Freight Forward - JOC Inland Distribution

Welcome to Freight Forward, where each Monday, I’ll recap what happened in supply chains the previous week through JOC.com articles and additional sources and also what to expect for the week ahead.

Just in case you’re wondering, I’m Cathy Roberson, a supply chain writer, and researcher. For this weekly series, I serve as a research analyst for the Journal of Commerce (JOC), for whom I identify trends, provide thoughts and input into stories and assist with parcel last-mile queries.

This week’s Freight Forward is a special one that marks the first in-person JOC Inland Distribution Conference since 2019. Bill Cassidy and Ari Ashe have worked hard on building out a great agenda – We’ll be discussing road, rail, intermodal, technology, and yes, there’s even a middle/last mile session which I’ll be moderating.

?I’ll also send out daily Freight Forward Inland Distribution wrap-ups on Wednesday and Thursday and for real-time updates and commentary, follow on Twitter at #inland22.

JOC’s Executive Editor Mark Szakonyi provides a welcome and a brief overview of what to expect at JOC’s Inland Distribution Conference:

So, to get everyone in the mood, a roundup of JOC inland distribution news from last week (with a dash of FedEx angst):

The American Trucking Associations (ATA) for-hire truck tonnage index rose 7.4% year over year in August, compared with a 4.7% annualized increase in July.?Increased consumer spending and manufacturing boosted for-hire truck tonnage in August, compensating for weakness attributed to a drop in new home construction.

On a month-to-month seasonally adjusted basis, the ATA tonnage index rose 2.8% in August after decreasing 1.5% in July. The unadjusted data reflecting actual truck tonnage rose 8.2% from July to August. JOC’s Bill Cassidy notes that it seems likely some freight that had been stuck in warehouses began moving to stores and factories as Labor Day approached and fall holidays drew nearer.

“With the economy in transition to slower growth and changing consumer patterns, we may see more volatility in the months ahead,” Bob Costello, ATA chief economist, said. “But the good news is that we continue to witness areas of freight growth in consumer spending and manufacturing, which is helping to offset the weakness in new home construction.”

Meanwhile, Union Pacific Railroad (UP) is reducing domestic intermodal rates out of Southern California and J.B. Hunt Transport Services is delaying its peak season surcharges, which JOC’s Ari Ashe notes are clear signals that the peak season in Southern California is much quieter than it was the last two years, when shippers were hit with surcharges as high as $5,000 per container.

On Sept. 20 UP cut rates on 18 lanes out of Los Angeles, the western US railroad said in a statement.

J.B. Hunt, a partner of UP competitor BNSF Railway, also informed customers that peak season surcharges across its national network are “postponed until further notice.” Unlike during previous peak seasons, domestic intermodal shippers that exceed their contractual allotments will not pay a penalty, the intermodal provider said.

“Market conditions do not currently necessitate the additional rail empty repositioning, equipment, and drayage activities typically required at this time of year,” J.B. Hunt wrote in its advisory, which two customers shared with JOC.com.

JOC’s Teri Errico Griffis has been monitoring US Federal Maritime Commission (FMC) updates and news and has learned that the FMC has started investigations into approximately half of the 95 charge complaints filed by shippers, forwarders, and drayage firms against ocean carriers, marine terminal operators and non-vessel operators since June through the FMC’s new Bureau of Enforcement, mandated by recent shipping reform. The other half stem from disputes that pre-date the June 16 enactment of the Ocean Shipping Reform Act of 2022 (OSRA-22), were incomplete, or were not in compliance with the complaint process.

Speaking of FMC investigations, Hapag-Lloyd and Orange Avenue Express (OAE) agreed to settle an FMC complaint that accused the ocean carrier of invoicing $258,000 in unreasonable detention charges when no return space was available at West Coast port terminals.

The FMC has 30 days to review the settlement or approve it.

This is the third detention and demurrage complaint filed against the Hamburg-based carrier in the last year. In a similar dispute that has yet to be settled, shipper One Banana North American alleged it incurred $687,470 in unfair detention and demurrage charges under similar circumstances to those described in OAE’s complaint. Hapag-Lloyd settled another dispute in June with Golden State Logistics that cost the carrier $882,220.

A really good story from JOC’s Eric Johnson looks at how the Ocean Shipping Reform Act of 2022 (OSRA-22) is not living up to its intended purpose when it comes to addressing longstanding problems with demurrage billing. Eric points out that the law provided no grace period for compliance despite mandating changes to longstanding carrier billing practices.

This lack of implementation time has essentially doomed the industry to be largely out of compliance with a specific mandate in OSRA-22, a new invoice data element intended to protect shippers from being wrongly billed for excess storage of laden import boxes in container terminals.

OSRA-22 requires demurrage invoices sent from either a shipping line or a terminal to an importer or its receiving party, generally drayage operators or customs brokers that manage drayage on behalf of the importer, to be accurate and to contain 13 data elements, including the “date that container is made available.”

But software vendors have told JOC.com that the new “container available” data element doesn’t really exist, and where it does exist, is not universally conveyed, much less in a standardized way. Such a message is key, because demurrage is calculated based on a contracted number of free time days from the date at which a container is made available for pickup.

As Bryn Heimbeck, CEO of import management technology provider TradeTech, put it, “there’s not yet a mechanism to send this data element from one end and to receive it on the other.”

In addition, Eric writes that the process for challenging charges that an importer or drayage provider believes to be inaccurate is still cumbersome. Although OSRA-22 provides for an expedited complaint process, even in a best-case scenario, that party’s cash would still be tied up for months. If the intent of OSRA-22 was to shift the invoicing burden of proof to container lines and terminals, the technical and physical processes still in place, three months after the law went into effect, are not allowing that shift to happen.

And finally, FedEx. If you heard a thud a couple of weeks ago, that was FedEx’s stock price after they pre-released less-than-stellar FY 2023 earnings (period ending Aug 31). Last week, they made the earnings official along with a plan to cut costs, readjust networks and plans to implement one of the biggest average annual general rate increases in the company’s history, 6.9%, effective in January 2023.

“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” said Raj Subramaniam, FedEx Corporation president and chief executive officer.

I’m not sure I 100% agree with Mr. Subramaniam. Instead, I believe the integration of TNT (acquired in 2016 and completed integration this year) played a big role in regard to Express issues and I believe for both Express and Ground, there is a normalization occurring. But we’ll see if I’m right or wrong when UPS reports its Q3 earnings in October. Meanwhile, my Air Cargo World column takes a closer look at FedEx Express FYQ3 earnings.

The Economic Outlook will return on Oct 3.?

That’s it for now – stay tuned for special Freight Forward editions on Wednesday and Thursday. As always, please be sure to hit the subscribe button to receive the latest updates.

For readers interested in reading more JOC stories, click on CATHYR20 to receive a 20% discount (Note this is for first-time subscribers.).

Comments are always welcomed so please feel free to add your thoughts, questions etc. I’ll be checking back throughout the week to answer questions, address comments and share additional insights.

Have a good week!

-Cathy