US Imposes New Air Cargo Security Rules

JOC Staff | Nov 8, 2010 7:09PM GMT

Measures include bar on shipments from Yemen, Somalia, limits on belly cargo

U.S. officials, responding to the terror plot last month that used cargo carriers, announced new restrictions and security procedures for international air cargo coming into the United States on Monday, including a ban on certain shipments and a range of tougher screening requirements.

The U.S. Department of Homeland Security expanded its bar against shipments coming from Yemen to include a prohibition on shipments from Somalia, and the department said it would no longer allow any shipments deemed high risk on board passenger aircraft.

The department also barred transport of any toner and ink cartridges larger than 16 ounces on passenger aircraft and said the ban would extend to "certain inbound international air cargo shipments."

By The Numbers: International Air Freight Industry.

Cargo deemed high risk for whatever reason is already inspected, but DHS said any shipments falling in that category would "go through additional and enhanced screening."

DHS said the same measures will apply to international mail, which the department said would have to be certified to be from "an established postal shipper" and will be screened at the individual piece level.

The new restrictions do not include new requirements for advance shipments information, but the agency said it was "working closely" with carriers and other governments "to expedite the receipt of cargo manifests for international flights to the United States prior to departure … to identify and screen items based on risk and current intelligence."

The measures follow the discovery last month of two bombs hidden in shipments of printer cartridges that were sent through FedEx and UPS out of Yemen.

Al Qaeda in the Arabian Peninsula, a terror group based in Yemen, claims responsibility for the failed attack and also claimed over the weekend that it had caused the September crash of a UPS 747 freighter in Dubai.

Authorities in the United Arab Emirates said last week there was no evidence the crash, which killed two crewmembers, was the result of a bomb.

"The threats of terrorism we face are serious and evolving, and these security measures reflect our commitment to using current intelligence to stay ahead of adversaries … working closely with our international, federal, state, local and private sector partners every step of the way," DHS said.

Court Denies Expedited Hearing on Clean Trucks

Bill Mongelluzzo | Nov 10, 2010 1:25AM GM

The Journal of Commerce Online - News Stor

The U.S. Court of Appeals for the 9th Circuit denied a request by the American Trucking Associations for an expedited hearing of its appeal in the Port of Los Angeles clean-truck case, all but assuring the case will remain in legal limbo deep into next year.

Unless the 9th Circuit changes its ruling, the hearing involving the Port of Los Angeles concession requirements, including a mandate that harbor trucking companies begin to phase employee drivers into their fleets, will not take place until the late spring or summer of 2011.

Meanwhile, a preliminary injunction issued by U.S. District Court Judge Christina A. Snyder prohibiting the port from enforcing the employee-driver concession requirement will remain in effect until the 9th Circuit hears the case and issues its ruling later in the year.

Judge Snyder last month ruled certain concession requirements in the port’s clean-truck program most likely violate federal preemption law which prohibits state and local entities from regulating motor carriers engaged in interstate commerce.

However, in a victory for the port, she sided with Los Angeles in its argument that the port competes with other ports for cargo and therefore falls under and exception to federal preemption law as a market participant.

On appeal, Judge Snyder confirmed her ruling, but granted ATA’s request for an injunction prohibiting the port from enforcing the employee-driver mandate until the 9th Circuit hears the case. The port had published an implementation schedule in which harbor trucking companies by Dec. 31, 2011, would have to begin hiring employee drivers, and must have 100 percent employee drivers within two years.

Labor and environmental interests strongly favor the employee-driver mandate, which would allow unions to organize the drivers. Most drivers now are classified as independent contractors, and unions, by law, can only organize companies with direct employees.

If approved in Los Angeles, the employee-driver mandate could spread to ports in other labor-friendly cities such as Oakland, Seattle, New York and Newark, which are on record supporting the Los Angeles plan.

ATA, with the support of the port, had asked the 9th Circuit to require that the parties file their briefs in late December this year so the case could be heard two months earlier than the appellate court had docketed.

US, India Agree on $10 Billion Infrastructure Fund

India and the United States plan to create a $10 billion infrastructure debt fund as a public-private partnership to expedite investments in India's infrastructure, according to India's commerce minister Anand Sharma.

"Both governments have, in principle, agreed to set up an infrastructure debt fund based on the recommendation of the India-U.S. Business Forum," Sharma said at a trade conference in New Delhi Monday.

The minister said New Delhi plans to spend an estimated $1 trillion on infrastructure development under the 12th Five Year Plan (2012 to 2017), and about 30 percent of this is expected to come from the private sector.

By The Numbers: U.S. Container Trade With India.

"Indian Finance Minister Pranab Mukherjee and U.S. Treasury Secretary Timothy Geithner are directly discussing what modalities should be adopted to put in place the infrastructure debt fund," Sharma said.

Without indicating a timeline, he said details of the proposed fund will be announced after the two sides take a final call on it.

Earlier, U.S. under secretary for international trade Francisco Sanchez said the Obama administration would encourage American investment in the Indian infrastructure sector.

Sharma also said both countries had agreed to boost trade and investment in various sectors such as infrastructure, technology, pharmaceuticals and education.

Meanwhile, U.S. President Barack Obama, who is currently on a three-day visit to New Delhi, held talks with Indian Prime Minister Manmohan Singh and the two leaders called for closer ties between the two nations.

"For in Asia and around the world, India is not simply emerging; India has already emerged. And it is my firm belief that the relationship between the United States and India -- bound by our shared interests and values -- will be one of the defining partnerships of the 21st century," President Obama said, addressing members of the Indian Parliament Monday.

EU Officials to Meet On Parcel Security

European Union explosive experts will meet Nov. 5 to examine new measures to tighten air cargo security.

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The meeting in Brussels, which follows the discovery last week of bombs on U.S.-bound flights in the UK and Dubai, will focus on the detection of explosives and cargo scanning procedures.

The experts are not expected to propose any new security rules at this stage.

Separately, EU interior ministers will discuss the co-ordination of security measures across Europe at a scheduled meeting on Nov. 8 and 9.

German interior minister Thomas de Maiziere has urged closer co-operation between security agencies to tighten air cargo security.

"Air freight has been relatively under monitored up to now," de Maiziere said. The recent bomb plots "mean changes for the air freight business," he said.

Obama Says U.S. Gridlock Hurts Trade Posture

President Obama tied U.S. domestic political battles to the nation's global trade competition and ability to boost exports as he embarked on a 10-day trip to Asia, saying gridlock at home puts the nation at a disadvantage with trading partners.

"The most important competition we face in this new century will not be between Democrats and Republicans," Obama said. "It's the competition with countries around the world to lead the global economy."

His remarks on trade came as he commented on a new Labor Department report showing the U.S. added 159,000 private sector jobs in October. They also came three days after he and congressional Democrats suffered a major election setback, as Republicans won the House with a large majority, gained seats in the Senate and took over many state governorships and legislatures.

By The Numbers: U.S. Foreign Trade.

Obama Friday said that in global commerce and its impact on jobs, "we can't spend the next two years mired in gridlock. Other countries, like China, aren't standing still, so we can't stand still either."

He said a goal of his trip to India, Indonesia, South Korea and Japan is to open doors for more U.S. exports, part of his pledge to double overall U.S. exports in five years. A reported 200 corporate executives are joining him to take advantage of the presidential push to make sales abroad.

Before starting his flight out of Washington, Obama said it is "absolutely clear that one of the keys to creating jobs is to open markets to American goods made by American workers. Our prosperity depends not just on consuming things, but also on being the maker of things."

The president also starts his trip at the end of a week when the Federal Reserve announced details of its plan to inject more money into the economy to strengthen a weak recovery. That has already helped lower long-term U.S. interest rates and the dollar's value against many foreign currencies, in turn making U.S. goods cheaper overseas.

Every $1 billion in exports can create thousands of U.S. jobs, Obama said, and "I'm looking very much forward to helping to pry some markets open, help American businesses, and put people back to work here at home during the course of this trip."

On his return, Obama plans to meet Nov. 18 with Democratic and Republican leaders of Congress, to open talks on how to extend tax cuts slated to expire this year, and on other goals such as his plan to add new transportation infrastructure spending while Congress works on long-term legislation for highway and other surface transport programs.

However, a number of GOP lawmakers have said they will resist new Democratic spending proposals and look for ways to cut federal spending. And Sen. Mitch McConnell, Ky., the Senate Republican leader, said this week his priority will be to make sure Obama is not re-elected president in 2012.

By The Numbers: U.S. Container Trade With India.

The president specifically talked about "opening up additional markets in places like India," one of the world's fastest growing economies and with the second-largest population. Through the first eight months of this year, the U.S. ran a deficit in goods trade with India of $7 billion, as U.S. exporters sold nearly $13 billion worth of products to that country while American consumers bought nearly $20 billion of goods from India.

A year ago, as recession took up the first half of 2009, goods imports from India totaled $13.6 billion while U.S. product exports there totaled $10.8 billion, for a $2.7 billion U.S. bilateral trade deficit.

Suit Accuses Swift of Underpaying Truckers

Swift Transportation faces a class-action lawsuit alleging the nation's largest truckload carrier underpaid its truck drivers for at least a dozen years.

Maricopa County Superior Court Judge J. Richard Gama ruled Nov. 4 a lawsuit filed against Phoenix-based Swift in 2004 may proceed as a class-action suit.

The suit claims that by basing per-mile pay on mileages calculated by software rather than actual miles driven, Swift underpaid drivers 7 to 10 percent.

By The Numbers: U.S. Truck Shipping Costs.

The class in the case encompasses all drivers and owner-operators who worked for Swift on or after Jan. 30, 1998. Leonel Garza is the lead plaintiff in the case.

Swift owns about 12,300 tractors and contracts with about 3,800 owner-operators.

The lawsuit itself took a circuitous route through Arizona's legal system, from the county court to the Arizona Supreme Court and back to the county court.

Swift, which had about $2.6 billion in revenue in 2009, is the largest truckload carrier in the U.S. when ranked by revenue. The company, which is in the midst of an initial public offering, lost $76.1 million in the first six months of 2010.

Airlines Face Big EU Air Cargo Cartel Fines

The European Union is expected to fine several major airlines hundreds of millions of dollars this week for fixing international freight rates.

The European Commission, the EU's executive, could announce the fines as early as Nov. 10, closing a four year investigation that began with raids on carriers' offices on both sides of the Atlantic.

Major airlines facing EU penalties have already paid over $1.6 billion in fines to U.S. authorities for their role in a global air cargo cartel that operated from 2001 to early 2006.

By The Numbers: Air Freight Price Index.

The Commission can fine companies up to 10 percent of their annual global revenue if it finds them guilty of price fixing but it rarely hands down the maximum penalty.

Air France KLM and British Airways, which were fined $350 million and $300 million respectively in the U.S., are among airlines facing substantial fines from the EU.

Cathay Pacific, Japan Airlines, Alitalia and All Nippon Airways have confirmed they have been investigated.

Lufthansa, Europe's largest cargo carrier, is not facing a fine as it informed the Commission about the cartel's activities.

The Commission's decision will have an impact on several pending legal actions by shippers seeking damages they suffered due to the cartel's activities.

Several hundred European shippers, led by Swedish telecoms group Ericsson and Dutch electronics giant Philips, are suing Air France-KLM and its Martinair subsidiary for $560 million.

Wisconsin Rail Fight Heats Up

Wisconsin’s Republican governor-elect, Scott Walker, campaigned and won on a pledge to kill a planned Madison-Milwaukee passenger rail line that drew a large federal grant. Now, departing Democratic Gov. Jim Doyle warns it is “pure fiction” that Walker would be able to redirect that money into repairing the state’s roads and bridges.

The Wisconsin rail fight has become a flash point in a broader political battle across the country over what one side sees as a sensible way to begin connecting cities in the future and the other sees as a big-government waste of funds.

Wisconsin won $823 million in federal funds for the Madison-Milwaukee project and other passenger rail work, along what would eventually be a corridor linking Chicago and Minneapolis. It would upgrade freight tracks of Canadian Pacific Railway and Wisconsin Southern Railroad to allow passenger service as well as freight, part of a broader Chicago Hub Network of Amtrak operations across the region.

By The Numbers: U.S. Rail Cargo.

But like many other corridor projects, it was slow to gear up amid protracted negotiations between states, railroads and federal authorities. Doyle finally signed an implementing accord just before the election with the U.S. Department of Transportation to try to get this project going, and commit his state to supporting it.

Last week, state officials told contractors to suspend their work in the face of the election results and Walker’s stated plans to redirect the federal grant to road repairs. “We have gotten this project to the point where construction work is ready to begin immediately,” Doyle said Nov. 8. “Right now, people could be at work constructing land bridges and more.”

He said “I have put the project on pause” to let Walker and federal officials confer about what to do next. But Doyle said the idea that the state can use the money in other ways “is pure fiction. There are already states lined up with rail projects waiting for us to turn back this money,” and if Walker decides Wisconsin should not build the project, “the U.S. DOT has made it very clear this money will go to another state” for its rail service.

In that event, Doyle said Wisconsin would also have to cover over $14 million in expenses already incurred for the project, plus $82 million in required upgrades to existing facilities.

Imports Drive 20 Percent Intermodal Surge

Intermodal traffic rose 20.3 percent in the third quarter from a year earlier, driven by a 28.1 percent rise in import-powered international loadings, according to the Intermodal Association of North America.

In all, IANA said railroads carried 3.603 million revenue loads of containers and trailers in the July-September period, up from 2.995 million in the 2009 quarter.

Domestic volume that competes with trucking grew 11.7 percent to 1.591 million units, most of which was the large-capacity 53-foot containers that have become the standard domestic intermodal box size along with some trailers. International shipment of 2.012 million marine containers is mostly in 40-foot units, but includes 20- and 45-foot boxes.

By The Numbers: U.S. Intermodal Shipments.

While the growth in domestic intermodal means it continues to outpace the economy and take transportation market share away from all-highway moves, IANA said international volume was so strong that it hindered restocking the North American domestic container fleet. Imports dominate the international traffic, and this year has often seen ship lines quickly unload their marine boxes so they could send empties back to Asia to reload.

Railroads and other firms that provide domestic containers had ordered more built at factories in Asia, but those 53-footers had to come back in on the same containerships that were usually full of marine containers carrying consumer goods.

“While many domestic container fleet operators have placed orders for new containers, containership capacity constraints have prevented many of these orders from being filled,” IANA said. “As a result, there are fewer domestic containers available to handle surging demand.”

The trade group said that could also be why intermodal trailer volume grew 8.5 percent in the quarter. Rail loadings of the more efficient, stackable containers increased 13 percent, but trailer traffic strengthened during the time that additional domestic containers were slow to come into the North American fleet.

The third quarter included what have been the highest-volume weeks so far this year, and industry officials say traffic remained around peak-season levels throughout October.

Index Shows Truckload Capacity Tightening

Truckload demand increased and capacity tightened in the first week of November following three straight weeks of decline, according to Longbow Research.

The investment research firm's Trucking Barometer market index rose 7.8 percent during the week ending Nov. 5, to 97.7. Year-over-year, the index is up 65.3 percent.

Capacity remained "relatively tight" throughout the Mountain region and across the West Coast, where port imports accelerated, the research firm said.

By The Numbers: Containerized Ocean Trade - Southern California Ports.

The index has dropped substantially, however, from its peak in the May-June period, when a surge in shipping demand that began in February crested.

The latest report fits an emerging picture of a slower economic recovery but also raises hope that holiday shipping demand could pick up in November.

Flatbed demand rose only 0.4 percent from the previous week. It has risen nearly 25 percent over the last 11 weeks, however, and 147.6 percent from a year ago.

Flatbed capacity is tightest on the West Coast and in New England, Longbow said.

"Our outlook is for the U.S. economy to continue a slow and steady recovery throughout 2010," the research firm said.

Cargo Mail and Package Bombs -- JOC Week in Review

The JOC Week in Review for November 5 gives you the highlights of top news stories from this week, and also a preview of the Nov. 8 edition of the Journal of Commerce.

Mail bombs and suspicious package news from JOC:
Apparent Explosives Prompt Air Cargo Terror Alert
President Obama Warns of 'Credible' Terror Alert
US Investigators Eye Earlier UPS Crash
UPS, FedEx Halt Yemen Shipments
Official: One Bomb Defused 17 Minutes from Exploding

Podcast:
Journal of Commerce Managing Editor Chris Brooks on what you can find in the Nov. 8 edition of the Journal of Commerce, including in-depth coverage of looming security threats to the air cargo industry.