The Week

The Week

Copyright 2003, Traffic World, Inc.

Quote of the week: "Lord forbid everyone should be on the same page." -- Brandon Fried, COO, Adcom Worldwide on advance notification rules from the FDA and Customs.

Shippers aren''t sure how interim final rules on food security released Oct. 10 by the Food and Drug Administration will affect their operations but they know the impact will be significant. The rules require shippers of a wide variety of food products to register with the FDA and give advance notification of U.S.-bound shipments. That''s on top of advance manifest notice requirements expected from the Bureau of Customs and Border Protection. Some smaller food shippers could be forced out of the U.S. market.

Better productivity and capacity utilization helped J.B. Hunt Transport nearly double its net profit in the third quarter. But the truckload giant is warning shippers that rising pay for drivers and new capacity shortages will lead to "significant freight rate increases" in coming months.

The National Industrial Transportation League threw its weight behind efforts by nonvessel-operating carriers to win authority to negotiate private contracts with shippers. If the Federal Maritime Administration balks at the NVOs'' request, the next stop may be Congress, the league warned.

Opponents of legislation that would allow cargo pilots to carry guns in the cockpit have all but conceded it will pass Congress this year, but they are looking for ways to stall its implementation and searching for legal loopholes. As the bill has the backing of House Transportation Committee Chairman Don Young, R-Alaska, and House Aviation Subcommittee Chairman John Mica, R-Fla., don''t expect its opponents to spend a lot of political capital fighting it.

Counterfeit drugs pose a lethal threat to consumers and the volume of bogus medications is increasing, says the Food and Drug Administration. An FDA task force created to combat the problem identified gaps in the pharmaceutical supply chain that criminals are using to inject counterfeit product into the national drug distribution system. Closing these gaps requires a multipronged strategy that includes the use of advanced track and trace technology.

Better communications between partners in the pharmaceutical supply chain could alleviate chronic drug shortages, says the Healthcare Distribution Management Association. It''s issued a set of voluntary guidelines to improve the flow of information.

Transportation companies, already criticized by shippers for spending too little on technology, are expected to cut technology spending by 12 percent in 2004, according to a report from Gartner. The large decline in spending will come at a time when technology spending among all industries is expected to rise. Some transport firms say they are bucking the trend. Elijio Serrano, CFO of EGL Eagle Global Logistics, said his company is spending about $40 million on IT-related operating expenses out of $2 billion in revenue, slightly above 2 percent. In addition, as much as three-quarters of EGL''s capital investment, which is between $20 million and $25 million, is being spent on technology, he said.

More trucking companies are going public in the next few weeks than in the last 10 years. Overnite Transportation Co., Quality Distribution Co. and Central Freight Lines all plan initial public offerings. The news for shippers is positive. Trucking companies that go public usually are more stable financially and, because they gain better access to equity markets, more apt to recapitalize their business with more modern fleets and equipment, analysts say.

Shippers have been left out in the cold by two court decisions blocking rail expansion plans. A county court judge in Texas blocked San Jacinto Rail Ltd.''s attempt to build a 13-mile rail line in southeast Houston. And a federal appeals court ruled that the Surface Transportation Board failed to consider the effects of increased coal shipping on air quality in its decision to permit the Dakota Minnesota & Eastern Railroad to extend its line into Wyoming''s Powder River Basin. The decisions raised the possibility of higher hurdles to expansion for railroads and a setback for increased rail competition for shippers.

U.S. cargo carriers are hoping for more access to European markets as a result of aviation talks between the United States and the European Union. The talks began in Washington on Oct. 1 and will continue with a second round in Brussels in early December. Cargo airlines have so-called "seventh freedom" rights - the right to fly traffic between two European countries - high on their wish list.

Fifteen billion dollars is the price tag for short- and long-term capital improvement projects at 51 public seaports in the United States, according to New York-based Fitch Ratings. That estimate does not include projects that require third-party or private-sector financing. Load centers such as Los Angeles find it easier to raise investment capital than second-tier ports, Fitch said, largely because the sheer volume of cargo handled makes them more attractive to investors. Still, Fitch sees ports as a good bet for investors.