United States Containerized Imports from the East Coast of South America:

Country	TEU Shipped Between May 2006 through April 2007
Brazil	455,056
Argentina	67,614
Venezuela	35,946
Uruguay	15,197
Paraguay	3,582
Guyana	1,254
Suriname	1,241
French Guiana	128
Total	580,018

Source: Journal of Commerce, August 6, 2007; PIERS Global Intelligence Solutions.

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Definition: A statistical term referring to a single loading or unloading of ocean freight containers from vessels at a port or terminal. The term is used to communicate the volume of container traffic (on an hourly, weekly, monthly or yearly basis) at a particular port or terminal.

Source: Dictionary of International Trade - Handbook of the Global Community, 7th Edition. Edward G. Hinkelman, 2006.

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The ocean fast facts for the month reflect the ocean container "lift" from South America to the United States. Believe it or not, vessel lift, or "lift," is also a term used by ocean carriers and NVOCCs alike to describe the volumes of cargo flowing throughout the ocean supply chain. Most ocean carriers and terminal operators refer to "lift" in order to quantify their ocean freight volumes with a measurable number, often in terms of TEUs. In forthcoming AIT e-Newsletters, the AIT Ocean Systems staff may refer to volumes or throughput by mentioning the term "lift." The source of "lift" in ocean terminology is not exactly known, but most likely refers to the cranes that since ancient times have lifted cargo onto sea going vessels. Today, using the term "lift" to describe ocean freight is very much applicable, as evidenced upon entering any container intermodal rail facility or ocean port and seeing the numerous mechanical cranes of many shapes and sizes "lifting" containers onto and off flatcars, chassis, and most importantly, the ocean vessels themselves.

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It's back to school season, and now is the time to review basic ocean knowledge that has appeared in recent AIT e-Newsletters. Test your ocean prowess with these ocean challenges…and no peeking at the answers below!

Questions:

1. True or False? General average is a loss that affects one cargo interest on board a vessel as well as the ship itself.



2. Which of the following is not an ocean carrier?
1. Honda
2. Hyundai
3. Zim
4. All of the above


3. True or False? A TEU is an acronym that describes a 20-foot international ocean shipping container.



4. Ro-ro is an abbreviation for?
1. A type of seaborne container used for shipping boats and oars.
2. A type of ship designed to load and discharge cargo that rolls on wheels.
3. A security officer commonly found on container ships used to prevent pirating or terrorism.
4. None of the above.


5. True or False? A triaxle is a type of chassis utilized under 20' containers to handle heavy freight up to 44,000 lbs.

Answers:

1. False. General average is a loss that affects all cargo interests on board a vessel as well as the ship itself.
2. a. Honda is not an ocean carrier.
3. True. TEU stands for "twenty-foot equivalent unit."
4. b. A ro-ro vessel is a vessel that allows cargo to "roll-on and roll-off," hence the name "ro-ro."
5. True. A triaxle is one of the many types of chassis utilized for intermodal freight haulage. Triaxles are used to distribute weight for heavier cargo to ensure legal over the road weight distribution.

What was your score? 100% correct? 80%? 60%? 20% ? Hopefully no matter how high or low your percentage was on the quiz, you feel free to contact your local AIT Sales or Ocean Operations Representative when you would like to have your ocean questions addressed.

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With the recent toy recalls in the news, suppliers in China are left scrambling to have replacement products sourced in time for the holiday rush, which will soon begin! It is anticipated that this will place a large burden on the ocean supply chain during late September and into October to make the "Thanksgiving" rush. Because of the additional challenges this peak season, remember to book as early as possible. Ships from North China (Shanghai) are already near full capacity or remain near capacity. Encourage your suppliers to carefully plan and forecast intended shipment volumes (i.e., number of ocean containers and container types). Some carriers continue to recommend 10 to 14 days lead time.

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Earlier this year and reported in the July edition of the AIT e-Newsletter, the Chinese government reduced tax incentives for export goods to shippers in China. This reduction caused a spike in shipments in late June into July. There is a "rumor" in the market that the Chinese government may again announce an additional reduction in tax rebate incentives to suppliers within the next 30 to 45 days. The next round of incentive reductions may target exporters of raw materials, so if you are involved with importing raw materials, your suppliers may be directly affected by this change.

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The Safe Port Act and the recent 10+2 data requirements for this ruling remain a critical initiative for container security. It is also important for AIT's shipping community to be aware of those requirements. There are several websites online describing the recent U.S. House Resolution, yet the following link from U.S. Customs and Border Patrol contains the most "easy to read" information regarding this ruling:

http://www.cbp.gov/xp/cgov/newsroom/full_text_articles/trade_prog_initiatives/
adv_data_elements.xml

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Foreign currencies remain strong and foreign countries continue to buy U.S. products for export. Vessel space is tight for U.S. exports to Asia, but AIT has still has access to competitive rates from the U.S. to Latin America, Asia, Oceania, and Europe this shipping season. Contact AIT for your LCL and FCL export needs! AIT Ocean Systems has ocean contracts and agreements with many ocean carriers and co-loaders alike to offer you numerous competitive cut-offs and service options to your foreign destinations. Ask your AIT representative for further information.

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On behalf of the entire AIT Ocean Systems team, we hope you had a great summer and are ready for a fantastic fall season.

One item forthcoming in the October 2007 AIT Ocean Systems Newsletter Edition: A Mid-Term Glance at Peak Season

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For avid television viewers, summer is marked by reruns of popular shows and previews of the fall lineup. Numerous articles in August industry publications seemed like reruns of topics covered here in our e-Newsletter from earlier this year, or were predictions and forecasts of the months to come. This particular international air freight e-Newsletter article will catch our readers up on issues we have addressed in 2007 and what is being said about those issues now.

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In the February 2007 e-Newsletter, we posed two questions:

• When do eastbound (Asia to USA) air freight rates, coupled with fuel and insurance surcharges, reach a point when ocean freight transportation (albeit days and weeks longer in transit time) becomes simply more attractive?



• Will U.S. importers extend their supply chains to allow for more time on the water and still meet consumer demands?

The answer to those questions derived from two sources. In the July 30, 2007, issue of International Freighting Weekly, in the special Asia Report section, the headline read, "Shipping Gains at Air's Expense." The 2006 influx of the super container ships capable of handling a significant number of TEU's did not result in the over-capacity predicted in the ocean freight market. The booming economies in Europe increased the Asia export trade to the point where not only was the increased capacity utilized, but the sea freight market remained so strong that increases of $300 to $400 per TEU were imposed.

The IFW article noted, "While shipping lines are reaping the benefits of the expanding Asia-Europe trade, airlines are weighed down by a capacity glut." (AIT e-Newsletter, May 2007). Carsten Spohr, CEO Lufthansa Cargo (E-Newsletter June 2007), stated that the "air freight industry is in for a period of 'blood, sweat and tears.'" In a previous newsletter, we discussed how airlines are reducing the use of the fuel inefficient B747-200 freighters, replacing them with new and fuel efficient 777's. The newer aircraft, while being fuel efficient, also adds capacity to the market. At the Transport Logistics Conference in Munich, Carsten rhetorically commented, "We see orders for new aircraft and I wonder where all that capacity will go."

Giovanni Bisignani, Director General of IATA, told the same conference, "Freight demand is showing much more price sensitivity than previously. The cargo business is still growing, but competition with other modes of transport is severe. And sea shipping is taking a greater proportion of the benefits from the economic boom."

A second article on this subject came from e-Cargonews Asia titled, "No fun at the seaside as shipping siphons off air freight," and stated, "Exporters' taking the cheaper ocean option is continuing to hit load factors at Hong Kong-based airline Cathay Pacific. 'There has been a continuing shift to ocean freight and yield is under pressure particularly on our Northeast Asian routes,' said Ron Mathison, Cathay Pacific director and general manager cargo."

It does seem the air and ocean industries are reaching that point on the pricing graph when escalating air costs, especially with fuel surcharges ever increasing, intersect with ocean costs and customers choose slower transportation in favor of reduced costs.

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Speaking of fuel surcharges, many editions of our e-Newsletters keep our readers up to date on these increasing costs and the various reasons why they go up. Although increased costs to our customers are certainly nothing to laugh about, one could not help but be amused when reading a cover story in the August 6, 2007 issue of International Freighting Weekly, "Oil prices hit an all-time high:"

"Oil industry experts said the current spike was caused by several refineries in the U.S. coming back on line and insufficient oil being available to supply them." The article concluded with the note, "Fuel surcharges charged by most of the airlines currently stand at $0.60/kg."

When the fuel surcharge went up to $0.50/kg earlier this year, the reason cited in the trade press by these same experts was that several U.S. refineries were offline for maintenance repairs (especially in the Gulf after Hurricane Katrina) with too much crude oil being imported than could be refined.

These contradictions are taking place at a time when more carriers are being fined heavily for collusion in regard to price fixing fuel surcharges. Korean Airlines and Qantas are the latest to be fined.

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Our March edition conceded that at several points in the supply chain, what is technically referred to as air freight is actually moved on the ground. Obviously pick-up and delivery is performed by a truck, van or some similar vehicle. We also know that some intra-Europe service carriers truck their freight from hubs such as Charles de Gaulle and Frankfurt to down line destinations, as opposed to trying to move freight in smaller aircraft, such as a B737. However, one could not help but be taken aback by a picture of the 60-ton DHL trailer operating in The Netherlands. The headline in the August 6 issue of IFW read, "Is mega-truck the future for freight?" Although currently allowed in Sweden and Finland, undergoing trials in Germany and The Netherlands, these behemoths can do with two trailers what it currently takes three to perform, not to mention increased fuel efficiency.

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Of all the subjects previously covered this year, the one that continues to get the most press (and therefore reader attention) is the steps being taken in the air freight and supply chain industries to reduce greenhouse gases and operate environmentally friendly.

Just after our August e-Newsletter was posted, we received the current issue of Cargo Vision, the quarterly magazine of Air France Cargo - KLM Cargo. The entire issue was dedicated to the "green" movement with the title "Heredity or Environment?" The periodical was replete with the internal debate of being socially responsible at a time when most shippers continue to choose low rates. An excellent article was "Waste Not" by noted industry insider Ian Putzger. The summary in the table of contents was enough to make the reader turn to page 16: "Shippers are beginning to ask their logistics providers about the environmental and social impact of their operations. Although queries are general now, the appetite for details is growing steadily as more shippers find the route to their customers passes through the environment."

The back cover of the August 6, 2006 edition of International Freighting Weekly declared, "Wal-Mart looks to go green in Canada." The sub-headline read, "Supply chain partners will be assessed on environmental impact."

Wal-Mart has introduced a supply chain sustainability scorecard that addresses four categories:

• Equipment - use of sustainable alternatives, efficient engines and tires
• Operations - enforcement of programs for recycling, vehicle idling, oil collection
• Facilities - responsible energy use (including green power), efficient buildings
• Corporate Commitment - a vision or culture of sustainability throughout the business

Any transportation insider, vendor, supplier or manufacturer who has ever worked with Wal-Mart knows that their buying power and market share will dictate how they will do business and with whom.

Further regarding KLM Cargo, the Air Cargo News August 3 edition stated in the Newsround column (pg. 12), "KLM has set its sight on staying ahead of the pack by signing an agreement for the reduction and compensation of CO² emissions with the Dutch wing of the World Wildlife Fund."

Air Cargo World, the monthly industry magazine, contained an article in their August edition (pg. 10) simply titled, "Selling Green." The article discussed an accord signed between U.S. and European Aviation administrations named the "Atlantic Interoperability Initiative to Reduce Emissions," with the thankful acronym of AIRE. The article notes, "The mutually beneficial pact provides a foundation for aviation interests on both sides of the Atlantic to work together on ongoing research with the dual goal of aiding the environment and making air transportation more efficient."

Lastly, Time Magazine, in a second piece on the subject this year, featured an online article (August 20, 2007) titled, "Does Flying Harm the Planet?" Citing some of the same statistics from last month, such as the disproportion of CO² emissions created by airplanes versus ground transportation compared to the amount of attention air travel receives, the article offered no solutions, as there aren't any in the immediate future. Passenger traffic will simply continue to grow, and technology will not keep up with the need to be environmentally conscious in an industry where airplanes are built for 25 to 30 year life cycles.

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In the July 2007 issue of the AIT e-Newsletter, we made the following comment that now may be prophetic:

"If ocean freight customers cannot get their product to the U.S. on time for the busy holiday shopping seasons, they will start to divert their most important items to air freight. Increased demand for limited or stable air freight capacity will cause air rates to increase significantly."

The second and recent toy recalls due to lead-based paints and materials, combined with magnets and other pieces that may be harmful to children, may have a significant impact on this year's air freight Peak Season. Toy stores around the country have taken many popular items and movie themed toys off the shelves. Time has not run out for the major toy manufacturers to have products reconstructed without the lead-based materials, re-packed with clear messages telling consumers that the item is "lead free," stocking the product on store shelves for this year's holiday buying spree.

No matter how low retail stores reduce prices on December 26, and no matter how many "sales" they promote, it will not offset the lost revenue impact of that item if not wrapped and under the tree by December 25. Toy manufacturers will do whatever it takes to get their product to market on time; that may include moving freight in the air.

Our counterparts in ocean freight tell us that in order to stage freight at regional distribution centers, east coast destined containers must be on the water by mid to late October, with west coast shipments sailing by the beginning of November. That is best-case-scenario and certainly last minute. Maybe with such schedules, the most sought after items will be on store shelves by the frantic day after Thanksgiving, the "official kick-off" of holiday shopping (aka Black Friday).

As we saw during the west coast port strike in 2002, air freight is a viable means of transportation when ocean freight cannot meet market demands, regardless of cost. As demand for capacity increases and competes with all other traditional air freight for space, such as clothes, electronics, and automotive, the influx of volumetric toys will overwhelm the available cargo space causing a series of price increases.

As noted earlier, it is not as though there is excess capacity on the water already. The ocean industry is sailing along just fine (pun intended). Ocean freight price and capacity may also be affected by a second toy shipping season.

Continental Cargo, Eva Airways and China Airlines have already announced rate increases effective early in September of 2007. As we wrote in July, "We predict that the 2007 PSS will come in stages; we can see upwards of three price adjustments between August and late November, maybe more. We will continue to stand at the shore and watch for the telltale signs of the impending season. Peak Season is coming and it is just over the horizon." It may be closer than we thought.

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In November 2006, we detailed the efforts of many of the global carriers to create and market products to support the ever-growing pharmaceutical air freight industry. The Journal of Commerce (August 13, 2007, pg. 22) had a headline we couldn't help but share with our readers, "Hooked on drugs." This eye-catching banner introduced us to the ongoing efforts of carriers including Continental Cargo and Lufthansa Cargo to advance this industry. The article also discussed that this cold-chain technology and process improvement is also benefiting other vertical markets, such as food and high-value cargo. Jack Boisen, Vice President Continental Cargo was quick to note, however, "First and foremost, it's about pharmaceuticals."

The 5^th Cold Chain Distribution for Pharmaceuticals convention will be taking place in Philadelphia September 10 - 13, 2007.

See www.coldchainpharma.com for more information.

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CBP is firmly committed to preventing the introduction of Foot and Mouth Disease into the U.S. In response to the outbreak in the U.K. (this includes England, Scotland and Wales), CBP is taking the following actions:

• Importation of live ruminants (cattle, sheep and goats) and ruminant products is currently prohibited entry due to the U.K.'s bovine spongiform encephalopathy status. With the recent diagnosis of Foot and Mouth Disease in the U.K., the importation of live pigs is now prohibited, and swine meat and by-products are also prohibited and must be refused entry.
• Passengers on private, charter, military and commercial aircrafts will be questioned and their baggage examined if they have visited a farm or ranch in the U.K. during the past 30 days.
• All pork and pork products found in passenger baggage of those passengers arriving into the U.S. from the U.K. will be confiscated by CBP.
• CBP Agriculture Specialists will disinfect all footwear and equipment worn or used on a farm, ranch, or pasture in the U.K.
• Commercial shipments of live pigs and pork by-products from the United Kingdom will be refused entry and must be destroyed or exported.
• Commercial shipments of pork and pork products with an arrival date of August 3, 2007, and thereafter are subject to the prohibition.

For more information, log onto the following site: http://www.cbp.gov/xp/cgov/newsroom/news_releases/08082007_6.xml

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Customs posted a Federal Register notice on August 21 that announced a modification and extension of the Customs Post Entry Amendment (PEA) Processing Test which allows for the amendment of entry summaries prior to liquidation.

Under the PEA test, an individual amendment letter (also known as a single PEA) must be filed by the importer (or its broker) upon discovery of the following:

1. A revenue related error in an entry summary where the error results in either an overpayment or underpayment of duties, taxes, and/or fees in the amount of $20 or more;
2. Any error in an entry summary relating to antidumping or countervailing duties;
3. Any non-revenue related statistical information errors in an entry summary that must be reported to the U.S. Census Bureau. Prior to publication of this document, individual amendment letters were required to be filed promptly after discovery of the error(s) and prior to liquidation of the one or more entry summaries covered in the letter.

The modification to the test states that an importer or broker filing a single PEA must submit the PEA at least 20 days prior to the scheduled liquidation date of each entry summary covered in the letter.

As of the effective date of the notice, the PEA test will be the only procedure in place for post summary adjustments prior to liquidation, and the Supplemental Information Letter (SIL) procedure will be discontinued.

CBP will issue an administrative message regarding this change soon after publication of the notice.

The full text of the Federal Register notice can be accessed online:
http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/
2007/E7-16415.htm

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Registration is now open for ACE Exchange Conference VII; it will be held in Atlanta on October 15-17, 2007. The conference will provide information on tools that are currently available in the Automated Commercial Environment (ACE), including the functionality that is being deployed in August 2007. Registration is free and will be taken on a first-come, first-served basis. During the conference, there will be a limited number of one-on-one appointments for account assistance or reports training; Customs suggests that you sign up early in order to schedule one-on-one appointments.

You can access more information about ACE and this conference on the CBP website: http://www.cbp.gov/xp/cgov/toolbox/about/modernization/

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In addition to freight delays due to replacement shipments for the recalled merchandise, the recent spate of product recalls could delay Customs clearance of some holiday merchandise if Customs is mandated to audit/target all imports of commodities that have been previously recalled. The target criteria used by Customs could include commodity/HTSUS, country of origin or manufacturer, shipper or manufacturer.

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If you have any questions or comments regarding this eNewsletter, please contact one of the following representatives. Thank you.

Air Freight: Joseph Hoban

Compliance: Paul Codere

Ocean: Chris Jostes & Kevin Krause

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