100% Air Cargo Shipped on Passenger Planes to be Screened

Frequent air cargo shippers, are you ready? Starting August 1st the Transportation Security Administration (TSA) will begin enforcing the 100% screening requirement for all air cargo shipped on passenger plans. This is in accordance with the 9/11 Act of 2007 and helps to close the security gap that many argue left our passenger plans open to possible terrorist attack. Each year more than 6 billion pounds of air cargo are shipped on passenger planes. While this new bill will now require all of this cargo to be screened prior to boarding, air cargo shipped on cargo planes, 75% of all air cargo, will not need to meet this new requirement. 

While some may argue that this shift to 100% screening will mean the end of passenger plane cargo shipment others are getting ready to meet the new requirements. Airports are already investing in new equipment and huge X-ray machines to aid in the screenings. To help ease the load on airports, cargo can also be inspected by one of the more than 800 independent facilities that have been certified by the Transportation Security Administration. 

The impact for shippers is that air cargo shipment rates will likely increase. The increased equipment and time needed for screening will lead to higher shipment costs. Also, the time needed to ship the goods could also increase. Many airports will now require shipments to be delivered earlier in order to have enough time to be properly screened.

The TSA has also created a program called the Certified Cargo Screening Program (CCSP) to allow business to become Certified Cargo Screening Facilities (CCSFs). For more info on some of the pros and cons of becoming a CCSF check out this blog post on Logistics Today. The TSA website also has lists of where to find an Independent Cargo Screening Facility that has been TSA approved. 

For companies with large volumes of air shipments it is important to start reviewing how these changes will impact your business now so you can be ready for a smooth transition come August 1st.

New Air Cargo Inspections Starting August 1st

Lenny P. Feldman and John B. McGowan of Sandler, Travis & Rosenberg, P.A. at www.strtrade.com announced on their website that all air cargo flown outbound or domestic will be screened. This includes bonded cargo transiting the us.

It's anticipated that there will be a period of adjustment as this requirement gets "digested" and for the airport infrastructure to gear-up and staff-up for the additional demand for screenings.

New opportunities open up for businesses with IAC and CCSP after applying for TSA certification.

BOTTOM LINE: Expect delays and/or additional administrative overhead as the Transportation Security Administration provisions this new measure. New oportunities for those in the business of transportation safety. Universal Cargo Management, inc. stands ready assist you in preparing for domestic and international shipping.

Making sense of ocean freight and air freight rate fluctuations

In trying to make sense of recent sea freight and air cargo rate fluctuations, we've gathered information from several sources and made the following observations:

1) Rates are going up and staying up, not down

2) Space will be an issue probably all year

3) Expect “new” surcharges

IN SHORT: We're all paying for that great 12 months we all had with the lowest freight rates in History between Oct ’08 through Sep ’09.

• Lack of boxes adds to transpacific capacity squeeze, freight forwarders fear new surcharge
• Battle for Space on the Transpacific: Richard Owens, Asia Pacific CEO for DHL’s global customer solutions unit, told IFW that even “a company with DHL’s clout” was being forced to fight for space.

Here's a rate chart showing what we're seeing (as of 29-May-2010) at Universal Cargo Management, Inc.   

CARRIER	EFFECTIVE DATE	2010 PSS				Remark
APL	2010.8.1	320	400	450	505	from China to USA (except Puerto Rico and Virgin Islands)
CMA	2010.6.15	320	400	450	510	from Asia to USA/Canada (East & West Coast, IPI, MLB) - cargo receipt date at origin
Cosco	2010.6.15	320	400	450	506	from Far East and Indian Sub-Continent to USA/Canada
CSAV	2010.6.15	320	400	450		from Asia to USA
CSCL	2010.6.1 ~ 2010.11.30	320	400	450	505	from Far East, Middle East and Indian Subcontinent countries/areas to USA
EMC	2010.6.15	320	400	450	506	from Far East (except India)/S.Africa to USA/Canada
	2010.6.15	360	450	506	570	from India to USA/Canada
Hapag	2010.6.28	320	400	450	510	from Asia and Indian Sub-Continent to USA/Canada, except India - date of cargo receipt at origin
	2010.6.28	300	375	425	n/a	from India to USA/Canada - date of cargo receipt at origin
Maersk	2010.6.15	320	400	450	510	from Far East Asia to USA/Canada (Transpacific Eastbound)
Matson	2010.6.16	320	400	450	506	Transpacific Eastbound (excluding Hawaii, Guam)
MOL (PSC)	2010.6.15 ~ 2011.3.31	400	500	565	635	from Asia to USA/Canada
MSC	2010.6.15	320	400	450		to USEC and US intermodal points via USEC
	2010.6.15	400	500	563		to USWC and US intermodal points via USWC
OOCL	2010.6.15 ~ 2010.11.30	320	400	450	505	to USA/Canada - base on cargo receiving date
Wanhai	2010.6.15 ~ 2010.11.30	320	400	450	510	to USWC

Changes in demand for global freight logistics

 ...Can an Importer from Shreveport, Louisiana Partner with an Exporter in Louisville, Kentucky?

Changes in demand for global freight logistics have opened new opportunities for collaboration. It doesn’t take an expert on global trade or economics to see that America is beginning to export more and import less. This is good news for American business, but does present some unprecedented challenges in moving goods overseas.

    “...carriers don’t like to move cargo inland as they want their containers in the ports to save the cost of repositioning.” - Devin Burke, CEO, Universal Cargo Management, Inc.

Although most of the growth in shipping traffic is still bulk items, such as scrap, produce, lumber, rawhide, cotton, etc, this country is growing in exports of such items such as used vehicles, construction equipment, as well as new manufactured goods such as building materials, medical equipment, sporting goods, high endfurniture. You couple that fact with the weak dollar, an Obama administration pushing to “double our nation’s exports in 5 years”, a growing middle class Chinese population developing an acquired taste for goods “made in America”, and other aggressive trade policies between America and countries like South Africa and Australia you would have to see there is a growing trend in exports. So what we are experiencing on the logistics side of exports are a steady increase in space and equipment shortages for anything being shipped out of America. Therefore if you are an exporter you not only face a space problem, where you may have to wait 3-6 weeks to get on board a vessel, depending upon the port,you are also experiencing shortages of actual equipment, especially in interior cities. So you may have to wait 2-3 weeks before equipment arrives before the carrier will accept booking.

On the import side, while there has been a decline in volume because of the decline in the American consumer’s buying power, retail decline, weak dollar, unemployment and other factors that severely slowed down the amount of cargo coming into this country from Asia in the past 2 years, there exists strangely enough since the 4th quarter of last year a severe space problem on ocean freight carriers from Asia, especially China.

The Big Disconnect: Import / Export Challenges
Now most of us all know the cause of this space problem to be manipulated by the carriers themselves when they decided to dock many of their vessels in ports like Singapore.(If you fly into Singapore you will see an ocean of between 6-700vessels sitting there empty, it’s quite a sight). This was done to “save” the lives of carriers because of the billions they lost last year (I heard Maersk lost $2 bill, wow, they supposedly have never lost money, ever, but who knows with creative accounting what the truth is, but still, wow). Well this capacity constraint actually worked for the carriers, as if you are an importer you will know the freight rate shave gone up from $700/40 from China to the west coast during the summer of’09, to now most importers are looking at paying around $2500/40 this summer. But even with the increase in revenue for the carriers, they are cleverly withholding their vessels in order to continue the space crunch, so they can maintain their high ocean freight rates for inbound freight to the USA.

The Federal Maritime Commission is investigating this matter and urges anyone wishing to participate in these hearings or offer information relevant to the development of the record in this proceeding to contact her office at (202) 523-5715.

So, What Are We Looking At?
We have a shortage of equipment for exports, and a shortage of space because of too many containers coming into America ? So why the disconnect ? One obvious answer is the fact the carriers don’t like to move cargo inland as they want their containers in the ports to save the cost of repositioning. However if an importer in say, Shreveport , Louisiana cannot get space for cargo coming from Shanghai and now has to pay freight somewhere in the range of $4500 or more (up about$1300-1500 from a year ago) uses a carrier like Maersk, or MSC that also has an exporter customer in a nearby town in Northern Louisiana of lumber, waste paper,or cotton who cannot get equipment and space for their exports for 3-4 weeks, why doesn’t MSC or Maersk put these two needs together to solve each others' problem? It would seem to me that either the people running these carriers are too shortsighted, or maybe the cargo moving out of this country is just too far away and costly to match with the destinations of imported cargo, I don’t know for sure, but I would bet on the former.

Bottom Line
In the past, carriers essentially subsidized the inland distribution of containers; now, with some homework on the part of American businesses, collaboration with May 22, 2010 to save container distribution costs can be leveraged in negotiating for space on outbound ships.Universal Cargo Management, Inc. has over 25 years experience assisting customers and partners in freight logistics internationally and domestically.