_{The Cargo Letter}

1. Port Of L.A.'s Window On The World

• Los Angeles Charts Year Ahead

26 Jan. - LAX -- Port of Los Angeles Exec. Director Larry A. Keller provided a look into the Int'l trade community as it prepares to enter a new century of partnerships at the Port's 3rd annual forum last week. "By all accounts, the Asian financial crisis is still with us, but it has a distinctly different look than one year ago," Keller said. "There have been changes, but the overall situation appears to be stabilizing. In general, projections about the rate & extent of recovery for Asia vary. Consensus, however, appears to be that we will see complete recovery in 2 to 5 years. Thankfully, in some cases, the effects are beginning to flatten now." "This year will be pivotal as businesses around the world position themselves to take advantage of the opportunities of a recovering world economy.

During his presentation, Keller provided insights into the effects of the Asian financial crisis around the globe, including:

Korea -- "It appears that recovery is coming to those nations hit first -- Thailand & Korea among them. Korea, in particular, is seen by some economists as a success story for open and deregulated economic reform. In general, the Korean economy is showing clear signs of recovery in key economic data. "For the past two months, foreign exchange reserves have swelled to pre- crisis levels. That's good news to companies such as raw materials exporters for whom Korea was a major customer," added Keller.

Japan -- "Japan's role in the recovery is key, with that single nation's economy accounting for two-thirds of Asia's economic activity. Last April, the Japanese government announced an economic stimulus package worth 16 trillion Yen, but that package alone is widely viewed as not enough to put the Japanese economy back on track. "If Japan is unsuccessful in its recovery efforts, some experts predict a dire Japanese scenario. That would lead to an economic downturn which would be profoundly felt around the world.

Taiwan -- "Although the domino effect has been felt by Taiwan, that country has continued to drive technical innovation and capture markets. The backbone of the Taiwan economy -- its domestic small and medium-sized manufacturers -- is thriving. The first nine months of 1998 actually saw a decrease of more than 10% in the two-way trade between Taiwan and the U.S. This is unprecedented," Keller added.

Hong Kong -- "What has been described as the worst economic recession in 36 years is forcing Hong Kong to abandon its so-called 'high-roller, casino- style' economy and establish itself as a truly cosmopolitan city of China. In fact, some economists go still further and foresee Hong Kong's future role as servicing China's economy. "The image as a transient colony is gone. Hong Kong, in response, is developing its high-tech industry, but is behind Taiwan and Singapore at this point," Keller continued.

Vietnam -- "Southeast Asian nations anticipate slow recovery. Some countries, like Vietnam, have found new avenues for recovery. For example, despite floods and drought, grain production is up. Rice is now that country's largest growing export, up 7% in quantity and more than 18% in value. "The economic upswing has been somewhat slowed by socio-economic difficulties, but Vietnam is certainly an example of recovery despite natural disasters and other negative influences," Keller said.

South America -- "Brazil has been most severely impacted, while Argentina and Chile have so far ridden out the storm in better shape. If, as some predict, further financial 'combustion' occurs in Brazil, it could negatively affect its trading partners like Argentina and Mexico. "But Brazil's situation would not be expected to have the devastating worldwide domino effect of the Asian financial crisis of 18 months ago. South America is a very different situation with much privatization of trade policies and financing," said Keller.

Europe -- "We are now seeing the beginnings of a new order in global financial markets, with the launch of the Euro and the integration of Europe into a single economy. This should not be underestimated in the face of the Asian crisis. The potential benefits of the Euro are great: low inflation, balanced budgets and price stability, plus price transparency which should lead to greater competitiveness for European goods on world markets."

Southern California -- "Here in Southern California, the signs are good. Home sales are up. Unemployment is down. The Port of Los Angeles is recording huge increases in inbound cargo as our Asian partners seek to recover through manufacturing and exporting to take advantage of the strength of the dollar. Our exports are down as the same partners show significant decreases in their domestic buying power," added Keller.

For the full text of Larry Keller's presentation, visit the Port's Web site & click on "press releases." http://www.portla.com

OUR "A" Section: Trade, Financial & Inland News

2. Freight Forwarder Trade Briefs

• Internet & E-Commerce Take Center Stage .......... as the industry gathered at New Orleans on 17 Jan. to review the various practical and legal advances for these technologies in our industry. The 3rd annual 1999 Air Cargo & Logistics Internet Symposium, sponsored by The Journal of Commerce &the Usenet Air Cargo Newsgroup, once again drew senior cargo professionals from around the globe to discuss how the most powerful information tool on the planet can be harnessed to improve every aspect of your transportation business. Particular focus was upon U.S. ratification of Montreal Protocol IV, use of electronic air waybills, advanced industry software capabilities, new Customs procedures, the recently enacted European Data Privacy Directive, and special legal considerations for using E-technologies. The legal presentations were provided by Michael S. McDaniel, Esq. & Cameron W. Roberts, Esq. of the Countryman & McDaniel firm at LAX. For those who missed this important Int'l conference, a special web site entitled "The Freight Detective Internet & E-Commerce Center" has been created which features a wide range of resources, "how to" guides, digital signatures, Internet tools, Domain Name aids, Y2K solutions, legal texts, and conference speaker generated links to the emerging world of transportation in cyberspace. And don't miss the now wildly popular "Internet Gizmos" section ....... https://cargolaw.com/d.electronic_commerce.html
• The Cargo Letter Web Portal Forges Ahead ........... as users of the popular Internet features provided by the Countryman & McDaniel law firm now exceed 10,000 each month. Projections indicate this number will double during February. There are two important reasons for the success. First, the site provides a "one stop" portal to every aspect of the Int'l transport industry from general research to vessel schedules & 24 hour news. More than any other resource, this web site meets your needs. Second, all the hundreds of services are both free and ad free for faster browser loading. Just a few of the hundreds of services are:

  Main Page - Features include 24 hour breaking news
  Air Cargo Central
  Ocean & NVOCC Center
  Library & Search Engine of The Cargo Letter, from Interpool - your industry
  message board & library of past events
  Cargo Loss Prevention
  Law Navigator Guide To Int'l Shipping & Customs Laws
  Legal Research Center
  Photo Gallery of Cargo Loss
  TRANS-CAMS, live transportation cameras, satellites & air traffic control
  U.S. Customs Resource Center
  World Ocean Shipping Schedules
  24 Hour Reuters Shipping & Insurance News, courtesy of McMahon Shipping &Insurance Research Ltd.
  The Freight Detective General Index

• UPS Chief Fights "City Hall" .......... as UPS Chairman & CEO Jim Kelly told the World Economic Forum Annual Meeting last week that Government-owned monopolies in the telecommunications, energy & postal sectors pose serious threats to free trade. Citing antiquated air transport policies &customs procedures as additional barriers to open markets, he offered proposals that would begin to eliminate the obstacles. Government-run postal services offer the most "compelling" example of monopolies using their dominant position to limit competition, Kelly said, pointing to the U.S. Postal Service as an example. Such monopolies typically engage in self-serving & anti-competitive behavior. "Predatory pricing is one such behavior," Kelly said. "Another is the use of anti-competitive cross-subsidies, the use of revenues obtained from the monopoly market to subsidize activities in the non-monopoly market." He said "the most blatant anti-competitive practice" state-owned postal services employ is the use of monopoly profits for acquisitions. Postal services should not be able to use funds derived from their legal monopoly to justify expansion into new markets, Kelly said. "The inevitable result (of such practices) is less competition and fewer alternatives for businesses that need these vital services," he said. "The abuse of monopoly power must be a priority concern of businesses in every industry in every part of the world," and discussion of the issue should be included on the agenda of the European Commission, Kelly said. To stop the practice, Kelly proposed that all World Trade Organization (WTO) members adopt domestic laws on fair competition that pertain specifically to state monopolies. Half of WTO members do not have fair competition laws, and many of those who do have inadequate or non- existent enforcement mechanisms, he said. Kelly also called for changes in air transport policies. Under current policies, planning for air cargo routes and passenger service are combined, and that has led to protectionist policies that benefit no one, Kelly said. He called for a multilateral agreement to cover air cargo services alone. Antiquated customs procedures are costly to businesses and their customers, Kelly said. Some countries forbid package delivery companies from handling shipments above a certain value & weight; other countries limit how much a truck can carry. In both cases, Kelly said, businesses pay. He said that customs authorities worldwide should expedite the entry of goods into their countries. According to Kelly, a simple 1st step would be to raise duty-free thresholds around the world.
• "City Hall" Strikes Back .......... as German Parcel, the next-day parcel distributor for Germany, has been acquired by the British Post Office in its 1st such purchase outside the UK. German Parcel is the country's 3rd largest private organization of this type, handling 2 million parcels a day and with annual sales of US$410M. It also has a 23% stake in General Parcel, the pan-European parcel service. AND ...... Deutsche Post, the German postal service operator, is to buy a 90% stake in Italian express parcel company MIT.
• Meet "Paxis" .......... as the new company has been formed by GATX Logistics & Lockheed Martin Postal Systems to deliver parcels using the U.S. Postal Service (USPS) for residential delivery. The new venture offers comprehensive parcel consolidation & distribution services to the most economical point-of-entry into the USPS delivery system primarily for the ground business-to-residential parcel transportation market. Paxis services include basic parcel services of Internet-enabled track & trace, E-Data Interchange & parcel pickup. The estimated annual dollar value of the ground transportation parcel consolidation and distribution market ranges between US$3.5 & US$4B, with growth projected up to US$6B in 5 years. The new service is operational, with the 1st of eight facilities to be located in Chicago. http://www.gatx.com
• Fritz Orders New Chairs ......... as Fritz Cos. has appointed Raymond Smith chief operating officer, a co-member of the newly created "office of the chairman", and a member of the company's exec. committee, reporting to Lynn Fritz, chairman & CEO. Smith was vice president of U.S. Fleet Leasing and earlier spent 15 years with GE Capital. Brad Skinner has been named V.P. of sales, marketing & worldwide process development.
• New Circle Int'l Chair Follows Gilbert ........ as David I. Beatson becomes the 5th chairman of the board in Circle's 100 year history. Beatson succeeds Peter Gibert, who remains a member of the board. Beatson, 51, joined Circle in July 1998 as its president & CEO. In August 1998 he was named to Circle's board. Prior to joining Circle, Beatson was president & CEO of U.S.-based integrator Emery Worldwide. A 24-year industry veteran, Beatson joined Emery in 1991 as V.P. of sales & marketing, following executive management positions with American Airlines & CF AirFreight. He is a graduate of Ohio State University, where he earned a bachelor's degree in Marketing &Finance, and of the Univ. of Cincinnati, where he received his MBA. Circle recently purchased Concord Express to bolster its business at Singapore.
• New Robinson Slot .............. as C.H. Robinson Worldwide has named Joseph Mulvehill, 45, to the new position of V.P. of Int'l, to oversee all of C.H. Robinson's Int'l operations & coordinate its expansion. More, the company has acquired the European 3rd party logistics company Norminter S.A. of France, which provides transportation & logistics services within Europe and had combined annual net revenues of approximately US$5M in 1998.
• Union Gets CHB Chip Specialist ............ as Union-Transport has acquired G. M. Miller & Co. Int'l of San Francisco. Based at SFO, G. M. Miller executes more than 25,000 entries annually, on behalf of semiconductor- industry customers that export raw materials & import finished products between the U.S. & Asia, primarily Hong Kong, Taiwan, Singapore, Malaysia &Korea. Founded in 1972 by Gary M. Miller, the company employs 35 people &will operate as a division of Union-Transport.
• The Big Swiss Make A Big Plan ........... as Panalpina, the Swiss based forwarding giant says it & SAirLogistics are conducting talks "to find ways and means to intensify their cooperation." Panalpina is one of the world's largest forwarding & logistics companies and SAirLogistics, owned by Swissair parent SAirGroup, is set up to market Swissair's cargo capacity. Panalpina will not provide details of the negotiations, but said the discussions include joint development of integrated air freight services.
• Other Big Swiss Takes The "E" .......... as Swiss forwarder Danzas is the latest European company to start offering its customers the option of paying in Euros (although not introduced in cash form yet). This event is news worthy because Switzerland is neither a member of the European Union nor within the Euro Zone. However, the company says that nearly 70% of its business comes from nations within the zone. Lufthansa Cargo has also started to accept payments in the new currency. However, a recent survey in the British press revealed that although most forwarders were ready and able to deal in the new currency, few customers had established systems to trade in Euros. For example, Circle Int'l has received zero requests.
• U.K. Combination .......... as Tibbett & Britten Group plc has acquired controlling interest in Haulmark Europe Ltd, the Europe/UK intermodal freight concern.
• Schenker Expands .......... as it has increased the investment in BTL from 35% to 54,7% by purchasing shares in the market.
• India Gives BAX The Bird - Again .......... as BAX Global India Ltd. has won the country's prestigious "Golden Peacock" National Quality Award '98 in the service category for the 2nd year-in-a-row. The Golden Peacock National Quality Awards were introduced by the Institute of Directors in 1991 to promote quality practices among manufacturing & service organizations in India. Entries for the award are invited on an annual basis. The institute is a non-profit association.
• Con-Way Guarantees At A Price ........... as Con-Way Transportation Service's new guaranteed service for less-than-truckload (LTL) freight will pay a 20% premium over the standard rate. This follows the trend towards guaranteeing delivery times & improving service within the US domestic carrier market, for a price. Con-Way again leads the list of the most profitable LTL carriers for 1998, with expected operating income of US$200M.
• Bravo U.S. Customs! ........... as its Automated Export System, run jointly by Customs & the U.S. Bureau of the Census, has just been awarded a 1998 Government Technology Leadership award. AES is expected to save U.S. taxpayers US$16M in fiscal year 2000. The system significantly improves today's error-prone export statistics. Thus AES affects the development of trade statistics & trade negotiations, which in turn influence the stock market and the Gross National Product (GNP). Meanwhile, Customs says it lacks funds to continue development of its Automated Commercial Environment (ACE) and that it would discontinue the system by the end of January.
• SW Outbound Compliance Up .......... as U.S. Customs Service reports outbound compliance along the Southwest Border high. Just tabulated results from a late 1998 survey of 7 land border ports in Texas, Arizona and California showed 98.3% compliance with documentation requirements & 93.7% accuracy in documentation. "Accurate export statistics are vital to many parts of our economy," said Customs Outbound Process Owner Peter Baish. The 1998 Southwest Border Outbound Compliance Survey was conducted at the ports of Brownsville, Hidalgo, Laredo, and El Paso, Texas; Nogales, Arizona; & Tecate, and Otay Mesa, California. The survey was conducted over a 3 month period, August 1 to October 31, 1998. A total of 4,749 trucks were examined. The survey team detected some specific problems in export reporting: irregular hours of service for exports to Mexico, avoidance of sampling by some trucks who deliberately withdrew from Southbound traffic lanes (imagine that!), multiple crossing points within ports, & reported use of unauthorized illegal crossing points (we're shocked!).
• Shanghai Customs Crack Down ........... with the uncovering of 122 smuggling cases between June & Nov.,1998. Sources at the port report a hard line taken by customs authorities as a significant boost to the city's export figures. Measures against smugglers were stepped-up late in July of last year. High levels of smuggling in China have generally reduced import revenues. Last year officials seized US$1.7B worth of smuggled goods. Combined imports/exports passing through the port accounted for US$63.64B, an improvement of 8.5%.
• The "Brooklyn Dymburts" Loose Super Bowl XXXIII .......... as Lon Dymburt, age 51, of Coral Springs, Florida was arrested on January 26, 1999 when U.S. Customs Special Agents searched his business, "Discount Prints," in Brooklyn, and discovered several hundred T-shirts bearing marks of various NFL teams, including the champions of the 1998 AFC & NFC playoff games. Agents also seized equipment used to create imprinted fabrics & counterfeit marks, such as acetate negatives depicting 1999 NFL Super Bowl teams -- the Denver Broncos & Atlanta Falcons, and approximately 70 silk screens bearing the images of the N.Y. Jets, Minnesota Vikings, Green Bay Packers, the World Wrestling Federation, New World Order, and recording stars such as Black Sabbath, Kiss, Tori Amos, Celine Dion, & Shania Twain. Also found in Mr. Dymburt's possession was US$10K in cash & a 1998 NFL game schedule. Last January, just prior to Super Bowl 1998, Customs learned of 5 air shipments from Discount Prints to Denver containing garments bearing fake logos of NFL teams & 1998 Super Bowl participants. Based on this information, Customs executed a search warrant at the premises of Discount Prints which resulted in the seizure of large quantities of apparel bearing the protected marks. The 1998 investigation led to the current seizure & subsequent arrest of Mr. Dymburt. The charges are knowingly trafficking goods bearing a counterfeit mark, in violation of Title 18 U.S.C. 2320. Be aware.
• AmTrak To Enter The Biz ........... as Amtrak's passenger trains are going into the freight business to carry urgent packages, pull refrigerated cars & move freight under new business partnerships which are part of a mandate from the U.S. Congress that the railroad become financially self- sufficient by the end of 2002. The new deals include an agreement with Burlington Northern Santa Fe that will have Amtrak provide transport for UPS & 4 other carriers between Kansas City & Albuquerque on Amtrak's Southwest Chief; Expansion of an existing arrangement with the U. S. Postal Service to move mail on certain routes; Entering the refrigerated-carload business in a partnership with ExpressTrak Inc. of Michigan, between California & the Northeast, and between California & Florida; and Introduction of Amtrak's ``Premium Package Express'' service in conjunction with Dynamex, a same-day service which will move packages on Amtrak's Metroliners between New York &Washington, D.C. Expect more announcements. As to U.S. rail in general, 1998 was a record year in terms of total freight, with volume estimated at 1.376 trillion ton-miles, a rise of 1.8%. Intermodal traffic up 0.9% to total 8.773M trailers & containers. Canadian rails were off 3.7% in 1998.
• Chunnel Chuntinues ......... as 1998 saw a major boom period for the English Channel Tunnel in terms of both truck movements & rail freight. The year saw 704,666 trucks passing through the tunnel, a 175% increase on 1997's figure, due partly to the lifting of road freight limitations. Rail freight traffic going through the Chunnel increased by 7% to 3.1 million tons. Overall, freight going through the tunnel in 1998 accounted for 11 million tons, nearly twice that for 1997.
• Marco Polo Lives! .......... as a new rail container service has been launched between Rotterdam & N.W. China, with a transit time of 2-3 weeks, depending on the final destination. The Marco Polo Rail Express operated by Multimodal Logistics of Rotterdam calls at such popular vacations spots as Alataw-Shankou, Jinghe, Wusu, Urumqi, Turpan, Korla & Hami en Yumen, with connections to China via Druzba & Alma Ata.
• "Next Rest Stop 100 Miles" ........... as each year, approximately 5,000 lives are lost on America's highways in big-rig truck crashes. This is the equivalent of about 14 jumbo jet crashes. A new study conducted by the U.S. National Transportation Safety Board estimates that 30% to 40% of truck crashes can be attributed to truck driver fatigue. This is quite an ad for the more expensive "team driving" cargo solution.
• Dutch Transport Not Yet Net Savvy ............ as a new survey in the Netherlands confirms that only 25% of Dutch transportation companies use the Internet, while in the total business segment penetration degree of is much higher, at 36%.
• Not Too Y2K Ready ........... as according to the Y2K Special Report to Business 2.0, 15% of U.S. companies will suffer at least one mission critical failure on January 1, 2000. That's the good news. 33% of French & Mexican companies and 50% of Japanese & German companies will have similar problems.
• Amazon.com Goes Brick & Mortar............ as the Internet bookshop has announced the lease of a huge warehouse near Reno, a strategy shift for the company, which originally wanted to outsource its logistics.
• Andersen Confronts Supply Chain ......... as Andersen Consulting now offers a common framework for rapidly assessing supply chain opportunities within a given company in less than 4 weeks. This diagnostic tool, called the "Supply Chain Value Assessment" (SCVA), uses the Internet for options &decisions about procurement, manufacturing, product development &distribution. SCVA is claimed to use a web-enabled self-assessment tool that is analyzed & returned in less than 72 hours, and later links that information with the results gathered by Andersen, including answers to more than 200 questions & company rankings on 40 cross-industry key performance indicators. In practical terms, SCVA will help companies weigh the costs & benefits of crucial supply chain issues. http://www.ac.com
• Loss For The Journal ........... as Robert Rudolf Burkhardt, noted writer for The Journal of Commerce, has died from complications of a stroke. He was 81. He was a past president of the Aviation/Space Writers Association &the author of two books on airline regulation and was former editor &publisher of Air Cargo magazine. He joined The Journal of Commerce in the early 1970s & covered aviation for the publication until retiring about 1990.
• Main Brain Train? ............ as the 9th Annual Meeting & Exposition of the Intelligent Transportation Society of America (ITS America) will be held April 19-22, 1999, at the Marriott Wardman Park Hotel in Washington, D.C. More than 4,000 professionals in "intelligent transportation" from the U.S. &around the world are expected to attend. More than 100 exhibits will show how people are using these technologies to save lives, time, and money. The meeting theme is "New Thinking in Transportation." OK, but if they're so smart, why weren't we supplied with a contact phone number, or e-mail address?
• True Wisdom May Still Exist In U.S. .............. as Byte Magazine, the leading computer publication has made the following editorial comment: "Don't worry about the Apple Macintosh computer; I understand the Pilgrims' world market share was about 8% in the beginning, too." Indeed, it would not be an exaggeration to describe the history of the computer industry for the past decade as a massive effort to keep up with Apple." -Byte Magazine

3. The Cargo Letter Financial Page

• AEI, the forwarder, predicts DOWN with 4th quarter net income reduced 20% to 25% from the previous year.
• Air Alaska Air. UP with record 1998 net income of US$124.4M, or US$4.81 per diluted share, compared with net income of US$72.4M, or US$3.53 per share in 1997.
• Amer Reefer Co. DOWN for 1998 with a net loss of US$1.7M compared to a net profit of US$4.96M for the year ended Dec. 31, 1997 on higher revenue of US$17.3M compared to US$17.6M for the year ended Dec. 31, 1997.
• Atlas Air. UP with net income in the 4th quarter nearly doubled to a record US$18.1M from US$9.1M in 1997. Revenue rose 20.3% to US$145.5M. For the year, revenue increased 5% to US$422.2M, while net income jumped to US$46.2M from US$23.4M.
• Boeing Co. UP with 4th quarter net income of US$465M, compared with a year-earlier loss of US$498M. Revenue grew 45.8% to $17.1B, helped by 13 unexpected aircraft deliveries in the quarter. Net income for the year was US$1.1B, compared with a net loss of US$178M in 1997. Revenue grew 22.6% to US$56.2B.
• Continental Airlines. UP with all-time record annual pre-tax profit for 1998 of US$770M, exclusive of previously announced fleet charges. This is the 4th consecutive year of record pre-tax profits, a 20% increase from 1997's record annual pre-tax profit of US$640M.
• Eagle USA Airfreight. UP with record revenues &earnings for the 1st quarter ended December 31,1998. Revenues increased 48% to US$144.9M from US$97.6M in same period fiscal 1998. Net income for the quarter totaled US$7.7M, a 32%.
• Emery Worldwide. DOWN with 4th-quarter operating income slipped 65% to US$13M. Revenue decreased 4 % to US$598.9M. The company blamed a slowdown of economies around the world, increased competition & deliberate purging of unprofitable accounts. Full-year revenue was down 2% at US$2.2B, while operating income fell 44% to US$64.3M.
• J.B. Hunt Transport. UP with 4th quarter 1998 net earnings of US$10.9M, or diluted earnings per share of 30 cents, compared with 1997 fourth quarter earnings of US$7.0M or 19 cents per diluted share. Total revenue increased 19% to US$493.8M in the quarter from US$415.2M in 1997.
• Northwest Air. DOWN with a net loss of US$224M for the 3 months ended September 30, 1998, compared to net income of US$290M in 3rd quarter 1997. **Pittston BAX Group. DOWN with net income of US$10.7M (US$0.56 per share) for the 4th quarter ended Dec. 31, 1998 on revenue of US$481M. In the year earlier quarter, net income was US$13.2M (US$0.66 per share) on revenue of US$448M. Global revenue increased 7% in the current quarter due in large part to growth in Asia/Pacific operations & the acquisition of Air Transport Int'l in 2nd quarter 1998.
• Roadway Express. DOWN with reported revenues of US$2.65B for the year ended December 31, 1998, down 0.6 %, compared to revenues of US$2.67B in 1997. Revenue per ton, however, increased 1.1% versus last year. Net income for the year was US$26M or US$1.31 per share (diluted) compared with US$1.80 per share, for 1997. In 1998, business levels as indicated by total tonnage were 1.7% below 1997 levels, with less-than- truckload tons decreasing 2.3% & truckload tons increasing 0.8%.
• Union Pacific. UP with operating income of US$256M, compared with a year- earlier operating loss of US$72M. However, there was a net loss of US$189M, reflecting a write-down of accounting goodwill at its Overnite Transportation trucking unit, expected to be spun off soon.
• United Airlines. DOWN as 4th quarter earnings fell 18% to US$189M on revenues of US$4.28B.
• NW Strike Was A "Bad Thing" ......... as reports now confirm the 2 week pilot strike at Northwest Airlines contributed to a net loss of US$286M in 1998 or $300M in pre-tax losses. Operating revenue for the 4th quarter shrank to US$2.2B, off 11.2%. Cargo revenue fell by 20% for the year to US$789.4M, while cargo ton/miles decreased by 14.4%.

OUR "B" Section: FF World Air News

4. Freight Forwarder World Air Briefs

• Slower Int'l Air Express Growth ............ as the conclusion of as study by Air Cargo Management Group (ACMG), a US-based aviation consultant. 1998 total shipment volumes of Int'l air express traffic were up by 12% on the previous year's volume. This does not compare favorably to the average annual growth rate of 19% since the study was initiated in 1992. 1995 showed the best growth so far with a 23% increase on 1994's volumes. ACMG also said that among air express operators, FedEx was feeling the pinch with a growth rate of 10% for 1998 compared with the average of 12 to 15% for other major players in this sector.
• Emery Is All The Buzz ......... as it has announced new "guaranteed U.S. domestic cargo service". Here are details: Gold Priority 2nd Day (delivery by noon on the 2nd business day) & Gold Priority Deferred (delivery by 5 PM on the 4th business day) -- to the company's existing range of next- day guaranteed services. Gold Priority Plus (guaranteed delivery at a time specified by the customer), 0930 service (delivery by 9:30 AM the next business day) & Gold Priority AM (guaranteed delivery by noon the next business day).
• FAA Fails HAZMAT Pledge? ............. as Cleveland's Plain Dealer newspaper has charged that FAA officials have failed to keep a 1996 promise to better control hazardous materials shipped by air on cargo & passenger planes. The Federal Aviation Administration has issued fewer & smaller fines for violating rules, opting instead for more warning letters, the newspaper reported, citing agency records. In response, FAA says 1,133 problems were reported in 1997. As of the end of August 1998, there were more than 1,600. The number of reported violations has increased because of agency improvements, including increasing the number of staff members, according to the FAA response to these charges.
• New Chek Lap Kok Heads To Roll ............ as the airports bosses were accused this week of misleading the government and blamed for negligence in the disastrous opening of Hong Kong's airport last July, as reported in The Cargo Letter [331]. The opening of US$20B Chek Lap Kok Airport had been planned as a gala event to showcase Hong Kong's bright future, but disintegrated into a huge embarrassment as computers failed, flights were delayed, baggage disappeared and cargo stopped. In all, the chaos caused some US$372M in losses. The new charges blame the problems on ``inadequate communication'' between the government & the Airport Authority, as well as overconfidence on the part of a main cargo handler. Airport bosses gave ``inadequate or even misleading information'' on the facility's readiness to open on July 6, said a spokesman. The report, which did not specify which officials were to blame, also pointed to negligence & mismanagement by the government, saying it failed to act quickly and made things worse by not delaying the opening. 25 remaining problems were cited, such as broken escalators, rats in the airport, toilets that won't flush & public telephones that don't work. Meanwhile, the Chek Lap Kok has just won the annual Critics' Choice Award in "Travel & Leisure Magazine" for best Int'l airport. Go figure.
• Bigger Big Apple ......... as the Port of New York & Jersey Port Authority have announced plans to expand cargo operations at the city's JFK &Newark airports. The two handled a combined total of 3M tons of air cargo in 1998, and foresee strong growth resulting from the expansion plans. JFK is to get 2 new cargo buildings in the north cargo area. One is to be a 240,000 square-foot cargo building with an adjacent 32,000 square-foot services- support building. The other is a 155,000 square-foot multi-tenant building. Continental Air will soon begin construction of a100,000 square foot cargo building in the north cargo area of JFK. Newark will add US$17M in new facilities. Meanwhile in the U.S. Northeast, Boston's Logan Int'l continues it's US$1B expansion project, begun in 1995, which is now due for completion in 2003.
• American Air Playing With Dynamite? ............ as American Airlines Cargo & TNT, the EU express company, have announced a worldwide Airline Service Level Agreement (ASLA) as part of a new partnership. Among the features of the new agreement are blocked-space availability, handling priority & binding agreements regarding flight schedules. Meanwhile, TNT has acquired Tranjato, the leading domestic express company in Portugal.
• UAL Catches Up .......... as beginning March 2, United Airlines Cargo will inaugurate freighter service between JFK & the Pacific Rim. Now heavily back in the air cargo business with dedicated freighters, United will operate service between Chicago, New York, Los Angeles, Tokyo, Osaka & Manila through its Anchorage hub. The freighter schedule adjustment also includes suspension of service to San Francisco & Taipei, where United will continue to provide service with daily nonstop Boeing 747-400 passenger service. UAL flew nearly 3 billion cargo ton miles in 1998. In other news, United is understood to be interested in acquiring America West Airlines.
• Mercury Air Cargo ......... has been appointed exclusive general cargo sales agent for China Southern Airlines in the U.S. & Mexico. The company will also now handle for Cathay Pacific at LAX.
• Air France IPO .......... as the French government has partial the partial privatization of airline Air France. Paris stated that in the coming weeks it will offer 32 million shares, or 17.4% of the total equity.
• Not So Fast .......... as the European Commission will open an investigation into the proposed acquisition by KLM of the 50% of the shares in Martinair Holland NV, one of the main Dutch charter airlines, that it does not already own.
• And Now A Word From Kent ......... as the UK's Kent Int'l Airport, also known as Manston, wants your business by emphasizing its closeness to continental Europe, its congestion-free skies & lower charges to airfreight operators looking to move to the UK or move their cargo operations there from other airports in the country. The airport, on the site of a former military base, is to buy an additional 660 acres from the military authorities in March. The airport is planning to invest heavily in infrastructure support with plans for additional cargo handling facilities & warehousing. Manston's charges for handling perishable goods are nearly 1/3 less the price of those levied at LHR & Gatwick & pallet-building charges are also significantly cheaper. There are plans to reduce landing fees once the major land purchase from the British military authorities has gone ahead. The first 11 months of 1998 saw the airport record a throughput of 4,700 tons.
• Unhappy Landings .......... as the Assn. of European Airlines has criticized increases in European airport take-off & landing charges as "unfair and unnecessary". The charges have been levied to compensate for the loss of intra-European Union duty-free sales. The situation has come about after national regulatory bodies allowed airports to raise charges, as for example, charges at Copenhagen airport increased by 15% on 1 Jan. The association says the fees are unfair & that airports could save substantial sums by cutting their costs.
• Arrow Air Sets A Schedule ........... as last week the MIA carrier added scheduled service linking Miami with Panama City, Panama, & San Jose, Costa Rica. Previously served on a charter basis for some years, increased demand resulted in a 3 x week fixed schedule.
• Checking The FedEx Man? ......... as it is now the "Official Express Delivery Service of the Nat'l Hockey League (NHL) & the NHLPA."
• Trouble In The Tail ............ as the FAA has issued a directive to B747-200 operators that requires them to stop using the tail section fuel tank because of a potential fire hazard. For the 246 aircraft involved, this could have serious implications for cargo capacity on long haul flights. Carriers will have to change their operations either by including fuel stops in their schedules, or reducing cargo loads so that flights may be completed non-stop. Evergreen, Kitty Hawk, FedEx, DHL, & American Int'l will all have to take action under the directive, which is expected to cost in the region of US$78,000 per aircraft. In total, the directive may cost the airfreight industry upwards of $12.5M. .
• Bar The Door & The Floor .......... as the FAA has ordered repairs to 160 converted B727-200 freighters operating in the U.S. domestic market. Joints in the fuselage near the main cargo doors of the aircraft must be fixed after recent reports that they have been showing signs of corrosion. More, airlines must make reductions from 8,000 pounds per container to 3,000 pounds as cargo floors of the converted aircraft are not strong enough. About 1/3 of the Kitty Hawk fleet is affected, but not Atlas Air given it's all B-747 fleet.
• U.S. Makes It Through '98 ........... as U.S. airline & commuter carriers flew 615 million passengers in 1998, and for the 1st time in the history of U.S. commercial aviation, they did so without a single passenger fatality. In at least 2 other years no one died in the crash of a U.S. jetliner, most recently 1993. But since the National Transportation Safety Board began compiling statistics in 1967, such zeros have always been offset by deaths in smaller, generally propeller-driven, commuter airplanes. In 1998, however, no passenger died in an accident involving a scheduled U.S. commercial flight.
• Volumes: IATA's statistical overview shows that, in 1997, the Emirates' Sky Cargo freighters achieved a weight load factor of 92.3%, placing Emirates at the top of a list of 30 Int'l airlines according to weight load factor (and voted Best Int'l Airline by readers of the London Daily Telegraph). American Airlines Cargo reports freight ton miles (FTMs) for December were 116.8 million, down 3.5% year over year, while FTMs for the year were 1.6 billion, down 2.3% year over year & cargo ton miles for the year were just under 2 billion, down 2.8% year over year.

OUR "C" Section: FF World Ocean News

5. Freight Forwarder World Ocean Briefs

• Sea-Maersk? ........... as rumors abound that Maersk will acquire Sea- Land. Sea-Land Sr. V.P. Chuck Raymond was recently quoted that there is "fertile ground for rumors to be propagated'.
• Industry Group Cool Toward FMC Reg Proposals ............ as the Ocean Carrier Working Group says that the FMC's new rules are not in keeping with the spirit of deregulation of the Ocean Shipping Reform Act. The group is concerned with the way that service contracts are filed or the way that they must report the number of contracts awarded or rejected to the FMC. Carrier agreements that represent a large market share are to be subject to extra regulations. The group is particularly critical of the FMC's plans to limit the breadth of voluntary restrictions that carriers want to set with regard to service contracts. FMC will meet again on 18 Feb. to finalize details for implementing the new act. All rules must be in place by 1 March & ready for introduction on 1 May.
• No Jones Act Changes Seen ........... as the Chairman of the U.S. Congress Coast Guard & Marine Transportation Subcommittee, Rep Wayne T Gilchrest, says that the group has no intention of revising the protectionist Jones Act which stipulates that vessels engaged in US domestic trade must be US-owned, US-flagged, US-crewed & US-built.
• U.S. Blasts Proposed PRC Can Regs .............. as the U.S. has expressed its serious concern with China's new proposals to regulate container shipping & urged it to cancel the regulation pan before it takes effect. The U.S. Maritime Administration says the regulations represent an unprecedented attempt to control the activities of the Int'l shipping market. "The message is that these are anticompetitive measures which can only be unfavorable to China's foreign commerce and our own," said Maritime Administrator Clyde Hart in his 22 January dispatch to Hong Shanxiang, vice minister of Beijing's Ministry of Communications. According to Hart, the proposals would give the Chinese government broad authority to approve rates, tariffs, service contracts, B/Ls & other contracting terms. These powers deviate substantially from the most recent U.S.-China shipping agreement, Hart said. "I urge you to withdraw them." The regs would also require U.S. & other foreign carriers to provide confidential business information. The China plan would obviously conflict with the new U.S. Ocean Shipping Reform Act 1998 (OSRA), which also takes effect this May. Full OSRA details in The Cargo Letter [333]. The Japanese Government has now joined the U.S. in demanding withdrawal of the proposed regs, stating that they could hinder fair & open competition in the Int'l market. Japan feels that that B/L registration would lead to burdensome procedures, which would increase transport carriers' costs and condemned the freight rate assessment system as excess intervention.
• NCBFAA Plan Takes Shape .......... as the National Customs Brokers &Forwarders Assn. of America has selected Worldwide Logistics Associates to manage the shippers' association it plans to set up. NCBFAA is still awaiting final word from the Federal Maritime Commission about whether forwarders can create a shippers' association.
• Going Down In The Atlantic .......... as members of the Trans Atlantic Conference Agreement (TACA) are lowering rates starting 1 February, with a minimum of US$ 500 to US$ 600 per 40' container. The tariffs on 1 February will range from US$ 825 to US$1,275 per 40' container.
• Going Up In The Pacific .......... as lines on the westbound Far East / Europe container route will again raise rates around Chinese New Year on 18 February. The occasion usually marks a peak period which is expected to be even busier than normal this year. Rates are already US$300 - US$500 per TEU more than they were during the corresponding period in 1998. Presently, rates are US$900 - US$1,300 per TEU band with no signs of leveling-off. Recent rises on the trade have forced NVOCCs to re-negotiate contracts with unwilling shippers. If the shippers refuse to accept the rate hikes, which are usually enforced with minimal notice, the forwarders must shoulder the costs themselves. NVOCCs have been further angered as some carriers are following a practice not to inform them of the new rates until they receive the container, instead of telling forwarders when they are making the booking.
• Your PC Could Foil Pirates ......... as London-based international anti-piracy and maritime crime agency ICC Int'l Maritime Bureau (IMB) has linked up with French company Collecte Localisation Satellites to launch a new, low-cost vessel tracking system. SHIPLOC, is claimed to be capable of the instant location of a vessel at sea or in port. IMB says that SHIPLOC has been developed for maritime use from a well-established satellite-based tracking system, ARGOS. At between US$150 and US$310 a month, the devise is relatively inexpensive. The only equipment needed by the shipowner is a PC with Internet access."The problem of vessel hijackings and the subsequent disappearance of vessels has been particularly acute in Asian waters. Recently, The 5,193 dwt general cargoship M/V Hong Peng, operated by Chinese owner Hainan Hongda Shipping Co, has not been seen since it left Hong Kong, bound for Taiwan, on Dec 28. Meanwhile it has emerged that the alleged hijackers of the 16,785 dwt M/V Cheung Son, (whose crew of 23 were murdered in what looks like the 2nd case of mass murder by pirates in a matter of weeks), have been arrested in China, but the vessel itself is still missing.
• NYK Doth Protest ............ as it has appealed to the European Court against the decision by the European Commission in Brussels to impose a ECU20.63 million fine against it for alleged anti-competitive offenses. NYK's main objection is that the fine represents 7.5% of the total fines placed on the 15 members of the Trans-Atlantic Conference Agreement (TACA). NYK's share of the trade is in the region of 1%.
• Hapag-Lloyd Decides To Buy ............ with a major container spending spree to have its own boxes rather than lease them, as this is said to provide a greater degree of control over repair standards & costs. The line currently owns 80% of the boxes carried on its ships and will add 40,000 TEUs to the 70,000 20-foot & 85,000 40-foot containers currently in inventory. With the Asian regional turmoil box stocks were growing faster than volumes, but the company aims to redress this situation by maximizing efficiency & shortening box round-trip times.
• The New Guys At Zim .......... as through the purchase of a controlling share in holding company Israel Corp. from the Eisenberg family, Israeli tycoons Sammy and Yuli Ofer have acquired 48.9% of Zim Israel Navigation Co.
• Going Deeper To Get Your Biz .......... as the Port of New York & New Jersey Authority has stepped up its bid to become a deep-water hub port with a US$733M plan to deepen 2 primary navigation channels, and the launch of a multibillion-dollar modernization strategy. The port predicts a shift away from the West Coast to the East Coast, as moving containers from Asia by landbridge via load centers such as Los Angeles becomes less attractive than using all-water routes through the Suez Canal.
• Coastie Cargo Meeting Today ........... as U.S. Coast Guard will hold a public meeting to discuss potential standards for securing cargo on certain vessels operating in U.S. waters, today, Feb. 3 from 12 p.m. to 4 p.m. at the U.S. Coast Guard HQ, Transport Building, 2100 Second Street S.W., Washington, DC.. New standards under consideration would apply to vessels carrying general cargo and hazardous materials while engaged in Int'l and/or U.S. domestic trade. They are aimed at reducing the risk of serious injury or death, vessel loss, property damage, & environmental damage caused by improperly secured cargo aboard a vessel. NOTE: The U.S. Coast Guard has fired a warning shot with threats to close ports to carriers that don't get their Y2K problems fixed before 2000. http://www.access.gpo.gov/su-docs/aces/acesl4O.htm
• "San Diego" Mystery Solved ......... as formerly classified Russian documents, released last week, show that a bomb planted by a German spy, not a mine, sank the U.S.S. San Diego off Long Island, N.Y., in 1918, a University of North Carolina historian said. For more than 80 years, no one has known for certain what sank the 503-foot U.S. Navy battle cruiser 11 miles off the Long Island coast on July 19, 1918, as it steamed toward Europe during World War I.
• The Buck Stopped Here ............ as a U.S. Dollar bill served as inspiration for the crew of container vessel M/V Delta Pride. Before making its way to the Texas coast, the Delta Pride spent 5 months in Tampico, Mexico, after its owner, Tri-star Shipping Lines of Karachi, went bankrupt. Mexican officials seized the ship's documents & crew's passports because of a financial dispute. While the ship was stranded off Mexico, crew members drank rainwater they collected and ate fish they caught. The captain said that he was inspired to turn the vessel northward toward the U.S. after he found a $10 U.S. bill on board and read the words, ``In God We Trust.'' The ship sailed into U.S. waters Nov. 24, but it was denied permission to enter the Port of Brownsville because it lacked a certificate of financial responsibility that guarantees the ship's owner pays if the vessel causes environmental damage. The week, the first of 23 stranded Pakistani sailors aboard the crippled cargo ship have come ashore. Crew of the Delta Pride have survived on donations of food, drinking water, medicine and other supplies before the U.S. Coast Guard last Wednesday permitted the 1st two of the sailors to step foot on Texas soil due to their poor medical conditions. Ultimate fates of the crew & vessel are unknown.
• Indian Garage Sale ......... as auctioning of undelivered containers at inland container depots by the Container Corporation of India, has earned approximately US$1M (of which customs gets 1/3), over twice the freight auctioned last year.
• Throughput: Trade between China & the EU was worth a total of $48.9B in 1998, up by 13.5%. Singapore to 15 million Teu in 1998, a 7% increase in container volume for 1998. Ecuador's port of Guayaquil retains the title of busiest port on the west coast of the continent with 400,000 TEUs in 1998, having recorded 376,000 TEUs in 1997 to beat Chile's San Antonio to top spot. Sydney's throughput amounted to 800,778 TEUs, a 9.6% rise over 1996-97. Korea's main port, Busan, saw a marked increase in the 1st nine months of 1998, up from 3.87 million TEUs for the same period for 1997 to 4.28 million TEUs, an increase of 10.5%. Of this, inbound 1.6 million TEUs (up 8.9%) outbound TEUs made up 1.8 million TEUs (up 13.5%) & transshipment 0.9 million TEUs (up 7.3%). Hong Kong had imports of 1.1 million TEUs recorded for 3rd quarter 1998, a fall of 14% compared with 3rd quarter 1997, and 1.4 million TEUs of exports were recorded, a fall of 5%. Shanghai becomes the world's No. 10 port having doubled its handling capacity in only 3 years, with 21% growth in 1998 over 1997, and a total throughput of 3.05 million TEUs. Bremerhaven last year increased 7%, to 1.82 million TEUs. Rotterdam rose in 1998 to 315.5 million tons,1.5% more than last year & with the number of containers showing another sharp rise: from 5.5 to 6 million TEU.

OUR "D" Section: FF in Cyberspace

6. The Cargo Letter "Cyber Ports Of Call"

Here are our suggested world wide web sites of the week for your business, your information and your amusement ...............

World Ocean Shipping Schedules
https://cargolaw.com/ocean%26nvocc.html.htm

Cargo Container Loss Prevention Devices .......... from CGM, includes use of GPS technology. A wide array of tamper evident devices specifically designed for cargo. These products identify pilferage before custody changes hands. They act as a visual template for inspection while offering deterrent value in a way that no other loss prevention products do.
http://www.tamper.com/

Global Trak ........ satellite tracking devices. MobilTrak to track on a real time basis & access remote computerized data from reefers.
http://www.kidtrak.com/

Roadway Express .......... opens new desktop tracking & e-commerce system.
http://www.roadway.com

iShip.com .......... new Web-based shipping service for e-commerce buyers &sellers, offers a complete e-commerce shipping solution, including multi- carrier rate and service comparisons & integrated shipping and tracking capabilities, at the convenience of one Web site.
http://www.iship.com

McHugh Software ............. as Sea-Land has gone live with its "TRACS", McHugh's transportation management system
http://www.mchugh.com

Royal FloMex Line ......... the latest Ro/Ro service between Tampa Bay, Florida to Puerto Morelos & Port of Progreso, Mexico
http://www.FloMex.com/

Customs Broker Exam Prep Course ......... New York, March 1999. Double your chances!
http://www.tradeexpert.com/prep1.htm

FLOW ........ the company will supply all your needs for shipping bulk water, if you have such needs.
http://www.flowinc.com

World Sourcing Ltd., LLC ........product sourcing, international trading, logistics & distribution, promotional items, all types of general merchandise.
http://www.worldsourcing.com

OUR "E" Section: The Forwarder/Broker World

7. New U.S. Transport Related Legal Cases

Argued Before the United States Supreme Court in Jan. 1999
United States Vs. Haggar Apparel Company
No. 97-2044
Court below: United States Court of Appeals, Federal Circuit

The issue in this tariff law case is whether regulations issued by the Treasury Department under the Tariff Act are entitled to deference in determining the proper tariff classification for imported goods and, specifically, whether 19 CFR s 10.16(c) reasonably interprets the statutory phrase "operations incidental to the assembly process" in Subheading 9802.80 of the Harmonized Tariff Schedule of the United States to exclude the "permapressing" of items of clothing assembled abroad. Facts: Haggar brought suit to recover customs duties paid under protest in 1988 and 1989 resulting from the "permapressing" (a process of chemically treating and pressing garments to make them "wrinkle-free") of its garments in Mexico. The Treasury Department specifically excludes duty allowances for "permapressing" because of the chemical treating process. The court below denied deference to Treasury Dept. regulations and held Haggar's process to be incidental to the entire assembly process, and therefore Haggar is entitled to a duty allowance. Decision pending.

Decided by the United States Supreme Court in Jan. 1999
El Al Israel Airlines Vs. Tseng
No. 97-475

The U.S. Supreme Court reversed the 2nd Circuit Court of Appeals (8-1, opinion by Ginsburg; dissent by Stevens) and held that the Warsaw Convention precludes an airline passenger from maintaining an action for personal injury damages under local law when her claim does not satisfy the conditions for liability under the Convention. Tseng, an El Al passenger, was subjected to an intrusive security search in New York before boarding a plane. The Warsaw Convention (Article 17) awards damages to a victim of an "accident" in international air traffic. The Court reasoned that since Tseng suffered no bodily injury, she was not covered under Article 17 and that recourse to local law would undermine the uniform regulation of air carrier liability that the Convention was designed to foster. Full text: http://supct.cornell.law.edu/supct/html/97-475.ZS.html

Decided by the 9th Circuit Court of Appeal in Jan. 1999
U.S. Customs
United States Vs. $273,969.04 U.S. Currency
No. 95-55882

Holding: The 9th Circuit held that the civil forfeiture of $273,969.04 in currency & US$117,550 in jewelry under 31 U.S.C. sec. 5317 was not punitive for the purposes of the Double Jeopardy Clause; that the forfeiture of the jewelry did not violate the Excessive Fines Clause; and that the record was not sufficiently developed to determine whether the forfeiture of the currency was excessive.

FACTS: Ms. Puzo failed to disclose to U.S. Customs that she was carrying US$273,969.04 in currency & four pieces of jewelry valued at US$117,550.00. Puzo plead guilty to 18 U.S.C. sec. 1001 and was sentenced. The U.S. brought this civil forfeiture action in rem against the currency under 31 U.S.C. sec. 5317. Puzo appealed summary judgment in favor of the U.S. arguing that the forfeiture violated the Double Jeopardy Clause and the Excessive Fine Clause. AFFIRMED IN PART; VACATED AND REMANDED IN PART. Full text: http://caselaw.findlaw.com/cgi- bin/getcase.pl?court=9th&navby=case&no=9555882

Of The Ten Biggest U.S. Jury Verdicts I 1998:

Jury Verdict No. 9.] US$81M against UPS for sex discrimination against a female supervisor in Iowa (Channon v. United Parcel Service Inc., U.S.D.C. (D. Iowa) Feb. 12). For details of all the Top Ten: http://www.lawyersweekly.com

8. Beijing Allows Democratic Election in Small Town An Indicator of Political Change to Come in the PRC?

-- by Warren S. Levine, for The Cargo Letter

SEATTLE, Jan 28, 1999 -- A small town in Sichuan Province became the first known political subdivision in The People's Republic of China to hold free democratic elections when they elected Tan Xiaoqu, a member of the Communist Party, the leader of their local government. Tan received just over 50 percent of the votes in a four-candidate election.

Buyun, a town of about 16,000 people, 950 miles southwest of Beijing, is a collection of smaller villages, a remnant of the old collective system whose legacy continues along current political lines, except for this latest election. Over 6000 people cast votes in the election in this remote town, which received the hushed approval of the county-level government, and drew some unexpected poll-watchers from Beijing.

One farmer was quoted as saying, "Open democracy is better, of course. We need a leader with the spirit to really get things done. The taxes on each pig, and on other crops, make it almost impossible to make a living."

Tan Xiaoqu, the winner of the election, praised the process, saying, "What the people wanted was to select their own officials. If it turns out they can't manage things, only the masses can decide."

Most curious is that China's permission was given to Buyun to hold democratic elections at the same time dissidents are being cracked down upon and are in the news on an almost daily basis.

On the same day one newspaper criticized the free election as being illegal, the more change-oriented officials of the Central Committee of the Communist Party said that it was legal, because of a 1997 speech given by President Jiang Zemin in which he called for "electoral experiments."