THE CARGO LETTER 
Air & Ocean Freight Forwarder - Customs Broker News
30 October 1996
Good Wed. Morning from our Observation Deck...... overlooking the officially designated "Cargo City" area and....... Runway 25-Right at Los Angeles International Airport.
Contribute your knowledge & information........by e-mail to The Cargo Letter. McDaniel
OUR "A" Section: FF World Trade, Financial & Inland News
-- by Edward Greenberg & Daniel B. Hassett
"WHERE'S MY SHIPMENT !" The three most feared words for a freight forwarder to hear, followed closely by the words "I'll sue you." The transportation industry will soon be hearing these dreaded words more frequently if adequate technical and legal steps are not taken to minimize their exposure to the coming........"Year 2000 crisis".
What is the Year 2000 crisis? In a nutshell, the vast majority of computer systems, such as those used by forwarders & brokers are programmed to allocate only two digits for a year. Thus, the year 1996 is stored as "96;" ........and the Year 2000 will be stored as "00." When "00" rolls around, computers will make calculations and comparisons without recognizing the turn of the century. Instead they will understand "00" to mean the year 1900, not 2000. For example, orders that are placed in 1999 for shipment after the Year 2000 may be completely lost due to incorrect data.
Invoicing of clients may have to be manually redone if your system cannot adequately read the Year 2000 and beyond. Stored data for past shipment & transactions may also be unreadable in the Year 2000.
Just try to imagine the myriad of employee-related problems you may face in the Year 2000 problem. For example, in order to determine pension, seniority and other time-based benefits for an employee who was hired in 1985, a computer will calculate years of employment by subtracting 85 from 96 to reach the correct result of 11 years. However, in the year "00" the computer will subtract "85" from "00" and report a negative 85 years of employment !
Similarly, after the Year 2000, a computer will perform a chronological sorting function without taking into account the 21st century. Thus, the 1985, 1995, and 2005 dates will be sorted BACKWARDS as '05, '85 and '95............instead of chronologically as '85, '95, '05.
There are many other examples of the potential havoc that will result if YOUR company does not take steps to resolve its Year 2000 problems. The key, however, is to determine how affairs may be impacted on an individualized basis, and to act quickly & methodically to remedy any adverse impact. Some technical fixes will be difficult and expensive, particularly if your original software vendor is no longer in business, or your computer system is an archaic "proprietary" structure. Others may be easy, especially if the software vendors themselves have (or can create) the necessary "patch" to address software code problems. Technical industry consultants have estimated that the typical costs of resolving Year 2000 problems for a medium-sized corporation could reach into the millions of dollars.
Since most forwarders & brokers already have software systems in place, the first step in solving YOUR Year 2000 problem is to conduct legal & technical audits. The technical audit will determine the extent of code problems associated with the date change to the Year 2000...........information necessary to prioritize which systems should be replaced or updated and determine a preliminary budget.
The equally important legal audit looks at your company's software & computer systems (including hardware & data processing) which are governed by separate licensing agreements. The license agreement will likely limit the ability of the forwarder/broker or independent service provider (ISO) to copy, use and modify the software. Therefore, the initial vendor must consent to copying, use & modification of the software such as that necessary to fix a Year 2000 problem. Failure to obtain consents could expose forwarders & brokers to damages, including copyright infringement. Because technology licensing transactions are complex, legal counsel should be.......versed in technology issues, directly in contact with service providers, and involved in drafting & review of necessary RFPs. Finally, legal counsel can evaluate any potential claims an end user has against software vendors, consultants and insurers.
Companies that outsource their data processing needs will also be affected if the outsourcing company is not Year 2000 compliant. Therefore, if you outsource..........be very sure to obtain a representation and warranty that your service provider is Year 2000 compliant.
Year 2000 related problems may soon overwhelm the technical, physical and intellectual resources available to correct the situation....... especially those who wait until the last minute. Therefore, the earlier you open discussions with your vendors, the more likely you'll be able to achieve a less expensive, more positive resolution and get a competitive edge over your competition.
[Ed Greenberg is a partner in the Washington D.C. firm of Galland, Kharasch, Morse & Garfinkle, P.C., and serves as maritime counsel to the National Customs Brokers & Forwarders Association of America. Dan Hassett, also of Galland, Kharasch, represents technology & other companies concerning technology transactions, trademarks & litigation ........including advice for the Year 2000.]
OUR "B" Section: FF World Air News
OUR "C" Section: FF World Ocean News
Today The Cargo Letter presents this thought provoking editorial from a highly placed, career employee of the Panama Canal Commission. Due to the controversial content, our source must currently remain anonymous. Reader comments are welcomed.
The Canal Zone- 27 Oct --At a time when several Central American countries consider contructing new canal/rails links between the Atlantic & Pacific Oceans and carriers are proposing alternate routes.........The Panama Canal Commission (PCC) held public hearings this month proposing dramatic Canal toll increases to fuel massive, unnecessary expenditures.
Proposed is a 2 phase toll-rate increase -- 8.2% in FY 1997 and 7.5% in FY 1998 -- coupled with an amendment applying rules of measurement to on-deck container capacity as well as the volume of the vessel itself. In justification are PCC pronouncements that the Canal's operating capacity in the range of 38-39 transits per day can be increased to 43-44 transits with very costly modifications such as additional tugboats & locks, locomotives, automation of locks machinery controls, traffic management system enhancement......and the single most expensive.....ongoing widening of the famous Gaillard Cut. Sadly, nothing could be farther from the truth.
Led by a chosen few with little understanding of the day-to-day operations & limitations, and a seeming lack of concern of the shipping industry, the PCC has ignored the serious potential for creation of alternative routes to compete against the Canal. Worse, scheduling & relay procedures and forgotten equipment, conceived and put in place by the orginal Canal builders .........which could possibly attain a higher number of transits per day.......have not even been attempted for use. While PCC logic is that physical widening will allow for more ships to pass, the Gaillard Cut never has been the Canal's bottle-neck .........and vessel scheduling will do more good than the enormous sums to be expended on the project. Our shipping community is being led down a very expensive road.
But there are other factors in the involved equation. More locomotives at Gatun & Miraflores locks means more employees. More ships waiting for the locks means more tugs and related crews. More ships means more pilots and canal deckhands. Yet since 1979, while the Commission's managerial positions have increased by 23%, the rest of the work force has undergone a 6% DECREASE. Some 32% of the most experienced Panama Canal pilots, will retire before the turnover to Panamanian control. Now PCC has requested the U.S. Congress to raise pay for upper management......with pay cuts for all the rest of the "lesser skilled" employees. The lesser skilled people (those who actually do the work) are facing wage reductions, job classification reductions, loss of Treaty mandated severance pay, loss of U.S. Federal protective regulations and possible loss of union collective bargaining. One has to ask if a poorly paid, mistreated and disgruntled work force will perform well enough to give the Canal a greater capacity.
Wilhelmsen Lines, which paid US$9M in tolls for 1995 (and looks forward to a US$2M plus increase), recently stated that it could simply by-pass the Canal completely. The Wilhelmsen official observed that increasing tolls could easily lead to reduction in Canal use, thereby reducing the total tolls. With the U.S. land-bridge up and running, many of the large carriers such as Maersk, Hanjin, DSR, Yang-Ming, Evergreen and others, have to be looking hard at other possibilities.
The Commission is also proposing to charge vessels for their container carrying capacity, not for the Ctnrs physically on board. The plan is not only unreasonable, but shows how out-of-touch Sr. Canal management is with our industry. Today some vessels are not allowed to carry Ctnrs to full capacity by the Canal regulations themselves! Thus to charge a vessel for a capacity of 1,000 TEUs and then only allow transit with 800 TEUs due to Canal regulations on visibility is commercially unsound. What about the small reefer with only 2 Ctnrs of shrimp on deck, but could carry more? What about the bulk-ship with half a load of lumber on deck? What about a general cargo vessel with one school bus on deck? Are the Ctnrs empty or full? Is this proposal simply an industry feint in order to raise the tolls to the higher requested amount? All good questions from an industry vitally concerned about a doubtful well-being of the Panama Canal.......and its doubtful future.
TO OUR READERS: A longer version of this fine story, complete with expert descriptions of Panama Canal operations, problems and solutions is available by E-mail to The Cargo Letter.
OUR "D" Section: FF in Cyberspace
Air Commerce Magazine has announced a proposed session Itinerary for the Air Cargo Internet Symposium scheduled for April 22-24, 1997 at the JFK Int'l Airport Ramada Plaza Hotel. Updated Information will be available at the following URL: http://www.concentric.net/~aircargo/acis.htm
For information on attending, exhibiting, or sponsoring an event, contact
Conference Director, Journal of Commerce
2 World Trade Center, NY 10048
PH: (212) 837-7000
FAX: (212) 837-7043
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