Ship Overcapacity May Dampen Rates

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Ship Overcapacity

May Dampen Rates

ccording to a report by SeaAxis, while container shipping

lines have rebounded from a disastrous 2009, capacity oversupply may result in more difficult times ahead. Vessel capacity is expected to rise 16 percent this year, and 13 percent in 2011, as a result of carriers’ reactivation of idled ships and

resumption of delivery of new ships ordered before the recession. Global container volume is only expected to rise about 10 percent annually.

Less than 2 percent of the world’s container fleet now is idle,

compared with more than 11 percent at the start of the year. With volume

rising, carriers have moved aggressively to restore rates to pre-recession levels. - Scott McDevitt President, TLI

Small Business

Administration

(SBA) – CDC/504

Loan Program

he CDC/504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides small businesses requiring “brick and mortar” financing with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization. A Certified Development Company (CDC) is a private, nonprofit corporation set up to contribute to the economic development of its community. CDCs work with SBA and private sector lenders to provide financing to small businesses.

Typically, a 504 project includes: • A loan secured from a private sector

lender with a senior lien covering up to 50 percent of the project cost; • A loan secured from a CDC (backed

by a 100 percent SBA-guaranteed debenture with a junior lien covering up to 40 percent of the total cost); • A contribution from the borrower

of at least 10 percent equity. How Funds May Be Used

• Proceeds from 504 loans must be used for fixed asset projects, such as:

Inside

This Issue:

Ship Overcapacity May Dampen Rates...1 Small Business

Administration (SBA) – CDC/504 Loan Program...1 Court Rules FEDEX Drivers Are Contractors...2 Global Risk Management...2 US Rails Set Second

Container-Count Record...3 Quote of the Month...3 Clarifying The UPS And FEDEX Position On Working With Third Party Consultants...4 Anniversaries &

Birthdays... 5 Technical Difficulties?...5

There are a few areas in which UPS and FedEx may be more cautious in their position with shippers.” (See page 4 for more

information)

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• Purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; • Construction of new facilities

or modernizing, renovating or converting existing facilities; • Purchasing long-term

machinery and equipment. • The 504 Program cannot be

used for working capital or inventory, consolidating or repaying debt, or refinancing. Eligibility

To be eligible for a CDC/504 loan, the business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, the business qualifies as small if it does not have a tangible net worth in excess of $7.5 million and does not have an average net income in excess of $2.5 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate. n

For more information, go to http:// www.sba.gov or your banking institution.

- Debbie Gori Controller, TLI

Court Rules

FEDEX Drivers Are

Contractors

n yet another decision in the ongoing question of whether FedEx drivers are employees or independent contractors (“ICs”), a federal judge in Indiana found them to be ICs. One of the key factors in determining whether someone is an employee or an independent contractor is the degree of control one has over the other. In this case, the judge determined that FedEx did not retain the right to direct the manner in which drivers perform their work.

Employee classification is an important issue for FedEx. Unlike United Parcel Service (“UPS”),whose drivers are

employees and unionized, FedEx has always maintained its drivers are ICs. This is a distinction that has significant economic impact for FedEx. If FedEx is found to be an employer of these drivers, it must make workers compensation and disability payments, pay payroll taxes, and possibly provide health and pension benefits. n

- Scott McDevitt President, TLI

Global Risk

Management

INCOTERMS 2010 become effective January 2011. They are rules that have been written by the International Chamber of Commerce (ICC) since 1936 and are used in international trade to define the responsibili-ties and liabiliresponsibili-ties of the buyer and seller. The number of terms has been reduced from 13 to 11 and reflects the impor-tance of cargo security.

These rules should be reviewed by all exporters and importers, large and small, to assure that freight risks are understood. They are essential in doing international business and should be specified on all contracts of sale.

More detailed informa-tion can be found on the inter-net by searching “INCOTERMS 2010” or you can go directly to the ICC website www.iccwbo. org.

- Norm Buehler Bravid International LLC

I

TLI’s business partner, Bravid International LLC, is available to help you understand these terms, as well as any compliance issues or export/import shipping problems, that you may be experiencing. If you have any questions,

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US Rails Set

Second

Container-Count Record

ccording to an article by the Journal of Commerce Online, dated 9/30/2010, US railroads, in the last week of September, set a second straight weekly record in the number of intermodal container loadings.

The Association of

American Railroads reported that a new, all-time high, container loading record of 206,535 containers was set for the week ending September 25th, 2010. This followed the previous week’s all-time high of 205,532 containers.

Intermodal loadings were reported to be 17.3% higher than the same period during 2009, and

total US, Canada, and Mexico intermodal loadings were up 16.7% over the same period in 2009.

Some industry analysts were surprised by the strong increase in volume as they had expected the volume to slow down after import container shipments spiked during the Summer. The report also indicated that international intermodal flows continued at a strong pace in September and domestic

intermodal continues to grow as a competitor to long-haul trucking.

The recent continued strength in the container business has prompted the Greenbriar Companies to place 2 rounds of orders to build new well cars to carry the jumbo 53-foot containers, and to refurbish some older well cars to stretch them to 53-footers.

The use of intermodal

containers continues to be an attractive option for moving truckload shipments on selected lanes. This is especially true in today’s environment of increasing fuel prices, increasing demand and decreasing capacity in the over-the-road trucking segment of the market. Improved transit times, door-to-door service, greater shipment visibility and competitive pricing combine to make today’s intermodal rail a viable option.

If you would like to learn more about today’s intermodal service offerings, and how Translogistics can assist in integrating intermodal into your transportation program, please contact your Translogistics, Inc. representative. n

- John Martin Director of IT, TLI

“No matter what side of an argument you’re on, you always find some people on your side that you wish

were on the other side.”

- Jascha Heifetz

A

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Clarifying The

UPS And FEDEX

Position On

Working With

Third Party

Consultants

here has been much discussion within the shipping consulting community about the status of UPS and FedEx working with third party consulting organizations in the negotiation of parcel

agreements with shippers. Below is an attempt to clarify what has happened and an opinion on what has motivated the parcel carriers to embark on these changes.

What we know...

It is true that at the Parcel Forum in 2009 both UPS and FedEx announced informally at a carrier roundtable session that their corporations were reviewing their policies on working through third party consultants in the negotiating of their parcel agreements. There was limited detail mentioned around what those changes would be.

What actually has occurred in the last year?

1. Both have implemented new, or refined, confidentiality controls that put more liability for the release of information back on the shipper. Therefore, if a consultant misrepresents, or violates, the confidentiality, the shipper has a level of liability with this. The view of the carrier is that the shipper

selected the third party, so therefore the shipper should bear responsibility for the consultant’s business practice as it relates to the project.

2. The parcel carriers also reserve the right to decline participating in a Request for Proposal (“RFP”) if they are not comfortable with the third party consultant or the process.

3. This forces more direct

involvement with the shipper in any price negotiation or RFP. The reality is that both UPS and FedEx have, more verbally than in writing, stated they prefer to communicate proposals directly with customers for a few different reasons:

1. The carriers believe their relationship is with the customer, not the consultant, so therefore building that relationship directly is something both carriers believe they have a right to do.

2. There was looseness to confidentiality around the pricing proposals as it related to some third party consultants. Both carriers have tightened the requirement to be clear on what is appropriate or inappropriate use of a proposal or finalized

price agreement provided to a shipper that the consultant has, or has had, access to.

3. There is also a non-documented perception of accuracy and integrity of certain third parties in both the motivation they had in selecting, or recommending, a carrier and the fairness of the process. The parcel carriers primarily have established controls that limit what a consultant can do with information ascertained when supporting a client in the negotiation and have structured the decision-making to lie more with the shipper than with the consultant. It appears both carriers have internal procedures that allow for an approval at some level for the use of third party consultants. Neither carrier has made these procedures available for external review.

With that said, at any point in time either carrier may decline negotiating with, or releasing their pricing information to, a third party consultant who is representing and/or supporting a customer.

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New Recent Events by the Third Party Consulting Community To address the perceived change in policy and tightened controls by the parcel carriers, one third party consulting company has filed suit against UPS and FedEx. The suit alleges a broad number

of complaints, including antitrust violations, intentional interference, unfair competition and others.

This should be an

interesting case to follow. There are different perspectives that will be presented here, and the aggressiveness UPS and FedEx take in defending their position should set the expectation for policies going forward.

There are a few areas in which UPS and FedEx may be more cautious in their position with shippers. One example is the ability for a shipper to have an audit of their invoice. Whether through external support of a third party or internally, not allowing a shipper to perform correct audits may put a customer in a position where they are in violation of certain federal laws, specifically Sarbanes Oxley. The Public Accounting and Reform Protection Act has multiple purposes. One purpose is to have a set of internal controls for expense management that is testable by an external company. Every company has the right, and some shippers have legal responsibility through Sarbanes Oxley (SOX), to ensure that a systemized process is in place for the verification and allocation of expenses including an audit. This can additionally extend out to procurement processes so RFPs still can be supported by third parties if structured correctly.

What can the vendor community do to support their cause?

First and foremost, operate with the highest level of integrity when providing services and be fair to all parties in the process. Consultants may also need to recognize that, for the time being, any carrier may choose not to participate in an RFP or bid. This has been, and will continue to be, a tenuous topic for third party consultants and the parcel carriers. Both UPS and FedEx are exceptionally successful and powerful companies which, when they choose to, have the strength to enforce their will on an industry. Not respecting that may limit the accessibility they will agree to with customers and third parties. n

- Jonathan Shaver Intravex

Translogistics,Inc. is available to help in the negotiation of your parcel contracts and in auditing to make sure the parcel carriers adhere to their guaranteed on time delivery or your money back.

November

BIRTHDAYS Tim Thomas -November 16th Debbie Gori -November 18th ANNIVERSARIES Donna Rubendall - November 12, 2007

Experiencing

Technical

Difficulties?

f you ever experience technical difficulties when attempting to reach Translogistics via phone, please email our Customer Service department at CS@translogisticsinc.com. Also, if you ever experience technical difficulties

when attempting to reach Translogistics via email or do not receive a response within one hour, please call our office at (610) 792-1610 or call toll free at (888) 983-3012 and someone will assist you immediately. You can also fax us at (610) 792-5667. n

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Updating...

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