»Issue 04, Volume 08                                                          www.scarbrough-intl.com                                                         » April 2008 

IN THIS ISSUE:

·  Cover Story

·  Business Monitor

·  Business News

·  Scarbrough News

·  Entertainment in the   

   Industry

·  New Requirements

 COVER STORY

China’s cost advantage could come to an end as early as 2010

A recent article “Rising costs threaten China’s advantage” published in the Shipping Digest written by Peter T. Leach suggests that rising costs could end China’s labor advantage by 2010. Jon Monroe of Jon Monroe Consulting in Sausalito, Calf. stated that currently China’s labor costs are rising at an annual rate of about 20 in the Pearl River Delta around Hong Kong where so much of the country’s manufacturing sector percent and labor shortages are starting to develop “especially in the Pearl River Delta around Hong Kong where so much of the country’s manufacturing sector is located” (April 14, 2008 p.12).

Still there are several other factors that will contribute to China possibly losing its edge in the near future. Most notably is the ever increasing cost of bunker fuel. This year carriers are looking to fully recoup those costs by implementing a floating bunker surcharge. Adding to the increase in fuel prices (not only for bunker but diesel as well) are a recently approved Los Angeles-Long Beach Clean Air program, requiring drayage companies to upgrade to newer, cleaner burning trucks; PierPass; and a Transportation Workers Identification Credential, that will require LA-LB harbor truckers to raise costs to fund it. Two proposed items that will also add to the increasing costs are a California port-based infrastructure improvement fee and a federal infrastructure improvement fee.

Never the less with the weakening dollar and the above mentioned cost increases the cost to import will continue to rise. U.S. Exports on the other hand recorded a record increase of over $176 billion from 2006 to 2007 according to the U.S. Census Bureau’s trade data. That is a 12.2 percent increase compared to a 5.9 percent increase for U.S. Imports. 

  -Jason Shank, Chicago Branch Manager

BUSINESS MONITOR

Air Cargo News, issued March 28, 2008, announces that the “Airports Council International (ACI), has revealed its preliminary airport cargo tonnage figures for 2007.  It puts total cargo, including mail, at 80.3 million tones, representing a growth of 2.5%” since 2006.  The following table demonstrates that Memphis, Tennessee, FedEx's main hub, is ranked number one globally for the highest number of cargo tonnage.

 “These figures are preliminary results incorporating 877 airports worldwide. Results may change slightly when confirmed figures are submitted in June 2008.”

For more information, please click here.

BUSINESS NEWS

Wisconsin Meets with China to Encourage Trade Relations:

Wisconsin Governor Jim Doyle met with Chinese official to promote trade between the Midwest and China.  An agreement with China’s Vice-Minister of Commerce was sought for a major new U.S. purchase agreement.  Heads of large US companies attended.

Although we do not know the current total amount of Chinese imports, China was Wisconsin’s 3rd largest international market with exports growing to 30% for a total of  $870,000.00.

Wisconsin manufactures equipment China uses to support their rapidly growing export business.  This also creates an opportunity to encourage investments in Wisconsin and good Wisconsin jobs.  As more information on business in Wisconsin geared towards China becomes available, more updates will be published.

-Ray Diederich, Import Department Milwaukee Office

SCARBROUGH NEWS

Executing with Excellence

Scarbrough International, Inc. prides itself on being “big enough to meet your needs, small enough to care.” What exactly does that mean?  A little thought on the application of this slogan reveals that it is not about the size of the company, but rather about the collective attitude of the company.  The purpose of this slogan is not to emphasize that our company is somewhere between big and small; instead, this slogan stresses that we at Scarbrough international have the resources, knowledge, technology, contacts, and desire necessary to handle the requirements of any of our clients’ supply chain, regardless of how big or small they may be.  Thus, we are “big enough to meet your needs.”

Not only does Scarbrough pride itself on the previously mentioned essentials for running a successful business, but its employees also strive to provide the best customer service possible.  Simply, we can get the job done.  Yet we are also small enough to care, which means that we care enough to listen to our clients’ needs.  We care enough about their success and our relationship as business partners to provide them with an exceptional level of customer service.  We want our customers to succeed, because when they are successful, we are successful as well. 

The slogan, “Big enough to meet your needs, small enough to care,” is a tough standard to keep.  It requires a motivated, highly trained and educated team that reacts quickly to customers’ needs.  We call this “executing with excellence.”  The key word is “excellence.”  What does excellence mean and how do we execute at a lofty level?  Excellence means to strive far above meritocracy.  Being mediocre is easy.  It’s simple to be average, ordinary, and adequate, but it is extremely difficult to always be excellent.  Excellence indicates reaching one’s full potential and that standard is one that is not easy to reach.

In order for the company to meet the expectations as described above, the employees, must look at their individual roles and responsibilities in the company and figure out how to execute those roles in an excellent manner.  How do I exceed with excellence undergoing my role in the company?  First, as a leader within the company, I have to teach others to be excellent.  Being excellent on my own is not enough; I have to instill in others desire and knowledge, and provide them the support necessary to allow them to “execute with excellence.”

Scarbrough International, Ltd. continually emphasizes excellence among its employees.  The Scarbrough Team wants to educate its customers and business partners that indeed, we are big enough to meet your needs and small enough to care.

-Brett Jones,

Kansas City Corporate Pricing Department

FUEL SURCHARGE UPDATE

The cost of diesel fuel in the United States has increased at an extremely high rate over recent months. Up until now we at Scarbrough Logistics have done everything possible to absorb this cost and keep our fuel surcharge at a minimal level.  The average cost for a gallon of diesel fuel hit an all time record high of $4.059 during the week of April 7^th, 2008.

Because of this recent spike Scarbrough is now forced to increase its surcharge to coincide. So, effective May 1, 2008 we will begin charging a 35% fuel surcharge for all shipments unless otherwise quoted.

-David Kirby, Logistics Manager, Kansas City

SCARBROUGH NEWS

Small Town, Big Load

Helicopters fit inside

containers?  It only took

a crane and a 3-story

building to load. 

The lead came from a Middle Eastern Agent in Beirut, Lebanon.  At this partner’s request, Scarbrough was able to secure a movement of a 2,500 lb Robinson R44 Clipper II helicopter.  The helicopter, designed by Robinson Helicopter Company in Costa Mesa, California is destined for a small island off the tip of Mozambique Channel that flows into the Indian Ocean between Madagascar and Mozambique.  According to Wikipedia, Comoros Island is the third smallest African nation by area.

So how did the helicopter really fit into a 40’ High Cube? It was cut into 3 pieces just to be reassembled after reaching destination in Comoros.  The R44 Clipper II will be used for the Comoros Embassy in Beirut, Lebanon.

-Geri Gavlick, Senior Export Account Representative

St. Louis

BUSINESS NEWS: GENERAL AVERAGE DECLARED

Why Obtaining Cargo Insurance is so Important:  Obtain it through Scarbrough!

Here is a recent situation that took place:  “On March 8, 2008 the MSC Sabrina was grounded at the Three Rivers (Canada) on her passage to Montreal and was unable to refloat without assistance.  MSC engaged local tugs to assist in refloating the vessel on April 4, 2008 after 450 containers were transloaded onto another MSC vessel and carried to their final destination.”

As a result of the forgoing MSC incurred significant costs and expenses and accordingly declared General Average.  If General Average is declared and the shipper has cargo insurance, the full shipment value will be promptly reimbursed by the insurer.  However, if the shipper does not have insurance, they are required to: complete and sign the Average Bond by the cargo receivers, provide a copy of the C&F commercial invoice, and provide a cash deposit in place of the insurers Average Guarantee. 

If you would like to receive more information on purchasing cargo insurance through Scarbrough International, please contact Lily Chang at 630-595-7900 or email her at lchang@scabrough-intl.com.

NEW REQUIREMENTS

10+ 2 Security Filing Initiative:

As an industry leader in Customs compliance, Scarbrough International is adequately prepared to fully comply with this new initiative and to prepare its clients to do the same.  Although not finalized yet, the 10 + 2 Security Filing Initiative is an initiative which requires the filing of 10 pieces of information from the importer and 2 pieces of information from the carrier.  They are as follows:

Importer:

· Manufacturer/Supplier complete name & address

· Seller / Owner complete name and address

· Container stuffing location

· Consolidator name and address

· Buyer / Owner complete name and address

· Ship to name and address

· Importer of Record EIN, name and address

· Consignee EIN#, name and address

· Country of Origin of the Product

· Commodity Classification

Carrier:

· Cargo Stow Plan

· Container Status Message Data

Scarbrough International has, to this point, completed the following steps in our preparation for the 10 + 2 Security Filing Initiative:

· Hosted a Customs compliance seminar for our clients where we discussed the initiative and the steps that they need to take to ensure that they are able to comply fully with the initiative

· Created an interactive form to be exchanged between the importer, supplier, booking agent, and Scarbrough International including the necessary pieces of information required for 10+2.

· Scarbrough International already works with our booking agents to fully comply with AMS requirements, which although different are not unlike the requirements of 10 + 2.  We are also working with our software vendor to fully integrate the 10 + 2 filing with our operating software.

As our preparations thus far indicate, Scarbrough is fully prepared to comply with this new directive and assist our clients in doing the same.  Our action plan for 10 + 2 will be finalized once the final ruling is known.

If there are any questions regarding this initiative and our preparations for it, please contact Bret Holder, Corporate Compliance Officer at 816-584-2440.

For more on 1For more information on 10+2, please click here.

BUSINESS MONITOR

U.S. Customs  partnering with China Customs

U.S. Customs and Border Protection and the General Administration of China Customs have collaborated to enhance global supply chain security with “the start of a pilot validation program in China.”  The U.S. companies have agreed to participate in the pilot along with three Customs-Trade Partnership Against Terrorism importer partners whose supply chains predominately originate in China.

China Customs has validated the initiative using the C-TPAT minimum security criteria as a guide along with CBP supply chain specialists for technical assistance. Not only will this initiative increase relations between China and U.S., but it will also be able to collect information that will increase benefits for all parties that are effected.

C-TPAT Director, Bradd Skinner, states, “It is a win-win for all. CBP and China Customs have the knowledge that all parties involved have good security practices in place and the companies can benefit by receiving fewer exams.”

For more information: click here.

ENTERTAINMENT IN THE INDUSTRY

America’s Port

America’s Port is a new eight-part mini series about the inner workings of the Port of Los Angeles.  The series takes an inside look at the Port and the people who keep it running 24/7, 365 days a year.

On the series premiere one of the ships docked and showed how the containers are secured to the vessel.  The premiere also filmed how containers go through security X-ray exams, and some of the triggers Customs agents look for when viewing.  Customs agents did question one of the containers and opened it for a better view.  After taking samples and checking the product for contraband, the cargo was released to the consignee.  The series is also addressing pollution of the Port and how it will affect the future.

On the second show producers showed how quickly a terminal can get behind because of vessels delays on the seas and what they do to expedite ships to avoid congestion.  Cargo vessels operate on a tight schedule and one delay can cause a bottleneck potentially creating a domino effect in an entire trade lane.  The series also showed how crime is handled in the Port and on the vessels operating within the Port.  During this episode houses were also being built for Habitat for Humanity and a town meeting was held about the expansion of one of the terminals.  During the town meeting, the terminal discussed what steps needed to be taken to control pollution so they could expand. 

Although the Port of Los Angles is a very busy place, the picture below was taken in honor of a family member of a Longshore worker passing.  This is the port’s version of a 21 gun salute. In the shipping world they do a crane salute, they moved the boom arms and cranes to a uniform height and remained silent for a moment.

 The Port of Los Angeles is so much more than shipping terminals and maritime operations.  It also houses families and has its own authorities much like a city.  The series is very educational and shows the ins and outs of a working port.  The series is shown on the National Geographic Channel Monday’s 9 pm central standard time. 

The National Geographic channel also has some information about the series and upcoming events at National Geographic.

-Teresa Polley

Import Customer Service Representative, Kansas City