Acknowledgements

This report was funded, in part, by the Arizona Department of Transportation, the Federal Highway Administration and Federal Transit Administration.

Additional funding was made available through the Arizona Department of Commerce Rural Economic Development Initiative.

Contact Information

Dave Wessel-Co-Project Manager

Transportation Planner

Flagstaff MPO

City of Flagstaff

211 W Aspen

Flagstaff, AZ 86001

928-779-7658 phone

928-556-0940 fax

Chris Fetzer-Co-Project Manager

Transportation/Environmental Planning Director

Northern Arizona Council of Governments

119 E. Aspen

Flagstaff, AZ 86001

928-213-5200 phone

928-773-1135 fax [email protected]

Don Breazeale, Consultant

Don Breazeale and Associates, Inc.

P.O. Box 7121

2 Rancho Santa Fe, CA 92067

858-759-8321 phone

760-942-9217 fax [email protected]

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Table of Contents

ACKNOWLEDGEMENTS ...... 1 CONTACT INFORMATION...... 2 TABLE OF CONTENTS...... 4 EXECUTIVE SUMMARY...... 5 DATA COLLECTION AND ANALYSIS ...... 30 TRENDS ANALYSIS...... 33 SITE ANALYSIS ...... 80 ECONOMIC DEVELOPMENT IMPACT ANALYSIS ...... 98 ARIZONA JOB GROWTH ...... 117 CONCLUSION ...... 124 APPENDIX A – CROSSDOCK FACILITIES...... 129 APPENDIX B - LETTERS FROM WINSLOW AND CAMP NAVAJO- BELLEMONT ...... 133 APPENDIX C-PORT AUTHORITY ...... 134 APPENDIX D-INTERVIEW FORM...... 160 APPENDIX E-LABOR CHARACTERISTICS ...... 164 APPENDIX F - SHIPPING TERMINOLOGY AND GLOSSARY OF TERMS AND ACRONYMS ...... 169

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Executive Summary

Data and information contained in this report has been gathered from a wide variety of sources and when taken from an outside source the Consultant has acknowledged that fact in the footnotes and in the text itself. In addition the Consultant has provided in Appendix A, a glossary of shipping terminology and terms and acronyms so the reader can follow this report and its terminology.

The Consultant believes that the growth rate for this facility when constructed will conservatively be at 5% per year after an initial first year growth reflective of a start up operation. While the goods movement market is growing at much higher levels as is reflected elsewhere in this report the Consultant believes it is consistent with the City and FMPO’ stated goals and the communities interests that growth be controlled. In addition it is typical of facilities of this type that they enjoy an initial surge of activity and then develop based on service and consistency of operation. Growth will depend on many factors not the least of which will be adherence to a well disciplined marketing plan.

The data reflected in Tables 1 and 2 below is also reflected in the section on data collection and is not meant to be redundant but rather to provide the reader with a reference to this data in an appropriate place in this report.

Don Breazeale and Associates, Inc. conducted 230 interviews and incorporated the data and information gathered in these interviews, without violating the confidentiality of the companies and entities interviewed, into the charts that are attached. The consultant also analyzed goods movement data from the U.S. Department of Transportation, Federal Highway Administration (Freight Analysis Framework) and truck movements to/from Coconino County purchased from Reebie Associates and these findings are also included in the charts attached. The Consultant used current industry standards to effectively analyze and extrapolate the data both from the interviews and Reebie (Reebie data was sorted by commodity so we were able to identify only those commodities easily converted from truck to intermodal movement). Issues such as the fact that there is an imbalance of trade between imports and exports to/from the state of Arizona that causes an excess of empties to be included in the data were taken into account. The consultants approach to data collection and to projections was conservative.

Table I: Based on data collected through the interview process, the total annual lifts for the Northern Arizona Regional Freight Facility is 70,026; lifts are defined for purposes of this study to be units.

Table 1

Potential Intermodal Diversions

Total Market Anticipated Market Total Intermodal Penetration Market

Total Trucks Inbound 35,100 68% 23,920

Total Trucks Outbound 47,800 76% 36,130

5 Total Rail Inbound 3,100 50% 1,550

Total Rail Outbound 800 75% 600

Intermodal empties outbound @ 20% 7,226

Phoenix bound transshipment freight* 600

Total 86,800 70,026 *Inbound by piggyback trailer and truckload carrier, cross-docked for LTL delivery to Phoenix area

Table 2: In addition the Consultant utilized Reebie data and the results of that analysis are indicated in Table 2 along with a total number of lifts the Consultant believes will be generated by this new facility.

Table 2 Coconino County Reebie Data Originated Less Truck and Total % Total to Intermodal Rail Freight 2,235,407 571,009 1,664,398 1.5 24,966

Terminated Less Truck and Total % Total to Intermodal Rail Freight 2,273,557 1 ,696,307 577,250 1.5 8,659

Total Table 2 33,625

Totals Tables 1 & 2 103,651

Please refer to the following URL for an excellent overview of a rail facility provided by BNSF: http://www.railprices.com/business/nes/whatis.html

Lift: A lift occurs each time a container and/or trailer is lifted from its point of rest onto a rail conveyance and/or when a unit is lifted from a rail conveyance to a place of rest in the facility.

Lift Cost: The cost per lift is determined as a component of the total facility cost albeit in most rail facilities in the USA a standard cost assessed by the operator has been established at $30-34.00 per lift. It should be noted that the terminal operator selected will set the gate fees (each move through the gate is assessed a charge; usually $10.00 per unit in and $10 per unit out), the lift on/lift off charges, and other accessorial charges such as forklift fees, heavy lift fees, and all other special handling fees. It is important to

6 note that while the revenue for this type of facility is generally an assessment of the gate and lift on/lift off fees that in reality the accessorial fees may usually amount to approximately 50% of the primary fees. Generally these are not included in an assessment of terminal revenue but will be an important part of negotiations with the terminal operator selected.

Cross Dock Facility: Cross-docking is the transfer of goods from one conveyance to another across a dock designed for high speed exchange and without any capacity for storage. In general a cross dock facility would be rectangular and would have a series of doors on either side with a dock high platform equipped with dock plates for unloading/loading. Depending on facility design and volume and operational issues the facility would have ramps for forklift traffic.

A rail facility at either Winslow of Camp Navajo/Bellemont would be designed for the anticipated volume and in stages to accommodate growth. The facility would most likely be 60 feet wide a corresponding number of doors on either side of the facility with rail egress/ingress along one side and truck ingress/egress along the opposite side.

We have included a picture of a typical cross dock facility in Appendix A

Flagstaff Region

The 2004 truckload market is experiencing the tightest capacity in years due to increased business, consolidation of the industry and others going out of business combined with rising costs (drivers, insurance, fuel) and the new hours of service regulations the price gap between intermodal freight movement and truck is narrowing. The long term trend of improving rail intermodal service reliability will accelerate the modal shift to rail.

Regional warehouse strategies continue to grow for the following reasons:

ƒ Major retailers are finding a few distribution centers around the country are not as agile in responding to demand spikes for particular items on a regional basis as distribution centers located closer to the marketplace ƒ Minimization of the risks associated with weather, labor disruptions, tariffs, quotas and terrorist acts ƒ Availability, cost and quality of regional short-haul transportation services ƒ Potential to reduce inbound transportation costs ƒ Complex, product customization center operations and products for a specific regional market

The regional warehouse model allows them to virtually customize their service to any given marketplace.

Small manufacturers have found success in the Phoenix area and we believe Flagstaff will be able to attract these types of businesses with the improved transportation services offered by a truck/rail compatible facility offering intermodal and transloading/cross-dock capabilities. The Flagstaff Region will be very attractive to warehousing, distribution and manufacturing with the

7 creation of the intermodal facility. Reliable rail and highway connections plus the ability to move rush shipments via the Flagstaff airport all add to the economic development package.

The State of Arizona offers an attractive business operating environment highlighted by the following:

Competitive business costs:

ƒ Corporate Income Tax Rate: 6.968% ƒ Real and Personal Property Effective Rate (state median): 3.14% ƒ State Sales Tax Rate: 5.6%-9.0% (state median is 8.3%) ƒ Right to Work State (low union activity) ƒ Low workers compensation rates ƒ No inventory tax

Financial benefits and incentives are available to companies that invest in Arizona:

ƒ Tax credits ƒ Foreign Trade Zones ƒ Enterprise Zones ƒ Empowerment Zones ƒ Job Training Grants ƒ Military Reuse Zones

In competing with other states for the relocation of manufacturing, warehousing and distribution, Arizona compares very favorably in the area of Workers’ Compensation Rates. The California Workers’ Compensation rate is currently 13.5% as opposed to 2.5% in Arizona per $100 dollars of payroll. This coupled with lower land costs and an experienced labor force will become more and more attractive to manufacturers and warehouse and distribution facility operators. The comparison of workers’ compensation costs by state has many uses: as a factor in plant relocation; as an indicator of possible differences in benefit levels; and to examine the changes through time in workers’ compensation premium rates among states. Premium rate indices (per $100 of payroll) range from $1.24 in North Dakota to $5.23 in California. Arizona’s index is $1.63. Two jurisdictions have an index rating above $4; eight are in the $3.00-$3.99 range; 26 are in the $2.00-$2.99 range; and 15 have indices under $2.00. Indices are based on data from 51 jurisdictions, for rates in effect as of January 1, 2002. State comparisons are offered in the following Figure 1 and Table 1.

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The Cost of Doing Business in Arizona

Data on business costs (average for 1998-2000 time periods) shows that Arizona’s costs are virtually identical to the national average, placing it 16th among all states. Arizona leads a closely-knit pack of five western states behind costly California (Figure 1). Colorado’s costs are roughly one half percent below the national average, followed by Washington, Utah and Nevada. Most western states rank in the bottom half. Five are in the lowest quintile. The lowest costs are in Wyoming (50th), where costs are 21% below the national average. Costs in California are 7.2% higher than nationwide, the 9th highest. Business costs are highest in the Northeast United States and lowest in the South.

Data on business costs is taken from an annual report prepared by Economy.com. Information for the costs of labor, energy, taxes and office space are included in the assessment. Weightings used to form the index are 65%, 15%, 10% and 10%, respectively, which reflect the importance of each in explaining long-term employment growth. For states, no office rent data is available, so the weights are 75%, 15% and 10%. The index uses a three-year moving average of each component in an effort to minimize volatility; for this report, data from 1998 to 2000 was used. Some 318 metro areas were included in the analysis. No data for non-metro counties is available. It is best to be rated 318 and Flagstaff comes in a 270.

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Arizona’s labor costs and state and local taxes are both below average, but are offset by high energy costs (13th highest). Arizona ranks 30th on state and local taxes, and is one of the lowest in the west.

Arizona’s “average” score reflects above average costs in both Tucson and Phoenix, while remaining areas of the state are well below average. Both Tucson (2.3% above average and a ranking of 67th) and Phoenix (1.1% and 76th) are saddled with higher costs than nationwide (Figure 2). Compared to other selected western metros, only the high-cost coastal California metros have higher costs than Tucson and Phoenix. Seattle, Denver, Salt Lake City, Las Vegas, Portland, Austin and Albuquerque have lower costs. Flagstaff and Yuma are both well below average – 3.6% and 4.5%, respectively.

When the four components usually considered in this type of analysis, labor, energy, taxes, and office rents are applied to key cities in Arizona the following profile presents itself: Tucson has low labor costs, very high energy costs, average taxes and very low office rents; Phoenix has average labor costs, high energy costs, low taxes, and low rents; Flagstaff and Yuma have high energy costs, average taxes, low rents and low (Flagstaff) or close to average (Yuma) labor costs. With regard to energy costs, both areas are served by Arizona Public Service (headquartered in Phoenix), and the Economy.com index is based on the rates for the metro Phoenix area. Thus, the energy costs in the index may be overstated for Flagstaff and Yuma. Additionally, it should be noted that office rent costs are estimated by Economy.com for both communities based on costs in surrounding metro areas and the applicable US Census region. Due to the wide variation in economic activity in any given region in Arizona, this approach may understate office costs, particularly in Flagstaff.

Since these data are averages over the 1998–2000 periods, recent wild swings in energy prices, particularly during the California energy crisis, are not included. Also missing are recent declines in regulated electric rates among Arizona utilities.

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Potential Jobs Created

Manufacturing Facilities; The addition of manufacturing facilities will add an average of 1 worker per 818 square feet of facility space.

Warehousing/Distribution Facilities; Warehouse and distribution facilities will add an average of 1 worker per 2,167 square feet of space. Should the facility perform operations value- added functions such as packaging, labeling, bar coding, pricing and simple assembly tasks then the number of employees per square foot would increase depending on the number of value added functions performed in the facility.

Rail/Truck Intermodal Facility; An Intermodal Facility can be expected to generate 8 – 13 jobs per gross acre. This does not take into account jobs that will be created by a transloading/cross-dock operation on the facility. This workforce would tend to fluctuate on a daily basis dictated by cargo volumes.

Intermodal Rail vs. Truck Costs; To move a 53’ domestic container/trailer the approximate difference in costs from and to Los Angeles is:

11 Origin/Destination Via Truck Via Rail Percent Reduction in Rate Atlanta, GA $ 3,454 $ 1,725 50 Chicago, IL $ 1,689 $ 1,244 26 Kansas City, MO $ 1,589 $ 1,165 27 Memphis, TN $ 2,974 $ 1,215 59 Newark, NJ $ 2,800 $ 2,365 16 St. Louis, MO $ 3,017 $ 1,189 61

We can expect the same percentages to apply to/from Flagstaff since most rail and truck rates are currently based on the mileage with some destinations enjoying lower rates, i.e. Chicago because there are more carriers available.

Site Analysis for each selected site using the criteria indicated:

The following clearly establishes a comparison of the two finalist sites and the individual site specific evaluations made for all seventeen sites visited are presented in this report and can be evaluated against the site analysis criteria indicated below. The two finalist sites selected by the Consultant and recommended for consideration by the Project Team are Winslow and Bellemont-Camp Navajo and these are analyzed in greater detail below and will be further evaluated in Phase II.

ƒ Winslow:

ƒ It should be noted that the site evaluation for Winslow that immediately follows these background notes is complete with conceptual designs, comments on soils, available acreage, available switching capabilities, at al and these facts address the viability of the site and its acceptability and suitability for this type of an operation. These opinions were offered by our staff who was for 35 years a chief railway engineer with BNSF;

ƒ Both sites offer the Project Sponsor an opportunity to develop a truck/rail compatible facility on either of the two sites being considered;

ƒ Winslow has adequate lodgings nearby;

ƒ Winslow offers some advantages regarding fueling, equipment repairs and maintenance since this is a crew change point for BNSF and there are fueling and maintenance facilities on site;

ƒ Winslow has sufficient acreage available for locating the truck/rail compatible facility on property immediately adjacent to the BNSF mainline;

ƒ Both sites have access to traffic interchanges albeit Winslow may have to add infrastructure due to potential development of Indian gaming and other industries in the area;

12 ƒ It appears that on the west side at Bellemont/Camp Navajo that a new traffic exchange will have to considered and this should be approached during the Phase III Engineering and Design Task;

ƒ When the full engineering and design study is done in Phase III issues such as stable soils and drainage patterns and bridges will be considered and are premature at the this stage of the process;

ƒ The Consultant asked each site to provide a brief statement regarding why their location was the best site-see attached letters (see Appendix B);

ƒ Cost was evaluated in Phase I;

ƒ Funding options for this project and for either of these sites is covered in some detail later in this report under the appropriate task;

ƒ The sites were evaluated based on the following site analysis criteria and only the two finalist sites are shown in this report but data and information was gathered on all 17 sites considered;

ƒ Site Analysis Criteria

ƒ A large piece of property that is flat to reduce grading and site preparation costs and level for safe, efficient railroad operations ƒ Tracks need to be level to eliminate rolling of rail cars ƒ Access to highways and utilities ƒ Stable soils ƒ Drainage patterns/bridges ƒ Rail storage tracks on site ƒ Switch engine to service facility ƒ Offsite storage areas for chassis, trailers and containers ƒ Access to mainline railroad service to minimize time and amount of equipment required to operate the facility

13 Winslow, AZ

BNSF rail yard at Winslow, AZ. Looking southerly at mainlines and locomotive servicing facilities. Winslow is a BNSF mainline train crew change point and all mainline trains stop here.

14

15

An intermodal facility could be constructed on the southwesterly of the BNSF tracks. The proposed facility as shown consists of a 3,600’ storage track with two intermodal loading/unloading tracks with a 105’ wide by 2,200’ long concrete/asphalt pad between the tracks. The facility could be extended 1,000’ to the west if necessary.

The proposed facility is adjacent to a major BNSF rail yard which has switching capabilities, storage tracks, fuel unloading, rail car repair and other tracks to make it a full service rail facility. The rail yard does not have an intermodal facility for unloading/loading truck trailers from rail cars.

The above track chart would indicate that there is space within the confines of the existing yard tracks. The tracks shown are the main run around tracks and there are many service tracks within the yard that are not shown on the schematic map. Some of the roads shown on the highway map are no longer in service.

All proposed construction is adjacent to a rail yard, terrain is relatively flat and ground is silty/sandy/clay. The cost for grading work would be minimal.

A rough estimate of cost for this facility would be $6,180,000 which includes construction of 6 yard turnouts, construct 10,000 LF of track, construct 26,000 SY of concrete loading/unloading pad, engineering and related costs.

With all mainline trains stopping at Winslow, there will be more flexibility to receive and ship rail cars from the proposed facility. Proposed facility is 57 miles east of I-40/I-17 interchange at Flagstaff on I-40. Elevation at the facility is about 4,900 feet.

Regulatory issues:

Zoning maps to be inserted and to be made available by Dave Wessel and Chris Fetzer.

Industrial Properties

The property north of Central Street and before you reach Well Field Road next the railroad tracks is Parcel 103-07-003 and possibly a portion of Parcel 103-09-002H (this property has the new tanks for rail unloading of bulk liquids) and both parcels are zoned I-2 which is industrial and an intermodal site is permissible on this property according to Dave Ashton of the Navajo County Development Services (928-524-4120)

Industrially zoned sites of various sizes for light or heavy industry are available for lease or purchase. Available buildings range from 200,000 to 80,000 sq. ft.

16 Chapter 17.44 Industrial District Sections: 17.44.010 Purpose. 17.44.020 Permitted principal uses. 17.44.030 Property development standards. 17.44.040 Permitted conditional uses. 17.44.010 Purpose. This district is intended to promote light industrial uses which are compatible with all surrounding districts. (Ordinance 736 Article IV. § (A) (8) (a), 1997)

17.44.020 Permitted principal uses. A. Light industrial uses as listed below, and other similar uses, including any kind of scientific research, manufacturing, compounding, assembling, processing, treatment, provided that all uses shall be operated entirely within an enclosed building unless screened from view from any residential or commercial zoning district and/or any public right-of-way by a solid six-foot high screen wall or fence; and dust, fumes, odors, refuse matter, smoke, vapor, noise, lights and vibrations shall be confined to the premises or otherwise controlled in accordance with city, county, state and federal environmental laws; and travel and parking portions of the lot shall be dust proofed; B. Manufacturing and wholesale operations. (Ordinance 736 Art. IV § (A)(8)(b), 1997)

17.44.030 Property development standards. A. Storage areas in industrial zoning districts may use barbed wire provided the barbs are a minimum of seven feet above grade and do not protrude beyond the fence line. B. A six-foot high solid screen wall or fence shall be constructed and maintained along the property lines adjoining a residential zone.

17

ƒ Bellemont-Camp Navajo:

ƒ It should be noted that the site evaluation for Bellemont that immediately follows these background notes is complete with conceptual designs, comments on soils, available acreage, available switching capabilities, at al and these facts address the viability of the site and its acceptability and suitability for this type of an operation. These opinions were offered by our staff who was for 35 years a chief railway engineer with BNSF;

ƒ Both sites offer the Project Sponsor an opportunity to develop a truck/rail compatible facility on either of the two sites being considered;

ƒ Bellemont has adequate lodgings nearby;

ƒ Bellemont may offer some advantages due to proximity to the Flagstaff market and a more central location for regional traffic;

ƒ Bellemont (Camp Navajo) has 815 acres in the “non-splatt zone”, as the management at Camp Navajo refers to it, and that land is immediately adjacent to the BNSF mainline and the I-40. In terms of overall area where economic development might take place as result of the development of this type of facility Bellemont (Camp Navajo) has considerably more land available that is contiguous with the proposed site. Some infrastructural changes will have to be made at Bellemont to allow better ingress/egress for truck traffic;

ƒ Both sites have access to traffic interchanges;

ƒ When the full engineering and design study is done in Phase III issues such as stable soils and drainage patterns and bridges will be considered and are premature at the this stage of the process;

ƒ The Consultant asked each site to provide a brief statement regarding why their location was the best site-see attached letters (see Appendix B);

ƒ Cost was evaluated in Phase I and after further review no substantial differences in the cost of development of either site has evolved and the general costs of development remain similar;

ƒ Funding options for this project and for either of these sites is covered in some detail later in this report under the appropriate task. ƒ The sites were evaluated based on the following site analysis criteria and only the two finalist sites are shown in this report but data and information was gathered on all 17 sites considered;

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ƒ Site Analysis Criteria

ƒ A large piece of property that is flat to reduce grading and site preparation costs and level for safe, efficient railroad operations ƒ Tracks need to be level to eliminate rolling of rail cars ƒ Access to highways and utilities ƒ Stable soils ƒ Drainage patterns/bridges ƒ Rail storage tracks on site ƒ Switch engine to service facility ƒ Offsite storage areas for chassis, trailers and containers ƒ Access to mainline railroad service to minimize time and amount of equipment required to operate the facility

Bellemont (Camp Navajo), AZ

Note the existing Arizona National Guard (ANG) yards tracks in white on the right side of the picture. These tracks are immediately north of the 815 acres that the ANG indicated that they wanted to commercially develop. On the 815 acres there are several warehouses which are being leased out for commercial uses.

19 The BNSF right of way (ROW) is 300 feet wide from ANG ROW to center of East Bound mainline track. The area between the ANG tracks and BNSF mainline is flat and suited for a rail facility.

An intermodal facility could be constructed on the southerly 150’ of the BNSF ROW and leave 100’ between the proposed facility and the BNSF mainlines to allow for BNSF expansion of mainlines or siding or addition of additional tracks to serve the proposed intermodal facility. The proposed facility as shown consists of a 4,800’ storage track with two intermodal loading/unloading tracks with a 105’ wide by 2,200’ long concrete/asphalt pad between the tracks. A stub track with car floor height dock and ramp could be constructed off of ANG tracks for unloading construction equipment, lumber, paper products and etc from flat or box cars. These two facilities coupled with the existing ANG yard tracks and warehouse tracks would accommodate almost all types of rail equipment.

BNSF currently provides rail service for the ANG tracks. The ANG yard tracks are switched by the ANG switch engine and they switch about 200 cars per month. All proposed construction is in an area previously occupied by a rail yard so grading work would be minimal. All additional switches would be placed in the ANG lead track. A rough estimate of cost for this facility would be $6,500,000 which includes construction

20 of 6 yard turnouts, construct 12,000 LF of track, construct 26,000 SY of concrete loading/unloading pad, engineering and related costs. Proposed facility is 10 miles west of I-40/I-17 interchange at Flagstaff on I-40. Elevation at the facility is about 7,200 feet.

Regulatory Issues:

Harry Rising (206-267-2351), who represents Camp Navajo, added that they are currently exploring more liberal terms of operation for Camp Navajo and will keep the Project Sponsors informed.

As anticipated, they have no zoning restrictions inside Camp Navajo.

Zoning maps to be inserted and to be made available by Dave Wessel and Chris Fetzer.

He also added that FAR (Federal Acquisition Regulations) does allow for compensation to commercial users in the unlikely event the military reoccupies the base.

The following is a copy of the House of Representatives bill (H.R. 3824) currently in the Armed Services Committee for review.

To facilitate the operation, maintenance, and capital improvement of Camp Navajo, Arizona, by the Arizona Army National Guard. (Introduced in House)

HR 3824 IH 108th CONGRESS 2d Session H. R. 3824

To facilitate the operation, maintenance, and capital improvement of Camp Navajo, Arizona, by the Arizona Army National Guard.

IN THE HOUSE OF REPRESENTATIVES February 24, 2004 Mr. RENZI introduced the following bill; which was referred to the Committee on Armed Services

A BILL To facilitate the operation, maintenance, and capital improvement of Camp Navajo, Arizona, by the Arizona Army National Guard. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. OPERATION, MAINTENANCE, AND CAPITAL IMPROVEMENT OF CAMP NAVAJO, ARIZONA.

21 (a) Private Sector Use of Camp Navajo- The Secretary of the Army shall enter into an agreement with the State of Arizona, acting by and through the Adjutant General of the Arizona Army National Guard, to amend License No. DACA09-3-82-153 between the Secretary and the State of Arizona, which relates to the use of Camp Navajo, the former Navajo Depot Activity, Arizona, by the Arizona Army National Guard as a year-round training and support installation, to authorize the Arizona Army National Guard to use excess capacity at Camp Navajo to provide services and facilities for a fee to private sector entities. (b) Construction of Facilities- The amendment required by subsection (a) shall authorize the construction of facilities at Camp Navajo by private sector entities, except that appropriated funds may not be used for this purpose, and no private entity shall obtain any ownership rights in any customer-funded facilities. (c) Termination of Contracts- Any contract with a private sector entity entered into pursuant to the amended license shall include a provision providing for the termination of the contract in the event Camp Navajo facilities are needed for national defense purposes. (d) Hold Harmless- Contracts with private entities entered into pursuant to the amended license shall contain provisions holding the United States harmless for any liability that may arise due to the private entity utilizing Camp Navajo facilities and holding the private entity responsible for any environmental cleanup and compliance required by their activities at Camp Navajo. (e) Treatment of Receipts- Revenues generated under contracts with private entities entered into pursuant to the amended license may be deposited in the Camp Navajo fund established by section 26-152 of the Arizona Revised Statutes, but such revenues shall be used only to support the infrastructure and troop programs of the Arizona Army National Guard.

Coconino County Zoning Ordinance

Section 12.0:

Purposes: In addition to the objectives outlined in Section 1 (Purposes and Scope), the Industrial Zones are included in the Zoning Regulations to achieve the following purposes:

a) To provide appropriately located areas for industrial uses and protect these areas from intrusion by dwellings and other inharmonious uses.

b) To protect residential, commercial and nuisance-free, non-hazardous industrial uses from noise, odor, dust, smoke, truck traffic and other objectionable influences and from fire, explosion, radiation and other hazards incidental to certain industrial uses.

22 c) To provide sufficient open space around industrial structures to protect them from hazard and to minimize the impact of industrial plants on nearby residential or commercial zones.

d) To minimize traffic congestion and to avoid the overloading of utilities by restricting the construction of buildings of excessive size in relation to the amount of land around them.

MP-20,000 - Industrial Park Zone: This zone is intended for modern industrial and research developments and administrative facilities that can meet high performance and development standards.

M-1-10,000 - Light Industrial Zone: This zone is intended for light industrial and limited service commercial uses that can meet high performance standards but that frequently do not meet site development standards appropriate to planned research and development of industrial parks.

M-2-6,000 - Heavy Industrial Zone: This zone is intended for heavy industrial uses in those urban areas of the County which are designated for general industrial uses on the

General Plan. Section 12.1: Permitted and Conditional Uses: Industrial Zones

Coconino County Land Use

Industrial

Because most industrial facilities need municipal water, sewer, fire protection, and other services, they are located within cities and towns. As of 2002, areas of heavy industrial zoning and development were located near Winona (76 acres) and on Leupp Road (242 acres) in the Doney Park area. Facilities included a truss manufacturing plant, auto salvage yards, bulk propane storage, a roofing company, and mining activities. A second industrial area, located just west of Flagstaff on Flagstaff Ranch Road (108 acres), features a bottling distribution center and a solid waste company.

Bellemont has a large paper products plant, a cabinet shop, a cultured marble plant, and a printing warehouse. A total of 140 acres are industrially zoned in Bellemont. Considerable additional development is possible at both the Flagstaff Ranch Road and Bellemont locations—preferably warehouse, distribution, and light manufacturing uses that do not require large amounts of water.

Mining has never had a significant economic impact on Coconino County. Mining activity is confined to sandstone quarries north of Ash Fork and to cinder and materials pits throughout the county. However, many mining claims could be reactivated if markets for certain minerals—such as uranium—improve. Most mining activity occurs on state or federal land. On private land, mining is exempt from County zoning.

23 Mining outside the county directly impacts us. Coal mined in Navajo County is transported by train to the Navajo Generating Station in Page and used to produce electricity. It is also transported to the Mohave Generating Station in Laughlin, Nevada, through a coal slurry line that crosses the county. Because of complex legal and political issues surrounding the use of groundwater for transporting slurry, a water pipeline has been proposed from the Colorado River in Marble Canyon to the coal mines.

Goal:

Provide for industrial development that is well-designed and environmentally responsible.

Policies:

Because of the importance of protecting the natural environment, especially air and water quality, only clean industries are appropriate.

The County shall support industrial development projects in areas that are or could be appropriately zoned and where an adequate level of infrastructure exists.

Industrial uses are discouraged along scenic corridors or at community gateways. Site design of commercial uses shall enhance and protect the aesthetic quality of community gateways and scenic corridors.

24

Site development process: listing of steps needed to be taken in Phases II and III to develop site (i.e., land acquisition, zoning/permitting, etc.)

ƒ Completion of Phase II and acceptance of the Final Report and Recommendations; ƒ Decision making by the Project Team, FMPO, City of Flagstaff, and all concerned parties regarding recommendations that will be presented in the Phase II Final Report including but not limited to governance, site selected, et al; ƒ Steps required to develop site: ƒ Establish governance-Consultant has recommended a Port Authority be formed and that the City and/or FMPO maintain a position of authority over this organization. Other forms of governance could be a Joint Venture between the City and the operator and/or investor/developer (this is possible but involves a great deal more man power commitment from the City in order to manage the JV and the risk would be greater), non-involvement by the City beyond issuance of an RFQ for the operator and/or investor/developer (this is not as advisable in the opinion of the Consultant since there may not be enough control and therefore protection of the City’s interests); ƒ Form the Port Authority and develop its charter; ƒ The Port Authority should develop a Shipper Association in support of the project-The Consultant has recommended that a Shipper Association be formed and has provided adequate information in another section of this report. The Shipper Association will be independent and will operate under its own Board of Directors and governance as allowed under the federal guidelines. The shipper base will be developed through the Shipper Association while the operator and/or investor/developer is being selected and governance is being developed. The Shipper Association is not geographically limited nor is it site specific and can therefore be developed quite independently from the site being developed; ƒ Determine which agency will represent the City’s interests on the Port Authority and appoint a designate or designates to the Port Authority; ƒ Conduct negotiations with the site selected regarding governance, project management, funding, and the step process; ƒ Outline the step process, determined after conferring with all concerned parties to the process, and provide open discussions regarding funding, community impact, and the step process—the Consultant would recommend public hearings;

25 ƒ Decide which agency will administer the step process and/or funding and how this will be done; ƒ Dependent on public debate and the City’s own approach to risk, make a determination if the City will develop the funding sources and/or be available to the prospective operator and/or investor/developer to assist with this aspect of the project; ƒ Unless the City and/or the FMPO decides it is going to own and operate this facility then they should issue an RFQ for prospective terminal operators and investors/developers; ƒ Review RFQ responses and select and negotiate with top three candidates; ƒ Select an operator and/or investor/developer and negotiate final terms and conditions including revenue sharing, marketing, and governance: Consultant has recommended a Port Authority be formed with the City and FMPO in the lead so some degree of control can be maintained over the development of the truck/rail facility. The Consultant also has recommended that GFEC be encouraged to provide the marketing for the facility in exchange for a fee from the operator and/or investor/developer. The operator and/or investor/developer will, of course, market this facility so there will have to be an agreement in place regarding market development for the truck/rail facility; ƒ Development of related industries on land adjacent to the selected site will, we assume, be the responsibility of GFEC; ƒ Establish reporting and audit process with operator and/or investor/developer; ƒ Operator and/or investor/developer will handle all details regarding land lease and/or acquisition, zoning and permitting, gate technology, intelligent transportation systems, and multi-modal handling and safety/security techniques, and will also be responsible for all environmental issues including air quality. They will handle all carrier relationships and will set operating standards and procedures and establish fees and tariffs. They will be responsible for ensuring that they conform to the requisites provided by the City’s Planning Department, and all other details regarding the development of the site*; ƒ The Port Authority and all relevant City and County agencies should be prepared to provide any assistance the operator and/or investor/developer requires and that is in the best interests of the agencies involved. These agencies should work with the project developer to ensure they have adequate access to the State Highway Department and any federal agencies in the state that might have bearing on the success of the project.

26 * Inserted in Appendix C are documents necessary to create a Port Authority.

*The following information regarding the latest Technology is provided as background to the Site Analysis and Development:

Intermodal Terminal Technology Analysis

Web Site

The terminal establishes a web site that may be accessed by their customers and the trucking companies. The trucking companies type in a container/trailer number to determine if it is available for pick up, whether it is wheeled or decked, and if any charges are due. The terminal is equipped with cameras along the perimeter, in the truck lanes, in the empty container and trailer parking yard and at the gates so the customer or trucking company can determine on a real time basis what the conditions are at the terminal; if there are long lines or some other form of congestion.

The on-line availability service and the cameras will ensure that the trucking company does not show up with incomplete paperwork or at a time that would cause undue delays.

Gate Complex

The ingress/egress points at the terminal have OCR (Optical Character Recognition) readers and containers and/or trailers must pass through these OCR points when entering and leaving the terminal. The OCR records the truck and/or tractor license number, the container and/or trailer number, and the chassis number.

When the driver arrives at the gate complex he passes his driver’s license through a reader. The gate entry point has a two-way communications device enabling a clerk in an office building and/or tower and the driver to communicate without the driver leaving his truck. The drivers indicate if they are returning an empty or loaded container/trailer, provides the seal number and the booking number in the case of a loaded container/trailer or if the driver is there pick up an empty and/or loaded container trailer they will provide a container/trailer number.

The clerk then processes the information a ticket will be printed out at the pedestal for each transaction. The loaded and/or empty in ticket will contain the date/time, container/trailer number, chassis number and location where the container and/or trailer is to be parked and/or decked in the terminal. The load and/or empty out ticket will contain the date/time, container/trailer number location and yard location stating whether or not the container is on wheels. If not on wheels the driver will obtain a chassis and then proceed to the decked container rows to have the container loaded onto the chassis.

The validated ticket for the outbound container/trailer will not be issued if there are any discrepancies in the U.S. Customs entry release, a hold by another government agency, a hold by the steamship line or railroad, or for non-payment of charges. This allows some

27 time for the truck company dispatcher, steamship line, or railroad, and the terminal company to investigate the problem and to try and resolve it while the trucker is delivering the loaded or empty container/trailer.

Once the driver has delivered the inbound load or empty to the proper location, they will proceed to the outbound transaction area or exit the facility. The driver with the outbound container/trailer will then proceed to the out gate and if the date/time, container/trailer number, chassis number, and truck license plate numbers match and the ticket is validated, the driver will proceed to the guarded security gate. The driver will hand the guard the validated ticket. The guard will then take a thumbprint and a Polaroid picture of the driver’s face.

The current technology has an accuracy rate at the out gate of 85%. That means 85% of the drivers that put their ticket in the pedestal going towards the security guard gate pass through unimpeded and the remaining 15% have one of several problems:

• The license, chassis, container or trailer numbers cannot be read completely by the OCR scanner; • The chassis does not match the ownership of the container; • There is a discrepancy with the paperwork.

The implementation of the in and out gate OCR’s and the single stage pre-gate (pedestal) have enabled the terminal operator to increase productivity per clerk daily from 150 moves to over 500 moves.

The computer receiving the information from the OCR’s and pedestals also monitors the number of trucks in each row and holds further trucks from entering the yard past the pedestal until such time as the row is clear enough to handle the trucks safely and efficiently.

Rubber Tired Gantry (RTG) Receipt and Delivery

Rubber Tired Gantrys work in rows of decked containers that are 6 containers wide and 3 high. To receive an outbound loaded container the trucking company is instructed on the validated ticket where the container and/or trailer is to be placed in the terminal. Each RTG is equipped with a GPS (Global Positioning Satellite) and as soon as the RTG is positioned over the truck and container a computer screen in the RTG cab lights up indicating where the crane operator is to place that particular container.

Once the crane lifts the container off the chassis, the driver exits the row and drops the chassis in the spot designated on the validated tag. If the driver is going to pick up a container from the same steamship line or railroad, he/she will keep the chassis hooked up and proceed to the location on the out gate ticket to pick up the next empty or load.

The RTG operates the same way for a loaded container being delivered to a truck as it does when receiving a container. As the RTG is positioned over the truck the screen

28 lights up with a yellow square with the number 1 in it to indicate which container goes on that truck. If there is another truck in line to get a container out of the same row, the square with a number 2 will light up so the crane operator knows they have one more container to deliver from that row before moving onto the next row.

This system has enabled the terminal operator to increase productivity of the RTG’s from 50 deliveries/receipts per day with a 4 person crew to 85 deliveries/receipts per day with a 3 person crew. Each RTG has two crane operators (2 hours on-2 hours off) and used to have a signal man and a clerk but due to the GPS system the clerk is no longer required to ensure the correct container number is being picked up and delivered.

The entire terminal is laid out via a RTLS (Real Time Location System) using X and Y axis and telemetry giving the terminal operator a complete inventory by container/trailer/chassis number and location for the entire terminal avoiding the old practice of having to walk or drive into the yard to locate a particular unit.

This system is installed not only on the RTG’s but also any yard trucks, side handlers and top handlers. The sensors actually marry a container to a yard tractor when the terminal is setting containers on chassis for delivery the next day and when the tractor parks the container on chassis and unlocks the fifth wheel the sensors divorce the container/chassis from the yard tractor and then reports the yard location using the RTLS system.

This same system will provide a load plan for the train as each container/trailer is loaded on board. This load plan will include the date/time, container/trailer number, railcar number and destination.

Security

Utilizing the cameras, OCR and RTLS systems, GPS sensors and the thumb print/picture technology described above makes it very difficult to steal a container/trailer and/or break into the facility. The cameras and the lighting system have motion sensors so if someone were to try to enter a locked yard at night it would light up like it is daytime and all movements would be recorded on the cameras. The cameras transmit the images to a central computer in the office building which also prevents the thief for just disabling the cameras or blocking their view.

29 Data Collection and Analysis

As required by the TOR, Don Breazeale and Associates, Inc. conducted 230 interviews and incorporated the data and information gathered in these interviews, without violating the confidentiality of the companies and entities interviewed, into Table one that below. The consultant also analyzed goods movement data from the U.S. Department of Transportation, Federal Highway Administration (Freight Analysis Framework) and truck movements to/from Coconino County purchased from Reebie Associates and these findings are also included in Table 2 below. The consultant used current industry standards to effectively analyze and extrapolate the data both from the interviews and Reebie (Reebie data was sorted by commodity so we were able to identify only those commodities easily converted from truck to intermodal movement). Issues such as the fact that there is an imbalance of trade between imports and exports to/from the state of Arizona that causes an excess of empties to be included in the data were taken into account. The consultants approach to data collection and to projections was conservative.

The Phoenix destined freight projected will result from diversions from the small and medium size truckload carriers with origin/destination in California, Mid-West and the East Coast and transiting Northern Arizona going to/from California, the Mid-West and points East. Currently these truckers will not take Phoenix bound freight from their regular customers because of the time factor involved in diverting the truck from Interstate 40 to Phoenix. This is especially true with the new Federal hours of service rules which went into effect in January, 2004. Under the current plan for the new facility there will be a cross-dock/transloading facility and a trucker wishing to discharge Phoenix freight and/or pick up Phoenix freight destined for other locations can cross dock that freight in Flagstaff and another less than truckload carrier can complete the local delivery in the Phoenix area or elsewhere in the state. DBA does not have specific data on the volumes of freight that may be generated by the trucking companies transiting the Flagstaff region via the I-40 other than the data generated by Reebie and reflected elsewhere in this report. Truckers interviewed indicated this market existed and provided the Consultants with rough estimates of the volume. The Consultants reduced these estimates to the levels that are indicated and believe these to be reliable. To generate this traffic would require a marketing effort and would involve advertising the operation on the internet sites that independent truckers visit to find loads available and the truck brokers that have cargo they want to match with other freight. The major truckload and less-than-truckload (LTL) carriers already have direct operations to/from Phoenix so DBA does not consider them as prospects.

Based on these figures, the total annual lifts for the Northern Arizona Regional Freight Facility is 70,026; lifts are defined for purposes of this study to be units.

30 Table 1 Potential Intermodal Diversions

Total Market Anticipated Market Total Intermodal Penetration Market

Total Trucks Inbound 35,100 68% 23,920

Total Trucks Outbound 47,800 76% 36,130

Total Rail Inbound 3,100 50% 1,550

Total Rail Outbound 800 75% 600

Intermodal empties outbound @ 20% 7,226

Phoenix bound transshipment freight* 600

Total 86,800 70,026 *Inbound by piggyback trailer and truckload carrier, cross-docked for LTL delivery to Phoenix area

There is no duplication of data in either of these tables. The data above is based on the 230 interviews DBA conducted with current and potential users of the intermodal facility. Please refer to the Interview Form attached in Appendix D. DBA did not include bulk cargoes or commodities moving to/from the region within a 400 mile circle. The 400- mile parameter is an industry accepted standard where it is generally agreed that trucking is less expensive than intermodal. In DBA’s estimation the percentage of market penetration indicated, while high, is attainable since all of the extraneous data has been removed and what remains is strictly freight that will be converted to intermodal.

Table 2 Coconino County Reebie Data Originated Less Truck and Total % Total to Intermodal Rail Freight 2,235,407 571,009 1,664,398 1.5 24,966

Terminated Less Truck and Total % Total to Intermodal Rail Freight 2,273,557 1 ,696,307 577,250 1.5 8,659

Total Table 2 33,625

Totals Tables 1 & 2 103,651

The numbers in Table 2 have been reduced by the 86,800 units indicated in Table 1 eliminating any duplication. The more significant numbers indicated under “originated and terminated” represent the total number of truck movements based on Reebie data collected for one year for Coconino County. The data in the second column reflects the adjustment for current intermodal, truck and rail traffic. The percentage of market

31 penetration reflected is very conservative at 1.5% since in most cases an allowable standard for market penetration might be between 5-7 %. The Consultant therefore believes that the total volume of truck and rail diversions to intermodal is attainable and that a good marketing program will allow even greater market penetration.

The numbers in Tables 1 and 2 have not been rounded off since the Consultant wishes to demonstrate the exactness of the data. .

32 Trends Analysis

Executive Summary

The Consultant believes that the Executive Summary and the individual sections of this report offers a rather thorough analysis of all the issues and information required in this study. The Consultant believes that the trade and transportation system in the United States is fragile and requires that a systemic approach to problem solving be instituted in order to correct existing problems that are preventing the goods movement system from functioning properly. In point of fact the Consultant believes that the USA needs a National Freight-Goods Movement Plan. The Consultant also believes that recurring problems along the two principal coasts of the USA are both systemic and infrastructural and will not be easily solved in the next 5-10 years. Interior land ports must be developed to bolster the coastal facilities and current distribution patterns will have to be re- strategized to allow for innovative decision making regarding points of entry, onward delivery, and better and more efficient distribution patterns. Our overall import/export trade is growing at an accelerated pace and the components of the goods movement system have not kept pace with the explosive nature of our trade. Consider for instance that the Ports of Los Angeles and Long Beach alone received 11.8 million, Twenty Foot Equivalent Units (TEU) in 2003 which equated to approximately $278 billion in waterborne trade out of a total of approximately $700 billion in waterborne trade for all of the USA and that this trade and volume number are expected to grow four fold times by 2020. The infrastructure and the system has and is failing now to handle the current volume and this does not even consider the overall growth of the trade with our two nearest NAFTA partners who still represent one third of the total trade with the USA. Coupled with the growth of domestic traffic the continued stress on the goods movement system will continue. This will continue to cause the goods movement industry to examine and consider alternative sites that provide the path of least resistance, where labor is available and less costly, where land is available, and where growth can be controlled.

As the world’s largest trading nation, the United States imports and exports more merchandise than any other country. This report provides a broad overview of changes in U.S. international merchandise trade since 1990 and how transportation modes and services enable this trade, which is a vital part of the U.S. economy.

From 1990 to 2001, U.S. gross domestic product (GDP), overall merchandise trade, and the merchandise trade deficit all experienced substantial growth, although at varying rates. The relative importance of export and import merchandise trade to the U.S. economy also increased during this period. Between 1990 and 2001, the ratio of the value of merchandise trade to GDP rose from 13 to 22 percent in inflation-adjusted terms. Furthermore, U.S. merchandise exports compared to the production of tradable goods has risen, meaning goods exports have become more important to domestic production despite the decline in manufacturing’s share of GDP.

33 U.S. merchandise trade was down 6.2 percent in 2001, with most of the decline taking place after the terrorist attacks in September, 2001. Compared with the same period in 2000, the value of overall U.S. merchandise trade dropped 1.7 percent from January through August 2001, but dropped 14.7 percent between September and December. While all modes were affected by September 11, air cargo saw the largest decline in freight activity (13 percent by value), followed by trucking (8 percent), maritime (3 percent), and rail (2 percent). Pipeline activity increased by 12 percent.

In the aftermath of the attacks, transportation security concerns have focused on the vulnerability of the U.S. transportation system. Because large volumes of trade merchandise from all over the world enter the United States daily on ships and airplanes, and on trucks and trains from Canada and Mexico, transportation security has become a top priority with growing attention focused on international import traffic. For example, in 2001, about 19 million containers were used to transport imports into the United States, 6 million by ocean vessel and 13 million by truck and rail from Canada and Mexico. The attacks changed how government and industry view cargo security and both are seeking ways to enhance security for traded goods from their foreign points of origin to final destinations within the United States.

Arizona and Northern Arizona and their trade and transportation data is dealt with in some detail at the end of this document. Commodities, volume of each and value, total transportation and other issues pertinent to Arizona are dealt with in that section of the report.

Shifts in Major Trading Partners: The United States trades with nearly 200 countries worldwide. In 2001, 15 countries alone accounted for 77 percent of the value of merchandise trade. One-third of this trade was with Canada and Mexico, our partners in the North American Free Trade Agreement (NAFTA). Due to strong growth in NAFTA and Asian Pacific trade, relative to that with Europe, the share of trade passing through border crossings and freight corridors with Canada and Mexico and with West Coast ports has increased, as has related container and intermodal traffic.

Modal Trends: Over 1.6 billion tons of international merchandise moved to and from the United States in 2001, accounting for 10 percent of the 16 billion tons of freight moved on the nation’s transportation system. Even though maritime transportation is the predominant mode for moving U.S. international freight (whether measured by weight or value), freight transported by other modes, notably air and truck, has grown faster. While air cargo accounts for less than 1 percent of U.S. merchandise trade tonnage, it accounts for over one-quarter of the value of the trade. The number of truck crossings into the United States from Canada and Mexico grew at an average annual rate of 5 percent per year since NAFTA’s inception in 1994 and is expected to continue to climb, especially between Mexico and the United States once all NAFTA trucking provisions are fully implemented. Security concerns and demands now affect all modal transportation networks and the ports and border crossings serving U.S. international freight flows.

34 Air freight is usually high value, light weight cargo. The use of air freight is primarily to satisfy a customer’s immediate need, for sample shipments, or to keep a production line going. As the Flagstaff region develops more manufacturing and warehousing/distribution there will be a demand for additional air freight capacity but the current airport will be able to handle it. The carriers will approach the City for landing rights, etc. as soon as there is a demand for the service..

Trends in Major Commodities: Since at least 1980, manufactured goods’ share of the value of U.S. merchandise trade has increased, affecting the growth in containerization and the demand for intermodal transportation. Although the United States continues to produce, export, and import vast quantities of natural resources, such as coal and petroleum products, and raw materials, such as lumber, these goods’ share of the value of trade declined as the commodity mix of U.S. international trade changed. Growth in higher-value manufactured goods was a major reason for the rise in air cargo and emergence of U.S. airports as world leaders in handling this cargo. Also, U.S. trade in transportation-related goods (motor vehicles, aircraft, rail locomotives, and ships and boats) nearly doubled between 1990 and 2001. A $24 billion surplus in aircraft and parts trade was the single highest surplus of any commodity in U.S. international trade in 2001. Changes in the commodity mix of U.S. trade and our major trading partners affect transportation choices and the border and port facilities that handle the trade.

Changes in commodity flows will not, in the main, affect the Flagstaff facility. However, the Project Sponsors will want to carefully consider what types of manufacturers and users they want to attract to the facility.

Transportation Services Trade: U.S. international trade in freight transportation and airport and seaport services generates substantial revenues for U.S. carriers and ports. Freight and port services facilitate domestic and international movement of freight and are essential to U.S. global competitiveness. Between 1990 and 2001, the United States maintained a trade surplus in airport and seaport services as the volume of merchandise imports and the payments by foreign carriers for using U.S. ports rose. However, the United States had a deficit in freight services. This deficit grew in large part because of the sustained growth of the U.S. economy that spurred demand for imported merchandise transported by foreign carriers. The freight services deficit contrasts with the surplus in overall U.S. services trade. Air carriers accounted for most of the receipts for exports of U.S. freight services, overtaking ocean carriers in 1997.

Factors of Change and Continuity: Many factors have influenced the pace of expansion in U.S. international merchandise and transportation services trade, including growth and changes in the U.S. population and economy, increased internationalization of the U.S. economy, advances in transportation and telecommunications technology, easing of regulatory structures in international transportation markets, and reduction of trade barriers. Shifts in the composition of the U.S. economy toward more services, increased dependence on imports for manufactured products, and changes in major trading partners likely will continue to affect goods movements within the United States for many years to come. While the pace of trade with Canada and Mexico will affect the relative roles of

35 trucking and rail, growth trends in trade with Pacific Rim nations will impact U.S. containerized cargo throughput and intermodal traffic. Also, trends in U.S. direct investment abroad and foreign direct investment into the United States will continue to complement the movement of merchandise trade and affect U.S. transportation services carriers.

Trade Growth and Concerns: With the growth in U.S. international merchandise trade, the condition and performance of the nation’s freight transportation infrastructure, such as local access roads at ports, at-grade rail crossings, dredging and channel depths, and availability of truck-only lanes for port access, will continue to be an important transportation concern. Landside access to U.S. ports, congestion on highways around major gateways, delays at border crossings, and environmental and community concerns may also continue to affect the movement of merchandise from, to, and within the United States. Government and industry efforts to enhance transportation security while ensuring the efficient flow of goods are likely to affect freight throughput at the major U.S. gateways, although the full impacts of the security measures remain uncertain.

Security is the number one issue in cargo movement at present and for the foreseeable future. An intermodal facility with state-of-the-art tracking capabilities, high security, Homeland Security (U.S. Customs) presence and a Foreign Trade Zone will provide a marketing opportunity for the Project Sponsors. As an example, the major retailers (importers) belong to a program called C-TPAT that requires them to guarantee the security of their cargo and its containers from the factory to the retail store.

The Consultant has concluded that expanding world trade and the resulting volumes have created a need for increased truck/rail compatible facilities. This type of facility will allow for a reduction and/or control of transportation related costs. The supporting data and analysis and the global increase in world trade and subsequent rise in freight traffic supports the fact that a truck/rail compatible facility in the Flagstaff Region will be attractive to companies wanting to relocate to the area and will enhance the ability of existing companies in the Region to expand their business and reduce costs.

Background

Americans are buying more imported merchandise than ever before, and more of the goods produced in U.S. factories are bound for export. Much of the imported merchandise is transported in containers from far-flung corners of the world, raising the need for heightened cargo security measures from the foreign points of origin to the final destinations in the United States. In 2001, the U.S. transportation system carried merchandise exports worth $731 billion and merchandise imports valued at $1.1 trillion (in current dollars). Transporting this merchandise requires a significant amount of equipment. For example, in 2001, there were over 936,000 aircraft, 215,000 maritime vessels, and 19 million vessel, truck, and rail container entries into the United States.1 From a national security perspective, the large amount of transportation equipment involved in U.S. international trade highlights the possible threat of using freight vessels and vehicles for terrorist activity. This vulnerability underscores the importance of

36 national measures aimed at improving security while maintaining quick and efficient freight flows.

In the aftermath of the September 11, 2001, terrorist attacks on the United States, improving security and maintaining an efficient flow of goods have become key transportation and international trade issues. Immediately following the attacks, the U.S. economy and international transportation networks were affected as merchandise imports and exports temporarily declined and the volume of freight passing through the nation’s airports, seaports, and land borders slowed. In the attacks’ aftermath, cargo security and handling have received increased attention, with government and industry seeking enhancements in this area. A key component of this effort is expanded information on traded goods and crews, such as advance and near real-time data.

This report provides an overview of U.S. international merchandise trade, reviews changes in trading patterns and modal trends, and examines shifts in the patterns of freight demand among U.S. international freight gateways.2 It also examines U.S. freight transportation and port services and their important role in facilitating U.S. international merchandise trade.

The report further analyzes the critical role freight transportation continues to play in enabling international trade and discusses capacity and access challenges that growth in international freight pose to the U.S. freight transportation system. It also looks at some of the new security challenges facing the U.S. freight transportation system as the nation implements transportation security measures following the 2001 terrorist attacks. The report concludes with a discussion of some of the major underlying factors that are driving change and continuity in U.S. international merchandise trade and the possible effects of trade growth on the nation’s transportation networks.

Although total U.S. international trade, including trade of goods and services, rose throughout the 1990s, levels fell in 2001. U.S. merchandise trade, the primary focus of this report, accounted for more than three-quarters of total U.S. international trade in 2001.3

From 1990 to 2000, the United States experienced strong growth in merchandise trade and economic output. During this period, the expanding U.S. economy favorably affected U.S. international merchandise trade, which grew at an average annual rate of 9.3 percent, about three times the rate of the nation’s economy in inflation-adjusted terms. Between 2000 and 2001, however, real GDP grew by 1.2 percent while total merchandise trade declined by 3.9 percent.4

Since 1990, freight transportation and port services used in moving the traded goods have also increased. Between 1990 and 2001, U.S. exports (receipts) and imports (payments) for freight services grew at an average annual rate of 5.3 percent, while port services grew at 4.2 percent per year (USDOC BEA 2003) based on current dollars. During this period, the United States remained the world’s largest exporter of transportation services,

37 maintaining its share of the global export of these services at about 16 percent (IMF 2001).

The U.S. freight transportation system has been shaped by the increase in and changing demands of international trade. Major U.S. seaports have grown in importance, reflecting, in part, the use of large container vessels to ship goods between ports in Europe, the Pacific Rim, and the United States. Increased containerization and other developments by the nation’s freight railroads have contributed to the continued expansion in intermodal transportation. Growth in international air freight has contributed to the emergence of U.S. cargo airports as global leaders in this industry. Expanded trade between the United States and its top two trading partners, Canada and Mexico, has increased the importance of north-south surface freight corridors relative to the traditional east-west movement of international trade.

This expansion in trade has been accompanied by changes in how freight moves. It has raised concerns about potential capacity bottlenecks at major freight gateways, for example, landside access to and from seaports and traffic congestion that can cause delays and impact the cost-effective delivery of goods. Since many of the nation’s major ports are located primarily in metropolitan areas, delays and congestion sometimes occur as port-related truck and rail traffic flow into local passenger traffic. Furthermore, the effects of trade-related transportation on the quality of life in communities near or adjacent to major gateways and corridors are a concern. After September 11, security issues have come to the forefront and heightened cargo-handling procedures are being implemented at all of the nation’s ports of entry, but their long-term implications for throughput are not yet known.

Footnotes 1 U.S. Department of Transportation, Bureau of Transportation Statistics; based on U.S. Department of the Treasury (2002). 2 This report generally examines merchandise trade trends from 1990 to 2001. Unless otherwise stated, references to U.S. trade and trade balances represent U.S. merchandise trade only. 3 Total U.S. international trade includes both merchandise and services trade. 4 In current dollars, GDP grew by 3.4 percent and U.S. merchandise trade declined by 6.2 percent (USDOC BEA 2002a).

Overall Trends in U.S. International Merchandise Trade

The United States is the world’s largest merchandise-trading nation,5 accounting for 12 percent of world merchandise exports and about 19 percent of world merchandise imports in 20006 (table 1). From 1990 to 2001, the value of U.S. international merchandise trade more than doubled (in inflation-adjusted dollars), from $891 billion to over $2 trillion (table 2, p. 10). During this period, the value of U.S. merchandise trade grew at an average annual rate of 8 percent, while growth in U.S. real gross domestic product (GDP) averaged 3 percent per year.

U.S. merchandise exports accounted for 38 percent of traded goods in 2001, compared with 44 percent in 1990. Imports grew to 62 percent of traded goods in 2001. The different growth rates for imports and exports resulted in a sharp rise in the U.S. merchandise trade deficit (figure 1). In just over a decade, the U.S. merchandise trade

38 deficit more than quadrupled from $105 billion to $490 billion (in inflation-adjusted dollars). Despite this large increase, the deficit rose at a slower rate in 2001 when compared with 2000, as both exports and imports fell (table 2). Throughout most of the 1990s, strong growth of the U.S. economy spurred the rise in imports and increased the merchandise trade deficit. Rising household wealth and income in the United States and strong consumer demand are some of the key factors that continue to contribute to the increase in merchandise imports. Growth in trade, whether imports or exports, results in higher levels of international freight movement and the demand for expanded freight transportation services.

In 2001, the value of total U.S. international merchandise trade declined nearly 4 percent from the record $2.2 trillion reached in 2000 (in inflation-adjusted terms), the largest annual decrease since 19907 (figure 2). In 2000, both trade and GDP grew at high positive rates. The decline in 2001 was due, in part, to the weakness of global economic activity and the effect of the September 11 terrorist attacks. Exports were particularly affected, falling by 6 percent in 2001, while imports fell 3 percent.8 Between 1990 and 2001, merchandise trade saw greater year-to-year fluctuations than U.S. GDP due to its dependence on global economic activity.

Importance of Merchandise Trade to the U.S. Economy

Despite the 2001 decline in trade, the relative importance of international merchandise trade to the overall U.S. economy has increased during the past three decades. Not only did the growth rate in trade continue to exceed the growth rate in the overall U.S. economy (figure 3), but the ratio of international goods trade in comparison to GDP also rose. By 2001, U.S. international merchandise trade (both exports and imports) was more than 20 times greater than in 1970, while total U.S. economic output was about 10 times greater (in current dollars).9 The ratio of the value of U.S. merchandise trade to GDP reached 22 percent in 2001, a sizeable jump from 13 percent in 1990 (both in inflation- adjusted terms).

Although it is instructive to compare the ratio of international merchandise trade to overall GDP, this ratio understates the importance of international goods trade because overall GDP is derived from both goods and services. The ratio of merchandise trade to goods GDP is, therefore, more comparable than the ratio to overall GDP. Compared with three decades ago, international merchandise trade today has risen in relation to goods GDP (the proportion of GDP produced by the goods sectors). Of the primary GDP sectors, only agriculture, mining, and manufacturing are significant producers of goods that are traded internationally (figure 4). The construction sector produces goods (e.g., highways, bridges, and buildings) that are not traded internationally and are excluded from merchandise trade statistics.

The ratio of goods exports to goods GDP was 43 percent in 2000, up from 15 percent in 1970.10 This suggests a rapid surge in merchandise exports compared to domestic goods production, a surge also evident in inflation-adjusted data available from 1987 to 2000. By contrast, a relatively modest change is seen when comparing goods exports to overall

39 GDP (figure 5). Examining trends in the major commodities also confirms the increasing importance of exports to the goods-producing sectors of the U.S. economy.

With international trade growing so rapidly, planning and deployment of multimodal freight transportation systems and services to effectively move the resulting cargo have become key areas to address. The development and maintenance of intermodal connectors is a particularly critical consideration, since such connections are often the weakest links in the nation’s multimodal transportation networks (USDOT MARAD 2002b, p. 3-5; USDOT FHWA 2000, p. 33).11

Footnotes 5 This report primarily analyzes trends in U.S. international merchandise trade in terms of value, because aggregate trade data for both exports and imports by weight are not available for all modes of transportation. It is possible, when prices change significantly, for the value of trade to change at a rate different from the quantity or volume of trade. Where possible, this report uses reported data or estimates of aggregate weight by mode of transportation to show changes in trade volumes. 6 The United States is also the largest services trading nation, accounting for about 20 percent of total private service exports (WTO 2001). 7 Data on inflation-adjusted exports and imports of goods are only available from 1987 and the 4 percent annual decrease is the largest recorded decline since then. The only other decline was a less than 1 percent decline in imports in 1991 that followed the U.S. economic recession in that year but was offset by a 7 percent growth in U.S. merchandise exports. 8 Export of transportation services also declined during 2001. See section on U.S. services trade. 9 A similar comparison in inflation-adjusted terms is possible only for 1987 to 2001, because data on total merchandise trade, adjusted for inflation in chained dollars, are unavailable prior to 1987. For the comparable data in real terms, see Statistical Appendix table C- 3, p. 117. 10 Export figures represent the value of the traded commodity. In contrast, goods GDP figures for agriculture, mining, and manufacturing represent the value-added by production of goods of these sectors to the U.S. economy. Therefore, it would be inaccurate to say that over 40 percent of U.S. merchandise production was exported in 2001 (Bordo et al. 1999). 11 Intermodal connectors are often local, county, or city streets and remain one of the key areas where improvements are needed in the intermodal transportation system (USDOT MARAD 2002b, p. 3-5; USDOT FHWA 2000, p. 33).

Table 1 Top 10 Leading Exporters and Importers in World Merchandise Trade: 2000

(Billions of current U.S. dollars)

Rank in 2000 Exporters Value Percent 1 United States 781 12.3 2 Germany 552 8.7 3 Japan 479 7.5 4 France 298 4.7 5 United Kingdom 284 4.5 6 Canada 277 4.3 7 China 249 3.9 8 Italy 238 3.7 9 Netherlands 213 3.3 10 Hong Kong 202 3.2

40 Total, top 10 countries 3,573 56.1 Total, all countries1 6,364 100.0

Rank in 2000 Importers Value Percent 1 United States 1,258 18.9 2 Germany 503 7.5 3 Japan 380 5.7 4 United Kingdom 337 5.1 5 France 305 4.6 6 Canada 245 3.7 7 Italy 236 3.5 8 China 225 3.4 9 Hong Kong 214 3.2 10 Netherlands 198 3.0 Total, top 10 countries 3,901 58.5 Total, all countries1 6,669 100.0 1 Includes significant re-exports or imports for re-export. Source: U.S. Department of Transportation, Bureau of Transportation Statistics; based on data from the World Trade Organization, "Table 1.5: Leading Exporters and Importers in World Merchandise Trade, 2000," International Trade Statistics 2001, available at http://www.wto.org/english/res_e/statis_e/its2001_e/section1/i05.xls, as of June 11, 2002.

Table 2 U.S. International Merchandise Trade and Gross Domestic Product: 1990-2001

(Billions of chained 1996 dollars)

Export Import share of share of Total Balance Real total total Year merchandise Exports Imports (exports- GDP1 merchandise merchandise trade imports) trade trade (percent) (percent) 1990 6,708 891 393 498 -105 44.1 55.9 1991 6,676 919 421 498 -77 45.8 54.2 1992 6,880 994 450 544 -94 45.3 54.7 1993 7,063 1,062 463 598 -135 43.6 56.4

41 1994 7,348 1,186 508 678 -170 42.8 57.2 1995 7,544 1,308 569 739 -170 43.5 56.5 1996 7,813 1,427 618 808 -190 43.3 56.7 1997 8,160 1,631 708 923 -215 43.4 56.6 1998 8,509 1,754 723 1,031 -309 41.2 58.8 1999 8,857 1,911 751 1,159 -408 39.3 60.7 2000 9,224 2,152 836 1,316 -480 38.9 61.1 2001 9,334 2,068 789 1,279 -490 38.2 61.8 Percentage change, 39.1 132.0 100.6 156.8 1990-2001 Annual growth 3.0 8.0 6.5 9.0 rate (percent) 1 To compare economic changes over time, current or nominal values of currencies must be deflated or adjusted for inflation. In the United States, the Bureau of Economic Analysis (BEA) establishes indices to calculate changes between years. These are used to calculate real chained dollars. Annual changes in the indices are chained (multiplied) together to form a time series. Chained dollars, instead of merely reflecting inflation, capture the effect of relative changes in prices and in the composition of output. They also better reflect cyclical fluctuations in the economy. Chained 1996 dollars are the most currently available indices from BEA for adjusting for inflation. Key: GDP = gross domestic product. Note: Data reflect revisions through February 2002 and are based on the National Income and Products Accounts (NIPA) basis. The NIPA basis reflects adjustments for statistical differences and coverage to the Balance of Payments basis. Source: U.S. Department of Transportation, Bureau of Transportation Statistics; based on data from U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Products Accounts, available at http://www.bea.doc.gov/bea/dn1.htm, as of Aug. 1, 2002.

42 Figure 1 Value of U.S. International Merchandise Trade: 1990-2001

(Billions of chained 1996 $)

Source: U.S. Department of Transportation, Bureau of Transportation Statistics, based on data from the U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Products Accounts, available at http://www.bea.doc.gov/bea/dn1.htm, as of March 2002.

43 Figure 2 U.S. International Merchandise Trade and Real GDP: 1990-2001 (Percentage change from previous year)

Note: Real gross domestic product (GDP) and total merchandise trade are in chained 1996 inflation-adjusted dollars.

Source: U.S. Department of Transportation, Bureau of Transportation Statistics, based on data from U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Products Accounts, available at http://www.bea.doc.gov/bea/dn1.htm, as of March 2002.

44

Figure 3 U.S. International Merchandise Trade and Gross Domestic Product: 1970- 2001 (Indexed 1970=100)

(Indexed 1987=100)

Note: This figure shows current dollars because data on total merchandise trade that are adjusted for inflation in chained dollars are only available starting from 1987.NOTE: 1987 is the earliest year for which the U.S. Department of Commerce, Bureau of Economic Analysis reports total merchandise trade figures that are adjusted for inflation in chained 1996 dollars. Source: U.S. Department of Transportation, Bureau of Transportation Statistics, based on data from U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Products Account (NIPA), available at http://www.bea.doc.gov/bea/dn1.htm, as of August 2002.

45

Figure 4 Gross Domestic Product (GDP) by Sector

Source: U.S. Department of Transportation, Bureau of Transportation Statistics, Office of Transportation Analysis, May 2002.

46 Figure 5 Merchandise Export Trade and Goods Production in the U.S. Economy: 1970-2000

Note: Goods production refers to the agriculture, mining, and manufacturing sectors based on the 1987 Standard Industrial Classification

Source: U.S. Department of Transportation, Bureau of Transportation Statistics, based on data from U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Products Account (NIPA) basis, revisions through August 2001, available at http://www.bea.doc.gov/bea/dn1.htm, as of August 2002

47

Shifts in Major Trading Partners

The overwhelming majority of U.S. merchandise trade is with relatively few countries, although the United States trades with nearly 200 countries worldwide.12 In 2001, over three-quarters (77 percent) of the value of U.S. merchandise trade was with 15 countries. Just five countries, Canada, Mexico, Japan, China, and Germany, accounted for over half (54 percent) of the value of U.S. international trade. Great opportunities under NAFTA exist now and will be enhanced by the creation of this freight facility. Nearly one-third of U.S. merchandise trade was with Canada and Mexico, the U.S.-NAFTA trade partners. Canada, the top U.S. trading partner for decades, remained the leading country and accounted for over one-fifth ($381 billion) of U.S. merchandise trade in 2001. The relatively high concentration of U.S. trade with a few major trading partners, and the geographic spread of the remaining trade among the other countries, influences the modes of transportation used in moving international freight to and from the United States. The proximity of Canada and Mexico to the United States allows surface modes (trucks, rail, and pipeline) to be the primary modes of transportation for NAFTA trade. For all the other U.S. trading partners, maritime vessels and air transportation are, by necessity, the modes used.

The abolition of all duties and tariffs is scheduled to occur by the end of 2004 under NAFTA. There are still a number of issues to be resolved, the major one being allowing Mexican truckers unlimited access to the United States. At present the Mexican trucks are only allowed to move within a 20-mile band of the U.S./Mexico border. The Consultant believes that freight flows indicated on the FAF map along US 89 to I-15 in Utah may have decreased due to increased trade with China. CANAMEX when implemented will allow the State and the Flagstaff Region to participate in the NAFTA based trade more completely and the freight facility will increase the opportunity for this to happen.

The 2001 decline in trade levels affected U.S. trade partners differently. Trade with a number of the top 25 trading partners declined sharply in 2001 compared with 2000. Among the top 10 trading partners, trade with Taiwan declined the most (21 percent), followed by South Korea (16 percent) and Japan (13 percent). Trade with the Asian countries was hit the hardest, in part because of sluggish demand in those countries and the global decline in the information technology industry.13

U.S. trade relationships have changed over the past three decades. By far the most pronounced changes have been the rising importance of Mexico and China. In 1970, Mexico was the fifth ranked U.S. trading partner with about $3 billion in merchandise trade with the United States. By 2001, Mexico had moved past Japan and was the second leading trading partner with about $233 billion trade. China, the 24th largest U.S. trading partner in 1980, 14 rose to the 10th position in 1990, and in 2001 was the 4th ranked trading partner with over $121 billion in merchandise trade. If the current growth rate of U.S.-China trade continues, China may overtake Japan in the very near future. These striking shifts in the geography of U.S. trade relationships clearly underscore the growth

48 of North American trade and the associated land trade routes, as well as the growth in Pacific Rim trade and the greater role of U.S. West Coast maritime ports.

Since 1970, trade with Mexico and China mushroomed while trade with major European partners grew more slowly, thereby changing the relative importance of trans-Atlantic trade. During this period, U.S. trade with several other Pacific Rim nations also grew rapidly. In particular, trade with South Korea, Taiwan, Singapore, and Malaysia grew quickly as these nations became centers for global manufacturing. Most notably in 1970, Japan was the only Asian country among the top 10 U.S. trading partners. Today, 4 of our top 10 trading partners are from Asia-Japan, China, South Korea, and Taiwan.

These shifts in the major U.S. trading partners affect the global pattern of U.S. merchandise trade and the transportation of these goods. Contemporary patterns of goods production and trade-in which manufacturing and assembly operations are often located in different countries-depend on extensive and reliable transportation and logistics networks worldwide. For example, the automobile industry brings together a large number of different components manufactured in various locations in several countries. As global automakers rely on factories in many parts of the world to make cars, the demand for transportation services will grow. General Motors builds automobiles in Thailand for markets in Japan and Europe; DaimlerChrysler and Volkswagen build vehicles in South African plants for European markets; and BMW manufactures vehicles in South Africa for the United States market (Wall Street Journal 2002). Also, when foreign companies produce vehicles (e.g., Volkswagen, Toyota, BMW, and Honda) in the United States for North American markets, demand is generated for freight and port services as components and parts are transported to the United States from multiple locations worldwide and the finished products are sold throughout North America.

Footnotes 12 This discussion of trade with the major trading partners uses current dollar figures because detailed official trade data by country, commodity, and mode of transportation are unavailable in inflation-adjusted real dollars. While adjusting for inflation is important to reflect the correct size of changes in the value of trade, other factors, e.g., foreign currency exchange rates, business cycles, balance of payments, stock market news, and central bank policies, affect the prices of goods and services traded internationally. Due to the complexity of the factors that influence international trade, it is difficult to control for trading partners’ inflation rates as well as currency exchange fluctuations. 13 One area of the U.S. economy that was hit particularly hard by the economic downturn in 2001 was the information technology (IT) sector. As private sector demand for IT products sagged, U.S. international trade in these commodities fell by 16 percent from $145 billion in 2000 to $122 billion in 2001. This slump in IT-related goods accounted for about one-fifth of the 2001 U.S. trade decline. Among the top countries for IT-related trade with the United States, Japan, Taiwan, Singapore, and South Korea were especially hard hit in 2001 in this area. See appendix table C-22 (p. 140) for the source data. 14 In 1970, China was not listed separately in the official trade statistics. It was listed as part of the “Communist World.”

Modal Trends in U.S. Merchandise Trade

A large amount of freight carried over the U.S. transportation network is imported or bound for export. In 2001, over 1.6 billion short tons of international merchandise moved to and from the United States, a 5 percent increase from 1997.15 Imports accounted for about 71 percent of this tonnage in 2001, up from about 65 percent in 1997. The relative roles of transportation modes in carrying this large amount of freight vary by value and weight16.

49 Water transportation carries more trade, both in terms of tonnage and value, than any other mode. Its share of the weight of U.S. trade rose from 73 percent in 1997 to 78 percent in 2001, but its share of the value declined slightly from 40 percent to 38 percent. Water is less dominant in terms of value because higher value-per-ton commodities are often moved by air and truck, especially in U.S.-NAFTA trade. While air transportation accounted for nearly 28 percent of the value of total U.S. trade in 2001, its share of the tonnage remained less than 1 percent. Trucks moved 21 percent of the value and 11 percent of the weight.

In terms of value, a far higher share of imports enters the United States by water transportation than are exported by ship-46 percent compared with 27 percent. By contrast, truck and air moved a larger share of the value of exports than imports. Trucks moved 26 percent of the value of exports and 18 percent of imports (table 7). In terms of weight, water accounted for 79 percent of U.S. imports and 75 percent of U.S. exports.

Despite the decline in overall freight movements in 2001 compared with 2000 the relative modal shares do not show a dramatic change. However, air’s share of the total value declined noticeably from 30 percent to 28 percent, in part, due to the closure of U.S. airspace for several days following the September 11 terrorist attacks. Trucking maintained its share, while rail rose very slightly. Water’s share rose slightly by value but remained stable by weight.

International Maritime Trade and Transportation

In 2001, merchandise trade valued at over $718 billion moved between the United States and foreign seaports. Trade with Canada and Mexico accounted for only 4 percent of the value of this maritime trade, while trade with overseas countries17 represented the remaining 96 percent. In 2001, Japan was the top U.S. maritime trading partner by value, followed by China and Germany. Like overall U.S. trade, maritime trade is concentrated among a few large trading partners, with the top five maritime partners accounting for 43 percent of the value of this trade in 2001.

Over 1.6 billion tons of goods were traded between the United States and other countries in 2001, and maritime transportation carried over three-quarters of the weight of these goods. The top U.S. maritime trading partner by weight was Mexico followed by Venezuela and Saudi Arabia. These three countries were also among the leading crude oil suppliers to the United States. Nigeria and the United Kingdom, which also supply a large amount of crude oil to the United States, are among the top maritime partners by tonnage. The top five maritime trade partners by weight accounted for more than one- third of the tonnage of U.S. maritime trade.

The type of goods transported in U.S. maritime imports and exports varies greatly, affecting the kinds of vessels and the seaports used. The physical characteristics, value, and weight of commodities are some of the factors that determine the use of container, tanker, or bulk vessels. Among the top U.S. maritime trading partners, the value per ton of merchandise ranged from a high of $2,800 for trade with Germany to a low of $100 for

50 trade with Canada. Clearly, most U.S.-Canada maritime trade involves low value-per-ton commodities (e.g., petroleum, agricultural, and lumber products), while higher value-per- ton goods (e.g., automobiles and automotive parts) move by surface modes. By contrast, most U.S.-Germany maritime trade involves higher value merchandise (e.g., automobiles) that moves by container vessels.

In 2001, the top U.S. seaport for international merchandise trade by weight was Houston, handling over 130 million short tons of commodities, mostly petroleum, valued at $44 billion. The leading port by value was Los Angeles, which handled 46 million short tons of commodities, primarily manufactured goods, valued at $104 billion. The rankings of the leading ports by value and weight are evidence of the specialization among U.S. seaports, with the U.S. Pacific and Atlantic coast ports heavily involved in container trade, while the U.S. Gulf Coast ports are mainly involved in dry bulk and tanker trade. Houston handled mostly bulk commodities (e.g., grain and coal) and petroleum products valued at an average of about $340 per ton, while Los Angeles handled primarily containerized commodities valued at nearly $2,300 per ton.

Commodity flows in the Flagstaff corridor are both containerized and bulk. The best opportunity for the intermodal facility is containerized and/or truck cargoes that are not bulk. The majority of the traffic along the I-40 is convertible from truck to rail and that should be the marketing target.

Growth and Shift in Container Trade

One of the most important trends in maritime trade worldwide in recent decades has been the growth in containerization and the resulting increase in longer distance shipments. Over 18 million 20-foot equivalent units (TEUs)18 of merchandise moved in and out of U.S. container ports in 2001, up 36 percent from 13 million in 1995. U.S. container ports handled an average of 50,000 TEUs a day in 2001.

In 2001, there were 5.6 million maritime container entries into the United States, down 6 percent from nearly 6 million in 200019. While the number of vessel containers entering the United States had been declining even in the months before September 11, when compared with the same months in 2000, there were 19 percent fewer such containers in September 2001 than in September 2000. The declines continued in October, November, and December 2001 compared with the corresponding months in 2000.

Three of the top five container ports in the United States are on the West Coast. Between 1995 and 2001, the Ports of Los Angeles and Long Beach grew the most in terms of container traffic, reflecting increased trade with Pacific Rim countries. Los Angeles and Savannah, Georgia, showed the largest average annual growth rate. High growth rates for Savannah, Miami, and Houston reflect the strong activity in U.S. container trade with Latin American countries.

The first use of containers for commercial intermodal sea-land movements was in the United States in 1956 (between Newark, New Jersey, and Houston). Since then,

51 containers have greatly affected the movement of U.S. international trade, port operations, and the distribution of ports’ share of total maritime trade.20 In the 1970s, the distribution of commodities entering the United States started to shift, with West Coast ports surpassing East Coast ports, a trend that continues today and affects transportation activity within the United States. U.S.-Asian Pacific trade was modest in the 1970s, and East Coast ports handled the majority of international maritime trade. As trade with Asia grew, the East Coast ports’ share of the value of trade declined while West Coast ports’ share increased. Gulf of Mexico ports experienced a modest increase in their relative share as trade with Latin America grew.

Over half of U.S. containerized merchandise trade, measured in TEUs, passes through West Coast ports. Nearly 56 percent of containerized imports and 43 percent of the exports passed through these ports in 2001. California ports alone handled 48 percent of U.S. container imports and 32 percent of the container exports. As West Coast ports handled many more containers for import than export, those ports had a larger share of the ocean borne containerized trade deficit, in terms of export-import balance, than other regional ports. Hence, West Coast ports serve more as import gateways into the United States than export gateways to the rest of the world.

In contrast, East Coast ports handled more exports than imports. East Coast ports handled 37 percent of U.S. containerized imports and 41 percent of the exports in 2001. The port of New York-New Jersey handled 14 percent of the nation’s container imports and 12 percent of the exports.

The critical role of maritime ports to U.S. international trade was seen in the fall of 2002. Operations at West Coast ports shut down due to a labor dispute between shipping lines/ port operators and dockworkers negatively affecting the flow of maritime goods passing through these ports to the rest of the United States.

Port Concentration

The distribution of maritime trade among U.S. port regions shows a greater concentration of traffic in a small number of ports, primarily because of the growth in container traffic and the demand for larger, faster, and more specialized vessels. Today, “Post-Panamax” super-freighter vessels21 are longer than 2 football fields, can carry up to 6,500 TEUs, and can cruise at speeds over 25 knots. More of these larger vessels are calling at ports in the United States and around the world. Some of the next generation of mega ships under construction today could carry over 8,500 TEUs (Muller 1999).

To handle these newer vessels, ports have had to invest in larger cranes, berths, storage yards, improved information technology systems, and additional dredging. The large investments needed to accommodate these vessels have resulted in fewer port calls or even no port calls by mega ships at certain ports (USDOT 1999). A change in the pattern of port calls could lead to changes in freight flows in different geographic regions of the United States. For example, traffic in and out of ports able to handle the mega ships could grow, thereby increasing the demand for landside infrastructure facilities in adjacent local

52 areas. Along the same lines, more coastwise traffic could arise in some areas, possibly leading to an expanded maritime hub-and-spoke network, where cargo unloaded at a larger port is separated and sent to smaller U.S. ports aboard smaller vessels.

While large investment needs are associated with mega ships, their increased use is thought to have improved the economics of containerization and brought some cost savings to the maritime industry. Larger ships make some of these gains and labor costs savings possible, since above a given ship size, the number of crew needed to operate a vessel does not necessarily change, thereby lowering the operating cost per ton (Campbell 1993). Also, faster turnaround time in ports (now generally less than one day, and hours in some cases) leaves more time for moving cargo and increases the volume of cargo moved in a year.

Port Calls and Vessel Capacity

As container activity has become increasingly concentrated, so too have vessel port calls and capacity. In 2000, the top five container ports handled over half of the containership calls to U.S. ports and nearly two-thirds of the cargo capacity22 of the calling vessels. Vessels calling at U.S. ports were also, on average, larger than those calling worldwide. The average size (per call) of container vessels calling at U.S. ports was nearly 38,000 deadweight tons (dwt) in 2000, up about 6 percent since 1998 (USDOT MARAD 2002a). In contrast, the average size of container vessels calling at ports worldwide was just 30,000 dwt. In 2000, three U.S. ports, San Francisco Bay Area ports, Los Angeles-Long Beach, and New York-New Jersey, ranked among the world’s top 10 container ports in 2000, measured by average vessel size per call.

Footnotes

15 During the same period, however, the value of merchandise trade grew by 20 percent (current dollars). Due to the way official U.S. trade statistics have been collected and processed by U.S. Customs and the U.S. Census Bureau, it is not possible to report an overall weight for all U.S. international merchandise trade for all modes prior to 1997. To calculate the total tonnage for all imports and exports, BTS estimated the U.S. export weight for truck, rail, pipeline, and other and unknown modes based on value-to-weight ratios from the import data. These estimates were added to official export weight data for water and air and then combined with official import weight data for all modes.

16 Due to the way in which U.S. trade data are collected, the modal shares represent single modes in use at U.S. ports of entry or exit even though more than one mode may be used in transporting the goods from point of origin to destination. 17 Overseas countries are all countries except Canada and Mexico. 18 A TEU is the standard unit for counting containers of various lengths and describing the capacity of container vessels. 19 These numbers are for individual containers, not TEUs. Because containers come in different lengths (e.g., 20 foot, 40 foot, 48 foot, and 53 foot), these figures differ from the TEU figures, which convert the tonnage of goods moved in the containers into TEUs. 20 Containers were first used for commercial intermodal ocean-land service by the McLean Trucking Company (now Sea-Land Service Inc.). The use of standard containers among multiple modes was revolutionary. Prior to this, containers or strong large-size boxes were used for truck and rail transportation within the United States and Europe (Muller 1999). 21 These vessels are too large to pass through the Panama Canal. 22 Capacity equals the number of calls multiplied by the vessel deadweight tons.

53 Major Challenges

Two of the major challenges facing U.S. seaports that handle larger containerships are dredging and disposal of dredged material and landside access issues. Channel dredging is a leading issue for U.S. ports, because channels and berths need depths approaching 50 feet in order to accommodate the larger container vessels. Beyond the engineering requirements, there is also the environmental issue of storage of contaminated sediments. Once dredged, channels need continuing maintenance to be kept passable, but this can be challenging since many ports are located in or near environmentally sensitive areas such as wetlands, estuaries, and associated fisheries. In addition to dredging, other port-related environmental concerns include waste and pollution generated from facilities and ships, congestion, noise, and other quality of life impacts on nearby communities.

Landside access issues affect ports and terminals of all types and container ports in particular. For example, bottlenecks due to insufficient highway and rail connections from ports and marine terminals to distribution centers could become more of a concern if the current growth rate of international trade continues with no marked access improvements. Major landside bottlenecks include traffic congestion on the roads and rails nearest the ports and terminals, at-grade rail crossings, and rail access impediments such as bridge clearance and distance from terminals. A Federal Highway Administration report on the National Highway System Intermodal Freight Connectors found that Interstate highway connectors going to the nation’s seaports had more mileage with pavement deficiencies than highway connectors to airports, in part due to the high priority given to airport access (USDOT FHWA 2000). The report also found that problems with inadequate turning radii and travel lanes and heavy traffic were the most common causes of congestion on highway connectors to ports.

A major effort to improve landside access to two of the nation’s busiest seaports is the Alameda Corridor freight rail expressway in California, opened in April 2002 (USDOT OST 2002b). The Alameda Corridor, a $2.4 billion project funded by private and public investments, connects the ports of Los Angeles and Long Beach to the rail yards near downtown Los Angeles and the national railroad network.23 The project consolidates 90 miles of branch rail tracks into one 20-mile railroad expressway. The project eliminated about 200 street-level railroad crossings, thus allowing trains to travel more quickly and easing highway traffic congestion. Several other objectives of the Alameda Corridor project included the improvement of direct access to terminals and docks, the reduction of cargo handling and dwell time at the ports due to improved rail lines that decrease transit times, and the reduction of air and noise pollution from idling trains, trucks, and cars at highway rail crossings.

Some intermodal connector projects aimed at improving landside access to ports include: 1) the FAST Corridor project (Freight Action Strategy for Seattle-Tacoma-Everett) in Washington state to streamline the movement of freight through the Puget Sound region of the state; 2) the Portway project in New Jersey to improve truck access to Port Newark, Port Elizabeth, and northern New Jersey; and 3) the Cross Harbor Freight Movement project study in New York City, which is currently evaluating alternatives to

54 improve freight access to the New York and northern New Jersey metropolitan area (USDOT FHWA 2000).

International Air Freight

Air cargo is transported by both all-cargo carriers and carriers that also transport passengers. In 2001, U.S. airports handled $519 billion of international merchandise trade for both types of carriers, down from $593 billion in 2000. Air transportation’s share of the value of total trade also declined slightly from 30 percent to 28 percent, due in part to the September 11 terrorist attacks. Because the commodities moved by air tend to be higher in value per ton (e.g., electronics, clothing, and high-value perishable goods such as flowers) than those transported by other modes, air freight’s share of U.S. trade by weight was less than 1 percent (about 6 million short tons) in 2001.

Despite the decline in 2001, the value of international trade moved by air transportation has grown tremendously over the past three decades, from $10 billion in 1970 to $519 billion in 2001, growing at an average annual rate of 14 percent per year (in current dollars). Air cargo grew at the fastest rate in the 1970s, averaging over 20 percent per year. The period with the slowest growth rate was between 1980 and 1985, due in part to the economic recession of the early 1980s. Also, high aviation fuel prices at the time dampened U.S. international air cargo movements. By the late 1990s, the growth rate for U.S. international air cargo was about half the rate in the 1970s. Overall, during this period, imports grew faster than exports, accounting for the current air trade imbalance.

In 2001, the top U.S. air cargo trading partner by value was Japan, followed by the United Kingdom, Germany, France, and Canada. Western European and Asian Pacific countries dominate air cargo trade to and from the United States, although the United States has many other air trade partner countries. In 2001, the top five air trading partners accounted for 38 percent of the value of air trade, compared with 54 percent for the top five partners for all U.S. merchandise trade. By virtue of geography, air transportation is more prevalent with overseas trade partners than with the NAFTA countries. While air transportation accounted for about 7 percent of the value of U.S. trade with Canada and about 5 percent of trade with Mexico in 2001, it accounted for 87 percent of trade with Ireland, 56 percent with the United Kingdom, and 35 percent with Japan.

Among the top 25 U.S. air trade partners, the value per ton of all merchandise (both imports and exports) ranged from a high of over $280,000 for trade with Ireland to a low of $41,000 for trade with Spain. For imports only, the value per ton of merchandise from Ireland, which includes commodities such as cashmere clothing and telecommunications equipment, was valued at almost $500,000 per ton.

In 2001, among the top 25 overall air trading partners, the United States had a positive air trade balance (exports minus imports) with 10 countries. U.S. trade with the Netherlands showed the largest air trade surplus of about $7 billion, followed by Canada and Hong Kong with $5 billion each. U.S. air trade with Ireland showed the largest deficit of about $12 billion, followed by Malaysia and China with $6 billion each.

55 Top Air Freight Gateways

In 2001, the leading U.S. airport for international merchandise trade by value was New York’s John F. Kennedy (JFK) International Airport. JFK handled 23 percent of the value ($117 billion) of U.S. air trade moving into and out of the United States.

Two of the top five U.S. air cargo airports by value of trade are located on the West Coast: Los Angeles ($64 billion) and San Francisco24 ($62 billion). These 2001 levels represent declines from previous years, as the Asian economic crisis of the late 1990s, along with the general economic slowdown and the effects of September 11, affected air cargo handled by both of these airports.25

Overall, the United States imports more than it exports by air, but there is much variation among airports. At Miami International Airport, the value of exports exceeded imports by $8 billion, reflecting trade with Latin America. At the opposite extreme, imports were $16 billion more than exports at New York’s JFK airport26.

In tonnage terms, Anchorage handled the most international air cargo, nearly 2 million short tons (23 percent) of the total air cargo weight in 200027. Miami International Airport and New York’s JFK followed with over 1 million short tons each. Between 1990 and 2000, the weight of U.S. international air cargo grew an average of 7 percent per year, reaching over 8 million short tons in 2000. During this period, Memphis International Airport grew the most as Federal Express expanded its hub operations there. With Federal Express moving freight from locations throughout the country to its Memphis hub before final shipment to foreign locations worldwide, Memphis moved up the tonnage ranking for international cargo handled from 48th position in 1990 to 9th position in 2000. Other U.S. international airports emerged as world leaders in air cargo, particularly Philadelphia, which grew by 21 percent per year, and Fairbanks, Alaska, which grew by 20 percent per year.28

U.S. international air cargo originating from and destined for U.S. gateway airports are transported along major air routes. In 2000, 5 of the top 10 gateway pairs by weight included Anchorage.29 Anchorage-Tokyo ranked first in bidirectional international air cargo, handling over 500,000 short tons of freight. Regional specialization also characterizes airport pairs and major U.S. air gateways. All five gateway pairs involving Anchorage were in Asian Pacific countries: Japan (two gateways), South Korea, Taiwan, and Hong Kong. The top gateway pairs with West Coast airports, San Francisco and Los Angeles, were also with Asian Pacific airports. Miami International Airport’s top gateway pairs were with Latin American airports in Colombia, Argentina, Costa Rica, and Chile. New York’s JFK and Chicago O’Hare were the major gateways to European airports, including those in Belgium, the United Kingdom, Germany, and France.

U.S. International Air Cargo Revenues and Capacity

Air cargo is an increasingly important source of revenue for the air transportation services industry, and the financial performance of U.S. air carriers influences their

56 competitiveness in international markets. Between 1980 and 2001, freight operating revenues for U.S. international air cargo, moved by both the all-cargo and passenger carrier sectors of the industry, more than quadrupled from $1 billion to over $6 billion (in current dollars).30 U.S. international freight operating revenues grew at a faster average annual rate (9.5 percent per year) than U.S. domestic freight operating revenues, which grew at 8.4 percent per year. During this period, growth in U.S. international air cargo revenues closely mirrored the increases in overall U.S. air freight revenue ton-miles, a measure of the utilization of air freight service31. However, in 2001, while international revenue ton-miles by U.S. carriers declined, international air cargo operating revenues by U.S. carriers held steady, due in part to changes made immediately after the September 11 attacks.

Available revenue ton-miles (the level of useable freight capacity) and unused ton-miles (the difference between available ton-miles and revenue ton-miles used) are two other measures indicating the utilization of air freight services. The availability of excess cargo capacity enables shippers to quickly arrange transportation of small quantities of goods to meet market demands, while maintaining low inventories. Between 1980 and 2001, the U.S. international available air ton-miles grew rapidly as the industry added capacity by acquiring new aircraft. International revenue ton-miles by U.S. carriers grew at a slower rate than the available capacity and the gap between used and available ton-miles widened32. Also during this period, U.S. international air cargo load factors (the ratio of used to available ton-miles) declined from 48 percent in 1980 to 44 percent in 2001.

The air cargo industry continually modifies its services to take into account new methods of goods manufacturing and distribution. A heightened challenge is cargo security. As suppliers and manufacturers integrate new production processes worldwide, the need to provide door-to-door security for merchandise could affect choices about business inventory and supply chain costs and influence future air cargo growth.

North American Trade and Transportation

The North American Free Trade Agreement, which entered into force on January 1, 1994, aims to reduce trade barriers and liberalize trade policies among the United States, Mexico, and Canada. As NAFTA reduced some of the obstacles to the movement of freight across the borders (including restrictions on transportation services), trade among the three countries soared. Between 1994 and 2001, the value of U.S.-NAFTA trade increased 79 percent from $343 billion to $614 billion (in current dollars); growing at an average annual rate of 9 percent, faster than the rate for U.S. merchandise trade with all other countries. The growth of U.S. trade with Canada and Mexico highlights the importance of north-south transportation corridors, the role of key land gateways, and the emergence of dominant flows (e.g., between Detroit, Michigan, and Laredo, Texas), which will continue to alter the pattern of freight movement within the United States.

Once the NAFTA provisions are fully implemented and freight operators licensed in one country are allowed broader access in another, freight services and operations will change. Differences in arrangements for transporting freight across the three countries

57 could affect the movement and flow of this traffic on the transportation networks of the United States. It also will increase vehicle inspection activity at U.S. borders and heighten the need for improved security for the millions of containers and trailers that enter the United States from Canada and Mexico.

U.S.-NAFTA: Overall Trade

In 2001, merchandise trade with Canada and Mexico represented one-third of the value of all U.S. international trade or $614 billion, with Canada accounting for about 20 percent and Mexico about 13 percent. Surface modes transported the majority of the value of U.S.-NAFTA trade, over 89 percent in 2001, nearly the same proportion as in 1994.33 Maritime trade accounted for 5 percent while air freight held a 6 percent share.

U.S. surface trade with Canada and Mexico fell in 2001 for the first time since the inception of NAFTA in 1994, with the greatest decline occurring after September 11. Surface trade was lower for most of 2001, showing a 1.5 percent drop between January and August, compared with the same period in 2000, and a decline of 11.6 percent between September and December 2001. Surface exports declined more steeply (7 percent) than imports (3 percent) for the year.

Despite the drop seen between 2000 and 2001, the value of U.S.-NAFTA surface trade grew between 1997 and 2001, with an increase of 29 percent from $426 billion to $547 billion. However, surface exports grew more slowly than surface imports during this 5- year period, 18 percent compared with 37 percent.

U.S.-NAFTA Trade: Modal View

Nearly two-thirds of the value of overall U.S.-NAFTA merchandise trade in 2001 was moved by trucks, similar to their share in 1997. By value, trucking was followed by rail with about 15 percent, then air, water, and pipeline. From a tonnage perspective, waterborne modes moved the majority of U.S.-NAFTA trade in 2001. The relatively higher tonnage share for waterborne modes is due to the trade in bulk commodities, particularly petroleum products in the Gulf of Mexico.

The September 11 terrorist attacks caused immediate drops in U.S.-NAFTA activity, particularly for the truck and air sectors. Trade by truck fell over 15 percent in September 2001, compared with 2000, and continued drops over the remainder of 2001 resulted in the first annual decline in U.S. truck trade since NAFTA’s inception. Of all the modes, air freight experienced the steepest fall in 2001-nearly 18 percent-due largely to the immediate impact of September 11 on the North American aviation services and system. Although the overall value of rail trade fell slightly in 2001, it was less dramatically affected than other modes, due partly to the fact that immediately after September 11, railroads continued moving freight across borders because the industry already had an effective cargo preclearance system in place for major shippers engaged in NAFTA trade.

58 Despite many of the modal declines seen in 2001 U.S.-NAFTA trade, there has been relative stability in modal shares between 1997 and 2001. However, some modes have grown at a more rapid pace during the five-year period. For example, although pipeline accounted for a relatively small percentage of the value of U.S.-NAFTA trade in 2001 (about 4 percent), it grew at a faster rate than any other mode-an average annual rate of 17 percent between 1997 and 2001-due largely to greater petroleum product imports to the United States.

In addition to overall U.S.-NAFTA modal trends, there are some notable modal differences between U.S.-Canada and U.S.-Mexico trade. Although trucks carry over 60 percent of the value of U.S. trade with both Canada and Mexico, it is possible that when greater cross-border access for commercial trucking carriers is implemented between the United States and Mexico, trucking’s share of the value of U.S.-Mexico trade could increase further.

Rail plays a critical role in particular corridors and for certain commodities in U.S.- NAFTA trade. Rail trade with Canada is greater than with Mexico, especially for U.S. imports. Although smaller proportionately, U.S.-Mexican rail trade has grown since 1997, both by value and weight, allowing rail to capture higher modal shares. This could increase further if there are notable efficiencies arising from Mexico’s rail privatization (begun in the 1990s) and the resulting development of rail alliances by U.S., Mexican, and Canadian carriers.34

Overall, U.S.-NAFTA waterborne trade plays a critical role particularly for trade in bulk commodities in the Great Lakes and Gulf of Mexico. In 2001, waterborne trade accounted for the majority of both U.S.-Canada and U.S.-Mexico trade by weight. However, waterborne trade plays a relatively greater role, both by weight and value, in U.S.-Mexico trade primarily due to large volumes of petroleum-related products.

NAFTA Trade and U.S. States

Key freight access and infrastructure issues in the United States are influenced by the distribution of NAFTA trade among U.S. states. Concern exists about future shifts in freight flows within the United States as NAFTA trade grows. While existing highway, rail, and water links allow all U.S. states to trade with Canada and Mexico, U.S. trade with Canada is heavily concentrated in the industrialized northeast and Midwest and the states of California, Washington, and Texas. U.S. trade with Mexico is even more concentrated geographically with a few southern Border States, although Mexican trade with Michigan, source of much automotive trade, is quite large. The transportation networks of these states could be especially affected by growth in NAFTA trade.

Several factors affect the distribution of NAFTA trade among U.S. states, including the location of dominant border ports, the size of a state’s population and its economy, and its manufacturing activities. In 2001, Michigan, Texas, California, New York, and Ohio accounted for 51 percent of the value of NAFTA surface trade. Michigan, Texas, and California alone, all of which are large in terms of economy, population, and

59 manufacturing activities, and are close to either Canada or Mexico, accounted for 40 percent of the value of NAFTA trade. As with trade levels, U.S. inbound truck crossings are heavily concentrated in a few states. Just four states (Michigan, Texas, New York, and California) handled over three-quarters (or 8.4 million) of the inbound truck crossings in 2001.

Overall surface trade with Canada and Mexico declined in 2001 compared with 2000, although trade with a few states grew. Among the top five states for U.S.-NAFTA surface trade, New York had the largest decline in the value of trade, nearly 12 percent, followed by Texas with 8 percent. Other border states, such as Vermont, experienced even steeper declines (27 percent).

The majority of U.S.-NAFTA trade by value is trucked across national and state boundaries. Because of their gateway role, Border States carefully monitor trade activity by this mode, both by value and number of crossings. Many states experienced declines in 2001 truck crossings-Texas, Washington, and Michigan all saw drops of over 5 percent from 2000 levels. Other border states experienced lesser drops, while crossings in Alaska and North Dakota rose.

Land Ports and Border Crossings

Although there are over 75 land ports along the U.S.-Canadian border and over 25 along the U.S.-Mexican border, the freight traffic at the border is heavily concentrated at a few major gateway ports. Such concentration affects traffic and congestion at the border, as well as the growth of major trade corridors. In 2001, the top land ports for U.S.-NAFTA surface trade by value were Detroit, Laredo, and Buffalo-Niagara Falls. Together, these three ports accounted for over 35 percent of the value of all U.S.-NAFTA trade in 2001 and 46 percent of U.S.-NAFTA surface trade.

Many of the top U.S.-NAFTA ports are national and regional trade gateways, while others serve local markets. For example, only about 20 percent of the value of shipments passing through Buffalo-Niagara Falls originate or terminate in New York. A similar figure is seen for Laredo. For Detroit, the biggest U.S.-Canadian border port, 70 percent of the value of shipments start or end outside of Michigan. In contrast, over 90 percent of the shipments passing through Otay Mesa, the largest California port, originate or end up in California.

The top U.S.-NAFTA land gateways handle thousands of truck crossings each day. In 2001, there were almost 11.1 million commercial truck crossings into the United States from Canada and Mexico, translating to 30,000 daily truck crossings.35 This was up 44 percent from 1994, but down 4.3 percent from 2000. The majority of these crossings occurred on the U.S.-Canadian border (61 percent), although the growth rate in truck crossings, as with trade, has been more rapid on the U.S.-Mexican border. As with trade levels, truck crossings are concentrated among a few ports. In 2001, the top three ports (Detroit, Laredo, and Buffalo-Niagara Falls) handled nearly 40 percent of all truck crossings.

60 Although trucking accounts for the majority of U.S.-NAFTA trade at the major land ports, several ports serve as important U.S.-NAFTA rail gateways, carrying long-haul freight to origins and destinations in several states. Over half of the value of U.S.- NAFTA rail trade passes through just two gateways, Laredo and Port Huron, Michigan, and these two ports, along with Eagle Pass, Texas, have seen explosive growth in the value of rail cargo since 1994, in part due to rail privatization in Mexico and new North American rail alliances. In the 1990s, rail lines, such as Kansas City Southern, focused on acquisitions, joint ventures, and strategic marketing alliances with other rail lines to form what has become known as the NAFTA Railway (KCS 2002). These rail alliances provide service from the central United States into Mexico and Canada. In conjunction with other large rail lines, such as Groupo Transportacion Ferrovia Mexicana, S.A. de C.V. (TFM), the Texas Mexican Railway, and Canadian National, shipments can move easily with a single rate throughout North America. Growth in rail cargo has also been accompanied by increases in crossings of trains, as well as full and empty containers. In 2001, over 40,000 trains carrying about 2.4 million containers entered the United States from Canada and Mexico, equaling approximately 112 trains and 6,500 daily container entries.

Trade flows and vehicle and equipment crossings at key land gateways have fluctuated since the inception of NAFTA. This is, generally characterized by a steady rise through 2000, followed by modest downturns in 2001, due to economic slowdowns throughout North America, the September 11 terrorist attacks on the United States, and the accompanying fall in trade between the United States, Canada, and Mexico. During the 1990s, traffic and flows at these gateways were influenced by notable differences in the geography and direction of trade flows, as U.S. trade expanded more rapidly with Mexico than Canada and import flows from Canada and Mexico grew more quickly than U.S.- NAFTA exports. In addition, key gateways are affected by the mix of commodities passing through these ports as well as changes in carrier efficiencies. For example, changes in commodity mix and other factors help to explain why growth in the value of truck import shipments mirrors that of incoming truck crossings between 1994 and 2001.

Despite the overall rise in trade levels for U.S.-NAFTA land gateways during the 1990s, notable changes were seen in 2001. Surface trade levels at most of the major U.S.- NAFTA gateways fell between 2000 and 2001, with Buffalo-Niagara Falls experiencing the steepest decline (13.9 percent) of the top 10 land ports. Together the top three U.S.- NAFTA ports (Detroit, Laredo, and Buffalo-Niagara Falls) saw surface trade values fall 6.5 percent over 2000 levels. Of the top gateways, on the U.S.-Mexican border, Otay Mesa, California, was the only U.S. land port that saw a rise in trade in 2001 (3.3 percent). This rise was outpaced by a small U.S.-Canadian port, Eastport, Idaho, which experienced a 140 percent increase in 2001 because of the opening of a new pipeline and a resulting $4 billion increase in pipeline imports (USDOT BTS 2002a).

Multimodal View: Top Gateways

Water, air, and land modes36 and their associated services and infrastructures are all used to transport goods in U.S. international trade. Whether goods are exported or imported,

61 substantial domestic transportation activity is needed to move goods to and from U.S. air and land gateways and seaports. Often, several modes of transportation are involved. shows the nation’s top ports of entry and exit for U.S. international trade shipments by value in 2001. In 2001, the top five gateways represented air, water, and land modes. The leading gateway overall in 2001 was New York’s John F. Kennedy International Airport with $117 billion of air cargo. The maritime ports of Los Angeles and Long Beach, the land gateway of Detroit, and the maritime port of New York-New Jersey followed JFK.

These ports handled both exports and imports, with some serving primarily as gateways for imports into the United States, while others were predominately gateways for exports from the United States to destinations around the world. Among the top 10 gateways, only the land port of Detroit, Los Angeles International Airport, and San Francisco International Airport handled more exports than imports.

Continuing growth in U.S.-Asian Pacific trade, further integration of North American manufacturing, variations in commodity mix, and many other factors will continue to affect the top gateways as well as the movements of international trade shipments to, from, and within the United States. Additionally, these gateways could be affected and their relative roles may shift as the United States embraces new freight security measures to protect against the use of freight conveyances for terrorist acts.

Trends in Major Commodities

The commodity mix of U.S. international merchandise trade has changed appreciably during the past two decades and continues to shift in response to changes in U.S. consumer preferences and global economic integration. Since 1980, manufactured goods’ share of U.S. international merchandise trade has increased,37 influencing the growth in containerization and the demand for intermodal transportation. Manufactured goods’ portion of the value of U.S. international merchandise trade jumped from 62 percent in 1980 to 85 percent in 200138. In the main shifts in commodity normally considered to be container traffic has no real relevance to the success of failure of a freight facility except that the carriers serving the facility will want higher rated goods and Flagstaff will want to be selective vis a vis the types of companies it attracts to the facility.

Meanwhile, natural resources and raw materials’ share of the value of U.S. merchandise trade declined, even though the United States continues to produce, export and import, and consume vast quantities of such products. Between 1980 and 2001, agricultural goods’ share of the value of trade fell from 13 percent to 5 percent. Mineral fuels’ (oil and petroleum products) share declined from 19 percent to 7 percent, in part due to relative declines in oil prices. While the commodity mix changed, the volume of U.S. trade in manufactured and other goods and the transportation required to carry it grew, affecting the shipment tonnage carried by all the freight modes.

Just five commodities, valued at about $1 trillion, accounted for over half (54 percent) of the value of U.S merchandise trade in 2001, and these five commodities have remained fairly stable since 1990.39 Only measuring and testing instruments (i.e., optical,

62 photographic, precision, and parts) entered the top five during the 1990s, pushing aircraft, spacecraft, and parts down into the sixth slot in the process. Other than this category, the top commodities for exports and imports were similar during this period. However, aircraft, spacecraft, and parts are among the leading exports.

Between 1990 and 2001, the value of all the major traded commodities grew at average annual rates of 4 percent to 19 percent. Higher value goods grew more rapidly than lower value goods, most notably pharmaceutical products and furniture, furnishings, and lighting products (commodity code 94), which moved from outside the top 20 in 1990 to the 14th and 13th positions, respectively, in 2001. The strong growth in U.S. trade of pharmaceuticals and furniture is indicative of a general increase in the U.S. trade of high- value commodities. The growth in trade of high-value commodities in turn has contributed to the rise in air transportation’s share of U.S. international trade value, since it is generally more cost-effective to transport smaller, higher value, and lower weight goods by air. Another notable change in the commodity mix was a drop in the ranking for cereal grain and iron and steel. In 1990, cereal grain and iron and steel were ranked 13th and 14th, respectively. By contrast in 2001, iron and steel was ranked 21st and cereal grain, 28th. Such changes in commodity mix could affect the volume of bulk cargo handled by U.S. ports.

The commodity mix of U.S.-NAFTA surface trade is somewhat different from that of U.S. international trade overall due to transborder shipments of the automotive industry and trade in raw and semi-processed materials. Motor vehicles, parts, and accessories (commodity code 87) were the leading commodity for U.S. trade with Canada and Mexico, followed by electrical machinery and equipment. An overwhelming proportion of these commodities moved by surface modes. In 2001, motor vehicles, parts, and accessories were transported mostly by truck ($60 billion) and rail ($55 billion). The movement of commodities in this category by rail accounted for 59 percent of all U.S.- NAFTA rail trade. Raw and semi-processed commodities (e.g., paper products, wood products, and articles of iron and steel, aluminum, and rubber) are more important components in U.S.-NAFTA trade than they are in overall U.S. international trade. The reverse is true for finished and processed goods (e.g., optical, photographic, and precision instruments; chemicals; and pharmaceutical products), which factor more highly into total U.S. international trade than in U.S.-NAFTA trade.

During the past decade, changes in the demand for and supply of particular commodities affected both the geographic pattern of U.S. trade and our top trading partners. For example, in 1990, Japan was the leading U.S. trade partner for commodity code 84 (primarily machinery and mechanical appliances), the most traded commodity group by value. By 2001, Canada had become the top U.S. trading partner for this commodity group, while Japan dropped to second. A similar switch occurred with electrical machinery and equipment (commodity code 85). In 1990, Japan was the leading trade partner with $23 billion, followed by Canada and Mexico. By 2001, Mexico had taken the lead with $58 billion, followed by Japan and Canada with $31 billion each (USITC 2002). For mineral fuels (commodity code 27), Canada has maintained its top position during the last decade, but trade with other countries for this commodity has shifted. For

63 example, Venezuela passed Saudi Arabia to the second position in 2001. Such changes affect the volume of crude petroleum and related products handled by U.S. East Coast and Gulf Coast ports. A change also occurred in trade in motor vehicles and parts and optical and precision instruments (commodity code 90). For both of these categories of goods, Mexico passed Germany to move into the third position, behind Canada and Japan. Such changes in trade or leading commodities affect transportation modes, services options, and system requirements.

Trade in Transportation-Related Goods

In 2001, the U.S. traded $290 billion worth of transportation-related commodities (e.g., cars, trains, and airplanes) with its partners, nearly twice the value of these commodities traded in 1990.40 Despite this overall increase, the share of transportation-related goods relative to all U.S. traded commodities fell slightly from 16.5 percent in 1990 to 15.5 percent in 2001. While motor vehicles and parts constitute by far the largest share of U.S. international trade in transportation-related goods, trade in aircraft, spacecraft, and parts was valued at $66 billion in 2001.

As is the case with overall international trade, the United States had a merchandise trade deficit in transportation-related exports and imports, totaling $76 billion in 2001. The deficit arose from the over $100 billion U.S. trade deficit for automotive vehicles and parts, which represented the second-largest deficit of total traded commodities and accounted for nearly one-quarter of the total U.S. merchandise trade deficit of $411 billion41. Over one-third of the automotive vehicles and parts deficit involved U.S. trade with Japan, while about one-fifth was with Canada.

In contrast, the United States had trade surpluses in 2001 in other transportation-related commodities. The $24 billion surplus in aircraft, spacecraft, and parts trade was the single highest surplus of any commodity in U.S. international trade and was due to surpluses with several trading partners, particularly the United Kingdom. The only deficits for aircraft products were with France and Canada, both countries that have large aviation manufacturing sectors. The U.S. international trade surplus for ships, boats, and floating structures was $693 million and for railway locomotives and parts it was $149 million in 2001. The trade surplus for railway locomotives and parts was in sharp contrast to the $416 million deficit in 2000 and was the first surplus since 1990. The 2001 surplus can largely be attributed to the United States supplying railcars and parts to Canada, the largest U.S. trade partner for railway products. The U.S. trade surplus in railway locomotives and parts was $257 million with Canada alone.

Footnotes 37 Merchandise trade encompasses all trade. Manufactured goods are one type of commodity group and are a subset of overall merchandise trade. 38 It is not possible to determine these shares by weight, because data on the weight of U.S. exports by land modes are not collected. 39 Based on the Harmonized Tariff Schedule-2 (HTS2) commodity classification code. 40 This includes merchandise trade only. Transportation-related services are discussed in the next section. 41 Mineral fuels, oils, and waxes, including crude oil and petroleum products, had the largest trade deficit of $110 billion in 2001.

64 Transportation Services Trade

In addition to international trade in merchandise, the United States exports (sells) and imports (buys) a variety of services, including freight transportation and port services42 (box 4). In 2001, total U.S. services trade accounted for about 21 percent of U.S. overall international trade, a slight decline from 23 percent in 1990. Between 1990 and 2001, merchandise trade’s share averaged about 78 percent. While overall services trade accounted for about one-fifth of U.S. international trade, services maintained the largest share of U.S. gross domestic product for many years.

Trade in freight and port services generates substantial revenues for U.S. businesses in terms of receipts to U.S. carriers and ports. These services also result in payments by U.S. companies to foreign freight carriers and ports. Exports of freight transportation services occur when a U.S. carrier receives payments from a foreign company or individual for transporting merchandise. Imports of freight transportation services occur when a U.S. company or individual pays a foreign carrier for transporting merchandise. Similarly, U.S. exports of port services occur when foreign carriers purchase services and goods (e.g., fuel) at U.S. airports and seaports. U.S. imports of port services occur when a U.S. carrier purchases services and goods at ports in foreign countries43 (USDOC BEA 2001).

The freight transportation and port services sectors comprise many industries, including carriers, ports and terminals, and logistics providers, among other businesses. These industries interact to manage the product supply chain and transport internationally traded goods. Because of the widespread use of just-in-time (JIT) inventory management, manufacturers, distributors, retailers, and other firms involved in international trade often rely on a combination of carriers and logistics providers (e.g., freight forwarders, arrangers, and consolidators) to transport goods globally from multiple suppliers.44 For example, Hewlett-Packard uses a complex logistics and transportation management system to supply inkjet printers to its North American market from suppliers in Vancouver, Washington, and Singapore (Armbruster 2001). Many American companies, such as Caterpillar Inc., Ford Motor Company, Frito-Lay, and Campbell Soup, use both in-house and third-party transportation service providers to manage the inflow of raw materials and outflow of finished products by multiple transportation modes on a time- definite basis (PR Newswire 2001 and Logistics Management Distribution Report 2000). Since JIT puts a premium on transportation system reliability and speed, the performance of freight carriers and ports directly influences the competitiveness of U.S. businesses engaged in international trade.

In 2001, U.S. trade in freight transportation and port services was $67 billion, down 6 percent from $72 billion in 2000. This annual decline was only the second since 1986, the first year for which the Bureau of Economic Analysis (BEA) reported consistent data on services trade.45 Of the $67 billion, 56 percent was for freight services and the remainder was for port services.46 The 2001 declines were in both exports (receipts) and imports (payments), mostly due to the lower volume of air traffic immediately after September 11.

65 Despite the decline in 2001, U.S. international freight and port services trade grew between 1986 and 2001 as the volume of merchandise transported internationally increased. During this period, U.S. total trade (receipts plus payments) for these services doubled from $33 billion to $67 billion, growing at an average annual rate of 4.8 percent. U.S. exports (receipts) grew at a 4.1 percent annual rate, whereas imports (payments) grew 5.3 percent per year, mirroring trends in goods trade indicates that while U.S. international freight and port services trade increased its relative share of the U.S. total private sector services trade declined from 23 percent in 1986 to about 15 percent in 2001. This occurred because other services’ share, particularly telecommunications and Internet-related services, increased much faster in the 1990s.

In 2001, the U.S. experienced a surplus in overall services trade, contrasting with the deficit for merchandise trade. At the same time, however, a nearly $14 billion deficit was seen in freight services while port services showed a $3 billion surplus, leading to an overall deficit of $11 billion for freight and port services combined. The 2001 freight services deficit continued a trend seen since 1986, the first year for which data are available. As the amount of U.S. merchandise imports increased, so too did the payments to foreign carriers transporting many of these goods. In contrast, during the same 15-year period, the United States maintained a surplus in port services as foreign carriers that transported increasing amounts of U.S. import cargo also purchased increasing amounts of services from U.S. ports.

The United States engages in services trade with numerous countries worldwide. Many of these countries are also the top merchandise trading partners of the United States. Overall in 2001, Japan was the top U.S. services trade partner in freight transportation and port services combined, with over $9 billion, about 40 percent of this for receipts to U.S. carriers and ports and 60 percent in payments to Japanese carriers and ports47. Japan was followed by Canada and the United Kingdom.

In 2001, U.S. exports (receipts) of freight and port services were $28 billion, with Japan accounting for almost 12 percent of this activity. For freight services exports alone, Canada was the leading U.S. trade partner, primarily because of the $1.6 billion paid to U.S. carriers for transporting goods to Canada by surface modes. Japan was second, with two times more paid to U.S. air carriers than U.S. ocean carriers. In contrast, for port services exports, Japan was the leading U.S. trade partner with $2 billion in activity; 62 percent of this was for the use of U.S. maritime port services.

Japan was also the leading U.S. trade partner for imports (payments) of freight and port services, accounting for 14 percent of the $39 billion total in 2001. For freight services imports alone, Japan also was the largest U.S. partner followed by Canada with $2.5 billion, where over 90 percent of these payments were to Canadian trucking and rail companies. Japan also led U.S. port service imports (or payments to Japanese air and maritime ports) with $2.1 billion, followed by the United Kingdom with $1.6 billion.

66 Transportation Services Trade by Mode

In 2001, declines in overall freight and port services trade were experienced by all the modes, but air cargo services were affected the most.

• Air freight services declined by about 11 percent (from $11 billion to $9 billion) reflecting a drop in air cargo transported. • Ocean freight services decreased about 5 percent (from $25 billion to $24 billion) due to declines in maritime trade volume and maritime rates for all ocean services (liner, tanker, and bulk). In particular, weak demand for bulk items, such as coal, iron ore, and grain, was responsible for this drop. • Surface freight services fell by 7 percent (from $5.1 billion to $4.7 billion) as some modal shifts and rate changes occurred in the aftermath of September 11. • Overall port services (primarily airport and seaport) decreased nearly 6 percent to $30 billion, mainly because of sizeable declines in air carrier activity following September 11. Part of this decline was also due to lower jet fuel prices in 2001 (USDOC BEA 2002b).

Prior to the 2001 overall declines, there had been some notable modal changes in freight and port services trade since 1986.48 U.S. air carriers now export the majority of U.S. freight services (i.e., receive the most receipts), having overtaken ocean carriers in 199749. Increases in air cargo revenues helped U.S. airlines offset relatively higher fuel prices during most of this period. Since 1986, exports by U.S. surface freight carriers for transporting goods to Canada and Mexico by truck and rail also rose, with most of the revenues representing services to Canada (USDOC BEA 2001). U.S. imports (payments for freight services to foreign carriers) rose between 1986 and 2000, reflecting the strong growth in the volume of merchandise imports and higher freight rates during this period, particularly for liner vessel freight imports from Asia and tanker freight rates for most regions.

For port services, the gap between U.S. exports of maritime port and airport services narrowed between 1986 and 2000, with U.S. airports providing more exports (receipts) in 1998 before maritime port services once again increased. Airport and seaport receipts rose as increases in both the volume of goods and passengers resulted in greater port expenditures by foreign air carriers and maritime vessels. U.S. payments for port services also went up for airport services between 1986 and 2000, as a result of growth in air cargo and passenger activity (USDOC BEA 2001). Payments for airport services far exceed those for either surface or ocean modes.

Footnotes 42 In this report, transportation services include freight services provided by transportation carriers as well as by port facilities (e.g., airports, seaports, and terminals). The other transportation services-travel and passenger fares-are not discussed here. BTS discusses them in a companion report, U.S. International Travel and Transportation Trends. 43 Note that the value of port services reported by the Bureau of Economic Analysis also includes services procured by foreign passenger carriers at U.S. ports and by U.S. passenger carriers at foreign ports. 44 JIT involves keeping materials on hand for only a few days or sometimes only a few hours of operation. In JIT inventory management, materials are delivered as needed in the manufacturing process and final products are shipped to distributors, wholesalers, and retailers as they are demanded by customers. 45 There was a 5 percent decline in 1992, following the U.S. economic recession of 1991.

67 46 Includes services for both freight and passenger operations at ports. BEA’s international transactions current account does not split out receipts for goods and services purchased at U.S. ports by foreign carriers into revenues for freight and for passenger services. For example, when a foreign air carrier buys fuel and services at a U.S. airport, that air carrier could use the purchased goods and services for both its passenger and freight operations. 47 Although the receipts and payments cover transshipments, it is not possible to disaggregate available data in order to separate out revenues from transshipped goods. 48 1986 is the first year for which detailed services trade data are available from BEA. 49 In 1997, U.S. air freight receipts were $4.6 billion while ocean carrier receipts were $4.5 billion.

Factors of Change and Continuity

Changes in trade patterns as well as direct investment between nations have deepened trading relationships with several countries and the United States. Alterations in trade patterns, in turn, affect the choices of transportation modes used in this country. For the exports of several countries, the United States is a leading destination. This is also the case, to a lesser extent, for imports. In 2000, 64 percent of all Canadian imports originated in the United States, up slightly from 62 percent in 1991. The United States was the destination for 87 percent of all Canadian exports, up from 76 percent in 1991. Much of the trade between the United States and Canada is due to the integration of North American automotive production. The remainder of the trade is both raw or semi- processed materials (e.g., lumber and petroleum products) from Canada and the exchange of other manufactured products facilitated by strong bilateral relations and the proximity of the two countries.

During the same period, Mexico received 74 percent of its imports from the United States. In 2000, 89 percent of all Mexican merchandise exports were destined for the United States, up from 80 percent in 1991. Today, a notable share of the trade with Mexico is in automotive products and electronics that are exported to Mexico for assembly in maquiladora factories50 and re-imported into the United States as finished products.

Between 1997 and 2000, U.S. trade with Asian Pacific countries grew, although, those countries’ imports from and exports to the United States represent a smaller share of their total trade than our North American neighbors. For example, although China ranked fourth as a major U.S. trading partner in 2000, its imports from the United States accounted for only 9 percent of total Chinese imports, down from 13 percent in 1991. However, the United States was the destination for 21 percent of all Chinese exports, up from 9 percent in 1991. As U.S. exports to Asian countries grow, containerized cargo transiting West Coast ports is likely to increase, creating more demands for efficient intermodal services.

A major factor influencing U.S. trading relations with our partners is the outflow of U.S. direct investment abroad (USDIA) to businesses around the world and the inflow of foreign direct investment in the United States (FDIUS) from businesses located abroad.51 Trends in both USDIA and FDIUS are important because investment by businesses could complement the flow of merchandise trade and affect transportation services carriers, such as shipping lines and airlines. Growth in USDIA and FDIUS also can result in increased intra-industry and intra-firm trade, as branch plants or supply chains are established by multinational companies.

68 In 2000, USDIA and FDIUS with all trading partners were nearly equal at $ 1.2 trillion, with a relatively small balance of $6 billion. Although almost identical in total value, the outflow and inflow of investments grew at different rates. Between 1997 and 2000, outgoing total USDIA grew by an average rate of 13 percent per year, while incoming investments rose at 22 percent per year. The top two partners for USDIA and FDIUS have not changed in many years. The United Kingdom remained the top country for both inflows and outflows of investments, accounting for about 19 percent in each case. Canada was the second leading destination for USDIA while Mexico ranked 10th.

In 2000, USDIA was slightly greater than FDIUS. In general, the United States invested relatively more in Latin American countries than they invested in the United States, resulting in a positive balance of investment with these countries. By contrast, European countries invested more in the United States than did the United States in Europe, resulting in a negative balance of investment with Europe. Since 1997, while the positive balance with the United Kingdom declined, the negative balance with Japan grew as Japanese businesses invested more in the United States.

Underlying Forces

Growth and changes in the U.S. population and economy: Two fundamental forces affecting U.S. international trade are growth and other demographic changes in the U.S. population, as well as structural changes in industrial manufacturing and distribution patterns. Over the past few decades, as the nation’s population and income grew, merchandise trade and freight movements rose greatly. Shifts in age and geographic distribution, immigration, and participation in the workforce have combined to affect consumer tastes for foreign products, thus increasing the demand for traded goods and transportation services. If the U.S. population continues to grow at past rates and some of the observed shifts in geographic concentration persist, demand for transportation services can be expected to increase, affecting both local freight movements as well as longer distance flows.

Similarly as the U.S. economy expanded, public and private investments in the development of the nation’s transportation infrastructure (roads, rails, waterways, and airports) helped facilitate U.S. merchandise trade. Increases in GDP made greater investment in transportation infrastructure possible and enabled industries to locate in more places while still specializing in goods for which they have a comparative advantage.52 Public investment in the development of the nation’s freight transportation system allowed regions within the United States the flexibility to engage in a diverse range of economic activities. While the U.S. transportation system expanded, the structural composition of U.S. GDP shifted toward more services and the nation’s reliance on imports for manufactured goods increased. It is possible that these changes could continue to influence the volume of U.S. international trade and affect goods movement within the United States for many years to come.

Internationalization of the U.S. and world economies: Although societies have traded with each other for millennia, the pace and scale of integration of the world’s economy

69 during the past five decades may well be unparalleled in history (Dicken 1998). Today, the world economy continues to change in dramatic ways. Due in part to lower transportation costs; geographic distance no longer protects industries from international competition as much as it once may have. The global nature of much of manufacturing makes it difficult to determine if a computer is “American,” a car “Japanese,” or a television “Mexican.” When component parts of manufactured goods are produced in multiple countries and brought together for assembly, determining the country of origin for trade purposes is a complex matter and this affects trade balances. Many expect globalization to continue to shape world economic activities, influence where and how goods are produced and distributed, and ultimately affect the transportation of goods into and out of the United States. Even if growth in the volume of freight moved were to taper off, ongoing changes in business logistics, outsourcing, and just-in-time inventory systems that characterize global production could increase the demand for more frequent and smaller shipments.

Advances in transportation and telecommunications technology: Transportation and telecommunications technologies have contributed to the rapid growth of international trade and helped to overcome the resistance of space and time. They have allowed the unparalleled mobility of goods and people.

Although air and containerized cargo improved merchandise trade dramatically, earlier transportation innovations in physical infrastructure, such as suspension bridges, tunnels, railroads, the U.S. Interstate Highway System, modern airports, and marine terminals, were also critical. Advances in both vehicles and infrastructure increased speed, reliability, and safety while reducing transportation costs and the time it takes to travel from one place to another.

For telecommunications, improvements in voice, text, and data technologies have allowed fundamental changes in services trade, including transportation services. Component parts of cars or aircraft might be designed in the United States; then the designs could be emailed to Japan, Taiwan, and Brazil for production; and the finished goods transported to the United States. Improvements in information technologies make it easier to seamlessly coordinate transportation operations across physically distributed transportation networks, facilitate intermodal and multi-modal movements of international trade, enhance transportation solutions for freight shippers, and allow significant gains in transmitting pre-clearance cargo and crew information for security operations.

Changes in the international transportation market: During the past three decades, the U.S. government took several initiatives to reduce economic regulation of domestic transportation services. The deregulation legislation included the Airline Deregulation Act of 1978 for commercial aviation, the Motor Carrier Act of 1980 for interstate trucking, the Staggers Rail Act of 1980 for railroads, and the Shipping Act of 1984 and Ocean Shipping Reform Act of 1998 for ocean carriers. In most cases, the legislation spurred industry restructuring, increased productivity, and allowed U.S. transportation services providers to better compete in international freight markets (USDOT BTS 2000).

70 In addition, changes in international regulatory structures, such as for trucking under the NAFTA motor carrier access provisions and for aviation under the “Open Skies” agreements, will continue to affect U.S. international freight movements.

In the aviation industry, two forces influenced the changes in international regulatory structures: the reality of globalized markets and the need to better incorporate issues such as safety and environmental concerns in bilateral agreements (Lyle 1995). One effect of the internationalization of economies and markets is that air transportation services, whether passenger or cargo, can no longer be isolated within national borders. Alliances between airlines are key to maintaining international competitiveness. At the same time, nations have sought to expand the focus on safety. The existing regulatory system has evolved from one with tight national restrictions to one that allows for bilateral “Open Skies” or the ability of air carriers to provide passenger and cargo services to and from other countries without restrictions.53 As of October 2002, the United States had concluded Open Skies agreements with 59 countries,54 but had yet to enter into one with the top three U.S. transportation services trade partners: Japan, Canada, and the United Kingdom.55

Changes in international and domestic warehousing and distribution operations: Warehousing and distribution centers have traditionally been located near the port of entry or manufacturer. Due to rising land costs and rising crime in urban areas, many warehousing and distribution operations are being located in “green field” sites in increasingly rural areas. In the Los Angeles basin, warehouses and distribution centers were located in the Los Angeles/Long Beach harbor area and downtown Los Angeles and have since gravitated to the Ontario/Riverside/San Bernardino (Inland Empire) area. There is now 365 million square feet of warehousing and distribution space in this area. Now retailers and manufacturers are looking at adding facilities in areas such as Victorville and the San Joaquin Valley in California. Don Breazeale and Associates predicts that this search for less congestion, lower land prices, available skilled and semi- skilled labor, lower workman’s compensation rates (13.5% in California vs. 2.5% in Arizona) and tax incentives will attract more and more warehousing and distribution operations to Arizona and Nevada to handle large volumes of import freight from Asia and be able to distribute to the California consumer market. Improved service capabilities in the Flagstaff Region for existing and potential goods movement will enhance the Region’s ability to attract companies who rely on transportation to bring their products to market or who require a distribution point that is less congested and provides more flexibility.

Reduction of trade barriers and liberalization of national economies: Since 1970, U.S. international trade more than quadrupled and expanded globally, in part because of substantial reductions in trade barriers resulting from changes in policy. Reduction in trade barriers was accompanied by the formation of regional economic groupings such as NAFTA, the European Union, and the MERCOSUR56 in Latin America. As trade barriers were reduced, the relationships between national governments and businesses changed, creating economic conditions that enhanced access to global markets and resources. Significant changes that could affect the economic deregulation of international

71 transportation services, multilateral Open Skies agreements, privatization of infrastructure, and general agreements among World Trade Organization member nations could further facilitate trade interactions.

Footnotes 50 Maquiladoras are manufacturing plants primarily concentrated on the northern Mexican border that specialize in assembling goods from imported components for re-export to the United States. In 2000, there were about 3,600 maquiladora manufacturing plants operating in Mexico. 51 BEA defines USDIA as the ownership or control, directly or indirectly, by one U.S. person of 10 percent or more of the voting securities of an incorporated foreign business enterprise or the equivalent interest in an unincorporated foreign business enterprise. FDIUS is the reverse. The annual investment position data for USDIA represents the value of U.S. parent companies’ equity in and net outstanding loans to their foreign affiliates, while that for FDIUS represents the value of foreign parent companies’ equity in and net outstanding loans to their U.S. affiliates. The major direct investment items include capital flows (equity, intercompany debt, and reinvested earnings), income, royalties and license fees, and other services transactions. 52 Comparative advantages in trade among regions arises as trading partners seek to take advantage of differences in the costs of producing different goods and services (Krugman 1991). 53 The United States signed the first Open Skies agreement with the Netherlands in 1992 and more recently, with Jamaica in October 2002. The agreements facilitate scheduling of connecting flights, greater capacity in specific markets, and potentially lower prices and rates due to increased flight options. 54 The United States and Uganda initialed the 57th agreement that, when formally concluded, will eliminate all restrictions on air services between the two nations (USDOT OST 2002a). 55 The United States and Japan agreed on “all-cargo liberalization” in 1996. The United States and Canada renewed their air bilateral agreement (not an Open Skies agreement) in 1995. 56 The MERCOSUR customs union was formed in 1995 between Argentina, Brazil, Paraguay, and Uruguay.

Freight Transportation Profile - Arizona

Understanding future freight activity is important for matching infrastructure supply to demand and for assessing potential investment and operational strategies. To help decision-makers identify areas in need of capacity improvements, the U.S. Department of Transportation developed the Freight Analysis Framework (FAF), a comprehensive national data and analysis tool, including county-to-county freight flows for the truck, rail, water, and air modes. FAF also forecasts freight activity in 2010 and 2020 for each of these modes. Information about the methodology used in developing FAF is available on the Office of Freight Management and Operations’ website.

The U.S. freight transportation network moves a staggering volume of goods each year. Over 15 billion tons of goods, worth over $9 trillion, were moved in 1998. The movement of bulk goods, such as grains, coal, and ores, still comprises a large share of the tonnage moved on the U.S. freight network. However, lighter and more valuable goods, such as computers and office equipment, now make up an increasing proportion of what is moved. FAF estimates that trucks carried about 71 percent of the total tonnage and 80 percent of the total value of U.S. shipments in 1998. By 2020, the U.S. transportation system is expected to handle about 23 billion tons of cargo valued at nearly $30 trillion.

Arizona

Table 1 presents information on freight shipments that have either an origin or a destination in Arizona. As shown in the table, trucks moved a large percentage of the tonnage and value of shipments, followed by rail (tonnage) and air (value). Figures 1 and 2 show freight flows on the highway and rail modes.

72 Truck traffic is expected to grow throughout the state over the next 20 years. Much of the growth will occur in urban areas and on the Interstate highway system (Figures 3 and 4). Truck traffic moving to and from Arizona accounted for 11 percent of the Average Annual Daily Truck Traffic (AADTT) on the FAF road network. This 11 % of FAF AADTT is for the Arizona FAF network only. Approximately 7 percent of truck traffic involved in-state shipments, and 26 percent involved trucks traveling across the state to other markets. Nearly 56 percent of the AADTT were not identified with a route-specific origin or destination. The FAF statistics are derived from a relatively small sampling of trucking way bills and usually only identify the cargo, origin and destination. The actual routing is still at the option of the trucker who has to allow for weather, traffic conditions, and where the return load is going to be picked up. The Consultant believes the sampling would be somewhat consistent over the 56% of AADTT freight movements not identified with route specific origins or destinations.

Table 2 shows the top five commodity groups shipped to, from, and within Arizona by all modes. The top commodities by weight are clay, concrete, glass, or stone and petroleum or coal products. By value, the top commodities are transportation equipment and secondary traffic. Secondary traffic is defined as freight flows to and from distribution centers or through intermodal facilities. No commodities are assigned to this intermediate step in the transportation process.

When reviewing the data above please consider that these numbers are specific to the State of Arizona and trends differ by regional area based on weather, shifts in population and buying habits. Consider that Arizona has different buying habits that NY and other places in the nation and in addition the Flagstaff Region has a population base that shifts slightly with the seasons.

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Figure 1. Freight Flows To, From, and Within Arizona by Truck: 1998 (tons)

74 2. Freight Flows To, From, and Within Arizona by Rail: 1998 (tons)

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Figure 3. Estimated Average Annual Daily Truck Traffic: 1998

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Figure 4. Estimated Average Annual Daily Truck Traffic: 2020

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Any freight analysis will be dominated by bulk commodities as illustrated above. These commodities move in specialized rail cars or truck trailers and usually are not containerized. If bulk commodities are loaded into closed vans or containers, damage to the container or rail car can be extensive, special handling including blocking and bracing will add substantially to the costs, and revenue will not be maximized. The Consultant does not consider these commodities as potential intermodal facility freight.

Northern Arizona and Flagstaff

The 2004 truckload market is experiencing the tightest capacity in years due to increased business, consolidation of the industry and others going out of business combined with rising costs (drivers, insurance, fuel) and the new hours of service regulations the price gap between intermodal freight movement and truck is narrowing. The long term trend of improving rail intermodal service reliability will accelerate the modal shift to rail.

Regional warehouse strategies continue to grow for the following reasons:

ƒ Major retailers are finding a few distribution centers around the country are not as agile in responding to demand spikes for particular items on a regional basis as distribution centers located closer to the marketplace; ƒ Minimization of the risks associated with weather, labor disruptions, tariffs, quotas and terrorist acts; ƒ Availability, cost and quality of regional short-haul transportation services; ƒ Potential to reduce inbound transportation costs;Complex, product customization center operations and products for a specific regional market.

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The regional warehouse model allows them to virtually customize their service to any given marketplace. Small manufacturers have found success in the Phoenix area and we believe Flagstaff will be able to attract these businesses with the improved transportation services offered by an intermodal facility and transloading/cross-dock facility.

The Northern Arizona/Flagstaff region will be very attractive to warehousing, distribution and manufacturing with the creation of the intermodal facility. Reliable rail and highway connections plus the ability to move rush shipments via the Flagstaff airport all add to the economic development package.

In the Consultants experience, the transportation customer is primarily interested in reliability and consistency of service, and then price and transit time. The majority of transportation users have developed a logistics chain that can absorb additional transit time.

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Site Analysis

NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

ASH FORK, AZ SITE ANALYSIS

A key requirement for any rail facility is a large piece of property that is flat and level for safe and efficient railroad operations.

Terrain at this site was very rough with no large area available that could be used for a rail facility.

Ash Fork is located on the Phoenix Line 29 rail miles from West Williams on the BNSF mainline.

Elevation at Ash Fork is approximately 5,150 feet.

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NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

BELLEMONT, AZ SITE ANALYSIS

A key requirement for any rail facility is a large piece of property that is flat and level for safe and efficient railroad operations.

Note the existing Arizona National Guard (ANG) yards tracks in white on the right side of the picture. These tracks are immediately north of the 815 acres that the ANG indicated that they wanted to commercially develop. On the 815 acres there are several warehouses which are being leased out for commercial uses. The BNSF right of way (ROW) is 300 feet wide from ANG ROW to center of East Bound mainline track. The area between the ANG tracks and BNSF mainline is flat and suited for a rail facility.

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An intermodal facility could be constructed on the southerly 150’ of the BNSF ROW and leave 100’ between the proposed facility and the BNSF mainlines to allow for BNSF expansion of mainlines or siding or addition of additional tracks to serve the proposed intermodal facility.

The proposed facility as shown consists of a 4,800’ storage track with two intermodal loading/unloading tracks with a 105’ wide by 2,200’ long concrete/asphalt pad between the tracks. A stub track with car floor height dock and ramp could be constructed off of ANG tracks for unloading construction equipment, lumber, paper products and etc from flat or box cars. These two facilities coupled with the existing ANG yard tracks and warehouse tracks would accommodate almost all types of rail equipment.

BNSF currently provides rail service for the ANG tracks. The ANG yard tracks are switched by the ANG switch engine and they switch about 200 cars per month.

82 All proposed construction is in an area previously occupied by a rail yard so grading work would be minimal. All additional switches would be placed in the ANG lead track.

A rough estimate of cost for this facility would be $6,500,000 which includes construction of 6 yard turnouts, construct 12,000 LF of track, construct 26,000 SY of concrete loading/unloading pad, engineering and related costs.

Proposed facility is 10 miles west of I-40/I-17 interchange at Flagstaff on I-40.

Elevation at the facility is about 7,200 feet.

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NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

HOLBROOK, AZ SITE ANALYSIS

A key requirement for any rail facility is a large piece of property that is flat and level for safe and efficient railroad operations

City of Holbrook has an industrial park located about 2 ½ mile south of the BNSF mainline near intersection of US 77 and US 377. There is a lot of open property in this area and the terrain is gentle rolling hills with silty/sandy/clay soils.

Proposed facility is 99 miles east of I-40/I-17 interchange at Flagstaff on I-40.

Elevation at the facility is about 5,100 feet.

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The site would have rail service by the Apache Railway which has a direct connection to BNSF passing tracks.

85 NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

PAGE, AZ SITE ANALYSIS

A key requirement for any rail facility is a large piece of property that is flat and level for safe and efficient railroad operations.

Page is located approximately 150 miles northerly of Flagstaff and the BNSF mainlines on US 89.

There is no available railroad access at Page.

The City has an Industrial Park on the southerly side of the city which has truck service only.

86 NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

PAULDEN SITE ANALYSIS

A key requirement for any rail facility is a large, level and flat piece of property on which to build railroad operating tracks.

Looking north from Chino Valley along US 89 towards BNSF line from Williams to Phoenix. Abandoned rail line previously connecting to BNSF Abra station is in middle right side of picture. Terrain at this location generally flat, however, no information is available to grade of the surrounding areas. Elevation at this site is approximately 4,450.

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Abandoned rail line shown in blue. From this site it is 25 miles on US 89 to I 40 and 51 miles on I 40 to Flagstaff for a total distance of 76 miles. It is 59 miles by rail from the Abra station to BNSF mainline at Williams. Rail service to this site would be determined by availability of rail service on the Phoenix line.

88 NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

CHINO VALLEY, PRESCOTT VALLEY AND PRESCOTT, AZ SITE ANALYSIS

Chino Valley, Prescott Valley and Prescott were located on a former Santa Fe rail line which was removed at least 15 years ago. The rail line was 28.2 miles long from BNSF Abra station on the Phoenix mainline to the end at Prescott. This rail line is shown on the map below.

To re-establish this rail line would require regrading the entire route to remove vegetation and to meet current railroad embankment design standards.

The terrain gets rougher as you go south from Abra towards Prescott. The map indicates many local drainage ways and it may be necessary to replace all culverts and bridges on this line.

The rail line also crosses many local roads and US highways 89 and 89A. It may be necessary to grade separate the proposed rail crossing of US 89 and 89A. All other crossings would need to have grade crossing warning devices installed which could include flashing light signals with gates.

The estimated cost to restore this rail line would be $2,000,000 per mile assuming there are no major drainage bridges to replace or construct highway grade separations.

As you go south from Chino Valley towards Prescott the terrain gets rougher which would make it difficult to find a large flat/level area for a rail facility. In addition there are many residential developments which could be close to any proposed facility.

89 NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

MC PHETRIDGE, AZ SITE ANALYSIS

A key requirement for any rail facility is a large piece of property that is flat and level for safe and efficient railroad operations.

BNSF station Mc Phetridge is the location of the Nestle-Purina plant which is located between I-40 and the BNSF mainlines. Plant on right side of mainlines at this location. Note trailer parking for plant is immediately adjacent to the mainline tracks.

All areas between the BNSF mainlines and the Nestle-Purina plant are occupied by tracks and there is no area to add additional tracks.

Mc Phetridge is located in the easterly Flagstaff city limits and is at elevation 6,825.

90 NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

SELIGMAN, AZ SITE ANALYSIS

A key requirement for any rail facility is a large piece of property that is flat and level for safe and efficient railroad operations.

Picture taken from east I-40 access road and ranch road looking west. Note rail cars on BNSF siding on right side of picture. Site is relatively flat and railroad embankment is on 3-4 foot high fill. There is a 29’ bridge and 4-42” culverts which cross BNSF mainlines and with small drainage channels across the site. Ranch facilities on site appear to be used.

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The distance from BNSF side track to I-40 is approximately ½ mile and distance between the two I-40 access roads is approximately 2.4 miles.

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Note the flat profile of the BNSF mainline thru the side track area. Existing side tracks are used for BNSF mainline meet/pass operations and would be available for other uses. Any new facility would be constructed from the existing side tracks which would not require disturbing mainline tracks. Elevation at site is approximately 5,250 feet. Site is 72 miles easterly on I-40 to the I-40/I-17 interchange at Flagstaff.

93 NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

WILLIAMS, AZ SITE ANALYSIS

A key requirement for any rail facility is a large piece of property that is flat and level for safe and efficient railroad operations.

Terrain at this site was very rough and there are many tourist facilities and roads to serve the Grand Canyon Railroad. There was no large area available that could be used for a rail facility.

Williams is located on the Phoenix Line, 3 rail miles from West Williams on the BNSF mainline.

Elevation at Williams is approximately 6,800 feet.

94 NORTHERN ARIZONA COUNCIL OF GOVERNMENT RAIL FACILITY ANALYSIS

WINSLOW, AZ SITE ANALYSIS

A key requirement for any rail facility is a large piece of property that is flat and level for safe and efficient railroad operations.

BNSF rail yard at Winslow, AZ. Looking southerly at mainlines and locomotive servicing facilities. Winslow is a BNSF mainline train crew change point and all mainline trains stop here.

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96 An intermodal facility could be constructed on the southwesterly of the BNSF tracks. The proposed facility as shown consists of a 3,600’ storage track with two intermodal loading/unloading tracks with a 105’ wide by 2,200’ long concrete/asphalt pad between the tracks. The facility could be extended 1,000’ to the west if necessary.

The proposed facility is adjacent to a major BNSF rail yard which has switching capabilities, storage tracks, fuel unloading, rail car repair and other tracks to make it a full service rail facility. The rail yard does not have an intermodal facility for unloading/loading truck trailers from rail cars.

The above track chart would indicate that there is space within the confines of the existing yard tracks. The tracks shown are the main run around tracks and there are many service tracks within the yard that are not shown on the schematic map. Some of the roads shown on the highway map are no longer in service.

All proposed construction is adjacent to a rail yard, terrain is relatively flat and ground is silty/sandy/clay. The cost for grading work would be minimal.

A rough estimate of cost for this facility would be $6,180,000 which includes construction of 6 yard turnouts, construct 10,000 LF of track, construct 26,000 SY of concrete loading/unloading pad, engineering and related costs.

With all mainline trains stopping at Winslow, there will be more flexibility to receive and ship rail cars from the proposed facility.

Proposed facility is 57 miles east of I-40/I-17 interchange at Flagstaff on I-40.

Elevation at the facility is about 4,900 feet.

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Economic Development Impact Analysis

Introduction

An efficient and effective trade and freight transportation system is essential to economic growth, productivity, international competitiveness, national security, and the overall quality of life in the United States. Freight transportation, along with a number of key components, can be a powerful enabler for economic growth. An efficient, technologically advanced, well-organized and well-managed trade and freight transportation system, supported by improvements in the infrastructure, can effectively reduce the cost of goods movement and ultimately reduces the cost to the consumer. Nearly seven million businesses in the United States rely on the national and regional transportation network to conduct business, engage in interstate commerce, and carry out international trade. At the same time, more than 100 million households rely on freight transportation to provide access to goods and services produced by businesses both here and abroad.

The Flagstaff Region has very few large scale shippers or even mid-sized shippers but in the aggregate, as the data indicates, the traffic is significant. It should be noted that the Consultants were very conservative in their estimates of traffic, that all bulk goods were removed from the estimates, that any movements under 400 miles were eliminated, and that there is no duplication between the data collected through the interviews and data generated by Reebie data. The Consultants also did not rely on significant diversions from other areas; the one exception being freight that flows along the I-40 and is destined for Phoenix and might be diverted to a transload facility at Flagstaff and this is not a significant volume of traffic.

Improvements in the logistics system not only reduce transportation costs, but also affect the productivity of businesses by providing better inventory management, allowing consolidation of business activities at favorable locations, and providing access to additional factors of production such as a better labor force, improved quality of life for staff, and access to raw materials.

We anticipate that establishing a truck/rail compatible freight center in the Flagstaff Region will provide improved connections to the national freight system. The need for additional capacity and improvements to the infrastructure has been analyzed and evaluated as part of this feasibility study and the following report attempts to assess the impact on the local and regional economies

An understanding of the relationship between investments in transportation infrastructure and the performance of the freight transportation system is critical to policy makers, transportation users and providers. Significant investments may have to be made in the infrastructure and the decision makers, both private and public sector, must be prepared to justify these investments.

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Government must rely on the business model of “revenue supporting costs” when evaluating this type of project with the additional caveats that usually apply to governmental decision making i.e. safety, environment, jobs creation, etc. The feasibility study regarding this project provides the community with an economically stimulating project that meets the criteria of revenue supporting cost; please note that the cash flow analysis clearly indicates a project that makes a profit even when capital investment is amortized over seven (7) years and when traffic considered is estimated on a very conservative basis. Both the low and high end traffic scenarios support this project and reflect a profit. Economic development potential can therefore be evaluated on the basis of an additional value added component of the project. In other words the pricing for the economic development side will not have to support in any way the truck/rail facility which will be self-sustaining.

Background

In the following section, the Consultants have attempted to provide the client with an overview, on a macro basis, of the economy and to therefore establish a relationship between this data and information to the economy in the Flagstaff Region.

National

The following excerpt is from the Southwest Economy, Issue 3, May/June 2003 as submitted by the Federal Reserve Bank of Dallas.

New Economy Myths and Reality

In the late 1990s, some economists announced that the American economy had fundamentally changed. According to this “New Economy” view, technological advances had brought on a higher sustained level of productivity growth, which allowed faster economic growth with less inflation. Given events since 2000—the long, steep stock market downturn, the falloff in business investment and the subsequent recession—many questioned whether anything in the New Economy view is valid.

Although those who hold this view consider accelerated productivity growth fundamental to the late ’90s boom, other forces were also at work. These include the earlier deregulation of key U.S. industries, financial innovation and freer trade in many parts of the world. Despite this, the flood of Internet related businesses and the spectacular rise in their stock valuations led some to see the New Economy as solely an Internet phenomenon.

Is the New Economy view simply Pollyanna economics or is it rooted in reality? An analysis of several myths shows that recent advances in information technology have, in fact, helped transform the U.S. economy. While such technology effects are an old story, the evidence suggests that the current situation differs significantly. The New Economy has not produced ever-increasing stock prices or tamed the business cycle. But it has

99 accelerated productivity growth, making the economy more resilient and flexible, with less volatile growth rates and fewer and milder recessions, thereby improving living standards.

What Is the New Economy?

Many use the term New Economy to refer to events expected to result in always-rising corporate revenues, higher sustainable corporate valuations and the end of business cycles. We define the New Economy as one that employs technology to substantively alter production or consumption processes or both.1

These technological transformations ultimately created new economies that changed valuations, production processes, and how and where people worked. They resulted in a general improvement in living standards and a dramatic shift in the organization of production and markets.

As economist Joseph Schumpeter noted in the late 1930s, there is nothing new about technology transforming economic outcomes on both the supply and demand sides. Railroads, steam power, illumination, cable lines, electricity, air-conditioning and other innovations had profound consequences for what was produced, where it was produced and the product mix consumers demanded.

Further, these inventions seem to have followed a path similar to that of the computer and its spillovers. An initial boom is followed by saturation and then shakeout. Next comes a period when firms learn how best to utilize the new invention for long-term, stable growth, which is followed by a period of problem solving, social dislocation, and consumer and worker resistance to technological change.

New Economy Benefits

While innovation is always transforming our economy, the current situation appears to differ significantly:

• Technological change has accelerated not only the pace of innovation but also the pace at which new products gain widespread use and produce significant sales.2 • Consumer information has exploded; weakening producer pricing power and making markets more closely resemble the perfectly competitive model, in which all participants have complete information.

1 J. Bradford DeLong and Lawrence H. Summers, “The ‘New Economy’: Background, Historical Perspective, Questions, and Speculations,” Federal Reserve Bank of Kansas City Economic Review, Fourth Quarter 2001, pp. 29– 59. 2 For example, it took 46 years for a quarter of American homes to be wired for electricity. Getting phones to a fourth of America took 35 years; cars, 55. More recently, the personal computer required only 16 years to penetrate a quarter of American homes, cellular phones took 13 years and the Internet seven. The rapid diffusion might be partly because these innovations built upon earlier ones. See W. Michael Cox and Richard Alm, “The Economy at Light Speed: Technology and Growth in the Information Age—and Beyond,” Federal Reserve Bank of Dallas 1996 Annual Report.

100 • Supply chain management, just-in-time inventory, rapid production and delivery systems, and the like are now proven business practices given momentum by new information technology. Inventories have grown increasingly smaller in relation to sales since the early 1990s (Chart 1). Evidence at the individual firm level and statistical analysis of GDP components suggest that applying the technology has produced a leaner supply chain that can better match inventories with sales. Better inventory management, in turn, has been largely responsible for the decline in the volatility of GDP growth, say some economists.3 • Customer service is often available around the clock. Many companies now deliver and process information and help customers via voice mail, the Internet and call centers. We take for granted service that is far better than that of a decade ago. • Productivity growth has increased in recent years, with the rate about 1 percentage point higher in the post-1994 period than in 1973–94 (Chart 2). Many studies attribute this to the effective use of new information technologies.4 Moreover, productivity growth, coupled with falling pricing power, has raised real income across all income groups. • Information technology has transformed our workplaces, production facilities, homes, schools and hospitals. The microchip has created a world characterized by better, faster and cheaper. Information technologies have changed where we work, how we work and what kind of work we do.

3 Owen Irvine and Scott Schuh, “Inventory Investment and Output Volatility,” Federal Reserve Bank of Boston Working Paper no. 02-6, December 2002. 4 Among the studies are those by Stephen Oliner and Daniel E. Sichel, “The Resurgence of Economic Growth in the Late 1990s: Is Information Technology the Story?” Journal of Economic Perspectives 14, Fall 2000, pp. 3–22; and Dale W. Jorgenson and Kevin J. Stiroh, “Raising the Speed Limit: U.S. Economic Growth in the Information Age,” Brookings Papers on Economic Activity, 2000, pp. 125–211. In contrast, Robert J. Gordon questions information technology’s importance to the recent productivity rise, concluding that the New Economy’s effects are largely confined to durable goods manufacturing in “Does the ‘New Economy’ Measure Up to the Great Inventions of the Past?” Journal of Economic Perspectives 14, Fall 2000, pp. 49–74.

101

New Economy Costs

These changes, while positive, nonetheless come with costs. Replacement of existing capital is expensive, in terms of both outlays and personnel retraining. Newer equipment tends to be more complex, and technology often moves faster than some people can master it. Time that had been spent on other things is now devoted to maintaining technology-dependent environments, and learning to use the technology may take several hours, days or even weeks.

There are other trade-offs as well. Consumers’ desire to stay connected to family, friends and businesses leads to continual hardware and software upgrades and has generated virtual monopolies for some providers. And increased identity theft and credit card and ATM fraud are directly linked to the commercial application of the Internet.

102 The Reality

The 1990s stock market boom and record economic expansion led to the view that something fundamental had changed in the U.S. economy. The era featured rapid economic growth and low inflation and unemployment, a combination unseen in decades. This New Economy view was often confused with assertions that the commercial application of the Internet had changed basic business fundamentals and valuations that the business cycle was dead and that Old Economy firms were doomed.

Many of these myths were dispelled when the stock market decline began in early 2000 and the economy slipped into recession in March 2001. Business cycles, including commensurate changes in unemployment and inflation are alive and well, profits matter and Old Economy firms are not going away anytime soon.

Nevertheless, the development and adoption of new information technology appears to have brought on an era characterized by higher sustainable productivity growth. While the stocks of many high-tech firms are gone, many of the productivity benefits remain. Accelerating productivity ultimately leads to higher living standards and fewer and milder periods of declining output, making our economy more resilient and flexible.

The New Economy is and will continue to be an influence on the development of new manufacturing facilities; albeit they will be small, manageable firms with less than 100 employees. Warehousing and distribution activities will continue to seek locations that keep land and labor costs in line, have a good quality of life for their employees, offer excellent and reasonable transportation alternatives and good productivity.

Besides the reason listed above, technological advances will need to be employed in an intermodal facility to attract the manufacturing and warehouse/distribution clients into the region. These operations require excellent communication between their suppliers, clients and transportation providers in order to compete.

Northern Arizona provides a skilled work force, excellent quality of life, reasonable wage levels, reasonably priced land and a desire to bring public/private partnerships to a mutually successful level.

That’s the reality of the New Economy. End of excerpt.

Manufacturing5

In the U.S. Department of Labor, Bureau of Labor Statistics the manufacturing sector consists of establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products.

5 http://www.bls.gov/iag/manufacturing.htm

103 Data from the Quarterly Census of Employment and Wages program, show that the manufacturing sector employs many workers, but in a relatively small number of establishments.

• Over 64 percent of workers in the goods-producing sectors (which includes natural resources and mining, and construction) are manufacturing employees, yet manufacturing accounts for less than 30 percent of goods-producing establishments. • In the economy as a whole, manufacturing represents almost 12 percent of all employment, yet less than 5 percent of all establishments.

Current Employment Statistics estimates show annual average employment in manufacturing fluctuating between 16,774,000 and 17,560,000 between 1993 and 2001, before declining sharply in 2001 and 2002. During 2002, manufacturing employment averaged 15,306,000.

• Employment of production workers in manufacturing followed a similar pattern over the same period, with numbers above 12 million until the decline beginning in 2001. In 2002, production workers in manufacturing averaged 10,799,000.

• The average weekly hours of production workers in manufacturing were above 41 hours per week each year in the 1993 to 2000 period, and between 40 and 41 on average in 2001 and 2002.

• Average hourly earnings of production workers in manufacturing have increased from an annual average of $11.70 in 1993 to $15.29 in 2002.

104

In 2002, the unemployment rate of persons most recently employed in manufacturing industries was 6.7 percent, according to the Current Population Survey. The overall unemployment rate was 5.8 percent that year.

Data from the Mass Layoff Statistics program show that, in 2002, there were 2,378 extended mass layoff events in manufacturing, resulting in 454,034 separations of workers from their jobs and 469,774 initial claimants for unemployment insurance.

Productivity and unit labor cost data are available for the manufacturing sector as a whole, both on a labor productivity basis and on a multifactor productivity basis. There are separate measures of productivity for many industries at the 4-digit NAICS level of classification.

Data from the BLS Producer Price Index and Employment Projections programs will be available on the web site cited below shortly after those programs publish data for NAICS sectors in February 2004. In addition, statistics on manufacturing are produced by the BLS Injuries, Illnesses, and Fatalities program; this program will release industry data on a NAICS basis in the second half of 2004, and then the web site will be updated..

The data above was last modified in February 10, 2004

Transportation and Warehousing6

The transportation and warehousing sector includes industries providing transportation of passengers and cargo, warehousing and storage for goods, scenic and sightseeing transportation, and support activities related to modes of transportation. Establishments in these industries use transportation equipment or transportation related facilities as a productive asset. The type of equipment depends on the mode of transportation; air, rail, water, road, and pipeline.

6 http://www.bls.gov/iag/transportutil.htm

105 The Quarterly Census of Employment and Wages data indicates that transportation and warehousing account for a small part of the nation's employment, and a smaller portion of business establishments. In the economy as a whole, transportation and warehousing makes up about 3.1 percent of all employment and about 2.6 percent of all establishments.

The Current Employment Statistics estimates indicate that the annual average employment in transportation and warehousing during the 1993 - 2002 period was 3,553,800 at the beginning of the period and reached a peak of 4,410,300 in 2000. During 2002, transportation and warehousing employment was 4,205,300, on average.

Annual employment of non-supervisory workers in transportation and warehousing was 3,019,400 in 1993 and peaked at 3,753,200 in 2000. Employment of non-supervisory workers in transportation and warehousing averaged 3,595,700 in 2002.

• Annual averages of the average weekly hours of non-supervisory workers in transportation and warehousing were below 40.0 during the 1993 to 2002 period, and were at 36.8 at the end of the period.

• In transportation and warehousing, the average hourly earnings of non-supervisory workers increased from an annual average of $12.71 in 1993 to $15.77 in 2002.

106

The Current Population Survey data indicates that in 2002, the unemployment rate of persons most recently employed in transportation was 4.9 percent. The overall unemployment rate was 5.8 percent that year.

Data from the Mass Layoff Statistics program indicates that in 2002 in transportation and warehousing, there were 338 extended mass layoff events, resulting in 82,065 separations of workers from their jobs, and 74,950 initial claimants for unemployment insurance.7

The data above was last modified on February 10, 2004.

7 Data from the BLS Producer Price Index and Employment Projections programs will be added to the cited web page after those programs publish data for NAICS sectors in February 2004. In addition, statistics related to transportation and warehousing, and are produced by the BLS Injuries, Illnesses, and Fatalities program; this program will be releasing industry data on a NAICS basis in the second half of 2004, and then web site will be updated with such data. See the BLS NAICS Implementation Schedule on the cited web page for other implementation dates.

107 The Bureau of Labor Statistics, U. S. Department of Labor estimates that industry employment in all occupations will increase 28.6% from 2002 to 2012. We have provided a snapshot of some of the warehouse industry positions and the projected growth in the chart below:

As indicated in the chart below, the projected growth in the Warehousing and Distribution industries is 28.6% over a 10-year period. This is one of the “hottest” growth industries as evidenced by employment data indicate that manufacturing employment will decrease 1.0 percent over the 2002-12 period. Total employment for all industry sectors is projected to increase 14.8 percent.

Sample Industry Employment by Occupation, 2002 and Projected to 2012 Warehouse and Distribution Industries

Selected Occupations from the Warehousing and 2002 2012 Percent Storage Industries Change

Total, All Occupations 513,600 660,300 28.6

Administrative Services Managers 804 1,136 41.4 Computer & Information Systems Managers 604 980 62.3 Industrial Production Managers 372 555 49.4 Purchasing Managers 347 466 34.4 Transportation, Storage & Distribution Managers 4,074 6,086 49.4 Industrial Engineers 495 739 49.3 Mechanical Engineers 127 191 50.8 Industrial Engineering Technicians 95 142 49.4 Mechanical Engineering Technicians 551 823 49.4 Sales Representatives, Wholesale & Manufacturing 6,554 9,788 49.3 Supervisors, Office and Administrative Support 7,573 9,699 28.1 Material Recording, Scheduling, Dispatch, Distribution 88,895 105,612 18.8 Cargo and Freight Agents 1,184 1,512 27.7 Dispatchers 992 1,342 35.2 Production, Planning & Expediting Clerks 4,398 6,569 49.3 Shipping, Receiving & Traffic Clerks 29,037 34,867 20.1 Stock Clerks & Order Fillers 48,605 55,444 14.1 Weighers, Measurers, Checkers & Samplers 1,685 2,517 49.3 Production Occupations 30,153 43,631 44.7 Transportation and Material Moving Occupations 244,030 300,478 23.1 Supervisors, Transportation & Material Moving Workers 16,008 20,351 27.1 Material Moving Occupations 193,071 233,235 20.8 Conveyor Operators and Tenders 1,267 1,610 27.1 Crane & Tower Operators 770 1,150 49.3 Hoist & Winch Operators 75 112 49.3 Industrial Truck & Tractor Operators 64,267 79,984 24.4 Laborers & Material Movers, Hand 120,907 142,606 17.9 Laborers & Freight, Stock, Material Movers, Hand 97,708 112,041 14.7

Bureau of Labor Statistics

108

The Consultant has taken the lists provided by GFEC detailing the companies that have or are currently showing an interest in relocating to the Flagstaff region and consolidated them. The Consultant then indicated by each type of business if we considered them potential users of an industrial park and/or the intermodal facility.

The consolidated chart is presented below:

109 Industry Nbr. Of Employees Size Requirement Status Industrial Park User Intermodal Facility User

Aerospace unknown unknown Project Yes Yes Alternative Energy 200 unknown Lost Yes Not Likely Alternative Energy 100 100,000 Lost Yes Not Likely Alternative Energy 25 25,000 Lost Yes Not Likely Automotive 6 2,000 Project Yes Yes Biotechnology unknown unknown Lost Yes Not Likely Biotechnology 4 1,750 Project Yes Not Likely Biotechnology 5 10,000 Project Yes Not Likely Biotechnology unknown 15,000 Prospect Yes Not Likely Biotechnology 12 20,000 Prospect Yes Not Likely Biotechnology 200 unknown Prospect Yes Not Likely Biotechnology unknown unknown Prospect Yes Not Likely Biotechnology unknown unknown Prospect Yes Not Likely Biotechnology 8 8,000 Prospect Yes Not Likely Biotechnology unknown unknown Prospect Yes Not Likely Biotechnology unknown unknown Prospect Yes Not Likely Biotechnology unknown unknown Prospect Yes Not Likely Biotechnology 8 20,000 Prospect Yes Not Likely Call Center unknown 100,000 Lost No No Call Center 425 42,500 Lost No No Call Center 150 45,000 Lost No No Call Center 25 10,000 Lost No No Call Center 10 unknown Project No No Call Center 25 5,000 Project No No Call Center 110 15,000 Prospect No No Call Center 50 500 Prospect No No Call Center unknown unknown Prospect No No Call Center unknown unknown Prospect No No Call Center 500 40,000 Prospect No No Construction 75 5,000 Prospect Yes Yes Distribution 75 350,000 Lost Yes Yes Distribution 2 4,000 Project Yes Yes Environmental Technology 200 130,000 Lost Yes Yes Environmental Technology 25 100,000 Lost Yes Yes Government 31 25,000 Project No No Information Technology 52 10,000 Lost Yes No Information Technology 8 12,500 Project Yes No Information Technology 18 10,000 Project Yes No Information Technology 30 8,000 Prospect Yes No Information Technology 80 20,000 Prospect Yes No Information Technology 12,500 Prospect Yes No Information Technology 5 500 Prospect Yes No Materials Handling 72 20,000 Lost Yes Yes Manufacturing 25 35,000 Lost Yes110 Yes Manufacturing 175 87,500 Lost Yes Yes Manufacturing 75 25,000 Lost Yes Yes Manufacturing 20 25,000 Lost Yes Yes Marketing the Facility

The Consultant has prepared a synopsis of the statistics available from the Bureau of Labor Statistics, 2004-2005 Career Guide to Industries as a guideline to the types of manufacturers that should be pursued by the entity or entities that will be charged with marketing the facility. The Consultant has prepared a list of the most likely manufacturing industries that should be targeted and the Consultant has addressed the question of what types of commodities would be the most suitable for warehouse and distribution operations.

The projected percentage changes in the employment of wage and salary workers by each of the industries listed below by 2012 is as follows:

Aerospace Products and Parts Manufacturing -17.6% Apparel Manufacturing -68.6% Chemical Manufacturing, except Pharmaceuticals and Medicines -16.7% Computer and Electronic Manufacturing -12.4% Food Manufacturing +4.7% Motor Vehicle and Parts Manufacturing +2.6% Pharmaceutical and Medicine Manufacturing +23.2% Printing +3.3% Steel Manufacturing -20% Textile Mills and Products -31% Truck Transportation and Warehousing +22.7%

The Consultant has briefly addressed each of the industries expected to increase in employment through 2012 and has included the URL to be accessed for additional detail outlined in the 2004-2005 Career Guide to Industries, U.S. Department of Labor, Bureau of Labor Statistics, Bulletin 2541.

Truck Transportation and Warehousing http://www.bls.gov/oco/cg/cgs021.htm

Firms in the trucking and warehousing industry provide a link between manufacturers and consumers. Businesses contract with trucking and warehousing companies to pick up, transport, store, and deliver a variety of goods. This industry includes three segments: general freight trucking; specialized freight trucking; and warehousing and storage.

General freight trucking provides over-the-road transportation of general commodities using motor vehicles, such as trucks and tractor trailers. This industry segment is further subdivided based on distance traveled and type of goods delivered. Local trucking establishments primarily carry goods within a single metropolitan area and its adjacent non- urban areas. Long-distance trucking establishments carry goods between distant areas.

Local trucking is comprised of 28,000 trucking establishments in 2002. The work of local trucking firms varies depending on the products transported. Produce truckers usually pick up loaded trucks early in the morning and spend the rest of the day delivering produce to many different grocery stores. Lumber truck drivers, on the other hand, make several trips from the lumber yard to one or more construction sites. Some local truck transportation firms also take on sales and customer relations responsibilities, in addition to delivering the firm’s products. Some local trucking firms specialize in garbage collection and trash removal or hauling dirt and debris.

111 Long-distance trucking is comprised of 41,000 establishments primarily engaged in providing trucking services for a wide variety of commodities over longer distances for example trucking between the United States, Canada, and Mexico.

Specialized freight trucking companies provide over-the-road transportation of freight, which, because of size, weight, shape, or other inherent characteristics, requires specialized equipment, such as flatbeds, tankers, or refrigerated trailers. This industry sector also includes the moving industry—that is, the transportation of used household, institutional, and commercial furniture. Like general freight trucking, specialized freight trucking is subdivided into local and long-distance subcomponents. The specialized freight trucking sector was comprised of 45,000 establishments as of 2002.

Some goods are carried across country using intermodal transportation to save time and money. Intermodal transportation encompasses any combination of truck, train, plane, or ship. Typically, trucks perform at least one leg in the intermodal transportation of goods. Goods can be transported at lower cost this way, but they cannot be highly perishable—such as fresh produce. Trucking still dominates the transportation of perishable and time sensitive goods.

Warehousing and storage facilities totaled 13,000 establishments in 2002. These firms are primarily engaged in operating warehousing and storage facilities for general merchandise and refrigerated goods and provide facilities to store goods. Self-storage mini-warehouses that rent to the general public are also included in this segment of the industry.

The industrial/commercial park and truck/rail facility owners and operators normally need not concern themselves about a specific commodity classification but Flagstaff may want to be selective regarding the types of manufacturers they attempt to attract to this facility. The warehouse and distribution facility that will employ the most people is one that is most involved in distribution and not just storage. Any facility involved in the re-handling of products including repackaging the merchandise and/or breaking out master cartons to ship small amounts to local stores is more likely to employ more staff. The facility that transloads/cross docks import merchandise from a container to an intermodal or over the road truck trailer will tend to be highly automated with conveyors, radio frequency identification readers (RFID), bar code readers to speed the unloaded goods to another trailer or container for delivery to the manufacturer or retail location and will therefore usually employ less staff.

Median hourly earnings of the largest occupations in truck transportation and warehousing, 2002 Truck Warehousing All Occupation transportation and storage industries General and operations managers $28.89 $33.43 $32.80 First-line supervisors/managers of transportation and material-moving 21.40 18.35 20.63 machine and vehicle operators Truck drivers, heavy and tractor- 17.10 16.17 15.97 trailer Dispatchers, except police, fire, and 16.72 15.01 14.56 ambulance Bus and truck mechanics and diesel 15.49 17.56 16.53 engine specialists Industrial truck and tractor operators 14.29 12.07 12.54 Customer service representatives 13.46 12.44 12.62 Bookkeeping, accounting, and auditing 12.53 13.36 13.16 clerks Laborers and freight, stock, and 11.46 10.87 9.48 material movers, hand

112 Median hourly earnings of the largest occupations in truck transportation and warehousing, 2002 Truck Warehousing All Occupation transportation and storage industries Office clerks, general 11.11 11.23 10.71 Secretaries, except legal, medical, and 10.29 11.89 12.16 executive

Pharmaceutical and Medicine Manufacturing http://www.bls.gov/oco/cg/cgs009.htm

Significant Points

ƒ More than 6 out of 10 workers have a bachelor’s, master’s, professional, or Ph.D. degree—more than twice the proportion for all industries combined. ƒ Nearly 47 percent of all jobs are in large establishments employing more than 1,000 workers. ƒ Earnings are much higher than those in other manufacturing industries. ƒ This industry ranks among the fastest growing manufacturing industries.

Median hourly earnings of the largest occupations in pharmaceutical and medicine manufacturing, 2002. Pharmaceutical and All Occupation medicine manufacturing industries Medical scientists, except epidemiologists $34.77 $27.40 Chemists 25.51 25.43 First-line supervisors/managers of 25.05 20.64 production and operating workers Chemical technicians 18.49 18.00 Chemical equipment operators and 18.15 18.00 tenders Biological technicians 17.83 15.73 Inspectors, testers, sorters, samplers, and 14.27 13.01 weighers Mixing and blending machine setters, 13.76 13.23 operators, and tenders Packaging and filling machine operators 12.77 10.20 and tenders Team assemblers 10.81 10.90

113 Food Manufacturing http://www.bls.gov/oco/cg/cgs011.htm

Significant Points

ƒ The industry has a high incidence of injury and illness; meat packing plants have the highest incidence among all food manufacturing industries. ƒ Production workers account for more than half of all jobs. ƒ Most jobs require little formal education or training; many can be learned in a few days.

Workers in the food manufacturing industry link farmers and other agricultural producers with consumers. They do this by processing raw fruits, vegetables, grains, meats, and dairy products into finished goods ready for the grocer or wholesaler to sell to households, restaurants, or institutional food services.

Median hourly earnings of the largest occupations in food manufacturing, 2002 Food All Occupation manufacturing industries First-line supervisors/managers of production and $18.78 $20.64 operating workers Industrial truck and tractor operators 12.67 12.54 Packaging and filling machine operators and 11.07 10.20 tenders Food batch makers 10.99 10.54 Bakers 10.54 9.89 Laborers and freight, stock, and material movers, 10.11 9.48 hand Helpers--production workers 10.11 9.25 Slaughterers and meat packers 9.80 9.79 Packers and packagers, hand 9.15 8.03 Meat, poultry, and fish cutters and trimmers 8.47 8.57

Motor Vehicle and Parts Manufacturing http://www.bls.gov/oco/cg/cgs012.htm

Significant Points

ƒ Nearly a quarter of all the industry’s jobs are located in Michigan. ƒ Average earnings are very high compared with those in other industries. ƒ Employment is highly sensitive to cyclical swings in the economy. ƒ Employment is expected to grow in firms that manufacture motor vehicle parts, bodies, and trailers, but to decline in firms that make complete vehicles.

114 The motor vehicle is an intricate series of systems, subsystems, and components assembled into a final product. Each manufactured part or component is integrated into the vehicle—none is developed to exist separately. Vehicles are constantly changing as new technology or reengineered components are incorporated, and as new and updated models are designed in response to changing consumer preferences. Motor vehicle and parts manufacturers must continually evolve to maximize efficiency and maintain continuing streams of commercially viable products in a highly competitive market.

Motor vehicles—passenger cars, sport utility vehicles, pickup trucks and vans, heavy-duty trucks, buses, and other special purpose motor vehicles ranging from limousines to garbage trucks—play a central role in our society. Most U.S. residents rely on them daily to travel to work or school, shop, or visit family and friends. Businesses depend on motor vehicles to transport people and goods. The United States is the world’s largest marketplace for motor vehicles due to the size and affluence of its population. According to the U.S. Department of Transportation, more than 230 million motor vehicles—nearly 138 million automobiles, 92 million trucks, and 750,000 buses—were registered in the United States in 2001. The number of light trucks has shown especially steady growth since the mid- to late 1980s.

The vehicles we drive are only a small part of the story in motor vehicle and parts manufacturing. In 2002, about 9,600 establishments manufactured motor vehicles and parts; these ranged from small parts plants with only a few workers to huge assembly plants that employ thousands.

Median hourly earnings of the largest occupations in motor vehicle and parts manufacturing, 2002 Motor vehicles All Occupation and parts industries Industrial engineers $30.10 $29.88 Tool and die makers 25.64 20.54 Maintenance and repair workers, general 19.00 14.12 Inspectors, testers, sorters, samplers, and weighers 16.49 13.01 Welders, cutters, solderers, and brazers 16.02 14.02 Computer-controlled machine tool operators, metal 13.08 13.97 and plastic Laborers and freight, stock, and material movers, 13.03 9.48 hand Molding, core making, and casting machine setters, 13.01 11.17 operators, and tenders, metal and plastic Engine and other machine assemblers 12.45 14.02 Team assemblers 12.36 10.90

Printing http://www.bls.gov/oco/cg/cgs050.htm

The printing industry prints products ranging from newspapers, magazines, and books to brochures, labels, newsletters, postcards, memo pads, business order forms, checks, maps, T-shirts, and packaging. The industry also consists of establishments that provide related services to printers, such as embossing, binding, finishing, and prepress services. Commercial lithographic printing establishments, which print newspaper inserts, catalogs, pamphlets, and advertisements, make up the largest segment of the industry, accounting for about 40 percent of employment and 32 percent of total establishments. Establishments offering primarily digital printing, which is the most technologically advanced method of printing constitutes the smallest segment of the industry—about 3 percent of total employment. Much of the work of this segment is characterized by low volume, often done by very small shops or freelance workers. Another segment of the printing industry is quick printing. Quick printing establishments generally provide short-run printing and copying with fast turnaround times.

115 Printing is a large industry composed of many shops that vary in size. More than 2 of every 3 printing shops employ 10 or fewer workers.

Median hourly earnings of the largest occupations in printing, 2002 All Occupation Printing industries General and operations managers $35.93 $32.80 Sales representatives, wholesale and manufacturing, except 23.90 20.54 technical and scientific products First-line supervisors/managers of production and operating 21.88 20.64 workers Prepress technicians and workers 16.05 14.98 Printing machine operators 15.02 13.95 Customer service representatives 14.89 12.62 Job printers 14.84 14.47 Bindery workers 11.02 10.51 Machine feeders and off bearers 10.49 10.50 Helpers--production workers 10.18 9.25

The State of Arizona

The Arizona Department of Commerce provides the following statistics on the job market for the entire state as follows:

Workforce and Labor Market Information Arizona’s main economic sectors include services, trade, and manufacturing. The single largest economic sector is services, employing more than 863,000 people in 2002. Wholesale and retail trade provided more than 366,000 jobs. Many of these jobs are directly related to tourism, an industry that injects more than $12 billion into the state’s economy each year.

In 2002, manufacturing accounted for 183,900 jobs, or approximately 8.1 percent of the state’s employment, and has historically generated almost 15 percent of wages and salaries.

The construction sector, also very important to Arizona’s economy, accounted for 172,300 jobs or 7.6 percent of the state’s employment in 2002. This sector has experienced a substantial increase in construction activity over the past few years.

116

Arizona Employment Structure % of total # of jobs Trade, Transportation and Utilities 19.5% 442,220 Government 17.1% 388,300 Professional and Business Services 13.9% 315,000 Education and Health Services 10.3% 233,400 Leisure and Hospitality 10.1% 229,500 Manufacturing 8.1% 183,900 Construction 7.6% 172,300 Financial Activities 6.8% 153,900 Other Services 3.8% 86,000 Information 2.3% 51,500 Agriculture 2.2% 49,000 Natural Resources and Mining .4% 8,900 Source: AZ Dept. of Economic Security

Arizona Job Growth

Arizona ranked eighth in the nation in non-farm job growth from October 2002 through September 2003. The outlook for 2004 is even brighter. Among states in the West, Arizona is expected to generate the second highest rate of job growth. In 2003, health services accounted for nearly half of the state’s job gains.

Projected Job Growth for 2004 Nevada 3.5% Arizona 3.4% Oregon 2.3% Texas 2.3% California 1.8% Colorado 1.8% New Mexico 1.8% Utah 1/8% Washington 1.3% Source: Western Blue Chip Economic Forecast

117

State’s Top Growth Sectors Sector National rank Percentage growth Health services 3 5.8% Other services 4 3.4% Construction 13 2.2% Business services 12 1.3% Total non-farm 8 1.1% Government 11 1.0% Transportation/utilities 11 0.9% Leisure/hospitality 17 0.9% Trade 16 0.6% Source: Western Blue Chip Economic Forecast

The State of Arizona offers an attractive business operating environment highlighted by the following:

Competitive business costs:

ƒ Corporate Income Tax Rate: 6.968% ƒ Real and Personal Property Effective Rate (state median): 3.14% ƒ State Sales Tax Rate: 5.6%-9.0% (state median is 8.3%) ƒ Right to Work State (low union activity) ƒ Low workers compensation rates ƒ No inventory tax

Financial benefits and incentives are available to companies that invest in Arizona:

ƒ Tax credits ƒ Foreign Trade Zones ƒ Enterprise Zones ƒ Empowerment Zones ƒ Job Training Grants ƒ Military Reuse Zones

In competing with other states for the relocation of manufacturing, warehousing and distribution, Arizona compares very favorably in the area of Workers’ Compensation Rates. The California Workers’ Compensation rate is currently 13.5% as opposed to 2.5% in Arizona per $100 dollars of payroll. This coupled with lower land costs and an experienced labor force will become more and more attractive to manufacturers and warehouse and distribution facility operators.

118 In California, the warehouse and distribution facilities that were originally located in the Los Angeles/Long Beach harbor area are continually moving inland. The Inland Empire in California (Ontario/San Bernardino/Riverside/Mira Loma, etc.) now is home to 385 million square feet of warehouse and distribution facilities. The latest facilities are now being located in such remote California locations as Tejon Ranch at the bottom of the I-5 grapevine south of Bakersfield (IKEA expanding to 2.5 million square feet), Shafter (Target) and Victorville (Wal-Mart, Mars, Inc.).

The comparison of workers’ compensation costs by state has many uses: as a factor in plant relocation; as an indicator of possible differences in benefit levels; and to examine the changes through time in workers’ compensation premium rates among states.

Premium rate indices (per $100 of payroll) range from $1.24 in North Dakota to $5.23 in California. Arizona’s index is $1.63. Two jurisdictions have an index rating above $4; eight are in the $3.00-$3.99 range; 26 are in the $2.00-$2.99 range; and 15 have indices under $2.00. Indices are based on data from 51 jurisdictions, for rates in effect as of January 1, 2002. State comparisons are offered in the following Figure 1 and Table 1.

119

120 The Cost of Doing Business in Arizona8

Business Cost Analysis Data on business costs (average for 1998-2000 time periods) shows that Arizona’s costs are virtually identical to the national average, placing it 16th among all states. Arizona leads a closely-knit pack of five western states behind costly California (Figure 1).

Colorado’s costs are roughly one half percent below the national average, followed by Washington, Utah and Nevada. Most western states rank in the bottom half. Five are in the lowest quintile. The lowest costs are in Wyoming (50th), where costs are 21% below the national average. Costs in California are 7.2% higher than nationwide, the 9th highest. Business costs are highest in the Northeast United States and lowest in the South.

Data on business costs is taken from an annual report prepared by Economy.com. Information for the costs of labor, energy, taxes and office space are included in the assessment. Weightings used to form the index are 65%, 15%, 10% and 10%, respectively, which reflect the importance of each in explaining long-term employment growth. For states, no office rent data is available, so the weights are 75%, 15% and 10%. The index uses a three-year moving average of each component in an effort to minimize volatility; for this report, data from 1998 to 2000 was used. Some 318 metro areas were included in the analysis. No data for non-metro counties is available. It is best to be rated 318 and Flagstaff comes in a 270 which is not bad at all.

8 Excerpted from: Statewide Economic Study 2002, The Cost of Doing Business in Arizona, July 2002 by Marshall J. Vest, Director, Economic and Business Research, Eller College of Business & Public Administration, University of Arizona prepared for the Arizona Department of Commerce.

121 Arizona’s labor costs and state and local taxes are both below average, but are offset by high energy costs (13th highest). Arizona ranks 30th on state and local taxes, and is one of the lowest in the west.

Arizona’s “average” score reflects above average costs in both Tucson and Phoenix, while remaining areas of the state are well below average. Both Tucson (2.3% above average and a ranking of 67th) and Phoenix (1.1% and 76th) are saddled with higher costs than nationwide (Figure 2). Compared to other selected western metros, only the high-cost coastal California metros have higher costs than Tucson and Phoenix. Seattle, Denver, Salt Lake City, Las Vegas, Portland, Austin and Albuquerque have lower costs. Flagstaff and Yuma are both well below average – 3.6% and 4.5%, respectively.

When the four components usually considered in this type of analysis, labor, energy, taxes, and office rents are applied to key cities in Arizona the following profile presents itself: Tucson has low labor costs, very high energy costs, average taxes and very low office rents; Phoenix has average labor costs, high energy costs, low taxes, and low rents; Flagstaff and Yuma have high energy costs, average taxes, low rents and low (Flagstaff) or close to average (Yuma) labor costs. With regard to energy costs, both areas are served by Arizona Public Service (headquartered in Phoenix), and Economy.com’s index is based on the rates for the metro Phoenix area. Thus, the energy costs in the index may be overstated for Flagstaff and Yuma. Additionally, it should be noted that office rent costs are estimated by Economy.com for both communities based on costs in surrounding metro areas and the applicable US Census region. Due to the wide variation in economic activity in any given region in Arizona, this approach may understate office costs, particularly in Flagstaff.

Since these data are averages over the 1998–2000 periods, recent wild swings in energy prices, particularly during the California energy crisis, are not included. Also missing are recent declines in regulated electric rates among Arizona utilities.

122

The Consultant was unable to identify specific occupational wages for the nation, state and Flagstaff so DBA prepared the following to illustrate the difference in wages covering all occupations for the United States, Arizona and the Flagstaff region.

123 All Occupations Employment (1) Median Mean Mean Mean Region Hourly Hourly Annual (2) RSE (3)

United States 127,523,760 $13.31 $17.10 $35,560 0.20%

Arizona 2,245,150 $12.58 $15.98 $33,239 0.90%

Flagstaff 55,030 $10.63 $13.36 $27,290 2.60%

(1) Data for detailed occupations does not equate to the totals because the totals include data for occupations not shown seperately. Estimates do not include self-employed workers. (2) Annual wages have been calculated by multiplying the hourly mean wage by a "year- round, full-time" hours figure of 2,080 hours; for those occupations where there is not an hourly mean wage published, the annual wage has been directly calculated for the reported survey data. (3) The Relative Standard Error (RSE) is a measure of the reliability of a survey statistic. The smaller the relative standard error, the more precise the estimate. Source: 2002 National Occupational Employment and Wage Estimates, Bureau of Labor Statistics Note: The Consultant not able to locate occupations specific to manufacturing and warehousing/distribution so we used all occupations to illustrate the current Flagstaff status relative to the State of Arizona and United States.

Conclusion

A Rail/Truck facility will better position Flagstaff and the Northern Arizona Region to capture or recruit manufacturing employment. Existing freight, proximity to the Phoenix and Southern California markets and location on the I-40 and Burlington Northern Santa Fe Railroad mainline will create an even more viable market for a successful rail/truck compatible facility. The strength of the overall international trade and related goods movement activity as demonstrated elsewhere in this report, a revitalized national economy, and a fifteen-month manufacturing employment expansion nationally supports the near, mid-term, and long-term viability of this project and for the fact that creating such a freight center will attract economic development in the region.

It is the Consultants opinion after a great deal of research and data collection that the high and low scenarios indicated immediately below are achievable given the willingness of the Project Sponsors to create a governance that will be supportive of the project and all its participants and that this governance take the form of a Port Authority. That the Port Authority facilitate the formation of a Shipper Association* and Freight Advisory Board , that the recommendations brought forward by the Consultant in Phase I be further examined in Phase II, and that sufficient funding for the project is determined to be available. A step process for developing the site in Phase II, governance, et al is detailed below.

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Table I: Based on data collected through the interview process, the total annual lifts for the Northern Arizona Regional Freight Facility is 70,026; lifts are defined for purposes of this study to be units.

Table 1

Potential Intermodal Diversions

Total Market Anticipated Market Total Intermodal Penetration Market

Total Trucks Inbound 35,100 68% 23,920

Total Trucks Outbound 47,800 76% 36,130

Total Rail Inbound 3,100 50% 1,550

Total Rail Outbound 800 75% 600

Intermodal empties outbound @ 20% 7,226

Phoenix bound transshipment freight* 600

Total 86,800 70,026 *Inbound by piggyback trailer and truckload carrier, cross-docked for LTL delivery to Phoenix area

Table 2: In addition the Consultant utilized Reebie data and the results of that analysis are indicated in Table 2 along with a total number of lifts the Consultant believes will be generated by this new facility.

Table 2 Coconino County Reebie Data Originated Less Truck and Total % Total to Intermodal Rail Freight 2,235,407 571,009 1,664,398 1.5 24,966

Terminated Less Truck and Total % Total to Intermodal Rail Freight 2,273,557 1 ,696,307 577,250 1.5 8,659

Total Table 2 33,625

Totals Tables 1 & 2 103,651

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*Flagstaff Regional Intermodal Shippers Association

The purposes for which the Association is formed are to promote and develop increased efficiency and economy in the distribution of its members shipments; to foster the trade, commerce and interests of its members; to encourage and promote harmony and cooperation among its members and generally to negotiate transportation rates and provide services for the shipment of products within the United States and globally. The Association is not formed for pecuniary or financial gain, and no part of the assets, income, or profit of the association is distributed to, or inures to the benefit of, its directors or officers.

Phase II developmental steps required for the project, the site, governance, shipper association, et al: ƒ Establish governance-Consultant has recommended a Port Authority be formed and that the City and/or FMPO maintain a position of authority over this organization. Other forms of governance could be a Joint Venture between the City and the operator and/or investor/developer (this is possible but involves a great deal more man power commitment from the City in order to manage the JV and the risk would be greater), non-involvement by the City beyond issuance of an RFQ for the operator and/or investor/developer (this is not as advisable in the opinion of the Consultant since there may not be enough control and therefore protection of the City’s interests); ƒ Form the Port Authority and develop its charter; ƒ The Port Authority should develop a Shipper Association in support of the project-The Consultant has recommended that a Shipper Association be formed and has provided adequate information in another section of this report. The Shipper Association will be independent and will operate under its own Board of Directors and governance as allowed under the federal guidelines. The shipper base will be developed through the Shipper Association while the operator and/or investor/developer is being selected and governance is being developed. The Shipper Association is not geographically limited nor is it site specific and can therefore be developed quite independently from the site being developed; ƒ Determine which agency will represent the City’s interests on the Port Authority and appoint a designate or designates to the Port Authority; ƒ Conduct negotiations with the site selected regarding governance, project management, funding, and the step process; ƒ Outline the step process, determined after conferring with all concerned parties to the process, and provide open discussions regarding funding, community impact, and the step process—the Consultant would recommend public hearings; ƒ Decide which agency will administer the step process and/or funding and how this will be done; ƒ Dependent on public debate and the City’s own approach to risk, make a determination if the City will develop the funding sources and/or be available to

126 the prospective operator and/or investor/developer to assist with this aspect of the project; ƒ Unless the City and/or the FMPO decides it is going to own and operate this facility then they should issue an RFQ for prospective terminal operators and investors/developers; ƒ Review RFQ responses and select and negotiate with top three candidates; ƒ Select an operator and/or investor/developer and negotiate final terms and conditions including revenue sharing, marketing, and governance: Consultant has recommended a Port Authority be formed with the City and FMPO in the lead so some degree of control can be maintained over the development of the truck/rail facility. The Consultant also has recommended that GFEC be encouraged to provide the marketing for the facility in exchange for a fee from the operator and/or investor/developer. The operator and/or investor/developer will, of course, market this facility so there will have to be an agreement in place regarding market development for the truck/rail facility; ƒ Development of related industries on land adjacent to the selected site will, we assume, be the responsibility of GFEC; ƒ Establish reporting and audit process with operator and/or investor/developer; ƒ Operator and/or investor/developer will handle all details regarding land lease and/or acquisition, zoning and permitting, gate technology, intelligent transportation systems, and multi-modal handling and safety/security techniques, and will also be responsible for all environmental issues including air quality. They will handle all carrier relationships and will set operating standards and procedures and establish fees and tariffs. They will be responsible for ensuring that they conform to the requisites provided by the City’s Planning Department, and all other details regarding the development of the site; ƒ The Port Authority and all relevant City and County agencies should be prepared to provide any assistance the operator and/or investor/developer requires and that is in the best interests of the agencies involved. These agencies should work with the project developer to ensure they have adequate access to the State Highway Department and any federal agencies in the state that might have bearing on the success of the project.

In addition, the Consultant believes the preliminary Cash Flow Charts developed during Phase I albeit not required by the Scope of Work are clear indicators of the revenue that can and will be developed once this facility is built. Copies of the preliminary Cash Flow Analysis will be presented in Phase II and will provide a high and low scenario.

Additional Information The Greater Flagstaff Economic Council records for the past two years show contact by eight manufacturing firms of over 100 employees. Similar in size to Nestle-Purina or SCA Tissue these size firms may generate freight and utilize a Rail/Truck facility. Facilities in places such as Van Buren, Arkansas (pop. 18,986), Fort Worth, Texas (pop. 534,694) have experienced substantial employment growth triggered by lower transportation costs associated with a Rail/Truck Facility.

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Arizona is second only to Nevada in job growth, in part due to the low cost of doing business in the State. Arizona ranks 16th nationally on Economy.com’s business cost.

According to the Greater Flagstaff Economic Council (GFEC), the top five impediments to businesses relocating to Flagstaff are: 1) Cost of living; 2) Lack of air service; 3) Small labor pool; 4) Lack of available building space; 5) Lack of rail service. The rail/truck facility directly obviously addresses point number 5.

128 APPENDIX A – CROSSDOCK FACILITIES

129

130

131

132

APPENDIX B - LETTERS FROM WINSLOW AND CAMP NAVAJO-BELLEMONT

133 APPENDIX C-PORT AUTHORITY

134 ARTICLES OF INCORPORATION OF NORTHERN ARIZONA REGIONAL FREIGHT FACILITY, INC.

A NONPROFIT ARIZONA CORPORATION

ARTICLE I

NAME AND PERPETUAL DURATION

The name of the Corporation is NORTHEN ARIZONA REGIONAL FREIGHT FACILITY, INC. (the “Corporation”). The Corporation is a nonprofit corporation under Arizona law, A.R.S. 10-3101, et seq. The period of duration shall be perpetual.

ARTICLE II STATUTORY AGENT

The statutory agent of the Corporation is ______, whose address is ______.

ARTICLE III OFFICE

The address of the known place of business of the Corporation is ______.

135 ARTICLE IV PURPOSE OF THE CORPORATION

The Corporation is organized and shall be operated exclusively for charitable purposes within the meaning of section 501(c) (3) of the Internal Revenue Code of 1986, or corresponding section of any future federal tax code. The Corporation shall engage in activities solely and exclusively in the interest of the general public, shall only engage in activities permitted by nonprofit corporations under Arizona law and shall be a public purpose entity. The Corporation is created as a cooperative regional effort of governmental entities in the Coconino/Navajo County, Arizona area (the “Area”). The general purpose of the Corporation shall be to lessen the burdens of government and to erect and maintain public buildings and works by engaging in charitable activities, including such activities as (i) constructing, operating and maintaining an intermodal facility, (ii) establishing, operating and maintaining a foreign trade zone or expansion zone within Coconino/Navajo County, Arizona (the “Area”), (iii) acquiring land in an industrially zoned section of the Area, and encouraging businesses to locate new facilities in the Area, (iv) providing employment opportunities for low income residents and improving economic conditions in the Area, and (v) improving the flow of transportation in and around the Area.

The foregoing enumeration shall not be deemed to limit or restrict the general powers of the Corporation and the enjoyment and exercise thereof, as conferred by the laws of the State of Arizona under which this Corporation is formed.

ARTICLE V EARNINGS; LOBBYING; PRIVATE FOUNDATION STATUS

No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its board of directors, officers, or other private persons, except that the Corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the proposes

136 set forth herein. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise tempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Notwithstanding any other provision of these Articles, the Corporation shall not carry on any activities not permitted to be carried on by (a) an organization exempt from federal income tax under section 501(c) (3) of the Internal Revenue Code of 1986 or the corresponding provisions of any future federal tax code, or (b) an organization, contributions to which are deductible under section 170(c) of the Internal Revenue Code of 1986, or the corresponding section of any future federal tax code. Nothing in this paragraph, however, shall be construed to prohibit the Corporation from reimbursing a Member for any reasonable costs any such Member incurs as a result of the operations and activities of the Corporation or from paying funds or distributing property to its Members or other governmental entities for use by them in the exercise of their governmental purposes for the public welfare of their citizens.

If at any time the Corporation is determined to be a “private foundation” for federal tax purposes, the following provisions shall apply:

1. The Corporation will distribute its income for each tax year at such time and in such manner as not to become subject to the tax on undistributed income imposed by section 4942 of the Internal Revenue Code of 1986, or the corresponding section of any future federal tax code.

2. The Corporation will not engage in any act of self-dealing as defined in section 4941(d) of the Internal Revenue Code of 1986, or the corresponding section of any future federal tax code.

3. The Corporation will not retain any excess business holdings as defined in section 4943(c) of the Internal Revenue Code of 1986, or the corresponding section of any future federal tax code.

137

4. The Corporation will not make any investments in such manner as to subject it to tax under section 4944 of the Internal Revenue Code of 1986, or the corresponding section of any future federal tax code.

5. The Corporation will not make any taxable expenditures as defined in section 4945(d) of the Internal Revenue Code of 1986, or the corresponding section of any future federal tax code.

ARTICLE VI MEMBERSHIP

The Corporation shall not have “members” within the meaning of A.R.S. § 10- 3140 since no person shall have the right, pursuant to the provisions of the Corporation’s articles of incorporation or bylaws, to vote for the election of a director or directors. Notwithstanding the preceding sentence, the Corporation shall have persons who are referred to herein and in the bylaws as “Members.” Membership shall be voluntary. No stock or other evidence of ownership shall be issued. The Board of Directors shall establish the selection process, qualifications, rights, duties, voting privileges, and classes of Members of the Corporation and, by a vote of 75% of the Directors then in office (provided that at least one Director appointed by each Member votes in favor of such action), may add new Members or modify or terminate such determination from time to time. Membership in the Corporation is limited to governmental units (including Federally recognized Indian Tribes) as contemplated by section 170(c) (1) of the Internal Revenue Code, or the corresponding section of any future federal tax code.

The initial Members of the Corporation shall be as follows: Coconino County, Arizona City of Flagstaff, Arizona

138 City of Bellemont, Arizona Navajo County, Arizona City of Winslow, Arizona

ARTICLE VII INITIAL BUSINESS

The character of business which the Corporation intends to initially actually conduct in this state is to take all such actions as may be appropriate to accomplish the purposes set forth in Article IV above.

ARTICLE VIII BOARD OF DIRECTORS

The Board of Directors shall be composed of at least eight Directors and two additional Directors for each new Member added in addition to the initial Members. Each Member shall have the right to designate two members of the Board of Directors. A Director may be removed by his or her appointing Member at any time with or without cause. A Director’s ability to participate in meetings of the Board of Directors shall be subject to such limitations as shall be provided in the bylaws should the Member appointing such Director fail to make a capital contribution in the time period provided for in the bylaws or should such Member elect to withdraw as a voting Member under the bylaws. The names and addresses of the initial Directors, who shall serve until their successors are elected and qualified are:

Insert Names and Addresses here:

The Board of Directors may appoint ex-officio non-voting members to the Board of Directors in such manner as they shall provide for in the Corporation’s bylaws.

139 ARTICLE IX ORIGINAL INCORPORATOR

The name and address of the original incorporator of the Corporation is ______.

ARTICLE X DISSOLUTION

Other than a judicial or administrative dissolution in accordance with Arizona law, the Corporation may only be dissolved upon the written consent of each member of the Board of Directors and the approval of the governing body of each Member. Upon dissolution of the Corporation, any assets remaining after payment of, or adequate provision for, the Corporation’s debts and obligations, shall be distributed to the Members. Any assets not disposed of shall be disposed of by the Superior Court of Coconino/Navajo County, Arizona.

ARTICLE XI LIMITATION OF DIRECTORS’ LIABILITY

The personal liability of the directors to the Corporation for monetary damage for any action taken or any failure to take any action as a director is eliminated to the fullest extent permitted by A.R.S. § 10-3202(B)(1), as it may hereafter be amended or renumbered, or the analogous provision of any future Arizona nonprofit corporation code.

140

ARTICLE XII INDEMNIFICATION

The Corporation may indemnify any person against liability and expenses, including without limitation, attorneys’ fees, judgments, fines and amounts paid in settlement, actually and reasonably suffered or incurred by reason of the fact that he/she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other entity, in all circumstances in which, and to the extent that, such indemnification is permitted by A.R.S. §§ 10-3851 and 10-3856, as such provisions may hereafter be amended or renumbered, or the analogous provision of any future Arizona nonprofit corporation code. Any indemnification hereunder shall be made by the Corporation only as authorized by the Board of Directors pursuant to A.R.S. § 10-3855, as it may hereafter be amended or renumbered, or the analogous provision of any future Arizona nonprofit corporation code. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or was serving at the request of the Corporation as a director or officer, against any liability asserted against him and incurred by him in any such capacity arising our of his status as such whether or not the Corporation would have had the power to indemnify him against such liabilities under this Article. The indemnification herein above permitted shall not be exclusive of any rights to which any director or officer of the Corporation may otherwise be entitled by law, including mandatory indemnification under A.R.S. 10-3852.

141 ARTICLE XIII AMENDMENT

These articles may only be amended only with the written approval of 75% of members of the Board of Directors and the approval of the governing board of each Member.

ARTICLE XIV CONFLICTS

In the case of any conflict between the terms hereof and the Bylaws, these Articles of Incorporation shall control.

CONSENT OF STATUTORY AGENT

______, having been designated as Statutory Agent, herby consents to act in that capacity until removed or its resignation is submitted.

Dated:

By: Name:

142 BYLAWS

OF

NORTHEN ARIZONA REGIONAL FREIGHT FACILITY

(A Nonprofit Arizona Corporation)

ARTICLE I

REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

1.1 Certain References. Any reference herein made to law will be deemed to refer to the law of the State of Arizona including any applicable provision of Title 10 of the Arizona Revised Statutes, or any successor statutes as from time to time amended and in effect. Any reference herein made to the corporation's Articles will be deemed to refer to its Articles of Incorporation and all amendments thereto as at any given time on tile with the Arizona Corporation Commission. References to specific sections of law herein made shall be deemed to refer to such sections or any comparable successor provisions, as from time to time amended and in effect.

1.2 Seniority. The law and the Articles (in that order of precedence) will in all respects be considered senior and superior to these Bylaws with any inconsistency to be resolved in favor of the law and such Articles (in that order of precedence) and with these Bylaws to be deemed automatically amended from time to time to eliminate any such inconsistency wroth may then exist.

1.3 Computation of Time. The time during which an act is required to be done, including the time for the giving of any required notice herein shall be computed by excluding the first day or hour, as the case may be and including the last day or hour.

ARTICLE II

OFFICES

2.1 Principal Office: The principal office of the corporation shall be located at any place either within the State of Arizona as designated in the corporation’s most current Annual Report filed with the Arizona Corporation Commission or in any other document executed and delivered to the Arizona Corporation Commission for filing. If a principal office is not so designated, the principal office of the corporation shall mean the known place of business of the corporation. The corporation may have such other offices either within or without the State of Arizona as the Board of Directors may designate or as the business of the corporation may require from time to time.

2.2 Known Place of Business. A known place of business of the corporation shall be located within the State of Arizona and may be but need not be the address of the statutory agent of the corporation.. The corporation may change its known place of business from time to time in accordance with the relevant provisions of the Arizona Nonprofit Corporation Act.

143 ARTICLE III

MEMBERS

3.1 Initial Members. The initial members of the corporation shall be as follows:

Coconino County, Arizona

City of Flagstaff, Arizona

City of Bellemont, Arizona

Navajo County, Arizona

City of Winslow, Arizona

3.2 Additional Members. Additional members may be added by vote of the Board of Directors as provided in Section 4.1 below.

ARTICLE IV

PORT AUTHORITY BOARD OF DIRECTORS

4.1 Purpose,. Empowerment and Number of Directors

A. Purpose and Empowerment

In addition to the duties of the Board set forth herein, it shall be the primary duty of the Board to make all policy statements on behalf of the corporation and to decide such policy issues as may come before the Board as well as to supervise the direction and action of the corporation and its Officers and employees given the approved and accepted policies of record. The Board of Directors shall also review all action taken by any committees.

B. Number of Directors

The affairs of the corporation shall be directed by a Board of Directors which shall consist of two persons appointed by each Member.

C. New Members

New corporation Members may be added by a 3/4 vote of the current Board of Directors provided that at least one Board member appointed by each Member approves the addition of a new Member. Any new Members must be federal, state or local governmental entities or Federally recognized Indian Tribes.

The cost of the Membership shall be determined by the current Board of Directors, and shall be at least what the other Members have contributed on the date that the new

144 Member is approved. Such amount is due within 60 (sixty) days of the date of approval of the new Member or as determined by the Board of Directors.

4.2 Master Plan

The Board shall draft a master plan for improvement of any land which shall be conveyed to, leased or acquired by the corporation. A majority vote of the Board shall be required to adopt this plan. The Board may from time to time modify the master plan by majority vote of the Board.

The provisions in the Master Plan shall not override or supersede any local existing zoning ordinance in effect at the time said lands are acquired. The jurisdiction wherein any land obtained by the corporation is situated shall govern such land.

4.3 Composition, Selection, and Qualifications of Members of the Board of Directors

A. A Member may appoint two (2) persons to serve on the Board of Director one of whom shall be from the business/private community and not an employee or elected official of any Member.

B. It is strongly recommended the Members shall appoint qualified person(s) to the Board. Persons experienced in economic development, transportation, and international issues are desired

4.4 Voting Rights

Each Director shill-be entitled to one vote provided the requirements of Article V are fulfilled. All votes shall be considered equal. Written proxies may not be given.

4.5 Term of Office

The term of office shall be five (5) years, with a maximum of two (2) consecutive terms. In the event a Director fails to complete his/her five year term, a replacement will be selected by the appointing Member to serve the remaining portion of the term. Should the replacement serve equal to or greater than three (3) years then he/she will have been deemed to have served a full five year term for the purposes of serving consecutive terms.

4.6 Initial Directors

The initial Board of Directors shall consist of directors selected to serve three or five year terms. Each Member shall select one director to serve a three year term and one director to serve a five year term. An initial director serving a three-year term shall be considered to have served a full term for the purposes of this section.

4.7 Notice of Meeting

145 Written notice and a complete meeting packet of each Board Meeting shall be mailed or delivered to each Director at least five (5) working days prior to the date fixed for such meeting, except that, upon a declaration of emergency by a majority vote of the total number of persons serving on the Executive Committee of the corporation Board notice of a special meeting shall be delivered to each Director at least twenty-four (24) hours before the date and time of such meeting and shall include the matters to be addressed in the special meeting.

Notice and complete meeting packet shall also be given to the Chief Administrative Officer (CAD) of the Member agency at the prescribed corporate office and delivered in the same manner as for the Directors.

Notice of each Board Meeting shall be given in such a manner as to comply with the Arizona "Open Meeting" law.

4.8 Quorum and Required Vote

A majority of the Directors in office shall constitute a quorum for the transaction of business. A vote of a majority of the Directors point at any meeting in which a quorum is present shall constitute action by the Board unless a different vote is required by the Articles of Incorporation, these Bylaws or by statute.

4.9 Directors’ Manner of Acting

A. Participation in Meetings

Any or all directors may participate in a regular or special meeting by or conduct the meeting through the use or any means of communication by which all directors participating may simultaneously hear one another during the meeting in which case, any required notice of the meeting may generally describe the arrangements (rather than or in addition to the place) for the holding thereof. A director participating in a meeting by this means is deemed to be present in person at the meeting.

B. Dissent or Abstention of a Director

A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless (l)the director objects at the beginning of the meeting (or promptly upon his or her arrival) to holding it or transacting business at the meeting, (2) his or her dissent or abstention from the action taken is entered in the minutes of the meeting, (3) he or she delivers written notice of his or her dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation before 5:00 p.m. on the next business day after the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken.

146

4.10 Removal of Directors

Directors shall serve at the will of their appointing Member. An appointing Member may remove its Directors at any time with or without cause. In the event a Director is removed by a Member, the Member shall promptly appoint a successor Director.

4.11 Ex Officio Members

The Board may designate non-voting ex-officio members to the Board. The presence of ex-officio members at a meeting will not be added in order to constitute a quorum. It is anticipated the ex-officio officers will have significant experience in areas relevant to the operation and goals of the corporation.

While the Board may designate such ex-officio members as it deems appropriate it is anticipated that the initial ex-officio Board Members shall include individuals selected from ______, ______, ______, ______, ______and ______and shall serve as initial ex-officio Board Member.

ARTICLE V

MEMBER PARTICIPATION, CAPITAL CONTRIBUTION, INDEMNIFICATION

5.1 Membership Participation

Membership shall include all entities identified in Article III of these Bylaws. However, both appointees of a Member to the Board of Directors shall be prohibited, unless a majority of the remaining Board Members approve otherwise, from participation, voting and/or a seat on the Board of Directors if the requirements set forth in Sections 5.1 and 5.2 below are not met within twelve (12) months from the date of the request for such funds from the corporation or during any time period that a Member elects to become a “non-voting Member” pursuant to Section 5.4 below. During the time period that any Board Member is prohibited from participating pursuant to this section, such Board Member shall not be considered a member of the Board of Directors for purposes of determining whether a quorum of board Members are present at any meeting or for purposes of determining whether any vote was approved by a majority of the Board Members.

5.2 Initial Capital Contribution

Each Member shall be responsible to contribute capital in equal amounts of $______.00. The initial Board will take into consideration all factors determined necessary to formation of the corporation and determine an operating budget for year one of the corporation. The amount necessary as determined by the Board shall then be divided by the number of

147 Member. Each Member shall be responsible for contribution of this amount. Failure by any Member to fulfill its obligation under this paragraph shall prohibit the Member from participating as set forth in paragraph 5.1 until such time as all contribution requirements are satisfied.

5.3 Cash Calls

It is anticipated that certain expenses, after the initial capital contribution, may arise prior to the corporation producing enough revenue to meet expenses. Each Member executing these bylaws and each new Member who shall hereafter be admitted to membership in the Corporation, agrees to be responsible for its equal share of any such expense as requested by majority vote of the Board, not to exceed $______00 per year (subject to appropriation by each respective governing board). Failure by any such Members to fulfill the requirement set forth herein shall prohibit the Member from participating as set forth in paragraph 5.1 until such time as all contribution requirements are satisfied.

5.4 Voluntary Withdrawal of Member

Any Member may at any time voluntarily withdraw from membership and shall be entitled to repayment without interest of the Member's capital contribution, payable over a three year term or at the request of the withdrawing Member, said Member may be allowed to remain as a non-voting member until dissolution, at which time the withdrawing Member would receive the amount set forth in paragraph 5.5(C) (the withdrawing Member may at any time prior to the dissolution become reinstated as a voting Member by paying all outstanding assessments from the date of withdrawal); or

The withdrawing Member shall receive such amounts in satisfaction of his interest as the withdrawing Member and the remaining Members agree upon by unanimous consent.

5.5 Dissolution

A. Events of Dissolution

The corporation may be dissolved only upon written consent of each and every director of the Board, and at the approval of the governing body of each Member.

B. Winding up

On the corporation’s dissolution, the business of the corporation shall be wound up within a reasonable period of time, its assets liquidated, a final accounting made and the corporation's books closed all in accordance with the applicable provisions of Title 10 of the Arizona Revised Statutes.

C. Distribution of Liquidation Proceeds

148 1. Assets/proceeds

Should any asset/proceeds in excess of 1iabilitics exist following this corporation's election to dissolve and winding up, the assets/proceeds shall be distributed to the Members. Any assets not disposed of shall be disposed of by the Superior Court of ______County, Arizona..

2. Liabilities

Upon dissolution and liquidation, any liabilities in excess of assets/proceeds will be divided equally among the remaining Members. A Member will be considered responsible under this paragraph unless it terminated its membership greater than two years prior to the date of the election to dissolve. Notwithstanding the foregoing, nothing in this provision shall cause the liabilities allocated to a Member to constitute a debt of such Member and the Member’s obligation to make payment of such liability shall be at the sole discretion of the Member's governing body and shall be subject to appropriation.

5.6 Indemnification

To the extent permitted by law, each Member shall hold harmless and indemnify each other Member from any claim, Liability or loss related to any funding, capital contribution or in any manner whatsoever with regard to the individual participation by that Member to the fullest extent allowed by law, save for that caused by the indemnitee's intentional misconduct or sole negligence or as specified in 5.5.C.2.

ARTICLE VI

OFFICERS

6.1 Officers of the Corporation

The officers of the Corporation shal1 consist of the Chairperson, Vice Chairperson, and a Secretary/Treasurer and shall collectively constitute the Executive Committee.

6.2 Election-Term

The Chairperson, Vice Chairperson and Secretary/Treasurer of the corporation shall be elected by the Board at the next scheduled Board Meeting following the Annual Meeting. Officers shall serve terms of one (1) year each or until their successors are elected and qualified

6.3 Chairperson of the Board

The Chairperson of the corporation Board shall preside at all meetings of the Board and the Executive Committee.

6.4 Vice Chairperson

149 The Vice Chairperson in the absence of the Chairperson, shall assume all duties of that office and, upon the death, resignation or removal of the Chairperson, the Vice Chairperson shall assume duties until a new Chairperson has been elected.

6.5 Secretary/Treasurer The Secretary/Treasurer shall keep the roll of Directors, give staff assistance in providing notice of all meetings and recorded minutes of the Boards, review and sign the minutes of such meetings and generally oversee the records, and shall perform such other duties as may be assigned by the Chairperson. The Secretary/Treasurer shall work with staff of the corporation and shall accept contributions to the corporation keep accurate accounts of all sums due and all expenditures made, and report the financial condition of the corporation to the Board at each Regular Meeting.

ARTICLE VII COMPENSATION

No Director or Officer shall be entitled to any compensation. However, the Board may reimburse reasonable out-of-Pocket expenses of its Officers and/or Directors in the performance of duties:, if such expenses arc approved by the Board.

ARTICLE VIII AMENDMENT

Amendments to the Bylaws may be adopted by the Board of Directors at the Annual Meeting or at a special meeting called for that purpose. Notice of any proposed amendments shall be included in a notice to the Member of the meeting at which the proposed amendments is to be considered. A resolution adopting the proposed amendment must receive approval by a three fourths (3/4) vote of the Board of Directors and the approval of the governing body of each member.

ARTICLE IX CONFLICT OF INTEREST

9.1 Definitions

A Port Authority

Only for the purposes of this Article IX, Conflicts of Interest, "Port Authority means and includes all Officers and Directors of the Port Authority and employees of the Port Authority and their relatives.

B. Relatives

150 “RELATIVE" means the spouse, child, stepchild, grandchild, parent, grandparent, brother, or sister, of the whole or half blood and their spouses.

C. Substantial Interest

"SUBSTANTIAL INTEREST' means substantial pecuniary or proprietary interest, either direct or indirect.

9.2 Specific Guidelines

A. No Officer or Director shall participate in the decision-making process on any matter in which such person has a substantial interest pursuant to State law.

B. Upon learning that Port Authority (or a Committee thereof) is involved in a matter in which a Officer or Director has a substantial interest, such Director or Officer shall notify the Chair of Port Authority of such interest and shall imrnediate1y withdraw from any further communication or discussion with any Officer, Director or employee of Port Authority with respect thereto.

C. No Officer or Director shall use his or her position as an Officer, Director, employee, or Committee Member of Port Authority to gain access to information or influence the decision-making process of either Port Authority or any governmental body or agency in connection with any Port Authority matter in which such Officer or Director has a substantial interest

D. Upon receipt of notice from an Officer or Director that such person has a substantial interest in a matter in which Port Authority is involves the Chair shall remove such Officer or Director from any discussion and not furnish or provide him or her with the information pertaining to that matter which is furnished to the other Port Authority Officer or Director; except to the extent that such information is generally available to the public at large.

9.3 Integration

An Officer or Director who may have a substantial interest in a Port Authority matter may disclose the potential conflict of interest to the Chair and/or counsel to Port Authority for an interpretation of this Conflict of Interest policy.

ARTICLE X MISCELLANEOUS

10.1 Contracts, etc.

151 Except as otherwise provided by law or these Bylaws, an Officer or Officers, employee or employees, or agent or agents of the Corporation as shall be specified by the Board may sign, in the name and on behalf of the corporation, all deeds, bonds, contracts, leases, and other instruments or documents, the execution of which shall be authorized by a majority vote of the Board, and such authority may be general or confined to specific instances.

10.2 Checks, Drafts, etc.

All checks, drafts, notes, bonds bills of exchange, or other orders, instruments, or obligations for the payment of money shall be signed and countersigned by such Officer or Officers, employee or employees, or agency or agents of the corporation as shall be specified by the Board.

10.3 Notice and Waivers Thereof

Whenever any notice to a Director or Officer is required by the Bylaws, by the Articles of Incorporation or by any law, such notice, except as otherwise provided by law, may be given personally or in writing by mail addressed to such Director or Officer at his or her place of business, if any, or at such address as appears in the records of the corporation as the home address of the Director or Officer. Any notice given by mail shall be deemed to have been given when it shall have been deposited, with the proper postage in a post office in a regularly maintained letter box, or with a postal carrier. A waiver of such notice in writing, signed by the person entitled to such notice whether before or after the time of the action or which such notice is required shall be deemed the equivalent thereof, and the presence without objection at any meeting of any person entitled to notice thereof shall be deemed a waiver of such notice as to such person.

10.4 Interested Directors

In the absence of fraud, no contract or transaction between the corporation and a Director or any other corporation or entity in which such Director is a Director or Officer, or is financially interested, shall be void or voidable for reason of the financial interest alone provided that the fact of such common Directorship, Officership, or financial or other interest is disclosed or known to the Board and that the Board approves such transaction or contract by a vote sufficient for such purpose without the vote of such interested Director. Such Director may, however, be counted in determining the presence of a quorum at such meeting.

10.5 Limitation of Liability and Indemnitv

A. Liability

No Officer or Director shall be liable to the corporation for any loss or damage suffered by it on account of any action taken or not taken by him or her as an Officer or Director, if such person ( 1 ) exercised and used the same degree of care and skill as a prudent person would have exercised and used under the circumstances and in the conduct of his or her own affairs, or (2) took or failed to take such action in reliance upon advice of counsel for the

152 corporation or upon statements made or confirmation furnished by Officers or employees of the corporation which he or she had reasonable grounds to believe. The foregoing shall not be exclusive of other right and defenses to which he or she may be entitled as a matter of law.

B. Indemnity

Each Officer and Director, whether or not then in office shall be held harmless and indemnified by the corporation against all claims and liabilities and all expenses reasonably incurred or imposed upon him or her in connection with or resulting from any action suit, or proceeding, civil or criminal, or the settlement or compromise thereof to which he or she may be made party be reason of my action taken or failed to be taken by him or her as an Officer or Director of the corporation in good faith, if such person, in the opinion of a court or the Board of Directors, (1) exercised and used the same degree of care and skill as a prudent person would have exercised and used under the circumstances in the conduct of his or her own affairs or (2) acted upon advice of counsel for the corporation or upon statements made or information furnished by Officers or employees of the corporation which he or she had reasonable grounds to believe.

C. Insurance

The corporation shall purchase and maintain insurance on behalf of, or insure or cause to be insured, any person who was or is a Director or Officer against any liability asserted against him or her or incurred by him or her in any such capacity or arising out of such status, whether or not the corporation would have the power to indemnify him or her as provided by Arizona State Law.

10.6 Books and Records

A. The corporation shall keep complete books and records of account, shall keep minutes of the proceedings of its Board, and shall keep a record giving the names and addresses of the Directors entitled to vote at the Principal office of business.

B. Within ninety (90) days following the close of the fiscal year the Board of Directors shall have caused be conducted an independent annual audit of the preceding year's financial activities.

C. Each year, at the annual Meeting an annual report shall be made to the Members, which shall include a statement of financial condition and a summary of the activities of the corporation for the preceding fiscal year.

10.1 Corporate Seal

The Seal of the corporation shall be impressed as follows: NORTHEN ARIZONA REGIONAL FREIGHT FACILITY, INCORPORATED ______ARIZONA ADOPTED THIS______DAY OF ______, ______BY THE BOARD OF DIRECTORS OF THE PORT AUTHORITY.

153

INTERGOVERNMENTAL AGREEM ENT FOR THE JOINT OPERATION OF THE NORTHERN ARIZONA REGIONAL FREIGHT FACILITY PORT AUTHORITY

WHEREAS, the City of Flagstaff, the City of Bellemont, the City of Winslow, Navajo County and Coconino County in the State of Arizona desire to enter into this Agreement with respect to the joint establishment, operation and maintenance of an intergovernmental entity to be known as the NORTHERN ARIZONA REGIONAL FREIGHT FACILITY PORT AUTHORITY (too "',Authority") as authorized by AR,S. §§ 9-500.11, ] 11-254.04 and 44-6501 and pursuant to the provisions of A.R.S, Title 11 Chapter 7, Article 3, and as authorized by appropriate action of the governing body for each Party, each Party desires to enter into this Intergovernmental Agreement for the purposes and objectives set forth; WHEREAS, the purposes of the Authority shall be (i) constructing, operating and maintaining A freight facility in Northern Arizona, (ii) establishing, operating and maintaining a foreign trade zone or expansion zone within Coconino/Navajo Counties, Arizona (the" Area"'), (iii) acquiring land in an industrially zoned section of the Area, and encouraging businesses to locate new facilities in the Area, (iv) providing employment opportunities for low income residents and improving economic conditions in the Area, and (v) improving the flow of transportation in and around the Area; WHEREAS, the parties each have the power to appropriate and spend monies in connection with "economic development activities" as defined in A.R.S. Sections 9.500.11 and 11 -254.04, as applicable, that each respective party's governing body has determined will assist in the creation or retention of jobs or will otherwise improve or enhance such party's inhabitants' economic welfare; and WHEREAS, the parties hereto desire to include within the applicability of this Agreement the establishment., operation and maintenance of the Authority as an intergovernmental entity, in the manner and in accordance with the terms and conditions set forth herein as Exhibit A., and; WHEREAS., §§ 11 ~201, 11-254.04 and/or 44-6501 and § 11-951 and § 11-952, and official action of the County of ""undertaken by the Board of Supervisors on the ____ day of ______, ______at its regularly scheduled and noticed meeting,

154 enables the County Board of Supervisors to enter into Intergovernmental Agreements for the purposes stated herein on behalf of the County of Coconino/Navajo and;

WHEREAS, A. R. S. Title 9, §§ 9-240, 9-500.11, 9-276 and/or 44-6501 and § 11- 951 and § 11-952, and official action of the City of ______taken by its City Council on the ______day of ______, ______at its regularly scheduled and noticed meeting enables the City of ______to enter into this Intergovernmental Agreement for the purposes stated herein; and

WHEREAS, A.R.S Title 9, §§ 9-240, 9-500.11, 9-276 and/or 44-650 and § 11- 951 and § 11-952, and official action of the City of ______taken by its City Council on the ______day of ______, ______at its regularly scheduled and announced meeting, enables the City of ______to enter into this Intergovernmental Agreement for the purposes stated herein; and

WHEREAS, H.R. ______provides that the real property upon, which the intermodal facility port and related activities will be located and which is more fully described in H.R. ______shall be transferred to the Northern Arizona Regional Freight Facility Port Authority which is defined as meaning ______, an Arizona corporation, at trust for the benefit of the parties hereto, or such other successor joint powers agency or public purpose entity as unanimously designated by the Parties hereto, and

WHEREAS, in ______, ____ the Parties entered into an Intergovernmental Agreement for the Joint Acquisition of the Real Property; and WHEREAS, the Parties hereto desire to unanimously designate the Authority as the public purpose entity which will receive title to the Real Property from the United States of America and to amend the _____ I GA to provide that the Authority shall be the public purpose entity which shall receive title to the Real Property directly from the United States; and

155 WHEREAS, the implementation of this Intergovernmental Agreement will substantially further the public safety, health and welfare of the Area and the Parries and will assist in the creation or retention of jobs or will otherwise improve or enhance the economic welfare of the Parties' inhabitants;

NOW THEREFORE, the Parties do hereby agree as follows, and at all times subject to the provisions of A.R.S. § 38-511, which is part hereof for all purposes,

SECTION 1 DEFINITIONS

"Operating agreement” means a set of operational instructions, guidelines, or by- laws for engaging in joint governmental activity for the purposes of A.R. S. §§ 9-500.11, 11-254.04 and/or 44-6501 and which shall be prepared by an organization jointly established by the participating entities named in the preamble hereinabove under an intergovernmental agreement pursuant to § 11-9S 1, et 17 seq., by, between or among them to engage in joint governmental activity for the purposes of AR. S. ]8 §§ 9-500.11, 11-254.04 and/or 44-6501, and which is set forth in Exhibit A. "Party” means each of the governmental entities named in the preamble hereinabove or such entities, agents or persons acting by and through official act of such governmental entities, and shall include such governmental entities or other governmental agencies or other public authorities duly established by governmental entities or agencies which may hereafter join in this Intergovernmental Agreement by appropriate amendment of the Agreement.

Section 2 Duration This Agreement shall commence on the ______day of ______, ______and terminate in accordance with the terms of termination set forth in Exhibit "A" or by mutual consent of the parties.

SECTION 3 PURPOSE

156 The purposes of this Agreement are (i) the constructing, operating and maintaining an freight facility in Northern Arizona in coordination with Local, State and Federal agencies (ii) establishing, operating and maintaining a foreign trade zone or expansion zone within the Area under the authority of A.R.S. § 44.6501, (iii) acquiring land in an industrially zoned section of the Area, and encouraging businesses to locate new facilities in the area, (iv) providing employment opportunities for low income residents and improving economic conditions in the Area, and (v) improving the flow of transportation in and around the Area. The purposes of this Agreement include any and all purposes set forth in A.R.S. § 44-6501 for any and all purposes set forth in that statute, the purposes set forth herein, the purposes set forth as "'economic development activities" in A.R.S. 13 §§ 9-500.11 and 11-254.04 and as is set forth in Exhibit A. The purposes of this Agreement shall also include the designation of the- Authority as the public purpose entity to receive title to the Real Property from the United States/County in compliance with H.R. ______. The public purpose to which this intergovernmental agreement is directed is to significantly increase economic activity within Coconino/Navajo County and its cities and towns by acquiring land and establishing, operating and maintaining a foreign trade zone or expansion zone, and providing appropriate facilities for operation of an intermodal facility in the Area, when constructed, and including but not limited to operation of intermodal facilities for such purposes

SECTION 4. THE MANNER OF FINANCING THE NORTHERN ARIZONA REGIONAL FREIGHT FACILITY AND OF ESTABLISHING AND MAINTAINING A BUDGET THEREOF The parties, in accordance with the obligation and responsibility imposed by law upon each separately with regard to expenditure of public funds and the derivation of revenues from governmental operations, excluding the assessment and levy of any ad valorem or other tax, other than one mandated by state or federal Law, shall provide in

157 the budget of each separately a sum for establishment, operation and maintenance of the Authority as set forth in Exhibit A.

SECTION 5 THE PERMISSABLE METHOD OR METHODS TO BE EMPLOYED IN ACCOMPLISHING THE PARTIAL OR COMPLETE TERMINATION OF THE AGREEMENT AND FOR DISPOSING OF PROPERTY UPON SUCH PARTIAL OR COMPLETE TERMINATION.

This Agreement shall terminate upon the terms and conditions set forth in Exhibit A or upon the occurrence of other elements of termination set forth herein

SECTION 6 OPERATING AGREEMENT The parties to this Agreement shall establish, operate and maintain the entity KNOWN as the NORTHERN ARIZONA REGIONAL FREIGHT FACILITY as set forth in Exhibit A.

SECTION 7 TRANSFER OF REAL PROPERTY TO THE AUTHORITY

The Parties hereby unanimously designate the Authority as the public purpose entity to receive title to the Real Property directly from the United States/County/City. To the extent the 1999 IGA is inconsistent 19 herewith it is hereby amended.

Signature Page to Follow:

IN WITNESS WHEROF, the Governing Body of each Party hereto has approved and executed this Intergovernmental Agreement in accordance with governing law.

PARTIES TO THE AGREEMENT

158

DETERMINATION OF COUNSEL

Pursuant to ARS 11-952(D), the attorneys for the Parties hereto have determined that the foregoing agreement is in proper form, and is within the powers and authority granted under the laws of this State.

159 APPENDIX D-INTERVIEW FORM

160 SAMPLE INTERVIEW FORM

FLAGSTAFF JOINT INTERMODAL TERMINAL INTERVIEW GUIDE

Company Name Contact Name Title Phone Fax Address City State Zip E-Mail Address

I. TELL US ABOUT YOUR COMPANY 1.We are a:

Railroad Steamship/Barge Line Importer/Exporter

IMC Air Freight Company Warehouse/Distribution Company

Trucking Company Manufacturer Freight Forwarder/Consolidator Customs Broker.

If you are a trucking company, do you specialize in: LTL TL

2. What is your company's annual sales volume?

$500K to $1M

$1M to $10M

$10M to $25M

$25M to $50M

$50M to $100M

$100M & above

161 II. TELL US ABOUT YOUR SHIPPING PRACTICES

1. For domestic or international shipments, please provide the following information re the top three origin/destination pairs ranked according to volume of goods shipped by your company in 2002. Please tell us if these origin/destination pairs have changed in 2003, or if there are changes planned in the next 12 months?

Volume (tons) or Nbr. Do you ship Commodity(s) Origins Destination(s) Principal Int’l Port of Of Cntrs./Trailers via (city, state, (city, state, Mode Entry/Exit and 20'/40'/45'/48 Flagstaff? and country) and country) (rail, truck, current Routing steamship, barge or air

2. Is your product time sensitive? What are the customer driven demands? What are the industry-imposed congestion points? Please describe the one(s) that directly affect(s) your business:

3. What organizational, institutional, and infrastructural issues cause the costliest delays and create the congestion points/choke points of most concern to you?: a) need for improved and updated infrastructure?

b) shortage of adequate equipment?

c) need for greater cooperation/coordination between federal, state, and local agencies and the transportation providers?

d) an absence of timely information concerning your shipments?

e) a need for greater cooperation/coordination between U.S. and foreign governmental agencies?

f) A combination of infrastructural and institutional issues that need to be made more efficient and user friendly? Please be specific and provide as much detail as possible.

g) Specific problems related to freight movement into and out of Flagstaff or its environs or any goods movement through the Western Region. Please be specific regarding what types of delays you have experienced or what potential problems you feel might be encountered.

4. Now that we have explained the project would you divert cargo to the Flagstaff Joint Intermodal Terminal for easier and faster delivery if such an opportunity presented itself? Do

162 you see this project as contributing to the “line of least resistance “ for freight movements in the region?

5. Do you see advantages to a rail and truck common user terminal to eliminate costly and time consuming “rubber tire” transfers between transportation modes?

6. If the opportunity presented itself are you interested in an equity stake in the proposed Flagstaff Joint Intermodal Terminal? very interested Moderately interested not interested

Please outline what you see as the positive reasons for investment in this project.

7. What technological improvements would be most useful to you if you were to consider the Flagstaff Joint Intermodal Terminal?

Automated Security Systems.

Automated Documentation (EDI, AMS, etc.).

Automated Fee and Tariff Collection.

Container, Chassis, Trailer, Railcar Tracking System.

X-ray Automated Contraband Inspection Systems.

Weigh-in-Motion Systems.

Others:

163 APPENDIX E-LABOR CHARACTERISTICS

164

The following excerpt is from the Greater Flagstaff Economic Council Basic Information Packet, February 2004.

LABOR CHARACTERISTICS

CITY OF FLAGSTAFF POPULATION

Total Population (July 2003 Estimate) 61,030 Civilian Workforce (AZ DES 2002 Average) 33,219 Unemployment Rate (AZ DES 2002 Average) 4.2% Median Household Income (Census 2000 Data) $37,146

EDUCATIONAL ATTAINMENT OF PERSONS 25 AND OLDER (Census 2000 Data) Total population 25 and over: 28,722

Education Level Percentage

High School graduate 83.8% Some college, no degree 27.5% Associate degree 5.9% Bachelor degree 29.9% Graduate/Professional degree 15%

Flagstaff’s Ethnic diversity (Census 2000 Data)

Ethnic Background Percentage White 77.9% Black 2.2% American Indian, Eskimo or Aleut 11.3% Asian or Pacific Islander 1.9% Hispanic Origin 16.1% Other Race 7.3%

COCONINO COUNTY POPULATION

Total (Census 2002 Estimate) 128,925 Civilian Workforce (AZ DES October 2003) 65,900

165

Unemployment Rate (AZ DES October 2003) 5.5% Median household income (Census 2000 Data) $38,256

COCONINO COUNTY’S ETHNIC DIVERSITY (Census 2000 Data)

Ethnic Background Percentage White 63.1% Black 1.0% American Indian, Eskimo or Aleut 28.5% Asian or Pacific Islander 0.9% Hispanic Origin 10.9% Other Race 4.1%

ARIZONA EMPLOYMENT Unemployment Rate (AZ DES 2003 YTD Average) 5.8% Unemployment Rate (AZ DES 2003 October) 5.2%

WAGES (AZ DES 2001 Wage Estimates for Coconino County)

Occupation Median Hourly Wage

Chief Executives $44.65 Computer/Information Systems Managers $32.81 Human Resources Managers $27.34 Computer Systems Analysts $23.54 Accountants and Auditors $18.29 Business and Financial Operations Occupations $18.54 Industrial Production Managers $25.32 Electricians $13.88 Executive Secretaries and Administrative Assistants $13.29 Computer Operators $10.47 Secretaries, Except Legal, Medical, and Executive $10.88 Production Occupations $11.12 Packers and Packagers, Hand $10.64 Retail Salespersons $7.24

Job Training Programs (Greater Flagstaff Economic Council)

Arizona Department of Economic Security-Flagstaff Job Service Center ƒ Concentrated Manpower Training Program ƒ Comprehensive Employment Training Act

166 ƒ Work Incentive Program ƒ Family Independence Program

Arizona Work Force Recruitment and Job Training Program, Arizona Department of Commerce

Coconino Community College Contract Education and Training Programs

Coconino County Career Center Job Training Partnership Act

Employment Recruitment Programs (AZ DES, Flagstaff Job Service Center)

The Flagstaff Job Service Center, a tax-supported public employment office, is a full- service office of the Arizona Department of Economic Security. The mission of DES is to promote full employment and economic stability for the people of Arizona through direct services, collaboration and coordination with business, education, labor, government and other organizations.

There appears to be an untitled section on business/career counseling services. Unless these can be tied directly to the R/T facility, strike them. ---assume you will address this

The Flagstaff Job Service Center is available to assist employers with the recruitment and screening of applicants, employer orientation programs and immigrant certification.

167

MAJOR EMPLOYERS IN THE GREATER FLAGSTAFF AREA

Employer Number of Employees

Northern Arizona University 2364 Flagstaff Medical Center 1820 Flagstaff Unified School District 1670 Coconino County 1184 W.L. Gore & Associates – Mfg. Medical Equipment 1000 City of Flagstaff 891 United States Forest Service (includes seasonal employees) 550 Coconino Community College 485 SCA Tissue – Mfg. Recycled Paper Products 235 New England Business Services – Telemarketing Services 170 Nestle Purina Co. – Mfg Pet Foods 160 United States Geological Survey – Map Making / Geology 151 Sturner and Klein – Telemarketing Services 150 Walgreens – Distribution Center 150 Arizona Public Services Co. – Electric 100 Pepsi Cola – Bottling / Beverage Dist 99 Grand Canyon Railway – Transportation 60 Prent Thermoforming – Mfg. Injection Molding 59 Southwest Windpower – Mfg. Wind Turbines 50 Connect Tech International – Electronic Assembly 30

168

APPENDIX F - SHIPPING TERMINOLOGY and GLOSSARY OF TERMS AND ACRONYMS

169 Shipping Terminology and Glossary of Terms and Acronyms

A ABS See American Bureau of Shipping

ACEP See Approved Continuous Examination Program

ADR See Articles Dangereux de Route

AGVS Automated guided vehicle system.

ASYCUDA Automated System for Customs Data. This program dealing with customs declarations has been developed by UNCTAD and is presently used by some 75 countries.

Abeam 1. Alongside, near amidships. 2. For navigational purposes in the direction of a right angle to the ship's heading.

Absorption Acceptance by the carrier of a portion of a joint rate or charge which is less than the amount which it would receive for the service in the absence of such joint rate or charge.

Acceptance of Goods The process of receiving a consignment from a consignor, usually against the issue of a receipt. As from this moment and on this place the carrier's responsibility for the consignment begins.

Accommodation ladder Movable steps arranged temporary alongside e.g. a quay to allow access on board for officials, crew or passengers.

170 Accompanied Transport The transport of complete road vehicles by another means of transport (e.g. train, ferry accompanied by the driver).

Accord Relatif aux Transports Internationaux de Denrees Perissables et aux Engins Speciaux a Utiliser pour ces Transports Abbreviation: ATP Agreement on the international carriage of perishable foodstuffs and on the special equipment to be used for such carriage.

Acknowledgement of Receipt A notification relating to the receipt of e.g. goods, messages and documents.

Act of God Accidents of a nature beyond human control such as flood, lightning or hurricane usually quoted as 'force majeure'.

Active Inventory Covers raw material, work in progress, finished products, which will be used or sold within a given period without extra cost or loss. This term does not cover the so- called reserve inventory.

Actual Demand Customer orders and often also the allocation of items, ingredients and/or raw materials to production or distribution.

Actual Voyage Number A code for identification purposes of the voyage and vessel which actually transports the container/cargo.

Ad Valorem In proportion to the value: A phrase applied to certain freight or customs duties levied on goods, property, etc. set as a percentage of their value.

Added Value The value attributed to products, and services as the result of a particular process (e.g. production process, storage, transport).

Advance Arrangement An agreement between the shipper and the carrier, concerning contacts between

171 those parties prior to tendering the consignment.

Advanced Amount Quantity of cash or cash equivalents expressed in a monetary amount given to a driver to cover expenses during a trip.

Advanced Charge A charge paid by a carrier to an agent or to another carrier, which the delivering carrier then collects from the consignee. Such charges are usually for agents' forwarding fees and incidental expenses paid out of pocket for account of the shipment by an agent or other carrier.

Advanced Interline An interline carrier that picks up cargo from the shipper and delivers it to another carrier for shipment to the consignee.

Advice Note A written piece of information e.g. about the status of the goods.

Aeroquip System Special accessories in a container consisting of among others the attachment rails on the inside walls to provide facilities for lashing and separation of the cargo.

Aft At, near or towards the stern or rear of a vessel or an aircraft.

Agency Fee Fee payable by a ship owner or ship operator to a port agent.

Agent 1. A person or organization authorized to act for or on behalf of another person or organization. 2. In the shipping line, an Agent is a corporate body with, which there is an agreement to perform particular functions on behalf of them at an agreed payment. An Agent is either a part of an organization or an independent body. The following functions and responsibilities may apply to the activities of an agent. 1. Sales

Marketing, acquisition of cargo, issuing quotations, concluding contracts in co-ordination

172 with the shipping line. Basically the agent is the first point of entry into the shipping line organization for a shipper.

2. Bookings

Booking of cargo in accordance with allotments assigned to the agent for a certain voyage by shipping line.

3. Customs

Dealing with the national customs administration for cargo declarations, manifest alterations and cargo clearance on behalf of the shipping line.

4. Documentation

Responsible for timeliness and correctness of all documentation required, regarding the carriage of cargo.

5. Handling

Taking care of all procedures connected with physical handling of cargo.

6. Equipment control

Managing of all equipment stock in a particular area.

7. Issuing

Authorized to sign and issue Bills of Lading and other transport documents.

8. Collecting

Authorized to collect freight and charges on behalf of the shipping line.

9. Delivery

The agent who releases the cargo and is responsible for its delivery to the consignee.

10. Handling of cargo claims

Handling of cargo claims as per agency contract.

11. Husbanding

Handling non cargo related operations of a vessel as instructed by the master, owner or charterer.

Aggregate Inventory The inventory for any group of items or products, involving multiple stock-keeping

173 units.

Air Container Any unit load device, primarily intended for transport by air, having an internal volume of 1 m3 or more, incorporating restraint provisions compatible with an aircraft restraint system, and an entirely flush base bottom to allow handling on roller-bed cargo handling systems.

Air Waybill Abbreviation: AWB A document made out by or on behalf of the carrier(s) confirming receipt of the goods by the carrier and evidencing the contract between the shipper and the carrier(s) for the carriage of goods as described therein.

Allocation The process of assigning activities, costs or facilities e.g. space to a certain organizational units.

Allotment A share of the capacity of a means of transport assigned to a certain party, e.g. a carrier or an agent, for the purpose of the booking of cargo for a specific voyage.

Always Afloat (AA) Provision in a charter party, that the vessel must remain afloat at all times when unloading and discharging.

American Bureau of Shipping Abbreviation: ABS American classification society which has established rules and regulations for the classification of seagoing vessels or equipment.

Amidships At or in the middle of a vessel.

Anchor Device for temporary securing a ship or floating structure to the seabed by means of a chain or cable and a weight with movable extensions (arms)

Apparel 1. A vessel's outfit, such as rigging, anchor and lifeboats.

174 2. The term used in distribution/transport of clothing for a single piece of clothing, a garment.

Approved Continuous Examination Program Abbreviation: ACEP An agreement between the owners of the equipment and the responsible governmental body to allow continuous examination of the equipment (e.g. containers).

Apron See Platform

Arbitration The process of referring to an agreed person for judgment on issues of dispute, without requiring the use of courts.

Area Code A code for the area where a container is situated.

Area Off Hire Lease Geographical area where a leased container becomes off hire.

Area Off Hire Sublease Geographical area where a subleased container becomes off hire.

Area On Hire Lease Geographical area where a leased container becomes on hire.

Area On Hire Sublease Geographical area where a subleased container becomes on hire.

Area of Repair Geographical area where a container is under repair.

Arrival Date The date on which goods or a means of transport is due to arrive at the delivery site of the transport.

175 Arrival Notice A notice sent by a carrier to the notify party advising of the arrival of a certain shipment or consignment.

Articles Dangereux de Route Abbreviation: ADR A European agreement concerning the international carriage of dangerous goods by road.

Assembly The stage of production in which components are put together into an end product appropriate to the process concerned.

Assignment The transfer of certain rights from one party to another.

Astern 1. Behind a vessel or an aircraft. 2. Backward; in a reverse direction.

Athwartships Across the vessel, that is, from side to side. Said of cargo stowed in this way, as opposed to length-wise.

Audit A methodical examination and review of a situation or condition (as within a business enterprise) concluding with a detailed report of findings.

Audit Trail A record of events, such as system access, network load, unsuccessful log-on attempts, that might have some significance for an investigation.

Authentication Proof by means of a signature or otherwise that a certain document or certain data is of undisputed origin and genuine.

Authorized Consignee / Consignor A trader authorized by the European Commission (regulation 2454/93) to receive or

176 dispatch consignments under transit procedures without having to present goods and documents directly at the customs office.

Authorization The commission to a certain person or body to act on behalf of another person or body. The person or body can be authorized e.g. to issue Bills of Lading or to collect freight.

Auto Container Container equipped for the transportation of vehicles.

Automated Guided Vehicle System Unmanned vehicles equipped with automatic guidance equipment which follow a prescribed path, stopping at each necessary station for automatic or manual loading or unloading.

Automatic Identification A means of identifying an item e.g. a product, parcel or transport unit by a machine (device) entering the data automatically into a computer.

The most widely used technology at present is bar code; others include radio frequency, magnetic stripes and optical character recognition.

Automatic Identification Manufacturers Abbreviation: AIM International Organization of companies and/or associations involved or interested in automatic identification.

Average 1. In marine insurance: a loss or damage to or in respect of goods or equipment. 2. The numerical result obtained by dividing the sum of two or more quantities by the number of quantities.

Average Adjusters In general average affairs average adjusters are entrusted with the task of apportioning the loss and expenditure over the parties interested in the maritime venture and to determine which expenses are to be regarded as average or general average.

Aweigh Description of the situation when the anchor has just been lifted from the seabed

177

Awning Light structure with canvas or wooden covering rigged above an open space to provide protection from sun or rain.

B B/L See Bill of Lading

BC Code Safe working practice code for solid bulk cargo.

BSI Container Specification British Standards Institution Specification for freight containers.

Back Haul The return movement of a means of transport which has provided a transport service in one direction.

Back Letter Back letters are drawn up in addition to a contract in order to lay down rights and/or obligations between both contracting parties, which, for some reason cannot be included in the original contract.

This expression is sometimes used for letters of indemnity, which are drawn up if the condition of the goods loaded gives rise to remarks and, nevertheless, the shipper insists upon receiving clean Bills of Lading. Letters of indemnity are only allowed in very exceptional circumstances.

Back Order A customer order or commitment, which is unfilled due to insufficient stock.

Back Scheduling A method of obtaining a production schedule by working backwards from the required due date in order to predict the latest start date consistent with meeting that due date.

Backlog 1. The quantity of goods still to be delivered, received, produced, issued, etc., for which the planned or agreed date has expired.

178 2. The total number of customer orders which have been received but not yet been shipped.

Balespace The bale space of a vessel is the capacity of cargo spaces under deck (including hatchways but excluding void spaces behind cargo battens and beams) expressed in cubic meters or cubic feet.

Ballast Materials solely carried to improve the trim and the stability of the vessel. In vessels usually water is carried as ballast in tanks, specially designed for that purpose.

Bank Guarantee An undertaking by a bank to be answerable for payment of a sum of money in the event of non performance by the party on whose behalf the guarantee is issued.

Banking System For marine purposes the practice of always keeping more than one piece of cargo on the quay or in the vessel ready for loading or discharging in order to avoid delays and to obtain optimal use of the loading gear.

Baplie An EDI message to convey the Bay plan on occupied and empty slots in a certain vessel at a particular time.

Bar Coding A method of encoding data for fast and accurate electronic readability. Bar codes are a series of alternating bars and spaces printed or stamped on products, labels, or other media, representing encoded information which can be read by electronic readers, used to facilitate timely and accurate input of data to a computer system. Bar codes represent letters and/or numbers and special characters like +, /, -, etc.

Bare Boat Charter A charter whereby the charterer leases the bare ship and appoints the master and crew himself.

Barge Flat bottomed inland cargo vessel for canals and rivers with or without own propulsion for the purpose of transporting goods.

179 Bars Special devices mounted on container doors to provide a watertight locking.

Base Home depot of container or trailer.

Basic Stock Items of an inventory intended for issue against demand during the re-supply lead time.

Batch A collection of products or data which is treated as one entity with respect to certain operations e.g. processing and production.

Batch Lot A definite quantity of some product manufactured or produced under conditions which are presumed uniform and for production control purposes passing as a unit through the same series of operations.

Batch Production The production process where products/components are produced in batches and where each separate batch consists of a number of the same products/components.

Battens Members protruding from the inside walls of a vessel's hold or a (thermal) container to keep away the cargo from the walls to provide an air passage. They may be integral with the walls, fastened to the walls or added during cargo handling.

Bay A vertical division of a vessel from stem to stern, used as a part of the indication of a stowage place for containers. The numbers run from stem to stern; odd numbers indicate a 20 foot position, even numbers indicate a 40 foot position.

Bay Plan A stowage plan which shows the locations of all the containers on the vessel.

Behältertragwagen Abbreviation: B.T. Wagen A container wagon of the German Railways.

180

Benchmarking The measurement and comparison with a standard or others of efforts and results in the business process for e.g. input, output, reliability, quality and customer satisfaction.

Note: For Shipping line it is the comparative search for the best practices (processes) that will lead to superior performance of the company.

It must be seen as a positive and pro-active process to make the company's operations lean and improve quality and productivity.

Bending-moment Is the result of vertical forces acting on a ship as a result of local differences between weight and buoyancy.

The total of these forces should be zero otherwise change of draft will occur.

At sea the bending moment will change as a result of wave impact which than periodically changes the buoyancy distribution.

Note: The maximum allowed bending moment of a vessel is restricted by the class bureau to certain limits, which are different under port and sea conditions.

Berne Gauge The most restrictive loading gauge (standard measure) or the lowest common denominator of loading gauges on the railways of continental Europe.

Berth A location in a port where a vessel can be moored often indicated by a code or name.

Best Practice The provision to a client of examples and constructive consultation for improved logistics processes in the delivery of goods and services.

Bilateral Transport Agreement Agreement between two nations concerning their transport relations.

Bill of Exchange An unconditional order in writing to pay a certain sum of money to a named person.

Bill of Health

181 The Bill of Health is the certificate issued by local medical authorities indicating the general health conditions in the port of departure or in the ports of call. The Bill of Health must have been visaed before departure by the Consul of the country of destination.

When a vessel has free pratique, this means that the vessel has a clean Bill of Health certifying that there is no question of contagious disease and that all quarantine regulations have been complied with, so that people may embark and disembark.

Bill of Lading Abbreviation: B/L, plural Bs/L A document which evidences a contract of carriage by sea.

The document has the following functions:

1. A receipt for goods, signed by a duly authorized person on behalf of the carriers. 2. A document of title to the goods described therein. 3. Evidence of the terms and conditions of carriage agreed upon between the two parties.

At the moment 3 different models are used:

1. A document for either Combined Transport or Port to Port shipments depending whether the relevant spaces for place of receipt and/or place of delivery are indicated on the face of the document. 2. A classic marine Bill of Lading in which the carrier is also responsible for the part of the transport actually performed by himself. 3. Sea Waybill: A non-negotiable document, which can only be made out to a named consignee. No surrender of the document by the consignee is required.

See also: Service Bill

Bill of Lading Clause A particular article, stipulation or single proviso in a Bill of Lading. A clause can be standard and can be pre-printed on the B/L.

Bill of Material A list of all parts, sub-assemblies and raw materials that constitute a particular assembly, showing the quantity of each required item.

Bimodal Trailer

182 1. A road semi-trailer with retractable running gear to allow mounting on a pair of rail boogies. 2. A trailer which is able to carry different types of standardised unit loads, (e.g. a chassis which is appropriate for the carriage of one FEU or two TEU's).

Binnacle Support mounted on the bridge deck to hold the compass.

Block Train A number of railway wagons (loaded with containers), departing from a certain place and running straight to a place of destination, without marshalling, transhipping or any coupling or de-coupling of wagons.

Boat A small open decked craft carried on board ships for a specific purpose e.g. lifeboat, workboat.

Boatman Person who attends to the mooring and unmooring of vessels.

Bollard Post, fixed to a quay or a vessel, for securing mooring ropes.

Bolster See Container Bolster

Bona Fide In good faith; without dishonesty, fraud or deceit.

Bonded The storage of certain goods under charge of customs viz. customs seal until the import duties are paid or until the goods are taken out of the country.

1. Bonded warehouse (place where goods can be placed under bond). 2. Bonded store (place on a vessel where goods are placed behind seal until the time that the vessel leaves the port or country again). 3. Bonded goods (dutiable goods upon which duties have not been paid i.e. goods in transit or warehoused pending customs clearance).

183

Booking 1. The offering by a shipper of cargo for transport and the acceptance of the offering by the carrier or his agent.

Booking Reference Number The number assigned to a certain booking by the carrier or his agent.

Bordereau Document used in road transport, listing the cargo carried on a road vehicle, often referring to appended copies of the road consignment note.

Bottleneck A stage in a process which limits performance.

Note: Generally this is interpreted as a facility, function, department etc. that impedes performance, for example a warehouse or distribution center where goods arrive at a faster rate than they can be transported or stored, thus causing stock-piling at improper moments or in unwanted areas.

Bottom Fittings Special conical shaped devices inserted between a container and the permanent floor on the deck of a vessel in order to avoid shifting of the container during the voyage of this vessel.

Bottom Lift Handling of containers with equipment attached to the four bottom corner fittings (castings).

Bottomry Money borrowed against a ship, or its equipment, repaid with interest upon the ship's arrival at port, and forfeited should the ship sink

Bow-thruster Machine located towards the forward end of a ship below the waterline, which can produce a lateral trust mostly by means of a propeller.

Box Colloquial name for container (e.g. Box-club)

184 Box Pallet Pallet with at least three fixed, removable or collapsible, vertical sides.

Branch Warehouse See Distribution Centre

Break Bulk 1. To commence discharge. 2. To strip unitized cargo.

Break Bulk Cargo General cargo conventionally stowed as opposed to unitized, containerized and Roll On-Roll Off cargo.

Break-even Weight The weight at which it is cheaper to charge the lower rate for the next higher weight- break multiplied by the minimum weight indicated, than to charge the higher rate for the actual weight of the shipment.

Breakwater A structure on board a ship, fixed to an open deck forward intended to deflect and disperse head seas shipped over the bow.

Broken Stowage The cargo space which is unavoidably lost when stowing cargo. The percentage of wasted space depends upon e.g. the kind of cargo, the packing and the used spaces.

Broker Person who acts as an agent or intermediary in negotiating contracts.

Brussels Tariff Nomenclature The old Customs Co-operation Council Nomenclature for the classification of goods. Now replaced by the Harmonized System.

Buffer Stock A quantity of goods or articles kept in store to safeguard against unforeseen shortages or demands.

Bulk Cargo

185 Unpacked homogeneous cargo poured loose in a certain space of a vessel or container e.g. oil and grain.

Bulk Carrier Single deck vessel designed to carry homogeneous unpacked dry cargoes such as grain, iron ore and coal.

Bulk Container A container designed for the carriage of free-flowing dry cargoes, which are loaded through hatchways in the roof of the container and discharged through hatchways at one end of the container.

Bulkhead 1. Upright partition dividing compartments on board a vessel. The functions of bulkheads are: o To increase the safety of a vessel by dividing it into compartments. o To separate the engine room from the cargo holds. o To increase the transverse strength of a vessel. o To reduce the risk of spreading fire to other compartments. 2. A vertically mounted board to provide front wall protection against shifting cargo and commonly seen on platform trailers (road cargo). 3. A partition in a container, providing a plenum chamber and/or air passage for either return or supply air. It may be an integral part of the appliance or a separate construction. 4. A vertically mounted wall separating the fore respectively aft compartment from the rest of the aircraft (air cargo).

Bull Rings Rings for lashing the cargo in containers.

Bulletin Specialised reports for specific activity related events.

Bunker (Tank) spaces on board a vessel to store fuel.

Bunker Adjustment Factor Abbreviation: BAF Adjustment applied by the shipping line or liner conferences to offset the effect of fluctuations in the cost of bunkers.

186

Bunkers Quantity of fuel on board a vessel.

Buoyancy The upward force extended by the vertical component of integrated pressure acting on the hull below the waterline; usually calculated as being equal to the weight of the water displaced by the hull.

Bureau Veritas French classification society.

Business Analyses The process of investigating and evaluating an organization to clarify processes and procedures.

Business Data Repository (BDR) The accumulation of business data taken from a system to reuse this data in other systems.

Business Function An upper level business activity that is achieved via the performance of component activities. Examples: Manufacturing, Shipping

Business Logistics 1. Logistics within a business system. 2. The coordinating function of material management and physical distribution, which executes the integral control of the goods flow.

Business Process A business process is the action taken to respond to particular events, convert inputs into outputs, and produce particular results. Business processes are what the enterprise must do to conduct its business successfully.

Business Process Model The business process model provides a breakdown (process decomposition) of all levels of business processes within the scope of a business area. It also shows process dynamics, lower-level process interrelationships. In Summary it includes all

187 diagrams related to a process definition that allows for understanding what the business process is doing (and not how).

Business Process Redesign (BPR) The process of redesigning business practice models including the exchange of data and services amongst the stakeholders (i.e. finance, merchandising, production, distribution) involved in the lifecycle of a client's product.

Business Rule A Business Rule is a business condition under which data items are created, related and maintained.

Buyer Party to which merchandise is sold.

Buyer's Market A 'buyer's market' is considered to exist when goods can easily be secured and when the economic forces of business tend to cause goods to be priced at the purchaser's estimate of value. In other words, a state of trade favorable to the buyer, with relatively large supply and low prices. C CAD See Cash Against Documents

CAF See Currency Adjustment Factor

CENSA Council of European and Japanese National Ship Owner's Associations.

Cabotage 1. Transport of goods between two ports or places located in the same country. 2. Transport of cargo in a country other than the country where the vehicle is registered road-cargo). 3. The carriage of a container from a surplus area to an area specified by the Owner of that container, in exchange of which and during which the operator can use this container.

Call

188 The visit of a vessel to a port.

Call Sign A code published by the International Telecommunication Union in its annual List of Ships' Stations to be used for the information interchange between vessels, port authorities and other relevant participants in international trade.

Note: The code structure is based on a three digit designation series assigned by the ITU and a one digit assigned by the country of registration.

Camber Slightly arched form of container-floors to strengthen the construction.

Capacity 1. The ability, in a given time, of a resource measured in quality and quantity. 2. The quantity of goods which can be stored in or loaded into a warehouse, store and/or loaded into a means of transport at a particular time.

Capacity Control Process of registering and steering of capacity.

Capstan Mechanical device with drum having a vertical spindle used to tighten or slacken mooring ropes or to haul an anchor.

Cargo 1. Goods transported or to be transported, all goods carried on a ship covered by a B/L. 2. Any goods, wares, merchandise, and articles of every kind whatsoever carried on a ship, other than mail, ship's stores, ship's spare parts, ship's equipment, stowage material, crew's effects and passengers' accompanied baggage (IMO). 3. Any property carried on an aircraft, other than mail, stores and accompanied or mishandled baggage Also referred to as 'goods' (ICAO).

Cargo Assembly The separate reception of parcels or packages and the holding of them for later dispatch as one consignment (air cargo).

Cargo Disassembly

189 The separation of one or more of the component parts of a consignment (from other parts of such consignment) for any purpose other than that of presenting such part or parts to customs authorities at the specific request of such authorities (air cargo).

Cargo Handling All procedures necessary to enable the physical handling of goods.

Cargo Restriction Code A code indicating that the use of a certain container is restricted to particular cargo.

Cargo Tracer A document sent by the agent to all relevant parties, stating that certain cargo is either missing or over-landed.

Cargo Unit A vehicle, container, pallet, flat, portable tank or any other entity or any part thereof which belongs to the ship but is not permanently attached to that ship.

Carriage The process of transporting (conveying) cargo, from one point to another.

Carriage Paid To (...named place of destination) Abbreviation: CPT See Inco Terms

Carriage and Insurance Paid To (...named place of destination) Abbreviation: CIP See Inco Terms

Carrier The party undertaking transport of goods from one point to another.

Carrier Haulage The inland transport service, which is performed by the sea-carrier under the terms and conditions of the tariff and of the relevant transport document.

Carriers Bill of Lading Ports Terminal, Pre-terminal port or Post-terminal Port as per tariff, indicated on the Bill

190 of Lading and which is not the port physically called at by Carriers' ocean vessels.

Note: Under normal circumstances in the B/L only ports should be mentioned which are actually called at.

Carriers' Lien When the shipper ships goods 'collect', the carrier has a possessory claim on these goods, which means that the carrier can retain possession of the goods as security for the charges due.

Carrying Temperature Required cargo temperature during transport and storage. See also: Setting/Air Delivery Temperature

Cartage See Haulage

Cash Against Documents Abbreviation: CAD Terms of payment: if the buyer of goods pays for the goods against transfer of the documents, entitling him to obtain delivery of the goods from the carrier.

Cash On Delivery Abbreviation: COD Terms of payment: if the carrier collects a payment from the consignee and remits the amount to the shipper (air cargo).

Caveat Emptor Let the buyer beware, purchaser must ascertain the condition of the goods to be purchased prior to the purchase.

Cavitation The formation of partial vacuum bubbles on submerged surfaces caused by low pressure arising from a hydrodynamic flow as a result of mechanical force, usually associated with the use of propellers. The collapse of the bubbles causes surface damage and pits.

Cell Location on board of a container vessel where one container can be stowed.

191 Cell Position The location of a cell on board of a container vessel identified by a code for successively the bay, the row and the tier, indicating the position of a container on that vessel.

Cell-guide Steel bars and rails used to steer containers during loading and discharging whilst sliding in the ship.

Cellular Vessel A vessel, specially designed and equipped for the carriage of containers.

Central Warehouse A warehouse which performs central functions for a number of warehouses.

Centre of Gravity Point at which the entire weight of a body may be considered as concentrated so that if supported at this point the body would remain in equilibrium in any position.

Certificate A document by which a fact is formally or officially attested and in which special requirements and conditions can be stated.

Certificate of Analysis A document, often required by an importer or governmental authorities, attesting to the quality or purity of commodities. The origin of the certification may be a chemist or any other authorized body such as an inspection firm retained by the exporter or importer. In some cases the document may be drawn up by the manufacturer certifying that the merchandise shipped has been tested in his facility and found conform to the specifications.

Certificate of Classification A certificate, issued by the classification society and stating the class under which a vessel is registered.

Certificate of Delivery A certificate, indicating the condition of a vessel upon delivery for a charter including ballast, available bunkers and fresh water.

192 Certificate of Free Sale A certificate, required by some countries as evidence that the goods are normally sold on the open market and approved by the regulatory authorities in the country of origin.

Certificate of Origin A certificate, showing the country of original production of goods. Frequently used by customs in ascertaining duties under preferential tariff programmes or in connection with regulating imports from specific sources.

Certificate of Redelivery A certificate, indicating the condition of a vessel upon redelivery from a charter including ballast, available bunkers and fresh water.

Certification Authority (Key Management) The certification authority is the central party of a key management system. It provides certificates to the users so that ¿trust¿ can be established between different users based on the ¿trust¿ between the Registration Authority and users. These certificates are furthermore made available in one or more directories which can be accessed by all users.

Chain Conveyor A conveyor consisting of two or more strands of chain running in parallel tracks with the loads carried directly on the chains.

Chain-Locker Compartment at the forward part of the ship designed for the storage of the anchor chain.

Charge An amount to be paid for carriage of goods based on the applicable rate of such carriage, or an amount to be paid for a special or incidental service in connection with the carriage of goods.

Charge Type A separate, identifiable element of charges to be used in the pricing/rating of common services rendered to customers.

Charter Contract See Charter Party

193

Charter Party 1. A contract in which the ship owner agrees to place his vessel or a part of it at the disposal of a third party, the charterer, for the carriage of goods for which he receives a freight per ton cargo, or to let his vessel for a definite period or trip for which a hire is paid. 2. synonym: Charter Contract.

Charterer The legal person who has signed a charter party with the owner of a vessel or an aircraft and thus hires or leases a vessel or an aircraft or a part of the capacity thereof.

Chassis 1. A wheeled carriage onto which an ocean container is mounted for inland conveyance 2. The part of a motor vehicle that includes the engine, the frame, suspension system, wheels, steering mechanism etc., but not the body.

Claim A charge made against a carrier for loss, damage or delay.

Classification Arrangement according to a systematic division of a number of objects into groups, based on some likeness or some common traits.

Classification Society An organization, whose main function is to carry out surveys of vessels, its purpose being to set and maintain standards of construction and upkeep for vessels, their engines and their safety equipment. A classification society also inspects and approves the construction of shipping line containers.

Clean Bill of Lading A Bill of Lading which does not contain any qualification about the apparent order and condition of the goods to be transported (it bears no stamped clauses on the front of the B/L). It bears no superimposed clauses expressly declaring a defective condition of the goods or packaging (resolution of the ICS 1951).

Clean on Board

194 When goods are loaded on board and the document issued in respect to these goods is clean.

Note: Through the usage of the UCP 500 rules the term has now become superfluous.

Clearance Terminal Terminal where Customs facilities for the clearance of goods are available.

Cleared Without Examination Abbreviation: CWE Cleared by customs without inspection.

Client A party with which a company has a commercial relationship concerning the transport of e.g. cargo or concerning certain services of the company concerned, either directly or through an agent.

Clip on Unit Abbreviation: COU Detachable aggregate for a temperature controlled container (Con Air).

Closed Ventilated Container A container of a closed type, similar to a general purpose container, but specially designed for carriage of cargo where ventilation, either natural or mechanical (forced), is necessary.

Co-loading The loading, on the way, of cargo from another shipper, having the same final destination as the cargo loaded earlier.

Co-maker ship The long-term relationship between e.g. a supplier or a carrier and a customer, on the basis of mutual confidence.

Co-shipper ship See Co-maker ship

Coaming Structure around the hatch or door opening of a ship intended to provide seating for the cover, to stiffen the deck or plates and to prevent the ingress of water.

195

Coaster A relative small ship plying between coastal ports.

Code A character string that represents a member set of values.

Code List The complete set of code values for a data item.

Cofferdam An empty space on board of a vessel between two bulkheads or two decks separating oil tanks from each other and/or the engine room or other compartments.

Collapsible Container Container which can be easily folded, disassembled, and reassembled.

Combination Charge An amount which is obtained by combining two or more charges.

Combination Chassis A chassis which can carry either one forty foot or thirty foot container or a combination of shorter containers e.g. 2 x 20 foot.

Combined Transport Intermodal transport where the major part of the journey is by one mode such as rail, inland waterway or sea and any initial and/or final leg carried out by another mode such as road.

Combined Transport Bill of Lading See Bill of Lading R302

Combined Transport Document Abbreviation: CTD Negotiable or non-negotiable document evidencing a contract for the performance and/or procurement of performance of combined transport of goods.

Thus a combined transport document is a document issued by a Carrier who contracts as a principal with the

196 Merchant to affect a combined transport often on a door-to-door basis.

Combined Transport Operator Abbreviation: CTO A party who undertakes to carry goods with different modes of transport.

Commercial Invoice A document showing commercial values of the transaction between the buyer and seller.

Commodity Indication of the type of goods. Commodities are coded according to the harmonized system.

Commodity Box Rate A rate classified by commodity and quoted per container.

Commodity Code Code used in the Harmonized System for the classification of goods, which are most commonly produced and traded.

Commodity Item Number Specific description number required in air transport to indicate that a specific freight rate applies.

Common Access Reference A key to relate all subsequent transfers of data to the same business case or file.

Compagneurs Nationales des Conteneurs Abbreviation: CNC affiliate of the French National Railways for Container traffic.

Compass Instrument used for showing the direction of north and the relative heading of the ship compared with this direction.

Component A uniquely identifiable product that is considered indivisible for a particular planning or control purpose, and/or which cannot be decomposed without destroying it.

197 Note: A component for one organizational group may be the final assembly of another group (e.g. electric motor).

Compradore A local advisor or agent employed by a foreign party or company who acts as an intermediary in transactions with local inhabitants.

Computer Virus A program that can infect other programs by modifying them to include a possibly evolved copy of itself.

Con Air Container Thermal container served by an external cooling system (e.g. a vessel's cooling system or a Clip On Unit), which regulates the temperature of the cargo.

Note: Con Air is a brand name.

Conditions 1. Anything called for as requirements before the performance or completion of something else. 2. Contractual stipulations which are printed on a document or provided separately.

Conditions of Carriage The general terms and conditions established by a carrier in respect of the carriage (air cargo).

Conditions of Contract Terms and conditions shown on the Air Waybill (air cargo).

Cones Devices for facilitating the loading, positioning and lashing of containers. The cones insert into the bottom castings of the container.

Conference See Liner conference

Congestion Accumulation of vessels at a port to the extent that vessels arriving to load or

198 discharge are obliged to wait for a vacant berth.

Connecting Carrier A carrier to whose services the cargo is to be transferred for onward connecting transport (air cargo).

Connecting Road Haulage See Drayage

Consensus General agreement, characterized by the absence of sustained opposition to substantial issues by any important part of concerned interests and by a process that involves seeking to take into account the views of all parties concerned and to reconcile any conflicting arguments. Consensus needs not to imply unanimity.

Consignee The party such as mentioned in the transport document by whom the goods, cargo or containers are to be received.

Consignment A separate identifiable number of goods (available to be) transported from one consignor to one consignee via one or more than one modes of transport and specified in one single transport document.

Consignment Instructions Instructions from either the seller/consignor or the buyer/consignee to a freight forwarder, carrier or his agent, or other provider of a service, enabling the movement of goods and associated activities. The following functions can be covered:

• Movement and handling of goods (shipping, forwarding and stowage). • Customs formalities. • Distribution of documents. • Allocation of documents (freight and charges for the connected operations). • Special instructions (insurance, dangerous goods, goods release, additional documents required).

Consignment Note A document prepared by the shipper and comprising a transport contract. It

199 contains details of the consignment to be carried to the port of loading and it is signed by the inland carrier as proof of receipt.

Consignment Stock The stock of goods with an external party (customer) which is still the property of the supplier. Payment for these goods is made to the supplier at the moment when they are sold (used) by this party.

Consignor See Shipper

Consolidate To group and stuff several shipments together in one container.

Consolidated Container Container stuffed with several shipments (consignments) from different shippers for delivery to one or more consignees.

Consolidation The grouping together of smaller consignments of goods into a large consignment for carriage as a larger unit in order to obtain a reduced rate.

Consolidation Point Location where consolidation of consignments takes place.

Consolidator A firm or company which consolidates cargo.

Consortium Consortium is a form of co-operation between two or more carriers to operate in a particular trade.

Consular Invoice An invoice covering shipment of goods certified by a consular official of the destination country and used normally by customs or officials concerned with foreign exchange availability to ascertain the correctness of commercial invoice values.

Container An item of equipment as defined by the International Organization for

200 Standardization (ISO) for transport purposes. It must be of:

1. a permanent character and accordingly strong enough to be suitable for repeated use. 2. specifically designed to facilitate the carriage of goods, by one or more modes of transport without intermediate reloading. 3. fitted with devices permitting its ready handling, particularly from one mode of transport to another. 4. designed as to be easy to fill and empty. 5. having an internal volume of 1 m3 or more.

The term container includes neither vehicles nor conventional packing.

Container Bolster A container floor without sides or end walls which does not have the ISO corner fittings and is generally used for Ro/Ro operations.

Note: A bolster cannot be handled either full or empty by a container spreader without special gear.

Container Chassis A vehicle specially built for the purpose of transporting a container so that, when container and chassis are assembled, the produced unit serves as a road trailer.

Container Check Digit The 7th digit of the serial number of a container used to check whether prefix and serial number are correct.

Container Depot Storage area for empty containers.

Container Freight Station Abbreviation: CFS A facility at which (export) LCL cargo is received from merchants for loading (stuffing) into containers or at which (import) LCL cargo is unloaded (stripped) from containers and delivered to merchants.

Container Lease The contract by which the owner of containers (lessor) gives the use of containers to a lessee for a specified period of time and for fixed payments.

Container Load Plan (CLP)

201 A list of items loaded in a specific container, and where appropriate their sequence of loading.

Container Logistics The controlling and positioning of containers and other equipment.

Container Manifest The document specifying the contents of particular freight containers or other transport units, prepared by the party responsible for their loading into the container or unit.

Container Moves The number of actions performed by one container crane during a certain period.

Container Number Identification number of a container consisting of prefix and serial number and check digit. (e.g. KNLU 123456-7) See also: Container Serial Number and Container Prefix

Container Owner A party who has a container at his disposal and who is entitled to lease or sell the container.

Container Platform A container floor without sides or end walls, which can be loaded by spreader directly and is generally, used for Lo-Lo operations.

Container Pool A certain stock of containers which is jointly used by several container carriers and/or leasing companies.

Container Prefix A four letter code that forms the first part of a container identification number indicating the owner of a container.

Container Safety Convention Abbreviation: CSC International convention for safe containers.

202 Container Serial Number A seven digit serial number (6 plus 1 Check Digit) that forms the second part of a container identification number.

Container Service Charges Charges to be paid by cargo interests as per tariff.

Container Size Code An indication of 2 digits of the nominal length and nominal height. See also: Size/Type ISO6346

Container Size/Type Description of the size and type of a freight container or similar unit load device as specified in ISO6346.

Container Stack Two or more containers, one placed above the other, forming a vertical column. See also: Stack

Container Sublease Contract by which a carrier gives the use of containers to another carrier for a specified period of time and for fixed payments.

Container Terminal Place where loaded and/or empty containers are loaded or discharged into or from a means of transport.

Container Type Code Two digits, the first of which indicates the category and the second of which indicates certain physical characteristics or other attributes. See also: Container Size/Type ISO6346

Container Yard Abbreviation: CY A facility at which FCL traffic and empty containers are received from or delivered to the Merchant by or on behalf of the Carrier.

Note: Often this yard is used to receive goods on behalf of the merchant and pack these in containers for FCL traffic.

203 Containerized Indication that goods have been stowed in a container.

Contraband Goods forbidden by national law to be imported or exported.

Contract An agreement enforceable by law between two or more parties stipulating their rights and obligations which are required by one or both parties to acts or forbearance by the other or both.

Contract Logistics The contracting out of all the warehousing, transport and distribution activities or a part thereof by manufacturing companies.

Contract of Afreightment An agreement whereby the ship owner agrees to carry goods by water, or furnishes a vessel for the purpose of carrying goods by water, in return for a sum of money called freight. There are two forms: the charter party and the contract contained in the Bill of Lading.

Contractual Port of Loading A port at which an ocean vessel does not call, but which is equalized with the actual port of call and upon which inland haulage services and inland tariffs are based.

Note: Generally speaking it is seen as the port to be mentioned on the B/L from which cargo is accepted (e.g. delivered by the consignee for sea transport).

Control The registration and check on data and activities as well as determining supervising procedures and changes related to procedures.

Convention Internationale Concernant le Transport des Marchandises par Chemin de Fer Abbreviation: CIM International agreement, applied by 19 European railway companies, setting out conditions for international railway transport of goods and the liabilities of the carrier.

204 Convention Relative au Contract de Transport International de Marchandise par Route Abbreviation: CMR Convention for the international carriage of goods by road, setting out the conditions of carriage and the liabilities of the carrier.

Note: Adherence to this set of regulations reflects a desire to standardize items such as documentation and rules on the carriers liability.

Conventional Cargo See Break Bulk Cargo

Converter Dolly An auxiliary undercarriage assembly consisting of a chassis, fifth wheel and tow bar used to convert a semi-trailer or a container chassis to a full trailer.

Conveyance Transport of goods from one place to another.

Conveyor A mechanical device in the form of a continuous belt for transporting cargo.

Core Competence The combination of individual skills and use of technologies that underlay the various products and or services of a business.

Core Data The fundamental set of data that is needed to convey the essential minimum detail for a specific transaction type. Ideally the detail should be all required pieces of information with no, or at least the very minimum of, options.

Core Master Data The fundamental set of data that is needed to establish sufficient (but minimum) reference material to support the maximum use of pre-code, pre-agreed information enabling simple (minimum required content) transaction messaging.

Core Systems Systems which are corporately owned and used globally. The systems are managed and controlled by a global team of specialists. The systems are considered as key for the general functioning of the entire company.

205 Corner Fittings Fittings located at the corners of containers providing means of supporting, stacking, handling and securing the container.

Corner Post Vertical structural member at either side of an 'end frame' of a container joining a top and a bottom corner fitting (and thereby forming a 'corner structure').

Correction Message A substitution for what has been wrong in a prior data interchange between computers in accordance with interchange agreements.

Cost and Freight (...named port of destination) Abbreviation: CFR See Inco Terms

Cost, Insurance and Freight (...named port of destination) Abbreviation: CIF See Inco Terms

Council of European and Japanese National Ship Owner's Associations Abbreviation: CENSA The main objectives of this Organization are to promote and protect sound Shipping policies in all sectors of shipping, to co-ordinate and present the views of its members and to exchange views with other ship owner groups.

Country of Departure Country from which a certain means of transport is scheduled to depart or has departed.

Country of Dispatch Country from which the goods are shipped.

Country of Origin Country in which the goods have been produced or manufactured, according to criteria laid down for the purpose of application of the customs tariff, of quantitative restrictions, or of any other measure related to trade.

Country of Provenance The country from which goods or cargo are sent to the importing country.

206

Crane A machine designed for moving and lifting weight by means of a movable projecting arm or a horizontal beam, which is able to travel over a certain distance.

Crew Member Any person actually employed for duties on board during a voyage in the working or service of a ship and included in the crew list (IMO).

Critical Path Method A network planning technique used for planning and controlling the activities in a project. By showing each of these activities and their associated times, the 'critical path' can be determined. The critical path is the series of successive activities which takes up most time and is therefore decisive for the total lead time of the project.

Cross Trades Term used by the shipping lines for the services of a vessel between nations other than the nation in which the vessel is registered (UNCTAD).

Cruise Ship A ship on an international voyage carrying passengers participating in a group program and accommodated on board, for the purpose of making scheduled temporary tourist visits at one or more different ports, and which during the voyage does not normally: (a) embark or disembark any other passengers; (b) load or discharge any cargo.

Currency A medium of exchange of value, defined by reference to the geographical location of the authorities responsible for it (ISO4217).

In general, the monetary unit involved in a transaction and represented by a name or a symbol.

Currency Adjustment Factor Abbreviation: CAF Adjustment applied by the shipping lines or liner conferences on freight rates to offset losses or gains for carriers resulting from fluctuations in exchange rates of tariff currencies.

Customer

207 See Client

Customer Pick Up Cargo picked up by a customer at a warehouse.

Customer Service 1. The way in which during a commercial relationship the wishes and demands of the (prospective) client are catered for. 2. Supporting activities at the customer interface adding value to a product (CEN273).

Customer Service Level A performance measure of customer service.

Note: generally this is seen as the degree with which customer orders can be executed, in accordance with the terms which are generally accepted in the market.

Customs The department of the Civil Service that deals with the levying of duties and taxes on imported goods from foreign countries and the control over the export and import of goods e.g. allowed quota prohibited goods.

Customs Broker An authorized agent specialized in customs clearance procedures on account of importers/exporters.

Customs Clearance Agent Customs broker or other agent of the consignee designated to perform customs clearance services for the consignee.

Customs Invoice Document required by the customs in an importing country in which an exporter states the invoice or other price (e.g. selling price, price of identical goods), and specifies costs for freight, insurance and packing etc., terms of delivery and payment, for the purpose of determining the customs value in the importing country of goods consigned to that country.

Customs Value The worth of an item or group of items expressed in a monetary amount, within a consignment declared to Customs for duty and statistical reasons.

208

Cybernetics The study of control processes in mechanical, biological, electrical and information systems.

Cycle Stock That portion of stock available or planned to be available in a given period for normal demand, excluding excess stock and safety stock. Damage Report Form on which physical damage is recorded (e.g. containers).

Damaged Cargo Report Written statement concerning established damages to cargo and/or equipment.

Dangerous Goods Goods are to be considered dangerous if the transport of such goods might cause harm, risk, peril, or other evil to people, environment, equipment or any property whatsoever.

Dangerous Goods Declaration Document issued by a consignor in accordance with applicable conventions or regulations, describing hazardous goods or materials for transport purposes, and stating that the latter have been packed and labeled in accordance with the provisions of the relevant conventions or regulations.

Dangerous Goods Packing Certificate A document as part of the dangerous goods declaration in which the responsible party declares that the cargo has been stowed in accordance with the rules in a clean container in compliance with the IMDG regulations and properly secured.

Data A re-interpretable representation of information in a formalized manner suitable for communication, interpretation or processing.

Data Carrier Medium designed to carry records of data entries.

Data Plate A metal identification plate affixed to a container, which displays among others the gross and tare weights and external dimensions.

209

Dead freight Slots paid for but not used.

Dead load The difference between the actual and calculated ship's draft.

Deadweight Abbreviation: DWT The total weight of cargo, cargo equipment, bunkers, provisions, water, stores and spare parts which a vessel can lift when loaded to her maximum draught as applicable under the circumstances. The dead-weight is expressed in tons.

Decision Support System Abbreviation: DSS An interactive computer-based system which generates a number of alternatives to solve an unstructured problem. These alternatives are being interpreted by the manager (decision- maker), where after he decides which alternative is to be used to solve the problem.

Deck Any extended horizontal structure in a vessel or an aircraft, serving as a floor and structural support, covering, partially or fully, a portion of the vessel or aircraft.

Declaration of Origin Appropriate statement as to the origin of the goods, made in connection with their exportation by the manufacturer, producer, supplier, exporter or other competent person on the commercial invoice or any document relating to goods.

Declared Value for Carriage The value of the goods declared to the carrier by the shipper for the purpose of determining charges or of establishing the limit of the carrier's liability for loss, damage or delay. It is also the basis for possible applicable valuation charges (air cargo).

Decoupling Inventory A stock retained to make the independent control of two successive operations possible.

Decoupling Point

210 The point in the supply chain which provides a buffer between differing input and output rates.

Dedicated Service 1. A service specially designed for the use by one or more particular customers. 2. A service (e.g. feeder) totally under control of the shipping line.

Deep Tank Tank fitted and equipped for the carriage of vegetable oil (e.g. palm oil and coconut oil) and other liquids in bulk. By means of oil-tight bulkheads and/or decks it is possible to carry different kinds of liquid in adjacent tanks. Deep tanks may be equipped with heating facilities in order to carry and discharge oil at the required temperature.

Default Charge A (standard) charge applicable for a trade, stretch or location.

In the absence of specifics (not otherwise specified/enumerated) a general amount has been set.

Degroupage Splitting up shipments into small consignments.

Delay in Transit (DIT) Delay of shipment at the customer’s request.

Delivered At Frontier (...named place) Abbreviation: DAF See Inco Terms

Delivered Duty Paid (...named place of destination) Abbreviation: DDP See Inco Terms

Delivered Duty Unpaid (...named place of destination) Abbreviation: DDU See Inco Terms

211 Delivered Ex Quay (...named port of destination) Abbreviation: DEQ See Inco Terms

Delivered Ex Ship (...named port of destination) Abbreviation: DES See Inco Terms

Delivering Carrier The carrier who delivers the consignment to the consignee or his agent (air cargo).

Delivery The process of delivering the consignment to the consignee at the agreed place.

Delivery Instruction Document issued by a buyer giving instructions regarding the details of the delivery of goods ordered.

Delivery Note A document recording the delivery of products to a consignee (customer).

Delivery Order 1. A carriers delivery order (negotiable document) is used for splitting a B/L (after surrender) in different parcels and have the same function as a B/L. 2. The authorization of the entitled party for the shipment to a party other than the consignee showed on the Air Waybill (air cargo).

Delivery Party The party to which goods are to be delivered.

Delivery Reliability The proportion of total delivery occasions in which the time, place, quality and quantity of products delivered accords with the order.

Delivery Schedule The required and/or agreed time of delivery of goods or services purchased for a future period.

212 Delivery Service The carriage of inbound consignments from the airport of destination to the address of the consignee or his designated agent or to the custody of the appropriate custom department agency when required (air cargo).

Delivery Time The time between order and delivery.

Demand The quantity of goods required by the market to be delivered in a particular period or at a specific date.

Demise Charter A contract whereby the ship owner leases his vessel to the charterer for a period of time during which the whole use and management of the vessel passes to the charterer, which involves that the charterer is to pay all expenses for the operation and maintenance of the vessel. Officers and crew will become servants of the charterer.

A demise charter whereby the charterer has the right to place his own master and crew on board of the vessel is also called 'bareboat charter'.

Demurrage 1. A variable fee charged to carriers and/or customers for the use of Unit Load Devices (ULD's) owned by a carrier beyond the free time of shipment. 2. Additional charge imposed for exceeding the free time, which is included in the rate and allowed for the use of certain equipment at the terminal.

Density of Commodity The mass of a commodity to its volume.

Dependent Demand A demand directly related to or derived from the demand for other items or end products. Dependent demands are therefore calculated, and need not and should not be forecast.

Depot The place designated by the carrier where empty containers are kept in stock and received from or delivered to the container operators or merchants.

213 Depot Location The geographical place where one or more shipping line depots are situated.

Derrick Lifting equipment on board a conventional vessel for loading and discharging cargo, consisting of a post attached to the deck and an inclined spar.

Dispatch The process of sending goods.

Dispatch Advice Information send by shippers to the recipient of goods informing that specified goods are sent or ready to be sent advising the detailed contents of the consignment.

Dispatch Days The days gained if the free time included in the rate and allowed for the use of certain equipment is not fully used.

Dispatch Note (for post parcels) Document which, according to the agreement concerning postal parcels, is to accompany post parcels.

Destination 1. Place for which goods or a vehicle is bound. 2. The ultimate stopping place according to the contract of carriage (air cargo).

Det Norske Veritas Norwegian classification society.

Detention Keeping equipment beyond the time allowed. See Demurrage

Detention Charge Charges levied on usage of equipment exceeding free time period as stipulated in the pertinent inland rules and conditions.

214

Deterioration The downgrading of a product due to long storage, damage to packing or other external influences.

Devanning See Stripping, Unpacking

Deviation from a Route A divergence from the agreed or customary route.

Dimensions Measurements in length, width and height, regarding cargo.

Direct Delivery 1. The conveyance of goods directly from the vendor to the buyer. Frequently used if a third party acts as intermediary agent between vendor and buyer. 2. Direct discharge from vessel onto railroad car, road vehicle or barge with the purpose of immediate transport from the port area (usually occurs when ports lack adequate storage space or when ports are not equipped to handle a specific cargo).

Direct Interchange Transfer of leased equipment from one lessee to another (container).

Direct Product Profitability Abbreviation: DPP System employed mainly within the retail sector for calculating the profit from any given product in any given position within the supply chain, requiring transparency and management of all logistic costs.

Direct Route The shortest operated route between two points.

Disbursement Sums paid out by a ship's agent at a port and recovered from the carrier.

Discharge 1. The unloading of a vehicle, a vessel or an aircraft.

215 2. The landing of cargo.

Discrepancy Difference between the particulars given and the particulars found.

Discrete Code A bar code in which the spaces between characters (inter character gaps) are not part of the code as each character begins and ends with a bar. The spaces can therefore vary in width, specified tolerances.

An example is Code 39.

Dispatch See Dispatch

Displacement The weight of the quantity of water displaced by the vessel. The displacement of the vessel on her light draft represents the weight of the vessel ready for use including stores etc.

Disposable Pallet Pallet intended to be discarded after a single cycle of use.

Disposal Chain A sequence of events in a goods-flow which gets rid of a specific good. This may include removal, recycling, waste dumping etc.

Disposal of Goods The act of getting rid of goods.

Dispositioning All activities relating to the inland movement of empty and or full containers.

Distribution The set of activities which ensure the availability of goods in the desired quality, quantity, place and time for the customer. See also: Physical Distribution

Distribution Centre

216 A warehouse for the receipt, the storage and the dispersal of goods among customers.

Distribution Channel The route by which a company distributes goods.

Distribution Requirements Planning Abbreviation: DRP-I The function of determining the need to replenish stock at branch warehouses.

Distribution Resource Planning Abbreviation: DRP-II The set of concepts, procedures and techniques, being an extension of DRP-I, for the effective planning and control of the physical distribution.

Divider A vertically mounted partition in a compartment on board of an aircraft.

Dock Bumpers Cushioning devices (rubber, plastic, wood, etc.) mounted at the extreme rear of a chassis or trailer to take the impact when it backs into a loading dock or platform (road cargo).

Dock Receipt Document issued by Shipping line acknowledging that goods are received for shipment.

Document Anything printed, written, relied upon to record or prove something.

Document Holder Usually fastened to the door on the front of a container. May contain e.g. a certificate of approval of the container.

Domestic Carriage Carriage whereby the place of departure and the place of destination are situated within one country (air cargo).

217 Domestic Rate Rate applicable within a country, and in most cases subject to special conditions other than those of IATA (air cargo).

Door Lock Bars See Bars

Door to Door Transport See House to House Transport

Double Banking Two vessels moored alongside each other on a certain berth.

Double Stack Train A number of railway wagons, usually a block train, on which containers can be stacked two- high.

Double bottom Construction of the bottom of a ship whereby a generally watertight space is formed between the shell and an inner bottom placed at a sufficient height above the baseline to allow access and to reduce risks due to grounding or colliding.

Double-deck Pallet Flat pallet with a top and bottom deck.

Down Time The period of time when a machine is not available for production due to a functional failure or maintenance.

Draft The draft of a vessel is the vertical distance between the waterline and the underside of the keel of the vessel. During the construction of a vessel the marks showing the draft are welded on each side of the vessel near the stem, the stern and amidships.

Draught See Draft

Drawback Repayment of any part of customs or excise duties previously collected on

218 imported goods, when those goods are exported again.

Drayage 1. The hauling of a load by a cart with detachable sides (dray). 2. Road transportation between the nearest railway terminal and the stuffing place.

Drilling Rig A structure, which drills wells in the bottom in order to search for oil.

Drop off Charge Charge made by container owner and/or terminal operators for delivery of a leased, or pool container into depot stock. The drop-off charge may be a combination of actual handling and storage charges with surcharges.

Dry Bulk Container Container consisting of a cargo-carrying structure, firmly secured within a framework, for the carriage of dry solids in bulk without packaging.

Containers of this type have type codes 80 and 81.

Dry Cargo Container Shipping line container which is designed for the carriage of goods other than liquids.

Dunnage Stowage material, mainly timber or board, used to prevent damage to cargo during carriage.

Duty Free Zone An area where goods or cargo can be stored without paying import customs duties awaiting further transport or manufacturing. E EDI For Administration, Commerce and Transport Abbreviation: UN/EDIFACT The ISO application level syntax rules for the structuring of user data and of the associated service data in the interchange of messages in an open environment.

219 Econometric Models A system of simultaneous equations for forecasting, based on mutual dependency among the variables used.

Economic Speed That speed of a means of transport which produces the best possible financial result for the owner. Such speed should not be in excess of the maximum or minimum output allowed for the engine(s).

Economy of Scale A phenomenon which encourages the production of larger volumes of a commodity to reduce its unit cost by distributing fixed costs over a greater quantity.

Electronic Business The process of transacting business electronically. This includes the sharing of unstructured of structured business information by any electronic means among suppliers, customers, governmental bodies, service providers and other parties in order to conduct and execute transactions in business, administrative and other activities.

Electronic Data Interchange Abbreviation: EDI The transfer of structured data, by agreed standards from applications on the computer of one party to the applications on the computer of another party by electronic means.

Electronic Data Processing Abbreviation: EDP The computerized handling of information (e.g. business data).

Elevator Equipment used to discharge some bulk cargoes such as grain which is removed from the hold by a continuous line of buckets or by suction and carried on a conveyor belt to store.

Email (Electronic mail) The sending of unstructured messages through the use of computer systems from one person to others.

Embargo

220 1. A government order prohibiting the entry or departure of commercial vessels or goods at its ports. 2. The refusal by a carrier, for a limited period, to accept for transport over any route or segment thereof, and to or from any area or point, of a connecting carrier, any commodity, type of class of cargo duly tendered (air cargo).

Emergency Medical Service Abbreviation: EMS Medical procedures in case of emergencies on board of vessels.

Encryption A method of converting information into a form which can be transmitted over insecure channels such as phone lines so that confidentiality is preserved.

Endorsement The transfer of the right to obtain delivery of the goods of the carrier by means of the consignee's signature on the reverse side of a bill of lading. If the name of the new consignee (transferee) is not stated, the endorsement is an open one which means that every holder of the document is entitled to obtain delivery of the goods.

Enquiry Document issued by a party interested in the purchase of goods specified therein and indicating particular, desirable conditions regarding delivery terms, etc., addressed to a prospective supplier with a view to obtaining an offer.

Ensign 1. Flag declaring a ship's country of registry. 2. Commissioned officer, lowest rank.

Enterprise An organization created to provide products and/or services to customers.

Entity A tangible or abstract thing of relevance to business about which data may be kept. Example: Customer, Order

Equipment Material resources necessary to facilitate the transport and handling of cargo. Transport equipment does under the given circumstances not have the ability to

221 move by its own propulsion (e.g. sea container, trailer, unit load device, pallet).

Equipment Damage Report Abbreviation: EDR Written statement concerning damage to equipment, based on a physical inspection.

Equipment Interchange Receipt Abbreviation: EIR Physical inspection and transfer receipt.

Estimated Time of Arrival Abbreviation: ETA The expected date and time of arrival in a certain (air)port.

Estimated Time of Departure Abbreviation: ETD The expected date and time when a certain (air)port is left.

European Article Numbering Association Abbreviation: EAN An international body responsible for administering the European Article Numbering system.

It has affiliates in many countries such as: CCG in West Germany, DCC in Japan, ANA in the United Kingdom.

Note: The North American body responsible for the Uniform Product Code (UPC) coding is the Uniform Code Council. (UPC is considered a subset of EAN).

European Pallet Pool Pool for the exchange of standard size pallets (the so-called Euro pallets) in European cargo traffic, formed in 1961 by a number of European rail administrators.

European Zone Charge Abbreviation: EZC A charge for inland haulage transport in case of carrier haulage in Europe.

Even Keel Said of a vessel which is balanced in such a way that the draft forward and aft is the same as the draft in the mid-ship of the vessel on both sides.

222

Event An occurrence.

Evidence Something which supports a claim or hypothesis.

Ex Works (...named place) Abbreviation: EXW See Inco Terms

Exceptions Clause See Exemption Clause

Excess Going over the prescribed amount or degree e.g. excess luggage is luggage of which the weight is over the weight for free carriage.

Excess Stock That portion of stock on hand which is over and above the desired stock level.

Exchange Rate The rate at which one currency can be exchanged for another, usually expressed as the value of the one in terms of the other.

Execution The actual act of carrying out a task.

Exemption Clause A clause in a contract, which relieves the carrier's responsibility for certain events.

Expected Likely to occur or appear.

Expediting The 'rushing' or 'chasing' of production or purchase orders which are needed in less than the normal lead time.

Expendable Pallet

223 See Disposable Pallet

Expenses Costs paid out in connection with booking of cargo and arranging transport (e.g. commission).

Expiration Termination of a certain period.

Export The process of carrying or sending goods to another country or countries, especially for purposes of use or sale in the country of destination. The sale of products to clients abroad.

Export License Document granting permission to export as detailed within a specified time.

Export Packer Company, packing goods for export.

Exporter The party responsible for the export of goods.

Extract Summary or copy of something written, e.g. used in connection with the log book.

F FAL Facilitation Committee of the IMO.

FMC Federal Maritime Commission (Control of Shipping acts USA)

FTL Full Truck Load, an indication for a truck transporting cargo directly from supplier to receiver.

Fabrication A term used to distinguish manufacturing operations for components as opposed to assembly

224 operations.

Facilitation The implementation of measures leading to the simplification, standardization and harmonization of the formalities, procedures, documents and operations inherent to international trade transactions.

Factory Delivery The delivery of goods by a factory whereby the goods are put at the disposal of another (internal) party such as a commercial department.

Fairway A navigable channel for vessels, often the regular or prescribed track a vessel will follow in order to avoid dangerous circumstances.

Fashion Transport Transport of clothing and/or garments including shoes, belts and handbags in dedicated means of transport.

Feed Back The flow of information back into the control system so that actual performance can be compared with planned performance.

Feeder A vessel normally used for local or coastal transport (for carriage of cargo and/or containers) to and from ports not scheduled to be called by the main (ocean) vessel, directly connecting these ports to the main (ocean) vessel.

Fender An appliance made of rubber, timber and/or rope or other materials normally attached to a dock or quay used to prevent damage to the hull of a vessel especially during mooring and un-mooring operations.

Ferry Ship carrying passengers and or vehicles engaged in regular short voyages, e.g. across a river or narrow body of water, between two or more places or ports.

Fifth Wheel Circular or wheel-shaped bearing mechanism, secured on the rear of the chassis of a truck- tractor that engages the semi-trailer king pin with a spring lock device and supports the weight of the front end of the semi-trailer.

225

First Carrier The carrier who actually performs the first part of the air transport (air cargo).

First In First Out Abbreviation: FIFO The method whereby the goods which have been longest in stock (first in) are used, delivered (sold) and/or consumed first (first out).

Five Freedoms A collective term which depicts the five areas of 'rights' for the air-transportation of passengers or cargo, viz. (expressed in terms of an airline of country A): Freedom 1 the right to over fly a foreign country.

Freedom 2 the right to make a non-traffic stop at a foreign country C en route to foreign country B. Freedom 3 the right to set down (off loading) passengers or cargo in a foreign country B from home country A. Freedom 4 the right to pick up (loading) passengers/ cargo from a foreign country B to country A.

Freedom 5 the right to carry passengers or cargo between two foreign countries.

Fixed Crane A crane of which the principal structure is mounted on permanent or semi-permanent foundations.

Fixed Height Load-carrying Truck Truck carrying its load on a non-elevating platform.

Fixed Platform Truck See Fixed Height Load-carrying Truck

Flag An indication of the country in which a means of transport is registered through a reference to the ensign of this country.

Flammable Capable to be set on fire under given circumstances. (Amendment 25 IMO DGS).

226

Flash Point The lowest temperature at which a good produces enough vapor to form a flammable mixture with air.

Flat See Flat Rack

Flat Bed Trailer A wheeled trailer or a semi-trailer with a flat cargo carrying surface or deck and without any superstructure.

Flat Pack Garments packed in cardboard boxes.

Flat Rack Container A container with two end walls and open sides.

Fleet Any group of means of transport acting together or under one control.

Flexibility The extent to which and the rate at which adjustments to changed circumstances are possible.

Flight Number A combination of two letters, indicating the airline, and three or four digits indicating the number of the voyage.

Floating Freely suspending in water of an object.

Floating Crane A crane mounted on a barge or pontoon, which can be towed or is self-propelled.

Floating Dock A floating structure which can be partially submerged to enable vessels to enter and to leave and which can be raised for use as a dry dock.

Floating Stock

227 See Pipeline Inventory

Flotsam Goods lost by shipwreck, found floating in the sea.

Flow Chart A diagram, using symbols and depicting the sequence of events that should take place in a complex set of tasks.

Flow Control A term often used to describe a specific production control system.

Flow Line The direction of flow in which e.g. pallets have been positioned and stowed.

Flow of materials The flow of materials and components which goes to and through the factory for the production process.

Fo'c's'le See Forecastle

Force Majeure Circumstance which is beyond the control of one of the parties to a contract and which may, according to the terms and conditions, relieve that party of liability for failing to execute the contract.

Fore and Aft Stowage Stowage from the bow to the stern (lengthwise), as opposed to stowage athwart ships.

Forecast 1. An estimation or calculation in advance; a prediction. 2. The amount of cargo expected to be booked for a certain sailing of a vessel. 3. The number of containers expected to be used in a certain area, for steering purposes.

Forecastle Abbreviation: Focsile Forward part of a vessel where stores, ropes and anchor chains are located.

228 Fork Lift Pockets See Fork Pockets

Fork Lift Truck A three or four wheeled mechanical truck with forks at the front designed for lifting, carrying and stowing cargo.

Fork Pockets Openings or recesses in a side of a container for the entry of the forks of a fork lift truck.

Formal Performance Evaluation Evaluation of carriers performance as per agreed contract.

Forms EDI A screen presenting to a user the contents of an EDI message in a manner that is easy to use and interpret. The form may reside on a web site or the computer of the party viewing or completing the form. The form may be based on the UN Layout key (UNLK).

Formula of Camp A mathematical formula on behalf of inventory management for calculating the optimum order quantity.

Forty Foot Equivalent Unit Abbreviation: FEU Unit of measurement equivalent to one forty foot Shipping line container.

Forward At, near or towards the bow or front of a vessel or an aircraft.

Forwarder The party arranging the carriage of goods including connected services and/or associated formalities on behalf of a shipper or consignee.

Forwarding Charge Charges paid or to be paid for preliminary surface or air transport to the airport of departure by a forwarder, but not by a carrier under an Air Waybill (air cargo).

Forwarding Instruction

229 Document issued to a freight forwarder, giving instructions to the forwarder for the forwarding of goods described therein.

Four Way Pallet A pallet of which the frame permits the entry of forks of e.g. a fork lift truck at all four sides.

Fragile Easily breakable. Term denoting that goods should be handled with care.

Franc Poincar Unit of value in which the limitation of the carrier's liability is sometimes expressed. One franc consists of 65.5 milligram of gold with a fineness of nine hundred thousands.

Franchise Amount which in case of damage will have to be borne by the assured.

Fraud Avoidance of payment of taxes and duties in full or in part or the claiming and obtaining of fictitious export refund claims. (Customs)

Free Alongside Ship (...named port of shipment) Abbreviation: FAS See Inco Terms

Free Carrier (...named place) Abbreviation: FCA See Inco Terms

Free House Unclear Delivered at a certain destination without payment of certain duties or incurred costs.

Free In Liner Out Abbreviation: FILO Transport condition denoting that the freight rate is inclusive of the sea carriage and the cost of discharging, the latter as per the custom of the port. It excludes the cost of loading and, if appropriate, stowage and lashing.

Free In and Out Abbreviation: FIO

230 Transport condition denoting that the freight rate excludes the costs of loading and discharging and, if appropriate, stowage and lashing.

Free Lift The maximum elevation of the forks, of a fork lift truck.

Free On Board (...named port of shipment) Abbreviation: FOB See Inco Terms

Free Port An international port or an area within an international port at which, crew, passengers, baggage, cargo, mail and stores may be disembarked or unloaded, may remain and may be transhipped, without being subjected to any customs charges or duties. (Examination is possible for instance to meet security or narcotics control requirements.) Source: IMO.

Free Pratique Permission granted by local medical authorities, denoting that the vessel has a clean Bill of Health so that people may embark and disembark.

Free Trade Zone Abbreviation: FTZ A part of the territory of a state where any goods introduced are generally regarded, in so far as import duties and taxes are concerned, as being exempted (Kyoto Convention).

Freeboard Distance measured vertically from the freeboard deck accepted and indicated by the class bureau to the waterline under specified conditions.

Freeboard of a Vessel Vertical distance from the main deck to the surface of the water measured at the middle of the vessel's length.

Freight The amount of money due for the carriage of goods and payable either in advance or upon delivery.

Freight All Kinds Abbreviation: FAK Single freight which is charged irrespective of the commodity.

231

Freight Collect Freight and charges to be paid by the consignee.

Freight Container See Container

Freight Costs Costs incurred by the merchant in moving goods, by whatever means, from one place to another under the terms of the contract of carriage. In addition to transport costs this may include such elements as packing, documentation, loading, unloading and transport insurance.

Freight Forwarder See Forwarder

Freight Invoice An itemized list of goods shipped and services rendered stating fees and charges.

Freight Manifest A (cargo) manifest including all freight particulars.

Freight Payer The party which, by virtue of an agreement is responsible for the payment of freight charges to the carrier.

Freight Prepaid Freight and charges to be paid by the consignor.

Freight Ton A unit for freighting cargo according to weight and/or cubic measurement.

Freighter A vessel or an aircraft used for the carriage of cargo.

Full Container Load Abbreviation: FCL 1. A container stuffed or stripped under risk and for account of the shipper and/or the consignee. 2. A general reference for identifying container loads of cargo loaded and/or discharged at

232 merchants' premises.

Full Trailer A truck trailer constructed in such way that its own weight and that of the cargo rest upon its own wheels, instead of being supported by e.g. a tractor.

Fully Cellular Containership Abbreviation: FCC A vessel specially designed to carry containers, with cell-guides under deck and necessary fittings and equipment on deck.

Fumigation To expose certain spaces to the action of fumes in order to disinfect or kill vermin. For containers done in line with national legislation.

G Gang A number of workmen acting together especially for loading and/or discharging operations of a vessel in combination with the necessary gear. (On a vessel for instance 6 gangs can be ordered to discharge or load.)

Gangway Bridge laid from an opening in the railing or side of a vessel to the shore or to a platform with the purpose of giving access to and from the vessel.

Gantry Crane A crane or hoisting machine mounted on a frame or structure spanning an intervening space, which often travels on rails.

Garments On Hangers Clothes in containers on hangers and hung from rails during transit, reducing the handling required for the garments.

Gateway 1. A point at which cargo is interchanged between carriers or modes of transport. 2. A means of access, an entry.

233 Gen-set Motor generator set as power source for, e.g., thermal containers.

General Agreement on Tariffs and Trade Abbreviation: GATT Major international agreement on trade and tariffs between many nations all over the world. The discussions are now held by the WTO.

General Average Abbreviation: G/A Intentional act or sacrifice which is carried out to safeguard vessel and cargo. When a vessel is in danger, the master has the right to sacrifice property and/or to incur reasonable expenditure. Measures taken for the sole benefit of any particular interest are not considered general average.

General Average Act (York-Antwerp Rules) There is a general average act when, and only when any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.

General Average Statement This shows in detail all general average costs and expenses and the contribution of each interest in the general average in proportion to its value.

General Cargo 1. Cargo, consisting of goods, unpacked or packed, for example in cartons, crates, bags or bales, often palletized. General cargo can be shipped either in breakbulk or containerized. 2. Any consignment other than a consignment containing valuable cargo and charged for transport at general cargo rates (air cargo).

General Cargo Rate Abbreviation: GCR The rate for the carriage of cargo other than a class rate or specific commodity rate (air cargo).

General Purpose Container A container used for the carriage of general cargo without any special requirements for the transport and or the conditioning of the goods.

234

Germanischer Lloyd German classification society.

Godown A warehouse or cargo shed. This term is often used in the Far East.

Goods 1. Common term indicating movable property, merchandise or wares. 2. All materials which can be used to satisfy demands. 3. Whole or part of the cargo received from the shipper, including any equipment supplied by the shipper.

Goods Control Certificate Document issued by a competent body evidencing the quality of goods described therein, in accordance with national or international standards, or conforming to legislation in the importing country, or as specified in the contract.

Goods Flow The direction and path of the movement of goods and sequence of placement of those goods in a supply chain.

Goods Item A separate identifiable quantity of products or articles of a single type.

Goods Receipt Document issued by a port, warehouse, shed, or terminal operator acknowledging receipt of goods specified therein on conditions stated or referred to in the document.

Goods in Transit The goods which have departed from the initial loading point and not yet arrived at the final unloading point.

Gooseneck 1. Gooseneck shaped front end of a trailer or chassis. 2. Recess front bottom of a container to reduce the total height of the chassis plus container.

235

Green Equipment Availability The availability of environmentally friendly equipment for transport.

Grid Number An indication of the position of a container in a bay plan by means of a combination of page number, column and line. The page number often represents the bay number.

Gross Manifest A manifest containing freight details without any appropriate disbursements.

Gross Tonnage Abbreviation: GRT The measure of the overall size of a vessel determined in accordance with the provisions of the international convention on measurement of vessels usually expressed in register ton.

Gross Weight 1. Weight (mass) of goods including packing, but excluding the carrier's equipment expressed in whole kilograms. 2. The weight of a shipment including materials necessary for blocking etc. (air cargo).

Gross Weight of Container Total weight of container including cargo (in kilograms).

Groundage Charge for permission to anchor.

Groupage The collection of several small consignments and the formation of one large shipment thereof (road cargo).

Groupage Centre A location where groupage activities take place (road-cargo).

Guarantee for customs

236 An enforceable legal instrument with which a customs administration can recover duties and taxes which become payable in the event of irregularities during a transit movement.

H Hague Protocol Amendment of the Warsaw convention at The Hague, September 28, 1955 (air cargo).

Hague Rules International convention for the unification of certain rules, relating to Bills of Lading (1924). These Rules include the description of responsibilities of Shipping Lines.

Hague-Visby Rules Set of rules, published in 1968, amending the Hague Rules.

Half Height Container An open top container, fitted with or without soft or hard cover, 4'3" in height.

Halyard Light rope or tackle fitted to a staff, spar or gaff used for flying flags.

Hamburg Rules United Nations Convention on the carriage of goods by sea of 1978 adopted in 1992.

Handling Instructions Indication how cargo is to be handled.

Handling Service Service concerning the physical handling of cargo.

Harbour Place of shelter for vessels. Most of the time used as an indication for the geographical location.

Harmonized System Abbreviation: HS It is a numeric multi purpose system, the international convention on the HS was

237 established under auspices of the World Customs Organization in 1983, for the classification of goods with its six digits covering about 5000 descriptions of the products or groups of products most commonly produced and traded. It is designed for customs services, but can also be used for statistics, transport purposes, export, import and manufacturing.

Hatch Cover Watertight means of closing the hatchway of a vessel.

Hatch Way Opening in the deck of a vessel through which cargo is loaded into, or discharged from the hold and which is closed by means of a hatch cover.

Haulage The inland carriage of cargo or containers between named locations/points.

1. Merchant inspired Carrier Haulage or customer nominated Carrier Haulage or shipper preferred Carrier Haulage service performed by a sub-contractor of the merchant. 2. Carrier inspired Merchant Haulage means Haulage service performed by a sub- contractor of the Carrier

Haulier Road carrier.

Header Board See Bulkhead (road cargo)

Heated Container Thermal container served by a heat producing appliance.

Heavy Lift Single commodity exceeding the capacity of normal loading equipment and requiring special equipment and rigging methods for handling.

Heavy Lift Vessel A vessel specially designed and equipped for the carriage of heavy cargo.

Hedging

238 Buying or selling earlier and more than really needed in order to protect the company against price increases or shortages of commodities or components to realize profits when prices fluctuate.

Heuristic The process of solving problems by evaluating each step in the progress, searching for satisfactory solutions rather than optimal solutions. It comprises XE "A form of problem solving where the results are determined by ex" a form of problem solving where the results are determined by experience or intuition instead of by optimization.

Hinterland The inland area served by a certain port.

Hitchment Cargo An amount of goods which is added to an original consignment as the owner and the destination are the same as those of the original consignment.

Hogged Loading condition of a vessel in such a way that the centre of the vessel is slightly raised (arch-wise in the centre).

Hold The space below the deck of a vessel, used to carry cargo.

Home Port The port of registration of a vessel.

Hot Hatch Sequenced on deck loading of containers to enable priority discharge at arrival port ¿ usually required for direct discharge to vehicle to meet a Just In Time delivery.

House Address Place of receipt respectively delivery (name and address) in case of carrier haulage.

House to House Transport The transport of cargo from the premises of the consignor to the premises of the consignee.

239 Note: In the United States the term 'Point to Point Transport' is used instead of the term 'Door to Door Transport', because the term 'house' may mean 'customs house' or 'brokers house', which are usually located in the port.

Hub The central transhipment point in a transport structure, serving a number of consignees and/or consignors by means of spokes. The stretches between hubs mutually are referred to as trunks.

Huckepack Carriage See Piggyback

Hull Outer shell of a vessel, made of steel plates or other suitable material to keep water outside the vessel.

Husbanding Taking care of a vessel's non cargo related operations as instructed by the master or owner of such vessel.

I Identification The unique data, e.g. name, number or code, determining a certain object or person.

Idle Time The amount of ineffective time whereby the available resources are not used e.g. a container in a yard.

Ignition Setting on fire or catching fire.

Implants Focal points of detached personnel situated within customers¿ premises to co- ordinate and advise the customers¿ logistics activity, often replacing in-house functions and resource.

Importer

In Transit The status of goods or persons between the outwards customs clearance and inwards

240 customs clearance.

Inco terms Trade terms in coded form as established by the International Chamber of Commerce in 1953, whereafter they have been regularly updated. (Last update 2000).

The terms represent a set of international rules for the interpretation of the principal terms of delivery used in trade contracts. See Inco Terms

Indemnification Compensation for a loss and/or the expenses incurred.

Independent Demand A demand which is unrelated to demand for other products. Demand for finished goods, parts required for destructive testing and service parts requirements are examples of independent demand.

Indirect Route Any route other than the direct route.

Infrastructure System of roads, waterways, airfields, ports and/or telecommunication networks in a certain area.

Inland Clearance Depot Abbreviation: ICD Inland location where cargo, particularly containerized cargo, may be cleared by customs.

Inland Waterways Bill of Lading Transport document made out to a named person, to order or to bearer, signed by the carrier and handed to the sender after receipt of the goods.

Insulated Container Thermal container without the use of devices for cooling and/or heating.

Insulated Tank Container Container frame holding one or more thermal insulated tanks for liquids.

241

Insurance A system of protection against loss under which a party agrees to pay a certain sum (premiums) for a guarantee that they will be compensated under certain conditions for loss or damage.

Insurance Certificate Proof of an insurance contract.

Insurance Company The party covering the risks of the issued goods and/or services that are insured.

Integrated Logistics Support The systematic approach applied to simultaneous management and acquisition of equipment and related logistics support, in order to provide the customer with a desired level of availability. Resulting in an optimum life cycle cost and to maintain this level through the entire life cycle.

Integrity The prevention of unauthorized modification of information.

Interchange Reciprocal exchange of e.g. information between two or more parties.

Intercoastal As opposite to coastal water operations, intercoastal refers to water transport carried out between coasts (e.g. between Pacific and Atlantic coasts).

Intercontainer A co-operative formed by 19 European Railways, for the management of international rail container traffic in Europe.

Interline Two or more road transport companies joining operations to bring cargo to a certain destination.

Interline Carrier A carrier with whom another carrier has an interline agreement.

242 Intermodal Transport The movement of goods (containers) in one and the same loading unit or vehicle which uses successively several modes of transport without handling of the goods themselves in changing modes.

International Air Transport Association Abbreviation: IATA An international organization of airlines, founded in 1945, with the aim of promoting the commercial air traffic. Parties should achieve this by co-operation between the parties concerned and by performance of certain rules, procedures and tariffs, regarding both cargo and passengers.

International Association of Classification Societies Abbreviation: IACS An organization in which the major classification societies, among others American Bureau of Shipping, Lloyd's Register of Shipping and Germanischer Lloyd, are joined, whose principal aim is the improvement of standards concerning safety at sea.

International Carriage Carriage whereby the place of departure and any place of landing are situated in more than one country.

International Chamber of Shipping Abbreviation: ICS A voluntary organization of national shipowner;s associations with the objective to promote interests of its members, primarily in the technical and legal fields of shipping operations.

International Civil Aviation Organization Abbreviation: ICAO An international organization of governments, dealing with search and rescue in distress, weather information, telecommunications and navigational requirements.

International Labor Organization Abbreviation: ILO An United Nations agency, dealing with employment rights and working conditions, covering work at sea and in ports.

International Maritime Dangerous Goods Code

243 Abbreviation: IMDG Code A code, representing the classification of dangerous goods as defined by the International Maritime Organization (IMO) in compliance with international legal requirements.

International Maritime Organization Abbreviation: IMO An United Nations agency concerned with safety at sea. Its work includes codes and rules relating to tonnage measurement of vessels, load lines, pollution and the carriage of dangerous goods.

Its previous name was the Inter-Governmental Maritime Consultative Organization (IMCO).

International Medical Guide for Ships Abbreviation: IMGS 'The doctor at sea'.

International Organization for Standardization Abbreviation: ISO A world-wide federation of national standards institutes (ISO member bodies).

International Safety Management Code This international standard for the safe management and operation of ships prescribes rules for the organization of a shipping company management in the context of safety and pollution prevention and requires the development and implementation of a safety management system.

Inventory 1. A detailed list of goods located in a certain space or belonging to a specified object. 2. Goods available for satisfying certain demands. Inventories may consist of finished goods ready for sale, they may be parts or intermediate items, they may be work in process, or they may be raw materials.

Invoice An account from the supplier, for goods and/or services supplied by him.

Issuing Carrier The carrier whose Air Waybill is issued (air cargo).

244 Item Separate article or unit.

Itinerary The route of a means of transport, indicated by the names of the ports of call or other locations, often including estimated arrival and departure dates.

J Jetsam Goods thrown or lost.

Jettison The act of intentionally throwing cargo overboard e.g. with the objective of lightening a vessel, which has run aground, such for the common good of all interests: vessel, crew and remaining cargo See GA

Jetty A mole or breakwater, running out into the sea to protect harbors or coasts. It is sometimes used as a landing-pier.

Jib 1. Projecting arm of a crane. 2. Attachment connected to the top of a crane boom.

Job That work which is undertaken to meet a customer or production order and, for production control purposes, has a unique identification.

Joint Venture A joint activity of two or more companies usually performed under a common name.

Journey A voyage from one place, port or country to another one, in case of a round trip, to the same one.

Jurisprudence Juridical decisions used for explanation and meaning of law.

245 Just In Time Abbreviation: JIT The movement of material/goods at the necessary place at the necessary time.

The implication is that each operation is closely synchronized with the subsequent ones to make that possible.

A method of inventory control that brings stock into the production process, warehouse or to the customer just in time to be used, thus reducing stock piling.

K Kanban A method which during storage uses standard units or lot sizes with a single card attached to each.

A pull system used at a stock point in which a supply batch is ordered only when a previous batch is withdrawn.

Note: Kanban in Japanese means loosely translated 'card or sign'.

Keel Longitudinal girder at the lowest point of a vessel from which the framework is built.

Kimbal Tag A label containing bar coded information about product size, color etc.

Kind of Packing Description of the packaging material used for goods to be transported.

King Pin The coupling pin, welded or bolted in the centre of the front underside of a semi- trailer chassis, which couples to the fifth wheel of the towing tractor or dolly convertor.

Knot Unit of measurement for the speed (of a vessel) equal to a nautical mile (= 1852 metres) per hour.

Kyoto Convention The convention for the International Customs Co-operation Council held in Kyoto in 1974 for the simplification and harmonization of national customs procedures.

On 25th of June 1999 the updated and restructured International Convention on the simplification and harmonization of Customs Procedures (Kyoto Convention) was unanimously adopted by 114 customs

246 administrations.

This convention was restructured to deal with computerized controls and to ensure better co- operation between customs authorities mutually and with trade in general.

L Label A slip of e.g. paper or metal attached to an object to indicate the nature, ownership, destination, contents and/or other particulars of the object.

Laden Vessel See Loaden Vessel

Land Bridge Overland transport between following and/or preceding sea transport of goods and/or containers.

Lash To hold goods in position by the use of, e.g., wires, ropes, chains and straps. See Lighter Aboard Ship

Lashing Point Point on a means of transport to which wires, chains, ropes or straps, which are used to hold goods in position, are attached.

Last Carrier The participating airline over which air routes the last section of carriage under the Air Waybill is undertaken or performed (air cargo).

Last In First Out Abbreviation: LIFO A method of which the assumption is that the most recently received (last in) is the first to be used or sold (first out).

Lateral and Front Stacking Truck High-lift stacking truck capable of stacking and retrieving loads ahead and on either or both sides of the driving direction.

Latitude The angular distance of a position on its meridian north or south from the equator,

247 measured in degrees ('a vessel at 25 degrees north latitude').

Lay Days The number of days allowed in a charter party for the loading and discharging of cargo. Lay days may be indicated in different ways e.g. consecutive days, working days, weather working days.

Lay Up a Vessel Temporary cessation of trading of a vessel by the shipowner.

Layout Key See United Nations Layout Key

Lazaretto Place where goods are fumigated, or where a person under quarantine is quartered.

Lead Time 1. The amount of time between the request of a service and the actual provision of this service. 2. A span of time required to perform an activity. In a logistics context, the time between the initiation of a process and its completion.

Lease A contract by which one party gives to another party the use of property or equipment, e.g. containers, for a specified time against fixed payments.

Leasing Company The company from which property or equipment is taken on lease.

Leasing Contract A contract for the leasing of property or equipment.

Less than Container Load Abbreviation: LCL 1. A general reference for identifying cargo in any quantity intended for carriage in a container, where the Carrier is responsible for packing and/or unpacking the container. 2. For operational purposes a LCL (Less than full container load) container is considered a container in which multiple consignments or parts thereof are

248 shipped.

Less than Truck Load Abbreviation: LTL A term used if the quantity or volume of one or more consignment(s) does not fill a standard truck.

Lessee The party to whom the possession of specified property has been conveyed for a period of time in return for rental payments.

Lessor The party who conveys specified property to another for a period of time in return for the receipt of rent.

Letter of Credit Abbreviation: L/C A written undertaking by a bank (issuing bank) given to the seller (beneficiary) at the request, and on the instructions of the buyer (applicant) to pay at sight or at a determinable future date up to a stated sum of money, within a prescribed time limit and against stipulated documents.

Letter of Indemnity Written statement in which one party undertakes to compensate another for the costs and consequences of carrying out a certain act. The issue of a letter of indemnity is sometimes used for cases when a shipper likes receiving a clean Bill of Lading while a carrier is not allowed to do so. Within Shipping line the issue of letters of indemnity are contrary to the company's instructions.

Levant Eastern end of the Mediterranean.

Liability Legal responsibility for the consequences of certain acts or omissions.

Lien A legal claim upon real or personal property to pay a debt or duty.

249 Life Cycle Cost Encompasses all costs associated with the product's life cycle. These include all costs involved in acquisition (research & development, design, production & construction, and phase-in), operation, support and disposal of the product.

Lift-On Lift-Off Vessel Abbreviation: LOLO Vessel of which the loading and discharging operations are carried out by cranes and derricks.

Lighter See Barge

Lighter Aboard Ship Abbreviation: Lash A vessel which carries barges.

Lighterage The carriage of goods within a port area by a barge, e.g. from a vessel to a quay.

Lightweight Weight of an empty vessel including equipment and outfit, spare parts required by the regulatory bodies, machinery in working condition and liquids in the systems, but excluding liquids in the storage tanks, stores and crew.

Line Item See Order Line

Line Number See Flight Number

Linear Programming A mathematical procedure for minimizing or maximizing a linear function of several variables, subject to a finite number of linear restrictions on these variables.

Liner Conference A group of two or more vessel-operating carriers, which provides international liner services for the carriage of cargo on a particular trade route and which has an agreement or arrangement to operate under uniform or common freight rates and any other agreed conditions (e.g. FEFC = Far Eastern Freight Conference).

250

Liner In Free Out Abbreviation: LIFO Transport condition denoting that the freight rate is inclusive of the sea carriage and the cost of loading, the latter as per the custom of the port. It excludes the cost of discharging.

Liner Service The connection through vessels between ports within a trade.

Liner Shipping Company A company transporting goods over sea in a regular service.

Liner Terms Condition of carriage denoting that costs for loading and unloading are borne by the carrier subject the custom of the port concerned.

List Inclination of a ship to port or starboard caused by eccentric weights such as cargo or ballast.

Live Stock Cargo consisting of live animals, such as horses, cows, sheep and chickens.

Lloyd's Register of Shipping British classification society.

Load Quantity or nature of what is being carried. This term normally refers to transport by truck.

Load Factor Management The process of maximizing the utilization of the (slot) capacity of vessels and or other means of transport.

Loaden Vessel Vessel where cargo has been put on board.

Loading

251 The process of bringing cargo into a means of transport or equipment.

Loading Platform A flat surface to facilitate loading usually alongside a warehouse.

Loadmaster A load-calculator designed for a vessel approved by a classification bureau for the calculation of the vessels stability.

Local Charge See On-line Charge

Local Rate See On-line Rate

Locating Pin See Cones

Location 1. Any named geographical place, recognized by a competent national body, with permanent facilities used for goods movements associated with international trade, and used frequently for these purposes. 2. Geographical place such as a port, an airport, an inland freight terminal, a container freight station, a container yard, a container depot, a terminal or any other place where customs clearance and/or regular receipt or delivery of goods can take place. 3. An area (e.g. in a warehouse) marked off or designated for a specific purpose.

Lock For marine purposes: A space, enclosed at the sides by walls and at each end by gates, by which a vessel can be floated up or down to a different level.

Locker A compartment, in a shed or on board of a vessel, used as a safekeeping place to stow valuable goods, which can be secured by means of a lock.

Log Book

252 The daily report, authenticated by the master of all events and other relevant particulars of a vessel, attested by the proper authorities as a true record.

Logistics (CEN) The planning, execution and control

• of the movement and placement of people and/or goods • and of the supporting activities related to such movement and placement within a system organized to achieve specific objectives.

Logistics Chain All successive links involved in the logistic process.

Longitude The angular distance of a position on the equator east or west of the standard Greenwich meridian up to 180o east or west.

Lorry Motor truck used for transport of goods.

Note: Motor truck is an American term. British synonym for motor truck is Heavy Goods Vehicle. This British term means any vehicle exceeding 7.5 metric tons maximum laden weight.

Luffing Crane A crane with which the load can be moved to or from the crane horizontally.

Luggage Travellers' baggage, suitcases, boxes etc., normally accompanied by a passenger.

Lump-sum An agreed sum of money, which is paid in full settlement at one time. This term is often used in connection with charter parties.

Lump-sum Charter A voyage charter whereby the ship owner agrees to place the whole or a part of the vessel's capacity at the charterer's disposal for which a lump-sum freight is being paid.

M

253 Mafi Trailer German brand name of a roll trailer used for RoRo purposes.

Maiden Trip First voyage of a vessel or aircraft after delivery from new-building to her owner(s).

Main Carriage The primary stage in the movement of cargo from the point of origin to the intended final destination.

EDIFACT el.8051

Main-line Operator Abbreviation: MLO A carrier employing vessel(s) in the main or principal routes in a trade but not participating within a consortium.

Maintenance Chain A sequence of events in a goods flow which preserves and/or restores the value of a specific good. This may include repairs.

Manifest Document, which lists the specifications of goods, loaded in a means of transport or equipment for transportation purposes.

As a rule cargo the agents in the place of loading draw up manifests.

Note: For Shipping line a manifest represents an accumulation of Bills of Lading for official and administrative purposes.

Manufacturers Plate A plate indicating the name and address of the container manufacturer and particulars of the container.

Manufacturing Process The producing of goods or wares by manual labor or machinery, often on a large scale and with division of labor.

Manufacturing Resource Planning Abbreviation: MRP-II A method for the effective planning of a manufacturing company, being a direct out-

254 growth and extension of MRP-I.

Marine Insurance Policy An insurance policy protecting the insured against loss or damage to his goods occurred during ocean transport.

Market Analysis Systematic investigation of the growth and the composition of a market.

Marketing The process of organizing and directing all the company activities which relate to determining the market demand and converting the customers buying power into an effective demand for a service and bringing that service to the customer.

Marks See Shipping Marks

Master Data The set of data that is needed to establish sufficient reference material to support the maximum use of pre-coded, pre-agreed information enabling more efficient transaction messaging.

Master Production Schedule Abbreviation: MPS A realistic, detailed, manufacturing plan for which all possible demands upon the manufacturing facilities (such as available personnel, working hours, (management) policy and goals) have been considered and are visualized. The MPS is a statement of what the company expects to produce and purchase expressed in selected items, specific quantities and dates.

Mate's Receipt A document signed by the chief officer of a vessel acknowledging the receipt of a certain consignment on board of that vessel. On this document, remarks can be made as to the order and condition of the consignment.

Material Requirements Planning Abbreviation: MRP-I An inventory and purchasing planning system that integrates product components, lead times and deadlines.

255 Materials Handling The activities of loading, unloading, placing and manipulating material and of in- process movement.

Materials Management The planning and control of the activities related to the materials flow from the suppliers up to the end of the conversion/production process.

Means of Transport Type of vehicle used for the transport of goods (e.g. aircraft, barge, truck, vessel or train).

Measurement Ton A ton of one cubic metre water.

Mechanics Lien The legal enforceable claim, which a person who has performed work or provided materials is, permitted to make against title to the property or as a preferential person in the event the estate or business is liquidated.

Medical First Aid Guide Abbreviation: MFAG Instructions to be consulted in case of accidents involving dangerous goods.

Memo Bill See Service Bill of Lading

Merchant For cargo carried under the terms and conditions of the Carrier's Bill of Lading and of a tariff, it means any trader or persons (e.g. Shipper, Consignee) and including anyone acting on their behalf, owning or entitled to possession of the goods.

Merchant Haulage Inland transport of cargo in containers arranged by the Merchant.

It includes empty container-moves to and from hand-over points in respect of containers released by the Carrier to Merchants.

Note: Carrier's responsibility under the Bill of Lading does not include the inland transport stretch under Merchant Haulage.

256

Meta-centric Height The distance between the centre of gravity of a vessel and a fictitious point. If the metra- centric height is zero or negative, the vessel will heel or capsize.

Minimum Charge The lowest amount which applies to the transport of a consignment, irrespective of weight or volume.

Minimum Inventory The planned minimum allowable inventory for an independent demand item.

Minor Unit Unit of recorded value (i.e. as recorded by banks) which is a division of the respective unit of currency.

Examples are the cent being a one hundredth part of the US Dollar.

Note: Some countries have minor units that are used in low-value coinage within a country or locality, but which are not used by the international banking system in making formal records of value. Examples: Belgium, Greece and Spain.

Mixed Consignment A consignment of different commodities, articles or goods, packed or tied together or contained in separate packages.

Mode of Transport Method of transport used for the conveyance of goods, (e.g. by rail, by road, by sea).

Model A representation of a process or system that attempts to relate the most important variables in the system in such a way that analysis of the model leads to insights into the system.

Module A separate and distinct unit of hardware or software that may be used as a component in a system.

Movement The act or process of changing the position of an object and or people.

257 Movement Inventory The inventory during a production process caused by the time required to move goods from one place to another.

Multi Purpose Carrier See Multi Purpose Vessel

Multi Purpose Vessel Vessel designed for the carriage of different types of cargo: general, bulk, heavy and/or containerized cargo.

Multimodal Transport The carriage of goods (containers) by at least two different modes of transport.

Multimodal Transport Document See Combined Transport Document

Multimodal Transport Operator/Carrier Abbreviation: MTO/Carrier The person on whose behalf the transport document or any document evidencing a contract of multimodal carriage of goods is issued and who is responsible for the carriage of goods pursuant to the contract of carriage.

Multiple Sourcing Selecting of and working with more than two equivalent suppliers for a certain product.

N Navigation The act of determining position, location and course to the destination of an aircraft or a vessel.

Negligence Imprudent action or omission which may cause injury, damage or loss.

Negotiable In terms of documents, 'negotiable' means that e.g. a Bill of Lading is handed over/transferred in the right manner (viz. proper endorsement) to another person either endorsed in blank or endorsed to a person and that person acquires, by this

258 transfer certain rights vis-à-vis the goods e.g. is entitled to take possession of the goods.

Net Manifest A manifest containing all freight details including negotiated disbursements.

Net Weight The weight of the goods, excluding all packing.

Network Planning System A technique for making a time schedule for the implementation of a project.

New Computerized Transit System Abbreviation: NCTS A concept for custom authorities to manage European Community and common transit, based on the use of computer systems and EDI techniques.

Non Vessel Operating Common Carrier Abbreviation: NVOCC A party who undertakes to carry goods and issues in his own name a Bill of Lading for such carriage, without having the availability of any own means of transport.

Normal Charge The specified general cargo rate without any quantity discount (air cargo).

Normal General Cargo Rate The under 45 kgs rate or, if no under 45 kgs rate exists, the under 100 kgs rate (air cargo).

Normal Rate See Normal General Cargo Rate

Notice of Readiness 1. Written document or telex issued by the master of a vessel to the charterers advising them the moment when a vessel is ready to load or discharge. 2. Document advising a consignee or his agent that cargo has arrived and is ready for delivery.

259 Notify Address Address of the party other than the consignee to be advised of the arrival of the goods.

Notify Party The party to be notified of arrival of goods.

O Object A tangible of abstract thing of relevance to business.

Object Oriented Approach The development of classes of business objects may support and have an impact on the developments in the area of simplification of EDI and its standards. A business object is a true representation of a tangible concept stemming from real business usage.

Obsolete Stock The products or materials that cannot be or is unlikely to be used in future processes and which is to be sold or disposed of through the usual outlets.

Offshore Contracting work carried out at sea (e.g. drilling for oil).

Oil Bulk Ore Vessel Abbreviation: OBO-Vessel A vessel designed for the carriage of either dry or liquid bulk cargo.

On-line Charge The charge which applies to carriage over the lines of a single carrier.

On-line Rate See On-line Charge

Oncarriage The carriage of goods (containers) by any mode of transport to the place of delivery after discharge from the ocean vessel (main means of transport) at the port (place) of discharge.

260 One Stop Shop An organization, which provides all needed requirements in one location.

One Way Pallet Note: The addition 'One Way' has nothing to do with the number of pallet sides in which the forks of e.g. a fork lift can enter, as opposed to the two and four way pallets. See Disposable Pallet

Open Order See Backlog

Open Sided Container Shipping line container with frames with wire-mesh at the sides covered by means of a tarpaulin, which can be dropped down to give unrestricted access to the sides of the container for loading or discharging.

Open Top Container A freight container similar in all respects to a general purpose container except that it has no rigid roof but may have a flexible and movable or removable cover, for example one made of canvas or plastic or reinforced plastic material normally supported on movable or removable roof bows.

Operating Efficiency A ratio of the actual output of a piece of equipment, department, or plant as compared to the planned or standard output.

Operations Research The development and application of quantitative techniques to the solution of problems. More specifically, theory and methodology in mathematics, statistics, and computing are adapted and applied to the identification, formulation, solution, validation, implementation, and control of decision making problems.

Operator The party responsible for the day to day operational management of certain premises such as ware-houses, terminals and vessels.

Optimal Trim The best calculated TRIM related to speed engine capacity, fuel consumption for a specific sailing condition.

Optimization

261 Achieving the best possible solution to a problem in terms of a specified objective function.

Option One of a limited range of choices or features that is offered to a customer when purchasing an otherwise basic standard product and that has to be an integral part of the product (used in commercial trading).

Optional Cargo Cargo of which the final destination is not known at the moment of booking but will be indicated during the transport.

Optional Port A port of which it is not known whether or not a vessel during a voyage will make a call.

Order A request to deliver specified quantities of goods or to render specific services.

Order Line Each line on a customer's purchase order. An order line always contains one Stock Keeping Unit (SKU) only, but the number may vary.

Organization An identifiable social unit with a particular responsibility which endeavor to achieve multiple goals by coordinated activities and relationships between members and objects.

Out of Gauge Cargo Cargo whose dimensions exceed the normal dimensions of a 20 or 40 feet container, e.g. over length, over width, over height, or combinations thereof.

Outsider A carrier, which operates on a route served by a liner conference but which is not a member of that conference.

Outsourcing Subcontracting of activities.

262 Outturn Report Written statement by a stevedoring company in which the condition of cargo discharged from a vessel is noted along with any discrepancies in the quantity compared with the vessel's manifest.

Outward Handling The operations to be performed on outgoing goods from a production unit, both administrative and physical, starting at the moment forwarding orders can be executed to the moment of actual departure of the goods.

Over Pivot Rate The rate per kilogram to be charged for the over pivot weight (air cargo).

Over Pivot Weight The weight in excess of the pivot weight (air cargo).

Overcarrier A carrier within a consortium who carries cargo beyond the allotment distributed to him.

Overheight Cargo Cargo, exceeding the standard height.

Overlength Cargo Cargo, exceeding the standard length.

Overpack A unit used by a single shipper to contain one or more packages and to form one handling unit for convenience of handling and stowage. Dangerous goods packages contained in the overpack must be properly packed, marked, labeled and in proper condition as required by the Regulations regarding dangerous goods (air cargo).

Overtime Work beyond normal established working hours, which usually requires a premium to be paid to the employees concerned.

Overwidth Cargo Cargo, exceeding the standard width.

Owner

263 The legal owner of cargo, equipment or means of transport.

Owner's Container Code See Container Prefix

P P & I Club See Protection and Indemnity Club

Package 1. Any physical piece of cargo in relation to transport consisting of the contents and its packing for the purpose of ease of handling by manual or mechanical means. 2. The final product of the packing operation consisting of the packing and its contents to facilitate manual or mechanical handling.

Packaging Materials used for the containment, protection, handling, delivery and presentation of goods and the activities of placing and securing goods in those materials.

Packing Any container or other covering in which goods are packed.

Packing Instruction Document issued within an enterprise giving instructions on how goods are to be packed.

Packing List Document specifying the contents of each individual package.

Packing Unit A type of package where a standard quantity of products of a specific product type can be packed and that requires no additional packaging for storage and shipment.

Pallet A platform on which goods can be stacked in order to facilitate the movement by a fork lift or sling.

Pallet Convertor

264 Superstructure which can be applied to a pallet to convert it into either a box or post pallet.

Pallet Rack A skeleton framework, of fixed or adjustable design, to support a number of individual pallet loads.

Pallet Truck Pedestrian- or rider-controlled non-stacking lift truck fitted with forks.

Panamax Size The maximum measurements and dimensions of a vessel capable to pass the Panama Canal.

Parcel See Package

Participating Carrier 1. A carrier participating in a tariff and who therefore applies the rates, charges, routing and regulations of the tariff. 2. A carrier over whose air routes one or more sections of carriage under the Air Waybill is undertaken or performed (air cargo).

Particular Average A fortuitous partial loss to the subject matter insured, proximately caused by an insured peril but which is not a general average loss. Particular average only relates to damage and/or expenses which are exclusively borne by the owners of a vessel which has sustained damage as a result of e.g. heavy weather or by the owners of the cargo, which has been damaged in transit.

Partition See Divider

Partnership An ongoing relationship between two organizations which involves a commitment over an extended time period and a mutual sharing of the risks and rewards of the relationship.

Payee

265 A party to whom a payment is made or owed.

Payer A party who pays or is to pay.

Payload The revenue-producing load carried by a means of transport.

Payment That which discharges a debt.

Payment Against Documents Instructions given by a seller to a bank to the effect that the buyer may collect the documents necessary to obtain delivery of the goods only upon actual payment of the invoice.

Performance Indicator A variable indicating the effectiveness and/or efficiency of a process.

Performance Measurement The comparison of the results of business processes with each other or with standards in order to know the effectiveness of these processes and/or the supportive actions.

Permeability Ratio expressed as a percentage assumed for the volume of a compartment which can be flooded by water after damage, to the total volume of that compartment; respectively the actual calculated value of that ratio.

Phased Delivery The delivery of parts of the shipment.

Physical Distribution Those activities related to the flow of goods from the end of conversion to the customer.

Physical Distribution Management The planning execution and control of those activities which are related to the flow of goods from the end of conversion to the customer.

266

Pick Order An order to pick certain quantities of goods out of a stock.

Pick Up Service The carriage of outbound consignments from the point of pick up to the airport of departure (air cargo).

Pick Up and Delivery A service concerning the collection of cargo from the premises of the consignor and the delivery to the premises of the consignee.

Pick and Pack Taking goods out of a stock and packing them according to customer conditions.

Picking Taking products or components out of a stock.

Picking List A list used to collect items from stores needed to fulfil an order.

Pier See Quay

Piggyback The carriage of road vehicles and trailers on railway wagons.

Pilferage Petty stealing of goods from a ship's hold, cargo shed or warehouse.

Pilot 1. Local expert advising a vessel's captain on safe navigation in those areas where the captain is ignorant of local circumstances or where it is obligatory to take a pilot. 2. A person qualified to operate the controls of an aircraft.

Pilot In Command The pilot responsible for the operation and safety of the aircraft during flight time.

267

Pipeline 1. A line of pipes for conveying liquids and gasses. 2. The physical goods flow from a supplying organization to a receiving organization.

Pipeline Inventory The amount of goods in a pipeline: the sum of loading stock, goods in transit and receiving stock.

Pivot Weight Minimum chargeable weight of a Unit Load Device.

Place of Acceptance See Place of Receipt

Place of Delivery The location where a consignment (shipment) is delivered to the consignee viz. the place where the carrier's liability ends for the transport venture.

Place of Despatch Name and address specifying where goods are collected or taken over by the carrier (i.e. if other than consignor).

Place of Receipt The location where a consignment (shipment) is received by the carrier from the shipper viz. the place where the carrier's liability for transport venture commences.

Placement The activity of positioning an object or goods in a chosen location or position.

Planning The setting of goals over a certain time and the determination of how to achieve these goals and with what resource.

Planning Horizon The period of time to which a certain particular plan relates.

268

Platform The area on an airport where aircrafts are parked for embarkation and/or loading and discharging purposes (air cargo).

Platform Body A truck or trailer without ends, sides or top but with only a floor.

Plimsoll Mark A mark, welded on both sides of the vessel, which gives the limit to which a vessel may be loaded, depending on the specific gravity of the water in which the vessel is situated.

Point Value The point value can be seen as the relative value of an empty container of a certain size type in a depot location. The system serves to quantify the imbalance of costs, resulting from a full container move, and are the result of empty optimization calculations.

Point values are created on forecasted container flows between depot locations.

They are calculated taking into account the forecasted imbalances plus repositioning, storage and container costs for empty moves and expressed in USD.

Note: In the various computer systems point values are used to calculate the imbalance charge or credit for a particular container flow. This charge or credit is the difference in point values between start and end depot location.

Point to Point Transport See House to House Transport

Pontoon A floating flat structure used for work alongside the ship, to facilitate embarkation or disembarkation of persons, or to move cargo alongside.

Pool The shared use of e.g. equipment by a number of companies, which make together the investments in the equipment mentioned.

Poop Aft part of a vessel where the steering engine is located.

269 Port 1. Harbor having facilities for vessels to moor and load or discharge. 2. Left side of a vessel when facing towards the front or forward end.

Port of Call Place where a vessel actually drops anchor or moors during a certain voyage.

Port of Discharge The port where the cargo is actually discharged (unloaded) from the sea (ocean) going vessel.

Port of Loading The port where the cargo is actually loaded on board the sea (ocean) going vessel.

Portal Crane A type of gantry crane with vertical legs of sufficient height and width to permit vehicles or railroad equipment to pass between the legs.

Port Log A statement concerning a vessel containing the actual arrival and departure time used tugs, draft, dead-weight, quantity of discharged and loaded goods/containers and any other important particulars.

Positioning The transport of empty equipment from a depot to shipper's premises or from consignee's premises back to a depot as the empty leg of a carrier haulage transport.

Postal Code A national code maintained by the Postal Authorities designed to indicate areas and accumulated addresses to facilitate sorting and the delivery of mail and other goods.

Note: The coding system is different in the various countries throughout the world. In the Netherlands the code consists of 4 figures and 2 characters.

Practice That what has become customary as a result of repeated acts.

Pre-slinging The act of placing goods in slings which are left in position and used for loading into and discharging from a conventional vessel.

270

Pre-trip Inspection Abbreviation: PTI A technical inspection of Reefer containers prior to positioning for stuffing.

Precarriage The carriage of goods (containers) by any mode of transport from the place of receipt to the port (place) of loading into the ocean vessel (main means of transport).

Precarrier The carrier by which the goods are moved prior to the main transport.

Preshipment Inspection Abbreviation: PSI The checking of goods before shipment for the purpose of determining the quantity and/or quality of said goods by an independent surveyor (inspection company) for phyto sanitary, sanitary and veterinary controls.

Presently there is a tendency by developing countries to use the inspection also for the purpose of determining whether the price charged for certain goods is correct.

Principal Person for whom another acts as agent.

Principal Carrier See Responsible Carrier

Principal Corporate Body The company that owns the various subsidiary companies or branches acting as customers on their own and is registered as the corporate customer for statistical purposes.

Priority Order An order which is identified as taking precedence over other orders to ensure its completion in the minimum time.

Private Warehouse A warehouse operated by the owner of the goods stored there.

271 Pro Forma Invoice Draft invoice sent to an importer by the exporter prior to order confirmation and shipment to assist in matters relating to obtaining import licenses or foreign exchange allocations, or simply to advise the value of a consignment so that letters of credit can be opened.

Procedure Steps to be followed in order to comply with a formality, including the timing, format and transmission method for the submission of required information.

Process Mapping A diagrammatically break down of a supply chain.

Procurement The activities which ensure the availability of the material and or services in the desired quantity, quality, place and time from the supplier.

Procurement Logistics Control of the flow of materials up to the manufacturing process.

Product A result, end items or output from a certain process.

Product Chain All phases in the transformation- or production process of one product.

Product Life Cycle The period of time between the introduction date and end date of a product in the market.

Note: Phases are introduction, growth, maturity, saturation, decline & end.

Production 1. The conversion of materials and or assembly of components to manufacture goods, products or services. 2. The total quantity of goods manufactured or to be manufactured in a particular period of time expressed in quantitative or financial terms. (The term manufacturing is often used specifically for physical operations resulting in a product).

272 Productivity Relative measure of output of labor hour or machine hour.

Profit Centre An organizational unit which will be held responsible for its own profits and losses.

Project Cargo Quantity of goods connected to the same project and often carried on different moments and from various places.

Project Management Managing a transport project, which involves the design and implementation of logistics solutions, including resource planning, costing, and profits.

Proof of Delivery The receipt signed by the consignee upon delivery.

Proper Shipping Name A name to be used to describe particular goods on all Shipping line documents and notifications and, if appropriate, on the goods. basis (air cargo).

Protection and Indemnity Club Abbreviation: P & I club A mutual association of ship owners who provide protection against liabilities by means of contributions.

Protocol A statement drawn up to attest certain events.

Public Authorities The agencies or officials in a state responsible for the application and enforcement of the laws and regulations of that state. Source: IMO.

Public Warehouse A warehouse which is available to all companies and persons who wish to make use of the services offered.

Published Charge A charge, the amount of which is specifically set forth in the carrier's rates tariff.

273

Published Rate See Published Charge

Pull Distribution System A system to provide warehouses with new stock on request of the warehouse management.

Purchase Order A definite order for one or more deliveries by the supplier to the customer of a specific quantity of goods, materials, services or products under agreed terms of delivery and prices.

Purchase Order Management Supply chain management to purchase order article level.

Push Distribution System A system to provide warehouses with new stock upon decision of the supplier of the goods.

Q Qualifier A data element whose value shall be expressed as a code that gives specific meaning to the function of another data element or a segment.

Quality (ISO8402) The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Note: The ISO9000 standards on quality management and quality assurance consists of 4 standards: 9000 guidelines for selection and use, 9001 model for quality assurance in design/development 9002 model for quality assurance in production and installation, 9003 model for quality assurance in final inspection and test, and 9004 guidelines for quality management and quality system elements, part 2 are guidelines for services.

Quality Assurance (ISO8402) All those planned and systematic actions necessary to provide adequate confidence that a product or service will satisfy given requirements for quality.

Quality Control (ISO8402)

274 The operational techniques and activities that are used to fulfill requirements for quality.

Quantity Charge The unit rate which is lower than the normal rate and applies to shipments meeting specific weight requirements (air cargo).

Quantity Discount A proportional reduction of a rate based on quantity (air cargo).

Quarantine The period during which an arriving vessel, including its equipment, cargo, crew or passengers, suspected to carry or carrying a contagious disease is detained in strict isolation to prevent the spread of such a disease.

Quay That part of a wharf which is intended for the mooring of vessels.

Queue A stored arrangement of computer data, programs or messages, waiting to be processed in the order in which they were submitted.

Quoin Timber wedge used to secure drums against movement.

Quotas A system of controlling imports, exports or production by specifying a certain limitation.

Quotation Amount stated as the price according to tariff for certain services to be provided or issued to a customer with specification on conditions for carriage.

Quotation Expiration Date The date as from which a quotation price is no longer valid.

R Rail Car A wheeled wagon used for the carriage of cargo by rail.

275

Rail Consignment Note A document evidencing a contract for the transport of goods by rail.

Ramp An artificial inclined path, road or track along which wheeled vehicles, cargo and trailers may pass for the purpose of changing their elevation and facilitating the loading and unloading operation (e.g. an entrance way into a Roll-on Roll-off vessel

Ramp Handling See Platform Handling

Rate 1. The price of a transport service. 2. Quantity, amount or degree measured or applied.

Rate of Calculation A factor for the calculation of an amount.

Rate of Turn The figure indicating the speed of a change of course of a means of transport expressed in degrees per minute.

Rating A class to which an article is assigned.

Re-invoicing The procedure whereby goods shipped directly from a supplier to the customer are invoiced in two stages: at first by the supplier to an intermediary and subsequently by the intermediary to the customer.

Rebate That part of a transport charge which the carrier agrees to return.

Receipt A written acknowledgement, that something has been received.

Receiving Carrier

276 The carrier receiving a consignment on behalf of a carrier, agent or shipper for onward transport.

Receiving Stock The stock comprising all the goods that have arrived at the door of the receiving organization and which is not yet available in the stock of that organization.

Reconditioning All activities connected with restoring and or adjusting the packaging of a product. In such manner that it can be presented to the customer in the requested form.

Reconditioning of Garments The act or process of bringing garments after transport in shop's condition.

Redelivery 1. Return of a shipment to the party who originally delivered it to the carrier (air cargo). 2. Return of a charter vessel to the owners.

Reefer Cargo Cargo requiring temperature control.

Reefer Container A thermal container with refrigerating appliances (mechanical compressor unit, absorption unit etc.) to control the temperature of cargo.

Refund The repayment to the purchaser of the total charge or a portion of that charge for unused carriage.

Region Specified geographical area for operational purposes.

Register Ton The unit of measurement for the internal capacity of a vessel whereby one register ton equals 100 cubic feet (2.83 cubic meter). The gross tonnage comprises all spaces below the main (tonnage) deck and the enclosed spaces above the main (tonnage) deck less exempted spaces.

The net tonnage consists of the gross tonnage less exemptions like ballast tanks, engine room, living quarters etc.

277 The register tonnage is mentioned on the tonnage certificate.

Registration Authority (Key Management) Registration Authority is used as an entry point for users to set-up links by using some existing trusted means such as registered letters of personal enrolment. This registration will also form the legal basis for the use of digital signatures by the user, if required, although this aspect in itself is not key management. Once this registration has been established, the user credentials and his public key are passed on the Certification Authority with a request for certification.

Regroupage The process of splitting up shipments into various consignments (degroupage) and combining these small consignments into other shipments (groupage).

Rejection Non-acceptance of e.g. cargo.

Release Order A document issued by or on behalf of the carrier authorizing the release of import cargo identified thereon and manifested under a single Bill of Lading.

Reliability of Delivery The reliability of a supplier concerning the agreed terms of delivery with regard to the quality, quantity, delivery time, conditions and price.

Replacement Indicating that a subject is interchangeable with another subject, but which differs physically from the original subject in that the installation of the replacement subject requires extra machining or provisions in addition to the normal application and methods of attachment.

Replenishment Completion of stock.

Repudiation The denial by a user of having participated in part or all of a communication.

Rerouting The route to be followed as altered from the one originally specified in the transport

278 document.

Reservation Allotment in advance of space or weight capacity. Also referred to as 'booking'.

Reserve Inventory See Safety Stock

Resources Organizations, People or Computer systems carrying out the activities.

Responsible Carrier 1. The carrier liable under the terms of a consortium Bill of Lading. 2. Carrier responsible for the transport of goods as indicated in the transport document.

Returns Goods returned to their place of acceptance.

Revenue Amounts of income stemming from the provision of transport services.

Reverse Distribution The collection of used, damaged, or outdated products and/or packaging from end- users.

Rinacertificate Certificate issued by the Italian Government for carrying dangerous goods in Italian Waters.

Road Carrier Party undertaking transport by road of goods from one point to another such as indicated in the contract.

Road Vehicle A means of transport capable and allowed to move over public roads and other landways.

279 Roll Trailer Special trailer for terminal haulage and stowage on board of Roll-on Roll-off vessels.

Also referred to as Mafi Trailer.

Roll-on Roll-off Abbreviation: RoRo System of loading and discharging a vessel whereby the cargo is driven on and off by means of a ramp.

Rolling Resistance The total frictional force that a tire, a set of tires or all the tires on a vehicle is developing with the road.

Rotation Sequence in which a vessel calls at the ports on her itinerary.

Round Trip A voyage, a journey etc. to a certain place, port or country and back again.

Route The track along which goods are (to be) transported.

Routing 1. The determination of the most efficient route(s) that people, goods, materials and or means of transport have to follow. 2. The process of determining how a shipment will be moved between consignor and consignee or between place of acceptance by the carrier and place of delivery to the consignee. 3. The process of aiding a vessel's navigation by supplying long range weather forecasts and indicating the most economic and save sailing route.

Row A vertical division of a vessel from starboard to portside, used as a part of the indication of a stowage place for containers. The numbers run from mid-ships to both sides.

Rush Baggage See Expedite Baggage

280

S SITPRO National organization for the Simplification of International Trade Procedures in the United Kingdom (e.g. in The Netherlands SITPRO is called 'Sitproneth', in France 'Simprofrance' and in Japan 'Jastpro').

Safe Working Load Abbreviation: SWL The maximum load any lifting appliance may handle.

Safety Stock 1. In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand and/or supply. 2. In the context of master production scheduling, safety stock can refer to additional inventory and/or capacity planned as protection against forecast errors and/or short terms changes in the backlog. Also referred to as 'overplanning' or a 'market hedge'.

Said to Contain Abbreviation: STC Term in a Bill of Lading signifying that the master and the carrier are unaware of the nature or quantity of the contents of e.g. a carton, crate, container or bundle and are relying on the description furnished by the shipper.

Salvage The saving or rescue of a vessel and/or the cargo from loss and/or damage at sea.

Scale Ton Freighting measurement used in certain trades for various commodities.

Scenario A formal specification of a group of business activities that may take place between parties to achieve a particular objective.

Schedule A timetable including arrival/departure times of ocean- and feeder vessels and also inland transportation. It refers to named ports in a specific voyage (journey) within a certain trade indicating the voyage number(s). In general: The plan of times for

281 starting and/or finishing activities.

Seal A device used for containers, lockers, trucks or lorries to proof relevant parties that they have remained closed during transport.

Seal Log A document used to record seal numbers.

Seasonal Inventory Inventory built up in anticipation of a seasonal peak of demand in order to smooth production.

Seaworthiness Fitness of a vessel to travel in open sea mostly related to a particular voyage with a particular cargo.

Sectional Rate The rate established by scheduled air carrier(s) for a section of a through route (air cargo).

Segregation Distance required by the rules of IMDG or BC codes between the various commodities of dangerous and or bulk cargoes.

Seller Party selling merchandise to a buyer.

Seller's Market A 'seller's market' is considered to exist when goods cannot easily be secured and when the economic forces of business tend to be priced at the vendor's estimate of value. In other words, a state of trade favorable to the seller, with relatively great demand and high prices of something for sale.

Semi Trailer A vehicle without motive power and with one or more axles designed to be drawn by a truck tractor and constructed in such way that a portion of its weight and that of its load rest upon e.g. the fifth wheel of the towing vehicle.

Sender

282 See Shipper

Sequenced Delivery The synchronized delivery of trucks to co-ordinate with production schedules or local delivery vehicles.

Service Based Pricing Pricing structured to service packages provided, related to activity based costing including bought in costs.

Service Bill A service Bill (of Lading) is a contract of carriage issued by one carrier to another for documentary and internal control purposes (e.g. in case Shipping line cargo is carried on a non Shipping line vessel.)

For internal documentary and control purposes a so-called participating agent in a consortium uses some kind of document which, depending on the trade, is referred to as 'Memo Bill' which will among others state:

• Name of Carrier on whose behalf the original document (Way Bill, Bill of Lading, etc.) was issued. • The original document number. The agent who issued the original document and his opponent at the discharging side. • The number of packages, weight and measurement, marks and numbers and goods description. • Further mandatory details in case of special cargo.

No freight details will be mentioned and the Memo Bill is not a contract of carriage. See Bill of Lading

Service Level A measure for the extent to which the customer orders can be executed at delivery conditions normally accepted in the market.

Service Level Agreement Abbreviation: SLA An arrangement between a service provider and an organization specifying details about the services to be provided.

Setting/Air Delivery Temperature An indication in the documents (B/L) stating the air supply temperature to the container.

Note: No other details than this temperature shall be included in the Bill of Lading.

283

Settlement Office The institution to issue billing to and receive remittances from agents and to distribute the monies to CASS airlines, Billing Participants and Part Participants (air cargo).

Shed See Warehouse

Shelf Life The specified length of time prior to use for which items which are inherently subject to deterioration are deemed to remain fit for use under prescribed conditions.

Shift Part of the work-program of a stevedoring company (a working day can have up to 3 shifts (24 hours)).

Ship See Vessel

Ship Broker Acts as intermediary between ship owners or carriers by sea on the one hand and cargo interests on the other. The functions are to act as forwarding agent or custom broker, fixing of charters, and acting as chartering agent.

Ship Operator A ship operator is either the ship owner or the (legal) person responsible for the actual management of the vessel and its crew.

Ship's Protest Statement of the master of a vessel before (in the presence of) competent authorities, concerning exceptional events which occurred during a voyage.

Shipment A separately identifiable collection of goods to be carried.

Note: In the United States of America the word shipment is used instead of the word consignment. See Consignment

284 Ship Owner The (legal) person officially registered as such in the certificate of registry where the following particulars are contained:

• Name of vessel and port of registry. • Details contained in surveyors certificate. • The particulars respecting the origin stated in the declaration of ownership. • The name and description of the registered owner, if more than one owner the proportionate share of each.

Shipper The merchant (person) by whom, in whose name or on whose behalf a contract of carriage of goods has been concluded with a carrier or any party by whom, in whose name or on whose behalf the goods are actually delivered to the carrier in relation to the contract of carriage.

Shipper's Export Declaration Abbreviation: SED A United States customs form to be completed for all exports to assist the government in compiling export statistics.

Shipper's Letter of Instruction Abbreviation: SLI A document containing instructions given by the shipper or the shipper's agent for preparing documents and forwarding (air cargo).

Shipping Note Document provided by the shipper or his agent to the carrier, multimodal transport operator, terminal or other receiving authority, giving information about export consignments offered for transport, and providing for the necessary receipts and declarations of liability.

Shipping Documents Documents required for the carriage of goods.

Shipping Instruction Document advising details of cargo and exporter's requirements of its physical movement.

Shipping Label

285 A label attached to a Shipping line unit, containing certain data.

Shipping Marks The identification shown on individual packages in order to help in moving it without delay or confusion to its final destination and to enable the checking of cargo against documents.

Shortage The negative difference between actual available or delivered quantity and the required quantity.

Shrink Wrapping Heat treatment that shrinks an envelope of polyethylene or similar substance around several units, thus forming one unit. It is used e.g. to secure packages on a pallet.

Shuttle Service The carriage back and forth over an often short route between two points.

Siding A short railroad track connected with a main track by a switch to serve a warehouse or an industrial area.

Simplification The limiting of formalities, procedures, documents, information, and operations to the minimum essential requirements, steps, data and tasks acceptable by all parties concerned.

Simplification Toolkit Collection of tools to enable simplified implementations of structured electronic commerce techniques such as, electronic data interchange, electronic funds transfer, automatic data capture, bar-code technology and unique goods/product/service/party identification schemes.

Simulation The imitation of the reality for studying the effect of changing parameters in a model as a means of preparing a decision.

Single Administrative Document Abbreviation: SAD

286 A set of documents, replacing the various (national) forms for customs declaration within European Community, implemented on January 1st, 1988. The introduction of the SAD constitutes an intermediate stage in the abolition of all administrative documentation in intra European Community trade in goods between member states.

Skeleton Trailer Road trailer consisting of a frame and wheels specially designed to carry containers. See Chassis

Skids Battens fitted underneath frames, boxes or packages to raise them off the floor and allow easy access for fork lift trucks, slings or other handling equipment.

Sliding Tandem An undercarriage with a sub-frame having provision for convenient fore and aft adjustment of its position on the chassis/semi-trailer. The purpose being to be able to shift part of the load to either the king pin or the suspension to maximize legally permitted axle loads (road cargo).

Sling Special chain, wire rope, synthetic fiber strap or ropes used for cargo handling purposes.

Slip Sheeting Hard plastic sheeting used to stack cartons, optimizing container space.

Slot The space on board a vessel, required by one TEU, mainly used for administrative purposes.

Slot Charter A voyage charter whereby the ship owner agrees to place a certain number of container slots (TEU and/or FEU) at the charterer's disposal.

Snake Loading Loading products into a container in the sequence with which the goods will be unloaded and stored in at destination.

Sourcing 1. The management on purpose of the various origins of products or materials

287 on behalf of the recipient of these products or materials. In some industries sourcing is seen as the change from push to pull delivery for a number of fast moving items. 2. Within Shipping line sourcing is specially dedicated to the retail industry acting as an intermediary between suppliers and the market with an integrated service for e.g. supermarkets or large department stores.

Space Charter A voyage charter whereby the ship owner agrees to place part of the vessels capacity at the charterers disposal.

Special Drawing Rights Abbreviation: SDR Unit of account from the International Monetary Fund (IMF), used to express the amount of the limitations of a carrier's liability.

Special Rate A rate other than a normal rate.

Specific Commodity Rate Abbreviation: SCR A rate applicable to carriage of specifically designated commodities.

Split Shipment In case of indirect delivery through consolidation and if split shipment conditions occur then each split part of the shipment will be delivered in a different consignment but all consignments identified by the same unique original shipment id.

Spoke The stretch between a hub and one of the group of consignees and/or consignors being served by the hub.

Spontaneous Ignition Temperature The lowest temperature at which a substance will start burning spontaneously without an external source of ignition.

Spreader 1. Device used for lifting containers and unitized cargo. 2. Beam or frame that holds the slings vertical when hoisting a load, to prevent

288 damage to cargo.

Spring Mooring rope rigged from the forward or aft to a quayside bollard amidships to prevent the ship from surging forward or aft when alongside.

Stability The capacity of a vessel to return to its original position after having been displaced by external forces. The stability of a vessel depends on the meta-centric height.

Stack An identifiable amount of containers stowed in a orderly way in one specified place on an (ocean) terminal, container freight station, container yard or depot. See also: Container Stack

Stacking To pile boxes, bags, containers etc. on top of each other.

Stackweight The total weight of the containers and cargo in a certain row.

Standard Costs A carefully prepared estimate of the cost of performing a given operation under specified conditions.

In Shipping line standard costs are determined for operations called 'standard Work Orders'.

Note: A standard work order describes a standard operation for which a standard cost is to be established.

Standard Industrial Classification Abbreviation: SIC A method, used in the United States, to categorize companies into different industrial groupings.

Standard Product Module Abbreviation: SPM The building blocks used by business management to define services (shipment products) that can be offered to customers. They describe a more or less isolated set of activities with a standard cost attached to it. For operations management each

289 module defines a combination of standard operations that needs to be carried out for a customer.

Note: SPM's can be regarded as the interface between business and operations management.

Standardisation The development of agreements whose purpose is to align formalities, procedures, documents, information, and operations. At a national level, this would be alignment with acceptable commercial norms and practices, at an international level it would alignment with identified "best" and/or most accepted practices.

Starboard Right side of a vessel when facing towards the front or forward end.

State of Origin The state in the territory in which the cargo was first loaded.

Steering of Containers The function, with the aid of specific software for tracking and forecasting, to direct empty containers to demanding areas at minimum costs.

Stem The foremost part of a vessel.

Stern The aftermost part of a vessel.

Stevedore A party running a business of which the functions are loading, stowing and discharging vessels.

Stock The materials in a supply chain or in a segment of a supply chain, expressed in quantities, locations and or values. UK.

Stock Control The systematic administration of stock levels with respect to quantity at all times.

Stock Keeping Unit The description of the unit of measurement by which the stock items are recorded on

290 the stock record.

Stock Locator System A system in which all places within a warehouse are named or numbered.

Stock Point A point in the supply chain meant to keep materials available.

Stock Record A record of the quantity of stock of a single item, often containing a history of recent transactions and information for controlling the replenishment of stock.

Storage The activity of placing goods into a store or the state of being in store (e.g. a warehouse).

Storage Charge The fee for keeping goods in a warehouse.

Stores Provisions and supplies on board required for running a vessel.

Stowage The placing and securing of cargo or containers on board a vessel or an aircraft or of cargo in a container.

Stowage Factor Ratio of a cargo's cubic measurement to its weight, expressed in cubic feet to the ton or cubic metres to the tonne, used in order to determine the total quantity of cargo which can be loaded in a certain space.

Stowage Instructions Imperative details about the way certain cargo is to be stowed, given by the shipper or his agent.

Stowage Plan A plan indicating the locations on the vessel of all the consignments for the benefit of stevedores and vessel's officers.

291 Stowaway An unwanted person who hides on board of a vessel or an aircraft to get free passage, to evade port officials.

IMO definition: A person who is secreted on a ship or in cargo which is subsequently loaded on the ship, without the consent of the ship owner or the master or any other responsible person who is detected on board after the ship has departed from a port and reported as a stowaway by the master.

Straddle Carrier Wheeled vehicle designed to lift and carry Shipping line containers within its own framework. It is used for moving, and sometimes stacking, Shipping line containers at a container terminal.

Straddle Crane A crane usually running on rails and spanning an open area such as rail-tracks or roadways.

Strap A band of metal, plastic or other flexible material used to hold cargo or cases together.

Stretch 1. Part of the total transport chain (trade route) including overland transport identified by place of receipt, ports of call and place of delivery i.e. it has one location or an address as a starting and or ending point. 2. The leg between two points.

Stripping The unloading of cargo out of a container.

Stuffing The loading of cargo into a container.

Suboptimizing Striving for optimum performance in one element of an organization disregarding the effects this may cause to the performance of the other elements. In other words, a solution for a problem that is best from a narrow point of view but not from a higher or overall company point of view.

Substretch

292 Part of a stretch. This term is used if it is necessary to distinguish between a stretch and a part thereof.

Supercargo Experienced person (officer) assigned by the charterer of a vessel to advise the management of the vessel and protect the interests of the charterer.

Supply Chain A sequence of events in a goods flow which adds to the value of a specific good. These events may include:

• conversion • assembling and/or disassembling • movements and placements

Supply Chain Definition A sequence of events, which may include conversion, movement or placement, which adds value to goods, products, or services.

Supply Vessel Vessel which carries stock and stores to offshore drilling rigs, platforms.

Surcharge An additional charge added to the usual or customary freight.

Survey An inspection of a certain item or object by a recognized specialist.

Surveyor A specialist who carries out surveys.

Note: A surveyor is often representing a classification bureau or a governmental body.

Swop Body Separate unit without wheels to carry cargo via road sometimes equipped with legs to be used to carry cargo intermodal within Europe.

The advantage being that this unit can be left behind to load or discharge whilst the driver with the truck/chassis can change to another unit.

These units are not used for sea transport.

293

Synergy The simultaneous joint action of separate parties, which, together, have greater total effect than the sum of their individual effects.

System A whole body of connected elements, which influence each other and have specific relations with the environment.

T TARif Intègrè Communautaire (TARIC) The integrated customs tariff of the community.

TIR Transport International des Merchandises par la Route.

TOFC See Trailer on Flat Car

Tallyman A person who records the number of cargo items together with the condition thereof at the time it is loaded into or discharged from a vessel.

Tank Container A tank, surrounded by a framework with the overall dimensions of a container for the transport of liquids or gasses in bulk.

Tanker A vessel designed for the carriage of liquid cargo in bulk.

Tare Mass of Container See Tare Weight of Container

Tare Weight of Container Mass of an empty container including all fittings and appliances associated with that particular type of container on its normal operating condition.

Tariff

294 The schedule of rates, charges and related transport conditions.

Tarpaulin Waterproof material, e.g. canvas, to spread over cargo to protect it from getting wet.

Tender • A small boat used to carry persons from shore to ship and back • Colloquial term used to describe the condition of a ship having marginal stability • To present for acceptance an offer (to tender a bit)

Terminal A location on either end of a transportation line including servicing and handling facilities. (Shipping line synonym of container terminal).

Terms of Delivery All the conditions agreed upon between trading partners regarding the delivery of goods and the related services.

Note: Under normal circumstances the INCO terms are used to prevent any misunderstandings.

Terms of Freight All the conditions agreed upon between a carrier and a merchant about the type of freight and charges due to the carrier and whether these are prepaid or are to be collected.

Note: The so-called Combi terms based on the INCO terms do make a distinction what of the freight and related costs is to be paid by the seller and what by the buyer. In the UN recommendation 23 a coding system is recommended to recognize the various items.

Thermal Container A container built with insulating walls, doors, floor and roof by which heat exchange with the environment is minimized thus limiting temperature variations of the cargo.

Third Party Logistics Supply of logistics related operations between traders by an independent organization.

Through Charge The total rate from point of departure to point of destination. It may be a joint rate or

295 a combination of rates (air cargo).

Through Rate See Through Charge

Through Route The total route from point of departure to point of destination.

Tier A horizontal division of a vessel from bottom to top. The numbers run from bottom to deck and from deck upwards and are used as a part of the indication of a stowage place for containers.

Tilt Transport Road transport whereby the cargo area is protected against the elements by means of a tilt made of canvas or other pliable material.

Time Charter A contract whereby a vessel is let to a charterer for a stipulated period of time or voyage, for a remuneration known as hire, generally a monthly rate per ton deadweight or a daily rate.

The charterer is free to employ the vessel as he thinks fit within the terms as agreed, but the ship owner continues to manage his own vessel through the master and crew who remain his servants.

Time Sheet Statement, drawn-up by the ship's agent at the loading and discharging ports, which details the time worked in loading and discharging the cargo together with the amount of lay time used.

Ton 1. Unit of weight measurement: 1000 kilograms (metric ton) or 2,240 lbs (long ton). 2. Unit of cubic measurement, mainly used to express the cubic capacity of a vessel. 3. Unit of weight or measurement used as a basis for the calculation of freights (freight ton).

Tonnage 1. Cubic capacity of a merchant vessel.

296 2. Total weight or amount of cargo expressed in tons.

Tracing The action of retrieving information concerning the whereabouts of cargo, cargo items, consignments or equipment.

Track & Trace The pro-active tracking of the product along the supply chain, and the paper information flow relating to the order.

Tracking The function of maintaining status information, including current location, of cargo, cargo items, consignments or containers either full or empty.

Traction The power to grip or hold to a surface while moving without slipping.

Tractor A powered vehicle designed and used for towing other vehicles.

Trade 1. Shipping line: A trade is a liner service (e.g. NEFES) or a cargo flow between

two individual markets (e.g. North Atlantic Trade) 2. a) The exchange of goods, funds, services or information with value to the parties involved. This value is either previously agreed or established during business. b) A commercial connection between two or more individual markets.

Traffic The number of passengers, quantity of cargo etc. carried over a certain route.

Trailer A vehicle without motive power, designed for the carriage of cargo and to be towed by a motor vehicle.

Trailer on Flat Car Abbreviation: TOFC

297 Carriage of piggyback highway trailers on specially equipped railway wagons.

Tramp Vessel A vessel not operating under a regular schedule.

Trans Siberian Landbridge Overland route from Europe to the Far East via the Trans Siberian Railway (TSR).

Transfer Cargo Cargo arriving at a point by one flight and continuing there-from by another flight (air cargo).

Transhipment 1. A shipment under one (Shipping line) Bill of Lading, whereby sea (ocean) transport is 'broken' into two or more parts. The port where the sea (ocean) transport is 'broken' is the transhipment port. 2. Transfer of cargo from one means of transport to another for on-carriage during the course of one transport operation. 3. Customs: Customs procedure under which goods are transferred under customs control from the importing means of transport to the exporting means of transport within the area of one customs office which is the office of both importation and exportation.

Transit Cargo 1. Cargo between outwards customs clearance and inwards customs clearance. 2. Cargo arriving at a point and departing there-from by the same through flight (air cargo).

Transit Country One of the States signatory to the Convention on Common Transit (currently, the 18 States of the European Union and the European Free Trade Association, plus San Marino).

Transponder A device (chip) used for identification, which automatically transmits certain coded data when actuated by a special signal from an interrogator.

Transport The assisted movement of people and or goods.

298 Note: Transport is often used as a generic term for various means of transport, and is distinguished from 'movement' in that it requires such means.

Transport Document Document evidencing a contract of carriage between a shipowner and a consignor, such as bill of lading, seawaybill or a multimodal transport document. (IMO) See Shipping Document

Transport International by Road Abbreviation: TIR A set of rules following a customs convention to facilitate the international, European transport of goods by road with minimal interference under cover of TIR- carnets.

Transport Unit A physical unit, e.g. container or checked uniquely identified (for instance by license plate) that has been provided by the original shipper for transportation and that should not be split during the transportation process. A transport handling unit can contain different packages. (automotive industry)

Trip See Voyage

Truck Class of automotive vehicles of various sizes and designs for transporting goods.

Trunk The stretch between two hubs mutually.

Trusted Third Party (TTP) Services A trusted party is a party which at least two other parties trust. TTP's may provide some additional services such as time-stamping, etc. The TTP services relevant to Electronic Business include:

• Independent time-stamping • Attribute certificates • Notary functions • Document repository • Non-repudiation of submission/delivery • Translation/validation of certificates

299

Tugmaster Brand name of tractor unit used in ports to pull trailers. They are equipped with a fifth wheel or a gooseneck type of coupling.

Tweendeck Cargo carrying surface below the main deck dividing a hold horizontally in an upper and a lower compartment.

Twenty Foot Equivalent Unit Abbreviation: TEU Unit of measurement equivalent to one twenty foot Shipping line container.

Twistlock Device which has to be inserted into the corner fittings of a Shipping line container and is turned or twisted, thus locking the container for the purpose of securing or lifting.

Two Way Pallet A pallet of which the frame permits the entry of forks of (e.g. a fork lift at two opposite sides).

Type of Cargo An indication of the sort of cargo to be transported, (e.g. Break Bulk, Containerised, RoRo).

Type of Equipment The type of material used, e.g. 40 feet container, four way pallet or mafi trailer.

Type of Load Indicator A general reference or a classification of loads of cargo like 'FCL', 'LCL', 'unpacked' and even ship's convenience container, though this is rarely used nowadays.

Type of Means of Transport The type of vehicle used in the transport process, e.g. wide-body aircraft, tank truck or passenger vessel.

Type of Movement Description of the service for movement of containers.

300 Note: The following type of movement can be indicated on B/L and Manifest all combinations of FCL and LCL and break bulk and RoRo. Whilst only on the manifest combinations of House, Yard and CFS can be mentioned.

Type of Packing Description of the packaging material used to wrap, contain and protect goods to be transported.

Type of Transport The indication whether the carrier or the merchant effects and bears the responsibility for inland transport of cargo in containers i.e. a differentiation between the logistical and legal responsibility.

Note: Values are Carrier haulage and Merchant haulage, whilst in this context special cases are carrier- nominated merchant haulage, and merchant nominated carrier haulage.

Type of Vessel The sort of vessel used in the transport process e.g. Container, RoRo, or Multi Purpose.

U Ullage Free space above a liquid contained in a tank, drum or tank-container, expressed as a percentage of the total capacity. Ullage is often used to leave room for possible expansion of the liquid.

Ultimate Consignee Party who has been designated on the invoice or packing list as the final recipient of the stated merchandise.

Ultra Large Crude Carrier Abbreviation: ULCC A vessel designed for the carriage of liquid cargo in bulk with a loading capacity from 250.000 till 500.000 DWT.

Unaccompanied Baggage Luggage not accompanied by a passenger.

Undercarriage 1. A supporting frame or structure of a wheeled vehicle. 2. The landing gear of an aircraft.

301

Undercarrier A carrier in a conference or consortium who carries less cargo than the allotment distributed to him.

Uniform The in 1993 revised rules of the International Chamber of Commerce (ICC) governing a letter of credit issued in respect of goods shipped applicable as from 1- 1-1994.

Union Internationale des Chemins de Fer Abbreviation: UIC International railway union, in which most of the European national railway companies are united.

Unit Load A number of individual packages bonded, palletized or strapped together to form a single unit for more efficient handling by mechanical equipment.

Unit Load Device Abbreviation: ULD 1. Any type of container or pallet, in which a consignment can be transported by air whether or not such a container is considered aircraft equipment. 2. Any type of air freight container, aircraft container, aircraft pallet with a net, or aircraft pallet with a net over an igloo.

United Nations Conference on Trade and Development Abbreviation: UNCTAD A United Nations agency whose work in Shipping includes the liner code involving the sharing of cargoes between the Shipping lines of the importing and exporting countries and third countries in the ratio 40:40:20.

United Nations Dangerous Goods Number Abbreviation: UNDG Number The four-digit number assigned by the United Nations Committee of Experts on the Transport of Dangerous Goods to classify a substance or a particular groups of substances.

Note: The prefix 'UN' must always be used in conjunction with these numbers.

302 United Nations Economic Commission for Europe Abbreviation: UN/ECE The UN/ECE is one of a number of Economic and Social Commissions established by the General Assembly of the United Nations. Despite its name it embraces both Europe and North America. The UN/ECE comprises twenty nine core member states, as well as any country which is a member of the United Nations and which applies under Article 11 of the United Nations constitution for delegate status.

The aim is to advance the economic development of Europe and associated countries through trade facilitation and common agreements.

United Nations Layout Key Abbreviation: UNLK A standard (ISO6422) which lays down the basic principles for the design of the image area on documents for use in international trade.

United Nations Standard Message Abbreviation: UNSM A collection of structured data that is exchanged to convey information related to a specific transaction between partners engaged in electronic data interchange. Messages are composed of logically grouped segments required for the type of message transaction covered.

Note: A set of segments in the order specified in a message directory starting with the message header and ending with the message trailer (ISO9735).

Utc Abbreviation of Coordinated Universal Time, the standard measurement of time.

Universal time (UT), based on the Earth's actual rotation, was replaced by coordinated universal time (UTC) 1972, the difference between the two involving the addition (or subtraction) of leap seconds on the last day of June or Dec. National observatories (in the UK until 1990 the Royal Greenwich Observatory) make standard time available, and the BBC broadcasts six pips at certain hours (five short, from second 55 to second 59, and one long, the start of which indicates the precise minute). Its computerized clock has an accuracy greater than 1 second in 4,000 years. From 1986 the term Greenwich Mean Time was replaced by UTC. However, the Greenwich meridian, adopted 1884, remains that from which all longitudes are measured, and the world's standard time zones are calculated from it.

Utilization Rate The quotient of used capacity and available capacity.

V Vacuum Packing A packaging technique that sucks all the air and moisture from a product, packing

303 the goods in a vacuum. This reduces the size of the product, allowing more goods to be packed.

Validation Rule The validation rules are a subset of the business rules defining constraints on the logical data model. They are expressed in the definitions of entities, domains and attributes.

Valuable Cargo A consignment which contains one or more valuable articles.

Valuation Charge Transport charges for certain goods, based on the value declared for the carriage of such goods.

Value Added Tax Abbreviation: VAT A form of indirect sales tax paid on products and services at each stage of production or distribution, based on the value added at that stage and included in the cost to the ultimate customer.

Value Chain Management Definition Maximizing total performance and added value across an entire process by reviewing each internal and external operation, and the links between these operations.

The process will be reviewed in a systematic and standard way in order to optimise speed, certainty, and cost effectiveness for the parties involved.

The process review can be achieved through established procedures and existing techniques such as value chain analysis and activity based costing.

Vanning See Stuffing

Vendee Buyer.

Vendor Seller.

304 Very Large Crude Carrier Abbreviation: VLCC A vessel designed for the carriage of liquid cargo in bulk with a loading capacity from 50.000 till 250.000 DWT.

Vessel 1. A floating structure designed for the transport of cargo and/or passengers. 2. Boiler, drum.

Volatility Allowance The largest difference in container availability taking into account past peaks in net demand after having removed the trend in container demand during the repositioning trade-off period.

Volume Size or measure of anything in three dimensions.

Volume Charge A charge for carriage of goods based on their volume (air cargo).

Voucher A receipt, entry or another document which establishes the accounts.

Voyage A journey by sea from one port or country to another one or, in case of a round trip, to the same port.

Voyage Charter A contract under which the ship owner agrees to carry an agreed quantity of cargo from a specified port or ports to another port or ports for a remuneration called freight, which is calculated according to the quantity of cargo loaded, or sometimes at a lump sum freight.

Voyage Number Reference number assigned by the carrier or his agent to the voyage of the vessel.

W Waiting Time

305 The period of time between the moment at which one is ready for an activity to start and the moment at which this activity can actually begin. See also: Queue Time

Waiver Clause Clause in a marine insurance policy stating that no acts of the insurer or insured in recovering, saving or preserving the property insured, shall be considered a dismissal from or acceptance of abandonment.

War Risk Perils of war or warlike operations, such as capture, seizure, arrests, restraints of kings, princesses and people, hostilities, civil war, mines, torpedo's. War risks are not covered under a policy for marine perils and must therefore be covered under a separate policy for war risks.

Warehouse A building specially designed for receipt, storage and handling of goods.

Warehouse Keeper Party who takes responsibility for goods entered into a warehouse.

Warehouse Receipt Receipt for products deposited in a warehouse.

Warehousing Those activities of holding and handling goods in a warehouse (store).

Warsaw Convention The Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed at Warsaw, 12 October 1929, or that Convention as amended by the Hague Protocol, 1955, stipulating obligations or parties and limitations and/or exonerations of carriers (air cargo).

Waste Disposal Processing and or removal to final resting place or transfer to a place for re-use or recovering of waste.

Waste Logistics The collection of used, damaged, or outdated products and or packaging from designated users.

306

Waybill Non-negotiable document evidencing the contract for the transport of cargo.

Wear and Tear Loss or deterioration resulting from ordinary use.

Weight Charge The charge for carriage of goods based on their weight (air cargo).

Weight Ton A ton of 1000 kilos.

Wharf A place for berthing vessels to facilitate loading and discharging of cargo.

Wharfage The fee charged for the use of a wharf for mooring, loading or discharging a vessel or for storing goods.

Wholesaler An intermediary between manufacturers and retailers in various activities such as promotion, warehousing, and the arranging of transport and or distribution.

Work Load The quantity of work ahead assigned to a certain facility such as a work station, capacity group or a department respectively staff-member.

World Health Organization Abbreviation: WHO The global agency linked with the United Nations and co-operating with other technical agencies relating to health matters at sea and on land.

World Meteorological Organization Abbreviation: WMO The United Nations agency dealing with meteorological issues.

X

307 X-ray High frequency electromagnetic ray of short wave-length, capable of penetrating most solid substances.

X.25 International standard of the CCITT for packet switching.

X.400 A CCITT recommendation designed to facilitate international message and information exchange between subscribers of computer based store-and-forward services and office information systems in association with public and private data networks.

X.500 The CCITT now ITU recommendations (ISO9594) for the structure of directories for the maintenance of addresses used in electronic mail.

XML Extensible mark-up language is an official recommendation by the World Wide Web Consortium as a successor of HTML (Hyper Text Mark-up language) it can be used to convey documents layout and contents from one computer application to another. XML is a subset of SGML.

XML/EDI The exchange of structured information over the Internet using XML as the syntax.

Y Yard Fenced off, outdoor storage and repair area.

Yaw Variation of the course of a ship to port or starboard caused by the action of waves or wind.

Yawl 1. A vessel's small boat moved by one oar. 2. A small sailboat rigged fore-and-aft, with a short mizzenmast astern of the cockpit - distinguished from ketch.

308 Yield Bucket The remaining slot capacity for a trade/voyage in a certain port of loading after deduction of the allowance for specific contracts.

Yield Management The process of maximizing the contribution of every slot, vessel, trade and network. Basically it should be seen as the process of allocating the right type of capacity to the right kind of customer at the right price as to maximize revenue or yield.

The concept should be used in combination with load factor management.

York-Antwerp Rules See General Average Act

Z Zodiac A rubber dinghy. An inflatable craft for the transport of people.

Zone Area, belt or district extending about a certain point defined for transport and/or charge purpose.

Zone Haulage Rate The rate for which the carrier will undertake the haulage of goods or containers between either the place of delivery and the carrier's appropriate terminal. Such haulage will be undertaken only subject to the terms and conditions of the tariff and of the carrier's Combined Transport Bill of Lading.

Zone Improvement Plan Abbreviation: ZIP System to simplify sorting and delivery of mail, consisting of a number of five digits (the so-called ZIP-code) for identification of the state, city or district, and the postal zone in the U.S.A. delivery areas.

309 Glossary OF TERMS & ACRONYMS

24/7: 24 hours per day, 7 days per week. AAPA: American Association of Port Authorities Accu-Tracker : Vehicle location system. ADOT: Arizona Department of Transportation Air Freight Forwarder: Intermediary between the beneficial owner and airline for the movement of freight and/or cargo. APL: American President Lines AQMD: Air Quality Management District Arterial: Roadway that carries more traffic than local roads but lower volumes than expressways. ATMIS: Advanced Transportation Management and Information System ATIS: Advanced Traveler Information System Automated Monitoring System: Traffic monitoring device that uses computer and communications technologies to improve and enhance performance. Automated Vehicle Identification (AVI): Automated monitoring system that uses a combination of computers, sensors, and vehicle tags to identify, monitor and record vehicle movements. Automatic Toll Collection: An application of automated vehicle identification that allows for the collection of tolls without the need for the vehicle to stop at a tollbooth AVI: Automatic Vehicle Identification AVL: Automatic Vehicle Location Box : Container, Truck trailer, trash container BEA: Bureau of Economic Analysis BTS: Bureau of Transportation Statistics CalTrans: California Department of Transportation CARB: California Air Resources Board CBP: County Business Patterns Census: Bureau of Census

310 CFO: Chief Financial Officer CFS: Container Freight Station-A location where containers are loaded or unloaded. CFS: Commodity Flow Study- Measurement of cargo volumes by commodity description. Chaining: see Trip Chaining CMSA: Consolidated Metropolitan Statistical Area COFC: Container on Flat Car-A container loaded on a rail flatcar without wheels. Combination Vehicle: An equipment configuration that includes separate power unit (tractor) and at least one trailer. Commodity Flow: Measurement of cargo volumes by commodity description. Commercial Trailer: A trailer used to handle freight in the transportation of goods for others; excludes house trailers, light farm trailers and car trailers. Consignee: Receiver of cargo or freight. Container yard: Location where ships are unloaded/loaded and truck and rail pickup and deliver cargo in containers. COO: Chief Operations Officer CTA: California Trucking Association CTDB: Central Traffic Database CTPP: Census Transportation Planning Package CTS: Commodity Transportation Survey CUT: California United Terminals CWS: Carload Waybill Sample Data Anomalies: Data figures that do not reflect the true situation. Diversion Analysis: Used to verify potential anomalies in data. DMV: Department of Motor Vehicles Dolly: An auxiliary axle assembly and/or a fifth wheel used to convert a semi-trailer to a full trailer.

Double: A combination of two trailers pulled by a power unit. Usually refers to a power unit pulling two 28 ft. trailers. DRI-WEFA: Econometric forecasting firm Emfac: Emission factor inventory model, usually followed by the year of creation of the model.

311 External Station Survey: Remote site for conducting truck counts and interviews. FAF: Freight Adjustment Factor (issued by FHWA) FHWA: Federal Highway Administration FICA: Federal Insurance Contributions Act Flatbed: Truck trailer with no sides, ends or top. FRA: Federal Railroad Administration Freight: A commodity being transported. Freight Forwarder: An individual or company that accepts Less than Trailerload or Less than Container Load shipments from shippers and combines them into carload or truckload lots. Designated as a common carrier. Geophysical Data : Type of data that describes the physical environment. GGS: Global Gateway South GIS: Geographic Information Systems GPS: Global Positioning Systems GPS: Global Positioning Satellite GSM: Global System for Mobile Communications GVW: Gross Vehicle Weight-The maximum allowable fully laden weight of the vehicle. The most common classification scheme used by manufacturers and by states for trucks and tractors. Highway Network : The system of roadways, arterials, and expressways that link traffic analysis zones together. HPMS: Highway Performance Monitoring System HSIS: Highway Safety Information System ICC: Interstate Commerce Commission (now called the Surface Transportation Board (STB)) IFTA: International Fuel Tax Agreement

Infrastructural Solution: Solution to a traffic problem such as congestion that requires investment in expensive infrastructure improvements to resolve. ITS: Intelligent Transportation System-Traffic monitoring or control systems that use computer information systems and telecommunications to dispatch, control, monitor, and record vehicle movements and activities.

312 ITS: International Transportation Systems, a container terminal in Long Beach, CA. Intermodal Container : Container or trailer capable of being carried on more than one mode of transport. Intermodal Piggyback Trailer: Container on a chassis or trailer capable of over the road movement, moving with the wheels intact via railcar. LACMTA: Los Angeles County Metropolitan Transportation Authority LBCT: Long Beach Container Terminal LCL: Less Than Container Load-shipments that do not constitute a container load of freight. LCV: Longer Combination Vehicle Less-Than-Truckload : Motor carriers operating with loads, whose weight is less than 10,000 lbs and whose load allows other loads to be carried. This excludes package carriers, such as Federal Express, UPS, and US Postal Service. Less Than Trailer Load: Shipments that do not constitute a full trailer load of cargo. Load Classification: Type of commodity, dry, bulk, reefer. LTPP: Long Term Pavement Performance MARAD: Maritime Administration, part of United States Department of Transportation MSA: Metropolitan Statistical Area MTA: Los Angeles County Metropolitan Transportation Authority MPO: Metropolitan Planning Organization MIS: Major Investment Study MIS: Management Information Systems MPO: Metropolitan Planning Organization MTMCTEA: Military Traffic Command Transportation Engineering Agency MVPc: Motor Vehicle Personal Computer NAFTA: North American Free Trade Agreement NAICS: North American Industrial Classification System NAAQS: National Ambient Air Quality Standards NECMSA: New England County Metropolitan Statistical Area NHPN: National Highway Planning Network NHRP: National Highway Research Program

313 NIMS: National Information Management System NORTAD: North American Transportation Atlas Data NTA: National Transportation Atlas O/D: Origin/Destination Over-the-road Trailer: Truck trailer used for highway carriage of goods. PCT: Pacific Container Terminal PFD: Private Fleet Directory PIERS: Port Import Export Reporting Service PMSA: Primary Metropolitan Statistical Area PNCT: Port Newark Container Terminal Power Un-Intelligent Transportation System: The control and pulling vehicle for trailers or semi-trailers. Primary Data Source: Data obtained by direct means such as surveys or interviews. Private Carrier: Truck fleet owned by the cargo owner or beneficial owner, used to carry one’s own cargo and not for hire to the public. No tariff of services or rates published. REIS: Regional Economic Information System RO-RO: Roll On-Roll Off, a type of vessel RTP: Regional Transportation Plan RTIP: Regional Transportation Implementation Plan S.C.: South Carolina SCAG: Southern California Association of Governments, Metropolitan Planning Organization (MPO) for the counties of Los Angeles, Orange, Ventura, Riverside, San Bernardino and Imperial in California. SCTG: Standard Classification of Transported Goods Secondary Data Source: Data obtained through the work of another entity. SIC: Standard Industrial Classification SIT: Savannah International Terminals Soft Solution: Solution to a traffic problem such as congestion that does not require infrastructural changes or other expensive means to resolve. Specialized Carrier: A trucking company franchised to transport articles that because of size, shape, weight, or other inherent

314 characteristics, require special equipment for loading, unloading, and transporting. SSA: Stevedoring Services of America STCC: Standard Transportation Commodity Classification STRAHNET: Strategic Highway Corridor Network

Straight Truck : A vehicle with the cargo body and tractor mounted on the same chassis TAC: Technical Advisory Committee Tanker: Truck, truck trailer or railcar usually used to hold liquid and gaseous products. TAZ: Traffic Analysis Zones, (Travel Analysis Zones or Transportation Analysis Zones). An arbitrary geographic area that serves as the primary unit of analysis in a travel forecast model. TIUS: Truck Inventory and Use Survey TMC: Traffic Management Center Tour: A vehicle movement consisting of several destinations or “trips”. Tractor Semitrailer: A combination vehicle consisting of a power unit (tractor) and a semi-trailer. Trailer : A vehicle designed without motive power, to be drawn by another vehicle. Trailer Configuration: Description of the truck trailer, i.e., tank, flatbed, etc. Transponders: Electronic modules used to receive and send radio frequencies and/or satellite transmission. TRAPAC: Transpacific Container Terminal Trip Chaining: A characteristic of truck movements to combine more than one destination into a longer “tour”. Local delivery and mail trucks are typical examples. Truck: A motor vehicle designed to carry an entire load. It may consist of a chassis and body; a chassis cab and body; or it may be of integral construction, so that the body and chassis form a single unit. Truck Modeling: Computer modeling of truck movements for a specified area and time period. TL: Trailer load or Truckload, full trailer load of cargo, usually for one destination, i.e., distribution center, etc. TRB: Transportation Research Board

315 Unidirectional: In one direction only. USDOC: United States Department of Commerce USDOT: United States Department of Transportation UPS: United Parcel Service. URCS: Universal Research Characteristics Standard USGS: United States Geological Survey USPS: United States Postal Service Vehicle Configuration: Description of the vehicle, automobile, truck, etc. Vehicle Tags: Defined as registration on passenger vehicles, in the freight tags or bar codes on transportation equipment, i.e., containers, trailers, tractors, railcars, etc. Video Imaging Technology: Cameras along freeways used primarily for traffic congestion information. VIUS: Vehicle Inventory and Use Survey VLS: Vehicle Location System. Volpe National Transportation Center: An organization that is part of the Department of Transportation located in Cambridge, Massachusetts. WIM: Weigh-in-Motion-In-road sensors to collect weight, axle and speed data on trucks. YTI: Yusen Terminals Inc.

Warehouse: A building where wares or goods are stored, as before being distributed. The warehouse users have three alternates in warehousing service, differentiated primarily by degree of control: private, public, and contract warehouses.

Private Warehouse: A warehouse operated by the owner of the goods stored therein. It can include small stockroom at a manufacturing plant or a huge order- picking facility of the catalog mail order house

Public Warehouse: A warehouse operated by a warehouseman engaged in the business of storing goods for hire. The word "public" refers to the fact that the warehouse provides a service to the public, and does not indicate public ownership. The public operator does not own the merchandise that he stores, and

316 usually his company is independent from the firms that do own the inventory.

Contract Warehouse: It is a combination of public and private services. Unlike the public warehouse that exists under a month-to-month agreement, the contract warehouse usually has a long-term arrangement. This contract may be used to govern supplement-warehousing services such as packaging, assembly, or other extraordinary activities. In such cases, the contract provides an element of stability in procurement of specialized services. Types of public warehouses: Bulk Warehouse: Public warehouses providing tank storage of liquids and open or sheltered storage of dry products such as coal, sand, salt, stone and chemicals.

Commodity Warehouse: Cotton, wool or tobacco warehouses, other agricultural product facilities, and grain elevators.

Distribution Center: A public warehouse becomes a distribution center when it performs for any given client those physical distribution functions essential to the effective movement of that particular client's goods to his customers.

Field Warehouse: A public warehouse, established on the premise of a business, enabling the warehouseman to acquire custodianship of the goods. The primary purpose is to enable the warehouseman to issue warehouse receipts to be used as collateral security by the depositor.

Household Goods Warehouse: A public warehouse that provides storage of household effects and other personal possessions. Normally operated by moving & storage companies.

Merchandise Warehouse: A public warehouse, for the storage and distribution of products that do not require refrigeration. Some public merchandise warehouses offer air-conditioned and humidity- controlled facilities and may provide both refrigerated and merchandise warehousing services.

Refrigerated Warehouse: Public warehouse, providing storage, freezing, distribution, and related services for perishable foods, and certain other products, requiring refrigeration.

317 Freezer space: Refrigerated area with a controlled temperature of 00 F or below. Cooler space: Refrigerated areas with controlled temperatures of from 2SOP to 60OP Atmospheric controlled space: Refrigerated areas with specifically controlled temperatures of 25OP to 60OP and relative humidity of 50% to 70%

Bonded warehouses: State Bonded warehouses: Public warehouses must be licensed by the state before they can be legally in business. In some cases a bond is required. The amount of the bond may bear some relation to the size of the warehousing operation, and is used for the protection of the storer - in the event that the warehouseman defaults in meeting his liability under law as a warehouseman.

U.S. Custom Bonded Warehouse: Until duty on certain commodities manufactured in foreign countries are paid, the federal government retains control of the goods. According to law, awaiting collection of duty must be stored at the owners’ expense, in the custody of warehouseman willing and able to furnish a bond that such commodities will not be released until the necessary duties are paid. The bond of Custom-bonded warehouse affords no bonded protection to the depositor of the goods.

U.S. Internal Revenue

Bonded: In the case of Internal Revenue warehouses that have posted a bond that guarantees payment of internal revenue tax on goods produced in the U.S. The bond of an IRS bonded warehouse affords no bonded protection to the depositor of the goods.

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