NCBFAA Government Affairs Conference September 24, 2007

Vessel Operators and Non-Vessel Operators: Partners or Adversaries in Contract Negotiation?

Tim Perry APL, Ltd.

AGENDA

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Trade Outlook We’re in This Together Successes & Challenges Summary

Trade Outlook

Trade Outlook Rising US Exports and Imports US exports and imports expected to grow

Trade Outlook World Containerized Trade Growing Containerized volumes expected to double from 2000 to 2020

Source: Global Insight

Trade Outlook Capacity and Fleet Growth to Slow Gap between Supply & Demand growth narrowing by 2008

16% 14% 12% 10% 8% 6% 4% 2% 0% Global Container Trade Grow th Global Containership Fleet Grow th 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: GRD, MDS, Drewry

Trade Outlook Infrastructure Issues: Current & Future

       1,776 2,557 

44.0% Container imports are expected to double by 2020 Rail freight tonnage is expected to increase by 50% by 2020 Air cargo volume is expected to increase by 5% every year through 2016

1,798

SEATTLE

4,396 

144.5% TACOMA

59,420

From 1970 to 2003, vehicle travel on highways rose by 161% but road mileage only increased by 6% Half of the nation’s 257 locks on inland waterways are functionally obsolete Of the 590,750 bridges, 27% are structurally deficient or obsolete Most ports have not been dredged to handle the 10,000-TEU jumbo containerships being built

2,043  3,382

65.5% OAKLAND

13,101

Legend: LA/LB



353.6%

2004 Volumes (‘000 TEUs) 2020 Volumes (‘000 TEUs) Source: American Society of Civil Engineers (ASCE) – 2005 Report Card for America’s Infrastructure, U.S. DoT

U.S. MARITIME CONTAINER TRADE GROWTH



253.6%

1,437 6,165

HOUSTON



466.8%

9,420 1,662 1,809 5,566

VIRGINIA SAVANNAH

1,010 2,152

MIAMI



113.1%

4,478 1,860 15,835

NY/NJ

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207.7%

6,639

CHARLESTON



256.9%

Trade Outlook Rail Growth in North America Intermodal traffic in US has almost doubled in the past 15 years – trend likely to continue

Trade Outlook Rail Constraints in North America US Rail infrastructure continues to be stressed in spite of significant investment by the railroads

Trade Outlook Rail Volume: 2005 vs 2035 Global Insights forecast highly congested conditions on transcontinental railroads main lines by 2035

Source: Global Insight

Trade Outlook Marine Terminals are stressed

Trade Outlook Port of Long Beach 2004

Trade Outlook Infrastructure Issues: Viewpoint

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The challenges which negatively impact ‘Flow’ today will become greater over time

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Pressure on ports will continue As rail volumes rise, and investment fails to keep pace with growth, rail velocity will continue to slip

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Highway congestion will hamper rail and truck distribution to major metropolitan areas throughout the US

We’re All In This Together

We’re all in this together It’s More than Port-to-Port

Origin Storage Capacity Origin Local Train/ Drayage Origin Origin Terminal Feeder/ Barge Capacity/ Productivity Capacity Transshipment Hub Capacity Main Line-Haul Capacity Origin Destination Destination Terminal Intermodal/ Local Warehouse/ Store Capacity/ Productivity Drayage Capacity Capacity

We’re all in this together

• • Parties have everything to gain by partnering.

“Closeness” – from booking through delivery.

- Vessel Schedules - Port Rotation - Cargo Details - Info that Shipper is NVO → VOC must know in order to manifest properly.

• Demurrage is a symptom of low cargo velocity.

Successes and Challenges

Successes and Challenges

• “24 Hour Rule” - Special BL - Master BL and House BL relationship • Exams Random VACIS, “Pop & Tap” - FDA “1M”

Successes and Challenges

• “Zero Tolerance” – Gateouts - MTO Bond - Old World Penalties $2,500 - New World Penalties 1st - $10,000 to $25,000 2nd - $25,000 to $50,000 3rd - $50,000 to $75,000 - Incidents reduced from 27 to 7 per month

Successes and Challenges

• AMS Changes: i.e. Suppress “transportation messages” until conveyance is arrived.

• • • “2Z” – Master / House BL mismatch advisory.

ACE PGA access to “holds” “10 + 2”

Summary

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Know your partners Communicate

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CESAC

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NCBFAA Customs Committee

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NCBFAA Legislative Advocacy - Ocean Carrier Best Practice Committee - COAC - Trade Support Network - TOPAS

NCBFAA Government Affairs Conference September 24, 2007

Thank you.

Tim Perry APL, Ltd.

1667 K Street NW, Suite 400 Washington, DC 20006 [email protected] 202.496.2482