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Latest News March 3, 2013

U.S. crude oil production tops 7 million barrels per day, highest since December 1992

EIA | February 28, 2013

U.S. crude oil production exceeded an average 7 million barrels per day (bbl/d) in November and December 2012, the highest volume since December 1992. The end-of-year data were reported on February 27 in EIA’s Petroleum Supply Monthly.

Increasing oil production in North Dakota and onshore Texas drove the increase in U.S. crude oil production over the last several months (although crude oil production in North Dakota took a dip in November, before increasing again in December). Much of the increase in crude oil production is coming from shale and other tight (very low permeability) formations.

Commerce – Regulatory & Compliance

Canadian truckers sweat U.S. sequestration’s impact

American Shipper | 03/01/2013

The Canadian Trucking Alliance is preparing for “massive” disruption to Canadian businesses due to impending U.S. government spending cuts, known as sequestration, which are expected to take effect today. The association said Canadian trade with the United States, which accounts for more than 80 percent of all manufacturing output, could be dealt a huge blow.

The association is also worried about what effects the automatic spending cuts will have on U.S. Customs staffing at the shared border between the two nations. Since roughly two thirds of trucked Canadian goods destined for the United States, CTA officials said they will encourage truckers to pass the border during off-peak periods, whenever possible.

CTA President and Chief Executive Officer David Bradley said he remembers that just a few years ago the Canadian-U.S. border was a mess, which sometimes caused truck drivers to wait in line for hours. “Manufacturers and retailers were forced to hold costly inventories to cope with uncertain border transit times and just-in-time turned into just-in-case,” he said in a statement.

Long road ahead for EU-U.S. trade talks

Logistics Management | Friday, February 22, 2013

Members of European Parliament want to move forward aggressively with a trade deal between Europe and the United States, but see hard bargaining and tough choices ahead.

While parliament members on the International Trade Committee said they were happy to be starting a dialogue, many of them pointed out significant differences in viewpoint between the European Union and United States that would need to be overcome. Public support, on both sides of the Atlantic, is a concern as well. Parliament members are concerned that Europe’s aggressive animal and plant health standards might be weakened by a trade pact. They also worried that the European Union’s geographical indication system for genetically modified crops and beef hormones might be affected. Even if European Council members unanimously agree to a negotiating mandate next month, talks likely won’t start until the middle of June. European officials expect the talks to take at least two years.

Industrial Machinery Will Be Export-Import Growth Engine for Next 10 Years or So

Industry Week | March 01, 2013

Industrial machinery is expected to be the top driver of U.S. export and import trade now and in the next decade, according to the latest HSBC Commercial Banking Trade Forecast.

According to the report, U.S industrial machinery exports, which range from large power generating machinery to small parts for domestic electrical items, are expected to account for 21 percent of U.S. export growth this year through 2015, making it the biggest sector contributor to overall U.S. merchandise export growth through 2015.

Labor, Staffing & Issues

ILA, USMX extend local negotiations deadline a week

World Trade | 02/25/2013

The U.S. Maritime Alliance (USMX) and International Longshoremen’s Association (ILA) said they have agreed to extend the March 1 deadline for completion of local negotiations to March 8. They said the extended deadline will coincide with the wage scale meetings planned by the union for the week of March 11. USMX and the ILA reached a tentative agreement on Feb. 1 on a new six-year master contract. The ILA-USMX master contract covers more than 14,500 ILA members who handle containerized cargoes in 14 U.S. East and Gulf coast ports.

Federal Motor Carrier Safety Association will not delay new hours of service regulations

Logistics Management | 02/28/2013

The Federal Motor Carrier Safety Administration has rejected a request by the American Trucking Associations to delay the start of updated hours-of-service regulations.

In response to a late January letter from ATA president Bill Graves, FMCSA Chief Counsel T.F. Scott Darling III on Feb. 22 denied a request to delay compliance with the new rules from a scheduled July 1 start date until three months after a federal court issues its decision on challenges to hours of service that ATA and other groups have filed. The letter from Graves was originally written to FMCSA administrator Anne Ferro. In Darling’s letter he said, “Basically, your request to delay the compliance date of the rule is really a request for a stay, pending a decision by the court, plus an additional three months of non-compliance. The FMCSA has evaluated the issued raised in your letter and, for the reasons set forth in this response, has determined that staying the compliance date of the rule is not warranted.”

In Graves’ letter to the agency, he wrote, “The requested delay will avoid potentially duplicative and unnecessary training, prevent confusion if the court’s decision alters in any manner the final rule.”

FMCSA apparently did not agree. Darling said FMCSA does not believe ATA has demonstrated good reason to delay compliance, and that uncertainty over the outcome of the court case does not mean trucking or the enforcement community will be harmed. Darling said FMCSA is not willing “to sacrifice what may be several months of public safety benefits from the timely implementation of the rule.” Oral arguments in the case are set for March 15. It’s not uncommon for courts to take at least a couple of months to render a decision.

The challenge to the updated hours-of-service regulations centers on allowing use of the 34-hour restart only once a week, with each restart to include time off between 1 a.m. and 5 a.m. for two straight days, as well as the provision requiring drivers to take a half-hour break after no more than eight hours of driving.

Logistics: Carriers, All Transportation Modes & International

NIT League says rail reform could save shippers $900 million

American Shipper | 03/01/2013

The National Industrial Transportation League said Friday it estimates shippers could save more than $900 million if the U.S. Surface Transportation Board would increase competition by giving shippers greater ability to have freight switched between railroads. During a telephone press conference, NIT League President and Chief Executive Officer Bruce Carlton discussed a comprehensive study and analysis of the League’s proposed new rule to govern competitive or reciprocal switching between railroads that’s being submitted to the STB today.

Competitive switching or reciprocal shipping refers to giving a rail shipper or receiver that’s “captive” to a single railroad the opportunity to have its freight moved on a competing carrier’s line, with an appropriate paid access fee. The NIT League said switching is important because it creates competition in rail markets by giving shippers an opportunity to seek a competing bid from another rail carrier that might offer savings or service improvements.

Ocean Freight Outlook from Drewry

American Shipper | 03/01/2013

Drewry Supply Chain Advisors is forecasting a modest increase of 4 percent in average global freight rates in 2013, with variations between different routes. “We expect freight rate volatility to continue as carriers grapple with increasing overcapacity”.

The 3PL & 4PL World

Reasons for Selecting 3PLs Are Changing

SupplyChainBrain | February 22, 2013

Analyst Insight: Third-party logistics providers continue to be the recipients of outsourcing requirements and have grown to provide a critical business capability, but the business rationale in selecting an outsourcing partner appears to be changing. The use of 3PLs remains compelling, with shipping companies continuing to report productivity gains – along with cost reduction and service enhancement – but in discussions with clients, increasingly manufacturers are looking to leverage industry best practices and process knowledge as a first priority.

As more and more shippers of product move away from owned logistics resources, the 3PL industry has experienced significant growth. While initially, principally about the physical movement of freight, the intermediary nature of the 3PL has resulted in the requirement for shipment, delivery and inventory information management and the growing expectation for an integrated business-to-business capability.

It’s also very interesting to note areas of logistics and distribution that are both outsourced and candidates for future outsourcing. In our discussions with clients, it’s pretty clear that more mature outsourcing includes either those areas that are transactional in nature or involve significant investment in physical assets, such as transportation and warehousing. Conversely, more strategic areas and core competencies are less likely to be considered for outsourcing. Yet, many companies we speak with are exploring the viability of outsourcing customer service – not just the “800 number” consumer compliant center, but the fundamental order-management functions.

We’d also like to point out another element that should be factored into outsourcing – risk. Our research reveals that risk is not yet well integrated into the relationship between shippers and 3PLs. Look for risk metrics to make their way into service-level agreements with 3PLs.