Happy Holidays and Best Wishes for a Joyous New Year!

December 23, 2008

Our View on the Economy, Volumes

This has been a challenging year for everyone, whether one is a retailer, manufacturer or logistics provider. The transportation sector usually leads out of a recession, but at least for ’09, experts expect volumes to continue to stay soft. Those of us that don’t own assets that might run empty (trucks, ships, planes) are expected to fare better than those that do, notably truckers and steamship lines. Ed Wolfe, a highly regarded transportation industry analyst, stated in his December newsletter that he based on what he sees in the transports (unprecedented drop in volume against easy compares) that he expects a “very, very deep recession.” The market analysts note that the ocean lane showing the steepest drop is the Asia to Europe lane, which for a while was growing at dramatic rates and absorbing additional capacity. However, most of this doom and gloom was prior to the Fed dropping interest rates, which has spiked a boom in refinancing, which might also put a little life back into the real estate market and then the economy.

Freight Market, Suspension of BAF

So that we don’t totally spoil your holiday cheer, there is good news for shippers in all this. Rates have been dropping quickly in most lanes. The steamship lines are trying to figure out how to handle this very abrupt drop in demand. The TSA is trying its own version of Steamship Line Holiday Cheer, and claiming that today’s rates will go up on February 1st (too much early eggnog at the TSA?). We see little to no evidence that we’re approaching a floor for the market, let alone a justification for an uptick from current levels. The real question is how many carriers will break ranks to bring in incremental volume at the expense of margin for everyone. While the TSA is yammering about increases, the corporate news releases from the liners themselves talk about protracted weakness in the ocean market. APL has reduced their Asia-Europe and Asia-North America capacity by 25% and 20%, respectively. The spot reductions also mean that just about every carrier has deserted the TSA BAF matrix – they’re offering all-in prices, and distinctly divorcing that from the 2008 TSA BAF schedule. We’ve been passing those reductions on to our customers in the form of BAF or base rate reductions as we’ve been getting them.

Because the market has shifted from a BAF-driven market to a spot market, we have switched to passing along rates as we’ve been getting them. If we get a reduction on December 4th, we’re not waiting until January 1 to pass that along in a general BAF decrease. Therefore, effective immediately, we are going to leave the BAF where it is today and adjust the base ocean rates going forward.

Since carriers are dropping rates dramatically at specific port/CY points, while others are saying that they’d rather lay up their vessels or run empty than sacrifice margin per box. As such, it is more important than ever to trust Global Link to find the best blend of rates and service, and our Customer Account Managers to make sure that your freight gets to its destination as expected, regardless of the underlying carrier. If you have a good (and increasing volume) forecast for Q1, we recommend that you work with your account manager, as at this point a guarantee of volume for a quarter will go very far in securing excellent rates from the lines.

10 +2 Pilot Program

Global Link Brokerage Services, in conjunction with our software provider, SmartBorder, has started a voluntary pilot program to understand and implement the new 10+2 requirements. We’re still taking volunteers that would like to begin to implement in their own supply chains, and embarking on this process together. So far, 7 of our largest customers have started working with us on this pilot. Customs has conveyed their interest making this a flexible and non-intrusive program, so early implementation will be key to all our customers. If you are interested in being a part of our voluntary pilot program, please contact Emily Chason at echason@globallinklogistics.com.

Consumer Product Safety Commission (CPSC) Lead Paint Ruling

The rash of issues with Chinese imports containing leaded paint prompted the government to strengthen the Consumer Product Safety Act (CPSA) in August. The CPSA now requires that the importer must issue a certificate, available at the time of arrival at the port, that sates that the product is free of lead paint and any other violations of the CPSC code for its product type. If the product falls into certain children’s product categories, a third-party certificate is required. Unfortunately, there is no electronic system to transfer these certificates to the government, so we recommend that our customers provide Global Link, if we are your broker, with copies of your certificates. We recommend that each customer consult their legal counsel to understand whether they should have a certificate by product, factory, or combined Asia import quality control program.

Everyone at Global Link wishes you, your family and your company a Happy New Year. We thank you for your business, and look forward to serving you next year.

Sincerely,





Hessel Verhage
President, Global Link Logistics

<<<return to news