May2012

Myths and Misconceptions
Art of customer service 6

Transshipment DCs 10
Multibillion-dollar crumbs 28
Maersk loses patriarch 36
MAY 2012
www.americanshipper.com
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Maersk loses patriarch 36
Maersk Mc-Kinney Mller died in mid-April
at age 98, after a life which saw him lead his
namesake company as chief executive or chairman
for nearly 40 years. But that hardly measures the
influence he exerted over the shipping conglomerate
that is as close to a household name as exists
in the shipping world.
Panama Canal: 48
The impact of the Panama Canal expansion,
now due to be completed by 2015, may be
much more subtle than generally anticipated
in large measure because the factors that
impact all-water services have already
happened, analysts say.
LOGISTICS 6
On SAPs roadmap 14
Aggressive TMS expansion.
Shippers IT 18
Getting smarter with RFID.
FORWARDING/NVOs 20
Recalculating.
Cottoning to 3PL business 22
Dunavant undergoes transformation.
TRANSPORT/AIR 26
No relief for Lufthansa in Frankfurt.
Multibillion dollar crumbs 28
Taking aim at life sciences shippers.
Gardening club 32
EU price-fixing investigation results.
TRANSPORT/OCEAN 34
Houston, we have a new service.
In or out? 40
Terminal activity strategies.
TRANSPORT/INLAND 44
IT in FTZ
Efficiencies through automation.
Making match-back work 46

IT eases container repositioning costs.
TRANSPORT/PORTS 48
Countercurrent 56
HMT challenged by ports.
DEPARTMENTS
Comments & Letters 2
LETTER: What will happen to Kiva?
A bona fide American shipper.
Shippers Law 60
Freight sold by the piece.
Corporate Appointments 62
On Second Thought ... 63

Training by organization.
Editorial 64
Outsourced logistics put to the test.
On the Cover
May 2012 Vol. 54, No. 5
Transshipment DCs 10
The expected rise of container terminals in, and
around, the Caribbean associated with the expan-
sion of the Panama Canal and the deployment of
ultra-large vessels could lead to lost business for
U.S. ports in the South Atlantic, but less recognized
is the potential threat to logistics sector jobs from the
outsourcing of distribution operations to the region.
Descartes art of customer service 6
In 2004, the supply chain software developer was
in a financial slump. It was also the year Art Mesher
become CEO, and the company has since enjoyed
a financial renaissance under his leadership,
evidenced by 28 consecutive quarters of profitability.
American Shipper rrrrrr
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AMERICAN SHIPPER: MAY 2012 1
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Vol. 54 No. 5 May 2012
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company/contactus
What will happen to Kiva?
Very interesting development Kiva becoming part of Amazon. (Reported in the
March 20 AS Daily.)
As of early April while writing these comments, I am not certain why Amazon would
buy Kiva. Just because Amazon, including Zappos, which is owned by Amazon, uses
Kiva technology in their warehouses does not mean you are going to buy the supplier of
that technology. Neither Amazon nor Kiva have said anything about this as far as I know.
More so, I am curious to hear what Kivas current and future (potential) customers
think about this. Amazon in most, if not all cases, is a direct competitor of those other
Kiva customers. Why would any of those companies want to disclose specifics about
their business, planning and operations to their competitor Amazon? Sure, Kiva and their
customers can create a lot of safety firewalls around data and information, but it is impossible
to ensure absolutely none of the data, or more critically, ideas and conversations, do not
end up somewhere at Amazon. To me that would be a very difficult hurdle to overcome.
Kiva was (and needs to be) a very integral part of its clients thinking and strategy to be
able to offer the solutions for which they have become so famous.
Kiva offers an incredible solution, you need to see it in person to fully appreciate how
it changes everything in a pick-and-pack distribution center environment. Everyone to
whom I have shown the video material about the solution is just in awe. Plus Kiva is a
U.S. company and manufacturers its robots here in the United States and thus a good
example that we can still develop and produce good products right here in the United States.
All this of course is no reason why Amazon would buy Kiva, especially at the price
paid which seems astronomical in comparison to Kivas current sales. So for sure there
are other, yet not disclosed underlying reasons for this. Possibly this could be related to
the fact that Kiva had a lot of investment from venture capitalists who wanted to exercise
an exit strategy. One of those investors, according to Kivas Website, is Bain Capital
Ventures an enterprise the U.S. public has recently learned a lot more about.
I sincerely hope Kiva will not become history. It would not be the first time when a
company has acquired a technology just to limit its further growth and distribution, as
it simply was too good to be kept alive. Kiva is an incredible system and U.S.-made,
creating many very good U.S. jobs. Who knows what Amazon will do with it after
spending three quarters of a billion dollars to acquire the firm? All we can do now is
hope that they will keep up the good work, and it will be Kivas customers who are going
to have to make some difficult decisions to make this happen.

Albert Saphir
President,
ABS Consulting,
Weston, Fla.
A bona fide American shipper
In the last three months, I have metamorphosed from American Shipper associate
editor to just plain ol American shipper, and boy, has it been an interesting experience.
A little background: five years ago, I moved to New Delhi, India to cover the liner and
logistics industry from an Asian perspective for American Shipper. In March, I relocated
back to the United States, to the Washington, D.C. area. That entailed not only a change
of address, telephone, and currency, but also the need to get my stuff back home.
There were options to help with my pending shipment international household goods
forwarders, Indian moving companies, and global integrators. In the end, I chose to use a
forwarder in Chennai, some 1,300 miles away, largely because he was a known quantity
(my father-in-law had used him extensively for project cargo shipments).
Whether I made the right decision is immaterial. What is important is that I gained
an appreciation of some of the hurdles small, infrequent shippers face in getting their
goods from here to there. Or in my case, from there to here.
Sending my goods exactly 64 boxes of household items and furniture via a truck
from Delhi to Chennai took a little more than one week. Once it arrived in Chennai, the
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fun began. The forwarder needed a copy of my passport and a letter from my company
explaining why I had been in India and why I was headed back.
A day later, after taking the items to customs officials in Chennai, the forwarder
explained to me that the official wanted to see my physical passport, not a photo. I sent
the passport overnight. Then I awaited its return and the news that my shipment had
been cleared with no duties due.
Three days later, I got my passport back, along with the original bill of lading and
invoice for a less-than-containerload shipment. It would be routed from Chennai to
New York via a feeder service to Colombo. From Colombo to New York, it rode non-
stop on a New World Alliance service to New York.
The ship arrived bang on-time, I might add March 19, some 32 days after being
loaded in Chennai. From there, more fun ensued.
The forwarder on the U.S. side notified me of the impending arrival as far back as
March 8. But the process of what needed to be done to release the cargo once it hit the
Port of New York and New Jersey was hardly explained.
After arriving myself in the United States on March 14, I telephoned the forwarder
in New Jersey to get an update and was told the shipment was due to arrive in port on
March 19. I was told the shipment would be dispatched two to three days later, unless
there was a U.S. Customs hold on the container.
I didnt receive another email, however, until March 26, a week after the ship
arrived. The container had been sent to a CBP facility for screening. That meant I was
liable to pay exam charges ($875), demurrage ($300), and the wonderfully descriptive
handling charges ($75). Ocean freight had been prepaid, as had the inland leg from
Delhi to Chennai.
To release the container from the forwarders New York area warehouse, I had to
pay those fees, along with Importer Security Filing fees and Colombo security fees. A
delay in doing so would mean more demurrage. So I sent a check and the original bill
of lading to get the shipment released.
Two days later, the shipment was moved from the forwarders New York area warehouse
to one in northern Virginia. As it was en route, I was told I needed to take a copy of the
bill of lading and my arrival notice (which was sent to me when the shipment arrived
in New York) to a U.S. Customs office near Dulles International Airport. I was, for
the first time in my life, clearing customs as a shipper.
That was the least painful part of the whole process. A pleasant officer looked over
my paperwork, asked me a couple questions, and stamped the copy of my bill of lading,
so that I could scan and email it back to the forwarder. The forwarder would then send
that document to the third-party warehousing provider in whose facility my shipment
was now located, in northern Virginia. Oh, and I needed to pay an additional $140
because the forwarder in India had miscalculated the weight of the shipment.
Once all these hurdles had been cleared, all that was left was for the third-party
warehouse to organize the final leg by truck (another third party, of course) to my
delivery address.
Looking back, the process actually ran fairly smoothly, despite a number of frantic
and heated calls over what I considered excessive charges and delays. No less than 13
entities had handled or coordinated my shipment: trucking company from Chennai to
Delhi; my forwarder in Chennai; forwarder at destinations office in Chennai; drayage
truck from warehouse in Chennai to container terminal; terminal operator in Chennai;
feeder line from Chennai to Colombo; terminal operator in Colombo; liner carrier from
Colombo to New York; terminal operator in New York; drayage truck from New York
to forwarder at destinations warehouse; forwarder at destination; third-party logistics
companys warehouse in northern Virginia; and third-party truck from northern
Virginia to delivery address.
And if the shipment moved from New York to Virginia via another third-party
trucking company, you can add a 14th entity.
Again, ignoring whether I made life harder on myself by not using a one-stop-shop
variety of household goods forwarder, the key learning point for me is how lost a shipper
can feel if they dont know exactly what theyre doing. Its easy to feel helpless and
desperate, to feel compelled to pay whatever is charged merely to have some control
over the shipment.
Whats worse, I often felt as if the companies that were supposed to be cooperating
to get my freight delivered on-time, in good shape, and with a minimum of cost, hardly
communicated with one another once the shipment was en route. I found myself emailing
critical shipment details to the various parties to keep things moving along.
But now I have my merit badge, and as the rockband The Who said before I was
even born, I wont get fooled again. (Eric Johnson)
Corporate Ofces
U.S. Phone (904) 355-2601
U.S. Fax: (904) 791-8836
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Editorial Board
Brian Amero
corporate trade compliance manager,
Teradyne Inc.
Timothy D. Brotzman Sr.
manager of international transport
and DG compliance,
McCormick & Co. Inc.
Joseph Burks
director of logistics,
Cooper Wiring Devices Inc.
Brenda Chenault
import/export compliance consultant,
Pfizer
Joseph L. De La Luz
general manager, trade compliance,
NEC Corp. of America
David Fisher
director, Global Logistics,
Johns Manville
Rick Gabrielson
director of international transportation,
Target
Geoffrey N. Giovanetti
managing director,
Wine and Spirits Shippers Association
John T. Joseph
director of imports,
J. Crew
Maryanna Kersten
internal compliance program manager,
global logistics regulatory
and compliance,
Hewlett-Packard Co.
Charles Smith
general manager of global
transportation, Interstate Batteries
Virginia Thompson
director of import/export operations
and international trade compliance,
Euromarket Designs, Inc.

American Shipper welcomes letters from readers.
All letters become the property of American Shipper,
which reserves the right to edit them. Include your
name, position and company affiliation (if applicable),
location, a daytime telephone number and e-mail
address. E-mail letters to: letters@shippers.com
Press releases are welcome and may be e-mailed
to: releases@shippers.com
Letters to Editor/Press Releases
With our proximity to Eastern and Midwest U.S. markets, todays major retailers and distributors know
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the horizon as more global market leaders see the advantage of making Virginia their ideal logistics hub.
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THE LOGI STI CS HUB
THAT REALLY DELI VERS.
casualties of the dot-com bust.
But that was also the year when Art
Mesher joined as chief executive officer, and
by all accounts, righted Descartes course.
The company has since enjoyed a finan-
cial renaissance under Meshers leadership,
evidenced by 28 consecutive quarters of
profitability. The comparison between its
$108.5 million loss in the fourth quarter of
fiscal year 2003 to an operating profit of $4.5
million in its most recent quarter is stark.
The company reported a net profit of
$12 million for its fiscal year 2012 (which
ended Jan. 31) up 4 percent from the
T
heres no escaping it: supply chain software developer
Descartes was in a bad place in 2004.
The company was staring into an abyss as its share
price dropped from more than $100 to just 95 cents that year.
The company had $28 million in debt and a working capital
deficit of $400 million. It had just recorded a $14 million loss
in the prior quarter.
It appeared as if Descartes would join the mounting
Cultural change brings
shipping industry
technology company
back from the brink.
BY GEOFF WHITING
prior fiscal year. Whats more, Descartes
had annual revenue for fiscal year 2012 of
$114 million, a 15 percent year-on-year gain,
and the first time it broke through the $100
million revenue barrier.
Descartes develops and provides on-
demand, software-as-a-service platforms
focused on improving the productivity
and security of logistics-based businesses.
It unites its members through groups like
the Global Logistics Community, which is
made up of more than 35,000 organizations
collaborating in 160 countries
The companys network covers multiple
transportation modes, with Descartes
providing management over the network,
including multi-party data and documents
allowing for Customs and regulatory
compliance alongside its transportation
management services.
According to Des-
cartes estimates, it
now handles 68 per-
cent of the top 25
global forwarders air
freight, and 35 percent
of all Canada/U.S.
cross-border filings.
Most shipments
from most major forwarders run through our
network, Mesher said in a March interview
with American Shipper.
Those close to the company give the ma-
jority of the credit for Descartes turnaround
to Mesher, who in turn hands the credit to
his staff and customers.
Its not our success that makes us suc-
cessful really, its our customers success,
he said. Were here because our customers
are successful.
Its clear how Descartes returned from
the brink after discussing the companys
revitalization with Mesher, who has focused
on innovation and autonomy within the
Descartes art of
customer service
Mesher
MIAMI
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ATLANTA
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(212) 764-4800, NEWYORK
www.mscgva.ch
MEDITERRANEAN SHIPPING COMPANY (USA), Inc.
as agents for MSC Mediterranean Shipping Company S.A.
WE BRING
THE WORLD
CLOSER
MSC is a global leader in the container cargo industry, with our on-task and in-touch professional team.
We understand that it is the human element that drives and sustains business, progress and partnerships.
We celebrate each new customer, while continuing to give our best, personalized and loyal service to our clients.
MSC: A Global Leader, Standing Firmly At Your Side.
MSC
WE BUILD SUCCESS,
ONE CUSTOMER AT A TIME.
LOGISTICS
company. He said autonomy is the cultural
linchpin that makes Descartes tick.
As the leader, my job is to create an
environment where it is okay to take risks,
fail, or be wrong, Mesher said. What is
most important is that you as an individual
take responsibility for your decisions about
how you will impact outcomes.
He added that Descartes is not a place
where someone will get fired for trying
something new and screwing up, but it is
a place where employees walk a perilous
line if they dont take risks.
Right Acquisitions. The company has
grown aggressively through acquisitions
over the past decade, with Mesher pointing
to two standouts the 2000 acquisition of
eTransport and the 2006 purchase of Flag-
ship Customs Software as examples of
how Descartes expands its reach while also
promulgating its internal culture.
Both the acquisitions were family-owned
businesses where the leadership was inter-
ested in stepping aside but a family member
was willing to take on a leadership role.
According to Mesher, the family mem-
bers who stayed on board gave employees
a familiar face and Descartes a frame of
reference for how to change the existing
culture to fit that of Descartes.
advancements: hardware and software
networks driven by the proliferation of
the microprocessor; ubiquitous wireless
connectivity; and the ability to tell whats
actively connected to a network.
The convergence of these advancements
has prompted Descartes to focus on creating
a new breed of shared, social systems that
can interoperate across a network ubiqui-
tously. Pairing this with rapidly decreasing
hardware costs, the company has been able
to put forth sophisticated networks with the
capability to handle billions of messages
globally on a single, interconnected system.
New York-based forwarder and customs
broker Encore Forwarding implemented
Descartes Global Logistics Network to
automate the electronic exchange of data
and enable real-time visibility. Encore had
been struggling with supply chain updates
because it depended on two staff members
to visit carrier Websites and manually
enter carrier numbers and bills of lading,
then manually enter the most up-to-date
information in its own system.
Encore said automatic updates now
enter its system four times a day and delay
notifications are automatically sent to car-
riers. The forwarder has also seen a 10-fold
increase in the number of carriers that are
connected to its own track-and-trace net-
work through the Descartes integration.
In addition, using Descartes has allowed
Encore to reallocate both staff members
to other duties.
RiMMS is emblematic of Descartes
rise in prominence, because its growth
is dependent on getting all the pieces a
customer needs in as small a product as
possible. As Descartes condenses all of
these systems into a smaller offering, it
loses the ability to charge per piece or cre-
ate continuous revenue streams off separate
lines. The company will make up for this
by introducing new products and services,
blending together existing software as it
goes mainstream and supplementing it with
new innovation.
RiMMS is expected to go mainstream
soon, according to Mesher, who referred
to the adoption curve for the companys
software products as the hype cycle.
It takes about 15 years from when in-
novation is started to when its mainstream,
he said.
For the first two years of the cycle, the
product has 20 to 30 customers that are
highly innovative and want to do things
that have never been done before. About 10
years in, this expands to most of Descartes
customer base thats seeking a best solution
from the supplier.
After about 15 years, the activity has
become the norm and companies that come
Mesher said Descartes has to be de-
liberate with acquisitions, balancing the
benefits of new technology with possible
style and leadership conflicts as it accepts
new members into the fold.
He described the acquisition ethos as
buy and build.
The best way that we can get customers
better results faster is to find really good
products with really good little companies
that we can acquire, make part of us, and
give customers immediate access to in their
environment, he said.
The goal of the buy-and-build strategy
is to give Descartes a broader platform and
accelerate the speed at which it can give
customers a defined benefit from a new
system. It does this by allowing Descartes
to generate a cash flow with its existing
software, reinvest that cash into new sys-
tems and acquisitions, and then leverage the
increased cash flow back into the system
to accelerate future purchases.
Lifecycle. In 2004 Mesher and his team
developed what the company calls its
resources in motion management system
(RiMMS).
RiMMS was designed to create a new
industry category and business model
based on the congruence of three market
LOGISTICS
on board tend to be small enterprises that
are very manually oriented and just want
it to be as easy and pain-free as possible.
When the innovation is successful,
Descartes customers who got in at the
beginning and were able to wait the 10 to 15
years get a large advantage from the middle
of the cycle, because they can leverage the
new technology and efficiencies in their
networks sooner.
Fewer Entrepreneurs. Mesher has
some strong opinions about the direction
of the supply chain software industry going
forward, and much of it has to do with giv-
ing the logistics industry a more simplified
technology landscape to navigate.
I think it would be better for our in-
dustry if we could replace some of the
entrepreneurs with professional manage-
ment, because wed probably all agree to
merge, he said. Of course we want to see
that and become the best home for these
companies as possible.
Mesher said its not efficient for data to
feed into multiple systems.
Why does data go in and out of every
ERP system? he said. Why does everyone
create an order and an invoice? And why
are there seven to 15 payment cycles that
exist in a global trade transaction?
If everyone knows who is shipping what to
whom, and everybody knows what theyre
supposed to do, there really could be one
system of record thats not an ERP system
but a supply chain system, Mesher said.
Descartes is developing a product that
could potentially serve as a single supply
chain system of record; one would stamp
each item with all of its information from
the moment it first enters the supply chain.
The idea behind the product, Stan-
dardizing Transactions And Managing
Processes Platform (STAMPP), is that it
would combine private information
what most companies keep behind their
firewalls with public data, such as that
found on social networking sites, in one
location with a system smart enough to
make decisions with it.
Once you have all that information of
whats supposed to happen, theres little
reason that a system cant have event-driven
data where data is automatically connected
all along the supply chain, he said. Its
what we are going to do. Its in our plan.
The system relies on a type of process-
ing called federated computing, which
allows a system to act as a middle ground
with public and private data, intelligently
determining what is shared and when its
shared. The term might not be recogniz-
able yet, but Mesher said its at the heart
of Descartes future.
STAMPP will not only build on the
efforts of RiMMS but increase its scale
and mass.
Weve got all the ingredients for a cake
and a working cake mold, we just need to
put all the ingredients in the mold and bake
it, he said, adding that STAMPP is in the
initial phase of its hype cycle.
As for whats coming in the nearer term,
Mesher sees a merging of RFID (radio
frequency identification devices), telemat-
ics, and other data gathering technology as
having the greatest impact on the future of
the supply chain software industry.
Most systems available now will be re-
built to address new technologies, and for
software companies, those are expensive
upgrades, he said. While cloud-based
systems are cheap for customers, they
require a lot of infrastructure on the part
of the software provider, and when new
technologies come up, the majority of that
infrastructure has to be upgraded.
Were constantly reinventing our core
base system and infrastructures because we
have the capital to do it, Mesher said. You
can count on us to rewrite our system every
three to five years and to keep customers
current.
Ocean carriers only plan on making a few
stops with the latest generation of vessels
that can carry 10,000 to 13,000 standard
shipping units. To maximize revenue and
maintain schedule integrity, behemoth
ships must spend as little time as possible
in port. In the U.S. trade, container lines
are eyeing terminals in the Caribbean, Cen-
tral America and the north coast of South
America as deep-water hubs where they
can offload cargo from Asia transported
via the Panama or Suez canals and serve
U.S. ports with smaller feeder ships.
One of the main attractions of the Ca-
ribbean ports is access to deeper water
because most U.S. East Coast ports lack
T
he expected rise of container terminals in, and
around, the Caribbean associated with the expan-
sion of the Panama Canal and the deployment of
ultra-large vessels could lead to lost business for U.S. ports in
the South Atlantic, but less recognized is the potential threat
to logistics sector jobs from the outsourcing of distribution
operations to the region, according to an industry analyst
and a port director.
U.S. logistics jobs could be outsourced
to Caribbean, Central America
as new shipping patterns evolve.
BY ERIC KULISCH
the necessary infrastructure including
navigable channels dredged to 50 feet or
more able to receive giant container
ships and efficiently handle higher cargo
volumes.
New transshipment activity could change
shipping patterns from the United States to
the Caribbean, with negative consequences
for ports in Florida, and create incentives
for importers to resort to packaging goods
offshore for store delivery instead of at U.S.-
based distribution centers, John Martin, a
well-known port economist and the head of
Martin Associates, recently told a gathering
of maritime industry stakeholders.
Terminal operators and governments,
some with Chinese donations, are investing
heavily to turn wharfs into major trans-
shipment centers in Kingston, Jamaica;
Freeport, Bahamas; Caucedo, Dominican
Republic; Costa Rica and Panama. Specu-
lation has also centered on Havana, Cuba,
as an ideal location for relaying cargo. The
development is a reaction to the widening
of the Panama Canal for ships with 2.5
times more container capacity, but also to
the growing desire of manufacturers and
retailers to produce more goods in Latin
America and shorten the distance to market.
Many global manufacturers, especially
apparel companies, are setting up produc-
tion facilities in Honduras, Guatemala and
other parts of Central America.
Transshipment centers are also mag-
nets for distribution and logistics activity,
which could migrate offshore without deep
harbors on the East Coast. They would
not be suitable for time-sensitive cargo,
which would move by alternative means,
experts say.
Within the past 18 months, Chinese and
other investors have also poured money
into distribution centers in several of those
locations, Martin said, without disclosing
specifics because of confidentiality agree-
ments. The business model involves trans-
ferring a box from the ship to a warehouse
for added-value processing and storage
Transshipment DCs
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LOGISTICS
of the goods, as is done at a U.S. import
distribution center, pre-racking 40-foot
international containers and even 53-foot
domestic U.S. containers, taking them off
the vessel at the U.S. destination port and
directly transporting them to retail stores.
Transshipment typically is defined as
a handoff of containers between vessels
on head-haul routes and feeder vessels
serving smaller ports in a region. Opening
shipping boxes, sorting the contents into
different containers for final delivery and
manipulating the goods is an intermediate
level of processing beyond transportation.
Martin said the lack of adequate infra-
structure at most U.S. ports on the Atlantic
or Gulf coasts will result in the export of
logistics jobs, which most assumed were
safe from outsourcing trends associated
with manufacturing because they were in
the service sector and involved domestic
delivery of goods.
About 30,000 jobs are tied to each an-
nual inbound, first port-of-call service at
a U.S. port, the economic consultant said
March 20 at the American Association
of Port Authorities spring conference in
Washington.
Locating logistics facilities over the
horizon makes sense, Sean Strawbridge,
managing director for trade relations and
operations at the Port of Long Beach, said
in an interview.
For all the reasons that manufacturing
was offshored, why wouldnt that same
model apply to logistics and distribution? If
youre labor costs are significantly reduced
and you can achieve the same or better
degree of efficiency, why not? he said.
The shifting dynamics of world trade will
put pressure on U.S. logistics companies
to take costs out of their business through
technology and other means, he added.
Caribbean officials view logistics parks
as catalysts for economic development and
are receiving substantial support from
China and the Inter-American Develop-
ment Bank (IDB), which is conducting a
feasibility study on how to improve mari-
time transportation and logistics systems
throughout Central and South America.
In Jamaica, a joint venture between Is-
raeli container line Zim Integrated Shipping
Services and Jamaica Fruit and Shipping
Co. in 2006 formed the Kingston Logistics
Center Ltd. adjacent to the port, which has
free trade zone status giving transshipment
cargo exemption from taxes and customs
duties. The company can consolidate,
deconsolidate, label, pack, palletize and
shrink-wrap cargo and deliver it to shipping
lines, as well as manage Jamaican imports
and exports, according to its Website.
A manager reached by phone said the
island-hopping service, saving shippers on
U.S. import charges, extra transportation
and other costs.
The Port of Norfolk is the only port
currently on the East and Gulf coasts
with unrestricted access to 50-foot water.
Baltimore is scheduled this year to open
a 50-foot berth to go along with its deep
channel. The Port of New York and New
Jersey expects the Army Corps of Engineers
to complete harbor deepening by 2014,
but will still have the challenge of raising
the Bayonne Bridge roadbed to increase
the clearance for megaships. The Port of
Miami is authorized and funded to dredge
to 50-feet, but the projects start has been
held up by a lawsuit from local residents
and environmentalists.
Paul Anderson, chief executive officer of
the Jacksonville Port Authority, rose from
the audience to complain that the United
States is the largest contributor to the IDB
and is indirectly subsidizing the transfer
of jobs to Caribbean nations. He also said
the inability of Congress to advance a
comprehensive surface transportation bill
and the federal government to address
infrastructure needs writ large is enabling
other countries to beat the United States to
economic opportunities.
It can take up to 15 years to get federal
approval for deepening projects and com-
plete them, with the cost shared by the
federal government and the state. The U.S.
government also lacks a national port strat-
egy and provides a token amount of money
for port-related projects, although funding
for some highway and rail upgrades helps
ports getting cargo on and off the docks.
The ultimate irony to me would be if
were contributing to development proj-
ects that will directly enable Caribbean
countries to transship to the United States,
therefore taking jobs that we should be
creating in the United States, he said in a
colloquy with Martin after the presentation.
The United States is the IDBs largest
shareholder. The bank is self-financed
through bonds and doesnt receive direct
contributions from member countries, al-
though it periodically replenishes its capital.
The bank borrows against its capital to
fund projects. It offers loans, makes equity
investments, and provides guarantees, grant
funding and technical assistance.
The IDB is able to provide long-term
loans in underserved sectors where local
banks are unwilling or unable to because
its goals extend beyond financial perfor-
mance to include social, economic and
environmental benefits.
The multilateral agency has not directly
funded any logistics parks in the Caribbean
to date, but governments that receive loans
facility is relocating its warehouse to a
larger site on the property, increasing stor-
age capacity to almost 35,000 square feet
from 14,000 square feet.
Panama has been developing logistics
facilities for several years, including the
fledgling Panama Pacifico park at the
former Howard Air Force Base, to lever-
age ocean and air traffic moving through
the country and its central location, and
become a regional trade and logistics
hub. The Colon Free Trade Zone offers
an array of logistics services and light
manufacturing. The logistics facilities are
increasingly being sought by international
companies such as Caterpillar as platforms
for prepping and delivering products to
the growing customer base in Central and
South America, but also provide a natural
relay station for goods bound for the U.S.
market, experts say.
China has invested heavily the past
decade around the world to gain access
to raw materials and in infrastructure
highways, railroads, and ports to
vertically control its supply sources and
get commodities to the homeland. Now it
is investing in logistics infrastructure to
support its export economy.
A portion of trade processed by Florida
ports involves imports to the United States
that are consolidated by buyers and shipped
out to the Caribbean by regional carriers
to serve cruise ships, tourists and local
residents. The shift of direct Asian and
European services to the Caribbean hubs
could reduce the need for cargo to be routed
through Florida, potentially jeopardiz-
ing business for freight forwarders and
regional carriers that have capitalized on
the consolidation trade, and fees for ports,
Martin said.
Instead, cargo could be consolidated out
of the Caribbean ports and delivered on an
For all the reasons
that manufacturing was
offshored, why wouldnt
that same model apply
to logistics and
distribution?
Sean Strawbridge
managing director
for trade relations
and operations,
Port of Long Beach
for economic development may channel
secondary loans to private banks that could
lend money for logistics projects, accord-
ing to Pedro Guerrero, an IDB transport
specialist.
Edson Mori, a senior investment officer,
said the IDB hopes to get involved with
development of inland ports intermodal
logistics hubs being planned in Latin
America.
Martin said the IDB is only providing
seed money to help developing nations and
the United States could have forestalled
some of the maritime competition if it
invested to make its ports more attractive
to carriers.
We have failed to understand that we
operate in a global economy and that we
need to have investments in port infrastruc-
ture, he said.
Anderson expressed frustration that the
U.S. government spent $870 billion on a
stimulus package in 2009 and has noth-
ing to show for it in terms of gateway
infrastructure, including highway and
intermodal connections.
He suggested that the government could
alleviate the infrastructure crunch by pick-
ing 10 major ports and providing each of
them $400 million, not counting matching
contributions by states and cities.
For $4 billion wed be set for generations
to be competitive with our ports, he said,
noting that tiny Panama had the political
will to pass a referendum allowing the
government to borrow money for the $5
billion canal expansion.
Were spending $1.2 trillion in debt and
we cant find $4 billion? he exclaimed.
In an interview on the event floor, An-
derson said governors, mayors and some
members of Congress are beginning to
understand the importance of investing in
port infrastructure, including maintenance
dredging of existing waterways to keep
them at their authorized depths.
Were falling so far behind. We cant
wait another five to 10 years for our coun-
try to realize that the rest of the world is
leaving us in its wake, he said. We dont
want to be the recipient of transshipment
cargo because we failed to invest a few
billion dollars.
The Jacksonville port director said he is
considering notifying the Florida congres-
sional delegation about U.S. funding for the
IDB being used for facilities to compete
against jobs at home, adding it could be
a potential lightning rod in the current
economic environment with 8.2 percent
unemployment and a huge federal debt.
I might let them know that we have
concerns and that it might mean jobs to our
state, our region and our nation, he said.
Linking North America with Latin America, Europe, the Mediterranean,
Australia/New Zealand and the South Pacifc Islands.
For more, please visit our website.
Mass, velocity and energy
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No matter what.
LOGISTICS
A
fter SAP released its Transporta-
tion Management (TM) 8.0 in
June 2011, it made good on a lot
of promises and requested improvements
for its existing system.
SAP has heavily marketed and enhanced
the platform, folding it into an aggressive
roadmap for its operations over the com-
ing years.
At its Supply Chain Management 2012
summit this March, Hans Thalbauer, senior
vice president of line of business solutions
for supply chain and research and devel-
opment, laid out plans for the companys
goals this year.
Thalbauer said SAP will center its ad-
vancements on market needs for security,
expansion, and mobility. He said faltering
European economies coupled with many
companies suffering supply chain disrup-
tion in 2011 mean every addition and update
SAP makes will have risk management and
increased efficiencies built in.
He said one of the main focuses for SAP
is to expand its systems to support more
global initiatives, systems, and data collec-
tion. He said the goal is to enable the most
efficient and sustainable transportation and
warehouse management processes with the
highest level of visibility.
For SAP, mobility focuses on the expan-
sion of mobile systems as well as adding
social networking to the mix. SAP wants to
be on every mobile platform it recently
rolled out new apps for Apple and Android
products and Thalbauer said it will gear
systems to look and feel like social networks
since an estimated 20 percent of the world
is currently using a social network.
We want to build a better supply chain,
he said. The new model we can craft
has five key elements: integrated sales
and operations planning, manufacturing
network planning, collaborative response
management, demand management, and
supply chain execution. These specifics
are the heart of SAPs new approach to the
supply chain and are the guiding forces for
the updates and developments the company
will see in 2012, he said.
In the first quarter of 2012, SAP made
its supply chain management (SCM) 7.02
generally available to customers. At the
same time it focused on a rapid deployment
service (RDS) around its Business Object
Supply Chain Performance Management
software, with an added goal of creating
new developments around advanced pro-
duction scheduling.
In the second quarter, SAP plans to use
its HANA data analytics to power the next
breed of SAP sales and operations planning
software. The companys RDS focus will
center on event management and a software
shift from warehouse management to its
SAP Extended Warehouse Management.
From the second quarter and forward, its
important to note that this is only SAPs
current projected path. The company admits
changes in the market or its business can
cause it to take a different path than whats
currently laid out.
The company plans to enhance offerings
around ocean carrier bookings in the third
quarter of this year. It hopes to release a
series of supply chain execution updates,
with its TM 9.0, EWM 9.0, and EM 9.0 all
coming out during those months.
For the end of 2012, SAP plans to bring
its HANA engine on board to power a new
demand signal management platform.
A key piece to all of SAPs coming work
and innovation is its HANA analytic engine.
HANA allows the company to provide much
quicker and more sophisticated operations
to customers, giving them the ability to look
at the world in a single glance.
Beyond 2012. Thalbauer said the key
to reaching SAPs timeline of goals is to
use what he calls a non-disruptive inno-
vation road map. This is built on more
innovation, less disruption, and long-term
predictability, he said.
Thalbauers innovation comes in both
evolutionary and breakthrough flavors.
Evolutionary innovation is the gradual
development of enterprise software and
mainly covers updates based on consumer
needs and the combination of systems.
The breakthrough innovation prong con-
cerns adopting new business practices
and processes as quickly and smoothly as
possible, and will be the key way HANA
and mobile platforms are incorporated with
future efforts.
The delivery-without-disruption pillar
represents the goal of delivering new ser-
vices to customers while avoiding excess
costs, time, and skill concerns. SAPs
concern here is to give customers a series
of integration options, allow software to
work together on a unified platform or
side-by-side, and to deliver innovations
quickly while ensuring that they are applied
consistently across an implementation.
For long-term predictability, were
extending the maintenance on our Busi-
ness Suite through the end of 2020,
Thalbauer said during the presentation.
We want to provide a clear strategic plan
for our software and ensure their benefits
to customers.
Tim Motter, a senior solution engineer
at SAP, fleshed out the roadmap, showing
the company had target markets and sys-
tems for its investments already scheduled
through 2015.
This year SAP will focus on freight
forwarders in its supply chain execution
platform by developing core TM processes
for them, looking at settlement and charge
management, determining profitability
On SAPs roadmap
IT firm promises aggressive TMS expansion
over the next three years.
BY GEOFF WHITING
We want to build a better
supply chain. The new
model we can craft has five
key elements: integrated
sales and operations
planning, manufacturing
network planning,
collaborative response
management, demand
management, and supply
chain execution.
Hans Thalbauer
senior vice president
of line of business
solutions for supply
chain and research
and development,
SAP
LOGISTICS
and cost distribution, and producing door
appointment scheduling.
SAPs goal for 2013 is to enhance its
work around contract logistics and rail
carriers. This includes the development of
a specific carrier portal, parcel manage-
ment solutions, order-to-cash for rail, and
TM enhancements centered on retail and
automotive support.
Following that, 2014 will be centered on
LSPs and ocean and air carriers through
the development of a standalone ware-
house control, a hub handling platform,
TM enhancements around these carriers,
transportation demand forecasting, and
services for better management of fleets,
assets, and containers.
The 2015 outlook is focused on oil and
gas companies as well as truck carriers.
SAP will, as in previous years, create TM
enhancements around its target market,
while developing warehouse optimization
software, an EWM multi-client framework
for LSPs, and a supply chain execution
platform for mid-markets.
Looking at its TM overall, Motter said
one of its primary goals is to continually
make as much of the work it supports a
one-click process. Were building this as
an automated service because thats where
all the benefits come from, he said.
This one-click model also allows for
better integration and support of multiple
systems. The TM doesnt care what sys-
tem it gets information from, it just needs
to know a destination and origin, an order
document, to start building the move and
give the user the best possible options,
Motter said.
The whole point of the system is to
remove manual steps and human-data
interaction prior to trouble tickets and
exceptions, he added.
In its TM 8.1 update, which SAP released
to select partners starting in March, the
company now provides support for full-
containerloads and less-than-container-
loads for the entire process execution, LCL
capacity planning based on new and more
comprehensive sailing schedules, LSP-
specific documents throughout the move,
and optimized transportation proposals
(routing) for multi-leg ocean shipments.
This builds on its TM 8.0 release in
2011 that focused on enhancing order and
cost management, track-and-trace, carrier
collaboration, import and export booking
and management, and handling danger-
ous goods.
Behind all of its options and features,
SAP looks at TM through a green lens. The
company feels that planning leads to cost
reduction and the biggest savings is typi-
cally the best decision. It has built TM on
this principle to include as many transport
modes, costs, constraints, penalties, and
consolidations as possible.
Currently, SAP considers its most
prominent TM partners to be IBM, GOPA,
Cognizant, SMC3, ALK, and INTTRA.
GOPA said that conservative estimates for
cost savings after the TM implementation
are 5 to 10 percent of initial transportation
costs, a significant bottom-line savings.
data analysis from any source.
Beyond being a platform for real-time big
data analysis, in-memory technology from
SAP is also being used as the foundation
for new applications. The latest advance-
ment is tapping HANA for predictive
analysis, which can improve customers
decision-making by predicting potential
future outcomes.
SAP is rolling out this ability as its Busi-
ness Objects Predictive Analysis software,
which provides a graphics-heavy and
user-friendly scenario around predictive
modeling and customized visualization.
This type of future prediction, based on
a wide range of inputs and variables chosen
by the customer, requires a full embrace of
big data. It was not possible in a real-time
manner before HANA, Thalbauer said.
SAP feels one of the biggest uses for
the platform initially will be companies
looking into past and current trends around
purchasing and shipping routes and how
they have impacted
their bottom lines.
Richard Howells,
SAPs head of solution
marketing for sup-
ply chain, said these
features will focus
heavily on risk mitiga-
tion and adjusting to
new circumstances.
As the service expands, SAP expects it to
also address potential future markets and
opportunities.
The company said Business Objects
Predictive Analysis and HANA are two
key steps in an ultimate goal of bringing
predictive capabilities to multiple tiers
within an organization, to further collabo-
ration and also help people like warehouse
managers predict and prepare for shifts that
may quickly come down the supply chain.
When looking at future HANA integra-
tions and services, SAP sees the cloud as
the default method of system communica-
tion. IT may see it as a security issue, but
the business side is not so uncertain. They
see that the value is there in collaboration,
Thalbauer said.
What would be best is to have every-
thing function as part of one solution,
Howells said. The future value is in col-
laboration.
SAPs goal for now is to drive down
costs and expand its portfolio of available
interoperable services and systems. The
companys success is a story of partner-
driven moves and preferences, where it
not only addresses customer concerns and
desires but attempts to use its own brand
prediction to determine what will be in
demand down the road.
Howells
The TM doesnt care what
system it gets information
from, it just needs to know
a destination and origin,
an order document,
to start building the move
and give the user the best
possible options.
Tim Motter
senior solution engineer,
SAP
Big Data. SAPs High-Performance
Analytic Appliance (HANA) is becoming a
bigger part of everything SAP does because
of the benefits its in-memory computing
and processing allows.
This type of computing means SAP
can provide a piece of local hardware that
accesses data on a system, compresses it
and stores the data in its Ram instead of
on a hard drive. For these purposes, Ram
is up to 10,000-times faster than standard
drives which means HANA and other
systems can analyze incredibly large sets
of data, detect patterns, and even adjust a
systems operations and outputs in a matter
of seconds instead of hours.
The speeds that HANA can muster mean
that its future is in real-time analytics, an
area that can be applied to every aspect of a
shipper or LSPs business. Managing risks
as they happen, adjusting shipments and
equipment as soon as a trouble ticket pops
up, and reducing the amount of tables and
charts required for employees to build are all
areas on which SAP is working in HANA.
Currently, SAP is ramping up HANA for
expansion into the small and midsized en-
terprise markets. Vishal Sikka, a member of
the SAP executive board on technology and
innovation platforms, said SAP HANA
enables nearly 80 percent of our customers,
which are small and midsized businesses, to
bring together structured and unstructured
OPERATIONS
Vessel On-Time Performance 100% Asia-U.S. West Coast 84%
100% Asia-U.S. East Coast 90%
100% Transatlantic 88%
100% Asia-Europe 90%
SAFETY
Long-Time Operational Stoppage 0 2
ENVIRONMENTAL
Nitrogen Oxide (NOx) Emissions per TEU-Mile 1%Annually to 3.12 grams 3% to 3.02 grams
Sulfur Oxide (SOx) Emissions per TEU-Mile 1%Annually to 1.99 grams 1% to 2.03 grams
Carbon Dioxide (CO2) Emissions per TEU-Mile 1%Annually to 137.34 grams 3% to 134.31 grams
OPERATIONS
In-Terminal Truck Turn Time <30 min. Jacksonville / Los Angeles / Oakland 15.0/ 22.2 / 22.0 min.
CUSTOMER SERVICE
Lost Calls Less Than 2% 1.60%
Phone Wait Time Less Than 20 seconds 16 seconds
Export B/L Documentation Completion Rate 98% Complete 24-hrs After Vessel ETD 98.91%
EDI
Message Processing Without Failure 90% 99%
EDI Uptime 99% 99%
Customer Setup Time Within 72-hrs 48-hrs
Customer Scorecard Compliance 95% 99%
*Global KPIs are international; regional KPIs are North American.
**MOL has also established a target to reduce NOx, SOx and CO2 emissions by 10% by FY2015 vs. FY2009.
To hear the whole story and learn what MOL can do for you, visit CountOnMOL.com.
Howare we doing? See for yourself.
What can you expect from MOL? For starters, high
performance standards and great results. In the spirit
of total transparency, we offer the first results of our
Key Performance Indicators*. In the coming months,
we will publish updated numbers. If we need
improvement, well outline how we will do it.
If we meet our goals, well strive to get even better.
For reliable, dependable service Count On MOL.
G L O B A L
R E G I O N A L
O C T. D E C. 2 0 1 1 T A R G E T K P I
J A N. F E B. 2 0 1 2 T A R G E T K P I
F Y 2 0 1 1 1 H v s. F Y 2 0 1 0 1 H T A R G E T * * K P I
F E B. 2 0 1 2 T A R G E T K P I
F E B. 2 0 1 2 T A R G E T K P I
J A N. F E B. 2 0 1 2 T A R G E T K P I
Getting smarter with RFID
R
adio-frequency identification, better known by its
acronym RFID, has seen varied uses in ports, trucks,
and outside the four walls of warehouses, but its now
expanding to new areas as other technolo-
gies muscle in on its original turf.
One of RFIDs earliest uses at the ports
was to track the location of large equipment
like cranes. Companies would bury an RFID
tag reader in the ground and could then
determine what piece of equipment was
parked overhead. This activity has shifted
to GPS, which is now more reliable and
can track equipment anywhere in a port.
RFID has also moved to smaller objects
and more stable uses, largely around man-
aging inventory and containers and giving
more dynamic information about trucks.
Unlike a barcode, the tag does not need to
be within line of sight of the reader and may
be embedded in the tracked object, which
helps expand its usefulness.
For now, RFID is all about getting
smarter with existing tags both passive
and active and the readers and systems
that support them.
Passive tags are the most commonly used,
partially because they require no battery
being powered by the energy used to read
them and they return a single piece of
information like a tag or batch ID. Passive
tags are dependent on the system that reads
them because all of the data associated with
the ID whether thats product, pallet, or
truck data is stored and managed in a
separate system that simply uses the RFID
tag as a way to check in.
The coming trends with passive tags is
deepening integration within management
tools so items can be tagged earlier in the
supply chain and provide information all
along the move. Tagging sooner can make
a supply chain more dynamic, because it
provides a better location for where items
are, how many there are, and to where they
can be shifted.
Active tags require a power source, but
can be programmed to do more advanced
tasks. These are built in a way where they
either are thrown away when the battery is
depleted or can be recharged and reused,
with the latter being more expensive.
can restrict the amount of tags in a certain
area and the speeds at which theyre moving.
Jones said some of this signal vagueness
can be counteracted with smart systems.
ITS developed a gate system that uses
RFID readers around multiple doors of a
hub to determine which gate a tagged trailer
was backing up to, allowing the trucking
company to know where the trailer was
being unloaded.
ITS was able to determine at which
door a trailer was parked by looking at the
signal strength of its readers. The company
realized the truck would be at the door
between the two readers with the highest
signal strength.
Maris said Motorola has seen similar
work where even passive tags can provide
enhanced information if they and the
reader are connected to a sophisticated
network, including the ability to tell fork-
lifts how hard to squeeze a box based on
the contents.
Another trend working in RFIDs favor
is that costs are consistently coming down,
even on the newer active tags. According
to Global Industry Analysts, the cost of the
cheapest RFID tags has fallen to less than
$1 and will continue to decline.
The future of RFID is small and powerful.
Maris said youll actually see them woven
into corrugated boxes. This leads to situa-
tions where you dont need to put a label on
the box since it already has a tag embedded
in the material itself, he explained.
For companies interested in jumping
into RFID, the first thing to do is to make
sure the solution helps your business. RFID
is just one of a number of technologies a
company should consider when taking on
an IT-based supply chain challenge.
RFID is not the wholesale panacea for
tracking materials, Green said. We see
all sorts of possibilities, but to actually get
them into practice and be used beneficially
is a slow process.
He said the crucial application for RFID
is reducing manual labor in easy-to-measure
ways because this would further its adoption
within a company.
The big key is to use it where you can
get the most return on your investment,
Maris said. Ive seen people who put
RFID in their supply chain just for the sake
of saying were cutting edge, and it just
isnt worth it.
Shippers IT l By Geoff Whiting
One use for active tags is to have a wakeup
feature periodically during a shipment
and monitor temperature and humidity of
a pallet in a refrigerated truck, said Peter
Green, president and chief technology of-
ficer at BellHawk Systems Corp., which
provides inventory and production tracking
systems using various technology. The tag,
which has to be programmed beforehand,
can perform this task throughout the move
and then when the pallet is unloaded all of
the tags data can be collected and matched
with the data.
Youll actually see (RFID
tags) woven into corru-
gated boxes. This leads
to situations where you
dont need to put a label
on the box.
Mike Maris
senior director, Motorola
Motorolas senior director Mike Maris
said advancements in these active chips
and devices that read them could soon
lead to a system where an RFID chip will
communicate directly to that refrigerated
truck and request a colder temperature if
its pallet got too warm.
RFID technology can also benefit from
connecting to a smarter system. Allan
Jones, who joined International Terminal
Solutions (ITS) in March as its head of busi-
ness development, said significant headway
can be made by pairing active RFID with
an intelligent system. ITS builds tracking
platforms using RFID, GPS, and other
automated data capture equipment.
A limitation to RFID is that its imprecise,
so the best uses for it are when companies
Recalculating
R
ecalculating Thats a familiar phrase to drivers who
use global positioning units to get from place to place.
If a traffic jam or detour causes a change in plans, the
unit can help drivers still find their way
efficiently to their destination.
Damco, the third party logistics arm of
A.P. Moller-Maersk, said a new product it
rolled out in March Damco Dynamic
Flow Control (DDFC) was developed
to give shippers an automated tool that can
help adapt their supply chains to changing
business conditions.
We have implemented it with a couple of
customers, mainly in the retail and apparel
segment, said Rolf Habben-Jansen, chief
executive officer of Damco, in an interview
with American Shipper. He also expects it
will be attractive to technology shippers.
A lot of companies see the need to build
more responsive supply chains, because
they get confronted with much more volatile
demand with ever shortening lifecycles.
And also the preferences of the consumer
are not always that easy to predict, he said.
Certainly today, when inventories in
the supply chain are really, really low that
means whenever you have a change, espe-
cially in the demand pattern or you have
a disruption on the supply side, you need
to be able to speed up or slow down or
adjust the way you bring goods to market,
he added.
Habben-Jansen said many companies
have half to a third the inventory that they
had 10 to 15 years ago and if you have less
buffer, then you need to make sure your
supply chain is much more responsive.
DDFC allows companies to influence
and change the routing or transport mode
from the moment you issue the purchase
order until you put it on the last leg of
transportation, he said.
Habben-Jansen noted the product will
allow companies to make changes much
later in the processfor example, decide
up to 24 hours before a sailing whether to
divert a container of goods onto a faster or
slower ship, or even switch some or all of
a shipment to a plane, if urgently needed.
Many companies have a large number
information without giving the ability to
act upon it, without manual intervention.
DDFC, it said, re-plans upon the given
change and executes accordingly, while
providing total visibility in the process.
DDFC is a hybrid of a system and con-
sultancy. We will use our expertise within
supply chain consultancy to design the
right solution from a business and logistics
perspective in conjunction with our custom-
ers. Based on such an assessment, decision
trees and EDI (electronic-data-interchange)
interfaces will be configured in the IT
system; new processes will be designed
and rolled out to key stakeholders in the
customers business, the company said.
Damco said DDFC offers three com-
ponents:
Review and optimization/design for
a better supply chain.
Support from comprehensive IT.
Staff to support implementation,
execution and continuous improvement.
Damco believes the customers that could
obtain the full benefits of the product will
be large, moving about 10,000 TEUs a
year, though Habben-Jansen said somewhat
smaller customers could also use DDFC.
He added the target audience for DDFC
is not restricted to companies that rely on
Damco or another non-vessel-operating
common carrier to buy freight capacity for
them, but could be used by companies that
have their own contracts with liner carriers.
The company said DDFC is now up and
running with a number of customers, but
said it was not yet able to share specific
names.
Damco said some companies have
achieved operational efficiency gains of
about 15 percent globally, reduced IT costs
with fewer EDI feeds, and improved the
productivity of their logistics staff. It said
overall DDFC customers have saved mil-
lions of dollars on ocean freight through
higher fill rates, better container mixes (and
use of more 40- and 45-foot containers),
reduced use of air transport, and reduced
inventory costs through a more than 20
percent reduction in origin processing time.
Damco also said its customers have smaller
carbon dioxide emissions by reducing their
number of container and truck moves and
using less air transport through DDFC.
Chris Dupin
Brokers, Forwarders & NVOs
of variables that they need to influence,
he said.
Thats where our solution, which actu-
ally automates a lot of steps, helps people
to consistently adjust their supply chains
and the way they bring their goods to mar-
ket to what the actual demand is, or when
they need to get it to market. Whether that
is based on cost, lead time, carbon foot-
print, those are all choices you can make
and which we can design in our business
rules, he said.
Damco explained most existing supply
chains are planned and executed manually
and as a result are slower, less optimized
and prone to error. Its DDFC product dif-
fers from traditional control tower solu-
tions that the company said only provide
Whenever
you have
a change,
especi al l y
in the de-
mand pattern or you have
a disruption on the supply
side, you need to be able
to speed up or slow down
or adjust the way you bring
goods to market.
Rolf Habben-Jansen,
CEO,
Damco
FORWARDING / NVOs
containerized delivery somewhere around
the world.
The companys intermodal spend was
about $250 million, and it moved 125,000
TEUs throughout the globe, from every
cotton-producing country to every import-
ing country.
In the 1970s, he said the company was
having trouble getting truckers to meet ap-
pointments and make on-time deliveries.
So Dunavant decided in 1972 to go into
the truck brokerage business, arranging
its own freight on a non-asset basis to
get better control of our supply chain
particularly with the domestic mills in
the United States which were looking for
just-in-time service.
Then we had to get into the warehous-
ing business because warehouses were not
performing and delivering our commodity,
cotton, to us, on a timely manner, he said.
As the company developed its logistics
business, it also wrote many proprietary
software programs to assist with its sup-
ply chain, and Dunavant said the most
important was the companys document
packaging system (DPS).
We were shipping cotton all over the
world, he said. You had an invoice and
a packing list that included all the qual-
ity parameters of each individual bale of
cotton, a letter of credit, a phytosanitary
certificate.
We wrote a system to aggregate all of
that electronically into one package where
we could move it and negotiate from one
system as opposed to having to run around
and aggregate a bunch of documents, he
explained. It cut out a lot of time and effort
to what we were doing.
But in the late 1990s and 2000s, the cot-
ton industry was undergoing a profound
change.
For one thing, domestic consumption
plummeted as textile production moved
overseas from 13.3 million bales of
cotton in 1997 to 4 million bales in 2007.
The company switched more into the
D
unavant is one of the storied names
of the cotton business, but a few
years ago the Memphis-based
company made a bold decision to exit the
cotton trading business to concentrate on
logistics.
To get a sense of the magnitude of that
decision, a little history is needed:
In the late 1800s, former Civil War Col.
William Pemberton Dunavant helped es-
tablish a railroad that moved cotton in Mis-
sissippi with Gen. Nathan Bedford Forrest.
His son, William Buchanan Dunavant
Sr., started trading cotton with T.J. White
& Co. in 1928 and was joined by his son,
William B. Dunavant Jr., at the firm in 1952.
The company was renamed W.B. Dunavant
& Co. in 1960 after T.J. White retired.
Upon the death of his father in 1961,
William B. Dunavant Jr. became chief
executive officer at the age of 28, building
the company into the largest cotton trading
company in the world.
An article in the International Directory
of Company Histories said not only did
Dunavant possess an innate feel for the
market, he proved to be a true innovator and
visionary. It credits him with pioneering
the concept of forward contracting in cot-
ton, whereby and entire crop was bought
at a set price before it was planted and
making the first sale to mainland China in
November 1972, just months after President
Nixons visit.
Proud Heritage. His son, William B.
Dunavant III, joined the company in 1982,
becoming CEO in 2005, and still runs the
company today.
We are very proud of our cotton heritage
and what my father and my grandfather built
up, said Dunavant, noting that revenues
reached more than $1.5 billion.
We focused solely on cotton and did not
trade other commodities, he said. The
principal business was to buy and sell raw
cotton from a farmer and ship it overseas
or domestically to a textile mill.
As merchandisers, the company discov-
ered the price of cotton, hedged risk, sorted
it by quality and delivered it to the mill. The
company was vertically integrated, with its
own warehouses for storing cotton, gins to
remove seeds, and mills for crushing cotton
seeds for their oil and meal.
It arranged transportation, and lots of it.
We provided all of the logistics for mov-
ing 5 to 6 million bales of cotton globally
every single year, Dunavant said. That
included everything in the supply chain
from warehousing to moving it by
truck, rail, ocean, and intermodal to a
Cottoning to 3PL business
Memphis-based Dunavant
undergoes a radical transformation.
BY CHRIS DUPIN
FORWARDING / NVOs
export business, and also sourced cotton
from around the world, namely from Aus-
tralia, India, Uzbekistan, Africa, and South
America in addition to the United States.
We truly were global negotiating
letters of credit and creating and solving
supply chain issues all over the world, and
we had a great team that did it, Dunavant
said.
Five years ago, the company hired
Richard McDuffie, a logistics expert who
held management stints at AutoZone,
Williams-Sonoma, Cardinal Logistics,
Ryder and J.B. Hunt.
We wanted him to come in and make
sure we were managing our business and
our spend in logistics all the way out to
the fourth decimal point, Dunavant said.
If you squeeze 50 cents a bale on 6 mil-
lion bales, its a lot of dollars at the end of
the day.
Even though it was shipping cotton
worldwide at different times, he said the
company was only using its employees
part-time, or about 80 percent of the time.
So the company started moving freight for
other people and it worked very well for us.
Difficult Decision. Dunavant said in
2000, as money became cheap, specula-
tion increased globally, especially in
commodities.
The risk level in cotton was really quite
incredible, he said.
So in 2008-2009, the firm made what he
said was a difficult decision, and sold its cot-
ton trading operation to the Allenberg Cot-
ton, part of Louis Dreyfus Commodities.
They were No. 1 in some places in the
world, and we were No. 1 in some places
in the world, Dunavant said.
When the company exited the trading
business it decided to focus on its logistics
operations.
Handling freight is not like trading
futures where there is enormous risk, so
our risk profile has changed, he said
We had logistics relationships and infra-
structure all over the world. I felt there was
a wide need to help small and medium- size
shippers as they go international.
He added: We feel like our biggest cus-
tomer was Dunavant for years and years,
and we did a very good job for Dunavant
and we feel we can do a very good job for
our other customers.
With Dreyfus deciding to handle the
logistics of the cotton trades, Dunavants
handling of this freight fell sharply.
Dunavant referred to the company today
as a small to mid-market 3PL, but said it
is building volume every day, moving at
a pretty good clip.
We are quite excited about this. We
have been doing this over two years and
I would say that we are in another com-
modity business, Dunavant said. The
commodity is freight, logistics and move-
ment. It is a high-volume business, fairly
low margin, and you have to do it right for
your customer.
The company retained its truck broker-
age operation, and logistics software. It
also has a capital management and private
equity business.
Dunavants logistics business today
consists of four groups:
Global The company is a licensed
freight forwarder, non-vessel-operating
common carrier, and customs broker and
is in the process of getting its air forwarder
license. It also has extensive experience
negotiating letters of credit. We can give
people solutions in literally any country in
the world. Its no different from what we
did in cotton, what we are doing today for
other people, Dunavant said.
Warehousing While the company
divested itself of 7 million square feet of
owned and leased warehouse space when
it got out of the cotton trading business, it
retains warehouses in Memphis and middle
Tennessee, and does pick-and-pack work.
Solutions This group provides sup-
ply chain consulting to small, midsized
and large companies. Dunavant said this
involves teaching clients the processing
and costing models it developed when it
was in the cotton industry and adapting it
to their businesses.
Freight The company has both non-
asset and asset-light freight operations. The
non-asset business is its truck brokerage
operation. The company said it has access
to more than 4,000 trucking companies
throughout the country and moves all types
of freight across all transport modes. The
asset-light business is involved in inter-
modal drayage, where the company uses
owner-operator drivers.
We had logistics
relationships and
infrastructure all over the
world. I felt there was a
wide need to help small
and medium-size shippers
as they go international.
William B.
Dunavant III
CEO,
Dunavant
Enterprises
E
van Armstrong, president of con-
sulting firm Armstrong & Associ-
ates, said it is fairly unusual for 3PLs to
grow out of shipper operations, but not
unprecedented.
He noted Dunavant was different
in that it was growing out of a trading
company and trading companies do a lot
of logistics work as part of their primary
business.
Examples of manufacturers that have
created 3PL subsidiaries include:
Caterpillar Logistics, which Arm-
strong said has top line revenue of about
$3.5 billion and runs 119 distribution
facilities with 28 million square feet of
space. He said about half of what Cat-
erpillar Logistics does is for the parent
company.
Uniroyals USCO subsidiary, which
was later acquired by Kuehne+ Nagel in
2001 for roughly $300 million.
Fidelitone, based in Wauconda, Ill.,
transitioned in the 1970s from making
3PLs born from shippers
phonograph needles to parts distribution
and then to a 3PL business as the music
industry changed. Today, Armstrong
said Fidelitone has top line revenue of
more than $320 million, 500 employees,
and 28 warehouses with as much as 1
million square feet of space.
Technicolor Transportation Man-
agement Services, a unit of the Par-
is-based entertainment technology
company, has revenue of about $450
million, Armstrong said. The company
handles more than 15 million shipments
annually, for example distributing DVDs
and games to retailers.
Celestica, the contract electronics
manufacturer, has also developed a size-
able 3PL operation.
ATC Logistics and Electronics
began life as a company that remanufac-
tured automobile and light truck trans-
missions and grew its 3PL subsidiary to
the point where it was purchased in 2010
by GENCO for $512.6 million.
FORWARDING / NVOs
The company also
believes the region
may benefit from in-
creased trade with
Central America as
labor costs rise in Asia
and fuel pushes up the
cost of transportation.
In addition, the
company is interested
in investing in the chassis business. Duna-
vant believes it will probably use a mixture
of chassis supplied by liner carriers and their
pools, shippers, as well as its own equipment.
As a 4PL we want to keep all our options
open, Dunavant said. However, he believes
an owned pool will be a safety asset that
attracts both drivers and shippers.
Dunavant is not willing to discuss the
current size of his business, but said clients
range from the Fortune 100 to midsized
businesses. They are in a diverse group of
industries too, covering retail, chemical,
food, industrial products, and automotive.
And, the company has some cotton shippers
as well as customers of other commodities
such as rice, grain and lumber.
When the company was a cotton trader
it worked with many agents overseas and
also had its own offices. It closed many of
those offices, but retained its partnerships
Drayage Business. The company
entered the drayage business at the end
of 2010, acquiring a majority interest in
Houston-based Trans Gulf Transportation
and partnering with its president Billy Keys.
Trans Gulf had terminals located near both
the Port of Houston and rail terminals, and
has expanded to the Dallas area.
A few months later, it acquired Sea Lane
Express which offers drayage services at
East Coast ports, including Norfolk; Wilm-
ington, N.C.; Charleston; and Savannah,
and inland cities such as Atlanta, Charlotte,
and Nashville.
Dunavant now has about 350 owner-
operator drivers in the drayage business
and plans to expand its drayage footprint
by gradually adding other ports and inland
cities in the Southeast.
Control over drayage will also help the
company offer shippers better visibility to
their cargo.
We are putting tablets inside all our
intermodal drayage trucks, Dunavant said.
We want people to be able to invoice before
our trucks are out of the port.
McDuffie said ports in the Southeast
should benefit from the opening of the
Panama Canal. I dont expect it to be a
hockey stick, but I think it will allow them
to grow at a good steady pace, he said.
McDuffie
with agents.
We kept all those relationships, so from
an overhead standpoint its good. From a
pick the phone up and call anyone in the
world standpoint, its good, Dunavant
said. Likewise, the company has maintained
its relationships with trucking companies,
ocean carriers, and government agencies
worldwide.
The company also added software and
kept the best people in logistics from the
former cotton business and has continued
to add personnel.
Dunavants background in commodities
could be useful if products designed to
hedge freight take hold. The company has
looked at opportunities to hedge fuel for
shippers in the past and had discussions
with the Shanghai Shipping Exchange
about its container freight index, Dunavant
said.
There is a lot of volatility in ocean freight
rates and there continues to be. I think that
with the background of Dunavant in the past
trading and understanding futures and op-
tions that we are going to keep a close eye on
it, he said. Futures and options in freight
are no different than in any other market.
It has a utility for the people who need it
and it creates a speculative opportunity for
those people that like to gamble.
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No relief for Lufthansa in Frankfurt
A
German federal court dealt Lufthansa Cargo a serious
blow April 4 when it upheld a state ban on night flights at
Frankfurt International Airport, the airlines cargo hub.
The decision jeopardizes Frankfurts
role as an international aviation center and
Germanys strong position as an exporter
and provider of logistics services, Deutsche
Lufthansa AG Chairman and Chief Execu-
tive Officer Christophe Franz said.
The airline indicated that it planned to
appeal the ruling.
The International Air Cargo Association
(TIACA) condemned the decision, saying
it will damage Frankfurts reputation as
a premier gateway for international trade
and harm the local and national economy.
Since Oct. 30, flights have been prohib-
ited at Frankfurt between 11 p.m. and 5 a.m.
to reduce the noise impact on residents.
Lufthansa had scaled back overnight
flights from 50 to 17 and capped the num-
ber of flights between 10 p.m. to 11 p.m.
and between 5 a.m. to 6 a.m. at 150, under
an approved plan with local authorities
that eventually was overturned by a state
court. It also outfitted its Boeing 737 fleet
in Frankfurt with sound suppressors at a
cost of several million euros, uses flight
techniques that minimize noise levels and
recently proposed further noise abatement
measures to Hesse officials.
And it is replacing older aircraft in its
fleet with quieter ones. The Airbus A380,
for example, is about 30 percent quieter
than a B747 jumbo jet.
Residents near the airport have the op-
tion of installing noise calming equipment,
such as ventilation fans and soundproof
windows, paid for by airlines through
airport charges.
The court also reduced the number of
flights in the bumper hours from 150 to
133, saying the flight frequency at those
times had to be lower than during the day,
Dow Jones Newswires reported.
Its not about turning night into day. But
the night cannot be allowed to become a
nightmare for the German export industry,
Karl Ulrich Garnadt, chairman and CEO
of Lufthansa Cargo said.
All-cargo carriers prefer operating at
half the cargo on board passenger aircraft is
transported via Frankfurt. Frankfurt is an
indispensable part of our business model.
This is the only place where freighters and
passenger aircraft can be linked quickly
and smoothly, Garnadt said.
Transshipment between aircraft takes
place for 70 percent of Lufthansas cargo,
officials said.
Airports in Leipzig or Cologne lack
takeoff and landing slots to accommodate
any move by Lufthansa, they said.
But in an interview several days earlier
with the German weekly news magazine
Focus, Garnadt suggested Lufthansa might
scrap its freighter fleet if the ban on night
flights is maintained.
Lufthansa operates 18 MD-11 freighters.
Lufthansa Cargo, the worlds fifth largest
cargo carrier, says a permanent night-flight
ban at Frankfurt would cost it about $130
million a year in lost sales, and dent profits
by about $65 million. The carrier previ-
ously implemented an emergency plan to
maintain service levels for customers, with
some flights being shifted to slots in other
parts of the day or routed through Cologne/
Bonn airport. Some direct connections to
China were canceled. It also transferred
an MD-11 freighter from Frankfurt to
Cologne/Bonn airport.
Until courts, businesses, industry and
members of the public start to understand
how much they rely on air cargo, the dan-
ger is that the decision made in Frankfurt
could be repeated at other major gateways.
If this happens, its not only the air cargo
that will suffer: local communities around
those airports and national economies will
also pay a higher price, both financially and
environmentally, Evans said.
Meanwhile, freight volume at Lufthansa
Cargo fell 9.3 percent to 426,000 tons in the
first quarter versus the same 2011 period.
The carrier reduced capacity by 8.2 percent.
Lufthansa reported a load factor of 69.5
percent, down 0.4 percent.
CHEP expands air freight footprint
CHEP Aerospace Solutions has acquired
an air cargo equipment manufacturing site
in Copenhagen from Nordisk Aviation
Products.
This follows the acquisition of Dries-
sen Services by CHEPs parent company
Brambles in November last year.
Air Integrators l By Eric Kulisch
night to give customers more time to drop
off cargo at origin and then deliver it during
the day at destination.
We are extremely disappointed by the
judges decision to uphold the night-time
ban, Olivier Evans, chairman of TIACAs
Industry Affairs Committee and an execu-
tive with Swiss WorldCargo, said. Slots are
a major battle ground for airlines at major
airports across the globe and in recent years
to satisfy the requirements of passengers,
all-cargo operations have been pushed into
the hours of the day, and usually the night,
when passengers dont want to fly. The air
cargo industry has adapted to this and made
it work. Today, night-time cargo flights are
part of a seamless supply chain that means
consumers and businesses can plan their
stock levels and production schedules with
confidence. This is now at risk.
Lufthansa points out similar restrictions
dont exist at any of the other major cargo
hubs in the world, including Amsterdam,
Paris, London or Dubai and that Frankfurts
new fourth runway would not be used
during those hours. It is seeking a more
balanced approach to allow the airline
operational flexibility in an industry that
demands speed to survive.
The airline said it wouldnt abandon
Frankfurt, but warned that other hubs in
its network would take priority in expan-
sion planning.
TIACA said restricting freighter move-
ments would reduce future investment
by airlines at Frankfurt and could lead to
job losses. It warned that local trucking
companies could be impacted if all-cargo
airlines are forced to use other airports and
consumers would pay more for their goods
due to higher transport costs.
Night flights are critical for express
shipments to North America and without
them shippers will migrate to other Euro-
pean hubs to move time-critical products,
Lufthansa officials said.
Switching to other airports is impossible
for Lufthansa Cargo, however, more than
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K
een interest in providing logistics
services to life science companies,
especially by firms specializing in
rapid delivery, was highlighted earlier this
year by two acquisitions.
In February, Los Angeles-based MNX,
an expedited transportation and logistics
services company, said it would acquire
the same-day express/next-flight business
of Columbus, Ohio-based AirNet.
Scott Cannon, MNXs chief executive
officer, said the acquisition will expand
the firms capabilities in the life sciences
industry and dilute MNXs concentration
in existing vertical markets so we will be
a much more well-rounded company in the
types of customers that we serve.
He said he expected life sciences will
go from being about 18 to 20 percent of
MNXs revenues to upwards of a third of
its business.
The MNX-AirNet deal was followed
in March by the announcement that Am-
erisourceBergen Corp. of Valley Forge,
Pa., was buying World Courier Group of
Stamford, Conn., for $520 million in cash.
It expects to close the deal in June. Am-
erisourceBergen is one of the three largest
drug distribution companies in the country,
along with McKesson and Cardinal.
World Courier is a global specialty
provider of transportation, storage and
distribution services for multinational
biopharmaceutical clinical trials, and
expected to have annual revenues of $500
million in 2012. It also serves sectors such
as the automotive, aviation, high-tech, and
oil and gas industries.
The acquisition of World Courier adds a
new premium specialty service to our exist-
ing portfolio of market-leading pharmaceu-
tical manufacturer services, said Steven
H. Collis, CEO of AmerisourceBergen.
World Courier has over 137 offices,
13 compliant storage depots, and 2,500
employees in 52 countries.
Press reports said World Courier had
hired Citibank to find a buyer and that both
FedEx and UPS have shown interest in the
company as well as private equity firms.
A World Courier competitor, U.K.-
based Marken Ltd., was acquired by Apax
Partners in December 2009 for about 975
million (or $1.6 billion).
Cannon noted UPS, DHL, and FedEx are
all major players in the healthcare sector,
which he said is growing dramatically.
Same-day has always been the crumbs
of the industry, but those crumbs amount to
a multibillion industry, said Cannon, who
is also president of the Express Delivery
and Logistics Association (XLA).
Same-day delivery has always been our
core, Cannon said. Were an industry
leader in that space globally and have had
a brand recognition going back 30 years.
About 80 percent of MNXs business is
same-day deliveries, and another 20 percent
is for express air freight and supply chain
services similar to those offered by 4PLs.
He said MNX will continue to work
closely with AirNet, which will become
an important provider of the lift that MNX
uses to move its customers shipments.
MNX had about $76 million in revenue
in 2011. Cannon said that because of the
acquisition and organic growth, he expects
the company will have sales of more than
$100 million in 2012.
Going forward, he anticipates roughly a
third of the companys business will be in
the life sciences a broad category that
could include everything from biophar-
maceuticals and clinical trial specimens
to blood, tissue and organs.
MNX got its start working in the enter-
tainment industry, and Cannon said it will
remain about a third of its business going
forward. He said the company handles
logistics for three of the four largest movie
studios through global contracts.
We are probably the best known provid-
er of same-day services, definitely within
the Los Angeles area, he said, adding the
company also serves entertainment hubs
such as London, Sidney, and Hong Kong.
It moves products such as posters and
standing displays for theaters, and Cannon
said MNX was fortunate in that it was not
heavily dependent on the actual movement
of movie prints as the industry moves to-
ward digital projection.
Seventy-pound boxes with film reels
have been replaced by five-pound hard
drives and, in five years, he said much of
that business will be replaced by films be-
ing beamed via satellite to movie theaters.
Another 20 percent of the companys
business is aviation-related, moving time-
critical parts to keep planes in the air.
The remainder of the companys business
comes from moving cargo for a wide variety
of manufacturing and service companies.
MNX moves packages for payroll compa-
nies, the apparel industry, and high-tech
companies such as semiconductor makers
really everything else that you could
imagine that uses same-day services.
While about 80 percent of MNXs busi-
ness is same-day, next-flight services,
MNX offers other sorts of express services,
though Cannon says its all intercon-
nected.
For example, when MNX ships market-
ing materials, such as posters and stand-
ees for studios, they are often shipped at
the last minute, but are larger than smaller
packages handled by the traditional next-
flight services that most airlines offer.
MNX is privately owned and Cannon is
one of five shareholders. A private equity
firm called St. Cloud Capital also has a
small stake.
He said MNX has been growing at
about 30 percent annually in an industry
that has been fairly stagnant, especially
domestically.
The company has benefited from a strong
international focus, part of its heritage as
it was founded by a British businessman.
MNX once derived 90 to 95 percent of
its revenues from international business.
That will decline to about 60 percent, in
part because of AirNets domestic focus.
We think there is an opportunity for us
to acquire other companies that are U.S.-
centric, Cannon said. Obviously the U.S.
economy is not growing as rapidly as around
the world, and as customers needs evolve,
companies like us chase them around the
Multibillion-dollar crumbs
Next-flight service providers are increasingly
taking aim at life sciences shippers.
BY CHRIS DUPIN
Same-day has always been
the crumbs of the industry,
but those crumbs amount
to a multibillion industry.
Scott Cannon
CEO,
MNX
TRANSPORT / AIR
planet and to wherever the work goes.
Because weve been internationally
focused and have a network second to none
in our opinion, I think we are well-suited
to pick up a lot of additional customers
around the world as more and more of our
customers push operations to other parts
of the world.
Next Flight. Cannon says many people
dont even know that next-flight services
exist or how they work.
If you needed to ship something from
Newark, N.J. to Miami and it had to get
there this afternoon, the way it would work
is this: You would call us, we would take
the order and we would dispatch a service
partner, a local courier who would come
to your facility and pick up whatever you
need to ship.
He would then go to the commercial
airline, and he would tender it on our airline
account, and we would dispatch a courier
in Miami to recover it from the airline and
go deliver it on your behalf. We manage the
entire process, he said.
Most airlines, he explained, sell a next-
flight package service, and MNX uses
the lift of 170 to 180 commercial airlines
worldwide.
One of the suppliers of lift to MNX will be
AirNet. However, with AirNet focusing on
air cargo, Cannon expects service levels at
Air Net are going to be much higher than you
would expect from a commercial airline.
He said couriers can usually pick up
and drop off cargo for next-flight services
at cargo locations, though in some cases it
will travel with baggage.
The materials that MNX moves in the life
sciences market generally weigh less than
25 pounds and are perhaps a foot square,
but the companys business runs the full
gamut of dimensions for example, it may
charter a plane to move an aircraft engine.
Why does a company like MNX get hired
to move parts for big airlines?
As you can imagine, there are 100,000-
plus parts on an airplane. If you look at all
the places they fly to, it would be impossible
for an airline to provision every single part
they might need for every aircraft at every
location, Cannon said.
Through an organization called the In-
ternational Airlines Technical Pool, more
than 100 member airlines share parts so
planes can be repaired quickly and put
back into service.
Buying inventory is very cost prohibi-
tive and eats away at capital, so its cheaper
to use a service like us and spend a little
more on transportation then it is to provision
every kind of part you could for an aircraft.
MNX is a small, asset-light business
a rare product or help a hospital to quickly
ship a sample.
UPS also sells a proactive response,
intercept service. If the normal small
package or freight channel handling for
a companys shipment is hit with some
disruption, such as bad weather, UPS will
jump in and take special steps to protect
the cargo. For example, it may need to put
the product on dry ice or in a refrigerator,
or ship it using a next-flight service.
UPS has a secure air service mostly
used by healthcare companies for very
expensive or highly sensitive drugs. A
bonded courier and armed guard will pick
up a delivery at a manufacturer, bring it
directly to the airport, place it on the plane
and only leave when the plane is ready to
be sealed for flight.
A similar team of couriers and guards
will wait at the other end and remove the
cargo so it does not move through the
normal freight stream, and deliver it to
the consignee.
What kind of cargo may get this kind
of white-glove treatment? Narcotics, ex-
tremely rare samples, or exotic oncology
drugs are a few of the examples Menna gave.
Matt Daniels, vice president and general
manager for DHL Same Day, said life sci-
ences is a growing market and requires
a transit time often faster than what the
traditional express carriers can offer. Life
science customers expect a 24/7 service
with visibility and are willing to pay more
for the right service.
He said in the clinical trial area, phar-
maceutical companies are expanding
the number of trials done on each project
so this is also driving more volume. Our
existing customers use us due to our reli-
ability and the access to information we
provide. We are working on a hybrid model
which will leverage our existing express
network with the expertise of our same-
day service offering. This will provide a
more cost-effective solution than what our
competitors can offer.
UPSs Menna said clinical trials in-
volve both the movement of investigative
medicines to patients and samples back to
centralized laboratories for analysis.
He said more of those trials are taking
place overseas in places such as Africa
and China. He explained the cost of trials
in some of these areas may be cheaper and
drug companies want to test products on
patients who are not already taking other
drugs, and because it may be important to
test drugs in persons with varied genetics.
Daniels said DHLs strong international
network is one of the reasons the express
carrier is involved and expanding in the
clinical trial business.
with about 250 employees after the acquisi-
tion of the AirNet business.
Life Science Lift. But the largest ex-
press companies, namely UPS, FedEx, and
DHL, have also expanded aggressively into
the pharmaceutical business.
Its an area they want to grow, said
Kevin Sterling, a senior vice president and
transportation industry analyst at BB&T
Capital Markets. If you look at air freight,
it is one of the larger sectors.
Michael Eckstut, a principal at the Hack-
ett Group consultancy, said because more
pharmaceuticals are biological products,
temperature control has become much
more important.
Like other businesses, there is a drive to
reduce costs, but he said this is complicated
in the drug industry because of the high cost
of products and the need for specialized
handling to ensure safety and patient health.
It may be cheaper to move a product on
next-flight or next-day services that result
in better handling, Eckstut said. In addi-
tion to products that have to be kept within
strict temperature parameters, there may
be liquids prone to spillage or radioactive
medicines.
Take a seemingly simple decision like
how to distribute product samples to sales-
people. The logistics department may want
to send that product using conventional
overnight services, but if delivery cant be
guaranteed within a narrow time window,
it may be worth paying more for special
handling because the salespersons time
is better spent with customers rather than
waiting at home or in an office for hours to
sign a delivery receipt for a drug.
John Menna, director of UPS healthcare
strategies, said his company handles every-
thing from raw materials to manufacturers
to delivery of final products to wholesalers,
drug stores, hospitals, clinics or consumers
homes.
UPS has also developed a network of
more than 30 dedicated healthcare distri-
bution centers around the world, including
over 20 in North America.
While built specifically for healthcare
products, the facilities have multiple
companies as tenants, which Menna said
reduces costs and makes it easier for com-
panies to adjust up or down the amount of
space they need as markets change.
UPS moves life science products across
all transport modes, including ocean, road,
and air, and it also offers next-flight or
next-day deliveries through its Express
Critical business unit.
This service is useful in several different
ways, he explained. For example, he said a
company may have an urgent need to move
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TRANSPORT / AIR
the surcharge as a tool for competition.
Members of the so-called AMS cartel
were Kuehne + Nagel (fined $48.9 million),
Panalpina (fined $31.5 million), Schenker
and Deustche Bahn (fined $30.7 million,
with a 25 percent leniency reduction), UPS
(fined $4.8 million), UTi Worldwide (fined
$4.1 million), Agility (fined $3.1 million,
with a 30 percent leniency reduction), DSV
Air & Sea (fined $504,000), DHL and Exel.
The AMS cartel, which is related to ship-
ments from Europe to the United States,
was easily the most heavily penalized,
with roughly 55 percent of the total fines
coming from this group.
The third cartel related to the valuation of
Chinas currency. The EU said following
the appreciation of the Chinese currency
(RMB) against the U.S. dollar in 2005,
international freight forwarders agreed
on a shift of contracts from U.S. dollars
to RMB or, if this was not possible, on the
introduction of a CAF surcharge and on its
level. The collusion was driven by the fact
that in general, the local services at Chinese
airports were paid for by forwarders in
RMB, while the customers of forwarders
were billed in U.S. dollars, which conse-
quently might have led to losses.
Members of this currency adjustment
factor cartel were the China offices of
Schenker (fined $7.3 million, including
fines for BAX Global, with a 20 percent
leniency reduction), UPS (fined $5.2
million), Panalpina (fined $4.3 million),
CEVA (fined $1.2 million, with a 50 per-
cent leniency reduction), Nippon Express
(fined $1.1 million), Kintetsu World Ex-
press (fined $830,000), Kuehne + Nagel
(fined $600,000), Yusen Air & Sea (fined
$425,000, with a 5-percent leniency reduc-
tion), DHL Global Forwarding and DHL
Logistics.
The final cartel related to peak season
surcharges (PSS) in which the freight
forwarders agreed in so called break-
fast meetings held in Hong Kong on the
introduction and timing of a PSS, to be
charged during the peak season transport
period in the run up to Christmas (lasting
generally from September to December)
and on occasions also discussed the level
of the surcharge.
Members of this cartel were Panalpina
(fined $26.1 million), Kuehne + Nagel
(fined $14.9 million), Hellman Worldwide
Logistics (fined $5.7 million), Expeditors
International (fined $5.5 million), Toll
Global Forwarding (fined $3.9 million),
Agility (fined $3.5 million, with a 25 per-
cent leniency reduction), Schenker (fined
$3.5 million, with a 50 percent leniency
reduction), DHL Global Forwarding and
DHL Supply Chain.
I
n September 2010, half a dozen major
global air freight forwarders agreed to
a collective $50 million in settlements
with the U.S. Department of Justice over
price-fixing allegations between 2002
and 2007.
The forwarders involved could be ex-
cused for believing those penalties would
set some sort of benchmark for similar
ongoing investigations in the European
Union, Australia, New Zealand, Canada,
Brazil, and Switzerland.
But in late March, the European Com-
mission hammered an even broader set of
forwarders for the same infractions, levying
roughly $225 million in price-fixing fines.
The magnitude of the fines, which af-
fect 14 forwarders, was likely more severe
because most of the alleged price-fixing
activity involved air freight lanes to and
from Europe.
The European Union antitrust divisions
case for the penalties including more
than $140 million against Kuehne + Nagel,
Panalpina, and UPS alone amounted to
four distinct cartels aimed at fixing prices
and other trading conditions for interna-
tional air freight forwarding services, in
breach of EU antitrust rules.
The investigation began in 2007 with pre-
dawn raids at some of the worlds biggest
forwarders based on tips from Deutsche
Post subsidiaries DHL Global Forwarding
and Exel, which escaped fines because they
reported the collusive activity.
The EU alleges the forwarders engaged in
backroom deals, using codes and dedicated
Yahoo email accounts to cover up price-
fixing schemes on air freight surcharges.
The first cartel was connected to sur-
charges assessed based on an electronic
declaration system for exports from the
United Kingdom, and introduced in 2003.
According to the EU, the forwarders in-
volved in this cartel agreed to establish
a surcharge on the reporting service and
to fix the amount according to the size of
the customer.
Companies should be
aware that crossing the line
and colluding on prices
comes at a high price.
Joaqun Almunia
antitrust commissioner,
European Union
Members of the cartel, dubbed the New
Export System cartel, were Kuehne + Na-
gel (fined $7 million), BAX Global (now
owned by Schenker, fined $4.9 million),
UPS Supply Chain Solutions (fined $3 mil-
lion), CEVA Logistics (fined $2.8 million),
DHL, and Exel. CEVA had 35 percent of its
penalty reduced under the EUs leniency
notice, while DHL and Exel paid no fines.
The NES cartel was related to shipments
from the United Kingdom to outside the
European Economic Area.
The second cartel was associated with a
surcharge based on the start of U.S. Cus-
toms advanced manifest system (AMS)
requirements in 2003-2004. The EU said
members of this cartel agreed to introduce
a surcharge for the AMS service, i.e. for
processing the electronic transmission
of such information to the U.S. Customs
authorities. They also agreed not to use
Forwarders heavily fined
in EU price-fixing
investigation.
F d h iiilll fi d
Gardening club
BY ERIC JOHNSON
TRANSPORT / AIR
The last two cartels related to shipments
from China to the European Economic
Area, with the peak season surcharge cartel
specifically related to shipments from South
China and Hong Kong.
The EU said the fines were set on the
basis of the EU 2006 Guidelines. Deutsche
Post (including its subsidiaries DHL and
Exel) received full immunity from fines,
while Deutsche Bahn (including Schen-
ker and BAX), CEVA, Agility and Yusen
received reductions of fines ranging from
5 to 50 percent, which reflected the tim-
ing of their cooperation and the extent to
which the evidence they provided helped
the commission prove the respective cartels.
In most cases, the freight forwarders
took specific measures to conceal the cartel
behavior, the EU said. In the new export
system cartel, the participants organized
their contacts in a so-called Gardening
Club and code names based on names of
vegetables such as asparagus and baby
courgettes were used when talking about
fixing prices. In another, (the currency
adjustment factor cartel) a specific Yahoo
email account was set up to facilitate ex-
changes between the cartel participants.
Some of the bigger names hit with mas-
sive EU penalties said they will appeal the
decision, arguing that the commissions
investigation led to incorrect conclusions.
They also said they had cooperated with the
investigation and should have had reduced
penalties.
We will carefully consider the decision
of the EU Commission and its rationale,
said Karl Gernandt, chairman of Kuehne
+ Nagel International AG, in a statement.
However, already now we are of the opin-
ion that the commission has not correctly
investigated the facts and the participa-
tion of Kuehne + Nagel and has drawn
significantly incorrect factual and legal
conclusions.
In addition, Kuehne + Nagels compre-
hensive cooperation throughout the inves-
tigation was not adequately acknowledged.
That is why we take into consideration
to appeal against the decision before the
European courts.
Panalpina likewise said it is considering
an appeal.
Panalpina will analyze the commis-
sions decision given its right to appeal the
decision to the European General Court,
the company said. The group has so far
made no provision for the penalty of 46.5
million euros ($61.9 million) as it was not
in a position to predict the outcome of
this proceeding and to assess its financial
exposure. It is Panalpinas position, which
is supported by independent economic
evidence, that the infringements likely
did not affect prices paid by Panalpinas
customers.
Panalpina settled with the U.S. Justice
Department for $12 million.
Panalpina also completed settlement
negotiations with the New Zealand Com-
merce Commission and the agreed penalty
was approved by the competent court, the
company said. Identical antitrust proceed-
ings in Canada and Australia were dropped.
Two antitrust proceedings are still ongoing
in Switzerland and Brazil.
The Swiss company said it has in the last
few years successfully built a state-of-the-
art compliance structure aimed at ensuring
rigorous adherence to competition and other
pertinent laws throughout the world.
EU Antitrust Commissioner Joaqun
Almunia said the fines were meant to send
a message to companies that conspire to
fix prices as Europes economy struggles
to gain a foothold.
These cartels affected individuals and
companies shipping goods on important
trade lanes, Almunia said. Many Euro-
pean exporters and consumers of imported
goods may have been harmed as a result.
Companies should be aware that crossing
the line and colluding on prices comes at
a high price.
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For more information, contact Greg Johnson,
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Houston, we have a new service
F
or all the hype surrounding the forthcoming Panama
Canal expansion and its effect on U.S. Gulf and East
coast ports, the lack of current direct connections from
Asia to the Port of Houston is quite stark.
As of mid-March, only one service di-
rectly connected Houston with the Far East:
CMA CGMs PEX3 all-water transpacific
loop. But in late March, COSCO Container
Lines and Hanjin Shipping said they were
starting a new service that would provide a
second direct link from China to Houston.
The lines GME service will have a
rotation of Busan, Shanghai (Waigaoqiao),
Ningbo, Xiamen, Yantian, Colon, Houston,
and Busan. It will be operated with eight ves-
sels in the 4,000-TEU range, with COSCO
providing six and Hanjin two. Those ships
are slightly smaller than those found on
CMA CGMs service.
But the service is unique in that it isnt
merely calling Houston on the way to other
U.S. Gulf or East coast ports. Houston is
the only U.S. call on the service. The PEX3,
for example, calls at Mobile, Miami, Savan-
nah, and Charleston in addition to Houston,
though Houston is the first U.S. call.
Houston landing a second direct call
from Asia could be significant. For all of
Houstons qualities a huge population,
shorter access to the U.S. Midwest, port
capacity a basic geographic reality doesnt
work in its favor.
Calling at Houston requires a noticeable
diversion from the trunk line route from
Asia to the U.S. South Atlantic and North-
east coasts via Panama. The port is several
clicks west of the canal, so any service from
Asia that calls direct at Houston sacrifices
faster transit times to U.S. East Coast ports.
For instance, CMA CGMs PEX3 calls
at Miami after Houston the transit time
from Busan (the last port of call out of
Asia) to Miami is 27 days. But on Maersk
Lines TP7 service, transit time from Busan
to Miami is 22 days. The five days largely
come because Miami is the first U.S. port of
call on the service, with the TP7 requiring
no northwestern deviation from Panama.
COSCO and Hanjins new service, due
to start April 28, avoids that issue by con-
Then there are the rail connections Hous-
ton provides. Both the Union Pacific and
BNSF railroads service the port intermod-
ally, potentially connecting huge swathes
of the U.S. Midwest to Houston instead of
via the U.S. West Coast, especially if ocean
rates are more favorable to shippers than
rail rates. Though infrastructure concerns
remain if cargo volume increases signifi-
cantly, Houston is well-connected.
There will be no more railroads built in
America if you can imagine how prohibitive
the cost would be, but Houston is blessed
with this very strategic network rail a
fabulous grid that literally connects Hous-
ton between the Rocky Mountains and the
Ohio Valley, Jeff Moseley, president and
chief executive of the Greater Houston
Partnership, told the New York Times.
Houston is already the second biggest
port in the United States by tonnage, but it
has lagged behind other ports when it comes
to container volume. The vast majority
(around two-thirds) of container services
presently calling at Houston link the port to
Mexico, Central America, the Caribbean,
and South America, which makes sense.
The Caribbean connections aid Houston
in that larger vessels transiting the expanded
Panama Canal might inevitably hub in ports
like Kingston. So the widened canal could
have indirect benefits even if the number
of direct services doesnt exponentially
increase.
And South America is one of the only
markets to experience consistent container
volume growth in the turbulent last couple
of years. Brazil, for instance, handled more
container volume last year than India,
marking its promise as a growth star for
box trades.
But for Houston to maximize its potential
more services to and from Asia are needed.
And for that to happen, the region will have
to lure shippers to want to use the port in
place of their current container gateways,
inducing lines to bring more direct Asia-
Houston links.
Hanjin said its new direct service with
COSCO will fulfill customers needs in
the trade.
The question then: is the new service
sufficient to meet those needs, or is it the
leading edge of a trend as a canal widens
to greater possibilities?
Ocean Transport l By Eric Johnson
centrating on U.S. cargo destined only for
Houston. Or, from the reverse perspective,
gives a conduit for U.S. exports to Asia
through Houston alone.
Going back to the PEX3, it takes exports
via Houston 47 days to return to Xiamen, the
first port in Asia on that loop. COSCO and
Hanjin didnt release details on westbound
transit times for the new GME service,
but it seems hard to imagine it would be
anything close to 47 days, given the loop
goes Houston to Busan direct.
The new call is likely no accident. The
Port of Houston Authority in late 2010
hired Ben Line Agency Ltd. in Singapore
to promote the port in 15 Asian countries.
Port officials clearly expect to glean some
benefits from the expanded canal, though
they are realistic about the immediate
impacts.
I think that we will see an increase, but
we are very, very conservative in what we
forecast, about a 15 percent increase of the
traffic we get on the trade lane from Asia to
Houston, Ricky Kunz, the port authoritys
vice president for origination told the New
York Times in February. What we do know
is that this third set of locks thats being built
is going to create a redistribution of cargo.
Its not going to make the cargo grow.
Of all the U.S. port cities that a widened
Panama Canal would provide better access
to, Houston is the largest outside of New
York. The greater metropolitan area around
Houston is the nations fifth biggest, while
the Dallas-Fort Worth area is the fourth
biggest. Including the San Antonio area,
that puts nearly 15 million people in urban
agglomerations within reach of the port,
compared to around 12 million in the region
between Philadelphia and Washington and
8 million in Greater Miami.
Theres also the fact that since 2005,
Walmart has operated a massive regional
distribution center in the Houston area.
Home Depot operates several facilities in
the area.
TRANSPORT / OCEAN
company in 1904. It was a key moment in
the course of the cargo shipping industry, as
containerization was just beginning to take
hold, thanks to the innovative entrepreneur
Malcom McLean.
Mller was initially sceptical of the idea
of containerization, but soon fervently
pushed the concept within his company.
Maersks first containerships emerged from
its Denmark shipyard in the mid-1970s, a
period of intense innovation in the shipping
business. Though Maersk had ground to
make up on McLeans Sea-Land, Mller
drove hard to match and then surpass the
American line.
Decades later, Maersks success is proof
of his vision. Aided by the 1999 acquisi-
tion of Sea-Lands international container
business (the two companies started an
operating alliance in 1995), Maersk is now
the biggest liner carrier in the world by
fleet capacity, annual volume, and revenue.
Other key acquisitions included Safmarine
(also in 1999) and P&O Nedlloyd in 2005.
Maersk has also regularly set bench-
marks for new ship sizes though the
most recent ships, the E-class 15,600-TEU
and the to-be-delivered triple-E 18,000-
TEU ships were ordered after Moller
W
hen people not keenly acquaint-
ed with the container shipping
business find out that its largest
company is based in Denmark, they are
usually surprised.
But the fact that the epicenter of the global
liner business is Copenhagen is a credit to
Maersk Mc-Kinney Mller, the long-time
head of the A.P. Mller - Maersk Group
and son of the companys founder.
Mller died in mid-April at age 98, after
a life which saw him lead his namesake
company as chief executive or chairman for
nearly 40 years. But that hardly measures
the influence he exerted over the shipping
conglomerate that is as close to a household
name as exists in the shipping world.
Mller was intimately involved in his
fathers company from 1940, when he was
named partner in the growing liner busi-
ness, until his death. In that seven-decade
span, Maersk grew to become the largest
liner shipping company in the world, aided
by the development of dynamic new servic-
es, key acquisitions, and ever-larger ships.
Behind it all was Mller, a man revered
within the company and throughout Den-
mark for his dedication and vision.
Will and energy marked Maersk Mc-
Kinney Mllers endeavors, said Group
Chief Executive Officer Nils Anderson,
currently on medical leave as he recovers
from heart valve surgery.
Mller took the reins of the A.P. Mller
Group in 1965 after the death of his father,
Arnold Peter Mller, who founded the
Maersk loses patriarch
Maersk Mc-Kinney Mller turned fathers company
into the worlds biggest container line.
BY ERIC JOHNSON
I met him in the very
early days, when
containerization
was just coming on
the scene. He was
a very impressive
leader at that time
for Maersk. As the
years went by, he
became a legend.
~ R. Kenneth Johns,
chairman, R.K. Johns
& Associates
You need both to make it work.
You need both to make a port work, too. The worlds largest carriers provide many
weekly services to Vancouver, taking advantage of a uniquely balanced trade.
In addition you have the choice of CN or CP railways, four container terminals,
extensive warehousing, transload facilities and more. Weve also increased our
capacity to 3.7 million TEUs. And were collaborating with government and industry
partners to invest nearly $9 billion in coming years to further develop the Gateway.
Port Metro Vancouver is the third largest container port on the West Coast.
Wed like to be #1 on your speed dial.
Choice.
Capacity.
TRANSPORT / OCEAN
stepped down as chairman, they had all
the hallmarks of his expansive, ambitious
leadership.
The A.P. Mller group was unique in
designing and building a continuous stream
of ever-larger new ships of all types at its
own shipyard in Denmark, Francis Phil-
lips, chief analyst for American Shipper
liner affiliate ComPair Data wrote in an
August 2011 commentary on the lines
operational strategy. From very early on
it was able to cascade its older container-
ships into new trades where Maersk
Line proved a ferocious newcomer.
Phillips also hailed Mllers re-
markable farsightedness and breath-
taking scale of vision, noting his
determination to build a company
that was unassailable following his
World War II experiences. Mller was
exiled to the United States during the
war after Germany invaded Denmark
and, according to the A.P. Moller au-
tobiography, the experience left him
determined never to see Denmark
breached in such a way again.
That only constituted a part of his
extensive ties to the United States.
His mother, Chastine Estelle Roberta
McKinney, was American. He was
also indelibly impacted by the rise
of Sea-Land and containerization,
helping to launch dynamic new fixed-
day weekly services from Asia to
the United States. The purchase of
Sea-Land merely completed the cycle.
Mller also fostered a management style
at the company that saw young graduates
learn things the Maersk way and progress
up the ranks, populating the industry with
thousands of well-versed workers.
His importance for liner trade is sig-
nificant educating people in A.P. Mller
- Maersk to be amongst the best in their
industry, as well as instilling a very strong
work ethic throughout the company has
always been a hallmark, said Lars Jensen,
founder of the maritime analyst SeaIntel
and former Maersk executive.
When meeting people in the shipping
community throughout the world I am
constantly amazed at just how many people
have at one time or another worked in A.P.
Mller - Maersk, and as such his company
has been able to provide the global shipping
community with literally tens of thousands
of skilled people, Jensen added.
Phillips pointed out that the dedication
to Denmark and the initiative to produce
a quality workforce went hand in hand.
Mllers greatest success probably
lay in motivating a generation of young
Danish men with a hard-working brand of
patriotic capitalism, he wrote. In general
he preferred recruiting them into his busi-
ness direct from school rather than from
university. Initiative was rewarded and
he challenged them to make decisions.
Underlying everything was the ideology
that what was good for A.P. Mller was
also good for Denmark.
In another story, on the 2006 unveiling of
the Emma Maersk currently the worlds
largest containership Phillips wrote
that admiration for Mller trickled down
through every crevice at Maersk.
Meeting him in person was the great-
est moment of my life, the ships cook
told Phillips.
Jensen said his prominence in Denmarks
business community is nearly unmatched.
He was a very big figure in Denmark,
right up there likely in the top five of
business icons in the past 150 years in
Denmark, with a good chance to take the
No. 1 spot, he said.
He left similar impressions on others in
the industry.
I met him in the very early days, when
containerization was just coming on the
scene, said former Sea-Land president R.
Kenneth Johns, who heads New York-based
R.K. Johns & Associates. He was a very
impressive leader at that time for Maersk.
As the years went by, he became a legend.
Hes done so much for this industry and
made Maersk the world leader. I have a
healthy respect and great admiration for
him.
Chris Koch, president and chief executive
officer for the World Shipping Council,
said Mller will go down as a titan of the
industry.
For half a century, Mr. Mller led the
growth of the worlds largest shipping
line with his focus, his leadership and his
timing, said Koch, who is also a veteran
of Sea-Land. He always showed a keen
interest in world events, a special affinity
for the United States and an intense loyalty
to Denmark. Like other industrial titans,
such as Ford, Carnegie and Gates, he will
be long remembered not only for the very
successful business enterprise he built,
but his leadership and contributions to his
country and his community.
Mller was more than just a shipping
magnate. The A.P. Mller - Maersk
Group is a true conglomerate, presid-
ing over a wide-ranging portfolio of
businesses that range from oil and
gas interests to Danish supermarkets.
Within the transportation and logistics
industry, the company also manages
terminal operations and forwarding
units. Maersk is also the biggest indi-
vidual shareholder of Danske Bank,
Denmarks largest bank.
The diversity of businesses and in-
terests under the Maersk umbrella has
kept the company somewhat insulated
from the wild fluctuations in revenue
and profits that have characterized
its core container shipping business
in recent years. Its an advantage that
none of its competitors enjoy.
Behind the scenes, Mller was
said to still be involved in high-level
decision-making despite retiring as
chairman in 2003. His last public ap-
pearance was at Maersks annual sharehold-
ers meeting, three days before his death.
Mller remained chairman of the board
of the A.P. Mller and Chastine Mc-Kinney
Mller Foundation, the A.P. Mller Relief
Foundation, and the Maersk Employee
Foundation, three family foundations that
collectively control more than half of the
groups shares.
The A.P. Moller - Maersk Group has
lost a businessman of international format
and the man who, if any, can take credit for
the group being among the worlds leading
and Denmarks undisputed largest business
with activities in a number of areas such as
shipping, oil and retail, said current Group
Chairman Michael Pram Rasmussen.
Mller had three daughters, all born in
the 1940s.
We are grateful that our father lived
a long and eventful life, Ane Maersk
Mc-Kinney Uggla, the youngest, said in
a statement. In his never failing wish to
do good, together with many and great
initiatives, he has left a significant mark
on our time. My sisters and I have lost a
father who never failed neither his family
nor his business.
TRANSPORT / OCEAN
itself, Davidson said.
Then there is Terminal Investment Ltd.
(TIL), the terminal operator often associ-
ated with Mediterranean Shipping Co.
Davidson said a lack of transparency on
MSCs relationship with TIL clouds the
industrys understanding of the affiliation
between the two entities.
Though the link has been described in
press releases related to specific terminals
as such: TIL has a unique relationship
with Mediterranean Shipping Co., with
TILs investments and projects conceived
with the aim of handling MSCs volumes.
Highstar Capital, the infrastructure
investment company that controls Ports
America (the biggest terminal operator
in the United States), describes TIL as an
affiliate of MSC on its Website. TIL is a
partner in Ports Americas Outer Harbor
project in Oakland, Calif.
MSC declined comment when asked
about its involvement with TIL.
As for CMA CGM and its subsidiary
Terminal Link, which operates 24 terminals
worldwide, the French line told American
Shipper that all its facilities are common
user and not dedicated to the affiliated ship-
ping line. CMA CGM, which is privately
held, declined to elaborate when asked if
it considers the profits and revenues of its
terminals business as separate from its
liner business.
Some lines have, in recent years, changed
the way they report their terminal finan-
cials, with the aim of combining those
revenues with liner revenues. APL, for
instance, used to report its terminals as a
separate business, but now they are reported
in a combined fashion, APL spokesman
Mike Zampa told American Shipper.
OOCL, MOL, Hanjin Shipping, and
Hyundai Merchant Marine all told Ameri-
can Shipper that they also do not report the
financial performance of their terminals
separately from their liner divisions.
On the one hand, internally we may
look at the financial performance of the
terminals separately and we do attempt
to gain profit from our terminals, said
an MOL spokesman. On the other hand,
we dont report the financial performance
externally.
OOCL told American Shipper that it
considers its terminals as a cost center
for its liner business, not a separate profit
center for the group. Since selling a group of
common user North American terminals in
2006 ones OOCL did seek to glean profit
from the line now operates terminals
only where it seeks to gain advantages in
efficiency and priority in other words,
where it can control its own destiny.
Some lines, including MOL, lump
T
he Chilean liner carrier CSAV has
had a difficult few years financially.
Between 2006 and 2010, the line
lost more than any other of the publicly
traded top 20 global container carriers
nearly $700 million in all. In 2011, it lost
another $959 million.
So it made some sense when CSAV
decided last year to spin off its terminals,
tugs, and logistics business Sudamericana
Agencias Areas y Martimas (SAAM) to
raise cash for its beleaguered liner business.
The spinoff, completed in February,
was determined because the risks and
volatility are different for the liner and
terminal operating businesses, Oscar Has-
bn, CSAVs chief executive officer, told
American Shipper in a February interview.
He also said it will make it easier for the
terminals company to access capital mar-
kets for expansion.
For CSAV to separate its liner and ter-
minals businesses is not unique. OOCL,
for example, divested itself of a series of
North American terminals in 2006. But
it does raise some questions about how
CSAV and its liner carrier brethren view
their terminals.
Are they cost or profit centers? Are they
independent businesses within a group
portfolio, or are they tools for liner carriers
to better control their destiny? The answers
differ depending on what the various car-
riers want to achieve.
If they want exclusivity and flexibility,
then its better that the terminals priority
is to serve the interests of the parent line,
said Neil Davidson, senior advisor for ports
at the London-based consultancy Drewry.
However, if the portfolio is suitable for
use by various shipping lines, then theres
a good chance that it can operate profitably
and make a contribution to the owning
carriers bottom line, or offset liner losses.
The cost center approach is aimed at
achieving greater efficiency in the carriers
business by integrating the terminal with
the wider shipping service network of the
parent carrier, he added. The profit center
approach seeks to achieve greater efficiency
at each terminal by implementing com-
mon systems and best practices across the
terminal network to improve efficiency.
According to Drewry, 13 of the top
22 terminal operators in the world are in
some way affiliated with container lines.
All but one of those can be found outside
the powerful cadre of the top four termi-
nal operating companies globally PSA
International, Hutchison Port Holdings,
DP World, and APM Terminals which
collectively control about two-thirds of all
global port throughput.
But the remainder of those liner-affiliated
terminal operators have a vital role to play
within the shipping groups to which they
are attached.
When we talk about carriers invest-
ments in terminals, there is a sliding scale
with, at one end, investment in terminals
solely to secure access to capacity and to
serve the parent line (as a cost center),
through to those carriers who view the
terminal business as more of a separate
business unit in its own right, with profit
as the primary motive, Davidson said.
APM Terminals has moved to the far
end of this scale, in that APMT is not even
owned by Maersk Line, he said. It is
owned by the parent group and so Maersk
Line and APMT are sister companies rather
than parent-child.
Davidson said other carriers whose ter-
minal businesses are nearer the APMT end
of the spectrum are CMA CGM and its Ter-
minal Link unit, NYK Line and its terminal
business, and COSCO Container Lines and
its sister company COSCO Pacific.
COSCO and COSCO Pacific get
complicated because COSCO Pacific is a
standalone terminal business, but COSCO
Container Lines also has terminal interests
In or out?
Top global container lines have varying
strategies for terminal activity.
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terminal revenue into the greater liner
shipping division, but operate terminals
on a neutral basis, meaning the facilities
arent dedicated purely for services run by
the affiliated line or its alliance and vessel-
sharing partners.
Hanjin views things similarly. The South
Korean lines terminals, including U.S.
operations in Long Beach and Oakland,
Calif.; Seattle; and Jacksonville, Fla. are
multi-user facilities.
As for our external business perfor-
mance report, we dont separate the finan-
cial performance of our terminals from that
of liner shipping, a Hanjin spokesman
said. We track them for our internal use.
We do try to gain profit from terminals as
a new source of income other than our liner
business, however, they also function as a
cost center for our liner business.
Hyundai also tallies its liner and termi-
nals business into a consolidated number
even though the line told American Shipper
it operates Hyundai Terminals as a separate
business unit.
To ensure access to terminal capac-
ity, competitive rates and service, they
are an integral component for operations
in selective markets, a spokesman said.
The terminals operate as a cost center
for Hyundai but they do compete for third
party business.
Davidson said that,
outside of APMT and
COSCO Pacific, NYK
is the only carrier that
breaks out its terminal
revenue separate from
its liner revenue.
Even those lines
with terminal portfo-
lios that are more at the cost center end of
the scale, there are often joint ventures
with stevedores and terminal operators,
who are clearly profit motivated, he added.
Those lines that view terminals as part
of their larger liner operations see advan-
tages in overall network efficiency and
flexibility, especially the ones running
dedicated terminals.
These fall clearly into the cost center in
my view, and they dont directly contribute
to liner profitability, Davidson said. How-
ever, their strength is in the flexibility they
offer to the carrier. For example, having
your own terminal means that if vessels
are running late, or early for that matter, it
is easier to accommodate them, compared
with a multi-user terminal where berth
windows are held by numerous carriers.
This flexibility can have indirect profit-
ability benefits for the carrier.
APMT, COSCO Pacific, and Evergreen
(and TIL, if considered aligned with MSC)
are the only liner-affiliated operators
among the top 10 global operators. The
rest of the top 10 is composed of companies
that are outright terminal operators the
powerful troika of PSA, Hutchison Port
Holdings, and DP World, and smaller, but
not insignificant European operators.
Meanwhile, the remainder of the terminal
operators affiliated with container lines lies
outside that powerful cadre of operators.
The decision of whether a terminal is to
be used as a profit or cost center has to be
viewed through the reality that terminal
operators have much better margins than
liner carriers. This is simple to compare
when looking at APMTs results relative
to those of Maersk Line, and COSCO
Pacifics results compared to COSCO
Container Lines.
Maersk Line lost $483 million in 2011,
yet APMT secured operating profits of
$767 million in the same year. Going back
to 2010 (a better year since both divisions
were profitable), APMT had an operat-
ing profit margin of 21.4 percent, while
the liner division had an operating profit
margin of 11.7 percent. And 2010 was a
record-breaking year for Maersk, in which
it had the highest one-year profitability of
any container line ever.
The most comparable relationship to
Maersk and APMT is COSCO and COSCO
Pacific. In 2011, COSCO Pacific had an op-
erating profit of $179.4 million on revenue
of $599.2 million. Thats a 29.9 percent
profit margin from operations. Juxtapose
that with sister company COSCO Container
Lines, which suffered a $1 billion loss in
2011 on $6.4 billion in revenue.
The operator has stakes in more than 20
terminals worldwide (though most are in
China), and many of its stakes are minority
ones, meaning it isnt the primary operator.
Its difficult to determine how profitable
the rest of the carrier-affiliated terminal
operators are because they generally group
the financial performance of their terminals
together with that of their pure liner ship-
ping businesses.
The tricky thing is migrating from a
cost center-based terminals portfolio to a
profit-based one, because clearly the par-
ent shipping line is used to paying certain
prices, and a profit-seeking approach to
the terminals often results in the need for
higher prices, Davidson said. This is one
of the main reasons why APMTs EBITDA
(earnings before interest, taxes, deprecia-
tion, and amortization) margin is lower than
that of the other main stevedores there
is a Maersk Line legacy.
In this case, Davidson is referring to
APMTs profit margin relative to inde-
pendent operators, not the container line.
In this comparison, APMT doesnt stack
up quite as well. PSA International, the
largest operator in the world by equity-
adjusted throughput, had profit margin of
39.4 percent in 2011, a staggering return
on revenue considering global container
growth that year was muted.
APMTs profit margin in 2011 was 16.3
percent. So despite APMT having 50 per-
cent more revenue than PSA, its profits were
roughly half that of the Singapore-based
independent operator.
DP World had an operating profit margin
of 37.5 percent in 2011 with $1.1 billion in
profits, meaning APMT had barely two-
thirds the profit of Dubai-based DP World,
despite DP World having two-thirds the
revenue of APMT.
Of course, profit margin doesnt tell the
whole story. Some in the industry point
to a companys return on invested capital
(ROIC) as being a better indicator than
pure profit margin, given that labor costs
can vary widely depending on an operators
geographic footprint.
APMTs return on invested capital was
13.1 percent in 2011, after being 16 percent
in 2010, and 10 percent in 2009. PSA doesnt
specify ROIC in its financial statements,
so its difficult to directly compare the two
companies by that measure.
But APMTs relatively lower profit
margin perhaps underlines the effect that
a shipping line can have on the profitability
of an independent, yet affiliate terminal
operator. Its hard to imagine that APMTs
average cost efficiency is half that of PSAs.
Its also hard to imagine that PSA is able
to secure tariffs at twice the average level
of APMT on the same costs.
So therein lays the dilemma for container
lines and their terminal operating subsid-
iaries or divisions. Theres no perfect way
to structure the relationship between lines
and affiliated terminal operators.
A pure profit-based approach can have
detrimental effects on liner efficiency, but
can help a group balance lean years on the
liner side, while a pure cost center-based
approach means the lines are ignoring
the high profit-margin nature of terminal
operations. And a hybrid approach means
neither set of advantages is pressed to its
full potential.
By spinning SAAM off, CSAV perhaps
decided that the best course was to cash in
and let the terminals business succeed on its
own merits as independent operators have,
even in down years for container shipping.
More than five years ago, OOCL decided
much the same for its portfolio of profit-
based terminals. Other lines have taken an
opposite tack, integrating their terminals
into their liner shipping businesses.
Davidson
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integrating it with a system to automati-
cally produce and submit Customs docu-
mentation is key. Slossberg said companies
should find a vendor with systems that are
modularly developed because it eases future
expansion.
Steve Boecking, vice president of Hill-
wood Properties, said there is a rapidly
growing interest in the (FTZ) program
across the country. Importers are looking for
every way to squeeze an extra dollar out of
the supply chain and FTZs are a good way to
do that. Hillwood Properties is a real estate
developer known for its FTZ development
and management work around the Alliance
Foreign-Trade Zone in Fort Worth, Texas.
Boecking pointed to CBPs merchandise
processing fee that is enforced every time
a company files a Customs entry, saying it
was the equivalent of a clerical fee, but an
FTZ allows for some filings like this to be
done on a weekly basis.
They just increased this by 65 percent.
Frequent importers can spend a couple
million dollars a year on merchandise
processing fees, but the FTZ is a tool that
helps reduce that fee to as low as roughly
$25,000 a year, he said.
One major reason for the existence of
FTZs is to bring manufacturing jobs to the
United States, so they have a production
requirement often satisfied by the final
assembly or packaging. The FTZ Board,
however, must approve the manufacturing
and processing activities in the zones.
Boecking said he had one customer that
saved so much money with an FTZ that the
company was able to hire between 1,000 and
2,500 Americans at $10 to $20 per hour and
still come out ahead of cheaper labor and
manufacturing outside of the United States.
Consider items like cell phones which
have packaging much larger than the item
itself. Importing parts individually takes
up less space than, allowing more shipped
per pallet. The importer can do the final
assembly in the United States, saving on
the cost of transporting and higher duties
on a finished product.
Were seeing a huge trend toward com-
panies getting into the program and a lot
of them are consolidating their warehouse
operations in North America and doing the
exports using an electronic export process
so they can fully automate, Connell said.
Integration Point sees companies now
automating beyond electronic filing by add-
ing document retention to store paperwork
used to enter any zone where they operate.
This saves money and time by removing the
need to print, mail, or deliver documents.
Now when someone starts up a new
FTZ, most companies can just purchase
FTZ software to manage the inventory in
T
he availability of easy-to-deploy
information technologies are driv-
ing more American shippers to take
advantage of the trade benefits associated
with foreign trade zones, despite upcom-
ing Customs and Border Protection rule
changes and increased requirements.
The FTZ program was authorized by
Congress in 1934 and provides customs
benefits to U.S.-based manufacturers and
companies engaged in international trade
to offset customs advantages created by
other countries.
Raw materials, components and mer-
chandise may enter these zones without
being subject to payment of customs duties.
Products may be stored or reworked before
being either rexported or entered into U.S.
commerce
FTZs handle more than 10 percent of
U.S. imports each year in terms of dollar
value, but they account for less than 1 per-
cent of the actual number of transactions.
That is a huge benefit for administering
customs, said Daniel Griswold, president
of the National Association of Foreign-Trade
Zones (NAFTZ).
The U.S. Foreign-Trade Zones Board, a
government-backed entity that comes under
the Commerce Departments International
Trade Administration, has issued a series of
revised regulations, its first major update
since 1991 and most of which went into ef-
fect at the end of April. Many of the new rules
come from technological advancements that
Customs wishes to adopt, Andrew McGil-
vray, executive secretary of the FTZ Board,
said. For example, new in-bond regulations
require electronic filing and many expect
FTZ regulations to follow later this year.
In the 20 years since prior regulations
were adopted, the pace of business and
corporate decision-making has accelerated
dramatically, and the FTZ program must
adapt, McGilvray said.
While some arguments behind these
changes were made prior to the Internets
prominence, they are heavily influenced
by this technology and the ability to file
documents electronically.
One such rule change is around the time
it takes to apply for and activate a trade
zone. Companies applying for FTZ produc-
tion capabilities now submit less company
information and use digital documents for
submission, comments and objections, al-
lowing the FTZ Board to reduce the process
from 12 months to 120 days.
McGilvray said the FTZ Board will
make information about new and existing
approved production activity available on
its Website to enhance transparency. The
information comes direct from electronic
notifications and applications.
We think the decreased amount of time
to activate a zone is going to significantly
increase the number of people interested in
the zone program, said Elizabeth Connell,
director of product management at Integra-
tion Point, which provides global trade
management and compliance solutions
such as those for FTZs. Weve seen year
after year a general increase in interest in
zones, both in activations and applications.
Connell pointed to electronic documenta-
tion as the big advantage for FTZs under the
new regulations because it saves money in
the short term and pushes companies toward
automating other associated processes.
Even before they were mandatory, elec-
tronic filings were already commonplace.
Weve seen figures that show more than
90 percent of filings are electronic and
were about to be moving to 100 percent,
Griswold said. Digitizing recordkeeping is
in everyones interest. Its easier for users to
file the information, easier for Customs to
process the information, and easier on the
environment. Its just a win-win all around.
Time And Money. Strong FTZ software
ensures reduced duty payments, manufac-
turing incentives, and removes the risk of
fines, which are important in this economic
atmosphere, said Wayne Slossberg, senior
vice president at QuestaWeb, a company
that provides global trade management
software and FTZ support. The more
integration and automation, the more the
system removes errors even as zones get
more complex, he said.
For companies already gathering data,
IT in FTZ
Foreign trade zone operators
obtain efficiencies through automation.
BY GEOFF WHITING
TRANSPORT / INLAND
the back of the house and the paperwork
that goes back and forth between Customs,
Boecking said. A lot of companies think
FTZs are a tedious accounting process, and
while they are very detailed its becoming
much easier with the software.
If you have that FTZ fully integrated
into your platform, you can do your denied
party screening, licensing concerns and
verifying controls, reporting to Census if
exporting out of the U.S.; all of these can
be automated in one place, said Melissa
Irmen, Integration Points senior vice presi-
dent of products and strategy. One push
of a button can do all of those steps all at
the same time. Thats particularly appeal-
ing to customers looking to increase their
export volumes.
This integration will have more benefits
as other countries and their agencies support
an electronic environment. The FTZ Board
has found other countries are increasingly
interested in sharing electronic data.
Automation and electronic documents
go hand-in-hand, and both will drive
each other going forward. The biggest
IT concern around the zones is for people
to realize that its not a major concern,
Slossberg said. At the end of the day, most
people that go in to foreign trade zones see
tremendous savings and get a tremendous
benefit for doing it. Its a curvy path but
once you get to the end of it, generally you
find that pot of gold.
FTZ Planning. The benefits of FTZs
depend on the ability to manage inventory
for accurate Customs reporting. Doing this
easily should be at the forefront of any plan
to apply for FTZ status.
Slossberg said finding an expert or FTZ
consultant and getting an ROI (return on
investment) study is the most important
first step. Consultants should work with
you through the entire process. They are
very good at helping to guide you through
the process, and sit between your vendors
and your company to facilitate the pro-
cesses, regulations, and changes for your
company, he said.
Boecking said there are two key ques-
tions to ask to determine if a FTZ is right
for you: How much money will the zone
save me? And, how will it affect my internal
operations and my supply chain?
FTZ benefits are often based on shipment
volume, so size matters. I like see an ROI
of at least 100 percent, if not closer to 200
percent, Boecking said. Thats when it
seems worth it. Savings to the bottom line
are often only 1 percent to 5 percent, and
for some companies thats not enough to
make it worth their while.
For internal operations, it depends on
how much manpower a company wants
to devote to the FTZ. Software and even
third-party managers can relieve much of
the burden. Not everyone should be using
a third party FTZ operator, but it is a new
concept, Boecking said.
Most prefer a Software-as-a-Service
(SaaS) model because it reduces the bur-
den on IT departments. Third parties can
develop and automatically update docu-
ments to ensure they meet new Customs
requirements and tariff schedules as soon
as they are enacted.
Slossberg recommended asking an IT
partner if you can purchase software or if
it is only hosted. If a company cant say
that I could do it either way, then thats a
red flag and something is not up-to-date
with their technology, he said.
Companies should also study individual
zones as services and requirements vary,
though all follow some general rules. In-
formation on all zones is available on the
FTZ Boards Website (http://ia.ita.doc.gov/
ftzpage/). Zones typically provide assis-
tance to help prospective clients determine
how to best use FTZs.
The biggest thing is that you have to
take ownership of the process and realize
that this is a change, Slossberg said. Com-
panies that pride themselves on change are
the ones that succeed in these environments
and in using technology. People that dont
embrace change, sooner or later everything
passes them.
As companies consolidate and central-
ize, it becomes easier for them to automate
their processes both internationally and
domestically.
With expanded automation, more
countries may begin requiring digital
documents. On a global scale we see
government agencies, both customs and
other agencies, wanting and requiring
electronic data more and more, Irmen said.
This provides incentive to do Customs fil-
ings on a global trade management platform
that collects all available data and distributes
it correctly for each country, she explained.
Were seeing lots of changes on the
horizon, not just regulation driven but also
from automation. Customs and others are
driving automation through their regular
systems and thats having an impact on
FTZs in general, she said.
NAFTZs Griswold sees technology
and FTZs supporting each other. While
technology has helped FTZs operate more
efficiently, the FTZs have offered U.S.
companies a way of taking advantage of
overall changes in technology, he said.
Overall changes in technology has made
the zones more relevant and appealing for
a larger slice of U.S. industry.
TRANSPORT / INLAND
ing the consolidation and collaboration
space compelling for those with new
offerings.
The U.S. market is easy to target because
the empty repositioning costs associated
with the U.S. are among the highest in the
world, Baker said. Moving empty con-
tainers from the U.S. interior to the West
Coast for approximately $500 or more per
container is not uncommon.
For SynchroNet, this means focusing
heavily on international markets with shift-
ing container demands and finding ways to
enhance the availability and profitability of
street-turns, or moving an empty container
locally to a demand location without first
returning it to a terminal.
Baker said a long-term goal is also to
bring the value of street-turns to interna-
tional beneficial cargo owners and give
them the ability to street-turn directly with
each other.
One way to do this is by addressing the
immediacy of need for the exporter or
trucker. Baker said SynchroNet is focus-
ing on aligning the urgency of the booking
with the return needs of the importer or
importers trucker.
While its software can give companies a
variety of destination points for containers,
Baker said the most important focus for us
is that the final destination is a location of
value to the supplier, and the users needs
are met.
The goal of IASs service is to address
the way companies work with U.S. truckers.
Behenna said the IAS Dispatch Manager
system has more than 2,000 trucking com-
panies connected and orders can be sent and
accepted electronically in a single interface.
Its services consider all the moves of a
firm with imports and exports, suggest-
ing possible matches based on factors like
schedule, distance, and flexibility with
either. Another module helps companies
that serve as either importer or exporter
and need added visibility to prevent haul-
ing empty containers on the leg that they
dont move goods.
The suggested moves are broadcast
across IASs network of trucking companies
that in turn provide rates for moving these
companies containers. IAS said trucking
companies have taken to the service because
it prevents them from running an empty
container back to a terminal, and they often
offer match-backs at cheaper rates.
In the United States, these companies
are facing a possible test of their services
later this year. The potential for a truck and
driver shortage would increase the value of
match-back services for unifying moves
and by providing truckers themselves with
more revenue opportunities.
C
ompanies have long known the key
to a successful match-back system,
or automated way to reducing
empty equipment miles, is through col-
laboration and data-sharing with as many
parties involved as possible, but this ability
is still relatively new to the transportation
industry.
Collaboration has been on the radar
for some time, but being able to tackle it
is still relatively new, said Phil Behenna,
senior vice president at International Asset
Systems (IAS).
IAS has been trying to integrate and coor-
dinate with many of these disparate systems
over the past 10 years, but Behenna said it
has been a significant challenge historically.
The problem is that in the absence of
total connectivity like we have today, ev-
eryone has already invested in their own
systems, he said. Companies are very
invested in them and wont throw them
away overnight.
Economic struggles, however, may push
partners to the point of abandoning prior
investments. The majority of ocean lines lost
money in 2011 and are now honing in on
cost control. The pinnacle will be container
repositioning because it is often a carriers
second highest variable cost behind fuel.
Behenna said shifts in who controls and
pays for domestic movement highlights the
need for collaboration.
Historically, about 70 percent of imports
to the United States were organized by ocean
carriers, but this has changed with a shift to
merchant-based haulage, he said. We think
there has been a 40 percent swing from
70 percent down to 30 percent and it is
questionable whether carriers will get back
in majority.
Now third-party logistics companies and
consignees are taking control of the moves
at the terminal or railroad. For the trucking
companies involved in domestic moves,
this means theyve shifted from receiving
work orders from 10 to 15 ocean carriers
to upwards of 200 consignees.
This fragmentation in work orders is
forcing trucking companies off systems and
back to the lowest common denominator for
receiving orders, typically emails and faxes.
Bob Baker, president and chief execu-
tive officer of SynchroNet, said companies
should approach match-back services with
the goal of connecting
all the parties of the
transaction, from large
and small shipping
lines to non-vessel-
operating common
carriers, truckers, and
logistics companies.
The key is to make
sure that consistent,
current, accurate data is received; that is
data which clearly defines the demand and
excess criteria for the carriers, is received
in a dynamic manner, he said.
Getting more truckers involved in these
systems is crucial since they face the largest
communication challenges, but also have
some of the most needed data. Removing
blind spots from assets by including truckers
in a system can enable better actions by all
parties, Baker said. We were generally just
looking at a few data sets that are included
in the bookings, he added. The thing
were adding in now is more demand and
time information.
The trucking company, particularly
when youre getting to the last mile, is the
holder of the Holy Grail. They exclusively
know who has the box, where it is, if it is
being unloaded or loaded, and how long
did that take, Behenna said.
The goal for SynchroNet and IAS is to
make as many partner connections as pos-
sible. Behenna said it takes time to build
momentum in connections and potential
customers should work with companies
that already have a vast network instead
of trying to build their own.
Baker echoed this sentiment saying that
adding more companies on a connected
system makes the process easier for every
step that follows. Its a matter of designing
something where everyone can benefit,
he said.
This fragmentation, however, is mak-
Making match-back work
New IT collaboration eases container
repositioning costs by reducing empty miles.
BY GEOFF WHITING
Baker
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is planning for the future NOW.
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be completed by 2015, may be much more
subtle than generally anticipated in large
measure because the factors that impact
all-water services have already happened,
analysts say.
It doesnt mean because you open the
canal that the volume will increase. Its the
logistics costs that become critical, John
Martin, an economist who specializes in
port development studies and strategic
planning, said March 20 at the American
Association of Port Authorities spring
conference in Washington.
More important than the Panama Canal
widening is the advent of monster contain-
T
he addition of a third set of locks in the Panama
Canal capable of handling container vessels more
than twice as large as those able to transit today is
widely characterized as game changer for the maritime in-
dustry, with many assuming more trade from Asia will flow
to the Eastern half of the United States by the all-water route
to the benefit of East and Gulf coast ports.
But the impact of the Panama Canal expansion, now due to
Why the expansion of this waterway
may not influence where
maritime cargo enters the U.S.
BY ERIC KULISCH
TRANSPORT / PORTS
erships that can carry 10,000 to 18,000
standard 20-foot containers, argues Sean
Strawbridge, managing director of trade
relations and operations for the Port of
Long Beach.
The fact that market shifts are largely
baked in place underscores that U.S. West
Coast ports and the Panama Canal are not
significant competitors for containerized
cargo, according to Scudder Smith, prin-
cipal consultant for infrastructure-engi-
neering giant Parsons Brinckherhoff and
an advisor to the Panama Canal Authority
about the ocean shipping market.
Smith, whose job includes conducting
market analyses for major port-related
financial transactions and freight plan-
ning studies for public and private sector
clients, says ocean carriers and Panama
are the main beneficiaries of the canal
expansion, not shippers. A wider, deeper
canal that can accept 12,500-TEU vessels
allows carriers to increase efficiency, while
Panamas strategically located ports and
logistics capabilities presents a convenient
hub for trunk lines to split off cargo to
feeder services for North-South trade in
the Americas. The new Panama Canal will
mostly alter how cargo is delivered to and
from the East Coast, but that doesnt mean
East Coast and Gulf ports should expect a
rise in import volumes, he says.
The thought that bigger ships will use
the same shipping patterns and a whole
lot more volume will be coming is a fairly
simplistic view, as all else is not equal. The
use of larger ships will not translate to the
same carrier schedules and calling patterns.
There will be fewer ports of call and ser-
vices may be further consolidated through
[vessel] sharing agreements, Smith said
on a Feb. 10 conference call hosted by
Baltimore-based securities brokerage and
investment banking firm Stifel Nicolaus.
The Panama Canal will not affect ag-
gregate volume or support a rising tide of
container business for all ports, he stressed.
There simply isnt enough new international
trade to spread around.
And a much ballyhooed shift in container
market share from West Coast to East
Coast ports due to the expanded canal is
not likely to materialize either because of
vessel substitution and the fact that many
of the trends that supported rapid growth
of the container industry have run their
course, Smith told Stifel clients.
There are few, if any, non-bulk products
today that are not shipped by containers, so
there is no room for growth from conversion
of loose cargo to containers. Outsourcing
by U.S. manufacturers has already been
maximized to the greatest extent possible,
sourcing shifts from Canada and Mexico to
use the canal.
The maximum capacity of vessels transit-
ing the Panama Canal is about 5,000 TEUs.
Larger ships frequently call Atlantic ports
with channels less than 45 feet, but they can-
not load to their full capacity or must time
their arrival and departure with the tides.
Discretionary cargo flows could also be
influenced by factors such as the size of the
Panama Canals toll increase, bunker fuel
prices (recently running at $700 a ton) and
rail rates from the West Coast.
The net cost reduction for shippers may
be closer to $200, Smith said. That translates
into a 0.2 percent savings per TEU based
on an approximate cargo value of $100,000
for a typical container hardly enough
to attract the attention of an importer, let
alone cause a company to reconfigure its
supply chain.
Meanwhile, the cost of shipping through
West Coast ports will also decrease as car-
riers deploy big ships on transpacific lanes.
In the end, shippers may only achieve a net
saving of $70 to $100 per TEU relative to
the West Coast, Smith said.
Furthermore, West Coast carriers, ports
and railroads have the advantage of being
able to differentiate pricing by market
segment and could lower prices for less
premium service with slower transit times
if they feel pressure from the all-water ser-
vices going through the Panama Canal, he
said. The West Coast services also have the
ability to price shipments on a door-to-door
basis. The Panama Canal simply collects
tolls and cannot differentiate between ori-
gins and destinations in its pricing.
Believe me, railroads are not going
to sit back and gouge prices as they did
between 2002 and 2007 and let intermodal
China last decade are mostly complete and
there are a growing number of companies
that have begun to relocate production in
Mexico or the United States for reasons
having to do with cost, quality control
and time-to-market. The fewer number of
plants opened overseas will help slow ocean
import growth, Smith said, reiterating a
favorite argument about why double-digit
container growth over 15 years was not
sustainable.
Between 1992 and 2007, U.S. imports of
shipping units grew at 2.5 times the growth
of Gross Domestic Product and analysts
assumed the rate of growth would continue
based on past volumes, not fundamental
economic factors. That all changed with
the recession in 2008. Smith and other
analysts predict slow growth and more
trade volatility for the immediate future,
with competition for throughput among
ports turning into a zero-sum game of
winners and losers.
Smith also debunked the notion that the
new Panama Canal option for mega-vessels
would induce demand from shippers seek-
ing a cheaper alternative than landing cargo
on the West Coast and transporting it by
rail to destinations across the country. The
largest vessels now entering the container
industry roughly generate $400 per TEU
in operating savings.
But, according to Smith, few of those
savings will be passed onto the shipper.
Carriers will have higher operating costs
when, as expected, the Panama Canal Au-
thority raises tolls to help pay for its expan-
sion project and will want to retain some
of that money to help cover the expense of
their new ships. A 5,000-TEU ship today,
for example, can pay $360,000 in tolls to
Analyze your total landed cost for any supply chain decision, not just the
transportation component.
When comparing all-water service to West Coast intermodal, dont forget
to factor in reverse intermodal and other costs on the East Coast besides
the ocean service.
Take advantage of an ocean service that meets the specific needs of your
product. Liner carriers today are able to offer many price and service
levels because of their extensive networks and technology investments.
Dont settle for a one-size-fits-all approach to transportation.
Investigate the possibilities of using offshore distribution centers in the
Caribbean or Central America to prepare cargo for final delivery. It may
be a less expensive alternative than running a domestic import distribu-
tion center (see article on p. 10-13).
Shipper takeaways
TRANSPORT / PORTS
go through the East and Gulf coast ports.
They have to be competitive, Martin said.
The argument that East Coast ports will
capture significant container volumes from
the West Coast is flawed, Smith said, be-
cause it doesnt take into account the type
of products involved.
All-water service via the canal can be one
to two weeks slower, and less expensive,
than transcontinental intermodal transport,
but there no longer are hard and fast rules
about transit time because transportation
providers offer so many types of service
levels. And shippers also have to factor in
the reverse intermodal or trucking service
to inland destinations.
High-value or perishable products that
must quickly get to market will continue
to rely on the faster transit times available
through the West Coast corridor. East Coast
ports currently handle 40 percent of all
cargo bound for the eastern United States
from Northeast Asia that is under $2.50 per
kilogram. That share drops to 10 percent
for electronics and other products worth
$20 per kilogram or more.
Besides, an 8 percent to 10 percent shift
in market share from the West to the East
Coast already occurred last decade inde-
pendent of the canal as shippers sought to
diversify ports of entry in response to labor
disruptions, rail capacity shortages, high
intermodal rates, better sourcing opportu-
nities in Southeast Asia and India via the
Suez Canal, and a desire to locate import
distribution centers closer to customers,
according to various experts.
South Atlantic and Gulf ports could still
benefit, however, from recent investments
by Chinese apparel and consumer goods
manufacturers in Guatemala, Honduras
and the Caribbean to produce merchandise
closer to U.S. consumption markets and
shorten their supply chains, said Martin,
president of Martin Associates.
Chinese computer maker Lenovo, for
similar reasons established a $40 million
plant in Mexico in 2009 to sell computers
to the North and South American markets.
The real competition for cargo, Smith
said, lies between West Coast ports like
Long Beach, Oakland and Seattle, and
more importantly, between U.S. ports and
ports on the western side of Canada (Prince
Rupert) and Mexico (Lazaro Cardenas).
The battleground for West and East coast
ports will mostly be limited to states in the
Ohio River Valley, now that the Norfolk
Southern and CSX railroads have devel-
oped much more efficient double-stack
intermodal connections to the region from
the ports of New York and New Jersey,
Baltimore and Norfolk, as well as the rest
of their eastern networks.
Thats the market, in terms of economics
and transit times, where transcontinental
moves and reverse intermodal off the East
Coast are comparable, and up for grabs.
The Atlanta area, which is partly served
by rail from the West Coast, is a big logistics
center for the Southeast that could effec-
tively be reached by direct water services,
but the current inability of the ports of
Savannah, Ga., and Charleston, S.C., to
handle fully-loaded larger ships may limit
carrier deployments and cargo shifts, Smith
said. The Port of Houston may also capture
some additional container volume, but
any potential gains could be counteracted
by cargo from Lazaro Cardenas that can
reach the Texas market via the Kansas City
Southern railroad, he added.
Strawbridge agreed in late January,
during a presentation at the Transporta-
tion Research Boards annual confab in
Washington, that the East vs. West coast
competition will be concentrated in the
Ohio River Valley. The area represents 1.5
million TEUs, or 10 percent of the volume
at the twin ports of Los Angeles and Long
Beach. Some of that volume currently
moves through Atlantic ports, so South-
ern California ports risk losing somewhat
less than 10 percent of the market but also
stand to gain a few points of market share,
depending on how shippers behave.
Chicago, Memphis, and Dallas are the
other big markets for Los Angeles-Long
Beach.
We dont see a big change because
many of those cargoes are time sensitive,
Strawbridge said in a phone interview. And
the railroads are also increasing their hot-
shot services. Its not just a one-dish on the
menu. Youve got many different choices.
You can pay more and have a faster ser-
vice, or pay less for slower service. Thats
where the supply chains have become more
sophisticated in recent years.
The complexity of logistics requirements
in todays business world means that gener-
alizations about the best transit time, trans-
port mode or route no longer apply, Martin
concurred. Logistics decisions are based
on a host of factors, most importantly the
type of product being shipped. Shippers can
take advantage of transpacific intermodal
service to distribution centers
in the Midwest, the Panama
Canal, direct calls through the
Suez Canal or transshipment
hubs in the Mediterranean
or Caribbean. They can also
choose to store products in
offshore distribution centers
in the hemisphere until they
are needed in the U.S. market.
Production shifts to Central
and South America will also
change shipping patterns,
he said.
Smith and other industry
officials note that Panama
is widening the canal as a
defensive move to adapt to
the evolution of big ships and
prevent cargo owners from
seeking alternative routes,
more so than trying to attract
new business from Asia. The
project also is important in the
countrys development of its
Source: Parsons Brinckerhoff.
40%
30%
20%
10%
0%
U.S. East/Gulf Coast share of NE Asia container
volume by product value per kilogram
2003 2004 2005 2006 2007 2008 2009 2010 2011*
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TRANSPORT / PORTS
ports at either end of the canal and associ-
ated logistics capabilities, which are well
suited for remixing cargo from North and
South American trade lanes.
This leads to the general conclusion that
the U.S. West Coast ports/railroads and the
Panama Canal are in fact not really sig-
nificant competitors. There is some market
overlap but over time they are probably not
going to beat each other up on pricing just
because of the different goals they have and
because of the different capabilities they
have, i.e. product value and time sensitivity
as well as the U.S. regional markets served
and inland destinations, Smith said.
Strawbridge, who once headed business
activities in Panama for terminal operator
Ports America, called the Panama Canal
expansion the next big non-event and one
of many influences on shipping patterns.
The real game changer is rather the
larger vessels and the limitations that will
be put on ports in handling the larger ves-
sels, he said. The Panama Canal has been
around for 98 years. Have we been compet-
ing with the Panama Canal for 98 years?
The reality of the Panama Canals lim-
ited impact on the West Coast, however,
hasnt stopped the Southern California
ports, business groups and local officials
from characterizing the canal as a major
threat to the goods movement industry and
thousands of jobs. A coalition there is work-
ing under the slogan Beat the Canal to
educate the public and politicians about the
importance of approving major highway,
rail and port infrastructure projects on the
drawing board in a way that minimizes
environmental impact.
West Coast ports are extremely produc-
tive and moving very strongly towards a
unified approach, Martin said, referring to
the coalition between railroads, ports, labor
and cargo owners. Theyre not going to
let erosion occur, just as (East Coast) ports
arent going to let erosion occur back to the
West Coast.
Infrastructure Limitations. Smith
points out that the third set of locks will only
have capacity for about 14 transits per day.
Super post-Panamax container vessels
could be crowded out by larger dry-bulk
vessels carrying commodities such as grain
or coal, vehicle carriers or big liquid-bulk
ships with petroleum or liquefied natural
gas, Smith warned.
That could accelerate the use of the
canals fee-based reservation system so
that vessels with more time-sensitive cargo
such as containers would pay to guarantee
passage without waiting at sea, he said.
Although the waterways expansion
may not enable East Coast ports to steal
container business from West Coast ports
like Los Angeles and Long Beach, the new
big-ship environment will have significant
repercussions for ports. Some of those big
ships will increasingly come to the East
Coast from Southeast Asia via the Suez
Canal.
Container lines, meanwhile, are expected
to decrease the number of vessels operated
because fewer super-sized vessels can move
the same amount of cargo, taking advantage
of their economies of scale.
Given that next-generation vessels can
accommodate much more cargo while
only marginally increasing fuel and other
operating costs, the only way for carriers to
fully realize profit on a per box basis is to
rationalize services through vessel-sharing
agreements or by merging loops, and run
full ships. A carrier that operates a dozen
6,000 TEU vessels to maintain a weekly
service may replace them with 10,000- to
12,000-TEU vessels, but the substitution
will probably involve more ships than sim-
ply cutting them in half to ensure weekly
service and allow for slow-steaming to save
on fuel costs. Carriers also need access to
right-size infrastructure and terminals to
load and unload vessels much faster, as well
as a stable labor environment, they say.
The big debate in the maritime industry
is over which eastern ports will receive
those vessels. By 2015, only the ports of
Norfolk, New York-New Jersey, Baltimore
and Miami will have 50-foot channels
and berths capable of handling the largest
vessels, although access to New York will
be restricted above water by the Bayonne
Bridge. The larger vessels require ports
with deep-water access, high-volume rail
facilities, bigger turning basins, and larger
and taller cranes. Ports are aggressively
competing for federal and state dollars to
launch dredging, rail and other projects to
make themselves ready for the big ships
even though carriers will only make direct
calls at a handful of ports and are widely
expected to make use of transshipment
facilities in Panama and the Caribbean to
deliver containers to secondary ports with
smaller vessels.
Jim Newsome, chief executive officer of
the South Carolina State Ports Authority,
and Rodolphe Saad, executive officer
of CMA CGM, have argued that carriers
will prefer concentrating Asia-origin calls
at a handful of U.S. load centers because
transshipment adds cost and transit time.
Transshipment, they have said, primarily
will be done to consolidate cargo between
North and South America.
CMA CGM is heavily investing in the
expansion of its terminal in Kingston,
Jamaica.
East Coast port authorities have a keen
interest in portraying transshipment as
ineffective because theyre trying to get
carriers to bring their big ships to their
container terminals. Many of these ports are
also struggling to obtain sufficient levels of
federal funds for harbor deepening.
But the higher utilization rates and oper-
ating efficiencies of the mega-vessels can
offset the transshipment costs and make
the process economical, Strawbridge said.
Direct calls are always better if a carrier can
maximize its lifts, he acknowledged, but
youre not going to bring 12,000 lifts into
Miami, Savannah or Charleston.
Mediterranean Shipping Co., for ex-
ample, heavily relies on transshipment in
the ports of Balboa and Colon in Panama,
as well as Freeport, Bahamas and last
year became the market-share leader in
the U.S. trade.
I think youre seeing more pendulum
and butterfly services doing transshipment,
not just north-south, Strawbridge added.
Big-Ship Ready. As port calls become
more concentrated and longer, carriers will
adjust their service schedules and ports
that receive the big ships will need more
yard space and intermodal capacity, as
well as more efficient cargo handling and
truck-gate operations to handle the surge
in volumes.
Automation is the key to achieving pro-
Middle Harbor facility at the Port of Long Beach,
before reconstruction work began.
Legal Notice
If you directly purchased Air Cargo Shipping Services to,
from, or within the United States from January 1, 2000
to September 11, 2006, your rights could be
aected by roposed Seulements
What are the Seulements about?
Plaintiffs claim that numerous air cargo carriers
and certain of their employees conspired to fx the
prices of air cargo shipping services in violation of
U.S. antitrust laws. The settling defendants deny
liability but have settled to avoid the cost and risk of
further litigation and/or a trial. British Airways, Lan
and Aerolinhas Brasileiras (Lan/ABSA), Malaysia
Airlines, South African Airways, Saudia, Emirates,
El Al, and Air Canada have settled these claims
and have agreed to pay over $207 million to direct
purchasers to, from, or within the United States. The
British Airways settlement provides $89.512 million,
the Lan/ABSA settlement provides $66 million, the
Malaysia Airlines settlement provides $3.2 million,
the South African Airways settlement provides
$3.29 million, the Saudia settlement provides
$14 million, the Emirates settlement provides
$7.833 million, the El Al settlement provides
$15.8 million, and the Air Canada settlement
provides $7.5 million. These are in addition to prior
settlements with other air cargo carriers in the case
of approximately $278.5 million. In addition, all
of these settling defendants, plus settling defendant
Salvatore Sanflippo, have agreed to cooperate
with the plaintiffs. The case is continuing against
non-settling defendants.
Who is a Class Member?
You are a class member if you purchased
air cargo shipping services, directly from one
or more defendants, for shipments to, from, or
within the United States during the period from
January 1, 2000 to September 11, 2006. All you need
to know is in the full Notice, including information
on who is or is not a class member.
Will I get a payment?
If you are a class member and do not opt out of
these settlements, you are eligible to submit a claim
and receive a payment. The amount of your payment
will be determined by the Plan of Allocation, which is
described in the full Notice. You may request a claim
form online at www.AirCargoSettlement3.com, or
by calling toll-free at 1-888-291-9655. Outside the
U.S. and Canada, call 1-614-553-1296 (toll charges
apply). You may also request a claim form by
writing to Air Cargo Settlement 3, c/o The Garden
City Group, Inc., P.O. Box 9380, Dublin, OH
43017-4280, USA.
Completed claim forms must be postmarked no
later than July 27, 2012.
What are my rights?
If you do not want to take part in the settlements,
you have the right to opt out. To opt out of one
or more of the settlements, you must do so by
June 1, 2012. Class members have the right to
object to the settlements, the Plan of Allocation, and
the request for up to 25 percent of the settlement
funds in attorneys fees, up to $2.5 million in
reimbursed expenses, and $1 million in future
litigation expenses. If you object, you must do so by
July 6, 2012. If you do not opt out of a particular
settlement, you will be bound by the terms of that
settlement and give up your rights to sue regarding the
settled claims. You may speak to your own attorney
at your own expense for help. For more information,
visit www.AirCargoSettlement3.com or call toll-free
1-888-291-9655. Outside the U.S. and Canada, call
1-614-553-1296 (toll charges apply).
A Final Approval Hearing to consider approval
of the settlements and the Plan of Allocation will
be held at the United States District Court for the
Eastern District of New York on July 27, 2012.
You may ask to appear at the hearing, but you
dont have to attend. For more information, visit
www.AirCargoSettlement3.com or call toll-free
1-888-291-9655. Outside the U.S. and Canada, call
1-614-553-1296 (toll charges apply).
This is a Summary, where can I get
more informanon?
You can get complete Settlement information,
including a copy of the full Notice, by registering
at www.AirCargoSettlement3.com, calling the
number below, or writing to Air Cargo Settlement 3,
c/o The Garden City Group, Inc., P.O. Box 9380,
Dublin, OH 43017-4280, USA.
1-888-291-9655 www.AirCargoSeulement3.com
TRANSPORT / PORTS
ductivity gains necessary to justify major
capital expenses, Strawbridge said.
The amount of time it takes to work
that ship just doubled. It takes twice as
long in todays operating environment,
he explained.
Crane productivity varies by port, but
West Coast ports typically lift about 27
boxes per hour, while some East Coast
ports have lift rates in the 35-to-40 range,
according to port analysts.
If productivity remains static
a carrier has only two choices:
add more vessels or decrease
the number of ports called,
Strawbridge said.
Western ports, especially in
Southern California, already
have most of the deep-water,
terminal and intermodal con-
nections necessary to efficiently
handle the super-size vessels, he
said. But they are not resting on
their laurels.
The Port of Long Beach, for
instance, has a 76-foot channel
and is making a huge strategic
investment to be ready for the
biggest ships with its redevelop-
ment of the Middle Harbor.
On April 3, Hong Kong-based
Orient Overseas Container Line
finalized a $4.6 billion, 40-year
lease of the property, which
is currently being expanded
and reconfigured into a single
terminal from two disjointed
ones to optimize waterside and
landside operations.
The $1.2 billion project will increase ca-
pacity from 1.3 million TEUs to 3.3 million
TEUs, plus add about 100 acres for container
storage when completed. Construction is
ahead of schedule and could be finished
by 2017 because work is unencumbered
by existing operations after one of the two
tenants there opted to sublet property at
another terminal, Strawbridge said.
The Middle Harbor Project is part of a
$4.5 billion capital improvement program
at Long Beach over the next decade that
includes the replacement of the Gerald
Desmond Bridge with a higher span that
will allow larger ships to reach the ports
back channels.
Electric rail-mounted gantry cranes for
transferring boxes to and from truck chassis
and railcars, and semi-automated ship-to-
shore cranes, planned for the modernized
terminal are key components to increasing
efficiency and turning ships quickly out
to sea, where carriers make their money.
Dockside cranes will no longer be oper-
ated by longshoremen in cabs at the top of
the superstructure. Computers will handle
the lifts until the last five feet, when a
technician sitting in a central office will
use a joystick to maneuver the spreader and
latch onto or release a container.
We believe its a model that is sustain-
able long-term and we believe well realize
productivity gains that will be much higher
on a per acre basis than anything else that
exists in North America, Strawbridge said.
Productivity remained static for 20
years with manned crane operations, but
taking labor out of the equation will result
in greater productivity levels, safety and
quality of work life, he said.
OOCLs Long Beach Container Terminal
successfully negotiated with the Interna-
tional Longshore and Warehouse Union to
accept the transition to technology.
The number of crane operators may
decrease, but the new system will result
in other jobs with higher skills that are
transferable to other industries, making
workers more valuable, Strawbridge said.
The former Ports America executive
knocked most East Coast ports as unable
to make a business case for the type of
infrastructure investment necessary to
handle extra Panama Canal traffic. Most
berths at major West Coast ports will have
access to 50-foot, or deeper, water.
East and Gulf coast ports collectively
seek $30 billion to $40 billion for infra-
structure projects to make them big-ship
ready, but at most they could potentially
siphon off 10 to 15 percent of West Coast
cargo, according to Strawbridge.
The $100 million to $200 million in
revenues those ports could collect each
year from that additional volume is too
slow a payback for the investment required,
he said. The math doesnt add up to the
amount of cargo that would be diverted.
The Port of Long Beach, as well as Los
Angeles, are the two largest container
ports in the nation and have the
throughput to justify ongoing
strategic investments, Straw-
bridge argued. And the earlier
the ports are ready for big ships,
the earlier shippers can consider
them in their routing decisions,
he added.
In 2010, the United States
imported $562 billion worth of
containerized goods, of which
$362 billion came from Asia.
Almost half the total imports,
or $250 billion, arrived at West
Coast ports, and 56 percent of
that total, or $205 billion, was
funneled through the ports of
Los Angeles and Long Beach.
About 35 percent of U.S.
containerized imports move
through the San Pedro Bay ports,
according to U.S. Maritime Ad-
ministration data.
The BNSF Railway and Union
Pacific have invested $12 billion
on facilities and mainlines serv-
ing Southern California alone
during the past five years, more
than double the cost of the Pan-
ama Canal expansion, Strawbridge added.
The arrival on March 19 of the 12,500-
TEU MSC Fabiola underscores why Long
Beach is investing to upgrade its infrastruc-
ture, Strawbridge said. The Fabiola is the
largest containership, so far, to call North
America. It called at the Hanjin-operated
Total Terminals International facility on
Pier T.
It was followed a week later by the 11,500-
TEU MSC Francesca, the second-largest
container vessel to dock in North America
and the 11,312-TEU MSC Lusciana in
early April.
Strawbridge noted that the Panama Canal
will not be able to handle a Fabiola-class
vessel for 2.5 more years.
All of what weve been planning for
is now coming to fruition. We still have
more work to do. Were not going to take
for granted what we have here, he said.
At the end of the day, we want our cus-
tomers and stakeholders to believe theyre
getting significant value by moving through
the Port of Long Beach.
MarAd study on
Panama Canal drags out
S
cudder Smith, principal consultant for Parsons Brinck-
herhoff, recently completed a study about the Panama
Canal for the U.S. Maritime Administration that is
intended to help the government better understand changes
in freight patterns, the ability of U.S. port and inland infra-
structure to handle traffic resulting from the arrival of larger
vessels, and guide necessary policy and investment decisions.
The report was supposed to be released last year, but has
been mired in red tape and now is undergoing a lengthy
peer-review process after MarAd took a long time to pick a
panel of experts.
The report will then go through a public comment period at
a yet to be determined date, according to a MarAd spokesman.
Although there may be some lost opportunities in the near
term from not having a coordinated public and private ap-
proach to upgrading trade gateways by the time the expanded
Panama Canal opens, the study is designed to inform the
long-term investments needed to support market-driven
demand 30 to 40 years in the future, the spokesman said
via e-mail.
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The Art of Vision
TRANSPORT / PORTS
(RAMP) Act and the Senates S. 412
(2011 Harbor Maintenance Act), call for
the total budget resources (be) made
available from the Harbor Maintenance
Trust Fund each fiscal year equal to the
level of receipts plus interest credited to
the Harbor Maintenance Trust Fund for
that fiscal year.
H.R. 104, introduced by Rep. Charles
W. Boustany, R-La., continues to gain sup-
port, with 187 co-sponsors (nine joining in
March), while S. 412, introduced by Sen.
Carl Levin, D-Mich., has 35 co-sponsors.
In late March, language in two versions of
the surface transportation billone which
passed the Senate and another that failed in
the House included sense of the Senate
and sense of the House statements that
said the administration should request full
use of the Harbor Maintenance Trust Fund
of operating and maintaining the navigation
channels of the United States.
Boustany introduced the bill in 2008 and
he told American Shipper in an interview
that he was optimistic about its prospects.
He expects language from the RAMP Act
to be included in the highway bill when
Congress once again takes it up after return-
ing from its Easter holiday break.
When Congress unsuccessfully tried to
pass a highway bill before the recess, the
RAMP Act was included in both the Senate
and House versions, albeit in the Senate
without a point of order that Boustany
thinks is important to make the law more
effective.
Many of our harbors have had silt build
up and it is having a drag on the economy,
Boustany said. It hurts American compe-
tiveness, especially as we ramp-up exports.
As chairman of the Oversight Subcom-
mittee of Ways and Means, I am not happy
with the fact that the Harbor Maintenance
Tax is being used for other purposes than
what it was intended for, and that is main-
tenance dredging, he said.
If the full allocation of the Harbor
Maintenance Tax was put in the operations
and maintenance dredging account, all of
these waterways could be dredged to the
fullest extent.
But Boustany said he is not trying to
get Corps hands on the $7 billion that is
in the trust fund, but fix the problem go-
ing forward.
We know that money has largely been
spent in prior budge cycles. Its really ac-
counting and a trust fund on paper. To try
and deal with that would have incurred a
major score based on the Congressional
Budget Office analysis. The way I wrote
the RAMP Act, it would not actually score,
we would not have to offset this, it would
not add to the deficit, it would simply be
S
upport in Congress for better main-
tenance of U.S. harbors has been
steadily gaining strength in recent
years, but a countercurrent of opposition
to the Harbor Maintenance Tax (HMT) and
designs on alternate uses for the money it
collects is also quickening.
With many East and Gulf coast ports
seeking to deepen their harbors to accom-
modate larger ships, Congress late last year
ordered the Army Corps of Engineers
Institute for Water Resources to prepare
a report by June 30 on how it should ad-
dress the need to modernize both ports
and inland waterways to accommodate
post-Panamax vessels. Draft versions of the
report indicate it will lay out a wide variety
of options, including possibly tapping the
Harbor Maintenance Tax for deepening.
Today, new construction is funded by the
general treasury.
In recent years, funding for coastal and
inland navigation by the Corps of Engineers
has dropped 22 percent from $2.014 billion
in fiscal year 2008 to $1.576 billion in fiscal
year 2012. It accounted for just 34 percent
of the Corps Civil Works budget in fiscal
year 2012, compared to 41 percent in fiscal
year 2008.
Maintenance of harbors keeping
navigation channels maintained to their
authorized depths and widths is funded
through the HMT, a 0.125 percent tax levied
on the value of cargo imported or domesti-
cally moved through federally maintained
channels and harbors.
(Originally the tax was to be collected
on exports as well as imports, but in 1998
the U.S. Supreme Court gave that part of
the law the boot in United States v. United
States Shoe Corp., holding it violated the
so-called export clause of the Constitution,
which says No Tax or Duty shall be laid
on Articles exported from any State. The
court rejected an argument by Customs
that the HMT was a user fee.)
Money collected from the ad valorem tax
goes into a Harbor Maintenance Trust Fund
(HMTF). Like the tax, it was created by the
1986 Water Resources Development Act.
Funds from the HMTF can only be spent
if its actually budgeted and appropriated
by Congress, but since it was created only
about half of the money thats deposited into
the trust fund is actually spent on harbor
maintenance.
The low level of HMTF usage has con-
tinued, despite the Corps estimate that full
channel dimensions at the nations busiest
59 ports are available less than 35 percent
of the time.
As a result, a huge balance has built up in
the fund, at least on paper. Legislators say
the surplus has been used over the years by
presidents, both Democrat and Republican,
to help reduce the size of the federal deficit.
According to legislation introduced in
the House and Senate earlier this year,
annual receipts from the tax in fiscal year
2011, which is collected by Customs and
Border Protection, increased 17.3 percent to
$1.6 billion. The balance in the trust fund
is expected to grow from $6.42 billion to
$7 billion in fiscal year 2012.
Identical bills in the House H.R. 104,
the Realize Americas Maritime Promise
Countercurrent
HMT challenged by ports that want it
either killed or tapped for other uses.
BY CHRIS DUPIN
If the full allocation
of the Harbor
Maintenance Tax was
put in the operations and
maintenance dredging
account, all of these
waterways could be
dredged to the fullest
extent.
Rep. Charles W. Boustany
chairman,
U.S. House Ways
and Means Oversight
Subcommittee
www.aaei.org
TRANSPORT / PORTS
putting the money back to use the way it
was intended going forward, he said.
Other Designs. Though Boustany and
his allies in industry have methodically built
support for the RAMP Act, there are other
voices raised in opposition to the HMT, or
who would like to see the money it collects
be spent differently.
The Harbor Maintenance Tax is simply
not fair, said Connie Bacon, commissioner
for the Port of Tacoma, speaking at the
Transpacific Maritime Conference in Long
Beach this March.
U.S. ports on the West Coast dont have
dredging needs and simply dont get any use
out of this, she said, saying ports such as
Seattle and Tacoma get less than one cent
of every dollar thats collected on cargo
moving through their ports.
Who would make that investment? she
asked. In contrast, one-fifth of all dredging
money is spent in one state, in Louisiana.
But advocates for dredging the lower
Mississippi, like Sean Duffy, executive
director of the Big River Coalition, noted
that some 32 states use the Mississippi River
to connect to world markets.
A study for his group by economist
Timothy Ryan found 20 percent of the
countrys commerce moved through the
lower Mississippi. A reduction of one foot
of draft in the channel on the Lower Mis-
sissippi from 45 feet to 44 feet would lead
to a loss of $772 million in direct spending
and a $1.4 billion loss in total spending.
Bacon complained Harbor Maintenance
Tax funds were being used to maintain
ports that are direct competitors of Ta-
coma, pointing to Savannah, Charleston,
and Norfolk.
Keith Hofseth, a technical director for
the Corps, said the traditional view of the
Office of Management and Budget has been
that the money not spent from the HMTF
is the money collected from ports which
dont need maintenance dredging and so
it is not used and does not cross-subsidize
other ports.
During a budget hearing for the Corps
earlier this year, Rep. Grace Napolitano,
D-Calif., made a similar complaint, say-
ing the HMTF was egregiously unfair
to ports in southern California, because
cargo flowing through Los Angeles and
Long Beach resulted in $220 million be-
ing contributed to the fund, but they only
received $265,000.
The fact the money collected on cargo
moving through one port is used to maintain
others is as if the government taxed Mc-
Donalds to build bigger Burger Kings. We
must correct and fix this inequity, she said.
In February, Napolitano introduced an
amendment to H.R. 7, the House version
of the surface transportation bill, that her
office said would have allowed the ports
of Los Angeles and Long Beach to receive
a fairer share of funding from the National
Harbor Maintenance Trust Fund. The
amendment was ultimately not included
in the bill.
Im aware of all these arguments,
Boustany said. There are multiple prob-
lems going forward with our maritime in-
frastructure. Clearly, we have facilities that
need to be deepened and widened beyond
what current authority allows, but those
are separate issues at this stage.
He said he wants to first fix the mainte-
nance issue and then we can look at how
you fund future maritime infrastructure
projects. But to tax the Harbor Maintenance
Tax and start diverting its use to do harbor
deepening and other sorts of infrastructure
projects is not what the tax was created for
in the first place.
We can have an argument about how
to fund all those things going forward or
even how to fund operation and mainte-
nance dredging when we do tax reform,
but the fact of the matter is operation and
maintenance dredging should be done with
the funds that are dedicated for it. And that
is the problem I am trying to fix, he said.
Paul Anderson, chief executive officer
of the Port of Jacksonville and a former
Federal Maritime Commissioner, said
cross-subsidization of ports was analogous
to the federal highway system.
We have a gas tax and as far as states
go, it is regressive. Large states are donor
states to make up for the smaller states that
couldnt put in their share. It is a very similar
model. Our ports are just as strategic as our
interstate highways are to the future of our
country to compete globally. Its a national
system; its not a state system, he said
Bacon also said there is a massive
transfer of revenue from deep-water ports to
shallow ports, many of whom have nothing
to do with the export-import trade that is
so important to the United States.
She pointed to a January 2011 report by
the Congressional Research Service which
said Corps data indicate that a significant
portion of annual HMTF disbursements
are directed towards harbors which handle
little or no cargo. The Oregon Inlet in North
Carolina, Grays Harbor in Washington,
Humboldt Harbor in California, and the
Lake Washington Ship Canal in Seattle
are some of the harbors or waterways that
fit this description. Commercial fishermen
and recreational boat (or yacht) owners
account for most, if not all, of the vessel
We are.
Ocean Marine Division
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Warehouse Contents
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TRANSPORT / PORTS
traffic in these harbors.
What would be great is if that money
could be used for some of the things that
are important to us, Bacon said.
In 2012, the Obama administration made
a proposal in its 2012 budget to expand the
authorized uses of the Harbor Maintenance
Trust Fund, so that its receipts are also avail-
able to finance the federal share of other
federal efforts in support of commercial
navigation through our ports.
FMC Study. Tacoma is one of the ports
complaining the harbor maintenance tax is
a cost that makes ports in the Northwest
less competitive with imports to the United
States first routed through Canadian ports,
such as Vancouver and Prince Rupert, and
then trucked or railed across the Canadian-
U.S. border where no similar tax applies.
Bacon pointed to a 2007 study by Leach-
man & Associates, which said Puget Sound
import volume is very elastic with respect
to potential container fees. If unmatched
by new fees at other ports, even relatively
small fees of $60 per FEU ($30 per TEU)
or less would render supply-chain chan-
nels using other ports more economically
attractive for imports to be consumed in
most markets located east of the Rockies.
If $30 per TEU has that kind of impact,
what happens when the tax averaged a $130
per TEU? It may not be the factor, but it
certainly is a factor, she said.
A similar point was made by the Port of
Seattle in a submission to the FMC which
is studying the alleged diversion of cargo
through Canadian ports because of the
HMT and other factors.
Seattle said the HMT averages $84
per FEU nationally and $89 at the Port
of Seattle.
While some costs are buried in the
overall through-cost charged by carriers,
because the HMT is assessed as an indi-
vidual line item for every import shipment,
importers are very conscious of the tax,
Seattle said. It added the land border
loophole is a cost significant enough to
incent shippers to divert cargo away from
U.S. ports, especially high value cargo.
Bacon said Tacoma has sought to repeal
the HMT or obtain exemptions from it for
deep-water ports and for ports near interna-
tional borders if they agree to forgo HMT
money in the future.
Alternately, she would like to see the
use of the funds broadened so ports like
Tacoma could get something of value from
it. Even 10 cents on the dollar would be
better than what we are doing now.
Anthony M. Pagano, director of the
Center for Supply Chain Management
and Logistics at the University of Illinois
at Chicago, said the HMT acts as a tax
on imports.
By not spending all of it, it is something
that might violate the World Trade Orga-
nization agreements, he said, adding the
European Union looked at the HMT and
found it was a discriminatory import tax,
but has not taken any action.
Other trading partners might sue the
U.S., he said. Im wondering why the
Chinese have not sued us yet. There is also
the possibility of retaliation by our trad-
ing partners. And also this is a violation
of trust that they are not spending the
money. In God we trust, but in Washington,
D.C., I dont think so.
He suggested the tax be eliminated, and
Bacon seconded the notion.
I certainly agree with Dr. Pagano, lets
get rid of that tax. But in the meantime we
have it. There are other possibilities with
expanding the use of the money so that ports
like Tacoma, Seattle, Los Angeles and Long
Beach can improve their competiveness.
Hofseth said the goal of the Corps post-
Panamax vessel study is to paint the picture
of what the realistic need is and where that
need exists and the path forward, he said.
The biggest obstacles to me seem to be
the Corps procedures take a long time to
work, and there are funding issues because
the budget is extremely limited.
The Corps took on the first of those
challenges earlier this year when it wanted
feasibility studies to follow what it called
the 3x3x3 rule target completion of
studies in 18 months, but no more than three
years; keep the cost to less than $3 million;
and produce a report of reasonable size, or
small enough to fit in a three-inch binder.
While subject to change, a draft of the
report posted on the IWR Website in early
April listed a plethora of options for funding
deep draft ports:
Business as usualcollecting the
HMT and budgeting deepening projects
separately according to the budget given
the Corps and its priorities.
Having Congress increase general
revenues for harbor deepening whenever
Corps analysis reports investment will be
economically justified and environmen-
tally acceptable.
Continuing HMTF user fee collection
and implementing a harbor deepening tax.
Increasing local cost share require-
ments. Today the HMTF funds all operation
and maintenance for Corps harbor projects
less than 45-feet deep, and half the mainte-
nance for harbors that are deeper than 45
feet. When deepening channels, the federal
government funds 80 percent if the project
is less than 20-feet deep, 65 percent of those
that are 20 to 45 feet, and just 40 percent of
those that are deeper than 45 feet
Increasing the funds collected by the
HMTF and then allowing it to be used for
harbor deepening. The draft report noted
the logic for such an argument would be
that the beneficiaries of the deeper projects
can be readily identified and such an in-
crease in fees would simply be a beneficiary
tax. The process for making decisions
about which port projects to undertake
would remain the same.
Dissolving the federal role in harbor
development and maintenance and transfer
all responsibilities to non-federal entities.
Under this option the HMTF could be
phased out, as would the current fees creat-
ing the revenues that are dedicated to the
fund. Individual port authorities would
include the costs of maintenance in their
overall cost structure and would levy fees
in whatever form they deem appropriate for
cost recovery for harbor improvements and
maintenance. Individual port authorities
would secure the funding they need by bor-
rowing what would be repaid with user fees.
If ports had to individually pay for
deepening, the report says an infrastructure
bank might be created and the Corps could
provide a report to the bank on whether
the applicant can earn a revenue stream
sufficient to repay the loan and on the ap-
plicants compliance with environmental
laws and regulations.
Making HMTF allocations based on
a competitive grant programs.
Investment planning based on a na-
tional optimization model.
Regardless of the federal governments
role in financing future critical needs, its
regulatory oversight role is expected to
remain unchanged, the report said.
Anderson noted, Ships are getting
bigger, it is the reality of the world and
we need to deepen our ports. The system
is so broken that every state, every port
and every member of Congress is trying
to find ways to get the money they need
to make infrastructure investments and
they are doing it very parochially. They
are not doing it with a sense that this is
a national system, that this is a strategic,
national initiative that we should be pur-
suing as a nation, not as each state on its
own, he said.
Interest by shippers in moving cargo
through multiple ports grew after the 2002
labor dispute between management and the
International Longshore and Warehouse
Union shut down West Coast ports and the
Panama began its project to add a third and
wider set of locks. Increasingly, Anderson
said, shippers feel they need a choice of
ports to protect their supply chains if there
is a natural disaster or terrorist incident.
Freight sold by the piece
T
he 2nd U.S. Circuit Court of Appeals has reversed a
lower court decision in a cargo case having to do with
customary freight units (Edso Exporting v. Atlantic
Container Line. 2nd Circuit. No. 11-1467.
March 20).
Edso owned a crane made by Grove and
hired Atlantic Container Line (ACL) to ship
it from Baltimore to Tripoli via Hamburg.
ACL operates a fleet of multipurpose
ships that carry both containers and roll-
on/roll-off cargo across the Atlantic. As
part of the Grimaldi Group, ACL offers
through Hamburg connecting services to
many destinations in the Mediterranean
and West Africa.
Edso said the crane sustained $154,064
in damage and sued ACL in district court.
The Carriage of Goods by Sea Act
(COGSA) limits a carriers liability for
damage in connection with the transporta-
tion of goods to $500 per package, or in
case of goods not shipped in packages, per
customary freight unit unless the nature
and value of such goods have been declared
by the shipper before shipment and inserted
in the bill of lading.
The 2nd Circuit said in a summary order
it was undisputed that both the crane was
unpackaged and Edso failed to declare its
value in the bill of lading. As a result, the
court said Edsos damages are therefore
limited under COGSA to $500 per cus-
tomary freight unit.
Before the trial court (the U.S. District
Court for the Southern District of New
York), Edso had successfully argued the
customary freight unit was each cubic meter
of the crane. Edso said numerous federal
admiralty courts have shown a general
reluctance to classify the customary freight
unit for a shipment as a lump sum for
limitation purposes under COGSA. The
company also noted that it did not carry
cargo insurance for the claimed loss.
The trial court granted Edsos motion
for partial summary judgment that the
maximum amount of the plaintiffs damages
amounted to $61,000 $500 multiplied by
122 cubic meters plus applicable interest
and costs.
ACL decided in the interest of economy
Edso, saying it had clearly established the
intent of the parties to book the shipment
on the basis of $60 per W/M ($60 per
metric ton or cubic meter). They noted the
freight was adjusted upward (from $6,480
to $7,320) when it was discovered the
crane was 122.09 cubic meters at the pier,
compared to 108.35 meters when the freight
rate was originally quoted.
But ACL told the district court at all times
throughout the negotiations, the parties
discussed the freight rate on the basis of
an all-in bottom line number and not on a
per-cubic-meter basis.
The 2nd Circuit said based on the facts
before it, we conclude that the bill of lading
and tariff, when read together, unambigu-
ously establish that freight was charged on a
per-item, rather than per-cubic meter, basis.
The bill of lading does not on its face state
that freight is calculated based on the cubic
volume of the crane; instead, it describes
the basis of the $7,320 freight charge as
AA, or As Agreed.
It added that any ambiguity as to the
meaning of this phrase is resolved by the
tariff, which is expressly incorporated by
reference in the bill of lading. The tariff
identifies a Base Freight of $7,320 and the
Basis as Each (EA). In the context of the
$7,320 figure immediately above, Each
(EA) can only refer to each crane. Because
the bill of lading, as supplemented by the
tariff, unambiguously establishes that the
customary freight unit in this case was each
crane shipped, the district court erred by
considering extrinsic evidence as to how
the parties calculated the $7,320 figure.
Edso argued the quote confirmation,
which indicated the crane was rated at
$60w/m, was incorporated in the bill of
lading. But the 2nd Circuit said the bill of
lading merely references the confirmation,
without any elaboration.
By contrast, the court said the bill of
lading expressly incorporates by reference
the tariff. If the parties had intended to also
incorporate the terms of the quote confirma-
tion, they would have done so explicitly.
It said since it found no ambiguity in
the governing documents concerning the
basis on which freight was charged, ACL
was entitled to partial summary judgment
limiting its damages to $500.
The judgment of the district court was
reversed.
Shippers Law l By Chris Dupin
and efficiency to waive any defenses it
might have as to its liability and have the
issue of what constitutes the customary
freight unit under the circumstances of
the case reviewed by the 2nd Circuit. The
carrier argued that each item shipped was
the customary unit, so that the $500 limit
would apply to the entire crane.
The 2nd Circuit agreed. It quoted from an
earlier decision, FMC Corp. v. S.S. Marjorie
Lykes, 851 F.2d 78, 80 (2d Cir. 1988), which
held that while some courts have held the
customary freight unit is the measurement
used to calculate the rate to be charged, in
the 2nd Circuit the customary freight unit
is not the standard unit of measure used
in the industry, but the actual freight unit
used by the parties to calculate freight for
the shipment at issue.
In that 1988 decision, the 2nd Circuit
said to determine the customary freight
unit for a particular shipment, the district
court should examine the bill of lading,
which expresses the contractual relation-
ship in which the intent of the parties is
the overarching standard. It also said the
district court could consider the tariff
required to be filed with the U.S. Federal
Maritime Commission, which also sets
forth the freight rate.
That 1988 decision held where the bill of
lading and filed tariff are unambiguous as
to the freight unit used to calculate freight
for the shipment at issue, the inquiry
is ended, and a court may not consider
extrinsic evidence of the parties intent,
including negotiations.
The 2nd Circuit said if, in particular,
the bill of lading and tariff unambigu-
ously establish that freight is charged on a
lump-sum basis, or based on the number
of items shipped, then it is irrelevant that
the parties may, as a practical matter, have
calculated freight based on the weight or
volume measurements of the goods.
In its memorandum of law for the district
court, the attorneys for Edso pointed to the
service contract entered into by ACL and
American Shipper www.AmericanShipper.com
ComPair Data www.compairdata.com
AAEI www.aaei.org
Agriculture Transportation Coalition www.agtrans.org
Alabama State Port Authority www.asdd.com
Atlantic Container Line www.ACLcargo.com
Avalon Risk Management www.avalonrisk.com
Centerpoint www.centerpoint.com
China Shipping Cont. Lines Co.
www.chinashippingna.com
Council of Supply Chain Mgmt. Professionals
www.cscmpconference.org
Evergreen Line www.evergreen-line.com
GAL www.galborg.com
Great American Insurance Group
www.greatamericaninsurancegroup.com
Guangzhou Port Company Limited
www.gzport.com
Hamburg Sd www.hamburgsud-line.com
Manzannillo International Terminal www.mitpan.com
Mediterranean Shipping Co. (USA) Inc. www.mscgva.ch
MOL (America) Inc. www.CountOnMOL.com
Navis www.navis.com/NavisWorld
New York State Canal Corporation www.canals.ny.gov
Nordana Line USA www.nordana.com
OOCL (USA) Inc. www.oocl.com
Port Metro Vancouver www.portvancouver.com
Port of Greater Baton Rouge www.portgbr.com
Port of Houston www.portofhouston.com
Port of Los Angeles www.portoflosangeles.org
Port of New Orleans www.portno.com
Ports America www.portsamerica.com
QuestaWeb www.questaweb.com
RUBB Inc. www.rubb.com
Safmarine www.safmarine.com
South Carolina State Ports Authority
www.PortCharleston.com
Tampa Port Authority www.tampaport.com
Union Pacific Railroad www.UnionPacific.com
Virginia Port Authority www.portofvirginia.com
Yang Ming America www.yangming.com
INTERNET INDEX OF ADVERTISERS Check out these locations on the World Wide Web:
Corporate Appointments
(
800
)
874-6422, FAX (904) 791-8836, e-mail releases@shippers.com
Logistics
Choice Logistics has hired Robert An-
drews as its new vice president of global
field operations. Andrews, who has worked
with logistics operations in a handful of
countries, will focus on expanding the
companys overseas operations.
Donna Desmond has been named global
sales executive at Jacksonville, Fla.-based
Suddath Global Logistics. Desmond, who
has 23 years of experience in the industry,
will focus on developing new accounts for
Suddath with an emphasis on high-tech
companies and government contracts.
Four employees of the transportation and
trade law firm Rodriguez ODonnell Gon-
zalez & Williams attorneys Carlos Ro-
driguez and Zheng Xie, and professional
staff Eddie Edwards and Christopher
Rul joined the Washington office of
Husch Blackwell.
Venable LLP hired Kelly Herman,
formerly senior attorney advisor at the
U.S. Department of Homeland Securitys
Customs and Border Protection, to serve
as counsel to its international trade prac-
tice. Herman served at CBP for the past
10 years and also spent a year in the U.S.
Trade Representatives office.
Forwarding
Page International in Savannah, Ga.
promoted Jackie Johnson to director of
exports. She started with Page in 2003,
and for the past six years was ocean export
manager.
Ocean
OOCL named Andy Tung the companys
new chief executive officer, effective July
1, replacing current CEO Philip Chow,
who is retiring. Tung is currently OOCLs
chief operating officer, and has served the
company in various capacities, including as
director of reefer trade between 1993 and
1998. He rejoined OOCL in 2006 and has
been COO since January 2009.
Christopher A. Coakley was appointed
vice president of government affairs at
Saltchuk Resources. Based in Washing-
ton, he will represent Saltchuks interests
at the federal level and will coordinate the
companys public policy efforts nationwide.
Brian Sondey, chairman, chief executive
officer and president of TAL International
Group, Inc., has been elected chairman
of the Institute of International Con-
tainer Lessors for 2012. He succeeds Peter
Younger of Cronos, Ltd.
CMA CGM Group appointed Jacques
Delort to vice president of information
systems and deputy general manager of
CMA Systems, a new entity set up under
a partnership with IBM. He was previ-
ously at Crdit Agricole where he served
as managing director of GIE EXA infor-
mation systems.
Inland
Barrett Distribution Centers picked Scott
Hothem as its new senior vice president
of customer solutions. He has held senior
manager positions at Matson Integrated
Logistics (which acquired Pacific Ameri-
can Services while Hothem was president),
Circuit City Stores, Merisel, Arvato and
Bertelsmann AG.
FORTE, a consulting firm for the supply
chain and distribution industries, hired Eric
E. Clark as its chief information officer.
AVALONRISK MANAGEMENT
Premier provider of insurance and surety solutions
for the logistics industry
www.avalonrisk.com
Training by organization
At least annually,
you should go
through a training
strategy session
to identify the
primary objectives
for the year.
Monitor your
compliance
metrics to see
if theyve
improved since
the training.
T
raining on trade compliance is often not as effec-
tive as it should be. Weve all attended the manda-
tory trainings where policies and regulations are
regurgitated and attendees go away with nothing more
than a handout. Occasionally though, a training course
will really add value.
This article focuses on tricks and tips to create a value
added training course ensuring that trade compliance
gets through to everyone.
Just like any undertaking, it is important to set aside
a certain period of time to do some planning in advance.
At least annually, you should go through a training
strategy session to identify the primary objectives
for the year. Your objectives might be to raise overall
awareness, highlight a new risk area thats been identi-
fied or prepare for an upcoming Focused Assessment or
C-TPAT validation. Formulate a checklist that includes
these types of objectives and be sure to align it with
regional and product line groups, if appropriate. Invite
other functions to participate in the checklist review.
Activities such as mergers and acquisitions, new product
development, new market entry, or other such activities
might drive training needs.
Trends are showing that people are not taking one-off
classes on their own time or initiative. They are actually
responding positively to corporate-sponsored classes.
By hosting your own training, you gain ownership by
communicating in terms your attendees understand,
and using case studies and real-life examples. You
should clarify up front how they can immediately use
the knowledge they gain, and what it will do for them.
And always provide them with easy-to-use resources
for future reference.
Depending on the level of executive support, and your
organizational structure, consider grouping certain de-
partments together for the training such as: Procurement
and Logistics, Tax and Finance, Sales and Marketing,
etc. Then you can really tailor the presentation to your
audience. Develop a clear summary of the training for
these groups so they clearly understand why they have
been targeted for the training. A good example would
be: Export Controls and Deemed Exports will provide
Senior Scientists the information they need to identify
potentially controlled items or technology, and help
them understand what restrictions are associated with
those controls.
Consider culture when scheduling and developing
training. Dont assume that all locations work the same
hours as yours. Consider when they might be most
receptive to training. For example, even though U.S.
companies might start their days at 8 a.m., starting a
training at 8 a.m. in a large Asian city will almost cer-
tainly flop. Take into consideration that in many large
cities, workers have a long commute!
Youll also want to develop clear and compelling
training objectives. These should be in the attendees
terms, and include what specific actions the attendee can
take after completing the course. A bad example would
be learn what Global Trade Compliance means. A good
example would be understand why an order would go
on compliance hold and who you should contact.
Once you have identified your training objectives and
clearly called out who should be an attendee, it is time to
develop targeted content. Consider developing content
in terms of depth and detail based on the attendees, such
as a high-level overview for new employee orientations
versus in-depth process training for trade compliance
professionals.
Most attendees outside of the trade compliance field do
not have time for a lengthy training session. If you can,
utilize other peoples training sessions to deliver your
content such as an ethics training or other compliance-
related topic. Also, present concepts in a very focused
manner such as a solution to a specific business problem.
Talking about trade compliance in general will not stick
with anyone. And always review the relevant concepts
quickly at the end of the training.
Keep people engaged in the training session. Depend-
ing on your corporate culture, consider doing brief quiz-
zes throughout or at the end of the course. Be sure to offer
links and resources to get information that supports the
answer. Always conduct post-training surveys to see how
people received the information. Surveys are the key to
the continuous improvement of your training courses.
Try to respond quickly to any feedback you receive and
dont just focus on how to change it for next year.
Finally, monitor your compliance metrics to see if
theyve improved since the training. A higher level of
compliance should be the ultimate goal and improved
metrics will help substantiate training costs to upper
management.
BPE Global is a consulting and training firm whose
mission is to enable companies to succeed in global
business.
Julie Gibbs
director,
BPE Global
jgibbs@bpeglobal.com
On Second Thought ...
Outsourced logistics put to the test

For the past two decades, American shippers have been mostly content to allow nearly
all their international logistics functions to be managed by freight forwarders, non-vessel-
operating common carriers and customs brokers.
While these intermediaries undoubtedly continue to perform invaluable transportation and
trade compliance services for shippers, there is an increasing cadre of large manufacturers
and retailers that are taking more control of their logistics processes actively planning
international shipments by telling their third-party logistics providers exactly which carriers
to use and when, and not necessarily based on the lowest cost, but more so by which service
offers them the most efficient delivery of their goods to destination.
These large shippers, often driven by heightened in-house cost control measures,
regulatory compliance pressures, and brand integrity, are increasingly investing in and
taking advantage of information technologies once exclusive to 3PLs and internalizing them
in their processes. They are also hiring top-notch executives away from the 3PL industry
to oversee their logistics activities.
Some shippers have even gone as far as to set up U.S. licensed in-house non-vessel-
operating common carriers to boost their direct carrier relationships and in some cases
offer some of their freight capacity to other shippers.
As explained in this issue (pages 22-25) by Associate Editor Chris Dupin, former cotton
trader Dunavant Enterprises several years ago took the radical step of abandoning its shipper
roots altogether to become a full-fledged 3PL.
The biggest inhibitor for shippers to justify bringing logistics in house is the scale of their
operations. A shipper would require lots of freight, and this freight would need to be either
highly specialized or so concentrated to make this work. That said internalizing logistics
management will likely not become a runaway trend among most American shippers.
What this activity demonstrates, however, is a steady lowering of the barriers to entry
in the traditional transportation intermediary business and overall shrinking switching
costs for transactional services.
While 3PLs are expected to continue their dominance over international logistics offerings
and processes, forward thinking operators will look to new technologies, markets, and
services to step up their game and compete at higher levels for shippers logistics business.
Those who dont recognize this shift may find themselves competing against their customers
logistics resources instead of other 3PLs.
TRUST YOUR INBOUND SHIPMENT TO THE
CARRIER THAT REALLY KNOWS CHINA.
Nobody Knows China Like We Do Its In Our Name.
Unmatched Access to the Yangtze

and Pearl Rivers.
Youngest International Fleet in the World.

www.chinashippingna.com

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