipbuilding Administration’s Maritime Security Program created the MSP. Congress put the MSP loan guarantee and shipyard modernization to Defense, and budgeted $98 million to be program in MarAd and therefore, Congress program. spent by that department to cover the opera- is an essential player in either affirming or Under the Bush proposal, funding would tion of 47 U.S.-flag liner vessels for the next rejecting the transfer.” be cut from $34 million last year to only $4 fiscal year, beginning Oct. 1. In the upcoming battle, “one of the first million in fiscal year 2002. However, a Secretary of Transportation Norman Y. questions I think Congress will ask is ‘does carryover of $10 million is expected to be Mineta gave no indication this (proposal) save money, does this make available for fiscal 2002. that he would fight to keep the program more efficient and does this “The logic behind this escapes me,” the program in MarAd. He make any sense,’ “ Graykowski said. “I Graykowski said. “The program pays for said the transfercan be car- think the answer to all three of those ques- itself and actually makes money for the ried out under an execu- tions is ‘no.’ “ government.” tive order. Jim Caponiti, MarAd’s acting deputy of The program performs exactly the way U.S. maritime interests, the Office of Inland Waterways and the Congress envisioned when it updated the including the Washing- Great Lakes, agreed that a transfer “would program in 1994, he said. Over the past ton, D.C.-based American Mineta take some kind of Congressional action. seven years, MarAd wrapped up some $6 Maritime Congress, oppose moving MSP They could not do it without a Congres- billion in projects. funds to Defense. sional mandate.” Graykowski takes issue with those who The AMC has taken the lead in major But, if necessary, MarAd wants to be attempt to characterize the program as a maritime issues over the years, including prepared for a smooth transition, Caponiti form of corporate welfare. “This is not a the formation of the current MSP, saving said. “We’re in discussions with DOD” to welfare program ... unless your definition cargo preference shipments for U.S. flag ensure a “smooth transition” if the program of welfare is paying the government back vessels, and keeping the Jones Act on the is indeed moved over to DOD. for the money which is guaranteed and in books. Graykowski questions whether anyone the process you build a ship, most likely a The industry also expects the solid sup- in the new administration has made an U.S.-flag ship, which employs U.S. mari- port of Senate Majority Leader Trent Lott, analysis to back up its transfer proposal. ners who pay U.S. taxes, along with all the R-Miss., and a host of industry backers Regarding the MSP, MarAd performs “a shipyard workers,” he said. including Sen. John Breaux, D-La. and bridging function between the military and “So where’s the welfare?” he asked. ■ Sen. Ted Stevens, R-Alaska. Lott and Breaux have already informed the White House that they want to keep all STB hears final pleas current maritime programs in place and with full funding. Shippers, carriers try to get in last word before board The transfer would not produce any savings, said AMC president Gloria Cantaeo hands down final railroad merger rules. Tosi. All day-to-day elements of the MSP deal with commercial and competitive is- WASHINGTON problems. When a proposed merger be- sues, which would mean that all MarAd Barring the unexpected, North Ameri- tween Canadian National and Burlington personnel dealing with the program would can Class 1 railroads will face tougher Northern Santa Fe threatened to push the have to be transferred to DOD, she said. government-imposed standards if they industry toward only two transcontinental The industry worked hard to come up choose to merge. railroads, the STB stepped in. with a cost-effective program to replace the U.S. Surface Transportation last March The CN-BNSF merger had since been long-standing operating-differential-sub- placed the railroad industry under a 15- called off. Last October the STB proposed sidy program, Tosi said. Both the ODS and month merger moratorium while it sought rules that clearly increase the burden on the MSP programs “have historically been to create specific requirements for future applicants to show that mergers are in the under MarAd’s banner.” mergers. public interest. The proposed rules would The MSP “is not an easy program to A flurry or recent mergers frustrated require railroads to give detailed plans and administer,” T osi said. “It’s not just a forum shippers with service breakdowns and other assurances that a merger would not only 12 AMERICAN SHIPPER: MAY 2001 When did it arrive? Is it full? Is it empty? Why is it still here?

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The International Asset System www.interasset.com NEWSFRONT preserve, but actually enhance competition. allows the STB to “impose conditions gov- arbitration should be the norm.” Merger applicants, for the first time, erning the transaction.” In case of a service failure, service assur- would have to pass a competition-enhance- “There are no limitations in the statute,” ance plans should be required to allow ment test mandated by the government, DiMichael said. The statute mandates that access to a shipper’s plant by another car- present the STB detailed service assurance the STB considers matters such as an ad- rier willing to provide service during the plans, and file annual reports to comply verse effect on competition, but does not term of the service failure, DiMichael said. with an extensive list of the agency’s pro- limit public interest considerations. Consumers United for Rail Equity, a group posed five-year oversight duties. The next Class 1 merger will quickly composed of chemical shippers, urged the The proposed reforms have been met with lead to “a nationwide rail duopoly” posing STB to take a stronger stand in its final rales. opposition from the railroads. Shippers, at “a substantial danger of loss of competi- “We like where you’re going, but we first somewhat critical of the agency for not tion” in a wide range of forms, including would like you to be more bold,” said Bob going far enough, will likely be the big win- loss of competition over gateways, through Szabo, who spoke for the consumers group. ners when final rules come out on June 11. the creation of new bottlenecks, and through “So far this (railroad) industry has been a Railroads had their last chance to change the loss of geographic competition, he said. one-way industry. It can consolidate, but it the STB’s mind-set during oral arguments The STB ’ s action in the Norfolk Southern/ cannot grow,” Szabo said. April 5 at the agency’s Washington head- CSX acquisition of Conrail shows that the The rail industry urged the STB to refrain quarters. agency has authority to impose competition- from making presumptions either for or However, two weeks before the STB enhancementprovisions, DiMichael said. The against mergers. “Each merger should be session, board chairman Linda Morgan re- STB imposed a condition of trackage rights judged, and stand or fall, on its own merits,” assured Congress that her agency is highly for Canadian Pacific between Albany and said CSX attorney Peter J. Schudtz. unlikely to abandon the proposed rules. New York, to provide new competition. Large mergers, especially those giving “It would take quite a lot to turn the clock shippers new single line services through back on the proposed rules,” Morgan said Specifics Urged. The NIT League and extended hauls, benefit shippers and the shortly after her appearance before the Sen- other shipper groups have urged the STB to public interest, Schudtz said. “Such merg- ate surface transportation and merchant write specifics in the new rules that would ers, properly structured and conditioned, marine subcommittee. tell applicants what they must do to meet should be approved by the board.” the competition-enhancement threshold. Mergers that decrease competition should Legal Authority. The Association of The STB must clarify that enhanced com- not be approved, he said. However, the STB American Railroads challenged the STB’s petition includes “enhanced intramodal should not condition mergers on the grant legal authority to broaden the public interest competition” or head-to-head rail competi- of “forced competitive access” that is not test by demanding that future merger appli- tion, DiMichael said. related to the remedy of competitive harms. cants show that a consolidation would not He said the STB must also give specific “Neither should the board make mergers only preserve, but enhance competition. examples of enhanced competition “so that the occasion for a reregulation of the rail The law does not call on the STB to a merger application can be directly mea- industry, successfully deregulated by the promote competition,” said AAR attorney sured against specific expectations that are Staggers Act of two decades ago,” he said. Samuel M. Sipe Jr. “It calls for the STB to stated in the rules.” CSX also warned against the STB be- preserve competition.” On preserving existing gateways, the STB coming a “claims bureau” and subjecting The rail industry is particularly upset must make it clear this means both physi- carriers who suffer economic losses as a with the STB’s competition enhancement cally and economically, “since gateways result of implementation difficulties “to a provisions, and warned the agency that can be closed by rate actions or charges as system of penalties.” overly stringent rules could thwart future well as by canceling interchanges,” he said. rail mergers that would benefit shippers. Finally the STB should specify how a Alliances. Burlington Northern SantaFe Rail consolidations can bring public ben- shipper is to pursue timely and inexpensive attorney Richard E. Weicher cautioned the efits and it is wrong for the STB to assume rate relief in the event a railroad’s action STB against presuming that benefits can be that future mergers will harm the shipping adversely affects the viability of the gate- gained through alliances or joint ventures, public, the railroads said. way, DiMichael said. rather than mergers. Merger applicants should not have to “There are very few additional mergers Alliances and joint ventures are “useful” give up the private benefits mergers bring, even mathematically possible,” he said. but do not bring the same benefits, such as Sipe said. “I don’t think there should be a “And the next major merger could well long-term investments, as mergers, Weicher surcharge on a merger.” trigger another one close by, so that the said. “Alliances come and go.” The National Industrial Transportation board may in reality have to adjudicate two Railroad representatives urged the STB League, the nation’s largest shippers’ asso- almost simultaneously.” to set a “model time frame” of about one ciation, rallied behind the STB. The rules on service assurance plans also year to decide future mergers. “A model “The board is absolutely correct that in need strengthening, DiMichael said. Carri- schedule would send an important message future merger proceedings, the public inter- ers should be required to specify a base to investors, shippers, and shareholders,” est demands not just that specifically-identi- service level against which service deterio- Weicher said. fiable anti-competitive effects of a merger be ration would be measured. The railroads Canadian National Railway attorney Paul cured, but that future mergers also provide should be required to compensate shippers A. Cunningham said the proposed rales for enhanced competition,” said Nicholas if service levels degrade from those prior to would stand in the way of transnational DiMichael, an attorney for the NIT League. the merger. mergers, and would violated terms of the The STB ’ s legal authority is “stated sim- Service assurance plans must also con- North American Free Trade Agreement, by ply,” that the agency can approve transac- tain quick and fair mechanisms for obtain- requiring applicants to file corporate con- tions that are “consistent with the public ing compensation when disputes occur, trol rules. Such filings suggest a prejudice interest,” DiMichael said. The law also DiMichael said. “Mandatory, expedited againstnon-U.S. entities, he said. ■ 14 AMERICAN SHIPPER: MAY 2001 NEWSFRONT

Others, such as the Joint Industry Group, National Customs Brokers and Forwarders Association of America and the American Association of Exporters and Importers, Import industry sets also threw major weight behind the movement. “It was a unified effort by the trade to tone for ERP identify and resolve issues,” said Arthur L. Litman, vice president of regulatory affairs for Tower Group International in Redondo “ Unprecedented” white paper delivered Beach, Calif. “We were able to coalesce the various trade interests to deal in a better to U.S. Customs by 17 industry groups. way with Customs.” The coalition’s formation is rooted in B y Chris G il l is the industry’s frustration during the past several years of the government’s failure W hen U.S. Customs’ Deputy sureties, air couriers and attorneys, submit- to fully implement the 1993 Customs Mod- Commissioner Sam Banks told ted a white paper to Customs outlining their ernization Act. In addition, import entries a group of industry executives objectives on how to modernize the were on the rise, increasing from about 9.4 two years ago in Washington that the only country’s management of imports. million annually 10 years ago to 23 million way they’ll make a big change to the “This is an unprecedented accomplish- in 1999. The agency expects to process agency’s import practices is to form a uni- ment for the U.S. trading industry on the more than 30 million entries a year by fied front, many in the room thought to U.S. Customs entry reform initiative,” said 2006. themselves “good luck.” James P. Finnegan, director of international Customs opened the door to change in Since then, however, the industry’s drive trade and compliance for Sony Electronics December 1999, when it proposed the En- to modernize the Customs import entry and chairman of the Business Alliance for try Revision Project to the industry. ERP process has pulled together a large, some- Customs Modernization, a member of the was widely reviewed and commented upon, what unlikely mix of reformers. Last month, coalition. leading to three rewrites of the proposal by a trade coalition of 17 industry groups, BACM, which represents 25 of the the agency. representing a gamut of industry sectors country’s largest importers, was one of the At the Customs Trade Symposium in such as apparel, electronics, automobiles, founding members of the reform effort. Washington last November, the agency

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AMERICAN SHIPPER: MAY 2001 15 NEWSFRONT emphasized to the industry the need to mated payments of duties, taxes and fees. modernize the import entry process before • Protests. The industry favors the abil- it started building its new computer system, ity to protest entries before final liquidation the Automated Commercial Environment, to recover any overpayment of duties. this summer. Three two-day ERP meetings • Drawback. With the IASS in place m Jm. Spk. Jt were subsequently scheduled from January and modernization of the current law, draw- Jon Kent to March. back claims should be easier to file with Washington With concern that Customs’ plan Customs. representative, wouldn’t go far enough, 17 industry groups Many executives believe the coalition’s NCBFA ^jjjgF involved in the ERP process decided to white paper is a well-rounded approach to develop a unified position, while realizing import process reform. thought the meeting they still have some individual Customs Even duty drawback, an area of the im- “/ issues to pursue for their constituents. port transaction that was left out of the went pretty well. original ERP proposal by Customs, was Hard Work. Taking on the Customs-re- included in the coalition’s white paper. No commitments lated issues and concerns of 17 industry Drawback is a refund of duties on imported or conclusions were groups and melding them into a consensus- materials, which are either exported or used based white paper was no easy task. The in the manufacture of exports. reached, but I think drafting team consisted of Richard Abbey “Drawback is an inte- of the Joint Industry Group, Richard gral part of the business we’re real close.” Belanger for BACM, Harvey Isaacs of the today,” said Edwin W. NCBFAA, and John Simpson from AAEI. Van Ek, president of “It wasn’t tough in the sense of disparate Oradell, N.J.-based draw- “I thought the meeting went pretty well,” views,” said Belanger, an attorney with the back specialists C.J. Holt said Jon Kent, Washington representative Washington law office of Powell Goldstein & Co., and chairman of for the National Customs Brokers and For- Frazer & Murphy. “There was a lot of AAEI’s drawback com- warders Association of America, and a intense work getting into the details and the mittee. “If you’re going Van Ek member of the trade coalition. “No com- position and perspectives of individual com- to revise the entry process, you must con- mitments or conclusions were reached, but panies and trade groups. It took time.” sider drawback to make sure the two are I think we’re real close.” The white paper covers six key aspects of compatible.” “Our reaction is a positive one,” said the import entry process, which need re- “I believe the trade industry document is John Durant, director of commercial rul- form: a reasonable and practical framing of the ings for Customs and team leader for ERP. • Cargo release and entry tracks. The general principles for Customs entry re- “Everyone understands where each side industry wants “minimal data at release” form, and serves as an excellent departure (Customs and industry) is coming from.” for all importers on formal entries. To sup- point for the next step of the process — the But Durant said the white paper was port this aspect, a Treasury study on the detailed work of developing functional “less visionary” than he had initially antici- necessary data elements to clear imports specifications that will be used for ACE pated from the industry. “What the trade will be submitted to Congress in May. system design,” Finnegan said. has done here was embrace the current • Importer Activity Summary State- import entry process with some modifica- ment. The industry supports the filing of the Devilish Details. On April 11, a del- tions,” he said. IASS 20 days after the end of the reference egation from the trade coalition met with With the development of a more flexible month (or 10 days proposed by the Census Customs officials in Washington to review computer system, the agency believes that Bureau). A test of the IASS is already the details of the white paper. further changes to the import process will planned for land-border ship- be easier to make in the future. ments. Meanwhile, Customs will re- • Post release and revisions. Trade coalition for import view the white paper carefully The industry supports “modern- entry reform and provide its own feedback be- ized” versions of Customs’ post fore the end of May. “At this entry amendment and reconcilia- American Association of Exporters and Importers point, the devil’s in the details,” tion programs to “revise” entry American Apparel & Footwear Association Durant said. data. Customs has been asked to Alliance of Automobile Manufacturers For Banks, now a senior ex- support an amendment to its rules American Bar Association — Customs Committee ecutive with Internet technology Air Courier Conference of America that allow for a period of not more firm Arzoon, the work so far be- American Electronics Association than 21 months from the begin- Association of International Automobile Manufacturers tween the industry and Customs ning of the importer’s fiscal year American Surety Association to reform the import entry pro- to file reconciliation entries. Business Alliance for Customs Modernization cess is more than even he had • Money payment. The indus- Global Electronic Trade Alliance expected. try has asked Customs to support Joint Industry Group “It’s a monumental accom- several payment approaches to National Association of Foreign Trade Zones plishment,” Banks said. “I’m settle duties, taxes and fees on National Customs Brokers and Forwarders Association of America proud that the trade groups could imports. The three options are the National Council for International Trade Development come to a consensus and that Cus- current 10-day payment period, National Retail Federation toms is seriously listening with payment against a daily statement, U.S. Apparel Importers Council USA-ITA an open mind. I’m more hopeful and a system using periodic esti- than I’ve ever been.” ■ 16 AMERICAN SHIPPER: MAY 2001 has Savannah become the location of choice for base in the Sunbelt, Midwest and Gulf. high-volume distribution centers? Start with an The result? 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Providers of transportation, warehousing and supply chain Internet software and exchanges are preparing for shake-up.

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W ith the honeymoon between the 2000 to 2 cents in this year’s first quarter. calculation and trade compliance systems. stock market and Internet-based For the year 2000, i2 reported an annual NextLinx, a competitor of Vastera founded technology firms now over, the net deficit of $1.8 billion on revenues of in 1994, has secured many contracts from big knives are coming out as the investors’ $1.1 billion. The deficit included a one-off names, but its financial results are unknown. checkbooks are being put away. amortization charge of $1.8 billion. Descartes Systems, the Canadian Internet- The complete change of climate and the Manugistics, another large supply chain based transportation management software pressure to perform are, as in other technol- planning software firm, posted a loss of firm founded in the early 1980s, is also losing ogy sectors, affecting the logistics and trans- $28.1 million on revenues of $268 million money, with a deficit of $31.6 million on portation software companies and electronic for its fiscal year ended Feb. 28. revenues of $66.6 million for the fiscal year marketplaces. If these large, well-established e-com- ended Jan. 31. The question now is whether these commerce supply chain companies are losing “Whoever has the funding can survive,” panies have attracted real Web-based cus- money, life must be even tougher for the said Robin Roberts, research analyst with the tomers and are generating sustainable new dot-com start-ups, many of which do financial group Stephens Inc. But this cannot revenues — expectations that are putting not publish their results. last in the long term, unless the company has particular pressure on the Internet start-ups. In the area of online import/export facilita- the management, skills and marketing to Even i2 Technologies, the well-estab- tion applications, the software firm Vastera make the company succeed, she warned. lished supply chain planning software gi- Inc. posted a deficit of $71.7 million appli- “You need a group of people who under- ant, issued a profit warning in early April, cable to common stockholders for calendar stand logistics processes,” she said, com- saying that its earnings per share would 2000, on annual revenues of $33 million. menting on supply chain e-commerce halve from 4 cents in the first quarter of Vastera provides e-commerce landed-cost software firms. 18 AMERICAN SHIPPER: MAY 2001 LOGISTICS

Roberts said that a lot of transportation marketplace, announced last November an single integrated process across the global and logistics exchanges have closed down, agreement to provide execution services to supply chain. because they lacked liquidity. Those e- FreightMatrix, the logistics e-marketplace Capstan Systems provides online landed marketplace start-ups that have survived owned by i2. NTE’s transportation services cost calculation tools, trade compliance and have become software providers, she added. will be available to the public and private e- other logistics software. And larger, well-known supply chain e- marketplaces powered by FreightMatrix. “The whole e-commerce logistics area commerce companies like i2 and Among the supply chain software firms, has been so much of a roller-coaster,” said Manugistics have a marketing advantage Roberts believes that G-Log (founded in Larry Sur, chief executive officer of that smaller players try to capitalize on. 1999) and Capstan Systems (started in 1998) IOLogistics. “For a start-up, it’s really good if you have good survival potential. “To have a viable product, you need to have a relationship with i2 or Manugistics,” G-Log, which had initial equity invest- have a real feel for customers, for the real she said. ments from FedEx Corp., provides systems transportation network itself,” he added. NTE, the large U.S.-based trucking e- to manage the movement of freight as a For example, arrangements concerning

Gordon Forsyth (212) 912-1077, fax (212) 912-1244, e-mail: [email protected] Outwit. Outplay... Watch your back. The weaker players have been weeded out. The remaining with proven track records and existing customer bases. After all competitors are hungry. A cutthroat environment is taking its toll the fuss, the establishment appears to be sticking with the on everyone. establishment — that is to say Fortune 500 shippers are giving This isn’t the “reality” television program Survivor. It is the their business to the Big Five consulting firms and to enterprise logistics software market. software vendors. No complete solution for global logistics management yet Gold does sit at the end of the rainbow for those start-ups that exists, so creating a winning team is critical for the remaining are able to ride out the next few quarters, but it won’t be easy. players. Acquisitions, partnerships and alliances are coming fast Venture capitalists are sitting on millions of idle dollars. There’s and furiously. just no time for due diligence. It’s hard to say who will win. It’s easier, at this point, to pick “I am only doing triage and euthanasia right now,” one VC losers. Two things can be said with relative surety. There will be told a logistics technology start-up based in Seattle. more than one winner. And there will be much more than one loser. It’s going to be a long summer for many companies. Some have The game in 2001 is being played at a slow pace compared to already tossed in the towel, while rumors spread about layoffs and last year. The flurry of activity that ushered in the year of the dot- office closings elsewhere. A recent report from consultants in San com in 2000 has given way to the slow methodical plodding of Francisco predicts that up to 80 percent of the technology firms corporate America in a stalling economy. based in the Bay area will close in the coming months. The good news is that spending on logistics technology, We may never know how much of the technology bom of the which can be categorized as a cost-cutting effort, has remained dot-com revolution would have worked had it actually been steady. Judging from industry reports and recent contract an- implemented. Just as overblown promises accompanied Internet nouncements, sales are being made and should continue through- development on the way up, worthy technologies will perish as out the year. the market overreacts on the way down. Manugistics Inc., down and almost out in the logistics soft- It’s difficult to find moderate sentiment when it comes to e- ware space just three years ago, is a case in point. Revenue at the commerce these days. Depending on whom you talk to, Internet Maryland-based software developer more than doubled to $89.3 technology offers no value at all, or it is an unprecedented force million in the three months ending Feb. 28 this year — the for change. company’s fourth fiscal quarter. For the fiscal year, sales rose 76 Which side is right? Neither and both. percent to $268 million. Net income equaled $8 million for the A more important question for transportation concerns is will year, as software license fees grew 131 percent. the Internet live up to its initial promise to bring equality of "Manugistics’ numbers, as well as recent results from its com- information to companies of all sizes? Right now, the online petitors like Descartes and Vastera, prove that it is possible to sell logistics software party looks like an invitation only affair. software in a stormy economy,” analysts from technology consult- Gordon Forsyth heads sales and marketingfor ComPair Data ing firm AMR Research told clients in a report recently. “The key Inc., a business partner o f American Shipper that provides is to sell products that can ease the pain of such economic times, and electronic logistics information and intelligence services to not some hyped vision. From this foundation, companies can then shippers, forwarders, non-vessel-operating common carriers, expand into more untested areas of e-business.” ports and software providers. A former deputy editorfor A m e r i - The bad news for most dot-coms is that logistics software can Shipper, covering air cargo and electronic commerce, spending appears to be gravitating toward established players Forsyth contribues columns periodically for the magazine.

AMERICAN SHIPPER: MAY 2001 19 LOGISTICS

trailer interchange and pre-loaded trailers In the trucking sector, Transplace.com must be made from the outset. incorporates the former activities of six of the largest publicly held truckload carriers Shake-up. There are no industry statis- in the U.S.: Covenant Transport, J.B. Hunt tics on how many logistics dot-coms have Transport Services, M.S. Carriers, Swift closed down since the heydays of a year Transportation Co., U.S. Xpress Enterprises ago. But consolidation has started — a Larry Sur and Werner Enterprises. trend that may now accelerate. CEO, In March, the supply chain software de- lOLogistics Critical Factors. “The critical thing veloper Arzoon, founded in 1999, announced seems to be getting the first Web customer the takeover of From2, a small landed-cost, “To have a viable product, signed up,” said Richard Armstrong, presi- trade compliance software and freight ex- dent of logistics consultants Armstrong & change firm also incorporated in 1999. Also you need to have a real Associates. in March, i2 acquired RightWorks, the San feel for customers, Armstrong said that all the major estab- Jose, Calif.-based e-procurement dot-com lished warehouse software groups are “mi- founded in 1996. Last year, Logistics.com for the real transportation grating to the Web.” Among the major players, took over QuoteShip.com. And Descartes Armstrong cited major software houses Irista has acquired the ocean transportation soft- network itself ” Inc., a subsidiary of HK Systems; Provia ware company E-Transport and other e-lo- Software Inc.; and Manhattan Associates. gistics companies. “The field is dominated by the people who Arzoon has made headlines in the press by bers. Crowley Liner Services, Compania have existing software customers,” he said. attracting $34 million in funding from big Sud Americana de Vapores, Wan Hai, APL, “It’s analogous to the click-and-mortar com- name investors such as Canadian Pacific, CP Ships, Flanjin, Hyundai, “K” Line, panies being better than the e-tailers.” CSX Transportation, Norfolk Southern and Mitsui O.S.K. Lines, Senator Lines, The established software companies may Union Pacific. Yangming and Zim Israel Navigation Co. be better at providing Web services than The supply chain management software have joined the portal. people “doing this from scratch,” he sug- business remains fragmented, with different A spokesman for GT Nexus said it would gested. firms specializing in transportation manage- be “collectively providing access to over a “Manugistics has been very successful,” ment, warehouse management, supply chain quarter of the global ocean container mar- Armstrong said. “Manugistics seems to execution or supply chain planning. ket through GT Nexus.” Ocean carriers dominate the space that is ‘capability-to- Because many vertical e-marketplaces have a minority equity stake in GT Nexus. promise’ and advance planning.” across all sectors of industry aren’t doing GT Nexus also said that ITOCHU Ex- “i2 has TradeMatrix out there,” he added, well, there are fears that the logistics e- press, the American subsidiary of the big another system designed to enable compa- commerce software firms and exchanges that Japanese trading house Itochu, is starting a nies to promise product availability. Com- serve them are exposed to risks of bad debts. pilot program to adopt the planning services menting on FreightMatrix, the logistics of the Internet container shipping portal. e-marketplace owned by i2, Armstrong said Start-ups vs. Establishment. “From In the air-freight sector, GF-X, founded that it appears to have no customer, to date. a marketing standpoint, start-ups have a in 1998, has also attracted major industry But there are new entrants like Arzoon, disadvantage,” said Roland Ziebell, head of players. The company’s aim is to enable Armstrong said. He said that Arzoon will e-commerce at Danzas-AEI, the global for- electronic transactions between carriers and provide “a true application to take care of warding and logistics group. forwarders. the domestic and international applications.” But he said that i2 and Manugistics, To date, GF-X has raised $85 million in although well established, have supply chain funding, making the company one of the Relationships. To attract industry us- management systems that are “too compli- best-funded business-to-business ex- ers and revenues, there is a growing recogni- cated.” changes. Equity stakes have been taken by tion in the transportation industry that “It’s going to take a while for companies American Airlines, British Airways, e-commerce must recognize, rather than re- to implement these complete systems,” he Deutsche Post World Net, Lufthansa Com- place, customer/service provider relation- said. “Descartes is much more focused.” mercial Holding, Panalpina World Trans- ships. Meanwhile, the start-ups are trying to dif- port (Holdings) and SAirLogistics. This particular aspect for logistics dot- ferentiate themselves from their larger com- GF-X, like GT Nexus, has sought to coms has a lot more to do with continuity in petitors and attract revenues and customers. build an online system without adopting the business than with Internet technology revo- “I don’t know what’s going to happen to spot-market, price-based auction model that lution. smaller providers like Arzoon,” Ziebell added. has been criticized by carriers. Last year, Jeff Crowe, chairman, president One avenue to achieve critical mass, for And GF-X works only on the wholesale and CEO of Landstar System, said that core a logistics dot-com, is to garner wide indus- market — carriers and forwarders. values and relationships will drive the suc- try backing among large transportation or The company said it offers “product dif- cessful e-commerce Web sites. Simple ex- logistics players. ferentiation and decommoditization through changes and “post it” sites will not be the “I think companies like Tradiant or Glo- allowing carriers to market all kinds of transportation markets of the future, he added. bal Freight Exchange (GF-X) founded their flight-based and time-definite products, not “I believe the vast majority of transporta- business as a strong industry initiative,” a simplistic flight-based model.” tion spending in the U.S. is negotiated by Ziebell said. “They will survive.” The air freight dot-com also said that it service contracts and that will not change,” Tradiant, now renamed GT Nexus, is a provides full integration with carriers and Crowe said. new multicarrier container shipping portal forwarders, not “simulated integration us- Relationships are particularly important that has signed many ocean carriers as mem- ing e-mail.” for forwarders and other intermediaries. 20 AMERICAN SHIPPER: MAY 2001 LOGISTICS

Some of them fear that the Internet — business to the Internet. including carrier-controlled e-marketplaces Sur, at IOLogistics, said that transporta- — could disintermediate them by removing tion dot-coms “had better have something their role between shippers and carriers. more than just an exchange.” However, in their annual State of Logistics Few people in the industry seem to be report, the two logistics companies Cass and shedding tears about the demise of some the ProLogis said that “it is still about relation- Richard Armstrong dot-coms. After their hyperbolic promises to ships.” The report cited Transplace.com, president, revolutionize transportation and logistics, the eFr8.com and Freightdesk.com as three vi- Armstrong & Associates dot-coms aren ’ t getting much sympathy from able exchanges “that add value and improve some of the old hands in the industry. relationships without intrusion.” “The field is dominated Yet, industry forecasts predict an in- eFr8.com was developed by a subsidiary crease in demand for online supply chain of Landstar System. Freightdesk.com was by the people who software. launched last year by Rob Quartel, the have existing software Sur said he remains enthusiastic about e- former U.S. Federal Maritime Commis- business in logistics. “E-commerce, by it- sioner, to enable forwarders and brokers to customers. It’s analogous self, is wonderful.” lower their costs and strengthen their cus- “I think that there are some companies tomer relationships. to the click-and-mortar out there that are putting freight manage- Armstrong said that the OptiBid online companies being better ment systems that are good,” he added. trucking procurement tool of trucking mar- But those systems "are not perfect,” he ketplace Logistics.com “is based on an old than the e-tailers. ” said. “It’s like Swiss cheese — they all have paradigm.” holes.” “I think that there are a lot of carriers that The logistics and transportation dot-coms have an immediate reaction against based transportation 3PLs are based in or that survive are likely to have a better un- OptiBid,” he added. near Lenexa, Kan. He suggested that it is derstanding of the real business world, the Armstrong noted three main dot-coms taking a long time for those companies to need for relationships, and the profit re- that are “online 3PL managers:” generate significant customer activity. quirements of institutional investors. FreightQuote, established in 1998; But Transplace.com, with its backing of After the Internet revolution and the freightPro.com, launched in 1999; and large truckload carriers, appears to have “a struggle for survival of the fittest, the dot- Transportation.com, which commenced substantial business,” he said, partly be- coms are turning to the old-economy prin- trading in June 2000. All three trucking- cause it has been able to move existing ciples. ■

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AMERICAN SHIPPER: MAY 2001 21 LOGISTICS

ply chain velocity. I bought it lock, stock, and barrel — the notion that we were going to be moving small quantities of product more often.” Collaboration for the cautious Lynch started his company with the idea of building software “which recognized that, at some point, packages were going to How software company Nistevo protects proprietary get smaller and move faster, so that more of a company’s product would be moving data within collaborative networks. more often.”

B y R obert M ottley Utilizing Assets. Prior to his involvement with Nistevo, Lynch had been presi- A s shippers and carriers scramble dent and co-founder of Allaire Corp., a for new ways to operate more effi- provider of e-commerce platforms. Before ciently, they often find themselves that, he worked as an options trader with the at opposite ends of the same rope. In this tug Chicago Board Options Exchange. of war, for one side to gain leverage, the “I felt there would come a point in time other must lose it. when companies would have to move their “Shippers are under continuous pressure products together in order to get efficient to increase logistics performance while re- asset utilization out of logistic service as- ducing costs,” said Kevin Lynch, chairman sets,” Lynch said. and chief executive officer of Nistevo Corp., “We went after our first couple of cus- based in Eden Prairie, Minn., a collabora- tomers, Monsanto and C.H. Robinson, with tive software company presently targeting that concept in mind. They helped us to truck carriers. shape it, and were a great training ground “They move smaller quantities of prod- for us,” he said. uct more often, which may mean filling half “Monsanto especially taught us that the a truck twice a week rather than a full truck difference between expedited and sched- once a week, in order to meet shorter cus- uled movements was something that dra- tomer lead times.” matically affected pricing” — scheduled Similarly, “the supply chain buffers that shipments being much less expensive. once protected shippers against shortages Within three years, Nistevo had beta- have shrunk as volumes of inventory grow tested and introduced a software system smaller. Mistakes that were once covered called Network Builder, just before col- by excess inventory now appear as expe- “I felt there would come laborative logistics became a cliche de jour. dited logistics costs,” Lynch said. “That was inadvertent good timing,” Motor carriers have woes also, he said. a point in time when Lynch laughed. “While we believe that our Margins are down to an average of 4.8 companies would have model can be expanded to other modes of percent. Driver turnover hovers at 103 per- transportation, our collaborative network is cent. The cost of a gallon of diesel fuel has to move their products currently focused on truckloads. risen 73 percent over the last 18 months. “Let me explain that. If you go into a One troubling factor for both camps is that together in order to get large, multinational company and tell them neither can get a handle on hidden costs, such efficient asset utilization that you can do all modes and all geogra- as the expense of asset repositioning. phies — a very common pitch these days, “How is it possible to reduce costs that out of logistic service assets. ” from providers who can’t possibly support are hidden?” asked Lynch. “The answer it — the company you’re courting usually lies in collaborative logistics.” Kevin Lynch says, ‘I like your system, let’s start imple- Just schmoozing around, sizing up the chairman & CEO, menting it on Thursday.’ Then the provider competition, does not constitute collabora- Nistevo Corp. has to backpedal and say, ‘our ocean mode tion. As Dr. C. John Langley, a professor at isn’t quite ready yet.’ the University of Tennessee, said in a recent “Trucking is the only unscheduled mode paper, “a marketplace itself is not synony- licated older systems without creating new now left in the U.S. Our concept is to go mous with collaborative logistics, which processes that would really spin heads. And, after assets that are unscheduled, and create occurs only when a community of shippers as many dot-coms have learned to their collaborative schedules among multiple and carriers coordinate business activities grief, a spangle of electronic commerce companies to create efficiency,” Lynch said. using an Internet service to improve profit- bells-and-whistles did not guarantee a re- “That’s why the only opportunity we see ability and performance.” turn on investment. for us right now is trucking. You’ll see us Lynch and Nistevo have been in the curl “When I founded Nistevo in 1997,1 was moving our collaborative model into pack- of this new wave for several years. “The looking at logistics service assets. I came aging and warehousing, even into what key to unlocking what I call breakthrough from a high technology and financial ser- some folks are calling collaborative yard efficiencies lies in leveraging the Internet vices background, not from supply chain management. to its full capacity,” he said. management,” Lynch said. “Once you start collaborating, some very Early Web-based logistics solutions rep- “I really believed in the concept of sup- interesting logistics stratagems come to 22 AMERICAN SHIPPER: MAY 2001 AS IMPRESSIVE AS OUR PORT IS, WE’RE HELPING SHIPS SPEND LESS TIME HERE.

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We’ll start you with one user told him it was hard to adjust to the explained, noting that Nistevo is not invited collaborative tour, and execute that with concept of sharing anything with anyone, to that parley, nor would it want to be. one other player, so you’ll have a sense of outside your own doors. “We structure those meetings as kind of a walking before you run. That was honest talk. “In order to get logistics summit. We bring together our net- “We’ll put Nistevo in, install it — you’ll anyone in logistics to think about this pro- work of clients, give them all the results of get real-time contract management and cess, you have to show them the value,” Network Builder, and then let them go to freight tendering benefits, and then extend Lynch said. breakout rooms where we’ve give them guide- it to this one tour. We’ll pick the load of “Your model for a collaborative network lines to discuss collaboration: ‘hey, guys, freight that can go on the tour and the has to be executable within the culture of you can’t talk about your rates.’ All you can delivery time windows,” he explained. the client company. I sense a lot of parties talk about is how you can trade trucks back “We’ll measure the savings, and report that are intuitively interested in collabora- and forth.’ To that end, Nistevo has hired a them on our management dashboard, on tion, even if they are not quite there yet as a former FTC attorney for on-site counsel. whatever frequency you like. After you’ve business rationale,” he said. run one tour, if you don’t like what you see, “A collaborative network must not dis- you can have still the benefits of e-logis- turb current relationships, and must not tics,” Lynch said. sacrifice privacy,” he said. “A collaborative network “That will more than pay for the approxi- Nistevo’s Network Builder takes a truck- must not disturb current mate $500,000 it costs to install Nistevo’s ing company ’ s top 100 trade lanes and runs a software within your company. We’ve had model to determine who else in the market relationships, and must customers that saved $750,000 on one tour might be a suitable partner in a collaborative alone, and are now running 30 of them. tour. not sacrifice privacy. ” “So, if you can take your freight and Often the management’s CEO will say, move more of it to these road trains, or “I need someone whose supply chain runs collaborative tours, you’ve effectively cre- at the same speed, whom I already know “Our first customers were very concerned ated a new mode-switch opportunity within well and can trust as a partner.” about even transmitting loads over the your logistics supply chain that didn’t exist Privacy in a collaborative network is at Internet early on,” Lynch said. “Now, obvi- before,” Lynch said least as much of a worry as the identity of ously, everybody’s O.K. with that, but they “And if you don’t like it, it runs like your possible players. are more cautious about the idea of one old system and you gain 2 or 3 percent “When we ask for certain data, people central place on the Internet where all of savings based on the fact that you have less may balk, saying, ‘oh, no, you don’t get this execution is happening.” contract leakage and better execution.” that. I know who’s in your network. The last Nistevo spent “more than $3 million in Nistevo doesn’t charge transaction fees. thing I want is to give my trade lane infor- hardware and software, plus tens of mil- “You pay, up front, based on the number of mation, along with my rates, to my com- lions of development dollars, to make sure locations in your network — the number of petitors. Carriers worry more than shippers, our model comprises strict guidelines of places you go to and from — where we’re because there are Federal Trade Commis- privacy,” he said. managing freight. Our model is a fixed-cost sion implications to any perceived collu- “We’ve also done some soul-searching one, and you know exactly how much your sion,” Lynch said. about what we are in business to do. We’ve expenses are going to be,” he said. “We’ve formed what we call a ‘black determined that we don’t want to be one of The one-time fee for installation “is typi- box' process to deal with those very legiti- our customers. We want to sell software to cally in the same range as your subscription,” mate concerns,” Lynch said. them, but we don’t want to become a third- Lynch added. The actual process of installa- party logistics provider for them,” he said. tion takes approximately 150 days. Logistics Summit. Within Nistevo, “Carriers were very skeptical at first, there ’ s a network development group which because of other dot-com companies that Looking Ahead. When will Nistevo’s ensures that any proprietary data in the had preceded us.” collaborative models be expanded to in- model is kept private, functioning as a clude rail and ocean transport? “Only when firewall within a firewall. Working Tour. Nistevo shows possible we’re ready,” Lynch said. “We’re research- “We’re embedding that process in our customers “the ways they can restructure ing the current cargo-sharing plans of sev- technology as well, so that one client can’t their partner arrangements, so that two buy- eral ocean carriers.” hack into the system to find the particulars ers of transportation who are balanced in a “Our idea, basically, is that dedicated of another,” he said. freight lane can go to a single carrier and capacity transfers the asset utilization risk “Our network development people alone negotiate a collaborative tour, independently. from the carrier over to the shipper. We’re run the model. When they create a report for They negotiate their rates separately, but doing that now in trucking. That’s the es- a prospective client, the report has all of the they do it in a way that we’ve modeled that sence of our model,” he said. other partner names blanked out, until the allows them to capture savings,” he said. “Carriers love it, because their margin client signs. Once you sign up, you can see “You have to set your pricing model so goes up. Shippers like it because the price who your best partners would be, but you your network community participants know of transporting their goods effectively comes can’t see their rate information, or their you are not trying to leverage them every down. I don’t doubt we can achieve those savings data that could be used to compute chance you get. In our network, each player synergies in other modes.” ■ 24 AMERICAN SHIPPER: MAY 2001 com m erce.

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contract. The test region covers 28 military installations scattered throughout Geor- gia, Florida and Alabama. The contract includes Army, Air Force, Navy and Ma- EGL wins MTMC rine Corps bases. It also includes four De- fense Logistics Agency depots. Together, these installations move about 50,000 ship- logistics contract ments a year. EGL will manage the movement of a wide range of military goods, such as boots, Houston-based firm will manage military medical devices, ship and plane parts and vehicles. The initial contract excludes EGL cargo transport in U.S. Southeast. from handling explosives, liquid bulk and classified materials. But there’s no reason

B y Chris G il l is why the logistics firm may not handle these types of goods in the future, Galluzzo said. U .S. military transportation strate- The logistics firm will have to arrange gists already believe that commer- for the movement of both truck and rail cial logistics firms could do a bet- shipments. Freight payments to carriers ter job at managing defense cargo move- must be made through an Internet-based ments, but they want proof. system developed by Minneapolis-based To do that, the Military Traffic Manage- USBank, called PowerTrack. ment Command, the surface transportation Another demand will be placed on EGL’s logistics unit of the armed forces, has information system. “We may be buying awarded a one-year contract to Eagle Glo- everyday transportation services, but we bal Logistics to manage its freight trans- also want EGL’s information technology portation in the U.S. Southeast. to provide us with visibility of our ship- “With emphasis on customer service at ments,” Galluzzo said. the lowest overall cost, it was determined EGL believes it’s transportation network, to test the use of a third-party logistics large staff, and information systems are up provider for the movement of domestic to the task. “We’re a communications com- freight shipments,” said Frank Galluzzo, pany that moves freight,” Reusche said. director of MTMC’s Distribution Analysis The logistics company has set up its Center, based in Alexandria, Va. operations to cater to industry groups. MTMC began exploring the use of a EGL’s military and government marketing third-party logistics provider for domestic group supports the development and man- shipments two years ago. Since the mili- agement of transportation and logistics tary has traditionally controlled its own programs for military and civilian agen- freight moves, it took time for the agency “We believe that all around cies of the government and businesses that to prepare its proposed commercial logis- provide products to the military and gov- tics contract. Numerous meetings were held this will be a healthy test. ernment. with the industry for feedback and advice. There’s a lot riding During the next several months, MTMC The contract solicitation to the industry and EGL officials will hold meetings to get was released last August. A dozen firms on this test in terms the contract in place and minimize disrup- bid for the $33 million contract. From late tions during the startup. “We believe that October to March, MTMC’s contracting of the future of military anything less than face-to-face meetings officers studied each bid. cargo transportation. ” will result in shortfalls with this contract,” “It was extremely competitive,” Galluzzo said. Galluzzo said. “The award was made on a Frank Galluzzo Once the contract is operational, MTMC best-value basis — considering price and director of Distribution will monitor its performance both quanti- trade off of quality of services.” Analysis Center, tatively, such as on-time delivery and loss The contract will run from July 1 to June Military Traffic or damages to freight, and qualitatively, 30, 2002, with two one-year renewal op- Management Command such as EGL’s customer service and re- tions. sponse to everyday shipping problems. “It’s a big deal for Eagle,” said Michael “We believe that all around this will be Reusche, director of government sales for the company contracts for over-the-road a healthy test,” Galluzzo said. “There’s a Eagle Global Logistics, which is based in transport with both small owner/operators lot riding on this test in terms of the future Houston. “We’re enthusiastic about being and large national carriers. Last year, the of military cargo transportation.” on the ground floor of this contract.” company built up its international logistics If the test proves successful, MTMC EGL is a 16-year-old, $1.8-billion non- services by acquiring Circle International. may consider developing similar logistics asset-based international logistics firm, contracts for its other domestic regions or with nearly 400 offices in 100 countries. In Demanding Contract. MTMC offi- overseas locations. the U.S. domestic transportation market, cials warn that this will be a demanding “We are confident that our complete 26 AMERICAN SHIPPER: MAY 2001 LOGISTICS

worldwide for military and civilian employees. The contract with American Auto Logistics has since been extended another year. The third-party logistics contract with EGL is based on the work of the Distribu- tion Analysis Center. MTMC set up the operation two years ago to analyze De- fense Department cargo traffic and shipment profiles. Then it recommends ways to improve service and lower the military ’ s logistics costs. Other Defense Department agencies that benefit from the center are the Defense Logistics Agency, the Army/Air Lorce Ex- change Service, the Navy Exchange Com- mand, Shipper Services and the Defense Commissary Agency. The Distribution Analysis Center received a big boost a year and half ago when Maj. Gen. Kenneth Privratsky Maj. Gen. Kenneth Privratsky took com- commander, MTMC mand of MTMC. The commander has since made big changes to how the agency man- “We are confident that supply chain capabilities, our emphasis on ages transportation logistics by encourag- customer service and our in-transit product ing the use of commercial-like practices. our complete supply chain visibility will reinforce the MTMC’s deci- “MTMC’s reengineering gave us more capabilities, our emphasis sion to outsource the movement of their of an impetus to try this third-party logis- domestic freight shipments,” said Joe tics contract,” Galluzzo said. “We need on customer service Bento, president and chief marketing of- end-to-end solutions for logistics.” ficer for EGL. The agency has improved its manage- and our in-transit product ment of ocean carrier service contracts and visibility will reinforce Modernization. MTMC has dabbled in instituted a diesel fuel index to reimburse some third-party logistics contracting in truckers and railroads equitably for price the MTMC’s decision the past but mostly for specialized pieces increases. MTMC is also exploring com- of transport or freight. mercial Internet-based systems programs to outsource the movement In 1998, MTMC awarded a two-year, to upgrade its aging in-house computer of their domestic freight $394-million commercial logistics contract system. to American Auto Logistics of Woodcliff MTMC is involved in the Defense shipments. ” Lake, N.J., to manage its Global Privately Department’s effort to further modernize Owned Vehicle Program. The Defense the movement of military and other de- Joe Bento Department ships about 75,000 vehicles fense-related cargo. Privratsky is chair- president & chief marketing officer, EGL

MTMC’s U.S. Southeast logisticsO man of the Surface Distribution Commit- installations covered under contract tee of the Strategic Distribution Manage- ment Initiative, which began last year. Hurlburt Field, Fla. Defense Depot, Albany, Ga. The Defense Department recently Patrick Air Force Base, Fla. Defense Depot, Anniston, Ala. launched another initiative to reduce cus- MacDill Air Force Base, Fla. Defense Depot, Warner-Robbins, Ga. tomer wait times and to increase time- Egtin Air Force Base, Fla. Blount island Command, Jacksonville, Fla. definite delivery of goods. Anniston Army Depot, Ala. MTMC's 954th Transportation Company, “We’re working closely with the mili- Fort Rucker, Ala. Cape Canaveral, Fla. tary depots to review each node of the Aviation & Missile Command, Redstone Mayport Naval Station, Jacksonville, Fla. transportation process,” Galluzzo said. “We Naval Air Station, Jacksonville, Fla. Arsenal, Ala. want to synchronize the movement of the Fort Benning, Ga. Naval Air Station, Pensacola, Fla. cargo.” Fort McPherson/Fort Gillem, Ga. Naval Surface Warfare Center, Panama City, Fort Stewart, Ga. Fla. But military transportation strategists Fort Gordon, Ga. Naval Air Station, Key West, Fla. realize they will never fully achieve the Defense Contract Management Agency: Navy Supply Corps School, Athens, Ga. type of just-in-time logistics management Orlando, Fla,; Atlanta; Birmingham, Ala. Naval Air Station, Atlanta/Marietta, Ga. that’s sought in commercial shipping. “We Defense Depot, Jacksonville, Fla. Naval Submarine Base, Kings Bay, Ga. will always need some buffer in inventory to accommodate our soldiers in the field,” Source: U.S. Military Traffic Management Command. Galluzzo said. ■

AMERICAN SHIPPER: MAY 2001 27 LOGISTICS

eight years for the largest ships. Is a long charter better than a shorter one? There are two opposing views,” Vulovic said. A ship owner is looking for steady busi- Power shifts in chartering ness at a reasonable profit, and for a charterer who is financially sound and interested in a long-term deal gives the owner a lower Hanley, Vulovic see shippers opting for time charters, ship risk rating with his bank and creditors. That makes it easier to raise money to build owners moving to larger containerships, longer charters. ships. On the other hand, the time charterer, in B y R obert M ottley addition to wanting the lowest time-charter rate possible, would like to be able to adjust T ime chartering has become to ocean the length of term, depending on whether commerce what razors are to shav- charter rates are projected to move up or ing: an essential means to an end. down, and also on cargo network require- Wealthier ship owners are building ever- ments . If charter market rates are forecasted larger container vessels backed by long- to rise, the time charterer would generally term charters. And in a new wrinkle, larger Edward F. Hanley prefer a longer term deal to avoid having to shippers are contemplating time chartering director of fleet repair, renegotiate in a higher market. vessels on their own, thereby forswearing U.S. Ship Who gets the upper hand, the owner or carriers altogether. Management Inc. the time charterer? “That depends,” Hanley “Big shippers are becoming aware that said. time chartering ships themselves can be “If a ship under time “In a rising market, where demand for more cost effective and more reliable than tonnage outstrips supply, then a ship owner booking their cargo with carriers,” said charter cannot perform would prefer a shorter term to be free to fix Edward F. Hanley, director of fleet repair because it has bad wiring, again at a higher rate. In a falling market, for U.S. Ship Management Inc., in Char- the opposite is true,” he explained. lotte, N.C. or for any other reason, “As Rod was saying, the strongest under- “As time charterers, they would have current for the vessel owner is security, total operational control of the vessel carry- the ship would be put which can be defined as ‘desired length of ing their own cargo,” Hanley said. “There- off-hire. That’s the worst charter at a reasonable profit.’ fore, they wouldn' t have to fight with various “Conversely, the strongest undercurrent carriers whenever freight rates or sailing nightmare for an owner. for the time charterer is flexibility, meaning schedules change.” the ability to get out of commitments, even “You may soon see strategic shipper While that vessel if there is some cost involved in doing so,” alliances forming on opposite one-way is off-hire, he isn’t getting Hanley said. trades,” Hanley said. “From a charterer’s perspective, when mar- “Two or more companies, with ad- any money, but still ket conditions change, any costs that may equately large cargo volumes and shipping be associated with early redelivery are usu- frequencies, would get together and say, has to pay his own bills. ” ally far less than the advantages gained in ‘we don’t need to be paying these high being free to either renegotiate or change to freight rates anymore. Let’s time charter a a larger or smaller vessel as required.” ship ourselves. We’ll use it this way, you Bom out of the sale of Sea-Land’s interna- That is especially true, Hanley said, if use it the other way, and we’ll share the tional division to Maersk. USSM is the market rates suddenly drop dramatically, or costs.’ This is something we anticipate,” disponent owner and bareboat charterer of 19 if changing cargo network requirements Hanley said. U.S.-flag containerships, which it time char- render the ship no longer suitable for a Hanley and Rod Vulovic, executive vice ters to the Maersk Sealand organization. particular trade. president and chief oper- As an independent and privately owned ating officer of USSM, re- company, USSM satisfies the U.S. Mari- Doomed Rat. On-hire and off-hire sur- cently spoke with time Administration’s requirements with veys are generally performed by a third American Shipper about respect to the operation of ships enrolled in party qualified surveyor at the beginning today’s volatile time char- the Maritime Security Program. and the end of a charter. The cost of the ter market for The very latest generation of large new surveyor and the time that the survey takes containerships. containerships, 6,800 TEUs-plus, gener- are usually split 50-50 between the owner Both Vulovic and ally sail on the intercontinental trades for and charterer. The age of a ship is often a Hanley worked previously Vulovic the carriers that own them. However, there factor in the time charter consideration. for Sea-Land Service Inc. Vulovic, as vice is a growing market of equally large and “Not necessarily the age in years,” president, ocean transportation, was respon- even larger ships being built and managed Vulovic said, “as much as what the age sible for all of Sea-Land’s waterborne assets. by independent ship owners who secure means in terms of the vessel’s economic Hanley was director of chartering services in pre-construction time charters with global obsolescence.” Sea-Land’s ocean transportation department, liner companies. “Older ships have engines that burn more at a time when Sea-Land had 50 to 60 ships “The durations of time charters is also fuel. Their speed is lower. They are not as on time charter. getting longer: three, four, five and even competitive in the overall marketplace. They 28 AMERICAN SHIPPER: MAY 2001 Time isn’t just money. It’s your money. We won’t waste it.

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www.cast.com LOGISTICS might not accommodate as many reefers or spection of the ship’s structure. today. According to conventional practice, have the stowage flexibility of more mod- “That’s something you do if you’re buy- the time charterer insures the cargo. The em ships,” he said. ing an asset, or if you’re going to be in- ship owner insures the vessel and the crew. “All of that translates into either higher volved in the management of a ship. If the Each can fall into ready traps. costs, or lower revenue earning capabili- surveyor reports poor conditions, the char- “Some years ago, we time chartered one ties for prospective charterers,” Vulovic terer can wait until the problems are rem- of our ships to an Asian carrier for a single said. edied, or alternatively choose another vessel voyage,” Vulovic recalled. “One of the A surveyor for a major salvage firm that is ready for service in all aspects,” carrier’s customers did not properly de- recently said he had been hired to check Hanley said. clare dangerous cargo. Because of improper over an aging vessel being considered for “The Military Sealift Command tends to documentation, no one knew what was in a time charter by the Military Sealift Com- have much more detailed survey require- the containers, which were then incorrectly mand. ments for the vessels they’re considering stowed on the ship by stevedores. “In the engine room, I found five gen- to be accepted on their hire,” Vulovic said. “The result was an explosion at sea, erations of machinery, typically having “The command is an intermediary be- killing two crewmen and injuring two oth- one unit piggybacked on top of an older tween the commercial market and the De- ers badly. A lot of cargo was ruined, in unit. It was all holding together. Believe partment of Defense. They are taking upon addition to the containers that had burned. me, I’ve seen worse. But the kicker was the themselves considerable liability in regard There was also significant damage physi- electrical wiring: really ancient, and so to the performance of that ship. Any subse- cally to the ship,” he said. frayed that a passing rat had been electro- quent mechanical problems could be det- “In the end, we repaired the vessel and cuted while brushing against it,” he said. rimental to a military mission or a required submitted our claim to our underwriters, The surveyor put the deceased rodent state of readiness,” he said. who in turn claimed that against the Asian into his report, which caused a suspension “If a ship under time charter cannot carrier and its underwriters.” of the charter party for almost a month perform because it has bad wiring, or for Are Vulovic and Hanley concerned by while repairs were made to the ship. any other reason, the ship would be put off- confidential shipper contracts in which car- “On-hire surveys are an industry stan- hire,” Hanley said. “That’s the worst night- riers are giving major cost breaks to ship- dard procedure before a vessel is delivered mare for an owner. While that vessel is pers with clout? into time charter,” Hanley said. “What is off-hire, he isn’t getting any money, but “From the owner’s side, we are con- somewhat less common is the type of sur- still has to pay his own bills.” cerned. The cargo client may have strong vey your source described: a more exten- leverage if he can force his risk on the sive vessel ‘condition survey,’ in which Extra Insurance. Protection from li- owner,” Hanley said. there’s more machinery evaluation and inability is another concern in time charters “However, the real danger of something happening will be the same as it used to be, as long as shippers continue to either inad- vertently or intentionally misdeclare dangerous goods,” Vulovic said. Time charterers, of course, have no way of knowing what may be carried in a container on a vessel sailing under their aus- pices. “There are thousands of customers. It’s impossible to really know what is in all of When you the boxes,” Hanley said. “Accidents and other perils of the sea are want the the reason why every charter party has a general average clause. If an influential best links... shipper wanted to subrogate this liability, the charter party would have to stipulate Columbia • Multiple container feeder services which participators in the adventure would be exempt,” Vulovic explained. Coastal linking U.S. Atlantic & Gulf Coast ports If an important client with clout wanted has them! plus Freeport, Bahamas. such an exemption from general average, • Project Cargo Division for Domestic then the charterer would have to go back to and International project cargoes call the owner and renegotiate the charter party. This would be more complicated if the 1-877-809-3504. time charterer and the shipper happened to be one and the same. For bookings and customer service, call: “In that case, we as an owner might say to the time charterer (and shipper), ‘fine, if Baltimore (410) 633-5701 Norfolk (757) 397-9203 you want to propose that, go right ahead, Boston (617) 268-8400 Miami (305) 591-1088 but you’ll have to cover us another way,’ Corporate (908) 991-0001 Savannah (912) 236-8984 such as with extra insurance,” he said. Charleston (843) 722-1420 www.columbia-coastal.com NY/NJ (908) 624-1991 Risks And Rewards. A ship broker is customarily paid 1.25 percent of the char- 30 AMERICAN SHIPPER: MAY 2001 LOGISTICS

Chartering terms

Bareboat charterer: Charterer gets the ship, its hull, and with the firm of Burke & Parsons in New York. machinery, and must hire a crew or the services of a ship manage- Hire: Charterer compensates the owner for use of a vessel. “On ment company. By contrast, a time charterer pays for a ready-to- hire” means the ship is in service as contracted. “Off hire” means go vessel. that the ship is temporarily unavailable to the charterer. Charter party: Actual document substantiating a vessel char- Part charters: Usually based on voyage charter party model, ter. There are several standard agreements, such as box time, or and occur when a shipowner cannot locate a charterer with a full New York Produce Exchange (NYPE). Box time is favored more load. Part charters can work well if the cargo is too large or bulky than NYPE, which dates to the 1920s and contains archaic lan- to be carried on a liner vessel, but too small to justify a full vessel guage. Larger liner companies have their own charter parties. Most charter. charter parties are written, though a few are oral, generally among Recap: The document transmitted when a fixture has been parties whose business is well known to each other. By law, a agreed, setting forth all of the negotiated terms and details. This charter party is no less valid if it has been orally rendered. is the operative document until the charter party is drawn up. Disponent owner: Name used to describe a charterer who Time charter: A charterer pay for the use of a vessel for a acts as an owner by sub-chartering a vessel, and assuming an specified period. The charterer also provides and pays for fuel, owner’s liability to the sub-charterer. port charges, and pilotage. The shipowner retains responsibility Fixture: Conclusion of charter negotiations between owner and for navigation and most operations aboard the vessel. charterer, when an agreement has been reached to charter a vessel. Voyage charter: A charterer pays for use of a vessel to carry Freight: Compensation paid to the owner by the voyage char- cargo from one designated port to another, or one port range to terer for use of a vessel. “This is sometimes confusing because the another. Charterer is usually responsible for stowage, discharge of same term is used to describe the payment made by a cargo shipper cargo, and pays freight passed on vessel capacity or cargo loaded. to the bill of lading issuer." said Keith Heard, an admiralty attorney The greatest risk is that a voyage may last longer than anticipated. ter hire for successfully arranging a deal. plained. expenses incurred in financing and operat- “That may seem low, but remember the “One of the ways shipowners make ing it,” he said. broker is only an intermediary. He owns money is via the differential between the Charterers, on the other hand, make nothing. He has zero risk,” Vulovic ex- rate at which they charter their ship and the money by profitably deploying the ship in

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AMERICAN SHIPPER: MAY 2001 31 LOGISTICS their network. out, you give heavy consideration to the ones such as Hyundai and Hanjin, “de- Do charter deals ever go so badly that all reputation of the prospective charterer,” he cided that they wanted to monetize their parties are burned? “Definitely, that hap- said. assets, so they sold their ships and then pens,” said Hanley. Despite such qualms, time chartering time-chartered them back.” Who is burned the most “depends on does not have to be an ulcer-making pro- Those vessels became available on the many factors, such as supply and demand fession. “When you’ve been in business charter market eventually, and when they of tonnage, freight rates, competition, cur- for a while, you figure out how to assess did, they were instantly larger and faster rency exchanges, and sometimes just plain your risk with the people you choose to be than the feeder ships that had been tradi- bad luck,” he explained. with in a relationship,” Vulovic said. tionally available. The larger liner compa- “Charterers could supply poor quality “Of course, misfortune happens. If it nies took notice and snapped them up, fuel to the ship, and accelerate wear on the does occur, it’s in everyone’s interest to deployed them in their regular liner routes. engine components in an almost impercep- work as a team,” he said. The next logical step was for indepen- tible manner. The owner could employ an Carriers who require additional ships dent owners to build bigger and faster underqualified and underpaid crew, result- and don’t want to commit the capital to vessels purposely for the time charter mar- ing in poor service to the charterer, cargo build them regularly turn to the charter ket. Liner companies, no longer burdened delays and or fines,” Hanley said. market to fulfill their tonnage needs. In the with capital commitments for ship con- “Also, an unscrupulous charterer can send past, liner shipping companies generally struction, could invest in terminal devel- the vessel into an unsafe port,” Vulovic said. owned their own vessels. opment and information technology. "Or, he can dangerously load the ship, so “That's changed,” Hanley said. "In the That step has evolved today into exclu- there’s a likelihood of the cargo shifting at last 10 years, carriers have realized they sive partnerships between global liner com- sea,” which could cause a vessel to capsize. can make more money by focusing on panies and independent shipowners. “The Having set up a chartering deal, the moving cargo rather than owning and op- owners build and operate vessels, which owner is protected somewhat by having erating ships.” are then time chartered and deployed in the crew on board. “They are the shipowner’s “Ten years ago, there was a small num- liner companies’ networks,” Hanley said. eyes and ears,” Vulovic said. ber of tramp feeder vessels,” Vulovic said. “Just as carriers have lowered their cost “You do what you can, but to a large “A few companies, Maersk and Sea-Land of capital by creating symbiotic relation- extent, once a ship is in service for a char- among them, would time charter those ships with certain trusted ship owners, we ter, once it's in the line, you cannot control feeder ships to serve the ever growing believe the next step will be a similar one everything,” Hanley said. trades they offered their customers.” between some of the largest shippers and a “You always try to charter ships in from Then, he explained, there came a period few forward-thinking ship owners directly,” reputable owners. When chartering ships where some carriers, mainly Far Eastern Vulovic predicted. ■ cap ab ility/

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contracts with realistic quantity commitments and corresponding space guaran- tees, working with freight rates fixed for Michelin keeps it simple six to 12 months, he said. By contrast, Michelin “cannot go very Tire manufacturer rejects need for global, long-term contracts. far with commitments” and has chosen to follow the market trends in terms of freight LONDON and their contents is restricted to the “bare rates, he said. The company is prepared to Michelin, the multinational tire manu- minimum.” The big tire producer shipped renegotiate rates on a monthly basis, to facturer, said it prefers informal rate agree- 103,000 TEUs last year with 75 shipping take account of market changes and varia- ments with shipping lines and played down lines worldwide. tions in its cargo volumes. the benefits for shippers of moving to long- With a small team of five senior execu- “One of the downsides of this method is term global service contracts. tives around the world responsible for ne- that we have lots of amendments to our Brian Moulton, head of global ocean gotiations with ocean carriers, Moulton contracts, which we would not have in a transport of the Michelin group, told an said that Michelin maintains very close stable situation," he said. audience of shipping line executives at the contact with carriers to react globally, when Moulton also noted the swings in freight Containerisation International conference necessary. “As such, we see no interest in rates in the container shipping market. in London that his company preferred short- having any global contracts,” he said. Michelin’s transatlantic eastbound rates term basic contracts. Michelin does not Because Michelin’s cargo flows fluctu- dived 65 percent from the first quarter of require the sort of more elaborate global ate widely over time and are unpredictable, 1997 to the fourth quarter of 2000. West- contracts promoted by certain ocean carri- it prefers not to commit to shipping fixed bound transatlantic rates dropped from a ers, he added, referring to recent comments volumes with carriers, Moulton said. “We reference index point of 100 in the first made by Flemming Jacobs, chief execu- prefer to work with the companies as part- quarter of 1997 to 65 in the third quarter of tive of Neptune Orient Lines and APL ners, and not to be bound by heavy contrac- 1999, before rebounding to 125 in the Liner. tual limitations.” fourth quarter of 2000, he said. “We are not looking for increased so- Noting that Michelin is “not perhaps Since the beginning of the year, west- phistication or more detailed specifica- your typical shipper,” Moulton said there bound transatlantic rates have decreased 5 tions,” Moulton said. The company’s are other “shippers with fairly regular flows to 10 percent, Moulton added, predicting contracts with carriers are “fairly simple, to economically stable parts of the world that the delivery of a large number of new uncomplicated and basic.” Those contracts from fixed production points.” Those ship- containerships this year would put pressure can vary in length from four to 20 pages, pers are able, if they wish, to negotiate on freight rates. ■ CERES PARAG0

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AMERICAN SHIPPER: MAY 2001 33 Shippers’ Case Law Abstracts by Robert Mottley, rmottley@ shippers.com

Appeals court cites CMR over COGSA Because Trek’s bill of lading required carriage “by land through In 1996, Orient Overseas Container Line (USA) Inc., acting as an four countries using two different modes of transportation (tmck and agent for Orient Overseas Container Line (UK) Ltd., signed a one- rail) and several different participating carriers,” the appellate panel year service agreement with Trek Bicycles Corp. to move cargo ruled the land carriage “was more than incidental to sea carriage” and containers from Wisconsin to various destinations in Europe. Two so placed “this dispute outside our admiralty jurisdiction.” Therefore, months into the contract, OOCL (UK) issued to Trek a “through bill the case would be governed by applicable choice-of-law rules. of lading” for the shipment of 301 packages of bicycles and bicycle The appeals panel said the district court erred in extending frame sets from Oconomowoc, Wis., to Spijkenisse, the Netherlands. COGSA to the land carriage, because COGSA “only applies by its The bill of lading indicated OOCL (UK) would serve as the “carrier” own force from the time the goods are loaded on (a vessel) to the for the water segment of carriage, while other unnamed “participating time they are discharged from the ship.” carriers” would transport the container for the land portion of the Which choice of law did apply? Belgium had ratified the Conven- carriage. OOCL (UK) had selected DeBrock Gebr. Transport, N.V., tion on the Contract for the International Carriage of Goods by Road as its trucker between Antwerp and inland destinations. Upon arrival (CMR, 1956). Article 1 of CMR stated that CMR “shall apply to of the bicycles at the port of Antwerp, DeBrock subcontracted with every contract for the carriage of goods by road in vehicles for N.V. Groeninghe to transport Trek’s container to Spijkenisse. On reward” between two European countries, if one of them had ratified Oct. 29, 1996, a Groeninghe truck picked up the container from CMR. And so the appeals court ruled that the carriers’ liability “must OOCL (UK)’s ship at Antwerp. Later that evening, the driver left the be assessed using the relevant portions of that body of law” — CMR, truck on a public road, without any supervision or guard, near his not COGSA. In reversing the district court’s decision, the appellate home in Deume, Belgium. Sometime in the night, thieves stole the panel ordered the lower court to decide whether the OOCL carriers truck and its container. The police tracked down 30 of Trek’s 301 qualified for CMR’s limitation of liability provision. stolen packages, but the remainder were never recovered. “We recognize that our interpretation may create uncertainty for In November 1996, Trek filed a claim with its insurer, the shippers who choose to transport goods under a through bill of Hartford Fire Insurance Co., for the value of the missing packages. lading similar to the one at issue here,” the appelate judges wrote. Hartford reimbursed Trek, and then, as the subrogated insurer, “Such uncertainty is inherent to international shipping, and may be sued the OOCL carriers in federal court for the recovery of the reduced by drafting a bill of lading that provides for the application value of the missing cargo. U.S. Magistrate Judge Douglas F. of a single law during all stages of transport, which the parties in Eaton, in the Southern District of New York, ruled in favor of the this case did not do.” shipper’s insurer, saying the Carriage of Goods by Sea Act (COGSA, [Hartford Fire Insurance Co. v. Orient Overseas Container Line 1936) “applies to the entire intermodal carriage, including the (UK) Ltd., etal.; U.S. Court of Appeals for the Second Circuit; No. period of time when the goods were in the trucker’s custody.” The 99-9502; date o f decision: Oct. 27, 2000] OOCL carriers subsequently appealed that verdict. The U.S. Court of Appeals for the Second Circuit noted that “we Carrier must notify a shipper of COGSA’s provisions are asked to decide the law to be applied to the loss of cargo during Western Bulk Carriers time-chartered a vessel, the Lake Marion, an ‘intermodal’ shipment of goods — that is, a shipment carried by to carry a shipment of cold-rolled, hot-rolled, and galvanized steel water and land transportation on a single bill of lading.” Furthermore, from Riga, Latvia, to various U.S. ports. The bills of lading “the bill of lading in the case at bar qualifies as a ‘mixed contract,’ for identified JSV Severstal-Invest as the shipper, but a company the container was to travel by land from Wisconsin to Montreal, by called Steel Coils purchased the cargo and became its consignee. sea from Montreal to Antwerp, and again by land from Antwerp to its Upon discharge of the shipment in the United States, it was alleged destination in the Netherlands. Ordinarily, such a bill would not fall that seawater had entered the ship’s cargo holds and damaged the within our admiralty jurisdiction,” the appeals court said. steel. When Steel Coils sued in federal court to recover damages of “Notwithstanding this general rule, we have held that a federal $550,000, the carrier defendants argued that their liability should court can exercise admiralty jurisdiction over a ‘mixed’ contract if be no more than COGSA’s $500 per package limitation. (1) the claim arises from a breach of maritime obligations that are U.S. District Judge Sarah S. Vance determined that, in order to severable from the non-maritime obligations of the contract, or (2) rely on the COGSA package limitation, a carrier had to show the land-based portion of the contract is “merely incidental” to the evidence that a shipper was provided a “fair opportunity” to declare sea-based operation. a higher value and pay an increased freight rate. In the case at hand, “The first exception does not apply because the loss occurred the bills of lading for the steel made no mention of COGSA at all. while the cargo was being transported on land in Belgium,” the That omission meant they “did not notify the shipper of its rights,” appeals court said. “The second exception also fails to provide Vance said. As for the carriers’ argument that, “as an experienced grounds for admiralty jurisdiction in this case. Transport by land shipper,” Steel Coils had to have known of COGSA’s liability under a bill of lading is not ‘incidental’ totransportby sea if the land limitation, the court said it was “not persuaded... the experience of segment involves great and substantial distances.” the shipper, without (anything) more, establishes the defendants’ The appellate panel cited prior case law holding that a carriage right to summary judgment as a matter of law. There is no evidence of goods of up to 1,000 miles was “more than incidental” to the that (the shipper) had actual notice of the $500-per-package liabil- maritime portion of a contract [Kuehne & Nagel v. Geosource, 874 ity limitation.” Vance ruled in favor of Steel Coils, denying the F.2d 283 (1989)], while extensive cross-U.S. transport of more defendants’ motion for summary judgment. than 1,000 miles was not “an incidental aspect of a shipping [Steel Coils Inc. v. Lake Marion, etal.; U.S. District Court, Eastern contract” [Berkshire, 954 F.2d 881 (1972)]. District of Louisiana; No. 98-3116; Date of ruling: June 15, 2000] 34 AMERICAN SHIPPER: MAY 2001 From o u r pe r s p e c tiv e ..

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To kill a name to demonstrate that the Internet version of the system, AESDirect, The rest of the world’s shipping industry may call them freight was secure enough to handle this information. forwarders or consolidators, but here in the United States they are Monk said areport would soon be issued to Congress. About 270 still “non-vessel-operating common carriers.” days after the report is submitted to Congress, the portion that The 1998 Ocean Shipping Reform Act attempted to kill the requires mandatory filing of munitions and Commerce Control NVOCC name by re-labeling and lumping the business under a List will take effect. Congress will also have to decide whether to more generic description as “ocean transportation intermediaries,” make AES mandatory for all export shipments. or OTIs. While the industry generally opposes mandatory filing, it may “The term NVO doesn’t exist anywhere else,” said Edward become a non-issue overall because many exporters and forward- Emmett, president of the National Industrial T ransportation League, ers are already using AES. based in Arlington, Va. “It causes a great deal of confusion.” Many executives in the ocean freight consolidation business Reinsch takes helm at NFTC resist the name-change by still referring to themselves by the label William A. Reinsch, formerly the U.S. Commerce Department’s officially given them 17 years ago under the Shipping Act. undersecretary for the Export Administration, has been named These operators may eventually accept the name change. But president of the National Foreign Trade Council. don’t count on it anytime soon. The council was founded in 1914 to serve the business’ interests in trade policy, export finance, international tax, and human ACE industry group rekindled resources. Today, it represents more than 500 companies and has With the development of U.S. Customs’ Automated Commer- offices in New York and Washington. cial Environment underway, a group of industry executives want “With the U.S. economy in a downturn, the importance of interna- to ensure that their voice is heard during the process. tional trade to U.S. business is ever more apparent - and the impor- “There is no question that ACE will have a significant impact on tance of the NFTC’s work ever more important,” Reinsch said. the day-to-day business of its users,” said the Trade Automation At the Export Administration, Reinsch gained a reputation for Policy Forum. “Thus, the trade community has a huge stake in the defending the high-tech manufacturers’ goal to become stronger in building of ACE and must remain engaged in the process.” export markets and to reform trade laws impacting U.S. exporters. The forum replaces the International Electronic Trade Steering He took the post in 1993 after a long career on Capitol Hill. Committee, which was dormant for about two years while the ACE Reinsch’s duties at the NFTC will be to oversee numerous initiative was shelved for lack of funding. “The industry’s efforts international trade and tax issues, which concern U.S. businesses. were better spent going out to get the money (for ACE),” said He replaces Frank Kittredge former General Electric executive and Michael Eads, executive director of the Trade Automation Policy president of the council for the past 12 years, who retired. Forum, based in Washington. With the new forum in place, industry executives will be able to NCBFAA seeks stability in GSP extension debate and build consensus on what they want from ACE and The National Customs Brokers and Forwarders Association of present that position to Customs. The group will also ensure the America recently sent a letter to U.S. Trade Representative Robert system considers global automation developments, Group of Seven, Zoellick thanking him for his support of a one-year extension to the World Customs Organization, World Trade Organization and the General System of Preferences in the Bush Administration’s Free Trade Area of the Americas. proposed fiscal 2002 budget. GSP provides duty-free treatment to imports of certain products AES and mandatory filing from specified developing countries. Developing countries benefit Could the government’s Automated Export System support from GSP by making their products more attractive to U.S. import- mandatory filing of shipper’s export declarations? ers. Without the program, U.S. tariffs would remain high on a You bet, said C. Harvey Monk, Jr., chief of the Commerce number of imported goods from these countries. Department agency’s Foreign Trade Division. The administration had asked for the industry to comment on “The system can handle mandatory filing,” Monk said. “We GSP, while Congress considers extending the program. GSP is due know we have a secure system. It’s been tested and reviewed.” to expire Sept. 30. AES was developed five years ago as a voluntary system to help NCBFAA has requested that the administration stick with its reduce paper filings of shipper’s export declarations (SEDs). one-year extension proposal to minimize disruption to the GSP Customs uses the information in SEDs to target illegal exports, program with the upcoming expiration date. while Census compiles it for the country’s trade statistics. “For years, GSP has routinely been extended only for short In the Consolidated Appropriations Act of 2000, Congress periods — from one to two years at a time,” said Peter H. Powell, initiated a proposal to make AES mandatory for filing all export Sr., president of the NCBFAA in the letter to Zoellick. “With these declarations. The secretaries of Commerce, State, Defense, En- brief periods of renewal, Congress is frequently unable to gain ergy, Treasury and the director of the Central Intelligence Agency passage of GSP renewal legislation until some time after the were asked to determine if this would be advisable and feasible. program’s expiration date, causing GSP to lapse for months at a The same legislation also considered the mandatory AES fding time. This has been very disruptive to the trading public, causing for exporters of munitions and cargo listed on the Commerce great uncertainty and costs.” Control List. The secretaries of Commerce, Treasury, and the NCBFAA has said it would welcome a more thorough review to director of the National Institute of Standards and Technology had improve the GSP program at a later date.

36 AMERICAN SHIPPER: MAY 2001 NEXT 20 YEARS

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freight worldwide. Antwerp-based Ecu-Line emerged in the late 1980s under the direction of Raymond Van Achteren and quickly became a power NACA, Ecu-Line form alliance player in the neutral NVO business in Eu- rope, Africa and the Mideast. Ecu-Line’s Neutral NVOs realign operations to share worldwide groupage business in 2000 accounted for about 70,000 TEUs. strengths in U.S./European trade. The subsidiaries of these NVOs have a history of working together in certain mar- B y C hris G il l is kets. Brennan, Mercator and Ecu-Line worked together several years ago in the T o industry analysts, the thought of Miami/Latin American trade. Ecu-Line and NACA Logistics “We don’t think customers For the most part, however, these opera- Group cooperating in one of the tors have tried to penetrate each other’s world’s most important trade lanes was are looking for a one-stop backyards on their own through acquisi- inconceivable. tions or other agency agreements. That changed in March when the two shop. They want service To enter the U.S. market, Ecu-Line ac- large neutral non-vessel-operating common providers with the largest quired other neutral NVOs, such as carriers announced a landmark agreement Mercator, New York-based Fleet Shipping to work together in the transatlantic freight number of services Lines, and SeaExpress of Baltimore. NACA consolidation business. in their niche.” firmed up existing offices of its NVO sub- “NACA, which primarily exports from sidiaries in Europe and formed an agency the United States, needed a strong partner in agreement with SLOTS in Germany. Nei- Andrew Scott Europe, and Ecu-Line was looking for a ther of these scenarios lived up to the poten- chief operating officer, similar situation in the United States,” said NACA Logistics Group tial, which the NVOs sought. Andrew Scott, chief operating officer for “The cargo flows that are presently moved NACA Logistics Group’s North American by the two carriers will be able to benefit operations, based in Long Beach, Calif. Direct Container Line, Brennan Interna- from the mutual strength in each continent “Since we share a large number of custom- tional Transport and Conterm Consolida- where clearly NACA is the leading player ers inbound and outbound in the market, tion Services. The shippers’ association in the U.S .A. and Ecu-Line has its roots and this agreement made a lot of sense.” allowed the companies to combine their position in Europe,” the companies said in “Forwarders aren’t attracted to names. freight volumes to seek lower rates and joint statement announcing the transatlan- They’re attracted to service,” said Kris De better service from ocean carriers. tic agreement. Witte, president of Ecu-Line USA (for- In 2000, the three long-time NVOs were The transatlantic agreement has required merly Mercator Shipping) in Miami. “By rolled into a single corporation, but al- some give-and-take from both NACA and doing this cooperation, we believe that we lowed to maintain their individual sales Ecu-Line. will improve our service equitably between and marketing identities under the NACA NACA agreed to close its offices in the companies.” Logistics Group umbrella. Last year, the Rotterdam, Antwerp, Paris and Le Havre, While both NVOs have spent the past group handled about 173,000 TEUs of and terminated its agency relationship with three years aggressively building SLOTS. Scott said the breakup their global networks, they real- with SLOTS was difficult, because ize that partnerships with other Transatlantic volumes many of the group’s shareholders strong players help to increase for NACA, Ecu-Line are also NACA clients. their market share quicker. “For With the exception of its Miami us alone to accomplish what we NACA Logistics Group office, Ecu-Line shut down its op- have under this agreement would Exports (LCL & FCL) North America to Europe: erations in New York, Chicago, have taken us three to five years Direct Container Line 7,555 TEUs Atlanta, Baltimore, Los Angeles to build,” De Witte said. Conterm Consolidation Services 8,000 TEUs and San Francisco. Ecu-Line will “We don’t think customers are Brennan International Transport 2,800 TEUs maintain its offices in Canada. looking for a one-stop shop,” Scott Under the agreement, Ecu-Line added. “They want service pro- Imports (LCL & FCL) Europe to North America: became NACA’s exclusive agent viders with the largest number of Direct Container Line 318 TEUs in the Netherlands, Belgium, services in their niche.” Conterm Consolidation Services 2,851 TEUs France and Germany. NACA’s As neutral NVOs, NACA and Brennan International Transport 444 TEUs subsidiary Brennan has become Ecu-Line buy space on Ecu-Line’s exclusive agent containerships at wholesale and Ecu-Line throughout the United States, with retail it back to freight forwarders Exports (LCL) North America to Europe: 1,400 TEUs the exception of Miami. with less-than-containerload or Imports (LCL) Europe to North America: 3,450 TEUs While no employee swap was full-containerload shipments. part of the agreement, both com- NACA (New American Con- I Estimated total volume of transatlantic alliance panies have picked up some staff solidators Association) was origi- in 2001: 27,000 TEUs from each other’s former offices. nally formed several years ago as De Witte said Ecu-Line’s busi- a shippers’ association between Source: NACA Logistics Group and Ecu-Line ness from Miami to Latin America 38 AMERICAN SHIPPER: MAY 2001 SHIPPING MADE EASY AS...

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Fish and Wildlife wrestles with automation

Brokers burdened by agency’s abandonment of link to Customs’ system.

B y Chris G il l is

T he U.S. Interior Department’s Fish Shippers can type the information onto the and Wildlife Service has tradition form while online and print it out, or they ally maintained good relations with can print it out to prepare on a typewriter. the country’s leading customs brokers spe- But the implementation of the new form cializing in the clearance of exotic animal and its Internet version has not bode well and plant products. But that relationship with the broker industry, which notes that it “Forwarders aren’t attracted has become increasingly strained since the had little time for input. Fish and Wildlife agency pulled the plug on its connection to published a notice in the Federal Register in to names. They’re attracted Customs' computer system last year. February 2000 requesting comment on the “The only way to clear a shipment through redesign of the 3-177 form, and the final draft to service. By doing this Fish and Wildlife today is to have the docu- was announced in the Federal Register last cooperation, we believe ments manually reviewed and stamped by August. the agency,” said Leroy F. Berven, vice Two comments — one of which came that we will improve our president and branch manager of Edward from within the agency — were received service equitably between M. Jones & Co. in Seattle. “This is a giant about the notice, recommending only mi- step backward.” nor changes. The brokers said their failure the companies.” For several years, Fish and Wildlife had to respond in force was because Fish and collected some import data through Cus- Wildlife didn’t do enough to publicize the Kris De Witte toms’ Automated Broker Interface. The proposed changes to the form. president, agency complained that the system was “Basically this lack of input from the Ecu-Line USA incompatible with its increasing enforce- very individuals who have to complete this ment and statistical reporting requirements. form allowed the service to incorporate any Customs’ strict confidentiality rules pre- and all information you could possibly imag- remains strong and will continue unchanged. vented the agency from gaining complete ine relative to an import of animal or plant The 40-person Miami office handles numer- electronic access to data it must report to products,” said Carolyn Rutkowski, man- ous transshipments from Ecu-Line’s Euro- wildlife conservation groups. ager of Dallas operations for Coppersmith, pean operations to Latin America. Ecu-Line While brokers were still required to sub- which processes thousands of shipments is also considering developing a closer rela- mit paper Fish and Wildlife forms 3-177, through Fish and Wildlife. tionship with SLOTS. ABI transmissions of data allowed them to “This additional information is not re- Since Northern Europe offers opportuni- secure faster clearances of animal products quired by any other government agency. ties for efficient transshipment services, the from the agency. Therefore the brokerage community will be benefits of the agreement between NACA “ABI allowed Fish and Wildlife to see an passing along the cost of additional program- and Ecu-Line should help both NVOs electronic record and know to expect docu- ming to its client base to incorporate such strengthen their presence in emerging mar- ments from the broker. Meanwhile, the fields in their data entry screens,” she added. kets such as Eastern Europe and Africa, agency could request Customs to hold the Another problem with the Internet ver- DeWitte said. shipment for inspection or let it go,” Berven sion of the form is that there’s no way for Many NVO executives believe this move said. “It wasn’t perfect, but it was a real brokers to transfer information from their by Ecu-Line and NACA is the beginning of improvement over the previous way of han- internal systems to Fish and Wildlife’s Web a merger between the firms down the road. dling these shipments.” site. Information must be re-keyed each Both companies insist the agreement is time the 3-177 form is prepared. not a prelude to a merger. “Ecu-Line does Internet Attempt. Without its data link Brokers who print out the form for typing not own any shares in NACA and is not to ABI, Fish and Wildlife has started to or for use in their computer printers have taking over any assets or liabilities from develop Internet-based strategies for re- found that it doesn’t follow the universal NACA. Ecu-Line has no influence over any ceiving trade data from the industry. print format rules of six vertical lines to an NACA office outside the U.S.A./Continen- The agency recently put the new version inch and 10 characters to an inch pitch. tal Europe trade. Neither is there any in- of its form 3-177 on the Internet Web appli- “Asaresultthe ‘official’ 3-177 form had volvement of NACA in the Ecu-Line cation in its Law Enforcement Manage- to be brought into industry print parameters shareholding,” the companies said. ■ ment Information System (LEMIS) 2000. before programmers could even get their 40 AMERICAN SHIPPER: MAY 2001 REFLECTING QUALITY

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So, if you are looking for a sparkling shipping service, that's a cut above the rest, and which meets and exceeds your transport needs, make Safmarine your carrier of choice for blue-chip delivery. FORWARDING / NVOs hands on a paper document to begin their Elephant Conservation Act and the Rhinoc- programming process,” Rutkowski said. eros-Tiger Conservation Act. While Fish and Wildlife admits that short- In 1999, the agency processed 95,664 comings exist with the new online form, the shipments valued at about $ 1 billion. Early agency said the form in- tallies for 2000 show that Fish and Wildlife corporates information processed 87,000 shipments valued at $ 1.28 brokers already provide Leroy F. Berven billion. But the true total of shipments pro- when they file their en- VP & branch manager, cessed by the agency last year will be higher tries on ABI. It also brings Edward M. Jones & Co. once the tally is complete. the form in line with the While the responsibilities of Fish and international endangered “The only way to clear Wildlife expand with each new law, the species agreements, the agency’s law enforcement budget for man- agency said. Rutkowski a shipment through power and equipment had stayed relatively Fish and Wildlife also issued four pages of Fish and Wildlife today stagnant over the years. instructions on how to correctly fill out the This changed last year when the fiscal new forms. “We believe that we have made is to have the documents 2001 budget for the agency ’ s Office of Law the form much easier to read and user Enforcement included $47 million, up from ftiendly,” said Kim Hamilton, senior wildlife manually reviewed $39 million the previous year. The budget inspector for Fish and Wildlife in Washing- and stamped by the agency. increase will allow the agency to hire 30 ton. additional special agents, the largest hiring The agency plans to make further en- This is a giant step in many years. hancements to its online 3-177 form. It’s Fish and Wildlife also generates about exploring ways to allow brokers to transmit backward. ” 30 percent of its income from $50-annual their data to the online form and transmit import/export license fees, and inspection the information directly to the agency. fees of $50 per shipment at 13 designated However, brokers would prefer that the each year. These products range from frog ports and fees of $95 per shipment at 16 agency reconcile with Customs and rees- legs and walrus tusks to ginseng roots and fur non-designated ports. tablish its electronic link to ABI. collars of coats, and the list keeps growing. At the ports, Fish and Wildlife continues to “We don’t want to get in a fight with Fish The agency was established 100 years work closely with other state and federal law and Wildlife,” Berven said. “We want to ago under the Lacey Act to stop illegal enforcement agencies, such as Customs, work with them. That’s why it’s so disap- interstate commerce of wildlife and to pre- Animal and Plant Health Inspection Service, pointing to see the agency moving in the vent imports of injurious species. and Food and Drug Administration. opposite direction.” The 1970s saw the passage of major wild- Penalties for violating the Lacey Act run “We’re certainly not opposed” to rees- life legislation, such as the Endangered Spe- as high as five years in prison and up to tablishing a link to Customs’ system, cies Act and Marine Mammal Protection $250,000 for individuals and up to $500,000 Hamilton said. “But we need it to work so Act. In recent years, wildlife protection laws for organizations. Violations of the Endan- that we meet our information requirements.” have become more international in scope, gered Species Act may result in one-year The answer to the industry’s communi- such as the Con vention on International Trade prison terms, and fines from $100,000 to cation problems with Fish and Wildlife in Endangered Species of Wild Fauna and $250,000. Fish and Wildlife recently issued may be solved in the next four to five years Flora (CITES), which covers more than 1,100 its biggest fine ever of $10.4 million to with the development of the International animals and plants. Other new laws are the Maryland-based U.S. Caviar & Caviar Ltd. Trade Data System, the front-end for Cus- Wild Bird Conservation Act, the African for illegally importing caviar. ■ toms’ future Automated Commercial Envi- ronment. ITDS promises to link as many as Customs lists firms violating textile rules 100 agencies with an interest in international trade data. WASHINGTON firm may appeal to the Treasury Depart- “In the future, Fish and Wildlife should U.S. Customs has published the latest list ment to have its name removed from the participate in an interface such as ITDS,” of overseas firms that have been involved in list, if it is found that the firm has not Berven said. “That’s the only way that illegal transshipments of textile and apparel committed any of transshipment violations makes sense in the long run.” to the United States. for more than three years after the date of its Fish and Wildlife also believes that ben- The agency assessed penalty claims un- name being published. efits will come from participation on the der section 592A of the 1930 Tariff Act U.S. importers are urged to exercise “rea- front-end system. “We’ll be more than against 23 firms, located in Hong Kong and sonable care” when sourcing goods from happy to work with ITDS,” Hamilton said. Macau. The violations range from using any of these listed entities “to ensure that A pilot run of ITDS is scheduled for June false importer of record documents and the textile and apparel are accompanied by in Buffalo, N. Y. The first government agen- counterfeit visas to stitching false labels in documentation, packaging, and labeling that cies participating in the pilot are Customs, apparel. The practice of transshipment is are accurate as to its origin,” Customs said. the Food and Drug Administration, the often used to beat stringent U.S. textile The agency’s Office of Field Operations Immigration and Naturalization Service, quotas or high rates of import duties. in Washington also requests the help of the and the Transportation Department. If a penalty claim is issued to a firm and import industry to locate the whereabouts of Ultimately, computer technology will help no petition is filed by the firm in response, 11 Hong Kong firms concerning alleged Fish and Wildlife better monitor the hun- Customs is authorized to publish the textile transshipment violations. Customs has dreds of exotic animal and plant products company’s name and known address in a published these firms’ last known addresses imported and exported through the country semiannual list in the Federal Register. The along with the new list of violators. ■ 42 AMERICAN SHIPPER: MAY 2001 You’d like to know where your consignment is at any time - anywhere in the vorld? No problem: all you need is an Internet connection and the consignment data of your cargo. 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partner in the eye,” he said. Troy Catucci Line ventured into the full- containerload business in 1989 at the en- couragement of Richard Liberto, formerly vice president of North America and Medi- Hands-on NVO terranean operations for Mediterranean Shipping Co. Since MSC was new to the Troy Container Line prospers off traditional carrier industry at the time, it built large volumes of its business on NVO freight. neutral freight consolidation services. Troy Catucci Line’s first full- containerload contract was for 100 TEUs. B y Chris G il l is “I didn’t sleep well that night after we signed the contract, not with a $250-per- hat’s love got to do with it? TEU shortfall,” Troy said. “But we got out A lot if you ask non-vessel- there, and filled the contract in six weeks.” operating common carrier Again, it was all about timing. “Being owner Michael Cadden Troy about how he entrepreneurs, you see the business oppor- got started in the business 20 years ago. tunity and grab it,” Troy said. “The carriers When Troy approached his future in- never realized, and still don’t realize, how laws about marrying their daughter Carol big the NVOs would become. Today, we O’Leary, her father told the young bar- could handle 100 TEUs even on a bad day.” tender to first get a day job. Troy did just In 1997, Troy bought out the Catucci that, and over time has built one of the most family, and continued to expand the NVO ’ s successful neutral mid-sized ocean freight business to markets around the world. “I consolidators in the industry, not to men- took all the aspects that I liked about the tion a lasting marriage. other companies I had worked for, took off “I went to a job agency in New York the rough edges, and created Troy Con- City and got a day job with Maersk Line in tainer Line,” he said. February 1981,” said the 44-year-old Today, Troy Container Line serves about Brooklyn native. “My job was to check 500 destinations worldwide, with the ex- bills of lading. I soon moved into pricing ception to the Caribbean. The company and documentation.” has about 40,000 TEUs of both inbound He stayed at the Danish ocean carrier for and outbound LCL and FCL cargo under about a year and a half. “At Maersk, I got contract with the ocean carriers. the best paid education you could get in In the United States, Troy Container this industry, but you knew your place. The “We don’t need to be number Line owns offices in New York, Chicago opportunities to grow within the organiza- and Boston. It also has nine receiving station were limited,” Troy said. one or the biggest. We just tions for LCL cargo. Later this year, the Then he met Tony Blanco, vice presi- need to be the one that company will open offices in the Southeast dent of Japanese NVO Trans Senko, in and West Coast and plans to add an office Chicago at a Christmas party in 1982. The the customers come back to. in the Gulf by January. timing couldn’t have been better for Troy. Troy Container Line has agency agree- “I’ve always been an entrepreneur at The big players and mergers ments with many neutral NVOs of similar heart,” Troy said. “I had heard about the simply create more business size in the world’s main freight markets. NVO industry at Maersk and wanted a The company works especially close with taste of it. I was hired by Mr. Blanco at the opportunities for us.” Antwerp-based Confreight Group in Eu- party.” rope and WS A Lines, based in Hong Kong, Growing up in the Irish neighborhoods Michael Cadden Troy to serve the Asian market. The NVO also of Brooklyn, Troy had always been en- owner, has a partnership with U.K.-based Polair gaged in business. By the time he was 18 Troy Container Line Shipping Ltd. years old, he had ownership in a gas station Despite positive growth predictions by with his brother. the company and new investments in com- Blanco was a demanding boss. His first “Working for myself felt good,” Troy puter technology, Troy still believes in day on the job Troy was told to immedi- said. “If anything had gone wrong, I would basic hands-on management. ately open an office in New York and build have had no one to blame but myself.” “This is not a business you take for up the company’s business between the The company operated under the name granted,” Troy said. “The NVOs that are U.S. East Coast and the Far East. Troy Catucci Line for the next 13 years, gone from this industry didn’t watch their While working for Trans Senko, Troy starting with less-than-containerload ship- bottom lines.” often used the trucking and warehouse ments to Asia, and gradually expanding to Troy, who survives on an average of four services of AID Export Trucking in Brook- Europe, the Mideast and Africa. hours of sleep, usually starts his day a4 a.m. lyn. There he got to know the sons of the During that time, Troy made numerous and finishes at 7 p.m. “The hardest thing for trucking company’s owner Sal Catucci, trips to Asia and Europe to establish a me to get used to is the fact that this place Keith and Kevin Catucci. In March 1984, network of overseas agents. “I’ve always could run just as well when I’m not here,” the three decided to open their own NVO. liked to base my decisions by looking the Troy said. “The only reason that I don’t 44 AMERICAN SHIPPER: MAY 2001 We Bring The World Closer

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ATLA NTA BA LTIM O RE BO STO N C H A R LEST O N CH A R L O TTE CHIC A G O C LE V ELA N D D A LL A S D ETR O IT H O U STO N L O S A N G ELES 770-953-0037 410-631-7567 617-241-3700 843-971-4100 704-357-8000 847-296-5151 440-871-6335 972-239-5715 734-955-6350 713-681-8880 949-660-1100

M IA MI NEW O R LEA N S N O R F O LK O AKLA ND SE A TTLE W ILM IN GTO N , N .C . M O N TREA L , CAN T O R O N TO , CAN V A N CO U VER , CAN 305-477-9277 504-837-9396 757-625-0132 925-939-3200 206-575-1956 910-392-8200 514-844-3711 416-231-6434 604-685-0131 FORWARDING / NVOs retire is because I enjoy what I’m doing.” tion, pricing and regulatory affairs. Gopal plans to expand beyond ocean freight con- During the past several years, Troy Con- Roy, formerly manager for Mediterranean solidation. “Will we look at air freight tainer Line has hired and promoted a num- Shipping’s freight cashier department, be- consolidation services? Maybe in the fu- ber of experienced industry executives to came Troy Container Line’s controller. ture,” Troy said. “Just because we’re fo- senior management positions. John E. Martinelli, assistant vice presi- cused on one aspect of the business, doesn’ t Gary A. Dreuer, who joined the com- dent, joined the NVO’s operation in Bos- mean we won’t survive — not at all.” pany in 1989, was recently promoted to ton after serving as Mediterranean Even the rash of mergers and acquisi- president. Patricia L. Fitzgerald was pro- Shipping’s regional sales manager. tions in recent years among the larger NVOs moted to senior vice president after serving In addition, William A. Maron, formerly doesn't ruffle Troy’s ambition to grow in three years as the firm’s director of sales owner of Maron Shipping Agency in New the market. and marketing. York, joined Troy Container Line as direc- “We don’t need to be number one or the Troy also hired several executives from tor of industry relations. He also provides biggest. We just need to be the one that the Mediterranean Shipping. Richard Liberto instruction on regulatory issues that affect customers come back to,” he said. “The big became vice president and is involved with U.S. exports. players and mergers simply create more the NVO’s forecasting, market prepara- Troy Container Line has no immediate business opportunities for us.” ■

Jones finds a new way Takes helm at Hi-Tech Forwarder Network with confidence and experience.

SAN FRANCISCO for small to mid-sized operators trying to Bernard Jones was looking for a new compete with the large multinational play- way of life. ers. About 20 networks operate throughout When the executive director’s job at the the world today. Hi-Tech Forwarder Network was offered, The network has the appearance of a Jones took it. large, international forwarding firm, with “I wanted to move on and do something small operations working with others of different,” said the 25-year industry vet- similar size in the freight markets they eran. ‘"I look forward to the challenge.” know best. However, each firm maintains Two years ago, Jones sold James P. its finances and corporate identity with the Jones & Son, the Ireland-based forwarding shippers. firm founded by his grandfather in the Networks generally hold full member- 1930s, to Jenkinson Holdings Ltd. He ship meetings once or twice a year to dis- packed up his family in May and moved to cuss business and create interaction San Francisco to head the Hi-Tech For- between the member executives. Regional “Before the networks, warder Network. meetings are also held monthly or quar- To the members of the network, Jones terly. we as a forwarder was the right person for the job. He has “Before the networks, we as a forwarder would spend 30 weeks been a member of the network since 1993, would spend 30 weeks a year flying around and served on its European regional com- to meet agents,” Jones said of his experi- a year flying around mittee in recent years. He was also past ence at James P. Jones & Son. “When we president of the Irish Freight Forwarding joined the network, we saved money hand to meet agents. When Association. over fist.” we joined the network, “The board thought it was very impor- Stephen J. Russell, president of San Fran- tant to find an executive director with in- cisco-based Alrod International, founded we saved money dustry experience to take advantage of our the Hi-Tech Forwarder Network in 1988. current strength and make us even more The network was incorporated in 1992. hand over fist. ” competitive in today’s transportation in- Some of the earliest members of the dustry,” said Michael Zankel, chairman of network were Miami International For- Bernard Jones executive director, the Hi-Tech Forwarder Network’s board. warders; ABC European Air & Sea Cargo Hi-Tech Forwarder Jones replaces Paula Larink, who served Distribution of Vienna; Supreme Airfreight Network as executive director of the network for Co. Ltd. in Hong Kong; Uni-Data AG of two years. “She did a good job even though Munich, Germany; Speditur (Group) she didn’t have any real logistics experi- Transitarios, S. A. in Porto, Portugal; Rush Alrod. Other firms also left due to acquisi- ence,” said Leonard Roberts, president of Cargo S.R.L. of Buenos Aires; Qualitair tions by large firms. Miami International Forwarders and past Freight Services in Paris; St. Louis-based While the Hi-Tech Forwarder Network chairman of the network. Ram International; and James P. Jones & remained active, it took a low profile for Son Ltd. about two years to plan its strategy for the Numbers. Forwarder networks have be- Russell left the network in the fall of future. “When the strong personality (of come increasingly important in recent years 1998 after Circle International bought Russell) left, the Hi-Tech Forwarder Net- 46 AMERICAN SHIPPER: MAY 2001 FORWARDING / NVOs work essentially had to re-blossom as a Building Services. Jones’ job as ex- code or postal code to immediately iden- genuine network,” Jones said. ecutive director will be to strengthen the tify the North American network member A meeting of the network’s world mem- cohesion between the members and over- best able to handle their shipments. The bership in Porto last year demonstrated the see the development of new services for next step for the system is to provide inland network’s strong vitality. In 2000 alone, the network. trucking costs to members and their cus- the Hi-Tech Forwarder Network added a One of the ways to build a stronger, tomers. dozen new members: New Times Interna- more interactive membership, Jones be- “While each agent’s specific transporta- tional Transport Service Co. Ltd. in North- lieves, is to encourage active regional com- tion requirements may vary, regular con- ern China; Transber S.A.C. of Peru; Enkay mittees. The strongest regional committee tact with the other HTFN regions has shown Express in Lebanon; Israel-based Mayan of the Hi-Tech Forwarders Network is in a common need among agents: To have a Overseas Ltd.; Quickflo Forwarders Pte. Europe. quick, easy way to obtain door-to-door Ltd. in Singapore; ScanAm Transport in “In Europe, the members hold confer- rates for shipments to and from North Scandinavia; Marine-Land-Air Transpor- ence calls once a month,” Jones said. “It America,” the network said. “An inland tation Co. Ltd. in Taiwan; PT. Cardig Ex- unites the members and keeps them inter- rates Web-based lookup feature will go a press Nusantara in Indonesia; ested.” long way to meeting this need.” Shanghai-based Bestway International Most of the conference calls are about Jones said other regions of the network Transportation Co. Ltd.; SitamSpAin Italy; how to improve business between mem- want to develop similar standardized han- Integral Transportation Networks of bers in Europe with those in Asia, the dling rate systems on the Internet. Canada; and Switzerland-based Universal Mideast, North America, Africa, and South Another Internet-based development at Express AG. So far this year, the network America, Jones said. the network is the upgrade of its cargo added Ritzy International Cargo Transport In North America, member Doug tracking and tracing system, Globe Track. Agency Co. Ltd. of Qingdao, China, and Meadow, vice president of sales at Ram “We’re putting new life into it,” Jones said. Delta Shipping Co. Ltd. in Ghana. International, is leading the development of The network’s management will also “The enthusiasm is running high,” Rob- an Internet Web-based inland rate system study more efficient ways to provide mem- erts said. “More business is being moved to make it easier for non-North American bers with freight consolidation services through the network.” network members to give their customers and has considered developing a “pre- Today, the Hi-Tech Forwarder Network more complete rates to the market. ferred” ocean carrier program. comprises 72 members with 206 offices in The first step of the inland rate system is Jones said the key to the network’s future 55 countries. Last year, these firms ac- implementation of a ZIP code locator. This success is to make the member services as counted for 300 million kilos of air freight tool allows members or their customers flexible and user-friendly as possible. “Rigid and 378,000 TEUs of ocean freight. from anywhere in the world to enter a ZIP things break,” he said. ■

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AMERICAN SHIPPER: MAY 2001 47 Transport / Ocean

By Philip Damas, [email protected]

Diffusing alliances Ed Emmett, president of the National Industrial Transportation It is no longer possible to describe the global alliances of League, said shippers are “irritated” by the joint announcements of container shipping lines as discrete groups of like-minded carriers higher prices or charges by carrier agreements and conferences. that operate joint liner services in multiple trades. “I don’t understand why carriers continue to create such static,” The four major alliances — the New World Alliance, the Grand he told the Containerization International conference in London. Alliance, the United Alliance and the unnamed COSCO/”K” Line/ Llew Russell, chief executive officer of the Yangming alliance — were expected to unify the service networks Australian-based liner conference administra- of their participating carriers. tion company LSS, told the conference that dis- But they have deviated from this goal by allowing their carrier cussion agreements set benchmarks by members to cooperate with shipping lines outside their original announcing joint price increases. “Shipowners alliance group. see the need to set benchmarks of what they are Some industry observers say there is an increasing array of trying to achieve,” but in fact they are not imple- cooperative agreements on the margins of alliances. menting the full increases, he said. Within the New World Alliance (APL, Hyundai Merchant Emmett Discussion agreements, of course, are not in- Marine and MOL), the three member carriers are starting slot- volved in negotiating contracts with shippers and forwarders. And exchange agreements in the transpacific with Evergreen, a non- contracts between conferences and shippers have virtually disap- aligned carrier. The New World Alliance also shares space with peared. Maersk Sealand in the transatlantic and with Yangming in the Asia/ Gunther Casjens, CEO of Hapag-Lloyd Container Line, said Mediterranean trade. conferences have tariff rates that are seldom applied as such in Within the Grand Alliance (P&O Nedlloyd, Hapag-Lloyd, NYK, dealing with customers, but they are used as benchmarks. OOCL and Malaysia International Shipping Corp.), P&O Nedlloyd operates an Asia/U.S. East Coast all-water service jointly with CMA The next generation of carriers CGM and China Shipping Container Lines. P&O Nedlloyd and China Shipping Container Lines is a favorite subject of discus- Hapag-Lloyd have also started a vessel-sharing agreement with Zim sion in shipping circles. Israel Navigation, a non-aligned line, in the U.S./Mediterranean Not only is this carrier following a breakneck growth policy by trade. And the Grand Alliance carriers P&O Nedlloyd, Hapag-Lloyd, starting services in the major east/west trades on its own with no OOCL and NYK have merged their transatlantic services with those prior experience of the North American and European markets, but of CP Ships carriers Lykes Lines and TMM Lines. it also negotiating orders for the largest containerships ever built. Within the COSCO/”K” Line/Yangming alliance, “K” Line and China Shipping is set to confirm orders for five 9,000-TEU Yangming cooperate with Hanjin, a United Alliance line, in the ships. In April, China Shipping entered the U.S./Mediterranean transpacific. There are also several slot-charter agreements in the trade. It plans to start a U.S./northern Europe service later this year. U.S./Mediterranean and Asia/Mediterranean trades between the “It’s like Evergreen 20 years ago,” a senior shipping executive COSCO/“K” Line/Yangming alliance carriers and Zim Israel told American Shipper. Navigation. Within the United Alliance, Hanjin has started taking space on APL adds capacity in Pacific trade one of the transatlantic services of the COSCO/“K” Line/Yangming APL is adding capacity in the transpacific trade by introducing alliance. And Norasia, a non-aligned operator, is taking space on two new 5,500-TEU containerships in the joint Asia/U.S. West three east/west services of the United Alliance, apparently filling Coast SAX service of the New World Alliance. some of the space left by Cho Yang. The APL Scotland will enter the service mid-May, followed by We could go on with other cases of this kind between alliance the APL Holland at the end of July. and non-alliance carriers or between carriers of different alliances. The two new vessels are replacing two smaller ships of about These agreements would appear to undermine the principle of a 4,300-TEU capacity in the six-ship SAX service, which calls at Los core alliance group. But they may also indicate that carriers are Angeles, Oakland, Kaohsiung, Hong Kong, Laem Chabang, more opportunistic in how they add new services, either by buying Singapore, Los Angeles and Oakland. slots on complementary services or by sharing the risk of introduc- According to World Liner Supply, a reporting service of the ing new services with any other carrier — inside or outside the online global shipping database ComPairData, the New World alliance. Alliance controls 18 percent of the transpacific capacity and is the But the most intriguing development is that it is now common for capacity leader in the trade. New World Alliance carriers APL, seven or eight carriers to market the same service on the same ship, Hyundai and MOL provide a transpacific capacity of about 34,800 the same way a passenger would hop on a bus. TEUs a week, with 54 vessels operated on nine separate weekly Perhaps it’s a recognition by carriers that they can no longer loops. differentiate their services purely on the basis of their port-to-port Hyundai also recently introduced larger ships in one of the services. transpacific services of the New World Alliance. In May, the New World Alliance carriers will introduce their Why announce joint rate increases? 10th weekly transpacific service by jointly taking space on an In today’s era of individual service contracts, ocean carriers are existing all-water Asia/U.S. East Coast service operated by Ever- still announcing identical rate increases and surcharges. green.

48 AMERICAN SHIPPER: MAY 2001 New & Enhanced Australia/New Zealand Si Vancouver y Seattle IS Portland ■

Los Angeles rs

Honolulu

North America’s Fastest EXPORT Transit Times

To Auckland/Tauranga Suva Melbourne Sydney From

Los Angeles 13 16 19 19

Oakland 16 19 22 25

Vancouver 20 25 28 24

Portland 20 24 28 24

Seattle 21 26 29 25

North America’s Fastest IMPORT Transit Times

Honolulu Manzanillo Oakland Los Angeles Vancouver Portland Seattle From _J

I Auckland/Tauranga 1 10 12 15 19 20 20 18 Adelaide and Fremantle serviced via Melbourne Melbourne 16 20 21 27 26 26 24 Sydney 20 17 21 23 30 30 28

• Brisbane serviced via Sydney Suva 6 - 12 15 16 16 15

P&O Nedlloyd proudly connects two High-Quality services throughout the Pacific North and Southwest with Australia/New Zealand. Our customers can now benefit with complete coverage of West Coast ports, fixed-day/weekly service and industry best transit times.

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West Coast operations. The post-Panamax ship is quickly becoming the workhorse of the Asia/Europe and Asia/U.S. West Coast trades. How much bigger According to ComPairData, the global liner shipping database, 58 of the 430 liner vessels used in the Asia/North America trade will boxships get? are post-Panamax containerships of more than 5,000 TEUs. In the Asia/Europe trade, 81 of the 341 vessels in this trade are bigger Contracts for 9,000-TEU ships are under negotiation. than 5,000-TEU. Certain ships operate in both the transpacific and Asia/Europe trades But will terminals be able to cope ? as part of long “pendulum” rotations. How- ever, by definition, all the ships employed in B y Philip D amas the booming Asia/Panama/U.S. East Coast all-water trade are of Panamax size or less. S everal shipping lines are close to The number of post-Panamax vessels ordering the first containerships of will double over the next two years. more than 8,000-TEU capacity, but “We need to seriously Since 1996, the trend from 5,000-TEU to others in the industry are warning of the consider a number 7,000-TEU vessels has taken hold, following associated risks. the introduction by Maersk Line (now Maersk China Shipping Container Lines is talk- of consequences, as Sealand) of the Regina Maersk (see table). ing to the Korean shipyard Samsung Heavy this is more than just Last November, Hong Kong-based Ori- Industries about orders for a series of9,000- ent Overseas (International) Ltd., the par- TEU containerships. When concluded, the a matter of ship size.” ent company of OOCL, ordered two orders will be for the world’s largest 7,400-TEU containerships from the Ko- containerships, overtaking Maersk Zenzaburo Wakabayashi rean shipbuilder Samsung Heavy Indus- Sealand’s “S-class” vessels of about 8,000- executive vice president, tries. They are expected to be delivered in TEU effective capacity. "K" Line the second quarter of 2003. The two post- A spokesman for the shipyard in Korea Panamax containerships will cost a total of told American Shipper that negotiations are $160 million, Orient Overseas (Interna- under way, following the signing of a letter pany is looking at vessel designs for larger tional) Ltd. said. of intent concerning future orders of9,000- ships of up 10,000-TEU capacity. Last year, Hapag-Lloyd ordered four7,200- TEU ships. Meanwhile, Dutch academics are con- TEU, 42.8-meter-wide containerships from Samsung, a shipyard that has led the de- tinuing studies about the suitability of in- the Hyundai shipyard. The first ship in the velopment of larger post-Panamax troducing, by 2010, a revolutionary vessel series is due to be delivered this fall. containerships in Asia, has designed a 9,000- type called the Malacca-max. The 18,000- And NYK and P&O Nedlloyd, two car- TEU prototype containership with a length TEU Malacca-max vessels would have the riers that were among the first to deploy of 330 meters, a draft of 14.5 meters, a width maximum size and draft to transit the Strait vessels of more than 6,000-TEU capacity, of 45.6 meters and a speed of 26 knots. The of Malacca in Southeast Asia (February have ordered more ships of the same type. width of the ship implies that it will carry 18 American Shipper, pages 68-69). According to unconfirmed reports, the new containers abreast, one more than the largest series of containerships being built by the containerships afloat today. The vessels would Move To Larger Sizes. Few in the secretive A.P. Moller group at its Odense be considerably wider than the 13-container- liner shipping industry today question the shipyard in Denmark may be of 10,000-TEU wide, 32.3-meters Panamax vessel type. cost advantage of post-Panamax capacity, rather than 6,600-TEU as stated The wider vessels will require container containerships. All the major containership officially by group affiliate Maersk Sealand. terminals to invest in longer cranes that can operators have built or ordered vessels of Maersk Sealand has a history of surprising work 18-container-wide vessels. more than 5,000-TEU capacity of this type, the industry by initially understating the true Robert Woods, group managing director even round-the-world operator Evergreen, capacity of its new vessel designs. of P&O Nedlloyd, recently said his com- which uses them mainly for its Asia/U.S. Meanwhile, CMA CGM — a partner of Containership size escalation

Year Vessel design Vessel name Capacity Increase in Length Width Draft Speed (TEUs) capacity from (meters) (meters) (meters) (knots) previous type 1988 C10 President Truman 4,300 275 39.4 12.4 24 1996 Maersk K-class Regina Maersk approx 7,000 63% 318 42.8 14 25 1997 Maersk S-class Sovereign Maersk approx 8,000 14% 347 42.8 14.5 25 Project Samsung 9,000-TEU 9,000 13% 330 45.6 14.5 26 Project Suez-max 11,989 33% 400 50 17 25 Project Malacca-max 18,154 51% 400 60 21 25 * I n m e t e r s .

50 AMERICAN SHIPPER: MAY 2001 TRANSPORT / OCEAN

China Shipping — and a German non- accept and welcome such a trend towards shipbroker Clarkson, that such ship econo- operating charter owner are believed to be jumbo-sized ships as an answer for improv- mies are small. involved in negotiations for orders for9,000- ing service,” Wakabayashi said. It is known that vessel operating and port TEU vessels from the Samsung shipyard. He also warned that if it takes four days expenses represent only about one-third of CMA CGM would not comment on this from the ship arrival to the unloading of the the cost of moving a container from door- development. last inbound container, the real transit will to-door. stretch from eight days for the first con- However, a spokesman Critics. But the constant upsizing of tainer discharged to 12 days for the last one, for Samsung argued that containerships has led to a debate about for a typical port-to-port transit. savings from very large how much bigger vessels should get until “Four more days ... is not competitive,” containerships are real. they reach the limits of the overall transpor- he said, adding that shippers may have to be “It is expected that, tation system. Is handling a 9,000-TEU given a lower freight rate for slower-mov- with this 9,000-TEU- behemoth really the same as handling two ing containers. class vessel, the transpor- 4,500-TEU ones? “K” Line has ordered a series of 12 post- tation cost can be reduced Stopford Shipping lines should carefully consider Panamax vessels of 5,500-TEU, and has by more than 17.7 percent,” compared to the impact on inland transportation opera- thus been conservative in their size com- the alternative of utilizing two 4,500-TEU tions and service levels before ordering giant pared to other shipping lines. vessels to move the same volume of cargo. containerships with capacities of9,000TEUs For shipping lines and for ports, another The unit cost per TEU comes to $171 for a or larger, warned Zenzaburo Wakabayashi, risk associated with the operation of very 9,000-TEU ship, as compared to $208 for a executive vice president of “K” Line. large vessels is the prospect that they could 4,500-TEU vessel, according to Samsung. “We need to seriously consider a number spend of higher proportion of their time in “The company has endeavored to de- of consequences, as this is more than just a port than today, despite their substantially velop an optimum vessel prototype in con- matter of ship size,” Wakabayashi said at a higher daily capital costs. sideration of the present status of the recent Containerisation International con- Relatively little is known publicly today facilities and cargo-handling equipment at ference in London. about the additional land and rail link re- major ports of the world and their plans for “Container vessels of close to 9,000 TEU quirements of future large vessels. expansion of the facilities,” the shipyard or even bigger have recently been tabled,” But many large terminals have already said, referring to the 9,000-TEU design. he said. “Will this make the best sense?” installed large container gantry cranes that Public statements made by major carri- Wakabayashi told American Shipper that can handle 19-container-wide vessels. ers suggest that no shipping line today is the operation of 9,000-TEU ships raises considering building the ships of 12,000- terminal, intermodal and commercial is- Cost Saving. Wakabayashi said the port- TEU or even 18,000-TEU capacity advo- sues. to-port cost saving from operating a 9,000- cated by the Dutch academic Niko Wijnolst “As someone who is reasonably con- TEU ship is “perhaps $150” per trip per and associates from Delft University. cerned about the future of the industry, I TEU, but would only be achieved if the However, the Korean shipyard Samsung would want to be reasonably careful about vessel was fully utilized. He echoed a criti- said recently that it is pushing ahead with a this important subject before endorsing any cism made recently by Martin Stopford, plan to develop a 14,000-TEU vessel de- new mega-size scheme,” Wakabayashi said. research director of London-based sign. ■ He said that infrastructure areas to be considered include terminal facilities, yard WTSA warns of reefer equipment shortage space, gantry crane capacity and productivity, chassis logistics, computer systems and LOS ANGELES alter equipment positioning patterns in ways inland transportation. Major transpacific container shipping that affect all U.S. shippers of refrigerated Scale economies may result in a lower lines of the Westbound Transpacific Stabi- cargo,” said Albert A. Pierce, executive cost of slot on board mega-vessels, lization Agreement have voiced concerns director of the Westbound Transpacific Sta- Wakabayashi said. But such vessels may over refrigerated container equipment avail- bilization Agreement. adversely impact service quality, as three or ability for U.S. agriculture exports to Asia. Refrigerated shipments from the United four days would elapse from the time the The carrier group said market demand for States to Asia grew 7.2 percent in 2000 over first container is unloaded in port to the time U.S. exports of fresh and frozen fruit, veg- 1999 to more than 232,000 40-foot the last container leaves the port. etables, meat and seafood remains high, and containerloads. If 9,000-TEU ships are operated in the U.S. pork and poultry producers are likely to The forecast for U.S. apple exports has transpacific between South China/Hong “pick up some of the slack in sales to Asia, as been raised to 670,000 tons in 2001, up 25 Kong and a Californian port, about 4,000 Europe sells more of its total pork and poultry percent from last year, the carrier group containers of 40-foot will be discharged in domestically.” The carrier group cited the said. Nectarine sales to Japan are expected the single U.S. port of call. Of these, more foot-and-mouth epidemic in Europe. to rise significantly, and citrus exports, than half would be destined for intermodal Increased beef and pork shipments from mainly oranges and grapefruit, are forecast rail transportation, he said. Australia and Canada to Asia in the wake of to increase by 1.1 million tons. “One train is physically limited to 240 the European epidemic, along with stepped Amid this growing demand, the carrier 40-foot containers,” Wakabayashi said. up intra-Asia bookings, also have begun to group warned of potential operational and Therefore, about 10 double-stack trains pull transpacific equipment returning from economic difficulties ahead. Given relative would have to be arranged to move the Asia out of the U.S. trade lane, a spokesman freight rates, “it is increasingly likely that a inbound containers from one such ship. for the carrier group said. refrigerated container arriving in Asia from “Unless those problems can be solved “We’re seeing strong demand as it is, but the U.S. will not return directly, but will be through infrastructure improvement, I think the European situation is something of a diverted for a time into the intra-Asia or it would be extremely difficult to simply wild card, because it has the potential to Australia trades,” it added. ■ AMERICAN SHIPPER: MAY 2001 51 TRANSPORT / OCEAN

with Kent Line’s ships calling first at Ja- maica,” Ross said. The outbound Florida market, however, will be more challenging to Kent Line. “It’s a very competitive market,” Graham said. Kent Line sharpens “Carriers build strong niches and there’s little cooperation between them.” Kent Line partnered with International Port Services Inc. (Interport) of Miami as East Coast focus its sole agent in the South Florida market. Interport is an affiliate of Intershipping Canadian niche carrier moves from Philadelphia C. A., Kent Line’s Venezuelan partner. The carrier plans to place several sales and pric- to New York; adds Florida port calls. ing staff at the offices of Interport in Florida. “Pricing and sales needs to be close to this B y Chris G il l is market,” Fraser said. Prior to this move, Kent Line served K ent Line International has long Shippers’ Association have committed Florida from Eastern Canada through a slot enjoyed its niche between Eastern about 700 TEUs under a service contract charter arrangement with Miami-based Sea- board Marine. Earlier this year, Seaboard Canada and the Caribbean ocean with Kent Line. “We expect this to increase decided to terminate the agreement. freight markets, but now the carrier But Kent Line remains undaunted wants to focus more attention on some by the termination of the arrange- of the U.S. East Coast markets in ment with Seaboard. “We look for- between. ward to offering services in our own The Saint John, New Brunswick- right from Florida,” Fraser said. based liner carrier recently moved its Kent Line hired Lance Gibbs to primary Northeast port call from manage its Florida/Caribbean busi- Philadelphia to New York and added ness from Miami. Gibbs, an ex-West the Florida ports of Jacksonville and Indies international cricketer, has a Port Everglades to its vessel voyages. long career in the transportation busi- Kent Line wants to link its con- ness. Over the years, he’s held man- tainer service as close as possible to agement positions at Booker Shipping shippers that rely on the East Coast in Guyana. He also served as North America/Caribbean trade for Crowley’s Leeward and Windward their business. Islands specialist, and managed “We’re working these markets in- Bernuth Line’s Guyana service. telligently,” said Graham Fraser, vice The carrier already moves about president and general manager of Kent 15 to 20 40-foot containers a week Line. from Canada to Florida. “We see this In Brooklyn, N.Y., where a large growing with the addition of Port business community has evolved Everglades and Jacksonville,” Fraser around the U.S./Caribbean trade in said. recent years, Kent Line’s arrival at The carrier says all-water service Red Hook Terminal was a welcome from Canada to Florida is a cheaper sight. alternative to trucking down the East “It’s a very good move,” said Coast and avoids the congestion and Sydney F.M. Ross, president of Eagle customs clearance process delays at Shipping and Trading Corp., a Brook- the U.S./Canadian border. lyn-based non-vessel-operating com- (

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Canada TRANSPORT / OCEAN which were delivered new to the carrier in 1999 and 2000. The carrier charters a third containership with a capacity of 1,100 TEUs, SMA fixes shortened arbitration process the Kent Courier. In addition, the carrier has built up a new Abuses of Shortened Arbitration Procedure forces dry van equipment fleet. It also specializes in the movement of temperature-controlled Society of Maritime Arbitrators to enact changes. cargo and over-dimensional freight. The full weekly rotation for its three NEW YORK No Oral Hearings. The revised proce- vessels is Saint John; New York; Jackson- The Society of Maritime Arbitrators has dure then takes a step that will dumbfound ville; Port Everglades; Kingston, Jamaica; solved a troubling problem. anyone who has agreed to formal arbitra- Rio Haina, Dominican Republic; San Juan, In 1989, the SMA introduced a Short- tion. No oral hearings are permitted. “Within Puerto Rico; La Guaira and Puerto Cabello, ened Arbitration Procedure, “designed to 15 days of appointment, the arbitrator shall Venezuela; Point Lisas, Trinidad; provide a quick and inexpensive method to establish a written schedule for the prompt Bridgetown, Barbados; Saint Lucia; San resolve small and simple submission of the claimant; initial state- Juan; and back to Saint John. disputes which do not re- ment of claim, with all supporting docu- Kent Line carries about 800 TEUs a quire a full-scale arbitra- ments,” the procedure states. week to the Caribbean, of which about 200 tion,” said Lucienne The respondent must reply with its re- TEUs are reserved for refrigerated cargo. Carasso Bulow, SMA’s sponse and counterclaim, in writing, “within Last year, the carrier moved more than president. 20 days of the claimant’s submissions.” 40,000 TEUs between Canada and the Car- Twelve years later, the Aware of the capriciousness of human ibbean. shortened process had nature, the SMA gives the sole arbitrator Three quarters of its cargo is carried on been burdened to the point Bulow leeway to vary the schedule “by a few the southern leg of its vessel voyages. The of cracking, because many disputes using it days.” Furthermore, revised procedure states carrier is exploring opportunities to expand for arbitration were “much larger and far that “short replies by both parties as to each northbound cargo flows. more complicated than was originally in- other’s defenses may be exchanged con- “We have to become more creative with tended for this procedure,” Bulow said. secutively or simultaneously, at the how we attract northbound cargo,” Fraser The same was true in London. Following arbitrator’s discretion.” said. “Some commodities from South the introduction of the Shortened Arbitra- The timeline allows a claim, defense, America are easily converted from tion Procedure in New York, the London counterclaim, and a brief reply to the coun- breakbulk to containers.” Maritime Arbitrators Association started terclaim, to be filed in a few weeks, instead With the Kent Courier’s larger size, Fraser its own Small Claims Procedure. In a recent of a half-year usually required in formal said the vessel is ideal for transporting LMAA bulletin, an arbitrator complained arbitration. empty containers back to Canada. that parties to complex disputes had delib- Kent Line is not concerned about becom- erately misapplied the small-claims form. No Discovery. The procedure then stipu- ing the biggest carrier in the Caribbean, just lates two other improvements that, wel- offering a consistent service. Some of the Sole Arbitrator. Full arbitration usu- come though they may be, have caused biggest competitors in the market are Tropi- ally requires three arbitrators, and can last tremors through the ranks of attorneys. cal Shipping, Tecmarine Lines, Seaboard for years while attorneys for each side de- “The arbitration shall proceed on docu- Marine, and Navieras/NPR. pose witnesses in a process known as ‘dis- ments alone,” the short-form rules ordered. “In the Caribbean trade, it’s tough to be covery.’ There is ample room for mischief, “There shall be no discovery, except as all things to all shippers,” Fraser said. “In especially if one side unnecessarily pro- deemed necessary by the arbitrator.” some places you’re at the top and in others longs a case. No discovery means no dragging out of you’re somewhere in the middle in terms of Bulow and the SMA decided to recast the the case. the competition. It’s all about how you’re Shortened Arbitration Procedure in a form Also, both parties are allowed to file only supported by the trade in these individual that would be closer to what the Society four items of dispute, although at the island markets.” originally intended. London will undoubt- arbitrator’s sole discretion, “a reasonable Since Kent Line is a subsidiary of Irving edly follow New York’s lead. amendment to this limitation is permitted.” Transportation Services, the carrier has ac- The 2001 revised Shortened Arbitration Finally, the shortened procedure sets fees cess to an extensive inland transportation Procedure calls for the appointment of a that fall more in the realm of sweet reason network in Eastern Canada and New En- single arbitrator. “The claimant shall nomi- than extortion: Legal expenses that can be gland. This includes Irving’s NB Southern nate an arbitrator from the SMA roster to awarded to a prevailing party are capped at Railway, which connects to the larger rail act as sole arbitrator, and simultaneously $2,500; the sole arbitrator receives a maxi- networks of Canadian National and Cana- request the respondent’s agreement. Fail- mum of $1,500 “for fees and expenses.” dian Pacific. The carrier has over-the-road ing a response ... within 10 days, the arbitra- To see that closure is brought about connections through Irving’ s trucking com- tor so nominated shall become the sole readily, the arbitrator must issue an award panies Sunbury, Midland and RST. arbitrator,” the procedure states. within 30 days of receiving the final docu- Outside of its Canadian/U.S. East Coast/ If neither claimant nor respondent can ments, or within 30 days of having declared Caribbean container business, Kent Line agree on a single arbitrator, the respondent that the proceedings are closed. also operates a breakbulk vessel, the Kent proposes “three other persons” from the The revised Shortened Arbitration Pro- Voyager, on a bimonthly rotation between SMA. If neither side at that point can pick cedure went into effect March 1. It is likely the East Coast of Canada and Maine to ports an arbitrator, the president of the SMA will to reverberate beyond the SMA in New in Spain, France, the Netherlands, United do so swiftly, and “that appointment shall York, becoming a model for the thousands Kingdom and lower Baltic region. ■ be binding on the parties.” of arbitrations around the country. ■ 54 AMERICAN SHIPPER: MAY 2001 TRANSPORT / OCEAN

attle-Tacoma, and then Oakland.” As for southern California, the carrier chose Los P&O Nedlloyd expands Down Under Angeles over Long Beach. “We decided to use Auckland and Vessel sharing agreement with ANZDL, Columbus Line, Tauranga,” the two main ports in New FESCO calls more ports with fewer ships. Zealand, DuVoisin said. ‘Then, because we were running two strings and we wanted to improve transit, one string goes to Sydney NEW YORK first. The other goes to Melbourne first. Fewer ships, more ports defines the com- Through that combination, we have created a munal rationale behind P&O Nedlloyd new product that reduces transit times to all of the Australia/New Zealand/North America ser- main ports.” vice as part of a cooperative pact with “In terms of the vessel sharing agreement, Australia New Zealand Direct Line, Co- Paul E. DuVoisin all of the lines have a configuration of their lumbus Line, and FESCO. senior VP for Australia- own ships, said Kate Rawlins, P&O The ANZ PAC service comprises two New Zealand trade, Nedlloyd’s vice president strings, with weekly port coverage from P&O Nedlloyd for the Australia-New Manzanillo, Mexico, to Vancouver, with Zealand trade. connecting ports in Australia, New Zealand, “We now have a broader “The length of the agree- Tahiti, Fiji and Hawaii. ment is written indefi- “Our vessel-sharing agreement with the service, with more direct nitely, but it has a other carriers had been under discussion off port calls, that places minimum period running and on for the past 18 months,” said Paul E. to the end of December Du Voisin, P&O Nedlloyd’s senior vice presi- the right capacity 2002,” she said. Rawlins dent for the Australia-New Zealand trade. “That also gives us the ability to review “That’s a long period in our business, but in the right segment in this to see how best to upgrade the service to the gestation for this agreement has justi- trade. We’re talking meet demands in the trade,” DuVoisin said. fied the time put into it. The test for us is “It’s not a fixed set of ships for a short that, if we asked ourselves today, ‘would about a long, thin trade period of time, but a rather considerable we do it again?’ the answer is yes,” he said. commitment, by today’s standards.” "Our previous product was getting a little with specific imbalances. “Working with the Russians in FESCO old, and we needed to address that,” he said. To deal with that, we have has been smooth. They are very profes- P&O Nedlloyd had a joint service in the sional ship managers,” he said. Australia-New Zealand trade with Colum- created a zone effect where “We had just a clear reason to share bus Line, which ended as the new service capacity is matched vessels: to improve everybody’s product,” started. “We now have a broader service, Rawlins said. “Given that collective goal, with more direct port calls, that places the to the needs of shippers relations between the lines have been pretty right capacity in the right segment in this good. It’s been very realistic in terms of trade. We’re talking about a long, thin trade in those segments. ” which tonnage was used or preferred.” with specific imbalances. To deal with that, “Every day saved counts on such a long we have created a zone effect where capac- route. We are committing to cutting two ity is matched to the needs of shippers in Our allocations have to change accord- days,” DuVoisin said. “We have built those segments.” ingly,” he said. enough sea contingency time into the sched- “There’s more frequency, with two “From Australia to New Zealand, you ule to maintain that commitment 90 percent sailings a week, with shorter transit times to have more manufactured products, more of the time.” the main ports of Melbourne and Sydney. reefer products that weigh slightly less, so “If one of our partners had the best transit There are two port calls now in New Zealand, the ships conform to that. On the homeward time in any port-to-port relationship, we all of which means reduced waiting times voyage to North America, you run a large used that as a benchmark for what could be for shippers,” he said. amount of reefer cargo, so there’s another achieved. If you have two services, it’s “We’ve allocated the space available into adjustment to be made.” much easier to schedule optimally than if four zones. One extends from North Previously, the carriers were running 22 you just have one rotation,” Rawlins said. America to Australia and New Zealand. ships “to try to individually match all of that More carriers today are expressing con- There are two zones within the Trans- need. In this cooperative agreement, we’ll cerns about misdeclared cargo, especially Tasman trade — one eastbound, the other be running 15 vessels that actually do more hazardous materials. Asked if shared ves- westbound — and then a fourth zone back than the 22 did before,” DuVoisin said. sels are more prone to such risk, Rawlins to North America,” DuVoisin said. Reconfiguring the ships for reefers in- said, “We’ve spent so much time in seeing Each zone has its own particular require- volves more than connecting power cords that hazmat procedures are strictly followed ment. “The focus for the southbound is dry from generators. “We have to reconfigure in our agreement by all participating lines.” cargo, which weighs less, and we use one in terms of the two strings, factoring in the “I can see no reason why working in a format for ship capacity. In the Tasman ports where loading and discharging can be vessel-sharing agreement would be any trade, the cargo from New Zealand to Aus- done most efficiently,” he said. more susceptible to problems of tralia tends to be forest and dairy products. In planning the cooperative service, P&O misdeclaration than working individually. The boxes are heavy, so the ships in that Nedlloyd looked at core ports. “We wanted There would be no additional risk at all on service have to conform to meet that need. one port call in the Pacific Northwest: Se- that account,” she said. ■

AMERICAN SHIPPER: MAY 2001 55 Transport / Air

(800) 874-6422, FAX (904) 791-8836, e-mail [email protected] lATA’S Jeanniot calls for industry restructuring Lufthansa Cargo to tighten network, expand alliances Pierre J. Jeanniot, director of the International Air Transport Lufthansa Cargo’s goals are to establish a seamless global Association, said bilateral treaty provisions and “archaic” foreign logistics network, and to expand its markets through the New ownership rules are preventing airlines from making profitable Global Cargo alliance, and with increased partnerships. restructuring moves. International companies “require one-stop worldwide logistics Jeanniot, speaking at the opening of the Airline Financial systems that encompass every step in the entire transport chain,” Summit 2001 in New York April 5, said these restrictive rules keep said Andreas Otto, a board member for marketing and sales. airlines from necessary consolidation. “Lufthansa Cargo’s aim is to have a worldwide, high-frequency “Only a profitable airline industry can deliver the type of price/ route network serving global clients in place in a few years time.” quality ratio the consumer expects,” he said. Otto, speaking at a German Aviation Press Club meeting in Jeanniot noted the frail profitability of the air transport industry, Hamburg, said the New Global Cargo alliance, formed with SAS caused by competitive pressure on yields, cost increases caused by Cargo and Singapore Airlines, is a big step toward a worldwide higher fuel prices over the past two years and the slow impact network. The alliance comprises 618 aircraft, 10 major hubs and a electronic commerce has had on airlines’ marketing costs. network covering intra-Europe and Europe/Asia. The alliance, “The fundamental laws of economics have not changed — and which is open to additional members will offer common express our industry should better manage itself accordingly,” he said.” service later this year, he said. Jeanniot also pointed out the inefficiencies that airlines face at Lufthansa Cargo plans to also expand its bilateral partnerships airports. While airlines have privatized, many airports and air and its Business Partnership Program with international forward- traffic control facilities “remain as government monopolies, with ers, Otto said. The partnership generates about 40 percent of the perennial inefficiencies and capacity shortages,” he said. And company’s revenues. those airports that have privatized “have been regarded as licenses The company, which was the first to launch time-definite to print money, in the absence of independent watchdog authori- services, should continue to see growth in demand for express and ties.” time-definite services, Otto said. Lufthansa Cargo’s sales efforts will shift to electronic channels, Airfreight carriers lobby against FedEx/USPS contract such as the company ’ s eBooking system, online marketplaces such Emery Worldwide, Evergreen International Aviation and Ryan as the GF-X online air cargo trading platform and call centers, Otto International Airlines said they will step up their opposition to the said. Later this month, his company will introduce a fourth version recent major contract between the U.S. Postal Service and Federal of its online eBooking system, which allows shipments to be Express. booked direct on Lufthansa Cargo from forwarding systems through In ajoint statement, the three companies alleged that the deal will Traxon and EDI in Germany, he added. add to costs and give FedEx monopoly powers. The contract will Otto said a possible night flight ban at Frankfurt airport is one of replace the previous system of distributing USPS freight among the greatest risks facing his company. “The global logistics chain several carriers. does not stand still at night. Frankfurt airport is the backbone of the “Mail users, taxpayers and our companies will pay a high price German export industry. Not just Lufthansa Cargo, but the entire for the fatally flawed contract between the Postal Service and economy depends on round-the-clock operation.” FedEx,” they said. “The unprecedented contractis worth more than $6 billion over seven years. USPS prohibited competition in UPS plans intra-Asia hub in the Philippines making FedEx the sole source carrier for the three types of mail United Parcel Service, the express carrier and package delivery most important to the general public,” they added. giant, said April 5 it has reached agreement to establish an intra- The joint statement was made by Jerry Trimarco, chief execu- Asia hub in the Philippines. tive office of Emery Worldwide Airlines; Delford Smith, CEO of Atlanta-based UPS said it signed ajoint letter of intent with the Evergreen International Aviation; and Ron Ryan, CEO of Ryan Philippine government, and also signed a memorandum of under- International Airlines. standing with the Bases Conversion Development Authority and The air freight carriers’ written testimony on the FedEx issue is the Clark Development Corp. to examine basing its hub at the being submitted to the U.S. House of Representatives’ Govern- former Clark United States Air Force Base in Pampanga. ment Reform Committee, in relation to a committee hearing on The base, now called Clark International Airport, was once the Wednesday. largest U.S. Air Force based outside of the United States, has been The carriers alleged that USPS “understated the expenses of the run by the Philippine government since U.S. forces vacated in FedEx arrangement and ignored a proposal by a potential competi- 1992. The airport offers more than 267 acres, and includes a pair tor that actually would have reduced costs.” of two-mile-long runways, four parallel and nine connecting The air freight carriers said that, along with several other taxiways and a ramp that can accommodate large aircraft. companies, they are petitioning the Justice Department to open a “The Philippines’ centralized location makes it possible for formal inquiry into the antitrust aspects of the transaction. “By cargo aircraft to reach all major Asian cities in less than four granting FedEx control over air transportation, USPS is further hours,” said Ron Wallace, president, UPS International. narrowing what is already a concentrated industry,” they said. Wallace also said the Philippine government offers an “expan- Referring to national security, the air freight carriers alleged that sive flight policy which will allow UPS to efficiently operate the the agreement threatens the existence of a number of the regional hub. “This policy allows UPS to better use its own aircraft by airlines that participate in the Civil Reserve Air Fleet, the partner- limiting ground and air traffic delays and refueling problems.” ship program between the air freight industry and the government UPS began its Asia Pacific operation in 1988, when it acquired that provides commercial aircraft to the military during an emer- Hong Kong-based Asian Courier System, and appointed Delbros gency. Inc. as its service agent in the Philippines.

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Deutsche Post to spin-off its German parcel business did so by offering very attractive rates that were supported by Last month, The European Commission concluded its antitrust transferring certain high-cost functions (e.g. sortation and linehaul investigation into Deutsche Post AG (DPAG) with a decision transportation) to non-union and more productive workers at finding that the German postal operator, a beneficiary of letter consolidators. This helped private carriers reduce the overall cost monopoly, had abused its dominant position by granting fidelity of the service and provide faster transit times. rebates and engaging in predatory pricing in the market for By offering DBMC rates, USPS facilitated growth of private business parcel services (see story, page 60). parcel carriers (consolidators), and reversed the declining trend In arriving at this decision, the commission investigated two for its Parcel Post business. Just as the commission is requiring of critical issues: DPAG, these special rates of USPS are available to all carriers • There was cross-subsidy between letter monopoly area and including competitors like UPS and FedEx Ground. In fact, FedEx competitive parcel activities. The commission looked to see if the Ground (as RPS) used the DBMC service of USPS in early 1990s parcel service provided by DPAG in open competition covered at for deliveries to rural ZIP codes in western states. least the additional or incremental cost incurred in branching out Postal agencies around the world are facing similar challenges. in to the competitive parcel sector. The Commission considered The long-term implications of the European Commission ruling any cost coverage below this level as predatory pricing. The will not be limited to Germany and Europe. As USPS lobbies for Commission investigation revealed that DPAG, for a period of changes in its corporate structure, U.S. Congress may be the first five years, did not cover the incremental cost of providing the mail to take this ruling into consideration. Though in the near term, the order delivery service. marketing and operational capabilities transferred to Newco in • DPAG’s pricing below cost blocked market entry by effi- this restructuring will have an immediate impact on the prospects cient competitors and therefore prevented the shipping public of the new company and other private parcel competitors. from receiving a broader array of services at better prices. The In the German market, if Newco is established mainly as a commission investigation revealed that from 1974 through Octo- marketing and sales company, it could lose market share to ber 2000, DPAG gave substantial discounts to its large mail order domestic business parcel service carriers like Deutscher Paket customers on the condition that the customer sent its entire mail Dienst and German Parcel. For business parcel service, these order parcel business or at least a sizable proportion thereof via private carriers are better positioned, as they already handle all DPAG. The commission felt that such a system of “fidelity” operational functions. For mail-order delivery service, these car- rebates precluded any private carrier from reaching the critical riers will gain equal access to the lower cost residential deliveries mass to successfully enter the German mail-order delivery mar- via DPAG. Without building some in-house operational capabili- ket. It supported this conclusion in part by the fact that from 1990 ties, Newco will also lack control over on-time performance, rate to 1999, DPAG had an 85-percent share of the mail order parcel increases, volume discounts and introduction of new services. volume in Germany, estimated at 100 million parcels per year. Thus the competition could benefit from this ruling to a greater The implication of this ruling is that DPAG has agreed to extent than Newco. separate its parcel business in Germany from the postal monopoly On a global scale, Newco will lack the capabilities of other business with the creation of “Newco” within nine months of the private carriers like UPS, DHL, FedEx and TNT. To be successful ruling date. While Newco will operate as a stand-alone company, against such global competitors, Newco will need to rapidly DPAG is expected to provide many operational services (particu- develop alliances, make acquisitions or merge with carriers that larly delivery services) to this new parcel carrier. In doing so, can offer a broader portfolio of services. DPAG will be required to make those services available to other While DPAG has preferred to retain its postal monopoly and carriers (Newco’s competitors) on same terms and conditions. spin-off the parcel delivery business, USPS is taking a different It appears that both cross-subsidy and lack of competition in approach. It is offering to give up the letter monopoly in exchange mail order delivery market were relevant to the decision largely for freedom to compete openly with services and volume-based because DPAG is a beneficiary of postal monopoly. Hence, if pricing to withstand aggressive competition from private carriers Newco or any of its private competitors are able to offer equally in the parcel business and from technology companies in the attractive prices and gain 85 percent of the mail order market, the letter/document business. cross subsidies will be accepted as “bundled pricing” and fidelity Irrespective of whether or how well Newco, DP or competitors rebates as “threshold incentives.” like UPS succeed in this new environment, it is almost certain that In the U.S. market, DPAG’s counterpart, the U.S. Postal Ser- the shippers and consignees will be presented with more shipping vice has avoided both situations by offering the same prices to all options, new services and pricing features. For global carriers that shippers and by being subjected to an exhaustive 10-month rate lack presence and looking to offer an alternative to UPS in the justification process with the Postal Rate Commission. An ex- German market, Newco presents another opportunity for acquisi- ample of one such initiative was the introduction of Destination tion, merger or alliance. Bulk Mail Center or hub (DBMC) service and rates to encourage Satish Jindel is a principal ofSJ Consulting Group, Inc. During zone skipping. his 18 years in the transportation industry, Jindel has played a In late 1980s, when USPS was experiencing competitive pres- significant role in the start-up and expansion of RPS (FedEx sures from UPS in the Parcel Post business, USPS elected to Ground) and lead numerous strategic assignments for SJC Cli- implement options to increase the marketability of its service. It ents.

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rity,” said Klaus Zumwinkel, chief executive officer of Deutsche Post World Net. EU fines Deutsche Post $21.6 million UPS cheered the EC ruling and renewed its call to the U.S. Department of Transpor- Ruling on rebates, predatory pricing requires postal giant tation to revoke a foreign air freight forwarder license granted to DHL Worldwide to create separate entity for parcel business. Express, which is owned and controlled by Deutsche Post. BRUSSELS UPS said the restructuring of Deutsche The European Commission fined Post won’t occur for at least the rest of the Deutsche Post AG 24 million euro ($21.6 year, giving the German post office time to million), finding that the German postal funnel monopoly profits into DHL for its carrier “abused its dominant position” by U.S. operations.” granting rebates, in addition to engaging in Klaus Zumwinkel “Allowing DHL to retain this license predatory pricing for its parcel services. CEO, effectively imports the unfair competitive As a result of the EC’s March 20 ruling, Deutsche Post World practices of the Deutsche Post from Eu- Net Deutsche Post, which holds a monopoly rope,” said Mike Eskew, UPS vice chair- over German postal service, will create a man. separate entity for business parcel services. “We think this is a generally The new entity can procure services from Earnings Soar. Deutsche Post World Deutsche Post, competitors or provide the positive result which Net set new records for profits and revenue services itself. However, Deutsche Post ser- will give our customers in 2000, with net earnings rising 48 percent vices and goods provided to the new entity to euro 1.53 billion ($1.4 billion). must be at market price; and the same prices and the capital markets Revenue rose 46 percent to euro 32.7 and conditions must be provided to the new billion ($29.2 billion), while profit from entity’s competitors. planning security. ” operating activities jumped 158 percent to The commission began investigating euro 2.38 billion.($2.1 billion). Deutsche Post following a complaint by “These record levels, as well as the in- United Parcel Service in 1994, in which the parcel business to Deutsche Post. crease in foreign revenue from 2 percent in Atlanta-based integrated carrier accused “The fidelity rebate scheme has “essen- 1998 to 29 percent last year, show that we Deutsche Post of using revenues from its tially precluded any private competitor from are on track to become the number one profitable letter-mail monopoly to finance reaching the ‘critical mass’ (estimated at global player in the logistics industry,” offering below-cost business parcel ser- 100 million parcels annually) to enter the Zumwinkel said. vices. German mail-order delivery market,” the The increase in revenue was mainly due Deutsche Post has assembled a 30-bil- EC said. From 1990 to 1999, Deutsche to recent acquisitions, he said. lion-euro network of parcel, logistics and Post’s share of the mail-order parcel market Profits in the mail corporate division finance businesses in about three years, topped 85 percent. practically doubled, to euro 2 billion ($1.8 including Swiss forwarder Danzas AG, Deutsche Post admitted to the unlawful billion) from euro 1.01 billion in 1999. American forwarder Air Express Interna- practice and said it has taken steps to avoid Revenue rose slightly to euro 11.7 billion tional and two German banks. The EC’s such conduct. “The 24-million-euro fine, ($10.4 billion). investigation was believed to have dampered which the commission has imposed corre- In the express segment, profit rose 27 Deutche Post’s initial public offering last sponds with the provisions already made percent to euro 76 million ($67.8 million), November, though the IPO netted about $6 and published in Deutsche Post’s accounts,” on revenue of euro 6.02 billion ($5.4 bil- billion. the German post office said. lion), up 26 percent. The EC said its investigation found that The commission said its ruling sets a Danzas AG, the Swiss forwarder ac- for five years Deutsche Post did not cover standard for measuring those “cross-subsi- quired by the group, has been fully inte- the costs incremental to providing the busi- dies” between the monopoly area and those grated into the logistics segment, which ness parcel services, which violated Article competitive activities where predatory contributed euro 113 million ($100.9 mil- 82 of the EC Treaty. prices result. lion) in profit, on revenue of euro 8.3 billion Deutsche Post did not receive additional “Today ’ s decision establishes clear rules ($7.4 billion), up 86 percent. fines for this violation, the commission on the issue of ‘cross subsidies’ that postal The financial services corporate division said, because “economic cost concepts use monopolies who are engaged in activities saw profit soar 771 percent to euro 505 to identify predation were not sufficiently open to competition must respect,” said million ($450.8 million) on revenue of euro developed at the time this abuse occurred. Mario Monti, competition commissioner. 8 billion ($7.1 billion), up about 178 per- Furthermore, DPAG has now tackled the “Pricing below cost must be paid by some- cent. issue in a satisfactory way.” body and that ‘somebody’ is the monopoly’s While mail has been the heart of Deutsche The commission also condemned customers. Moreover, pricing below cost Post’s business, it’s role in earnings has Deutsche Post’s “long-standing scheme of forecloses market entry by efficient com- softened as DP has expanded its express, fidelity rebates in mail order parcel deliver- petitors and therefore prevents a wider of- logistics andfinancial services divisions. De- ies.” The EC found that from 1974 through fer at better prices and service conditions.” spite strong growth in earnings last year, the October 2000, the German carrier gave Deutsche Post “welcomed the decision” mail division has gone from accounting for substantial discounts to large mail order in a statement. “We think this is a generally half of the company’s revenue and 90 percent customers on the condition that they com- positive result which will give our custom- of its profit in 1999 to about one-third of mit a large portion or their entire mail-order ers and the capital markets planning secu- earnings and 74 percent of profit in 2000. ■

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the project. The logistics and forwarding companies H-P picks Schenker, Panalpina “are looking for a long-term involvement” for this contract. Hewlett-Packard’s supply chain deal includes moving Schenker and Panalpina will be jointly responsible for negotiating airlift capacity 2,000 tons of air freight a month to Europe. for Hewlett-Packard, supported by SwissGlobalCargo. The cooperation be- ESSEN/BASEL orders online with Hewlett-Packard, trig- tween Panalpina and Schenker will enable Germany’s Schenker AG and the Swiss gering demand-oriented production in the the companies to optimize the space alloca- group Panalpina have joined forces to pro- company’s factories in Asia. At the same tion and offers scheduled, high volume vide joint supply chain services to Hewlett- time, Schenker will receive information on airfreight capacities on cargo aircrafts — Packard in Europe. the deadline for delivery of the order to the both commercial and charter, they said. The computer group appointed the two airport, enabling the company to reserve Schenker will be in charge of dispatch- competing logistics and forwarding com- freight capacity and prepare the dispatch. ing the orders from the airports in Asia, panies to ensure the supply of its products to “This system reduces the throughput time while Panalpina’s subsidiary SwissGlobal- wholesalers and retailers in Europe. The for each order to a few days and permits a Cargo will organize the receipt of the goods large project includes moving about 2,000 flexible reaction to the market,” Schenker in Europe and distribute them to the appro- tons of air freight a month from Asia to and Panalpina said in a joint statement. priate Hewlett-Packard consignees. Europe. The information systems used by Distribution in Scandinavia, Poland and “We’ve chosen these two service provid- Schenker will map the entire process chain the Baltic countries will be provided by ers for their ability to handle direct ship- in real time. Each order will have to be Schenker’s own European land transport ments,” said Gordon D. Gilstrap, director flown to the European hub and sorted by the network. of logistics for Hewlett-Packard in Fort recipient within two days. In the rest of Europe, existing truckers Collins, Colo. “It’s an option for shipping The joint management of the project is and other providers of physical transport of our products.” led by Franziska Bohner of Schenker and Hewlett-Packard will continue to be used. Schenker described the contract as one Volker Boehringer of Panalpina. In an in- Panalpina and Schenker said they would of the largest ever involving a combination terview, they said that Panalpina and use their networks of locations to fulfill the of two logistics service providers. Schenker have set up “joint operational contract. “The interface management in Schenker and Panalpina, as global for- desks” at origin and destination points for this logistics project is made easier by close warding organizations that each employs cooperation and in particular by the utiliza- more than 10,000 members of staff in hun- tion of internal capacities,” they said. dreds of offices worldwide, usually go after Schenker buys Contrary to fourth-party logistics pro- such contracts on their own. viders, Schenker and Panalpina combine But Hans von Dewall, spokesman for Dutch forwarder physical operations through their own net- Schenker, said the volumes involved re- ESSEN works with supply chain management, von quired a cooperation with Panalpina. Schenker’s Dutch subsidiary Dewall said. “It’s not common, definitely,” he said. Schenker International Nederland B. V. The two forwarding groups have set up a “We are competitors, but this is quite a is acquiring all assets of the companies project team for the Hewlett-Packard con- volume ... The volume is extraordinary.” IDC Airfreight B.V., IDC Forwarding tract and have started implementing it while Von Dewall expects the air freight ship- B. V. and IDC Logistics B.V. from the final negotiations were being completed. ments to start with monthly volumes of Dutch IDC Group B.V. The contract has an indefinite duration, 1,500 tons from Singapore, China and Tai- Schenker said the takeover would Schenker said. wan. The maximum volume anticipated is improve its air freight capabilities. Gilstrap said Hewlett-Packard has re- 2,000 tons a month. Schenker has recently opened a logis- cently developed other direct international For Hewlett-Packard, the contracts with tics center in the Distripoort area of the shipping contracts with Federal Express, Schenker and Panalpina will help rush its Port of Rotterdam. MSAS Global Logistics, Danzas/AEI, and newest product lines, such as laptops and Expeditors International. ■ storage devices, to market. “We have some stiff competition out there and we have Atlas Air takes stake in U.K. airline customer demands that we’re dead set on meeting,” Gilstrap said. PURCHASE, N.Y. 747-400s under a multiyear agreement. At A team of about 30 Hewlett-Packard Atlas Air Inc. said it has taken a 49- that time, Atlas Air will convert its wet- managers and staff has spent the past year percent stake in a new United Kingdom- lease contracts with BA to global. Global and a half developing ways to improve the based airline, Global Supply Systems Ltd. will lease those first two aircraft from Atlas. company’s international product distribu- The new airline, started by entrepreneur “We believe that the demand for low- tion. The company’s goal is to create “a set John Porter, who owns 51 percent, will cost heavy air freight capacity in the U.K. of supply chain models” into which to fit its provide leases covering Boeing 747 will continue to grow. With this invest- products at the various stages of market freighter aircraft, including crew, mainte- ment, we are positioning ourselves to capi- demand: new, mature, and obsolete stages, nance and insurance, to U.K. airlines. talize on that growth, while adapting to the Gilstrap said. Global anticipates starting operations this changing regulatory environment in the fall, and will base its operations out of U.K.,” said Richard Shuyler, chief execu- Roles. Under the contract with Schenker London’s Stansted Airport. British Airways tive officer of Atlas Air. and Panalpina, customers will place their will be its first customer, wet leasing two Atlas Air is based in Purchase, N.Y. ■ 62 AMERICAN SHIPPER: MAY 2001 TRANSPORT / AIR

Panalpina buys back stake in SwissGlobalCargo SAir Group reports loss, BASEL chased a 10-percent stake that S AirGroup change of strategy The Panalpina Group said it has bought held in the share capital of Panalpina back a 45-percent stake in air freight op- Holding. Consequently, Klaus Knappik, ZURICH, Switzerland erator SwissGlobalCargo which Panalpina SAirGroup’s representative on S AirGroup said it suffered its worth finan- had sold to SAirLogistics in April 1999. Panalpina’s board of directors, has re- cial year in company history in 2000, due to SwissGlobalCargo is a joint venture signed. a substantial loss by its aviation group. between Swiss-based forwarding and lo- Bruno Sidler, chief executive officer of Mario A. Corti, who was named group gistics giant Panalpina and Swisscargo, Panalpina, said the re-acquisitions would chairman and chief executive officer on the capacity management arm of not negatively impact the cooperation be- March 15, vowed to realign its overall busi- SAirLogistics. Since last summer, the ven- tween Panalpina and Swisscargo, nor ness strategy, including concentrating on ture has been providing heavyweight time- would it influence SwissGlobalCargo’s core strengths and unloading its hotel chain. definite airfreight services between Europe operational performance. Success in the group’s airline-related divi- and North America as well as between Knappik said S AirGroup’s sale of those sions, including SAirLogistics and Europe and the Far East and South Africa. interests reflects the company's aim to Swisscargo, failed to offset the aviation losses. Panalpina’s principal shareholder, the refocus on its core business: airport-to- S AirGroup reported a net loss of CHF 2.89 Ernst Gohner Foundation, has repur- airport air freight. ■ billion ($ 1.66 billion) compared to net profit of CHF273 million in 1999. Revenues rose 24.8-percent to CHF 16.23 billion ($9.36 BAX Global signs contracts with Airbus, Air France billion), due largely to acquisitions and or- ganic growth. However, SAir saw an operat- IRVINE, Calif. tory management and online tracking and ing loss of CHF 16 million ($9 million). BAX Global, the air freight forwarder tracing system. The combined S AirLines division reported and logistics provider, has signed contracts The Air France contract calls for BAX to earnings before interest and taxes of CHF with two aerospace companies, Airbus manage a “substantial part” of the airline’s 24.8 million ($20 million) on operating rev- Industrie and Air France. materials through its facilities at Orly and enue of CHF 7.17 billion ($4.13 billion), up The Airbus contract, which begins June 1, Roissy, France. The contract calls for time- 11.7 percent. calls for BAX to act as one of the aerospace definite, door-to-door delivery for all items Losses from airline investments, value company’s in-house forwarders at Airbus’ imported and exported from parts vendors adjustments to loans and provisions estab- Worldwide Material Service Center in Ham- in Asia, France and the United States. lished for restructuring costs, asset impair- burg. BAX said it will handle about 2,000 to BAX has added five new aerospace con- ments and contractual obligations impacted 3,000 shipments per month, or about half of tracts in the past year to a base of customers SAir’s bottom line by CHF 3.73 billion. the import and export of spare parts, part kits that includes British Airways, GE Engine Steeply rising fuel costs and surplus capac- and repair parts for Europe’s largest aircraft Services, Air New Zealand Engineering Ser- ity exacerbated the problem, SAir said. manufacturer. Airbus and BAX are develop- vices, US Airways, British Aerospace, Rolls Swissair recorded a loss of CHF 195 ing a customs information technology inven- Royce, Sikorsky and Ansett Airlines. ■ million ($112 million) on operating revenue of CHF 5.79 billion ($3.34 billion). Con-Way expands into air freight forwarding Corti said the company would make a decision on its role in French airlines Air ANN ARBOR, Mich. required time frame became a secondary Littoral, AOM and Air Liberte, which to- Con-Way Transportation Services, the issue.... Our LTL and expedited operations gether accounted for losses of CHF 600 subsidiary of CNF, said it will enter the air have given us an excellent vantage point for million ($344 million). SAir holds a 49- freight forwarding business, when Con- services positioned on either side of the air percent stake in each of those airlines. Way Air Express opens May 14. freight market. Adding an air freight option SAir said it would restructure Belgian The new company will begin operating for our customers is just a natural step in airline Sabena, in which it owns a 49.5- with 13 service centers and an agency net- extending our services.” percent stake and the Belgium government work to provide service to all 50 states and Gary Baude, a 22-year veteran of the air- holds 50.5 percent. Sabena lost euro 325 Puerto Rico. freight industry, will head up Con-Way Air million ($284 million) in 2000. Con-Way, best-known for its North as vice president and general manager. Other LTU, which lost $ 196 million, and SAir’s American less-than-truckload trucking ser- management staff members are Mike 10-percent stake in Austrian Airlines are vice, began providing next-day and sec- Dodson, director of sales; Jim Mannfeld, also under review, the company said. ond-day services in 1983. The company director of operations; and John Those results overshadowed SAir Logis- expanded into time-definite delivery in 1996 McManama, controller. tics, which posted operating revenue of CHF through Con-Way Now, which uses dedi- Con-Way Air has established service- 1.71 billion ($987 million), up 27.2 percent, cated trucks as well as air charter and next- price agreements with most of the major and earnings before interest and taxes of flight-out operations. U.S. airlines, as well as agreements with a CHF 99 million ($57 million). Swisscargo, “During the 1990s, North American ship- network of cartage agents to cover local with earnings before interest and taxes of pers began choosing carriers by transit time pickup and delivery in and around airport CHF 69 million ($40 million), made the and shipment characteristics,” said Gerald zones, the company said. largest contribution to the results. L. Detter, president and chief executive The new company has also developed a Corti, formerly chief financial officer of officer of Con-Way. “The type of vehicle software system, known as Sentry, equipped Nestle, replaced Eric Honegger as chairman used to accomplish the delivery within the with exception management tools. ■ and Philppe Bruggisser as CEO. ■ AMERICAN SHIPPER: MAY 2001 63 Theodore Prince

E-mail: ted.prince @ transgistics. com

The OSRA experience technology, as well as a great amount of customer integration. A Two years have passed since the Ocean Shipping Reform Act customer that has gone through the time and effort of integrating a went into effect on May 1, 1999. The U.S. Federal Maritime logistics provider will not easily consider converting to another Commission is conducting a survey of the transportation industry provider. Such customer “switching costs” make the logistics to evaluate OSRA’s impact (see story, page 6). Release of the business more easily retained than traditional ocean transport. findings is expected later this year. There is also some belief that the logistics business is more Industry observers mostly expect the results of the survey to profitable. closely track previous studies. The National Industrial Transpor- Much is being made of the financial condition of ocean ship- tation League, one of the major proponents of OSRA, found ping companies. Last year, many carriers reported strong finan- shippers “cautiously optimistic” about the legislation, with points cial results. This was largely due to strong Asian trade growth and of concern centering around industry consolidation and the con- the resurgence of other — but smaller — markets. While lines tinued presence of discussion groups, which establish voluntary were unable to uniformly impose rate increases such as those they guidelines for rates and service. had obtained for the previous two years, they evidently were able Although labeled “deregulation,” OSRA was not deregulation to avoid giving back the increases. In addition, the trade imbal- as we knew it with other modes. The ability to set rates without ance allowed lines to operate an import-empty traffic cycle, which regulatory review and approval was granted in the Shipping Act was more profitable than import-export. of 1984. OSRA enabled parties to establish confidential contracts. Last year, TSA lines announced their intention of another rate This provision hastened the end of conferences, forcing steamship restoration to take effect this May. The consensus of shippers is lines to ponder fundamental changes in the commercial basis. that this was mostly posturing and that service contract negotia- Prior to OSRA, lines practiced cost-driven-pricing. Rates were tions have been very favorable to shippers. There are two reasons established based on the cost of services provided. After OSRA, for this result — supply and demand. customers established what they considered to be the market rate The supply side is affected by the unprecedented amount of for the services — subject to supply and demand. Lines were capacity entering the trade. Last year, annual capacity deployed in forced to engage in price-driven costing and take cost saving the eastbound Asia/North America trade exceeded 10 million measures. TEUs. Capacity growth is expected to continue. In 2000, there Today, lines are addressing basic expense issues. For example, were almost 1 million TEUs of vessel capacity ordered for equipment expense is under scrutiny. Severe equipment imbal- delivery between 2001 and 2004. Most of this new capacity is in ances — characteristic of several trade lanes — are being evalu- post-Panamax vessels. In the next 12 months, it is estimated that ated. Empty containers stacked at depots remind us that it is now almost fifty new vessels of 5,500 TEU size will be delivered. almost cheaper to buy a new container in China than to reposition Many industry observers expect new capacity to exceed trade an empty back there for reloading. growth. The Transpacific Stabilization Agreement, a discussion group Demand is driven by the economy. Transportation is often seen of 14 major steamship lines in the eastbound Pacific trade, began as a leading indicator of recession and recovery. The slowdown in imposing a $60 chassis fee earlier this year. This represents a consumer spending may therefore dramatically impact the import partial unbundling of equipment expense to the customer. It also trade. (Although there is some hope that a weaker U.S. dollar makes the resulting North American ocean rates more comparable could increase exports, the economic problems in countries such to other trades, where the steamship line does not provide chassis as Japan weaken such a theory.) — leaving that responsibility to the customer and trucker. Some economists wonder whether the United States is experi- To reduce expense, steamship lines continue to invest in infor- encing a new business cycle. Under the traditional model, eco- mation technology. Some companies use the old standards of nomic growth continued until inflation raised prices — whereby electronic data interchange, phone and fax. But more and more the Federal Reserve System would raise interest rates and bring capabilities are being delivered over the Internet. A wide spec- the economy to a recession. The Fed would then cut interest rates trum in Internet services is available. Services range from the most and the cycle would begin anew. The new business cycle is basic, providing general corporate information, to somewhat characterized by a lack of inflation and business over-investment. sophisticated (providing access to vessel schedules and tracking Recovery of the economy is therefore dependent on business information) to fairly complex (a few lines allow the ability to resuming investment after absorbing the existing overcapacity. book loads and release bills of lading). (This model could also apply to the liner shipping industry.) Ocean carriers tend to move as a herd. Integration of the Internet Earlier this year, a flurry of rumors surrounded the alleged into business is no exception. Two consortia have been established arrest of vessels operated by Cho Yang. The rumors turned out to to provide neutral platforms for industry access. Late last year, five be untrue, but industry observers remain attuned for signs of carriers announced the formation of INTTRA. Earlier this year, financial difficulty — and further merger and acquisition. nine other lines formed the Global Trading Network (GTN). These The legacy of OSRA may well turn out to be the further efforts recognize the significant expense and effort in undertaking advancement of the ocean shipping industry, which serves the world-class electronic commerce initiatives. global economy, into the mainstream of that same economy. There is another aspect to the technology initiatives. Some Theodore Prince, a principal in Transgistics LLC, based in steamship lines are trying to expand into value-added services. Richmond, Va., has spent his career in the surface transportation These supply chain services depend on sophisticated information industry.

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QP is the application that creates the records. WP allows the ABI filer to electronically report the arrival and export of in-bond cargo. The system sounds like a brokers’ pro- Truckers in slow gram at first, but Tin Man is also designed to allow all surface transportation providers gear with QP/WP to have the ability to initiate in-bonds. Taking The Plunge. Last August, Con- solidated Freightways, a long-haul less- Customs ’ automated in-bond process offers better than-trailerload trucking firm, decided to integrate Tin Man’s QP application in its control to cross-border trucking operations. cross-border operations. QP allows Consolidated Freightways to B y C hris G il l is electronically transmit manifest level data to Customs, shaving one to two days off ometimes it’s difficult to know when duties. Often this cargo is held in bonded transit times for its in-bond shippers. “By you have a good thing. warehouses or at foreign trade zones until reducing paperwork and other clearance- This appears to be the case for the it’s cleared through Customs or re-exported based administrative activities, we can get trucking industry when it comes to taking to another country. shipments to our customers faster and more advantage of a U.S. Customs’ automated The in-bond process is extremely paper efficiently,” said Dennis F. Freeman, cus- in-bond management system, known sim- intensive for both Customs and the indus- toms compliance manager for the ply as QP/WP. try. It’s estimated that about 4.5 million in- Vancouver, Wash.-based trucker. So far, only one large trucking firm and bonds are initiated in the United States each Consolidated Freightways had some ini- a small Laredo, Texas-based niche operator year. The in-bond document, Customs Form tial concerns about venturing into so-called have taken advantage of the system, which 7512, requires detailed information, such broker territory by coming online with QP. offers both companies more control over as name of the bonded carrier, type of But it quickly found that most brokers aren’ t their in-bond cargo transport business. cargo, and the names of the shipper and enthusiastic about processing in-bond pa- Industry analysts pin QP/WP’s overall consignee. Brokers are often asked by ship- perwork and would prefer to focus on their failure to take off in the U.S. trucking indus- pers to prepare and manage the in-bond try to the customs brokers’ traditional con- documentation on their behalf. trol of the in-bond process and to plain To get a better hand on this burdensome ignorance of the system. Both of these process, Customs set out five years ago to obstacles, they say, are largely due to Cus- develop an automated in-bond system, called toms ’ failure to market the program to truck- the Tin Man, which is part of the agency’s ers. Automated Broker Interface module. ABI In-bond shipments are imported mer- filers are able to create in-bond records in chandise that’s allowed to move within the Customs’ database via electronic data inter- United States without paying taxes and change transaction sets, QP and WP.

Customs prepares for CAFES

WASHINGTON spector will scan these barcodes to verify U.S. Customs plans to begin imple- the shipments with information in the mentation of a new system this month to agency’s system, and to determine further reduce the time it takes to clear whether to move it along. The agency trucks at the borders. said CAFES should help to eliminate The system, Customs Automated Forms some congestion at the land borders. Entry System or CAFES, will use a rede- CAFES will ultimately give truckers signed in-bond form with a two-dimen- an ability to interact with the agency’s sional barcode (PDF-417). This type of Automated Manifest System through the barcode, which resembles a checkerboard, Automated Broker Interface electronic- “To make QP successful, is able to contain larger amounts of data data-interchange formats for in-bonds, than traditional vertical-lined barcodes QP/WP. it has to be looked used for land-border clearance. The agency held meetings with the The plan is for shippers in Canada and industry to generate interest to partici- at as a tool that helps both Mexico to produce the in-bond forms pate in CAFES at the roll-out ports of the broker and trucker. ” (Customs Form 7512) with the 2-D Port Huron, Mich., and Laredo, Texas. barcodes. Truckers will carry these forms The American Trucking Associations has Steven R. Graham with them as they transport their ship- expressed interest in the development of vice president, ments to the border. The Customs in- CAFES. Micro Software

66 AMERICAN SHIPPER: MAY 2001 TRANSPORT / INLAND

entry work. Nevertheless, “brokers don’t like to lose perceived QP Enhancements. Still, QP business,” Freeman said. QP in-bond benefits needs further enhancements to A common perceived pitfall increase its ability to manage infor broker QP participation is that • Transmit electronic in-bonds directly to U.S. Customs. bond moves. “The system is time Customs requires the originating • Control in-bond shipments by reporting arrivals and exports. consuming to use,” said George broker to arrive the in-bond at • Receive electronic departure authorizations. Martinez, assistant manager for destination. Consolidated • Transfer bond liability to reflect who is carrying the in-bond Transmaritime. shipment. Freightways encourages brokers Truckers can use QP to move • Arrive in-bond shipments at destination. to initiate the in-bonds and solves shipments in-bond to foreign trade • Receive electronic Customs release and status messages. this dilemma by guaranteeing that • Receive warnings when in-bonds are not arrived. zones, but that ability ceases when it arrive the in-bond when the • Protect against penalties from unresolved in-bonds. the goods leave the foreign trade cargo reaches destination. • Enhance relationship with U.S. Customs and shippers. zones. Two data elements are Meanwhile, Consolidated • Provide electronic record retention. needed to cover the outbound for- Freightways found immediate eign trade zone cargo: an out- praise for QP at its 350 terminals Source: Micro Software Services bound indicator and a company across North America. identifier. “When our terminal receives in-bond Trucking firm, Transmaritime, and its “This is very simple and will cover lots of cargo, CF electronically transmits required affiliate company Terrier Transportation cargo moving out of the foreign trade zones,” documentation direct to U.S. Customs,” Co., has used QP for the past three years to Graham said. Customs has said it plans to Freeman said. “Under this new system, move ocean containers in-bond from the make the programming changes to accom- paperwork is eliminated and CF drivers no ports of Los Angeles and Long Beach, modate this aspect of foreign trade zones in longer stop at a customs brokerage at the Calif., to Laredo, and from QP by summer. border.” Houston to Laredo. A Another big improvement to QP would In the paper in-bond environment, a third trucking firm is also be the addition of air-cargo in-bond ship- trucker must notify Customs of a shipment’s reportedly testing QP in ments. Unlike ocean, truck and rail EDI arrival by hand delivering documents at the its operations. formats, which operate at the master bill of nearest Customs office. “Even though in- “We’re looking at it lading level, the Air Automated Manifest bond freight is often cleared in transit, the right now, but we haven’t System also includes the house waybill paper-based step required for delivery au- committed anything to it level. thorization almost always results in unnec- yet,” said Sandra A. Scott, Scott For years, Customs has talked about add- essary delay,” Freeman said. customs and trade advocate for Roadway ing in-bond function in Air AMS, known as Other benefits to QP are the electronic Express, based in Akron, Ohio. project 323. It has yet to be implemented. ability to store information, reduce data “We welcome more competition to take “With Air AMS as an extension to QP, we entries, and other complete control of li- advantage of QP,” Freeman said. “Compe- would have a more complete in-bond man- ability. “QP provides us full visibility of the tition will make the system even better.” agement system,” Graham said. ■ in-bond transactions,” Freeman said. ConsolidatedFreightways’ drivers, however, carry a copy of in-bond documents in CN, Wisconsin Central file for merger their cabs to stay within the current Cus- toms rules. If Customs requests the docu- WASHINGTON merger agreement without penalty if the ments at any time, the driver can produce Canadian National Railway and Wis- STB does not treat the transaction as a them. consin Central Transportation Corp. have minor consolidation, rather than a major “There’s been a learning curve with this,” filed an application with the U.S. Surface rail merger. The STB is expected to decide Freeman said. “But once everyone under- Transportation Board to merge the two rail- on the status of the application within 30 stands how it works, QP is a win-win for all roads. days. parties in the in-bond transaction.” The two railroads also filed a pre-merger A moratorium on major merger applica- Consolidated Freightways bought its QP notification and competitive impact brief tions is in force until June 11 while the STB application software from Micro Software with Canada’s Competition Bureau. makes final decisions on new merger rules Services, a Miami-based developer of QP The filings follow a WCTC shareholder for Class 1 railroads (see story, page 12). software. The trucking company hopes to approval of the $1.2 billion merger. CN’s Wisconsin Central said the merger, pend- include QP functions in its future Internet offer of $ 17.15 a share cash, plus assuming ing STB approval, should be completed by applications. $400 million in Wisconsin Central debt, fall. In addition to Consolidated Freightways, was approved by 99 percent of the stock- Rosemont, 111.-based Wisconsin Central Micro Software has also sold its PC-based holders on April 5. is CN’s largest customer and has been haul- software to 40 of the 45 brokers using QP. The transaction will secure CN owner- ing CN freight between Superior and Chi- In November 1998, the company helped ship and control of a link in its North Ameri- cago under a 1998 agreement. John Cassidy International to become the can Free T rade Agreement network between CN, which acquired Illinois Central two first broker to initiate an in-bond shipment Superior, Wis. and Chicago. years ago, said it will sell off Wisconsin in QP. CN said its application has the support of Central’s overseas rail properties. Those “To make QP successful, it has to be more than 280 shippers, local governments, include a 42-percent stake in English, Welsh looked at as a tool that helps both the broker chambers of commerce, public agencies, and Scottish Railways and a 24-percent and trucker,” said Steven R. Graham, vice and other railroads. stake in T rans Rail Holdings, a New Zealand president of Micro Software. CN said it has the option to terminate the rail operator. ■

AMERICAN SHIPPER: MAY 2001 67 TRANSPORT/INLAND

Management’s system to monitor and track its railcars in the United States. CG Railway has signed interline agreements with Canadian National/Illinois Cen- Where the rail meets the water tral, CSX, Norfolk Southern and Burlington Northern Santa Fe, which provide service to International Shipholding’s all-water service Mobile. The company worked with the Alabama to Mexico takes advantage of NAFTA. State Docks to upgrade an old finger pier into a modem rail-to-vessel terminal, a $3- B y Chris G il l is million investment. The vessels for the CG Railway — the nternational Shipholding has long been the years and most of the bad weather goes Bali Sea and the Banda Sea — were for- successful at building profitable niche north into Veracruz area,” Johnsen said. “The merly float-on/float-off special purpose businesses. Coatzacoalcos area has good weather condi- ships used to transport materials under In- Now the New Orleans-based liner carrier tions.” ternational Shipholding’s long-time con- hopes to have that same success with a new Weather conditions in the Gulf are im- tract with Freeport McMoRan’s copper and U.S. Gulf/Mexico service. In February, In- portant to understand and monitor if CG gold mining operation on the Indonesian ternational Shipholding launched CG Rail- Railway wants to maintain its eight-day, island of West Irian Jaya. way, an all-water rail service International Shipholding re- between the Port of Mobile in placed the two vessels under the Alabama and Mexico’s Port of Freeport McMoRan contract and Coatzacoalcos. had them converted to transport “We’ve always looked for areas railcars. Each vessel has eight where there are specialty transport rows of tracks with a total capac- needs,” said Erik F. Johnsen, presi- ity of 60 railcars and 30-foot- dent of International Shipholding. high sidewalls to protect against “We thought it would be smart to the sea, Johnsen said. offer a complementary rail service In Mexico, the company to and from Mexico.” formed ajoint venture agreement With the North America Free with railroad Ferrosur, S.A. de Trade Agreement stimulating the C.V., a subsidiary of Grupo movement of large cargo volumes Carso. “The senior management between the United States and of Ferrosur have been helpful in Mexico, traditional land-border detailing and determining for both crossings along the Texas/Mexico parties the service requirements border are faced with increasing and advantages of the rail service congestion and delays for truck for receivers and exporters,” In- and rail traffic. ternational Shipholding said. CG Railway was created to shave “We view CG Railway as a significant transit times off railcar partner,” said Luis I. Olivera, com- movements between the freight mercial director for Ferrosur. The markets east of the Mississippi railroad manages the railcars to River and southern Mexico’s in- and from the ocean vessels at dustrial belt. The service promises Coatzacoalcos and throughout shippers faster, more reliable ser- southern and eastern Mexico. vice to Mexico, while railroads ex- Both Ferrosur and CG Railway perience better use of their have worked together to get the equipment. necessary operations agreements The Mobile/Coatzacoalcos in place with the Coatzacoalcos transit time offers a four-day port authority and with the Mexi- spread between the two vessels in can government’s Secretaria de this niche. Each vessel operates A barge-load of boxcars are readied at the Port of Comunicaciones y Transportes within an eight-day round-trip Mobile for shipment to Mexico’s port of Coatzacoalcos. and Administracion Portuarta In- voyage between the ports. CG tegral. Railway has arranged it so that a vessel round-trip transit schedule. CG Railway officials said they have also arrives in each port the same day. “This is going to run like a railroad. It received good cooperation from the U.S. will move back and forth like a railroad and and Mexican Customs officials and the Careful Planning. International be on time like a railroad,” Johnsen said. Coast Guards of both countries to operate Shipholding spent a year and half planning “That means no deviations.” the service. Railcars are sealed at origin and the launch of CG Railway. CG Railways obtainedU.S. SurfaceTrans- the freight remains intact until it arrives at The company studied all aspects of the portation Board authorization to operate, and destination, Johnsen said. trade, including weather patterns in the re- is associated with the Association of Ameri- Mobile’s proximity to the Caribbean and gion. “We looked at the weather maps over can Railroads. The company joined Railcar Mexico has made it a focus of different rail-

68 AMERICAN SHIPPER: MAY 2001 TRANSPORT / INLAND ferry schemes in recent years. Since 1988, Pharmachem, the largest sup- plier of chemicals to Puerto Rico’s pharma- ceutical industry, has operated a rail-ferry barge service from Mobile to Ponce. The Chemex Service operates twice monthly, transporting about 24 tank cars per voyage to Ponce. The carrier brings back empty tank cars and some loads back to Mobile. While Mobile offers a 900-mile route to southern Mexico’s industry, as opposed to traditional 1,400-mile all-land route from Mobile to southern Mexico via Laredo, Texas, U.S. railroads have straggled to get a Mobile/ southern Mexico service off the ground. “Because of the logistics benefits involved here, a rail-ferry service from Mo- bile to Mexico would happen sooner or Niels W. Johnson (left), chairman, and Erik F. Johnsen, president, of later. But the start up wouldn’t be easy,” International Shipholding Corp. said E.G. “Buddy” Browning, a 43-year ern Railway operated a barge rail-ferry ser- and its rail-ferry service was abandoned. veteran of the Mobile waterfront and man- vice for railcars moving between Galveston, In the mid-1990s, CSX, through its so- ager of project de velopment and marketing Texas andCoatzacoalcos. The400-foot-long called “Gato Marino” project, hoped to for Page & Jones. by 100-foot-wide barge moved carloads of combine its operations with its marine unit, Before joining Page & Jones last year, grain to Mexico. At the time, the railroad had Sea-Land Services, to ferry railcars to south- Browning spent 18 years with Illinois Cen- no land-border access to Mexico. ern Mexico. The Mexican government’s tral Railroad and 25 years with Alabama Burlington Northern wanted to expand privatization of the railroads and the de- State Docks Terminal Railroad in various to Mobile to cover the East Gulf market. valuation of the peso, however, terminated senior management positions. He was But the service never got started, because the CSX project. closely involved in the early attempts by the railroad merged with the Santa Fe Rail- Shortly after, Illinois Central Railroad railroads to start rail-ferry service to Mexico. road. The merger gave former Burlington proposed another rail-ferry service between During the early 1990s, Burlington North- Northern access to Mexico through Laredo Mobile and southern Mexico in coopera-

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AMERICAN SHIPPER: MAY 2001 69 TRANSPORT / INLAND tion with Copenhagen-based ocean carrier Shipholding’s annual report, gross voyage prove it can save money to the shipper, and Scan Lines. The service, called Gulf Link, profit was $49.5 million for 2000, down that won’t be easy.” was put on the back burner after Canadian from $66.7 million in 1999. The company Georgia Pacific moves about 30 to 40 National acquired Illinois Central in 1998. earned $32.5 million in operating income, railcars of wood pulp and particleboard a International Shipholding’s ability to start down from $54.1 million in 1999. month to southern Mexico on CG Railway. CG Railway was a major coup for the ocean International Shipholding attributed its “The potential is there to triple our vol- transportation company and the Port of loss to the divestiture of its Seminole coal umes,” Laurine said. Mobile. transportation contract. “We expect to grow While CG Railway may appear to be a our operations with this behind us now,” more efficient link between the East Coast/ New Ground. International Shipholding said Niels W. Johnsen, chairman of Inter- Gulf to Southern Mexico, it must contend operates differently from most scheduled national Shipholding in New York. with well-established land crossings along liner services. The company has no interest the Texas/Mexico border. in containerized freight, preferring to de- Confidence Building. International “So far they’ve done what they said they velop ocean transportation business oppor- Shipholding’s venture into the railroad busi- would do,” Laurine said. “If they can con- tunities in niche markets. ness is new territory. The success of CG tinue to show that it’s an alternative that That’s the way the Johnsen brothers, Railway will hinge on the company’s abil- makes economic sense, shippers will work Erik F. and Niels W. Johnsen, have run their ity to generate steadily increasing freight with them.” shipping business for the past 50 years, and volumes from railroads and shippers in the Alabama River Pulp, based in Purdue Hill, the management style is expected to con- U.S. Gulf/Mexico trade. Ala., has also used CG Railway at the request tinue in the future of the company. of its Mexican customers. “We weren’t terri- International Shipholding owns and oper- bly optimistic about the service when it was ates the world’s largestbarge-carrying LASH “This is going to run like first announced, but our Mexican customers (lighter aboard ship) vessel fleet, under sub- showed interest in it from day one,” said sidiaries Central Gulf Lines, Waterman a railroad. It will move Glenn Wiegel, manager of traffic and distri- Steamship Corp. and Forest Lines. back and forth like bution for Alabama River Pulp. Central Gulf first introduced its first two The company plans to move 3,000 to LASH ships in 1969 and 1970. By 1998, the a railroad and be on time 5,000 tons of wood pulp a month on the CG company’s international LASH fleet had Railway. “The transit time is the benefit to grown to 12 vessels. like a railroad. That our customers in Mexico,” Wiegel said. The LASH system consists of small means no deviations.” “We haven’t heard any complaints at all barges, each with capacity for up to 375 about the service.” tons of cargo, that are towed between points Page & Jones operates as CG Railway’s Erik F. Johnsen on inland or coastal waterways and ports vessel agent and sales and marketing arm in where the barges are lifted on and off a large Mobile. CG Railway has a similar arrange- “mother ship.” These ships have a capacity Historically, U.S. railroads were hesitant ment with Representaciones Maritimas to handle 82 to 89 LASH barges each. The to let certain types of equipment cross into (Repmar) in Coatzacoalcos. LASH vessel fleet has become a major Mexico because of fears of protracted de- “Both companies coordinate with other carrier for forest products, rubber, military lays and inability to maintain control over freight forwarders and customs brokers to equipment and project cargo. the equipment. expedite the flow of cargo,” Browning said. But after 30 years of service, International “Capital cost and equipment utilization “We try to pre-clear the cargo before the Shipholding’s LASH vessels are showing are the big issues for railroads,” Browning vessels arrive at the ports.” their age. The company will have to decide said. “If the railroads can get additional While cargo volumes are increasing on the during the next several years whether to turns in their equipment, that’s where the CG Railway, it’s still predominantly a south- phase out or replace its LASH vessels. profits are. Two turns per railcar every 30 bound trade, with mostly forest products and Meanwhile, International Shipholding days is desired.” chemicals destined to manufacturing plants hasn’t relied solely on its LASH vessel The traditional land-border clearance for in Mexico. Olivera said Ferrosur will con- business. During the past 20 years, the rail traffic into Mexico from the East/Gulf tinue to promote the service to breweries and company made significant inroads into the coasts takes about 45 to 60 days to turn a chemical, paper and indus- auto-transport business from Japan and railcar, while with CG Railway railcars trial goods manufacturers Korea to the United States and Europe. take 18 to 20 days to turn. in the industrial cities of International Shipholding has a fleet four “We abide by the terms and conditions of Coatzacoalcos, Orizaba, roll-on/roll-off vessels for this service. the Association of American Railroads,” Puebla, and Mexico City The company also operates a molten Olivera said. “We don’t expect to have any to increase northbound sulfur bulk carrier between Louisiana and problems managing railcars (in Mexico).” cargo flows. U.S. Gulf ports for Freeport McMoRan. Georgia Pacific, a long-time user of In- “I’ve watched Interna- International Shipholding’s self-unloading, ternational Shipholding’s Waterman Steam- tional Shipholding over conveyor-belt equipped coal carrier moves ship and Forest Lines services, was one of the years and it’s a successful operation,” coal along the coast for New England Power the first Gulf shippers to use CG Railway. said James K. Lyons, director and chief Co. Two U.S.-flag ice-strengthened multi- ‘ ‘International Shipholding has the muscle executive officer for the Alabama State purpose vessels continue to operate in the and staying power which gave me the con- Docks. “If anyone can pull this off, Interna- polar regions for the Military Sealift Com- fidence to try this service,” said David tional Shipholding can.” mand, and a bulk carrier operates as part of Laurine, Georgia Pacific’s assistant man- “They’re good marine operators and a cape-size bulk carrier pool. ager of marine transportation, based in At- they’re becoming good railroad operators,” According to the International lanta. “But the Mobile service will have to Browning said. “They did their home work.”H 70 AMERICAN SHIPPER: MAY 2001 TRANSPORT/ INLAND

Senate bill seeks repeal of fuel tax on railroads Rutter picked to head WASHINGTON was deposited into the transportation trust Federal Railroad A bill introduced in late March by Sen. funds dedicated to improving highways, Fred Thompson, R-Tenn., would repeal airports and waterways. Administration the 4.3-cent motor fuel excise tax imposed In 1997, Congress redirected the 4.3- on railroads and inland waterway transpor- cent gasoline tax back into the highway WASHINGTON tation. trust fund and the 4.3-cent aviation fuel The Bush Administration has nomi- The bill is identical to a House bill intro- excise tax back into the airport and airway nated Allan Rutter to be administrator duced earlier in March, and reprises a bill trust fund as part of the surface transporta- for the U.S. Department of introduced in the last Congress by Sen. tion reauthorization bill, TEA-21. Transportation’s Federal Railroad Ad- John Chafee, R-R.I. Congress voted to “However, the final version of TEA-21 ministration. repeal the tax as part of the Taxpayer Re- did not touch the tax on inland waterway Rutter is transportation policy di- fund and Relief Act of 1999, which was barge fuel or railroad fuel, so that tax rector for the Texas Governor's Office vetoed by President Clinton. revenue is still being deposited in the gen- where he has served since 1995. Prior The tax had been imposed in the Omni- eral fund,” Thompson said. There is no to that, he was deputy executive direc- bus Budget Reconciliation Act of 1993 on railroad trust fund. tor of the Texas High-Speed Rail Au- all transportation fuels as a means to help The bill is co-sponsored by Senators thority for five years. reduce the federal budget deficit. Prior to John Breaux, D-La.; Frank Murkowski, R- The Arlington, Va.-based National the act, the gasoline, aviation and diesel Alaska; Jim Jefford, R-Ver.; Phil Gramm, Industrial Transportation League fuel excise tax had been considered “user R-Texas; Don Nickles, R-Okla.; and praised the administration’s nomina- fees,” and revenue raised from the taxes Blanche Lincoln, D-Ark. ■ tion of Rutter. “I have known Allan Rutter for al- Bipartisan bill would back short-line railroads most 20 years, and I have never heard a negative comment about him. His WASHINGTON the three years of the allocation. relationship with the president will help A bipartisan U.S. House bill would pro- “This bill will ensure that short-line rail- to elevate railroad issues to a higher vide $350 million to the nation’s 500-plus roads get the funding they need to continue priority and that will be good for the short-line railroads. carrying out their vital role in local com- entire freight transportation industry,” Sponsored by Representatives Jack merce,” said Quinn, chairman of the rail- said Ed Emmett, president of the NIT Quinn, R-N.Y., Bob Clement, D-Tenn., road subcommittee of the House Committee League. ■ and Spencer Bachus, R-Ala., the bill would on Transportation & Infrastructure. set up a new program in the U.S. Depart- Frank Turner, president of the American ment of Transportation to provide the capi- Short Line and Regional Railroad Associa- Groups seek extension tal to preserve and improve the short-line tion, said the bill “is vital” to the industry to carriers’ rail track. save jobs and “to keep thousands of local on equipment retrofit The funds would be authorized for each shippers from losing their connection to the fiscal year between 2002 and 2004. national rail network.” WASHINGTON The bill sets an 80-percent cap on the In a related development, Canadian Na- Four trade associations representing com- federal share of the project cost, and funds tional said it will support efforts to secure panies that own or operate intermodal equip- must be used as quickly as possible, within the federal funding. ■ ment have petitioned the Federal Motor Carrier Safety Administration for a one- MTMC adds automatic fuel adjustment system year extension of a deadline for retrofitting trailers, semi-trailers and chassis more than WASHINGTON Association’s committee meeting in New eight years old with reflective materials. The U.S. Military Traffic Management Orleans last August. The FHWA had called for the retrofit to Command, the surface transportation lo- The new automatic fuel adjustment policy be completed by June 1. The trade groups gistics unit of the armed forces, has initiated is the result of ajoint MTMC-industry fuel noted in a joint statement that more than an automatic fuel adjustment for motor board, which first met last November. The 430,000 trailers and chassis are affected: carriers and railroads. board agreed to use the Energy Department’s “Despite the industry’s best efforts, a fail- MTMC’s Global Freight Management weekly fuel price as the governing national ure to achieve this goal by June 1” will system will automatically show any fuel standard for diesel prices. render 193,000 units “potentially unavail- adjustments on the bills of lading. In the “The policy establishes a baseline fuel able for use. The resulting shortage of equip- past, truckers and railroads incurring high price — with a 10-cent per gallon margin,” ment could lead to congestion and gridlock diesel costs faced long delays in receiving said Ruth Tetreault, traffic management at U.S. ports, rail terminals, and inland MTMC fuel adjustments. During the past specialist for MTMC, based in Alexandria, facilities just as the peak shipping season year, overland transporters took a hit when Va. “For example, if we establish a fuel accelerates.” the price per gallon of diesel fuel ranged baseline of $ 1.30 and the price of fuel goes The four groups are the Ocean Carrier from $1.31 to $1.67 a gallon. above $ 1.40 — they will be automatically Equipment Management Association, the The idea to create a system which prop- entitled to a fuel adjustment.” Intermodal Association of North America, erly compensates truckers and railroads Industry representatives on the board the Institute of International Container Les- during times of soaring fuel costs was initi- praised MTMC’s initiative to develop the sors, and the Association of American Rail- ated at the National Defense Transportation fuel adjustment system. ■ roads. ■

AMERICAN SHIPPER: MAY 2001 71 can markets. Before the merger, the carriers had started developing terminal and inland Wallenius Wilhelmsen’s transport operations into these markets. In 1992, Wallenius set up Pacific Vehicle Processors in Port Hueneme, Calif., to handle terminal focus vehicle shipments from Europe, Japan and Mexico, which are delivered to markets on Auto and wheeled equipment shippers benefit the U.S. West Coast and Southwest. A rail terminal and two major interstate highways from carrier’s hubs and computer technology. serve the 65-acre facility. Up to 8,000 vehicles can be stored there at a time.

B y Chris G il l is Similarly, the carrier established Atlan- tic Vehicle Processors in 1998 at the Port of allenius Wilhelmsen already hicles through its vehicle processing cen- Brunswick, Ga. The East Coast facility was knows how to efficiently trans- ters in ports. expanded to 50 acres in 1999, and has W port autos and other wheeled The carrier said its merger mirrors the storage space for up to 6,500 vehicles. equipment to overseas markets. consolidation of the auto and wheeled equip- Wilhelmsen created Australian vehicle That’s why the Scandinavian carrier is ment manufacturing sectors in recent years, handling firm Fleet Fit in 1998. The opera- stepping out onto its terminals to find out and the same goes for its development of tion has since been expanded to include where it can further expand its business in hub terminals. Melbourne, Perth, Brisbane, Townsville, the transportation management of roll-on/ “Once these companies have acquired Darwin, Sydney and Adelaide. roll-off cargo. others, they no longer want their inbound All three of these operations offer ve- “We’ll continue to provide port-to-port and outbound operations spread out over hicle shippers automated inventory track- transportation. But we want to do more than many ports,” Wang said. “We need to de- ing, upgrades, body and paint repair and just that," said Jan Eyvin Wang, president velop hubs which can be offered as possible accessory installation services. of Wallenius Wilhelmsen Lines Americas, main hubs for our customers.” In Europe, prior to the merger, Wallenius based in Woodcliff Lake, N.J. “We need to Vehicles are traditionally shipped in bulk, also opened a 100-acre automotive terminal define what we need to do to help our clients with dealers maintaining large volumes of at Zeebrugge, Belgium, which handles up to succeed.” stock at destination. “Today, the dealers’ 22,000 vehicles at a time. The facility pro- The merger of Wallenius Lines in Swe- stocks are learner as the manufacturers move vides inland transport by truck and rail, in den and Norway-based Wilhelmsen Lines toward specific production schedules and addition to short-sea transport to markets in July 1999 created the world’s-largest ro/ cycles,” said Richard Lawson, senior vice such as Scandinavia, United Kingdom, Ibe- ro carrier in the ocean transportation indus- president of Wallenius Wilhelmsen in the ria, Mediterranean and North Africa. try. Today, the carrier’s 60-vessel fleet United Kingdom, who is responsible for the Wallenius also built a small terminal at moves about 1.8 million vehicles a year. carrier’s inland logistics processes world- Finnish port of Hamina in 1998, which The merger also extended and consoli- wide. “We’re matching our delivery ser- handles up to 1,000 vehicles mostly des- dated the carrier’s reach into shore-side vice to that process.” tined for the Russian market. logistics management of vehicles. Wallenius In the mid-1980s, Richard Lawson Wilhelmsen estimates that it moves about Laying The Groundwork. Wallenius Autologistics Group set up a network of 35 1.4 million vehicles a year to inland desti- Wilhelmsen’s terminal operations are most vehicle processing centers and depots, mostly nations and processes about 200,000 ve- developed in the European and North Ameri- in the United Kingdom and Germany.

72 AMERICAN SHIPPER: MAY 2001 PORTS

The company became involved in vehicle include 100,000 square meters of terminal preparation for rental and leasing companies, space, which will be expanded as auto vol- manufacturer’s fleets, and demonstration umes increase. General Motors, BMW, models, and delivered these vehicles in single Nissan, Toyota and Honda, have plants in the and bulk allotments. It also refurbishes ve- vicinity of the carrier’s terminal. hicles coming off lease to prepare them for Wallenius Wilhelmsenmanagementis also sale or leasing again. Richard Lawson studying possible locations for hub opera- Autologistics has a fleet of about 700 trans- tions in China. “Since we’ve had a strong porters and contracts with 250 others to de- presence in the market for a number of years, liver vehicles to the pan-European market. we’ll have the benefit of an existing infra- Wallenius bought a major stake in the structure upon which to build,” Lawson said. company in 1991, and Richard Lawson Wallenius Wilhelmsen executives, how- Autologistics became a subsidiary of ever, admit that one-size doesn’t necessar- Wallenius Wilhelmsen after the merger of ily fit all when it comes to developing the two carriers. terminals for markets. “While we can have a global strategy for ocean transport, we New Hubs. Wallenius Wilhelmen’s work must always maintain a regional strategy on developing hub terminals is far from for inland logistics,” Lawson said. finished. The carrier recently signed a 20- The thread that holds the fabric of year lease agreement with the Port of Balti- Wallenius Wilhelmsen’s international ter- more. Negotiations between Wilhelmsen and minal operations together is new informa- theportbeganinl996duringMarylandGov. tion technology program, known as WW Parris N. Glendening’s first trade mission to “We’ll continue to provide Solutions. Norway to meet with Wilhelmsen officials. While Wallenius Wilhelmsen has always As Wallenius Wilhelmsen’s new North port-to-port transportation. had systems to manage parts of its terminal Atlantic hub, at least 3,000 vessel calls will But we want to do more operations, the carrier recently bought an be made at the terminal over the next two i2Technologies software package, which decades, with an annual cargo volume of than just that. We need covers the entire operation from tracking 600,000 tons that could grow to 2 million cargo to freight payment. Shippers are able tons a year. to define what we need to become interactive with Wallenius Maryland state transportation officials to do to help our clients Wilhelmsen’s system. have commited funds to develop the first “The system has great flexibility and can phase of a multiphase project, which would succeed. ” be tailor made around the individual cus- provide about 50 acres and 120,000 square tomer,” Wang said. “We’re implementing feet of covered shed space at Dundulk Jan Eyvin Wang this system around the world.” Marine Terminal. Additional phases would president, expand the terminal up to 150 acres. The Wallenius Wilhelmsen Lower Costs. Since the high-tech hubs contract also provides three five-year re- Lines Americas lower operations costs for Wallenius newal options that could extend the agree- Wilhelmsen, the carrier is able to pass some ment to a total of 35 years. savings onto its customers in the form of “A lot of planning and thought went into about their shipments. lower freight handling charges. our selection process,” Wang said. “Southampton has been a key strategic “If the carrier is using fewer ports of call “Baltimore’s commitment to customers and port for many years,” Lawson said. “In the that means they’re using their assets more the port’s strategic advantages, including U.K. market, we’re finding that manufac- efficiently, which could bring down the an exceptional intermodal system, and a turers have less space for cars at their own costs to their customers,” said Denny Car- superior, highly trained labor force, met our plants, and could use our facility to stock penter, vehicle logistics department man- needs best.” their vehicles for short periods before the ager for Ford’s worldwide direct market One of Baltimore’s key advantages is its vessels sail.” operations based in Allen Park, Mich. close proximity to the Midwest manufactur- The carrier’s main customers in the port Ford and its subsidiaries ship a high ing base compared to other East Coast ports. are Land Rover, MG Rover, Jaguar, Gefco percentage of their vehicles with Wallenius In the United Kingdom, Wallenius (Peugeot), which export to the United States, Wilhelmsen. “They’re putting together a Wilhelmsen recently signed a $4.3-million Asia and Australia, while Ford and BMW are good menu of services (at the terminals). agreement with Associated British Ports to imported to the U.K. market through the port. The customer just chooses the process or build a new 11.75-acre car handling facility “This new facility will provide us with processes it wants to use,” Carpenter said. at the Port of Southampton. The new five- enough terminal capacity to cater for the Tim Poole, director of logistics for the deck car terminal, scheduled for comple- growth of our customers’ export programs U.S. marine division of Bayliner Boats, and tion later this year, will accommodate up to well into the next decade,” said Craig general manager of the pleasure boat 3,120 cars at a time. Four of the decks are Jasienski, managing director for Wallenius builder’s in-house trucking fleet, said the covered to protect vehicles from the weather. Wilhelmsen in the United Kingdom. development of Wallenius Wilhelmsen’s The facility will also incorporate the lat- Later this year, Wallenius Wilhelmsen hub ports has allowed his company to more est car-handling features and computer tech- will open a new terminal at Port Learn efficiently consolidate its shipments into nologies, such as barcoding system to scan Chabang to serve Thailand’s growing auto single truck loads. cars arriving at the terminal. Customers manufacturing industry. The operation will For example, Bayliner’s plants in will also have online access to information be developed in phases. The first phase will Cumberland and Salisbury, Md. can ship

AMERICAN SHIPPER: MAY 2001 73 PORTS

Vancouver’s take-charge port

Improvements to terminal management put containers in faster motion.

B y Chris G il l is

he management of the Vancouver Port Authority in British Columbia has a lot riding on its shoulders. TIt knows that a breakdown in terminal operations could quickly send containers Kevin G. Little to the arms of major U.S. seaports just VP of business south of the Canadian border. So the port development, authority is on constant alert for problems. Vancouver Port Authority “It’s a unique situation that we have “While we can have here,” said Kevin G. Little, vice president of business development for the V ancouver “We have a team offive a global strategy Port Authority. “We are a primary gateway people whose job it is for ocean transport, (to Western Canada). We can’t let it go down.” to come up with 1 million we must always maintain The port knows what it's like to lose TEUs of infrastructure a regional strategy valuable container cargo to U.S. ports. In late July 1999, Vancouver experienced a (new terminal capacity) for inland logistics. ” month-long trucker strike, which nearly crippled the port’s operations. in the port.” Richard Lawson The strike arose out of trucker frustra- senior vice president, tion with staffing levels at the container Wallenius Wilhemsen terminals and wait times. Labor Relations nounced a plan to introduce an Interim Board mediator Brian Foley tried to head Container Licensing and Permitting Pro- off the strike, but was unsuccessful. gram for container trucking companies and boats out of Baltimore rather than splitting The impact of the strike immediately independents that do business in the port. up the loads between Baltimore and Norfolk, caused carriers to divert cargo to U.S. ports. By signing the contract, trucking compa- Va., Poole said. Bayliner can move up to six Shippers in the area also had to alter their nies agree, like any of VPA’s construction 17-foot and 20-foot boats per truckload. supply chains or idle plants. vendors, to pay fair wages to their employ- Some heavy equipment shippers, how- The biggest loser, however, was the Ca- ees/contractors. To complement this li- ever, benefit less from hub terminals. “We nadian economy. The Vancouver Port Au- censing program, terminal operators agreed try to ship our equipment to dealers within a thority estimates that each container that to establish a gate appointment system. 500-mile radius of a port,” said Paul passes through the port generates Can “Opportunity is bom from crisis,” Little Campbell, senior supervisor of transporta- $1,000 for the national economy. said. tionforLink-BeltinLexington, Ky., abuilder Two weeks into the strike, the economy By August 25, the strike was over and of excavators and construction cranes. “We lost about Can $55 million and more than the movement of containers from the don’t want the dealers to have to pay exuber- 7,000 containers remained stranded on the Vancouver terminals resumed. Only one ant land transportation freight charges.” Deltaport, V anterm and Centerm container other strike hit the port in November that Campbell said hub terminals would al- terminals. Thousands of other boxes were year, the result of a contract dispute below some heavy equipment builders to de- diverted by on-dock rail to interior points. tween the British Columbia Maritime Em- velop unit pools at the ports so that they Norman Stark, Vancouver Port Authority ’ s ployers Association and the International could sell their equipment and load quickly president and chief executive officer at the Longshore and Warehouse Union, which on vessels as needed. time, said the strike resulted in “terrible only lasted a week. While other ports may not have the hub damage to both Vancouver’s reputation Last year, the port was strike-free, and status, Wallenius Wilhelmsen has no plans and Canada’s reputation in ocean trading was able to concentrate on infrastructure to abandon transportation services to other circles.” and terminal management upgrades. In ro/ro ports, such as Norfolk, Charleston, But the port authority did not sit idly by 2000, Vancouver handled more than 1.16 S.C.; Jacksonville, Fla.; Miami, Mobile, waiting for the strike to resolve itself. It million TEUs of cargo, a 9-percent in- Ala.; New Orleans, Galveston, Texas; Los took action. “We had no alternative but to crease over 1999. Angeles, Tacoma, Wash, and the Canadian step in to establish some form of control,” ports of Vancouver, Halifax and Saint Little said. Industry Relations. Meanwhile, the John. ■ During the strike, the port authority an- port authority maintains close contacts with

74 AMERICAN SHIPPER: MAY 2001 PORTS carriers and shippers at the port. we can improve the operation.” ports from a central authority in Ottawa. “We’re a close-knit community up here,” The carriers and shippers routinely in- Some of the key provisions in the act, said Dave Bedwell, executive vice presi- teract with the port through the Chamber which will shape future port management, dent of China Ocean Shipping (Canada) of Shipping of British Columbia. are: Inc. “The port’s philosophy of getting ocean “We tend to try to work together rather • A nine-person board nominated by the and rail carriers, terminals and labor to- than confront each other,” said Ron private and public sectors. gether has been successful.” Cartwright, president of the Chamber of • The ability to borrow up to $225 mil- COSCO is the second-largest container Shipping. “The port has been a strong lion for port improvements without central carrier to call the Port of Vancouver. The partner in the development of the western authority approval. carrier transported 165,000 TEUs both maritime community.” • The ability to create subsidiaries in loaded and empty boxes through the port last The port became more efficient in de- non-core business. year. The Chinese carrier uses Vancouver as cision making after the passage of the • A reduction in the time to process land the first port of call in North America for Canada Maritime Act two years ago. Un- exchanges, acquisitions and dispositions and some of its transpacific services. der the new Canada Port Authorities sys- to approve business plans and capital expen- “We used to fight each other all the time tem, individual port authorities have more ditures. in this port,” Bedwell said. “Now there’s control over their own destiny as opposed “What's helped us with the act is that the enough business to share. It’s all about how to the former system, which governed the approval process for improvements is much

structure (to accommodate containers),” said Capt. Allen O. Domaas, director of operations and harbormaster for the Fraser River Port Authority. “Not every port can be a load center or gateway,” Domaas added. “We’re simply focused on firming our niche.” Prince Rupert Port Authority believes it’s a prime candidate for future West Coast container traffic. “The biggest hurdle to develop Prince Rupert into a container operation is the mindset that this can’t happen,” said Don Krusel, president and chief executive officer for the Prince Fairview Terminal is the Prince Rupert Port Authority’s forest products Rupert Port Authority. and specialty grain facility. “However, go back 40 years and start the con- Krusel tainer revolution again and Prince Rupert Container visions would be circled.” Prince Rupert touts a 115-foot-deep har- Fraser River and Prince Rupert ports believe bor, land space andrail connections. “We’re going to market ourselves as a pure they have ingredients for box shipments. intermodal container port,” Krusel said. “We can offer an express service between VANCOUVER, British Columbia Fraser Surrey Docks, which caters mostly the North American heartland and Asia.” Why should Vancouver get all the con- to forest products, steel, salt, ammonium The port is eager to find new business as tainers? nitrate, project and other general cargoes. traditional bulk cargoes, such as coal, grain That's what the port authorities of the CSAV/Norasia had moved 3,500 to and forest products have fallen by half in British Columbia ports of Fraser River and 6,500 TEUs annually to the port in a recent years to about 14.6 million tons last Prince Rupert are asking. These two pre- North/South American service, but the year. “We’re a commodity port and com- dominantly bulk ports are pushing to de- carriers terminated the service. The car- modities are under pressure,” Krusel said. velop niche container businesses of their rier members of the Australian vessel Industry analysts believe these ports own. sharing agreement — P&O Nedlloyd, will have a tough time convincing carriers “We encourage the aspirations of all Australia New Zealand Direct Line, Ham- to use their facilities. the ports in British Columbia to exploit burg Sud/Columbus Line, and FESCO — “Would the carriers be willing to go to the advantages of being closer to hinter- has started service to Fraser River Port. Fraser or Prince Rupert because of space lands for special shipments,” said Ron Fraser has had two container cranes problems in Vancouver? I don’t think so,” Cartwright, president of the Chamber of since the 1970s, and added a third, mod- said Jim Fairweather, vice president of Shipping of British Columbia. “It’s a ern gantry crane last year. Greer Shipping Ltd. “The carriers still put healthy scenario.” “We have good truck access, but we up with the congested terminals in Fraser handles some containers at the need to continue to improve our rail infra- Vancouver.”

AMERICAN SHIPPER: MAY 2001 75 PORTS

Vancouver containerized vs. breakbulk lumber (1996-■2000 in 1 ,000 tons)

Ron Cartwright 1996 1997 1998 1999 2000 president, Containerized 498 507 713 1,185 1,214 Chamber of Shipping Breakbulk 1,980 1,487 747 669 735 of British Columbia 1 Total lumber 2,479 1,993 1,460 1,854 1,949 ■ % containerized 20% 25% 49% 64% 62% 38% “ We tend to try to work % breakbulk 80% 75% 51% 36% together rather than Source: Port of Vancouver. confront each other. Lumber in a box The port has been a strong Low rates make containers an attractive partner in the development alternative for shipping forest products. of the western maritime

community. ” VANCOUVER, British Columbia is generally $800, while the rate differen- It used to be that lumber shipments from tial for kiln dried lumber is $1,200. The Western Canada moved by breakbulk ves- rates for these commodities are currently faster. Thus we can respond to the market sels, but low freight rates and changes in several hundred dollars below these dif- faster,” Little said. shippers’ tastes in recent years have made ferentials. the ocean container a more attractive way Despite the low rates, lumber shippers Terminal Improvements. Theportau- to move this commodity. from the Pacific Northwest have suffered thority continues to make improvements to “Our industry has become one that from sluggish Asian economies. its two oldest container terminals, Centerm doesn't like to keep a lot of inventory “Two years ago, we moved 20 con- and Vanterm. around, and containerships stick to good tainers a day. Now we’re down to about At Centerm, seven acres were added last schedules,” said Ian May, vice president 10 a day,” said John Ellis, vice president year by filling in the bight between the of regulatory issues at the Council of of Global Pacific Terminals in North terminal and the Ballantyne Terminal. The Forest Industries of British Columbia in Vancouver, which specializes in loading 72-acre facility has 10 incoming truck lanes Vancouver. lumber into containers. “It’s still a brutal and an on-dock intermodal yard, which is A standard two-inch by four-inch market.” served by Canadian National, Canadian building stud package for breakbulk trans- To compensate during this slow pe- Pacific, BC Rail and Burlington Northern port consists of about 294 pieces. The riod, Global Pacific has had to get in- SantaFe railroads. Containerships may dock containerized-version of these shipment volved in other types of cargo-handling at two of the four berths at the terminal. packages are slightly smaller at 216 business. The port authority has started adding a pieces. Japan, one of Asia’s largest con- Some carriers have opted to ship their 53-meter berth extension at Vanterm in sumers of imported lumber, prefers its containers back to Asia empty because April to accommodate the bigger building lumber in 13-foot lengths. the outbound freight rates for lumber and containerships. The extension should be The inside 39-foot length of a 40-foot other commodities are so low. “While finished by the end of the year, and will container can make loading lumber ship- lumber will never go all the way back to allow the terminal to handle up to two of the ments a little tricky. Containers of green breakbulk, we have seen a shift back to largest containerships at once. lumber, which is 30 percent heavier than that type of transport this year,” said But carriers still say the containers could kiln dried lumber, can hold eight 13-foot- Kevin G. Little, vice president of busi- be handled more efficiently in these two long packages and four 10-foot-long ness development for the Vancou ver Port terminals, especially with how containers packages. Containers of kiln dried lum- Authority. are stacked and moved. ber can hold a dozen 13-foot-long pack- The port handled about 110,200 TEUs “One terminal could affect the entire port, ages and six 10-foot-long packages. or 1.2 million metric tons of container- even though others are running efficiently,” The rate differential between shipping ized lumber exports in 2000, a 2.5-per- said Jim Fairweather, vice president of Greer green lumber in containers and breakbulk cent increase over the previous year. Shipping, a steamship agent for several container carriers in the port and chairman of the liner committee of the Chamber of Shipping. they had no lines signed up. Now it’s a busy (440 TEUs each) at once, and is served by “The port authority could set some perfor- terminal.” both Canadian National and Canadian Pa- mance standards for the terminals.” The port recently paved 25 acres for cific railroads. The total capacity at Deltaport Deltaport is the port’s most modern con- additional container storage and plans to is 850,000 TEUs. tainer terminal. It was opened for business expand the terminal another 35 acres by the Managing container traffic growth will be in the Roberts Bank area in 1997. end of the year. The 100-acre terminal has a top priority for the port. “We have a team of “The port authority made a big leap of six post-Panamax gantry cranes. An on- five people whose job it is to come up with 1 faith when it decided to build Deltaport,” dock rail system is able to handle two maxi- million TEU s of infrastructure (new terminal Fairweather said. “When they opened it, mum length double-stack container trains capacity) in the port,” Little said. ■

76 AMERICAN SHIPPER: MAY 2001 Corporate Appointments

(800) 874-6422, FAX (904) 791-8836, e-mail, [email protected]

Logistics ing executive positions with several logis- In addition, TakatakeNaraoka will move tics corporations, and has worked on the to Tokyo to assume responsibility for all of Cardinal Logistics Management Inc. U.S. West Coast, Germany, Thailand and Japan sales, and Hiroshi “Rocky” Iwai will Jerry Bowman has been named execu- Singapore. move from sales in Chicago to assume the tive vice president and general manager, duties of vice president, Japanese sales for responsible for business development and Forwarding North America. operations. As part of the reorganization, Morooka, Bowman has more than 25 years of logis- Expeditors International Yasunaga, Naraoka and Bill Payne, senior tics and transportation experience, and The air and ocean forwarder and custom- vice president of operations, will be ap- served on the executive team of Ryder ers broker has named Paul DiVecchio as pointed to the North American board of Integrated Logistics. He served in a number principal of export regulatory compliance directors. of executive assignments with Ryder, infor Expeditors Tradewin LLC. cluding senior vice president for the United DiVecchio has more than 30 years of Air States and Canada. After leaving the com- experience in export regulatory compli- pany in March 1998, he was named chief ance and has performed for than 130 audits American Airlines operating officer of Pameco Corp., a dis- on export compliance programs. He has Steve Buckerfield has been named man- tributor of HVAC equipment and parts. He developed and presented training programs aging director for cargo sales in Europe. was promoted to president and chief execu- for U.S. Customs and the U.S. Department Buckerfield, who replaces John Smith, tive officer of Pameco’s new electronic of Commerce, where he also acts as an joined American in 1990 and served as the commerce company in September 1999. advisor on regulatory interpretation. carrier’s cargo sales manager in Ireland and the United Kingdom. Previously, he worked Celarix Inc. Maritime seven years for Emery Worldwide’s U.K. The Cambridge, Mass.-based provider operations. of collaborative logistics solutions has ap- INTTRA pointed Jim Daniell as chief executive of- The multicarrier container shipping por- BAX Global Inc. ficer. tal, has named Kenneth Bloom chief execu- The Irvine, Calif.-based transportation Daniell was president and CEO of tive officer, effective in May. and supply chain management company OrderTrust Inc. He succeeds Evan Bloom, a veteran of Stolt-Nielsen Trans- has named John Carr senior vice president Schumacher, founder of Celarix, who will portation Group, was chief operating of- of its supply chain management operations, continue as the company’s vice-chairman. ficer of Optimum Logistics, where he and has appointed Oliver Evans vice presi- developed and marketed Translink, a Web- dent of global sales for Europe, the Mideast Commerce One enabled supply chain management system and Africa. Dennis H. Jones chief operating officer for more than 13 chemical producers and Carr, a 22-year veteran of international and vice chairman of board for the 110 logistics service providers. Optimum is logistics, spent the last 11 years with Fritz Pleasanton, Calif.-based provider of soft- a subsidiary of Stolt-Nielsen, which pro- Cos., most recently as group vice president, ware services for electronic marketplaces. vides integrated transportation services for business development for North America. Jones, 48, was executive vice president bulk liquids. Fritz, the San Francisco-based freight for- of information technology and chief infor- During his 12 years with Stolt-Nielsen, warder and customs broker, was recently mation officer for FedEx Corp. Bloom held a variety of management posi- acquired by United Parcel Service tions covering the maritime industry and Carr will serve on BAX Global’s execu- Danzas AEI the development of industry technology. tive committee and will be based in the The corporate logistics division of company’s supply chain management head- Deutsche Post World Net has named Bemd NYK Line (North America) Inc. quarters office in Atlanta. H. Flickinger, a former Stinnes AG veteran, Masamichi “Matt” Morooka has been Evans was vice president, alliances, for to head its Solutions Business Unit. He named president, replacing Tetsufumi KLM Cargo. succeeds Paul Bijvoets. “Teddy” Otsuki, who returns to Tokyo as JACKSONVILLE’S OLDEST Flickinger was on the managing board of general manager of the company’s plan- JACKSONVILLE'S BEST Stinnes AG. For 15 years he held a number ning group. FULL SERVICE FULL SATISFACTION of logistics and information technology Morooka has been general manager of LOGAN positions with BASF in Germany and the trade planning division of NYK (North Diving, Inc. abroad, and bore responsibility for trans- America). . Phone (904) 731-0000 port operations, including those of Schenker Replacing Morooka is Kunihiko “Ken” £ Fax (904) 731 -5493 AG. Miyoshi, who will move from the logistics planning and analysis division. Schenker Inc. Yutaka Yasunaga has been named chief SOUTH'S LARGEST Christopher Dale has been named execu- information officer. He was leader of busi- MARINE STORE tive vice president, marketing and sales for ness process management and the “Pegasus” PIER 17 MARINE the Stinnes subsidiary that provides logis- project, NYK’s maj or information technol- 4619 ROOSEVELT BLVD. tics, customs brokerage and forwarding ogy development program geared to pro- JACKSONVILLE, FL 32210 (904) 387-4669 • 1-800-332-1072 services. vide global supply chain management via CHARTS & PUBLICATIONS Dale is a 20-year industry veteran, hold- the Internet.

AMERICAN SHIPPER: MAY 2001 77 Service Announcements

(800) 874-6422, FAX (904) 791-8836, e-mail, [email protected]

OOCL adds ship, ports to Scan Baltic Express will be Antwerp, Thamesport, Hamburg, Gdansk, St. Petersburg, Gdansk, Hamburg, Hamina, St. Petersburg, Hamburg, Antwerp. Orient Overseas Container Line said in May it will add a third The service also carries OOCL deep-sea cargoes to and from larger vessel to its Scan Baltic Express service. Poland, Finland and Russia with relay at Hamburg and Thamesport. The 860-TEU vessel will allow for an additional weekly call in St. Petersburg, and for CMA CGM takes slots on Hanjin’s services other additional Baltic port calls, based on shippers’ needs. The service has operated CMA CGM has signed a slot charter agreement to take space on with two 600-TEU vessels since April 1999. Hanjin Shipping’s Pacific Northwest transpacific services. The revised rotation, effective May 21, CMA CGM is preparing to substantially change its transpacific services for the forth- coming peak season, coinciding with the end I nt ernet Index of a slot charter agreement with Maersk Sealand. CMA CGM and China Shipping Container to A dvert isers Lines are expected to announce the launch in May of a new vessel-sharing agreement service that would serve Check out these locations on the World Wide Web the port of Los Angeles and ports in China, South Korea and Japan. American Shipper www.AmericanShipper.com ComPairData www.compairdata.com Lines form Asia/U.S. South America VSA Columbus Line, Maruba, Lykes Lines and TMM Lines are A.N. Deringer www.anderinger.com forming a two-loop vessel-sharing agreement that will employ 11 American President Lines www.apl.com ships on the route from Asia to the West Coast of South America Atlantic Container Line www.ACLcargo.com via the U.S. and Canadian west coasts. Australia-New Zealand Direct Line www.anzdl.com From early May, the VSA’s services will replace the North Canada Maritime www.canmar.com America/West Coast South America service of Ampac consortium Cast North America Inc. www.cast.com members Columbus, Lykes, Maruba and TMM Lines, which will Ceres Terminals www.ceresglobal.com also incorporate a fortnightly multipurpose service run by Lykes Columbia Coastal Transport www.columbia-coastal.com Columbus Line www.columbusline.com and TMM Line. TMM said it will not use the Asia/North America West Coast/ China Ocean Shipping Co. www.cosco-usa.com Emirates Sky Cargo www.sky-cargo.com West Coast of South America vessels to carry cargoes between Evergreen America Corp. www.evergreen-america.com Asia and North America. The port rotation for Loop 1 of the VSA will be Hong Kong; Georgia Ports Authority www.gaports.com Hapag Lloyd Container Line www.hlcl.com Yantian; Shanghai; Busan; Vancouver, British Columbia; Seattle Intercontainer-lnterfrigo www.icfonline.com (seasonal, southbound only); Los Angeles; Manzanillo, Mexico; Intermarine Inc. www.intermarineusa.com Salina Cruz (alternate); Puerto Quetzal; Buenaventura (alternate); International Asset System www.interasset.com Callao; Iquique (alternate); San Antonio; Lirquen (alternate); Callao; “K” Line www.k-line.com Puerto Quetzal (alternate); Manzanillo; Los Angeles; Seattle (alter- Logan Diving www.Logandiving.com nate); Vancouver; Hong Kong; Yantian; Shanghai; and Busan. Marine Terminals Corp. www.mtcorp.com The port rotation for Loop 2 will be Hong Kong; Yantian; Maritime Global Net www.mgn.com Shanghai; Busan; Vancouver, British Columbia; Los Angeles; Matson Navigation www.matson.com Manzanillo, Mexico; Puerto Quetzal; Puerto Caldera (alternate); Mediterranean Shipping Co. USA Inc. www.mscgva.ch Callao; San Antonio; Callao; Buenaventura (alternate); Puerto N.Y.K. Line N.A. www.nyk.com Caldera (alternate); Manzanillo; Los Angeles; San Francisco; OOCL (USA) Inc. www.oocl.com Vancouver; Hong Kong; Yantian; Shaghai; and Busan. P&O Nedlloyd (USA) www.ponl.com For Columbus Line, which already operates one Asia/North Port Everglades Authority America/West Coast of South America service, the addition of a www.co.broward.fl.us/port.htm second loop on this extended route represents a further move into Port of New Orleans www.portno.com the Asia/South America market. Port of Portland www.portofportlandor.com Safmarine www.safmarine.com Evergreen, New World in slot agreement Seaboard Marine Inc. www.seaboardmarine.com Shippers Direct www.shippersdirect.net Tai wan’s Evergreen Marine Corp. has entered into a slot exchange Vancouver Port Corp. agreement with New World Alliance members APL, Hyundai Mer- www.portvancouver.com/access_usa chant Marine Co. Ltd., and MOL, covering the trade between the U.S. Virginia Ports Authority www.vaports.com East and West coasts, the Far East and Central America. Wallenius Wilhelmsen Americas www.wwlamericas.com Under the agreement the New World Alliance will purchase Waterman Steamship Corp. Jj about 500 slots on Evergreen's eastbound and westbound round- www.waterman-steamship.com the-world services. The services are operated with 10 vessels of about 4,000 TEUs each and call ports in California and the U.S.

78 AMERICAN SHIPPER: MAY 2001 East Coast. APL will purchase about 200 slots, and Hanjin and Genoa-based Coscos, the Italian general agent of the Chinese MOL will purchase 150 TEUs each. shipping line, said the three-ship service will call at Halifax on two In Evergreen’s Far East/U.S. East Coast service, APL will be weekly sailings out of three. The service will continue to call at allocated 300 TEUs and Hyundai 200 TEUs for each sailing. The Genoa and New York once a week. service employs nine vessels averaging 2,800 TEUs each. COSCO will provide on-carriage for Montreal, Toronto, other Evergreen will purchase a minimum of 300 TEU slots on the Canadian inland destinations, and for U.S. Midwest and West New World Alliance’s Far East/ Pacific Northwest service. MOL Coast destinations. provides five vessels of about 2,700 TEUs for the service. Columbus, partners restructure Brazil fleet China Shipping starts U.S./Med service Columbus Line, Alianca and Crowley American Transport, China Shipping Container Lines has started its previously an- three affiliates of the German Hamburg-Sud group, are planning to nounced fortnightly U.S./Mediterranean service. replace 11 medium-sized ships with six newly M The new service has a port rotation of New built 3,700-TEU vessels in the U.S./East Coast E D York, Norfolk, Naples, Leghorn, Genoa, Fos, of South America trade. & Valencia, New York and Norfolk. It uses two At present, Columbus, Alianca and part- N. 1,700-TEU ships that were formerly employed ners operate two U.S. East Coast/East Coast on the carrier’s Asia/Mediterranean service. of South America loops that employ 11 ves- The service’s 12-day transit from New York sels of 1,200 to 2,500 TEU capacities. Crowley to Naples is the fastest in the market, according American Transport operates a third, separate U.S. East Coast/East to ComPairData, the Internet-based liner shipping database. Coast of South America service with other partners, with five In lune, the new fortnightly service will be upgraded to a weekly vessels of about 2,000-TEU capacity. frequency and will be merged with an existing Mediterranean/ A spokesman for Columbus said the new 3,700-TEU vessels Suez/Asia service, creating a U.S. East Coast/Mediterranean/Asia/ would be phased into a revised service in about October. Carriers Mediterranean/U.S. East Coast pendulum service, expected to of the joint services are discussing the eventual rotations and employ 10 vessels of about 2,000-TEU capacity. services. The changes will not result in major changes in capacity in the trade, the spokesman added. COSCO extends U.S./Med service to Halifax Columbus could not comment on whether its East Coast of South America services would be merged with those of sister COSCO Container Lines is extending its Genoa/New York company Crowley American Transport as part of the fleet restruc- shuttle service to Halifax, Canada, at the end of April. turing. The first sailing to Halifax will be by the 1,702-TEU Xiang Yun He, The 3,700-TEU ships will be the largest in the East Coast of due to leave Genoa on April 29 and arrive in Halifax on May 10. South America trades.

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AMERICAN SHIPPER: MAY 2001 79 What to do with the U.S. slowdown

When signs of economic recession are in the air, there isn’t much to rejoice about — whether you are a shipper, a service provider or a carrier. U.S. railroads have already announced substantial layoffs. Newspapers report of other U.S. logistics and transportation companies tightening their belts admist warnings of less- than-expected revenue growth. But industries related to international transportation and trading are faring better than others. First, international oceanbome trade volumes and air freight traffic are only expected to slow down in the U.S. trades — not fall. Transpacific eastbound oceanbome traffic volumes were down in January and February, but should now pick up again or at least remain on a plateau. The Air Transport Association of America reported a 4.8-percent drop in U.S. domestic cargo traffic for January-February, compared to the same period in 2000, but international traffic rose 1.1 percent. And major service providers can also rely on continuing growth in overseas markets in Europe and Asia (except Japan) to generate business. For American shippers, now is the time to forget about the volume-driven frenzy of the last two to three years. Instead, their task is to find smarter ways of moving goods, controlling inventory or implementing information technology systems. How to handle larger volumes during peak seasons is another issue. For shipping lines and airlines, ports and airports, there are serious long-term issues of capacity that need to be addressed. The slowdown gives port and airports time to catch up and prepare strategies to move larger volumes in the long-term. The transpacific oceanbome container trade alone saw eastbound volume swell from 4.4 million TEUs in 1997 to 6.7 million TEUs in 2000 — that’s a gain of more than 50 percent. Similarly, criticism of congestion at U.S. airports are getting louder and airlift cargo capacity on passenger planes is tight. It’s not too early to start work on capacity bottlenecks now. Recent history has shown how vulnerable the western U.S. rail network and port system are when volumes surge, as they did two years ago. Container terminal congestion in the U.S. ports also looms large, after three years of record growth — not to mention the potential for blackouts in California. Perhaps it’s a mixed blessing that volume growth is slowing now.

80 AMERICAN SHIPPER: MAY 2000 Success in China requires attention to detail, as well as an understanding of the country's intricate structure.

OOCL's network of offices, intermodal connections and strategic partners forms the threads of the most comprehensive supply chain of its kind in China. In addition, our advanced information technology system helps OOCL offer a truly seamless solution.

When it comes to covering China, OOCL has you covered.

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