H O M E          L A T E   B R E A K I N G   N E W S            P A S T   N E W S L E T T E R S

Tighter security rules for air cargo

The Transportation Security Administration (TSA) published new regulations covering air cargo security last Friday. The new regulations are designed to strengthen security concerns for the 50,000 tons of air cargo that moves aboard passenger and cargo aircraft daily. Highlights include:

• Consolidation of approximately 4,000 private industry Known Shipper lists into one central database managed by TSA.

• Requirement of background checks for approximately 51,000 off-airport freight forwarder employees.

• Extending secure areas of airports to include ramps and cargo facilities and extending requirement of background checks to roughly 50,000 employees in those facilities.

• Hiring of an additional 300 air cargo inspectors for domestic cargo inspections. 

• Expansion of the current "risk based" targeting program.

• Increased surprise inspections of cargo and handling facilities. 

• Expanded use of canine explosives detection teams in air cargo facilities

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W O R L D   T R A D E

Vietnam and US agree trade deal

Vietnam has agreed to drop a plan to invest $4bn in its textile industry

Vietnam has formally agreed a trade pact with the US, paving the way for Vietnam to join the World Trade Organization (WTO).

Under the deal, Vietnam will reduce its tariffs and lift restrictions on almost all US imports.

Representatives from the US and Vietnam signed the agreement at a ceremony in Ho Chi Minh City.

The latest deal goes further than a previous deal between the two countries, which was agreed in 2000.

Last year, trade between the two rose by more than 20% to $7.8bn after the US ended quotas on Vietnamese textiles and garments.

Under the latest deal, Vietnam will cut tariffs to 15% on 94% of US manufactured goods and on 75% of farming goods as well as opening up its energy, telecoms and financial services markets to foreign competition.

The country has also agreed to drop a $4bn plan to improve its textile and garment industry - a move the US had viewed as a means to subsidize the sector.

WTO eyed

Vietnam is keen to become the 151st member of the WTO, which would give it the right to equal treatment in terms of market access to all the organization’s members.

But under WTO rules, it first has to reach agreement on the steps it will take to open its own markets to foreign goods.

The US was the last country Vietnam had to negotiate a treaty with, but it must still win approval for permanent normal trading relations from US Congress.

Deputy US trade minister Karan Bhatia called the treaty an "historic step forward" adding it was "the culmination of years of hard work and preparation on both sides".

Mr Bhatia added he would push for prompt approval from Congress, adding he felt "fairly optimistic" about winning backing for permanent trading.

For fact sheets regarding Vietnam’s WTO accession, visit the USTR Web site at http://www.ustr.gov/Document_Library/Fact_Sheets/2006/Section_Index.html

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United States in Violation of WTO rules

The European Commission issued a notice on May 3, 2006, announcing that additional customs duties will be reintroduced as of May 16, 2006, as a result of a World Trade Organization (WTO) confirmation that the American Jobs Creation Act (Jobs Act) of 2004 provides federal tax subsidies to U.S. exporters in violation of WTO rules. The Jobs Act was intended by U.S. lawmakers to replace the Extraterritorial Income Act and its predecessor, the Foreign Sales Corporation program, which were ruled by the WTO to be illegal export subsidies. When a WTO Appellate Body confirmed in February 2006 that the Jobs Act still left the United States in violation of WTO rules, the European Commission announced that it reserved the right to reimpose sanctions.

BIS Export Enforcement

Keeping the most sensitive goods out of the most dangerous hands

Digital Oscilloscopes Controlled for Nuclear Nonproliferation Reasons to Israel

On March 21, 2005, Metric Equipment Sales pled guilty in the Northern District of California to one felony count of exporting digital oscilloscopes to Israel without a BIS license. The oscilloscopes, with sampling rates exceeding 1 GHz, are capable of being utilized in WMD development and missile delivery fields and are controlled for nuclear nonproliferation reasons. Metric was sentenced to a $50,000 criminal fine. BIS assessed Metric a $150,000 administrative penalty and a five year suspended denial of export privileges as part of an agreement with Metric to settle charges related to these unlicensed exports.

Controlled Items to Ballistic Missile Facility in Iran

On February 2, 2005, the U.S. Attorney for the District of Connecticut announced an indictment charging Mohammed Farajbakhsh, Hamid Fatholoomy and their U.A.E.-based companies Diamond Technology and Akeed Trading with conspiring to illegally export goods to Iran via the U.A.E. The defendants were alleged to have shipped computer goods from a U.S. supplier to an entity affiliated with Iran’s ballistic missile program, as well as satellite communications equipment and other goods. In April 2005, Farajbakhsh pled guilty to one count of conspiracy and one count of violating the International Emergency Economic Powers Act. In September 2005, Farajbakhsh was sentenced to seven months in prison and two years probation. OEE, the Defense Criminal Investigative Service (DCIS) and ICE jointly conducted this investigation.

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Down but not out

Journal of Commerce    Monday, May 22, 2006    By: BILL MONGELLUZZO

For months, U.S. importers had been looking forward to this year's contract negotiations with trans-Pacific container carriers. With big, new ships adding capacity, shippers expected favorable supply and demand to produce sharply lower rates.

But now that many major contracts have been negotiated and signed, a somewhat different picture has emerged. Importers say they're securing rate reductions, as expected, but that there is no method this year to the madness that normally surrounds trans-Pacific rate negotiations.

"Carriers are selectively lowering their rates. The rates are coming down, but it's not across the board," said Charley Woo, president of MegaToys in Los Angeles. Shippers say that while rates are down several hundred dollars per FEU from the summer-fall peak season of 2005, rates have not plummeted to new lows.

Shippers and carriers for months have expected that capacity would exceed demand as dozens of new vessels enter the global shipping fleet this year. Carriers began to reduce their rates late last year, after the Christmas rush ended. Rates have fallen another $50 to $100 from the low point in late 2005, Woo said.

It appears that carriers have based their rate cuts on the expectation of excess capacity, not on current market conditions. Containerized imports from Asia during the first four months of the year were stronger than expected, and vessel utilization rates were unusually high for the traditionally slack winter months. Several shippers and carriers now say ship lines appeared too eager to lock in cargo commitments.

With the addition of more than 100 new container ships, carriers are expected to increase global capacity by 1.3 million TEUs, approximately 16 percent. Industry analysts have been predicting that capacity this year will exceed demand by at least five percentage points, and rates will therefore drop steadily.

"All of those analyst reports earlier in the year made it seem like supply will be much more than demand," said Frankie Lau, director of marketing at Orient Overseas Container Line. It hasn't turned out that way.

Except in February, when imports dropped off following the two-week Chinese New Year in Asia, supply and demand in the largest U.S. trade lane have been fairly balanced. The ports of Los Angeles and Long Beach, which handle two-thirds of West Coast imports from Asia and nearly 40 percent of the national total, reported another strong month in April.

Imports increased 18.5 percent in Long Beach in April and 16.8 percent during the first four months of the year compared to the same period in 2005. Los Angeles imports were up 11 percent in April and 8 percent year-to-date compared to the first four months of 2005.

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Rail jams could threaten peak season, says Hanjin exec

JoC Online   Thursday, May 18, 2006    By: William Armbruster

The JOURNAL of COMMERCE ONLINE

NEWARK, N.J. -- Poor rail service and congestion at intermodal rail centers pose the biggest threat of to the smooth flow of international shipments during the coming peak shipping season, according to Hanjin Shipping's top U.S. executive.

Insufficient investment by railroads could lead to bottlenecks both at West Coast ports and at intermodal yards in the U.S. interior, said William Rooney, managing director for Hanjin.

Railroads have been reluctant to invest in new equipment and facilities because they were hammered by Wall Street for failing to achieve adequate returns on capital, he said, adding that rail operators have recently enjoyed sharp increases in their stock prices.

Memphis, Chicago and Dallas are the rail hubs where delays could occur, Rooney told the International Commerce Club of New Jersey Wednesday evening.

The second-biggest challenge facing the industry this year is the trucker shortage, a situation likely to be compounded if the federal government takes a hard line on undocumented immigrants.

The trucking industry's dependence on immigrants was underscored May 1 when most drivers in Los Angeles and Long Beach, Calif. parked their rigs as part of a nationwide protest, he said, and noted that 93 percent of the responses to a recent survey of truckers in California were in Spanish.

The shortage of truckers is adding to the cost of service because higher pay is necessary to keep existing drivers in the workforce and to attract new ones.

Rooney said West Coast ports, particularly Los Angeles and Long Beach, have added enough capacity and improved productivity sufficiently to avoid serious congestion this year, but capacity will be a critical issue in the coming years, he said. That's partly because it can take three to four days to unload containers from the big, new ships now entering service.

Terminal developers and ocean carriers are eyeing alternative gateways, particularly Canada's Prince Rupert in northern British Columbia, but the industry is wary because the port is served by just one railway, Canadian National.

Last month, CN announced that it plans to invest C$1.5 billion in it rail network, including its share in the Prince Rupert container terminal, which the railroad is developing in conjunction with the local port authority and New Jersey-based Maher Terminals.

Other possibilities include the Port of Lazaro Cardenas in Mexico, but it may take as many as 12 to 15 years to build enough container terminals and a viable rail network to connect with the U.S., he said.

Rooney said the industry "is most excited" about the potential for developing a container port in Punta Colonet, about 80 miles south of Tijuana in Baja California. Punta Colonet has natural deepwater, but is undeveloped.

A request for proposals will be issued in the next month or two, but it will take at least 10 years before the site could be turned into a container port, he said.

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APL warns on U.S. gridlock

JoC Online   Tuesday, May 16, 2006

A top executive of APL, the world's seventh-largest container carrier, warned that the aging U.S. transportation infrastructure can't keep up with relentless growth in world trade.

John Bowe, president of the Americas for APL and its sister company APL Logistics, said Monday that if the infrastructure isn't overhauled, consumers and the economy will pay a steep price.

"The U.S. economy has been transformed by unprecedented growth in containerized imports," Bowe told a transportation symposium organized by the MIT Center for Transportation and Logistics in Cambridge, Mass. "Growth in the transportation infrastructure hasn't kept pace. If we don't fix this, supply chains will bog down, consumer prices will go up and the economy will suffer."

Bowe called for public-private collaboration on a national freight policy; significant new investment in the rail network, and increased productivity at ports.

He cautioned, however, that government can't be counted on to pick up the massive cost of infrastructure improvement. "The private sector will have to play a larger role," said Bowe. "But we'll look to government to provide incentives that stimulate investment."

For more than a year APL, a unit of Singapore's Neptune Orient Lines, has been campaigning for infrastructure improvements. In January APL Chief Executive Ron Widdows, Transpacific Trade Senior Vice President Bob Sappio and Bowe attended briefings with President Bush's Domestic Policy Council, to press for capacity improvements that will help the U.S. handle containerized imports from Asia that are forecast to grow by about 30 percent in the next three years.

"We've worked with shippers on temporary solutions," Bowe said. "We've made better use of alternative U.S. gateway ports, we've improved planning and forecasting, and we continue to work closely with our rail partners to manage through rail congestion. But there'll come a time in the not too distant future when even these measures won't be enough.

"We're pushing too much cargo through a pipeline that is not growing fast enough," he said. "Eventually it will be overwhelmed. We need to act now to prevent gridlock."

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