'Tis the season for Teamster contracts

An Executive Summary of Industry News

By Staff -- Logistics Management, 1/1/2008

• ’Tis the season for Teamster contracts. December saw both UPS and YRC Worldwide Inc. sign new deals with the International Brotherhood of Teamsters. The Teamsters told UPS it had certified, ratified, and approved a new contract covering 240,000 UPS employees that includes wage increases and significant contributions to healthcare and pension plans. The YRC deal is a five-year labor contract that covers its member subsidiaries Yellow Transportation, Roadway, and USF Holland. YRC said this contract covers most dockworkers, drivers, and other union employees.
• Aloha allowance. Both Matson Navigation and Horizon Lines LLC ushered in the New Year by hiking up their respective rates, adding more expense for U.S. mainland shippers moving goods to and from the Hawaiian Islands. Matson said the increase was to offset assets acquired last year, yet to be paid for. Horizon, too, said it must pay for improvements to its vessels and facilities, including the $9.5 million it plans to spend on enhancing island operations. Matson has added four new vessels to the trade lane, and Horizon plans on adding five larger vessels to its Hawaii rotation over the next year. Furthermore, Horizon will spend $4.5 million to modify its cranes in Honolulu Harbor to accommodate this new capacity.
• STB puts the kibosh on MCR. A proposed joint venture between Class I railway Norfolk Southern (NS) and Watco Companies that would have provided freight and passenger rail service for more than 384 route miles in Michigan and Indiana was nixed by the Surface Transportation Board (STB). The reason? The STB felt that NS would have had too much control over the Michigan Central Railway (MCR) venture. The board stated that if the deal had been approved, NS would have been a 33 percent stakeholder in the MCR and would have provided most of the rail line segments and trackage rights west of Ypsilanti, Mich. NS and Watco spokespeople told LM they were disappointed with this decision and said they plan to examine other options on these rail lines.
• Pugh steps down. After serving the National Motor Freight Traffic Association (NMFTA) for more than 32 years in various capacities, Executive Director William M. Pugh has resigned. Pugh was the driving force behind NMFTA’s transition to a new organizational structure over the past year and took the lead on new procedures that will allow for the continued development and maintenance of the National Motor Freight Classification without the need for antitrust immunity all while facilitating input from carriers, shippers, and third parties. The NMFTA had not announced a replacement for Pugh at press time.
• Cleaner, greener, but costlier. A “Clean Trucks” fee applicable to the entire San Pedro Bay was put in place when commissions for the ports of Long Beach and Los Angeles voted to impose a $35 charge on every loaded twenty-foot equivalent unit (TEU) entering or leaving the ports by short-haul (or “drayage”) truck beginning June 1, 2008. The tax—widely opposed by shipper groups—would apply through 2012 when all trucks must meet 2007 emission standards. Marine terminal operators will be responsible for collecting the tax from cargo owners. These monies would then be turned over to the port where they will be placed in a special port-established fund to replace and retrofit the drayage fleet.
• Ag shippers opting for air. A new report entitled “The Role of Air Cargo in California’s Agricultural Export Trade: A 2007 Update” indicates that California airborne food export trade was 24.5 percent higher in 2006 than it had been 10 years earlier. “Given the seasonal nature of this business, most of these goods move in bellies of passenger aircraft—not charters,” said Dr. Bert Mason, professor and chair of Fresno State’s Agricultural Economics Department. Shippers of high value agricultural products will be keeping a sharp eye out for changes in passenger air travel, he added. “One purpose of this study was to draw attention to the unique role of air cargo in reaching lucrative and expanding overseas markets that would be otherwise inaccessible to specialty crop growers in this state,” Mason said. “While ocean carriers would certainly like to capture more of this export commodity, it still has to move by air to arrive at inland destinations on time.”
• Because they can. Given maritime analyst’s projections for robust growth in the trans-Atlantic, U.S. shippers are being handed a rate increase by the carrier consortium serving the trade. “Eastbound trade volume is now creating severe demands on vessel space and, in particular, on container availability for the growing U.S. exports,” said a spokesperson for the Trans-Atlantic Carrier Association (TACA). As a consequence, TACA will be imposing a general tariff increase effective from February 1. The spokesperson added that the TACA “rate restoration” measures put in place late last year provided insufficient revenues to cover the rising cost pressures encountered by these demands. Analysts have noted that there has been a high level of forward bookings, and surmise that carriers may be concerned about the additional costs of re-positioning containers. Carriers comprising TACA include Atlantic Container Line A.B., Maersk Line, Mediterranean Shipping Co., Nippon Yusen Kaisha (NYK) Line, and Orient Overseas Container Line (OOCL).
• ACE is wild. A spirited, if not entirely wild, exchange of ideas characterized the Automated Commercial Environment (ACE) Exchange Conference in San Francisco late last year. It was the final stop on a tour organized by U.S. Customs & Border Protection (CBP) cargo systems program office to engage shippers in a dialogue about the commercial trade processing system that’s still in development. “We don’t want to have a negative impact on your business processes,” said Louis Samenfink, CBP’s executive director. “It is quite the opposite. This is designed to expedite cargo throughput and to keep us all on the same page.” Entry summary and post-release information is scheduled for implementation this year.
• Modal mitigation? Some shippers based in the Pacific Northwest may be trying to mitigate higher transpacific ocean rates by opting for more intermodal moves in the coming months, said Janet Papworth, executive vice president of Clearpointt, a transportation and logistics company based in Everett, Wash. “Companies like Target, Lowes, and Pier One, are already seeking creative ways to control costs by spreading out the modal component,” she says. “They can’t do it by using just rail, because those carriers are trying to build capital to create and repair new infrastructure.” Her remark was prompted by news that vessel operators participating in the Canada Transpacific Stabilization Agreement (CTSA) plan to raise West Coast rates by $400 per forty equivalent units (FEU) and inland point and East Coast rates increase $600 per FEU this year. The CTSA comprises 11 container lines serving the trade from Asia and the Indian Subcontinent to ports and inland points in Canada.
• LM’s 2008 Salary Survey and Outlook webcasts are almost here! Be sure to watch your inbox now that you are back to work in the New Year. During mid-January, we’ll be sending out 2008 Salary Survey questionnaires via e-mail. Last year nearly 1,400 readers participated in this highly anticipated study, giving the market a clear picture of average logistics salaries around the country, as well as which titles rake in the biggest bucks. And, on January 30 at 2:00 p.m EST, the 2008 Logistics Outlook webcast goes live! This ever-popular event offers shippers a snapshot of where the U.S. economy is headed and, more importantly, what kind of rates to expect in the coming year. During this interactive event, shippers will be able to ask industry experts questions in real time. We’re looking forward to seeing you online!