Brokers, Forwarders & NV0s
LCL on wheels
Averitt Express, originally a multi-shipment regional motor carrier that now provides international logistics service, expanded its new less-than-containerload service to the Port of Yantian in Shenzhen, China, and Hong Kong on Dec. 1.
The freight transportation company, headquartered in Cookeville, Tenn., launched its Asia-Memphis Express service in July serving shippers at the Chinese ports of Ningbo and Shanghai.
Averitt has provided LCL service from Asia for several years, but the new service for the first time blends the LCL service with Averitt's less-than-truckload network. The company said the hybrid ocean-rail-truck offering shaves up to 10 days transit time for final customer deliveries.
LCL shipments can face delays on both sides of the ocean journey because freight intermediaries often have to wait until they have enough shipments from multiple customers to fill a container and then sort and restuff the freight at the first U.S. port of entry for onward distribution. Third-party deconsolidation generally adds wait time to the cargo's transit.
Averitt's response has been to take more direct control and streamline the process. The company relies on a revenue-sharing partner, China International Freight, rather than a contractor to consolidate the container shipments and book through transport to Memphis with the ocean carrier, according to Charlie McGee, vice president of international development.
When the container hits the ports of Los Angeles and Long Beach it is placed on a BNSF train. Averitt picks up the cargo at the Memphis rail ramp and takes it to its main terminal, where it is deconsolidated and immediately put into the line haul network for distribution to local service centers that handle final delivery.
Averitt's LCL product differs from the OceanGuaranteed express LCL service offered by Con-way Freight and APL Logistics because the latter is designed to capture deferred air freight customers seeking a reliable cost-saving option. Averitt's less expensive pricing is targeted at attracting existing ocean customers.
'We are going to level the playing field for the medium-to-small importer who relies on LCL shipping and is trying to compete with the mass retailers, wholesalers and mega manufacturing entities,' McGee said in a company news release.
The other difference is that Con-way must first pick up the box at the vessel operator's container freight station, shuttle it to its local service center, and deconsolidate and repack it into trailers for inland distribution. Averitt cuts out a step by using in-bond intermodal transport to Memphis and combining its container freight station at the same location as its LTL cross-dock so freight is directly injected into its network. The process defers customs clearance until the cargo reaches Memphis.
Con-way and APL, however, guarantee on-time performance within certain tolerances, while Averitt does not have a guarantee. OceanGuaranteed chops up to 25 days from normal shipping schedules, with shipment windows of 14 to 20 days to the central and eastern United States. OceanGuaranteed also puts shipments directly into its trucking network, avoiding slower rail service. Averitt said its import transit times average 25 to 27 days depending on the port of origin.
Averitt plans to expand its LCL product to Busan, South Korea, and Kaohsiung, Taiwan, in the first quarter and to Tokyo and Yokohama, Japan, in the second quarter of 2009, McGee said on the floor of a major intermodal expo in Fort Lauderdale, Fla., on Nov. 13. – Eric Kulisch
NSAs still wait to shine
Four years ago, the non-vessel-operating common carrier industry scored a victory of sorts by witnessing the U.S. Federal Maritime Commission's approval to implement a regulation to allow this segment of the ocean transportation industry to enter formal service arrangements with shippers.
In fact, it was the last time NVOs truly rallied together for a common objective, fulfilling a call by former Sen. Slade Gordon, R-Wash., who led an unsuccessful floor debate in 1998 to eliminate the provision that denied NVOs the right to sign service contracts under the Ocean Shipping Reform Act.
So what's happened to the NVOCC Service Arrangements (NSAs)? Are they just so popular that no one in the industry talks about them anymore?
The answer to both of these questions is that NSAs are still largely underused.
'The reduced volumes, spot rating and market volatility are not positive drivers for NSAs,' Thomas Keene, vice president of BDP Transport, a Philadelphia-based freight forwarder-NVO, told American Shipper. 'Shippers are more concerned with meeting their MQCs (minimal quantitative commitments) and the duration of the existing rates with the liner carriers.'
BDP joined with a half-dozen large NVOs in filing a petition with the FMC in 2004 to persuade the agency to use its exemption authority in OSRA to develop regulations that allow NVOs to enter service arrangements. The other NVOs in that petition were UPS, FedEx Trade Networks, BAX Global and C.H. Robinson Worldwide. Even the World Shipping Council, which represents the liner carriers, did not block the measure, adding impetus for the FMC to grant approval to move forward with implementing the NSA rule on Dec. 14, 2004.
UPS and FedEx, with their 'closed loop' networks, were particularly interested in NSAs as a way to more effectively compete with the logistics operations of the liner carriers, while large forwarder-NVOs hoped to use NSAs to solidify their business with shippers.
To engage in NSAs, NVOs must first register with the FMC to electronically file the essential terms of their service arrangements with the agency. These essential terms do not identify the shipper or the rates and charges.
According to the FMC, 685 NVOs were registered to file NSAs as of Oct. 31. The commission also reported that 2,476 original NSAs and 2,952 amendments have been filed by the NVO industry between the regulation's inception and Oct. 31.
Still, NVOs estimate the amount of freight that actually moves under NSAs is minimal compared to the overall industry's volume. 'We use them currently as a contractual obligation with the larger shippers,' Keene said.
He acknowledged 'many shippers still don't understand' NSAs, and that the NVO industry could do a better job at educating the industry about their use. But this is easier said than done as NVOs scramble to gather every cubic meter of freight they can use to fill their boxes.
Keene believes it will take much healthier market conditions before NSAs will get their chance to shine. – Chris Gillis
