The rise of the digital brokerage vertical in domestic trucking has led to inroads into the ocean side and it has caught the eye of FMC, the Federal regulatory agency overseeing U.S. imports and exports via ocean. Well-funded start-up companies offering digital freight matching and online shipping services for global shipments have become quite active in offering full container (FCL) and less-than-container load (LCL) services. When the services include import and export into the U.S. they may be subject to license, registration, bonding, and tariff publication, and other regulatory compliance requirements under U.S. law and federal regulations.
The FMC defines “Freight Forwarding” as the dispatching of shipments on behalf of others in order to facilitate shipment by a common carrier, this may include but not be limited to 13 core defined activities. (https://www.hklaw.com/en/insights/publications/2020/06/forwarding-and-logistics-startups-must-be-wary-of-us-licensing) If your chosen provider for ocean shipments from the U.S. is not licensed, and is conducting one or more of the activities defining a licensed forwarder, your forwarder may be subject to fines per each violation. Import shipments handled by an NVOCC to the U.S. must register with the FMC and publish a tariff as well as comply with bonding and contract format requirements, but do not need a license.
The bottom line is, as more digital freight matches and online global shipping companies enter the global marketplace, do your due diligence to ensure your providers are in compliance with FMC.
The good news for October? We only had one constant to deal with, fuel costs. Unlike the positive news with truck rates finally breaking the trend and decreasing in October, fuel remained flat for October. As a positive sign to come fuel remains flat through the first part of November. The outlook for fuel expense in 2021 remains positive as the World Bank is projecting oil will average $44 per barrel in 2021. This price is significantly lower than the $61 average price per barrel in 2019.
The larger part of the expense equation is line haul expense. Forecasts have been relatively aligned with costs remaining higher and contract rates seeing 5% to upwards of 10% increases during 2021.
As we have seen in the past six months, the challenge hasn’t been so much on the contract side as it has been in the spot market where rates were volatile on a weekly and, in some cases, on a daily basis. The larger questions remain with the economy and COVID-19 restrictions, and their impact on freight rates into 2021. Lastly, messaging by the larger asset carriers on projected rate increases has reached a crescendo in the past month. Many are now showing solidarity in pronouncing double-digit increases in 2021. Negotiations will determine their ability hold onto the rate increases as 2021 begins to unfold and we get by the next surge in imports.
The 3rd quarter earning reports posted overall positive results for various transportation components. Q3 showed strong revenue with increases in net income as carriers, both ocean and truck, and logistics companies led the way with gains in sales and profitability. Strengthened by pent-up demand and capacity constraints, the 3rd quarter required logistics companies to step up and support more of the shipper’s supply chains as primary asset-based carriers were stretched thin. The result showed increases of 20% in top-line reported by leading logistics firms compared to 2019 3rd quarter results.
On the asset side, the general trend lines for both revenue and net income were positive with carriers such as Landstar System and Arc Best posting increases compared to last year’s 3rd quarter. Ocean carrier profits soared as demand for pandemic product lines increased dramatically from China alongside pent-up demand for finished goods, components and parts. The 4th quarter is pushing us quickly into year-end and budgets are now a top priority.
There are outreaches we can now utilize to begin to forecast and put pencil to paper for the CFO, and give us a fighting chance to stay within budget for 2021. Three key calls to action include:
Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena. As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.
“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”