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Transportation News Bulletins - Logistics

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Canadians Fill French-Fry Void as Mexican Levy Hits U.S. Goods
Monday, 08 March 2010 00:00

A sharp decline in the export of U.S. frozen processed potatoes to Mexico—primarily driven by retaliatory Mexican tariffs—has resulted in a corresponding loss of business for U.S. refrigerated motor carriers that service the Mexican market.

Nationwide revenues from U.S. frozen processed potatoes shipped to Mexico, primarily French fries, declined by more than 50% in 2009, to $31.4 million from $64.3 million in 2008, according to Elise Cortina, executive director of the Frozen Potato Products Institute.

The 20% tariffs on frozen potatoes, implemented in March 2009 by the Mexican government after the Obama administration shut down a pilot program permitting Mexican trucks to make deliveries in the U.S. interior, also has caused a sizable shift of frozen potato production and distribution from the United States to Canada, Cortina told Transport Topics.

“Exports of frozen product from the U.S. to Mexico are down significantly from the levels they were at before the retaliatory tariffs,” Cortina said. “Conversely, exports from Canada to Mexico have increased significantly.”

John Keeling, executive director of the National Potato Council, said the Mexican government targeted the tariffs on 89 products so they would do the most harm to U.S. commerce and at the same time do the least damage to Mexican consumers.

Unfortunately for U.S. exporters, the plan, approaching its first full year of operation, is working, Keeling said.

Facing pressure from industry trade associations ranging from pork producers to cosmetics products manufacturers, U.S. Trade Representative Ron Kirk said last month that he has been asked by President Obama to work with Congress and the Departments of Commerce and Transportation to find a solution to the cross-border trucking problem.

A group of 56 members of Congress sent a letter to Kirk and Transportation Secretary Ray LaHood last week, urging the administration to quickly resolve the trucking dispute, Reuters reported.

LaHood told a Senate committee March 4 that finalizing a fix to the cross-border controversy was taking a long time because “there’s a lot of moving parts,” but that DOT was “very near” a proposal that would address Congress’ concerns about safety.

Much of the resistance to opening the border to trucking—which was required as part of the North American Free Trade Agreement that slashed tariffs between the United States, Mexico and Canada— has been driven by the Teamsters union, which claims it will lead to an influx of Mexican drivers to U.S. fleets.

The damage from the Mexican retaliation has not been limited to the potato industry. It clearly has created challenges for refrigerated motor carriers such as C.R. England, the largest refrigerated hauler in the United States, with 2008 revenues of $873 million.

England’s revenues for hauling frozen fries to Mexico were sliced nearly in half in 2009, compared with 2008, according to Dave Akers, vice president, Mexico, for the Salt Lake City, Utah, motor carrier.

“Year-over-year volumes decreased 33% and non-fuel revenues nearly 45%,” Akers told Transport Topics.

By comparison, Akers said the company experienced year-over-year revenue growth in shipping fresh potato products to Mexico, and that other agriculture products included in the Mexican tariffs did not result in “any significant year-over-year fluctuation.”

“In other words, the Mexico tariffs only had impact at England for transportation of frozen processed potato products,” Akers said. “That impact, however, was significant and equates to hundreds of loads annually per individual shipper.”

While several refrigerated carriers did not return phone messages, others said they were aware of the industry-wide challenges the Mexican tariffs caused.

“We used to receive maybe 30 loads a month of frozen potatoes,” said Armando Meza, a marketing executive with Frio Express, a Mexican-based refrigerated carrier that partners with large U.S. trucking companies. “Now, we receive zero. So the tariffs have had a big impact.”

Dan Bell, vice president of logistics for Dallas-based refrigerated carrier Stevens Transport, said his company’s small Mexican frozen fries business has vanished since the tariffs were implemented.

“The business in general has been impacted quite a bit,” Bell said. “All the reefer carries haul frozen potatoes. We may not be hauling the same lanes or for the same customer, but all of us are hauling some French fries.”

Bell said that Stevens had been reducing its frozen potato business with Mexico for the past two years. “But when the tariffs came along, it pretty much wiped out the little bit we had left,” Bell said.

Bell said the Mexican tariffs were among the hot topics of discussion at the Food Shippers of America conference in Orlando, Fla., last month.

Keeling, the potato institute executive, said the tariffs on frozen potatoes were bound to hit U.S. carriers hard, since Canadian producers and distributors are located within 80 miles of the U.S. border.

Transport Topics, 3/8/2010

Politicians demand action on U.S.-Mexico cross-border trucking program, says report
Friday, 05 March 2010 00:00

WASHINGTON—Nearly nine months after The White House indicated that it was making progress on the cross-border trucking program between the United States and Mexico, a group of 56 members of Congress this week penned a letter to United States Trade Representative Ron Kirk and Department of Transportation Secretary Ray LaHood, requesting that this situation be addressed and resolved, according to a Reuters report.

"The current situation is unsustainable and untenable," the letter read. "Our constituents need help immediately and we implore you to work quickly to implement a solution that ensures safety and normalizes trade. Please communicate your plans for a solution so we are better able to understand the administration's strategy."

As LM has previously reported, the U.S.-Mexico cross-border trucking program has seen more than a few bumps in the road in recent years. In 2009, the pilot program for cross-border trucking was eliminated as part of the White House's $410 billion Omnibus Appropriations Act, H.R. 4105. Even through this program-killing measure was approved, that Obama administration said it would work to create a new cross-border, long distance trucking program between the U.S. and Mexico.

The historic objections over this program from U.S. politicians have centered around how Mexican truckers face less regulation than American Carriers and would post a hazard on U.S. roads.

Under the North American Free Trade Agreement (NAFTA) passed in 1993, the U.S. is required to open its border to Mexican and Canadian carriers who meet U.S. trucking standards. The Canadian border is open; the Mexican border is not.

Soon after the program was eliminated, the Mexican government said it would place tariffs on roughly 90 American agricultural and manufactured exports as payback for the U.S. decision to shutter the program.

These tariffs amount to $2.4 billion of American goods, ranging from fruit juices to pet food to deodorant, among others, ranging from 10 percent to 45 percent, with affected products coming from 40 states, stated a 2009 Los Angeles Times report, which added that these products represent less than two percent of U.S. exports to Mexico.

In June 2009, a group of roughly 4,500 Mexican truckers indicated they planned to sue the United States for $6 billion, due to the United States Congress's decision to shut down the cross-border trucking pilot program between the U.S. and Mexico. The Mexican trucking companies are represented by Mexico's National Cargo Transportation Association, also known as Canacar.

While these problems still exist, the White House has indicated at various points in the last year, that this issue will be addressed and a solution is coming, with LaHood stating in March 2009 that a new program was in the works and that he was actively lobbying up to 30 former colleagues in the House of Representatives to craft a U.S.-Mexico cross-border trucking program that satisfies the United States' commitment to the North American Free Trade Act as well as highway safety.

Fast forward nearly nine months later and it looks like not much has changed in regards to this situation, although LaHood said during a Senate Committee of Appropriations Transportation Housing and Urban Development subcommittee hearing on the Fiscal Year 2011 Budget for the Department of Transportation this week that progress is, in fact, being made on the cross-border trucking program.

During the hearing, Senator Patty Murray (D-Wash.) said if things do not change, her state will eventually lose jobs to Canada. And while there are concerns about cross-border trucking, Murray said the U.S. clearly needs to work with Mexico to address this impasse and move forward and then asked LaHood what the current plan is for cross-border trucking.

"We are finalizing a plan," LaHood told Murray. "The reason it is taking so long is that there a lot of moving parts. But we are very near a proposal that we think will meet all of the safety concerns that I heard when I talked to 25 members of Congress...we are close to talking to all of you about our way of addressing the safety concerns Congress brought to us."

In an August 2009 interview, Michael A. Regan, CEO of transportation rate analysis firm TranzAct Technologies, told LM this situation centers around the need for government to make a firm decision one way or the other.

"That is the main issue," said Regan. "Also, the unions have fought this because of the perception that it is going to impinge on their ability to employ their members. There is also the alliance between the unions and OOIDA (Owner-Operator Independent Driver's Association) that don't want the they go in with the guise of potential safety issues."

And making matters worse is that there is more truck capacity at the moment than there has ever been before, noted Regan. With tonnage and demand levels far below previous levels, the situation is exacerbated.

Logistics Management, 3/5/2010

Forwarders and airlines must be more flexible on capacity
Thursday, 04 March 2010 00:00

Forwarders and airlines need to set up far more flexible capacity agreements to cope with the increasingly difficult task of forecasting demand, according to Kuehne + Nagel (KN).

Tim Scharwath, president for north-west Europe, said the forwarder’s track record and strong relationships with carriers meant it was able, “with difficulties”, to secure the capacity it needed for longstanding customers out of Asia during last year’s frantic fourth-quarter peak season—“but at different rates than we anticipated”.

“The thing to learn, especially from air freight last year, is that you have to be much more flexible than you ever imagined,” he said.

“You cannot go into the market and say ‘I want a year’s volume’, and define this much volume per week or per month. It doesn’t work like that—or at least, it didn’t work last year.”

But rather than greater use of ad hoc capacity, the flexibility needed to deal with the new, more volatile environment, meant working even more closely in partnership with carriers, he said.

“The way volumes went up and down last year, and is continuing this year, there has to be a dual approach from all parties—the carriers and the freight forwarders or customers—in order to find the right amount of volume needed, sometimes, for example, on a different day of the week.

“In the past, it was much more plannable than it is now, or was last year,” added Scharwath. “So maybe we need different IT tools, that show you where there is spare volume available.”

Scharwath said KN had been working on setting up more flexible capacity arrangements, but acknowledged there had been resistance from airlines on agreements out of Asia—the very market where securing capacity was most important.

John Pattullo, CEO of Ceva Logistics, told IFW: “One of the things we are trying to do, in both air and ocean freight, is leverage our global scale, and by having a more centralized approach, we would expect to be able to read the market and respond more intelligently.”

International Freighting Weekly, 3/4/2010

Manufacturing Index Hits Six Year High
Monday, 01 March 2010 00:00
PMI of 58.4 shows acceleration in sixth month of growth

Manufacturing business increased in January for the sixth consecutive month after 13 months of decline, according to a survey of the nation’s supply executives by the Institute for Supply Management.

The PMI index of economic activity hit 58.4 percent, its highest level since August 2004, when it reached 58.5 percent. Growth in January accelerated as the index jumped 3.5 percentage points compared to December's seasonally adjusted reading of 54.9 percent.

New orders, production and employment grew in January. Supplier deliveries were slower. Inventories have been contracting for 45 months in a row, since April 2006. But the contraction slowed somewhat in January as the inventories index moved up 3.5 percentage points to 46.5 percent.

A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, this month’s reading corresponds to a 5.5 percent increase in GDP and the ninth consecutive month of growth in the overall economy.

“This month's report provides significant assurance that the manufacturing sector is in recovery. Both the New Orders and Production Indexes are above 60 percent, indicating strong current and future performance for manufacturing. This month, 13 of 18 industries reported growth, up from nine industries last month, and this is a good indication that the impact of the recovery is expanding,” said Norbert J. Ore, chair of the ISM business survey committee.

Journal of Commerce Online, 3/1/2010

Port of Los Angeles wins a legal battle with ATA
Thursday, 25 February 2010 00:00
The U.S. Court of Appeals for the 9th Circuit cast aside the American Trucking Association’s challenge to “Clean Truck” concessions.

LOS ANGELES—In a ruling made late yesterday, the U.S. Court of Appeals for the 9th Circuit cast aside the American Trucking Association's challenge to "Clean Truck" concessions.

The U.S. District Court in Los Angeles will hear testimony today from the Port of Los Angeles and from the ATA seeking a summary judgment in the lawsuit. Pending a decision there, the case is scheduled to be heard on its merits next month. Meanwhile, the Port of LA can not yet require motor carriers to use employee drivers.

Yesterday's ruling was greeted with enthusiasm by Los Angeles mayor, Antonio Villaraigosa, who said he is hopeful that the trial court will uphold the full concession agreement "to provide full accountability and sustainability of the Clean Truck Program in the future."

Port of Los Angeles executive director Geraldine Knatz was equally jubilant.

"While we look forward to our day in court, this decision allows the Port of Los Angeles to continue to be the driving force of change in the San Pedro Bay. It's commonly known that the majority of the trucking companies in our program serve cargo terminals at both ports," she said.

According to Katz, the enforceable agreements Los Angeles has forged with these companies "is the best guarantee" that this port complex and the communities of San Pedro, Wilmington and Long Beach will have significantly lower truck emissions well into the future."

As reported in LM, however, the Port of Long Beach has already achieved remarkable results in lowering truck emissions without demanding that independent drivers be organized.

By late last year 5,000 clean trucks—"big rigs that meet 2007 federal emissions standards or better"— were moving more than half of the truck-hauled cargo at the neighboring ocean cargo gateway. Approved by the Board of Harbor Commissioners in 2007, the Clean Trucks Program established a phase-out of the older trucks along with a system to subsidize the cost of new vehicles for truck operators who required financial assistance. The program debuted Oct. 1, 2008, with a ban on 1988 and older trucks.

On January 1, of this year, 1993 and older trucks were banned, as well as 1994 to 2003 trucks that were not retrofitted to reduce air pollution.

Logistics Management, 2/25/2010

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