The Cargo Letter

THE CARGO LETTER [382]
Air & Ocean Logistics - Customs Broker News
29 October 2002

Good Tuesday Morning from our Observation Deck...... overlooking the officially designated "Cargo City" area and....... Runway 25-Right, at Los Angeles International Airport, voted "Best Cargo Airport in North America"

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Michael S. McDaniel, Editor & Publisher, Countryman & McDaniel, forwarder/broker attorneys at LAX.

INDEX to The Cargo Letter:

Top Story: U.S. West Coast Crisis |
Section A: Section: Trade, Financial & Inland News |
Section B: FF World Air News |
Section C: FF World Ocean News | Section D: FF in Cyberspace |
Section E: The Forwarder Broker World

Top Story: U.S. West Coast Crisis;

      **Christmas Grinch On The West Coast** Oct. 28 - LAX -- It may be an amazing coincidence that the day after Christmas is known as "Boxing Day" -- given that Dec. 26 is also the date on which the 90-day "cooling-of" period ends between the Pacific Maritime Assoc. & the Int'l Longshore Workers Union. Whether there will be any actual "Boxing" that day -- or actual movement of 20 ft. & 40 ft. boxes, is anyones guess? The negotiations with federal mediators broke off on Oct. 7, but resumed Oct. 24. No progress is reported.

     Charges - According to reports prepared by "the PMA & its member companies," container move productivity during the 1st week of the ILWU being back to work under a White House forced Taft-Hartley injunction fell 34% in Oakland, 20% in Portland, 27% in Seattle, 19% in Tacoma, & 9% in Los Angeles/Long Beach. "The figures are based on gross container moves per hour," the carrier assoc. said.

      Countercharges - The ILWU's Local 13 in Los Angeles responded with its own formal charges, claiming that the PMA is "sabotaging productivity" on the docks of West Coast ports. The ILWU's allegations were filed Oct. 16 with the Labor Relations Committee of the PMA & ILWU, a joint panel comprising representatives from the union & the PMA. "The PMA is systematically crippling productivity at the docks & blocking the movement of goods," said the president of Local 13. >> Said the ILWU, "The complaint focuses on the PMA's failure to act in 'good faith' under its obligation to file orders for proper manpower to staff the docks. On Oct. 11, the PMA claimed the ILWU had failed to fill crane operator orders placed by one of its members, SSA (Stevedoring Assn. of America). Yet representatives of the PMA admit that, on that very same day, SSA neglected to call in to work 26 of its 44 on-call crane operators, effectively leaving at home the manpower they claimed to so desperately need," a Local 13 statement said.

      The Feds - But federal prosecutors suggested Oct. 25 they are prepared to take the West Coast longshoremen's union to court to enforce a federal order that dockside work resume at a "normal pace" at the ports. PMA & ILWU met Oct. 24, with a federal mediator for 1st time in more than 2 weeks. That day, PMA sent a packet of statistics to prosecutors to bolster its earlier claim that the 10,500-member union had deliberately dragged down productivity by as much as 30%. ILWU filed a rebuttal with the U.S. Justice Dept. & said it would file supporting documents by Oct. 29. "They're just numbers," union spokesman Steve Stallone said, referring to depressed work rates the assn. said proved a slowdown. "There's no evidence backing it up. There's no way they can be independently verified." Stallone added. Federal prosecutors rejected the ILWU assertion that arbitration should be the 1st step to solve the current problem. Proscecutors said federal court would come first. This said, late reports are the union productivity started improving when federal prosecutors threatened action.

      The Mess - U.S. National Industrial Transportation League has asked the U.S. Customs Service to grant ocean carriers a waiver from the Jones Act to allow them to move thousands of stranded containers along the U.S. West Coast for a limited period. "The extraordinary circumstances created by closure of West Coast ports prompted the League ... to call upon the U.S. Customs to grant a limited exemption to the Jones Act," the NIT League said. The Jones Act prohibits foreign-flagged vessels to engage in coastwise movement of cargo between U.S. ports. However, transpacific carriers & shippers are now facing serious problems caused by the West Coast port dispute, as thousands of containers were discharged at the wrong port by carriers to avoid vessels getting caught in lengthy port delays. Hyundai & other non-U.S. carriers, are believed to have asked for permission to move containers between U.S. West Coast ports, but their requests were turned down by U.S. Customs.

      U.S. Customs said if an operator uses a vessel of the same shipping company to complete the voyage stopped by the lockout, the operator would not be in violation of Section 27 of the 1920 Merchant Marine Act, also known as the Jones Act. The Jones Act, however, requires that cargo in the U.S. coastal trades sail on U.S.-flag vessels. Waivers to the law are only allowed during times of national defense.

      More than 10,000 U.S.-bound containers unloaded at Ensenada & 7 other Mexican ports just between Sept. 27 & Oct. 6. Other 'West Coast" containers are all over the Caribbean.

      Detention - The chronic backlog now on the docks has rankled truckers, who suffered losses during the lockout & are now complain shipping lines are charging them rental fees (detention) for equipment they couldn't return on time. The fees can run US$44 each day for a container or truck chassis owned by the shipping lines, according to Stephanie Williams, a VP of the California Trucking Assn. "That's like Blockbuster Video taping up their video drop box and then saying, 'You owe us money," she said. (More on this, below in "5. FF World Ocean Briefs.")

      Airfreight Boom - The West Coast port crisis has led to air cargo freight rate increases ranging from 15 to 30%, depending on destination. Rates in Thailand are said have caused rates to rocket by as much as 80%, with cargo space fully booked. Atlas Air & its sister company, Polar Air Cargo flew a combined total of 60 additional charter flights this month, just during the actual 10 days of port closures.

      West Coast bound containers have been off-loaded by the carriers at Panama & ports all over the Caribbean under claims of "force mejure." Factory closures & job lay-offs continue to mount. However & whenever this crisis ends -- the economic toll on Asian shippers, ocean carriers & U.S. importers have & will be devastating. Learn The Viewpoints & Latest News:

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

Freight Forwarder Trade Briefs

• Vote For Us Anyway ........ as the U.S. Congress adjourned before Nov. elections without approving the "Port & Maritime Security Act of 2001." But on Oct. 25 a panel of former top government officials & other experts again warned that U.S. seaports, energy systems and food & water supplies are vulnerable to terror attacks despite government attempts since the Sept. 11 attacks to improve security. If the country does not deal urgently with its security shortcomings, the panel warned, the next attack could result in even greater casualties & widespread disruption to daily life & the economy. The panel's report said the need for action was made more pressing "by the prospect that the U.S. might go to war with Iraq & that Saddam Hussein might threaten the use of weapons of mass destruction" in the U.S. "America remains dangerously unprepared to prevent & respond to a catastrophic terrorist attack on U.S. soil,'' said the task force, chaired by former Sen. Warren Rudman, R-N.H., & Gary Hart, D-Colo. Rudman said legislation to create a Dept. of Homeland Security, which is stalled in Congress, should pass without delay, or lawmakers will pay a heavy price if another major attack occurs. "The time for action is now," Rudman said. More, CIA Director George Tenet warned 2 weeks ago that Osama bin Laden's al-Qaida terror network probably will attempt a strike against the U.S. soon, & the current situation is similar to what existed before the Sept. 11, 2001, attacksattend the Int'l event.
• FIATA 2002 On The Bosphorus ........ as delegates of the Int'l Federation of Freight Forwarders Associations (FIATA) assembled from around the world along the Bosphorus Straits at Istanbul, Turkey, for the 2002 World Congress -- theme: "Links -Beyond Six Continents" -- from Sept. 8 to 12, 2002 -- hosted by UTIKAD, the Turkish Int'l Freight Forwarders Assn. Issa Baluch was elected as the next president of the FIATA. Mr. Baluch is currently serving his 2nd consecutive term as senior VP, a position held since 1999. Mr. Baluch is the founder, chairman & CEO of the Swift Group. His term as FIATA president will begin Sept. 2003 when the next FIATA World Congress will be held in Bali, Indonesia. Based in Zurich, Switzerland, FIATA has over 40,000 corporate members from 150 countries & is the world's largest freight forwarding organization, employing around 8 - 10 million people. The U.S. delegates to the Istanbul gathering were: Doreen Bonnici, Norman Krieger, Inc. Douglas Browning, Deputy Commissioner of U.S. Customs Robert S. Kielbas, Roanoke Trade Services, Inc. Gary Klestad, Trans-World Shipping Corp. David Lucia, Security Cargo Network Michael S. McDaniel, Countryman & McDaniel Joel McGinley, Transcore Scott Moscrip, Internet Truckstop Faith Ozzdemir, TT Club Ian Saunder, U.S. Customs Service Robert Voltman, TIA Matthew Zehner, Roanoke Trade Services, Ins.
  www.fiata2002.org
• China Smiles ........ as exports in the month of Sept. grew 34.7% year-on-year to US$31.9Bn as demand for the country's goods continued to grow at a rapid rate thanks to increases in foreign investment & companies trying to get products exported out before anticipated problems at U.S. west coast ports, and the National Day holidays. China's Sept. imports stood at US$29.8Bn a rise of 36.1% over same month a year ago, according to the National Bureau of Statistics of China. Meanwhile, the PRC's 3rd quarter gross domestic product increased 8.1%, compared to same quarter in 2001, thanks to the opening of more foreign-owned factories on the mainland.
• America Frowns ........ as new orders for durable goods fell 5.9% in Sept, their steepest decline since Nov. 2001, the Commerce Dept. said Oct. 25. Logistics costs as a percentage of the U.S. gross domestic product declined to 9.5% in 2001 from 10.2% in 2000.
• Lowered Borders ........ as by the end of 2003, there will be 2,000 fewer jobs for freight forwarders & customs agents in the European Union than there are today. This is a direct result of the planned expansion of the EU. Eight east European nations, Cyprus & Malta may join by 2004. The EU said that Turkey is not yet "ready" for membership.
• Blame Canada ........ as American officials caution they may be forced to drastically slow trade across the northern U.S. border if the Canadian government relaxes its marijuana laws. The changes being considered by Prime Minister Jean Chretien's government would make the penalty for getting caught with a joint similar to a traffic ticket.
• You Asked For It ........ as U.S. Customs Commissioner Robert C. Bonner said the Office of Regulations & Rulings had met his challenge of eliminating the backlog of Ruling Requests by Sept. 30. Since Feb. 1, the office has issued more than 1,000 rulings, covering nearly all aspects of the customs laws including classification, valuation, special trade programs, country of origin, & drawback. "The trade has been very vocal about the need for reform," Bonner said -- a very great understatement. Today new Ruling Requests are being processed in less than 90 days, Customs says. Under the Customs Binding Rulings Program, importers can request a written ruling or advice on a range of issues. These include proper tariff classification, country of origin marking, eligibility for duty drawback, valuation, merchandise entry requirements & other transport related matters.
• Hezbollah Vuitton? ........ as sales from counterfeit clothing, jewelry & software, which have long funneled millions into the coffers of Int'l crime groups, now are suspected of helping to finance terrorism. Current estimates are that sales of counterfeit goods account for 5% to 7% of worldwide trade, possibly as much as a half-trillion dollars a year. U.S. officials said there is particular concern that a region in South America famous for counterfeit products may have ties to terrorism. The region near the borders of Paraguay, Brazil & Argentina has a large Arab population. Law enforcement officials said they are investigating multimillion-dollar counterfeit software operations based in Ciudad del Este, in eastern Paraguay. Some of the suspects are of Lebanese origin & were arrested by Paraguayan authorities based on information from the U.S. government, officials said.
• Scary Halloween For Costume Importers ........ as for years, imported costumes made from cloth - including the most popular characters sought by children, such as Spiderman or Cinderella -- moved freely through U.S. borders without being subject to tariffs or import quotas. Now, these goods, classified as "nondurable costumes", are at the center of a legal battle that's sending fright through the Halloween costume industry. Next year, prices might rise as much as 50% if a federal appeals court upholds a lower court ruling that these goods should be treated like regular apparel, subjecting them to duties of up to 30%. The dispute grows out of a case brought by New York-based Rubie's Costume Co., which sews most of its costumes in the U.S. but found it was getting slapped with duties from 10% to 16% on fabric it imported. For years, the U.S. Customs had defined nondurable Halloween costumes as duty-free "flimsy festive articles". While the quotas have been temporarily waived, importers have been getting hit with duties since last March, forcing costume suppliers either to absorb costs or share some of that burden with retailers, resulting in lower profits. Customs will refund those duties to importers if the appeals court rules in the importers' favor.
• Unsanitary Little Scheme ........ as the U.S. Dept. of Agriculture's Animal & Plant Health Inspection Service has ordered a Metairie, La.-based corporation & its principal officers to pay more than US$1M in fines. Crown Products Inc. president Kee Lee & VP Jeffrey Teague were sentenced to 5 years probation & each ordered to pay US$250,000 in fines, after pleading guilty to counterfeiting using Phytosanitary Certificates. The company, which exports agricultural commodities including dry beans & popcorn worldwide, was ordered to pay a separate fine of US$500,000. The false certificates were counterfeited in-house & signed by the company’s officers -- false representing USDA official signatures. Phytosanitary Certificates, with the USDA seal, are required for many agricultural exports. The document certifies that the plans or plant products listed on the certificate have been inspected according to appropriate procedures & are free of quarantine pests or diseases of concern to the importing country. Crown, Lee & Teague were also ordered to pay US$120,000 for the cost of the investigation, US$58,000 in restitution, & US$69,500 in fines.
• Getting Out ........ as USFreightways Corp., the Chicago-based trucking, freight forwarding & logistics group, said it is withdrawing from the freight forwarding business by selling these activities. GPS Logistics Inc. & Seko Worldwide Acquisition LLC have agreed to acquire USF Worldwide Inc. & USF Worldwide Logistics (U.K.) Ltd., USF's freight forwarding subsidiaries. Freight forwarding accounted for about 10% of USFreightways' group revenue of US$2.6Bn in 2001, and this line of business has been losing money. The company will now concentrate on its LTL, FTL & logistics operations.
• Goodnite To Overnite Strike ........ as the Int'l Brotherhood of Teamsters announced Oct. 24 the end of the 3 year "unfair labor practice" (ULP) strike against Overnite Transportation, trucking subsidiary of Union Pacific Corp. Teamsters local unions began the ULP strike on Oct. 24, 1999. In Feb. of 2002, the U. S. Court of Appeals for the 4th Circuit vacated a ruling it had previously issued upholding an NLRB decision that would have paid the Overnite workers more than US$3M in withheld wages & would have granted bargaining orders at ten Overnite terminals.
• Manhattan Associates Buys ........ as it has acquire Logistics.com"s assets for US$20M.
• Schenker Gets Joyau ........ as it will acquire the French logistics group, on undisclosed terms. Joyau is a leading logistics service providers in France, with annual sales of about US$250M, & about 2,500 employees in 53 locations. Schenker has operated as a logistics service provider in France from about 30 locations with about 900 employees.
• More Room At UTi Worldwide ........ as it has acquired Standard Corp., the Columbia, S.C.-based 3PL provider & operator of more than 10 million square feet of distribution space, mostly in the Southeast, for an initial payment of $45.5M in cash and $3M in UTi Worldwide restricted ordinary shares
• Too Late Now ........ as U.S. sales of heavy-duty trucks soared 39.7% in Sept. from a year earlier, as fleets continued to buy trucks with engines made before tougher federal emissions standards took effect Oct. 1.
• 700 More Miles For CN ........ as the Ontario, Canada government has directed the Ontario Northland Transportation Commission (ONTC) to negotiate the sale of ONTC's ONRail unit exclusively with Canadian National. ONRail, a unit of ONTC, an agency of the Ontario government, operates rail freight and passenger services over a 700-mile rail network serving Northeastern Ontario & Northwestern Quebec. Its primary connection with CN is at North Bay, Ont., approximately 200 miles north of Toronto.
• Now Sit Down & Shut Up ........ as Amtrak is ending the "satisfaction guarantee" program it introduced 2 years ago as a marketing maneuver to lure & keep passengers. The passenger railroad never met its goal of holding reimbursement requests to one per 1,000 passengers. "We found that most of the certificates we were issuing resulted from factors outside Amtrak's control -- things like delays on the freight railroads, or weather-related delays," said Amtrak. Overall, in the fiscal year that ended in Sept., about 4 passengers per 1,000 asked for service guarantee vouchers -- meaning 99.6% did not. www.amtrak.com
• New CNA Marine ........ as CNA has decided to reorganize its marine business in Canada. Eastern Marine Underwriters is reorganizing, the MGA that CNA acquired with the purchase of Maritime Insurance Company in 1998 and henceforth will use the brand "CNA Marine." The Maritime name will also disappear in Canada and all CNA's business will be underwritten by Continental Casualty Company.
• The Jury Smoked Him ........ as a Chicago lawyer was convicted of smuggling thousands of Cuban cigars into this country in violation of the 39-year-old trade embargo against the communist country. Richard "Mick" Connors, 53, was found guilty this month & could get up to 5 years in prison at sentencing Dec. 12. The federal jury took 5 hours to convict Connors of smuggling, trading with the enemy, conspiracy & lying to a passport officer. American citizens must have State Department permission to visit Cuba. Authorized visitors may bring back US$100 worth of goods including cigars for their own use but may not resell them here. Mick says he did not inhale.