Ocean Fast Facts

According to the American Association of Port Authorities, how many tons of cargo
in terms of waterborne imports and exports through United States ports were
generated in 2007?

1.5 Million Tons
50 Million Tons
1.4 Billion Tons
22 Billion Tons

Click here to see the answer!

Ocean Freight - What's on the Horizon for 2009?

The year 2008 represented a significant shift in the fluctuations of the import and export flows of the United States. Essentially, 2008 resulted in a "non-peak season" event within the Trans Pacific Eastbound trade that has never before been witnessed. There are several factors to watch as early 2009 unfolds:

Ocean carriers continue to reduce capacity in an effort to fend off large rate decreases in nearly all trade lanes. Not only does this tighten the available capacity inbound, but will have an effect on export cargo as well.
The market is anticipating slight BAF decreases for January, but the volatile prices of fuel could see increased BAF beyond January into the 2nd quarter.
Carriers are still faced with increased operating costs at ocean freight terminals around the world, especially in the United States. It is crucial to remember that fuel is not the only component in determining ocean freight rate levels. Terminal and vessel operating costs are anticipated to remain a critical component in determining ocean freight rates into 2009.
The "greening" of the supply chain has an added cost for ocean carriers as well. For example, the yet to be assessed "Clean Truck Fee" at the Ports of Los Angeles and Long Beach will most assuredly result in additional charges per TEU. Other port authorities outside of Los Angeles and Long Beach will most likely enact similar environmental initiatives to help maintain infrastructure growth, while simultaneously maintaining a green profile. The costs for these initiatives will most likely be passed along to importers and exporters alike.
Certain regions of the world will remain capacity restrained. The growth in such regions as Dubai will continue to experience near capacity vessels in the first quarter of 2009. Carriers may attempt to pass along congestion surcharges in parts of the Middle East, Mediterranean, Africa and Latin America.
Carriers may continue to consolidate with other lines or reduce staff to weather the near-term economic downturn, as some lines such as APL have already announced.

Ultimately, the ebb and flow of imports and exports during 2009 will depend on the performance of global markets and the strength of the U.S. dollar against overseas currencies. In this fluctuating environment, AIT is prepared to provide sailing options to fit customer needs in most any trade lane, whether the freight is inbound or outbound from the United States. AIT continues to utilize direct carrier and co-loader options to satisfy its customer base and keep that freight sailing out on the horizon.

Your ship has been CLASSIFIED by a classification society ... but what exactly is a classification society?

When shipping their commodities via ocean transport, customers are often times required to ensure the ship in which their cargo is traveling is classified with a reputable classification society. Additionally, letters of credit occasionally specify that a shipment must move via an ocean vessel that has been classified, or perhaps even dictate that the cargo must move on a vessel that has been classified by a certain agency.

But what is a classification society? Classification societies are non-governmental organizations or groups of professionals, ship surveyors and representatives of offices that lay down and check the standards concerning the design, construction and survey of ships and offshore structures. They explicitly take no responsibility for the safety, fitness for purpose, or seaworthiness of the ship, however.

There are a number of classification societies, including Lloyd's Register, Det Norske Veritas and the American Bureau of Shipping. Classification societies employ ship surveyors, material engineers, piping engineers, mechanical engineers, chemical engineers and electrical engineers, often located at ports and office buildings around the world.

Source: http://en.wikipedia.org/wiki/Classification_society

Clean Truck Fees again delayed at the
Port of Los Angeles / Long Beach

Effective November 17, the ports of Los Angeles and Long Beach were to begin collecting a new local-based fee for imports and exports delivered by truck into the ports terminals. The fee will be assessed to ensure the development of environmental infrastructure projects, such as subsidizing costs to purchase trucks that meet the emissions requirements of the clean trucks initiative in the Los Angeles Basin. The latest delay of this fee may be in part due to confusion on whether or not the charge should apply for cargo that moves directly from on dock rail yards versus off dock railroads. No date has been officially announced. Once the latest issues are resolved, the fee is going to apply as follows:

LCL Export	$3 W/M
LCL Import	$2 W/M
FCL Import and Export	$35 per TEU

For more information online, please visit: http://www.cleanairactionplan.org and http://www.polb.com

A Brief Update on 10+2

The Journal of Commerce announced on November 24 that the United States Customs and Border Protection will publish the Importer Security Filing rule in Tuesday's Federal Register. The interim rule, known as 10+2, will take effect on Jan. 25, 2009. Enforcement of the law will begin one year later. Added into the interim rule is the inclusion of a public comment period for certain data elements and economic effects of the rule. The 10 additional data elements from importers and two from carriers that Customs will require are those that appeared in the proposed rule earlier this year, the rule includes:

Seller
Buyer
Manufacturer or supplier
Location where container is stuffed
Party to whom the goods are shipped
Consolidator or stuffer

The rule will also require the importer of record number, consignee number, 10-digit harmonized tariff number, and country of origin. Customs says these four elements are identical to the ones importers currently report on entry statements. Ocean carriers bear a large responsibility of the 10+2 plan and will be required to file and provide carrier/vessel status messages and a vessel stow plan.

Under the law, importers will file their data through the Automated Broker Interface while carriers will file by way of the Automated Manifest System (AMS). All but two elements must be filed with Customs 24 hours before a container is loaded aboard ship. The name and location of the party stuffing the container must be filed 24 hours before vessel arrival. The interim rule changes the penalties for failure to file from the value of the merchandise to $5,000 per violation, to be covered by the rule's new bonding requirements. Customs is allowing flexibility in what importers report in six data elements: manufacturer, consolidator, stuffing location, country of origin, tariff commodity number, and the "ship to" party.

The agency is soliciting additional public comment on the six elements, and is asking companies and trade groups to comment on the costs of compliance and new flexibility in the rules. The deadline for comments will be June 1, 2009. For a copy of the Federal Register security filing rule, please refer to: http://www.federalregister.gov/OFRUpload/OFRData/2008-27048_PI.pdf

Source: Journal of Commerce, November 24, 2008

For a full explanation of the 10+2 rule please visit this month's Compliance eNewsletter.

Big Ships coming to the East Coast?

Port Authorities on the U.S. East Coast ports are have mixed feelings regarding the expansion of the Panama Canal in 2014. While some are optimistic, others are not as much, considering the potential challenges that arise with handling larger vessels 8,000 TEU and larger. The concerns by some of these port authorities may also be elevated considering the current economic climate.

Which ports have something to gain? While widespread opinion in the industry is that expansion of the Panama Canal's ability to accommodate the new generation of mega-ships will make East Coast ports more competitive in attracting imports from Asia, the ports that have the most to gain are those that have the most efficient marine terminal operations and those with deep channels. Additionally ports with an extensive intermodal network to efficiently handle cargo beyond the port to inland intermodal points (IPI / RIPI) are those that are anticipated to benefit the most from large vessels calling at their ports. Harbor commissions and Port executives alike in an attempt

Politically-oriented harbor commissions are promoting their ports as East Coast load centers, but port executives are wary about making large investments in dredging and terminal expansion projects for a boom in cargo that will not materialize if they don't make the cut, especially as the economic situation is uncertain into 2009 and beyond. To compound matters, when large 8,000 plus TEU ships arrived in Los Angeles/Long Beach a few years ago, terminal operators had to adjust yard and gate operations to accommodate the influx of volumes loading and off-loading these large vessels. The draft of these ships also would force many East Coast ports to make significant investment in dredging projects which would allow these large ships to pass in and out of East Coast Ports unhindered. This leads to environmental concerns which many local municipalities may not be prepared to face.

It is anticipated that ports on the East Coast will soon face the same challenges as did the ports of Los Angeles and Long Beach when the first large vessels started calling at those ports. In 2009 and beyond, planning for large ships on the East Coast will be in the industry headlines, and potentially importers and exporters in those locations will soon be faced with the same challenges and possible rewards of 8,000 TEU ships calling in their cities.

Source: November 21, 2008, The Journal of Commerce Online

Sight draft

A sight draft, also known as a bill of exchange, is a draft that is payable when presented. Sight drafts are generally used when the seller of goods wishes to maintain control of the goods being shipped to a buyer or "drawer," either for credit reasons or to retain title. Money is payable when the completed documents are presented or within a specified period called "days of grace."

Sight drafts are one of many ways to arrange payment for the exchange of goods moving internationally. There are several important factors for sellers to be mindful of in terms of protecting themselves when dealing with sight drafts. For example, it may not be always known whether or not the consignee has funds available to pay for the goods. In an alternate shipping scenario, the consignee may decide to refuse the shipment while the goods are in transit, which would leave the shipper or seller responsible for the costs of both the goods and the transportation of those goods.

A draft should always indicate that charges are payable by the drawee (or consignee), which should typically be a reputable bank. Because of this, letters of credit are generally a better form of protection for the seller of the goods. Additionally, original bills of lading should always be issued and sent directly to the overseas bank along with the draft. Specific instructions to the bank should clearly indicate to deliver documentation strictly against payment of sight draft. In times of tight credit, these little tips can assist ensure in the prompt payment of goods.

Source: International Directory of Trade, 7th ed. Edward G. Hinkelman, 2006.

The Parting "Wave"

Who can believe 2008 is already coming to a close? Ocean imports to the U.S. had started quite strong, along with continued high volumes in U.S. exports. Suddenly, in the second quarter, ocean imports fell significantly and U.S. exports remained strong.

The ups and downs in the economy lead to somewhat of a "yo-yo" kind of year when looking at ocean import and export volumes. The credit crunch and mortgage crisis in the U.S. lead to a decline in exports as the 3rd quarter arrived. But after one year of full U.S. export ships and limited container availability, especially in the middle of the country, the market started to soften and vessel space and equipment became more readily available.

This was undoubtedly an exciting year to watch the true economic forces of supply and demand tug at each other on a daily basis. The ocean industry saw highs and lows never before witnessed in global trade.

As 2009 unfolds before us, the lessons learned for ocean importers and exporters are important to remember: Plan early, and plan often! Even though vessel space and equipment may appear to be available, it is vital to continue to plan and arrange for your shipments as early as possible. Careful planning will help ensure smooth sailing of your shipments well into the New Year.

On behalf of the entire AIT Ocean Systems team, thank you for another great year of support on this "high-seas" voyage. Best wishes for a safe, healthy and happy holiday season. See you in 2009!

Preview January 2009 AIT Ocean Newsletter:
The Ocean Hot Spots in 2009

If you have any questions or comments regarding the Ocean eNewsletter,
please contact Kevin Krause from the AIT Ocean Department.

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