Industry News
From The Cargo Letter

THE CARGO LETTER [291] Air & Ocean FF News For 6 Dec '95

Good Wed Morning from World Port L.A.! We are continuing to reformulate our approach and format in an effort to create a publication which is of value, interest and practical use to the FF community. [This explains why you haven't seen us quite as often]. There are more changes to come.....SO PlEASE BEAR with us. Your suggestions and contributions are appreciated! Become a contributor to The Cargo Letter.

Index to The Cargo Letter:

  1. OUR "A" Section: FF Finacial, Trade & Inland News
  2. Cargo Letter's Freight Forwarder STOCK WATCH
  3. Eagle Air Stock Soars 28% On First Flight
  4. SA Customs Reconsiders "In Bond" Cancellation
  5. Fritz Buys CARGOWAY To Aid Brazil Push
  6. FFWorld Trade & Inland Briefs
    OUR "B" Section: FF World Air News
  7. Japan's Air Market Remains Uncertain
  8. Burlington Air Buys Roadway Global Air
  9. Santa Works For AIA?
  10. FF World Air Briefs
    Our "C" Section: FF World Ocean News
  11. FF World Ocean Briefs
    OUR "C" Section: The FF Business Corner & Legal Tips

OUR "A" Section: FF Finacial, Trade & Inland News

1. Cargo Letter's Freight Forwarder STOCK WATCH

Here are this week's Stock Watch Report AND progress on our "Cargo Letter 10" portfolio. [portfolio represents $l000 purchase of each stock at close on 3 Nov 1995]

[INDEX: 1st & 2nd Number are last price & daily change............3rd & 4th Number represent how our $1000 investment in each stock is doing and our win/loss to date.]

Our "Cargo Letter 10" winner for the week is Delta Air, but there has been some leap frogging.......with none of our "Cargo Letter 10" being a clear break-out stock. We awaited a Fritz move after it's 2 for 1 split last month, but this has yet to happen. Intercargo Insurance Company once again lags behind the pack..........BUT we predict an upsurge for this stock in the next 60 days.

ABF          28 1/4       -3/8        -13.09      $986.20
AEIC         22 7/8       +1/4        +63.95     1,063.91
APS          24 5/8       -1/8         +5.10     1,004.94
DALpC        61 7/8       -1/4        +78.30     1,076.62
FDX          80 3/4     +2 7/8        -48.59       951.23
FRTZ         36           ----        -58.81       941.04
HARG         16 7/8       ----        -55.90       943.31
ICAR         8 3/8        +1/8       -255.53       744.37
IPX          16 7/8       +3/8         +7.46     1,007.43
MAX          8 1/2        ----       -128.20       871.76

ABF	[Airborne Express]
AEI	[Air Express International]
APS	[American President Lines]
DALpC	[Delta Airlines]
FDX	[Federal Express]
FRTZ	[Fritz Companies, Inc,]
HARG	[Circle International,Ince/The Harper Group]
ICAR	[INTERCARGO Insurance Company]
IPX	[Interpool -IPX]
MAX	[Mercury Air Cargo]

Ed Note: We are sorry for any inconvenience caused by our use of certain value errors in stated in our 20 November edition.

2. Eagle Air Stock Soars 28% On First Flight

Dec. 2--As previewed by The Cargo Letter in October 1995, Eagle USA Airfrieght went public this week and took an intial soar of 28% increase in value on friday. The issue was heavily subscribed by institutional investors.

This Houston-based FF & Svc company plans to use the money, among other things, to expand its U.S. network, upgrade its computer systems and start construction on a a $2.1 million warehouse and HQ near Houston Intercontinental Airport soon. The company was founded in 1984.

3. SA Customs Reconsiders "In Bond" Cancellation

By Pete Bower for The Cargo Letter in S. Africa

South Africa - 2 Dec - Following howls of protest from hauliers, container operators and forwarders the SA Cmmr of Customs has postponed the implementation of his temporary duty scheme for cargo transiting SA to & from neighbouring African countries. The plan was to cancel the *In Bond* concession and replace it with a scheme whereby forwarders and/or hauliers would have been required to lodge a deposit of duty at a rate of 125% of the actual duty. The deposit would have been refunded upon presentation of a copy of the processed bill of entry from the final country of importation and proof of the existence of real importers. This would have to be presented within 30 days or the forwarder/haulier would lose the SA duty deposit.

The Commissioner, threatened with a Supreme Court action to contest the legality of his plan, has agreed to talks with forwarders and others throughout the region and has delayed implementation until February. The talks will take place meanwhile to try and find ways to stamp out the widespread fraud involving transit traffic which caused the Commissioner to make such a draconian plan in the first place.

4. Fritz Buys CARGOWAY To Aid Brazil Push

SAN FRANCISCO---Fritz Companies, Inc. announcd this week its purchase of Cargoway Transportes Internacionais Ltda.'s customer base. The new asset will be applied to Fritz Trans-Shoes, a Fritz division dedicated to shoe manufacturers, retailers and other Brazilian exporters. Cargoway, founded in 1978, has four offices in Brazil & one in New York. This move makes Fritz Trans-Shoes one of the largest specialty FF the footwear and apparel industries in Brazil. This buy-in to a speciality market merly underscores the need for all FFs to focus on the obvious long term opportunites which have been targeted by the majors in this S. American market.

A primary account gained from the Fritz business acquisition is one of Brazil's largest department stores, Hermes Macedo. There are over 40 Hermes Macedo locations throughout Brazil.

5. FFWorld Trade & Inland Briefs

Mercosur Creates "The Hidrovia"______In another move which will help change the shipping face of South America, the Mercosur trade bloc-- Argentina, Brazil, Paraguay, and Uruguay-- are transforming the Paraguay-Parana River system from "canoe trail" to navigable waterway. The 3,200 Km route will cost US$1.2 billion over the next three years and directly connect product and agricultural wealth with the S.A. interior. Known as the "Hidrovia", this new commercial water course will stretch from Caceres, Brazil to Nueva Palmira, Uruguay. MAJOR winners from the construction will be historically land locked Paraguay and Bolivia. Bolivia's new "port city" of Quijarro will now be spared the increddible expense and delay of trucking from Santa Cruz.

American Commercial Barge Line Co. plans container operations and believes Hidrovia could become "The Mississippi River of South America". FF opportunnity?

South Orient R.R. Pushes South______ In a move said to be complicating the proposed Southern Pacific/Union Pacific merger, tiny South Orient R.R. is fighting for a twenty mile stretch of abandoned track that extends from Fort Worth to Grapevine, Texas. South Orient needs the track for extension of its operations to Dallas, and south to Chihuahua, Mexico. The move is opposed by both Grapevine city fathers and operators of what is called the "Tarantula Train", an Old West tourist steamer, which wants exclusive use. The dispute is headed for a classic Western shoot-out of tourists versus shippers.

OUR "B" Section: FF World Air News

6. Japan's Air Market Remains Uncertain

The next round of U.S./Japan air cargo negotiations concluded in Washington D.C. last week, but the outcome seems dependent upon point of view. U.S. Department of Transportation's spokesman reported "progress was made", but Japanese press reports stress "a large gap between what U.S. and Japanese airlines want".

Fed Ex was granted fly-through rights earlier this year to service routes between its Subic Hub and the rest of Asia, but that Japanese action came only under the threat of U.S. sanctions. JAL remains firm that Tokyo should not allow U.S. carriers to increase the number of on-carriage destinations after landing in Japan, but Fed Ex and Northwest believe such rights should be unlimited. The next round of talks is set for January 1996, but requested new routes for World Airways and Polar Air Cargo may already have been removed from the mix. Japan seems presently determined to continue protection for its domestic air cargo industry.

Meanwhile, JAL hints at a 10% rate increase on ex-U.S. up lifts commencing 1 February 1996 in order to keep pace with a similar increase announced by Nippon Cargo. Westbound Pacific rates are a far cry from those to Europe ex-Japan, however, as Air France bemoans its "unhealthy market" and greatly increased competition since the opening of Kansai International Airport in late 1994. Air France blames the Japanese recession which has caused spot shipments from Japan to form 70% of the market while consolidation is declined. This creates a situation where revenue is lost because some flights move empty while others are hopelessly overbooked.

As to FF's in the Japanese market, Fritz Companies announced this week its integration of operations between Intertrans Japan, Ltd. and Suzyo Fritz, Ltd., into a new organization which will be known as "Suzyo Fritz Logistics Services, Inc." Headquartered in Tokyo, the new Fritz organization will operate from an Osaka, Ibaraki, Nagoya and Fukuoka network.

7. Burlington Air Buys Roadway Global Air

As previewed by The Cargo Letter in early November, Burlington Air Express has bought assets of Roadway Global Air, but apparently will not hire its 1,000 employees in Indianapolis and Terre Haute where Roadway is centered. Indeed, Burlington plans to route any increased traffic through its freight sorting hub at Toledo, Ohio. The purchase price was not disclosed.

Roadway Services is said to have taken the move because air package delivery company has not lived up to expectations and likely would not be profitable until 2000...... it has lost $103 million and expects to take a $65 million charge on the sale.

American International Freight may be impacted by the sale and shift by Burlington to Toledo because it provided the major space for Roadway Global cargo and operates a sorting hub at Terre Haute.

8. Santa Works For AIA?

YPSILANTI - 2 Dec - For the third year in a row, American International Airways, Inc. (AIA) will provide the U.S. Postal Service with air transportation beginnning 9 December, and with ground handling services for second-day mail between 31 cities coast-to-coast during the holiday rush.

"Santa Service" will center at AIA's Blytheville, Ark. hub (formerly Eaker Air Force Base), and will deploy 34 aircraft, including B-747s, L-1011s, B-727s and DC-8s, to handle the 13-day assignment which calls for 52,785 statute miles per day, loggang 1,836.9 air hours. Over 600 temporary workers will be hired for ground handling assistance and an additional 159 AIA employees will be detailed to the Blytheville hub for the holiday rush period.

9. FF World Air Briefs

Fed Ex labor talks broke off 25 Nov after a 30 day cooling off period ended. Shippers continue to fear major delays as the paek holiday period approaches.

Air City"? ______Further to our 20 November story on Taiwan's hope of making Chiang Kai-Shek Imt'l Airport a major cargo fathers now have branded the project "Air City". Fed Ex remains interested in the site for coordination with it's Subic Bay "Memphis of the Pacific."

New Fritz Contract "DUPLICATES" Success____ Fritz Cos Inc has won a contract to handle North American document logistics business of Xerox after a year-long trial programme in which it competed with other major freight forwarders. The deal covers shipments within North America as well as air and ocean export shipments from the United States and Canada to the UK, the Netherlands, France and Spain....and....European shipments into Canada and the United States.

Our "C" Section: FF World Ocean News

10. FF World Ocean Briefs

France On Strike_____Expect the prospect of this ongoing problem to spread to the ocean ports this week. Marsellille is the first shut down target. Air is thus far not affected.

Lykes Still Afloat In Banruptcy_____Under an arrangement with major creidtors and the U.S. Bankruptcy Court, Lykes Brothers Steamship Co. can keep using the cash it needs to operate until February 29, 1996, before starting to reduce debts due to major creditors. The Court has ordered Lykes to pay American President Lines $401,500 in monthly charter payments that Lykes owes from the $1.64 million in monthly payments that A.P.L. makes to charter other ships from Lykes. The money will go into an interest-bearing account. APL sought the order out of fear that its ships chartered to Lykes might be seized abroad by creditors of the troubled line.

Sea-Land Sale?______According to DIAMOND LIGHT information sevices , CSX is denying rumors of a Sea-Land divestiture due to the recent depression of CSX share prices, according to TradeWinds. The Cargo Letter was unable to obtain a statement from the U.S. carrier on 5 Dec '95

Nippon Express CO. has started a container LCL cargo transport service from Singapore to the Philippines.

Columbus Line Is Another Leaving SFO_____The next in a series of moves away from Port of San Francisico, Serpac/Columbus Line, which sails from the U.S. west coast to Colombia, Ecuador, Peru and Chile is shifting operations to Oakland effective Dec. 7. Calls will now be at at the Matson Terminal. [Serpac is Columbus Line, Compania Dus Americana de Vapores and Flota Mercante Grancolombiana.]

Bangkok Marine New Far East Service_____Bangkok Marine started a new service Nov. 27 calling at Laem Chabang, Thailand; Sihanoukville, Cambodia; Ho Chi Minh City, Haiphong & Hanoi Vietnam; twice per week with low load 80 TEU vessels.

WELCOME Port Of Gaza____Under control of the new Palestinian govt., expect ctnr operations to commence here in the Spring f 1996.

The International Association of Maritime Economists has announced it's first regional conference in the U.S. on December 15-16, '95 at MIT, Cambridge, Ma. The "Conference on Critical Issues in Maritime Economics", will feature a papers related to joint shipping & forwardering ventures, and economics of shipping regulations. Speakers include maritime economists from N. America, Europe and Asia, "Tanker Markets in the 21st Century: Competitive or Oligopolistic?" by Cargo Letter Member & Contributor Markus Wiedemeir of Damco Maritime, Italy. [For reservations: Mrs. Sheila McNary, MIT Room 5-22, 77 Mass Avenue, Cambridge, Ma 02139, Voice: 617-253-6763, Fax : 617-253-8125]

Cargo Disasters_____M/V Darfur (CTNR vessel) and M/V Happy Fellow (five dead) in collision off France with unknown cargo damage last week.

OUR "C" Section: The FF Business Corner & Legal Tips

by Byron E. Countryman,Esq
Countryman & McDaniel

Looking At The Limited Liabilty Co____Most freight forwarders and other transportation related companies in the U.S. are familiar with legal entities having characteristics similar to Limited Liability Companies ("LLCs") such as partnerships and corporations. While some of these entities operate under what is known as "C-Corp Status", more choose the form......."S-Corporation" election.

An LLC is an entity created under state statute that combines the corporate characteristics of limited liability for all of its equity holders or "members" with partnership tax classification and flexibility in its operations. Members of an LLC are afforded limited liability protection in a manner similar to shareholders of a corporation under existing corporate law, while the LLCs income is subject to only one level of federal income tax. An LLC is a separate legal entity capable of suing and being sued and having the rights, obligations, powers and privileges accorded by the state statute under which it is organized. .

Legislation to introduce and adopt a new form of entity known as the Limited Liability Company was enacted in the State of Wyoming as early as 1977, but it was not until the Internal Revenue Service concluded in Revenue Ruling 88-76 that an LLC organized under the Wyoming LLC Act would be classified as a partnership for federal income tax purposes. Since the publication of Revenue Ruling 88-76 there has been an explosion of interest in LLCs and to date, forty-seven states, including the State of California, have enacted legislation permitting formation of LLCs.

For more information about the Limited Liability Company, e-mail Mr. Countryman or telephone 213-487-0347.

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