Archives for January, 2017

Logistics Managers Get New Tool For Calculating Customs Risk

Readers of the Global Logistics 2017: Customs & Regulations Update have learned from the expertise of a handful of industry leaders for the best market intelligence.

BPE Global, a leading trade compliance consulting firm based in San Francisco, has launched the Trade Policy Impact Calculator, a free tool accessible to logistics managers. The calculator offers a fiscal snapshot of possible trade changes and the impact to companies bottom lie.  The calculator is designed help CEO’s develop a strategic plan to ensure profitability under the incoming U.S. Administration.

According to BPE president, Beth Pride, CFO’s will get bottom line costs for budgeting and forecasting purposes. COO’s will have estimates so they can develop proactive manufacturing and supply chain strategies to optimize margin.

Chief Counsels will understand the implications of U.S. trade policy impact on existing sales, service and manufacturing contracts. And Chief Marketing officers will be able to develop sales, marketing and pricing strategies inclusive of any increased or decreased Cost of Goods Sold (COGS).

Ms. Pride also notes that this free calculator allows logistics managers to take their company’s ACE data “and with the push of a button,” get a fact-based data sheet that shows the impact of the President Trump‘s proposed trade policies,

“The report is based on your actual import activity in 2016,” Ms. Pride says. “We let you insert your import value, origin and classification data into the calculator and then the calculator analyzes your data. It calculates how your imports in 2016 would have looked considering statements that the President made as a candidate during the campaign such as placing a 45 percent duty on imports from China and 35 percent duty on imports from Mexico.”


Source: Logistics Management

Details Can Be Weighty When Renting Commercial Space

Renting a commercial space is a move many entrepreneurs postpone as long as they can, because it’s one of the biggest expenses and most consequential commitments a startup or young company faces.

A commercial lease binds landlord and tenant to a variety of promises. A well-executed lease can benefit both parties, but a hasty, vague arrangement can break an embryonic enterprise.

Commercial Versus Residential

When someone rents an apartment or home, consumer protection laws dictate many terms of the landlord-tenant contract. Not so with commercial leases, which have few of the privacy protections and other regulations afforded residential rentals.

A renter rarely performs a radical makeover on a new home, but commercial renters often need to customize a space to accommodate offices, retail operations or assembly lines.

Because they’re tailored to meet the business’s requirements while respecting the owner’s property rights, commercial leases are negotiated from scratch. This lack of standardization means business owners and landlords need to exercise due diligence before signing a contract that can bind them for years.

Coming To Terms

The renter’s monthly payment must be affordable, and the contract should state what that payment covers. Some landlords include the cost of property insurance and taxes, utilities and maintenance in a commercial lease, while others bill tenants separately for these expenses. In the latter case, the landlord should explain how these costs are calculated.

The amount and frequency of rent increases, or escalations, should be addressed. Some landlords specify dollar amounts, while others tie hikes to an objective yardstick like the Consumer Price Index (CPI).

The lease term needs to be long enough to provide stability, but be short enough to free the business if it outgrows the space or finds it unworkable. The contract should list all necessary improvements to the commercial space and identify who’s responsible for doing and paying for buildouts and who owns permanent fixtures when the business leaves. If renovations are required to make the space accessible to disabled customers or workers, the contract should state what they are and who pays the bill.

The contract also needs language that clarifies

  1. That the incoming business is compatible with the property’s zoning classification.
  2. Who’s responsible for maintenance and repairs of the grounds, building and important systems, such as heating, air conditioning and ventilation.
  3. What common areas, such as lobbies, restrooms and meeting rooms are part of the rented space,
  4. Specifications and allowances for exterior signs designed to attract customers.
  5. The security deposit amount and provisions for its return.
  6. The tenant’s right to sublease and procedures for terminating the contract.

A commercial real estate broker can help business owners understand and negotiate the details of a lease. An experienced broker can also assist with property search. One of the most important functions a commercial broker can perform is helping to identify the best location for a business — especially if the business is in retail.

Defaulting on a lease can be catastrophic for a business and costly for a landlord, which is why both should review the lease carefully and consult a commercial real estate attorney before signing.


Source: The Taos News

Underwriters Get Ready For Crewless Ships

Autonomous ships are being explored by the cargo industry, giving marine insurers about five years to determine the costs of covering a crewless ship for risks that can occur at sea.

And the lack of historical data typical of any new technology is complicating the process of underwriting the risks of unmanned ships.

“As insurers, we need to get data,” said Andrew Kinsey, a former ship’s captain and now a New York-based senior marine consultant at Allianz Global Corporate & Specialty S.E. “We need a method to safely and effectively implement unmanned vessels and get the data we need.”

He suggested a convoy scenario, where several unmanned vessels would be chaperoned by a manned vessel, “riding herd, like a sheepdog,” he said. An autonomous vessel would be best suited to replace dry-bulk carriers that operate in intercontinental trade, according to three-year research project Maritime Unmanned Navigation through Intelligence Networks, as these ships travel slowly, transporting cargo such as timber or steel in long, uninterrupted ocean voyages.

“The insurance industry has been at the forefront of most pioneering projects now covering drones, satellite launches, satellites in orbit, test flights, remotely controlled underwater vehicles and a number of other automated products,” Sean Woollerson, London-based senior partner at JLT Specialty Ltd., said in an email. “But a vessel being operated remotely from onshore will bring unique challenges in the developing of a fully automated complex key component for the supply chain.”

Those challenges include pirates, a fire at sea and the time involved to reach the ship if a computer malfunctions. Alan Jervis, founder of Marine, Transportation and Energy Insurance Experts, a consultant to the worldwide insurance, risk management, shipping and transportation industries based in Toronto, points out that a ship is different than other vehicles that may operate autonomously. For one, a cargo ship will be isolated on the ocean.

“One of the duties of the crew is to ensure the cargo is inspected, that it doesn’t leak or break through and cause a fire,” Mr. Jervis said.

Shipping services provider Clarkson P.L.C. puts the number of cargo ships operating now at 9,600. Though none are unmanned, crewless smaller vessels are expected to be in use in three to five years, with larger merchant ships, those carrying oil and heavier cargo, arriving in 10 to 15 years, according to the Royal Institute of Naval Architects, a London-based professional organization whose members work in the design, construction, maintenance and operation of marine vessels and structures.

Europe is prime territory for their use, facing issues such as increased cargo volume and environmental requirements and a decline in the number of sailors. So the Europe Commission funded the three-year MUNIN research project to investigate the possibilities of unmanned ships. MUNIN, completed in August 2015, used 10 years of global manned ship data to compare risks of manned ships to those of unmanned ships and projected that an unmanned ship would have one-tenth of the risk of a manned ship in foundering and collision, in which human error often plays a role. The analysis also predicted a savings of $7 million over a 25-year period per ship in fuel use and crew supplies and salaries.

“This is less about pros and cons of a crew and more about how insurers can analyze risk,” Tom Hoad, London-based head of innovation at Tokio Marine Kiln Group Ltd., said in an email. “Undoubtedly one of the benefits is that better informatics means that insurers might be in a better position to calculate risk. Risk managers use advanced modeling tools to determine risk. Perhaps one of the downsides, though, is the question of what new risk emerges from not having a crew.”

To Mr. Jervis, liability and a credible backup plan if something goes wrong at sea would be paramount to cover the millions of dollars of cargo generally on ships.

“There wouldn’t be anyone there if there was a breakdown of the computer systems,” Mr. Jervis said. “You could have a train break down in the city of Chicago and a crew could come in minutes, but the Atlantic can be a one-week voyage and the Pacific two to three weeks.

“When it comes to drone technology in any line of transportation, there is no one-size-fits-all approach. Insurers have to look at every risk on a case-by-case basis and decide what the individual threats are,” Mr. Hoad said. “Typically insurers calculate risk by comparing the known volatility of a similar class to the new one. For example, light aircraft gave the industry more data about unmanned aerial vehicles. But vessels have unique risks, such as pirates.

Although the Royal Institute of Naval Architects considers pirates to be “virtually a nonissue for fully unmanned ships, it cites the lack of crew to take hostage and the ease of creating control systems that cannot be operated by nonauthorized personnel.

“Pirates would need an ocean-going tug to steal the ship or cargo,” the Royal Institute of Naval Architects said in a January statement.

With 23 years in the Merchant Marines, including 13 as captain of five vessels, Mr. Kinsey disputes that, saying an unmanned vessel at sea would be at higher risk of piracy.

Speaking from experience with pirates, Mr. Kinsey said: “I believe that a human presence on board with active piracy measures in place is an effective deterrent to a pirate boarding.”


Source: Hellenics Shipping News

Trucking Turns To Technology To Blunt Insurance Hikes

Trucking companies considering deploying on-board cameras now have another reason to adopt them: lower insurance costs.

Truckers using the new Greenlight smartphone-based dashcam can get discounts on insurance products of up to 5 percent from Paul Hanson Partners, which is working with Greenlight.

That’s no shabby incentive at a time when trucking insurance is increasingly expensive and harder to get, with insurance companies such as Zurich and AIG leaving the trucking market or curtailing coverage as jury awards in accident lawsuits against trucking companies climb higher and higher.

“We’re not too far away from insurance companies forcing commercial fleets into using some type of telematics as a precursor to obtaining insurance,” said Jason Green, CEO of Greenlight. Insurers may wind up playing as big a role in the adoption of safety technology as regulators. Actuaries are going to have hard numbers on the difference in incidents for those who are using dash cams and those who aren’t. We’re getting a lot of presales and a lot of interest in Greenlight, because we tie it to an insurance discount through PHP.”

On-board cameras are just one tool that trucking companies may turn to as they try to blunt insurance costs that jumped significantly in 2016. Rising liability insurance costs are a concern to trucking operators and their shipper customers. Higher insurance costs not only put pressure on transportation rates, they threaten to force smaller trucking operators with fewer insurance options out of the business.

Green claims his company is unique in tying its forward-looking mobile dashcam and driver management system to lower insurance premiums, but he’s not the only one who sees a potential for cameras and other on-board safety systems to drive down insurance costs, or hold increases at bay.

“We’ve certainly seen an increase in auto liability severity,” Todd Reiser, vice president of transportation at Lockton Companies, said during a conference call with reporters last month hosted by Stifel Capital Markets. “In the past, worker’s compensation was more a hot button. That’s changed in recent years as claims become more severe. A million-dollar claim 10 years ago, unfortunately, now we’re finding is a three-, four-, five-million dollar claim.”

As a major trucking insurance broker, Lockton has broad visibility into the market.

“We’ve seen some major settlements and verdicts in 2015-16,” Reiser said. “One example is a $35 million jury award in a fatal truck crash in Texas. Those types of awards should concern shippers, too. Plaintiff attorneys can slap shippers with negligent hiring liability lawsuits following truck accidents.”

Reiser cited “a massive increase” in the use of on-board cameras as trucking companies and drivers gain experience with them.

“We’re finding more and more carriers are piloting cameras or have gone ahead and done the full implementation and are seeing significant impacts and frankly exonerations in cases where they may have been targeted for liability initially,” Reiser said. “As for trucking insurers making telematics a prerequisite for coverage, I see it moving more and more toward that direction. If you have all these various technologies we are sort of going to put you in a different category than those that don’t. The underwriting community has certainly embraced certain aspects of truck safety technology and for the first time … we’ve had underwriters say we will provide some sort of discount or credit as far as when and how truckers implement the technology.”

Reiser referred to lane-change warnings systems and collision mitigation systems as well as on-board cameras, but on-board cameras, in terms of cost, are an easier choice for many carriers. Greenlight wants to make the choice easier by replacing cameras with smartphones.

Replacing stand-alone cameras wasn’t what Green initially had in mind. His career has largely been focused on developing the point-of-view camera, first with a company called Twenty20 that he co-founded and later with Contour, a GoPro competitor now part of iON Cameras.  Greenlight started out as an onboard video recorder.

“I was looking at dashcam recorders. People were putting a camera on the windshield, and I thought, man, we could do this better using the phone. The big challenge was making it robust,” Green told  “Once we had that, we realized we had a telematics device that could capture data and video together from one source with very minimal hardware.”

A dash-mounted cradle works with iPhone and Android phones, and a mobile app converts the phone into a dashcam. In addition to video, drivers, as well as fleet managers and insurers, can see data from the system, including information on their performance during recent trips and safety scores.

“Some of our partners use the system for training,” Green said. “We will use the data to flag drivers when we see signs of a risk, hard braking, for example. We can send them training videos automatically. When they complete training it gets noted in the insurance account.”

Green initially had the consumer market in mind, and a consumer version of the product is available for $49.

“We got pulled into fleets because the opportunity is so good,” Green said. “You look at the cost of fleet operations and insurance and you can see why the need is so high.”

The initial market for the system is not over-the-road long-haul trucking, but final-mile logistics providers and local delivery companies.

“We started by looking at companies operating straight trucks and cargo vans, but we’re getting a lot of attention from the Class 8s,” Green said.

He recommends trucking companies pay their drivers an incentive to use their personal phones as cameras.

“You’ll reap the rewards in insurance costs,” Green said. “Also, a smartphone used as a dashcam is a smartphone that’s not being used for texting or phone calls while driving. Everybody knows the smartphone is a distraction. We’re putting it to work, so it’s less likely to be a distraction.”


Source: JOC

With Absent U.S. Export Subsidies, U.S. Exporters Turn To The Private Sector

Federal subsidies for U.S. exports have been slowed for more than a year thanks to Republican congressional resistance, and reports from the field show something unsurprising: When government subsidies fade away, the private sector often steps in.

The Export-Import Bank of the United States is a federal agency that extends loans and loan guarantees to foreign buyers of U.S. goods. Since late 2015, Ex-Im‘s board has lacked a quorum, because Republicans haven’t held a vote on Obama‘s nominee. Without a functioning board, Ex-Im can’t approve deals of greater than $10 million. Before that, for five months in 2015, Ex-Im‘s charter had expired and the agency couldn’t approve any new financing deals.

How are exporters reacting?

“People that relied on EXIM-backed financing,” Hernan Mayol, chair of the Florida International Bankers Association’s Trade Finance Committee, told Miami Today, “they felt a little pain. They had to go through the private insurance market to find an alternative until it was reauthorized.”

That is, when Uncle Sam wasn’t there to provide taxpayer-backed trade insurance, private insurers stepped up.

“It’s been mostly business as usual for Miami exporters, just as it was before and during the lapse, according to an industry expert,” the Miami publication reports.

There is a robust private market in the sorts of financing and insurance Ex-Im provides.

“Ex-Im Bank is a competitor.” Michael Kraemer, a banker at AIG told me. “There is a vibrant private export credit market,” another financier told me. “Ex-Im provides financing that the private sector also provides.”

A Goldman Sachs research note sounded the same theme in 2014.

“If the US Export-Import charter is not renewed, we believe the overall impact in the near-to-medium term would be fairly limited given the robust financing environment at present…”

Government subsidies generally do one of two things: they subsidize things that don’t have market value, or they displace private sector activity. Much of Ex-Im‘s work seems to be knocking the private sector out of the way.


Source: Washington Examiner