The Cargo Letter
THE CARGO LETTER 
Air & Ocean Logistics - Customs Broker News
30 June 2001
Good Sunday evening from our Observation Deck......
overlooking the officially designated "Cargo
City" area and....... Runway 25-Right, at Los Angeles
International Airport, "Biggest Cargo Airport in The World*." Yes,
we are a day late.
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Michael S. McDaniel, Editor & Publisher, Countryman & McDaniel,
forwarder/broker attorneys at LAX.
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INDEX to The Cargo Letter:
OUR "A" Section: Trade, Financial & Inland News
1. Freight Forwarder Trade Briefs
2. The Cargo Letter Financial Page
OUR "B" Section: FF World Air News
3. Freight Forwarder World Air Briefs
OUR "C" Section: FF World Ocean News
4. FF World Ocean Briefs
5. The Cargo Letter Cargo Damage Dispatches
**Back By Popular Demand**
OUR "D" Section: FF in Cyberspace
OUR "E" Section: The Forwarder/Broker World
6. The Cargo Letter "Cyber Ports Of Call"
7. New U.S. Related Legal Cases
- Fritz UPS -- Debut .......... as on May 24
shareholders of logistics giant Fritz Co. Inc.
approved its acquisition by United Parcel Service in a deal
worth US$437M -- its common stock was delisted from the Nasdaq exchange,
and an era ended. No. 1 U.S. package-delivery firm UPS said
it plans to form a freight forwarding & customs
clearance business which will have annual revenues of
more than US$750M -- to include Fritz and 7 brokerage & forwarding
operations acquired over the past 18 months. The unit is not expected
to have a material impact on UPS earnings this year. UPS reported about
US$30B in revenue for fiscal year 2000. The company will offer full service
customs clearance services to shippers of all goods, not just small packages.
Now, UPS also means cargo.
- UPS Planning To Be Free .......... as the express
giant claims it is already taking steps to capitalize
on an expected upsurge in Int'l express freight when a
planned Americas Free Trade Agreement falls into place within the
next 7 years. The company is looking to consolidate its position by investing
in new logistics technologies & local freight carriers throughout
Latin America while also increasing its current flight
frequencies in the region. UPS has cited its recent
acquisition of Challenger Air Cargo as proof of its
Latin American ambitions.
- Mexican Road Block .......... as in a move that
surprised the Teamsters Union & business interests
on either side of the issue, the U.S. House of
Representatives voted 285-143 last week to bar the Transportation Dept.
from issuing safety permits that would let Mexican trucks operate throughout
the U.S. The Senate has yet to vote on the issue. As part of the 8-year-old
NAFTA, president Bush had announced plans to let Mexican trucks begin
making deliveries throughout this country starting next Jan. They currently
are restricted to a narrow commercial zone just north of the Mexican
border. Mexican President Vicente Fox has suggested Mexico could seal
its borders to U.S.-registered freight vehicles as a result
of the U.S.' continuing failure to comply with
provisions of NAFTA. The chess game continues.
- UPS Vindicated.......... as a federal appeals court
has overturned a 1999 ruling that said UPS illegally
used offshore companies as tax shelters, sending the
case back to U.S. Tax Court In 1983, UPS created a subsidiary in Bermuda
that was later called Overseas Partners Ltd., which was subsequently spun
off but remains owned by UPS employee-shareholders. Its purpose was to
provide reinsurance -- a way of spreading risk -- for UPS
packages insured for more than US$100. That
arrangement was found to be an illegal offshore tax
shelter by Tax Court Judge Robert P. Ruwe, who ruled on Aug. 9, 1999,
that UPS was "motivated by the reduction of federal
income tax" in what the judge called a "sham
transaction." But the 11th Circuit Court of Appeals said that
"the sophistication (of the insurance revisions) does not change the
fact that there was real business that served the genuine
need for customers."
The New Comish ..........as President Bush has
announced his nomination of Robert C. Bonner, a
partner with law firm Gibson, Dunn & Crutcher in
Los Angeles, on May 30 as the Treasury Department's next Commissioner
of Customs. The industry hopes that the new commissioner will be understanding
of trade issues, especially increased funding for Customs' future
computer system, the Automated Commercial Environment.
No More MSAS Global Logistics .......... as it has
completed the change of its legal name to Exel. MSAS
was the name of the logistics & freight-forwarding
arm of the Ocean Group, which merged with fellow British group
Exel last year. The name Exel is now used for the enlarged supply chain,
logistics, warehousing and forwarding group. The new Exel brand was announced
in July 2000, and has been progressively rolled out across the global
business, which operates in over 120 countries with more than 55,000 employees
at 1,300 locations in 120 countries.
Kuehne & Nagel Int'l Buys American .......... as
it has taken a major step forward in No. America with
an agreement to acquire USCO Logistics for US$300M,
plus an earn-out based on performance. USCO, a privately owned, non-asset-based
logistics management company, has more than 3,300 employees & manages
more than 1.5 million sq. meters of distribution center space in more
than 70 locations in the U.S., Canada & Mexico.
Jardine Also Buys Yankee ........ as Jardine Logistics
Group, a unit of Jardine Matheson Holdings, has
acquired Freight Solutions Int'l LLC, the U.S.
forwarder logistics company. Acquisition gives Jardine, which already
owned 40% of Freight Solutions, its 1st wholly owned and
controlled subsidiary in the U.S.
Schenker Will Add 10 .......... as in pursuit of an
expanded U.S. customer base, it plans 60 U.S. office
this year, up from the present 51. Schenker's goal is
to double its US revenue in 3 years, from the current US$550M.
To start, it has opened a 106,00-square-foot integrated logistics center
in Miami - its 1st in the U.S.
Japan, Inc: DOWN .......... as 2 of Japan's big
trading houses, which have traditionally handled
everything from noodles to missiles, are in talks to
tie up in a bid to slash costs. A tie-up between Mitsui & Co Ltd &
Sumitomo Corp, both members of vast business groups known as
"keiretsu," would be the latest in a string
of alliances among beleaguered trading houses, once a
powerful symbol of Japan Inc. With more & more Japanese manufacturers
venturing out on their own to procure goods, trading houses have
found their once cozy roles as Int'l middle men undercut, forcing them
to undertake drastic restructuring in the face of global
Sino - U.S. Up ......... as trade between China &
the U.S. grew steadily in the 1st 5 months of this
year, according to recent statistics released by
China's General Administration of Customs. China exported a total of
US$20.3B worth of commodities to the U.S., up 75 over same period last
year, while imports from the U.S. grew more than 20% to
US$10B in the five month period. In the same period,
foreign direct investment from the U.S. kept
increasing, with a contracted investment value of $2.8 billion and an
actual investment of $1.3B, growing 25% & 40%
Feeling Festive ......... as U.S. Court of Int'l Trade
in New York has ruled that imports of holiday table
linen items may be classified as "festive articles"
which are duty-free. In the case of "Park B. Smith, Ltd. vs. U.S.
[Slip. Op. 01-63]," the importer argued that hand-woven
cotton items such as placemats & napkins decorated
with party motifs were "festive" because they were
used by consumers on special occasions. U.S. Customs disagreed & classified
the items under tariff provisions that carried duty & quota. The court
also repudiated other Customs' limitations on fall & harvest season
party items by extending "festive" beyond
merchandise incorporating specific symbols, such as
jack-o'-lanterns & Santas. After the ruling, items bearing generalized
colors or patterns associated with a festive occasion qualify as duty-free.
OK, how about "Santa toasters" or "Easter Bunny T.V.
New To WTO ......... as the former Soviet Republic of
Lithuania, independent since 1991, has joined the WTO
as its 141st Member.
Trade In Tibet ....... as foreign trade is to rise
by 15% annually to US$266M by 2005, compared with
last year's $130M, according to Chinese government
sources. The region's gross domestic product (GDP) growth is projected
at 12% over the next 5 years. The central government is putting US$1 B
in to stimulate foreign trade in western areas. As the major beneficiary
of the fund, Tibet will use the cash to develop new export products,
such as traditional Tibetan medicine, mineral ore, timber, beer &
mineral water. Bring on that Tibetan brew! Free Tibet!
More Expensive UK Smoke ......... as anyone buying or
selling illegally imported cigarettes or hand rolling tobacco will be liable
for a fine of up to 5,000 pounds (US$7,020) starting June 30.
Here Come The Lawyers ......... as a trade battle is
shaping up over a law that lets American companies
pocket tens of millions of dollars in fines that the
government collects from foreign competitors. Foreign governments say
the law violates trade agreements & have started proceedings against the
U.S. in the WTO. If they win, they could cripple American
companies' ability to compete abroad by imposing fines
of their own on U.S. goods. The law, passed last year,
seeks to level the playing field for U.S. companies by giving
them money when the federal government determines foreign competitors
dumped their products in the U.S. at artificially low prices.
The 1st checks go out later this year. Critics
warn of a flood of litigation. "It encourages people in the private
bar to seek out cases. Ambulance-chasing. Not too many lawyers will be
able to resist what essentially is a bounty," said the American Assn.
of Exporters & Importers. The
law was written with the steel industry in mind, & steel dominates
the companies that have won trade complaints. Of 360 punitive
duty cases preliminarily qualified for payments, 46%
involve steel. The list of industries benefiting is
long: pasta, aspirin, garlic, tomatoes, uranium, & the
humble 4th of July sparkler. Diamond Sparkler of Youngstown, Ohio, the
only remaining American sparkler maker, won an unfair trade
complaint against its Chinese competitors, resulting
in the U.S. govt. slapping a punitive duty on imports.
"Even with the 94% duty, we're still getting killed,'' said Diamond
Sparkler. "We just can't compete with wages we have to pay." Under
the law, punitive duty money collected on sparklers imported
from China can go to Diamond instead of the U.S.
Treasury, as it did before. American companies must
apply to get the funds & put the money to an allowed
use, such as training, new technology, health benefits & pensions.
The law also lets unions apply for a share. The
European Union, Australia, Brazil, Chile, India, Indonesia, Japan, S.
Korea & Thailand have told the WTO that giving
trade-violation fines to competing companies violates
Int'l agreements. Even if the U.S. prevails with WTO,
-- in a separate challenge -- the Canadian govt. has
warned that if duties levied against Canadian or Mexican products
are given to competing American companies, Canada will claim a violation
of NAFTA. One to watch.
Hitting The Roadway ........... as Roadway Corp., with
tonnage levels down 13%-14%, sees continued weakness
in 2nd quarter. The national motor carrier attributed
the decline to continued weakness in the economy, which has
reduced business levels, particularly in the LTL portion of the company's
business. The decline will negatively impact results, with
Roadway's operating ratio expected to drop by about
1.5% of revenue. Earnings are projected to be 60% -70%
below those of 2nd quarter of 2000.
Hitting The Railway ........ as Transportacion
Maritima Mexicana S.A. de C.V. will acquire the
Mexican government's 24.6% share of Transportacion Ferroviaria
Mexicana S.A. de C.V. for US$168M. Kansas City Southern Railway Co.,
owns remaining shares of the Mexican railroad.
Was That Woman In The Room Your Wife? ............. as
CargoReservations.com has introduced a new Trading Rooms
feature to provide an additional communication option
for the list of 98 agents, brokers, carriers, 3PLs,
container freight stations & forwarders currently under contract
to use the system. Trading Rooms allow clients to create their own category-specific
meeting rooms, or join existing rooms to handle such tasks as
negotiating prices, discussing contingency plans or simply checking the status of a shipment. The company, which started in early
May, recently reached US$1M for total transactions.
The B2B is a neutral, real-time air cargo exchange
provider for brokers, carriers, forwarders, & 3PLs. We wish continued
Supply Delinked ........ as SupplyLinks, a logistics
electronic commerce B2B headed by former Emery
Worldwide & Circle Int'l CEO David Beatson, said
it shut down operations last week after being denied further funding
from investors. A funding deal worth more than US$6M fell apart after the lead investor pulled out. SupplyLinks was unable to find
an alternative. Visit quickly:
Rotten Vegetables ......... as the U.S. Dept. of
Agriculture has filed an action against Harvest Distributing Inc. for
"repeated & flagrant" violations of the Perishable
Agricultural Commodities Act. USDA alleges that the Jenison, Mich. company
failed to pay 24 sellers more than US$2.2M for perishable agricultural
commodities purchased in interstate commerce from May 1998 -- July 1999.
- Doing Time ........ as U.S. Customs seized 40,000 fake
designer watches from Hong Kong worth US$36M in the
biggest counterfeit bust of its kind in the U.S. Three
suspects, U.S. national Arman Chan Chun-man, his Filipino
wife Maria Uy, & Guatemalan Edwin Echevarria are charged with trafficking
in counterfeit goods & will appear in U.S. District Court at Los Angeles.
Among the fakes Rolex, Cartier, Armani, Omega & Technomarine. Investigators
found the huge haul in 2 storage facilities after an undercover probe
that began in Dec., when they intercepted a suspicious parcel from Hong
Kong containing counterfeit watch parts. The chief Customs
agent at LAX, Craig Ziegler, was quoted as saying the
counterfeit watches came with Hong Kong-made fake
certificates of authenticity. The U.S. estimates it loses about
US$100B from counterfeiting annually.
- Crouching Tiger Mosquito ......... as this bug known
to carry disease in Asia has been introduced into
Southern California, arriving in shipments of an
increasingly popular plant called "lucky bamboo." There have been no
documented cases of disease in the U.S. transmitted by the
Asian Tiger Mosquitoes, but viruses carried by the
insects have caused serious infections in Asia.
Mar. 31, 2001 (2000: US$7.1M). Operating profit more than quadrupled to
US$540M (US$119M). Turnover was up 3.8% at $13,143M (US$12,664M).
KLM has reported a net income for the fiscal year ended March 31, 2001 of
US$65.9M, or 1.61 euros ($1.38) per common share, a year-on-year increase
(before extraordinary items) of $63.4M. Operating income, which advanced by
$155.8M, nearly trebled to $237.1M. Return on capital employed improved from
3% to 5.7%.
FedEx. DOWN with net earnings of $113M, or 38 cents
per share for fiscal quarter ended May 31 -- down 54%.
That compares with earnings a year ago of US$245M, or
85 cents per share.
Intercontainer-Interfrigo (pan-European intermodal group
owned by European railroads) DOWN with a net
deficit of euro 1 million (about US$1M) for 2000,
compared to a net profit of euro 5 million in 1999.
Pacer Int'l (non-asset based North American 3rd party
logistics) DOWN. Gross revenue for the 1st quarter
ended April 6, of US$440.3M, up $131.7M or 43% from
US$308.6M for 1st quarter of 2000. The company's net income decreased
by US$4.8m from US$4.4M in 1st quarter 2000 to a loss of US$0.4M in the
1st quarter of 2001 -- result of reduced operating income 7 US$2.3M increase
in interest expense due to borrowings for acquisitions.
Senator Lines. UP with a net profit of US$17M on revenue
of US$1.35B in 2000, 1st profit since it was set up 14
years ago in Bremen!
- British Airways. UP with pretax profit of US$212M for the 12 months
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Written from wire stories, the Associated Press,
Reuters, Hong Kong Shipping News Lloyds & other world sources.