Annual Review and Outlook

With agreements such as the North American Free Trade Agreement and the Korea-US Free Trade Agreement under review, it is important for US industries that have found success under these agreements to have opportunities for further growth. It is also concerning that in Japan — the largest value destination for US beef and pork — our competitors are poised to make access gains while a US-Japan trade agreement seems to be nowhere on the horizon.

For the upcoming year(s), I expect to see major shifts in visibility, use of Internet of Things, and connectivity between all parties in the supply chain.

Longshore workers worldwide are experiencing firsthand the rapidly changing shipping industry.

There are always a number of moving parts in our industry that keep us on our toes.

The container-leasing industry demonstrated great resilience by navigating through and recovering from the Hanjin Line bankruptcy in 2016, the largest such failure in container shipping.

Without a doubt, our industry continues to change at a furious pace.

Port leaders face critical decisions in 2018.

The port industry faces challenges posed by new technologies.

Our dynamic industry, which plays an essential role in the increasingly complex world of commerce, is facing challenges on numerous fronts.

Chronic port congestion and extended turn times represent the biggest challenge to the intermodal trucking industry.

We are at a transformative moment for our industry.

The three shaping forces of 2018 will be technology and its impact, the changing nature of our workforce, and the targeting of infrastructure investment support to achieve outcomes tied to specific business needs.

After three rounds of negotiations on modifying the North American Free Trade Agreement, it is clear that the US is taking very strict positions.

In 2018 we believe the new platforms promoting digitization will be enablers in all aspects of the underlying processes.

Negotiate a relationship, not just a deal. When most shippers talk about ocean carrier negotiations, it usually revolves around making a deal that is focused on low rates.

As for 2018, while economic indicators are trending up, the agricultural grain and feed markets look to face another year of supply outpacing demand.

“Digitization” was the word of the year in 2017. The word of the year for 2018 will be “digital execution.” In 2018, actions will speak louder than words, and digitization will be the focus of billions of dollars of investment in logistics and the resulting innovation in our industry.

The current pace of change is one of the most pressing concerns for supply chain professionals. Rapid changes often lead to supply chain disruptions, both positive and negative, which can have a serious impact on those who are responsible for designing, leading, and executing supply chain programs.

In 2018, the industry will continue exploring the application of new technology and gear up their organizations for digitalization of container shipping. Although it is still early days in knowing clearly how all these investments by industry incumbents and externally funded start-ups will play out, there’s general consensus that if the manual processes and fragmented systems that have proliferated across the shipping industry for years can be digitized, then there is a significant opportunity to deliver a far better customer experience for the end-users and make the industry far more efficient. One thing is clear, for the industry to be successful in managing any kind of long-term transformation, significant management and leadership skills will be required to shape organizations to be more flexible, adapt to change, and be more open to collaboration. Working as one entity on a common technology platform with a single source of the truth is a first step toward more integrated planning and execution and more productive and profitable business processes. But technology alone is not enough — successful transformation requires the ability to understand and address the business process issues, and have the people and expertise to implement solutions into the organization that will support new business processes. Digitalization means a change in behavior not only within one part of the industry, but across industry enterprises, ocean carriers, terminals, ports, shippers, and their technology providers. Most of the inefficiencies are in the interaction between different shipping parties, and it will be the ability of the industry to find an approach to collaborate and be prepared to change internal processes so that planning and execution processes can be synchronized across the end-to-end supply chain.

The transportation industry and the markets it serves operate in evolving environments, creating challenges and opportunities for railroads. As the rail industry adapts to changing customer needs, we are finding new ways to enhance safety, service and efficiency. Innovation and technology touch every part of a railroad, starting with employee training. Locomotive engineers train on 3D virtual simulators replicating the train operations experience. Simulator programs also help other craft employees become proficient through real-life scenario examples, ensuring they are well prepared to handle any situation. While railroad tracks may look the same as they did 150 years ago, they are technical runways outfitted with sophisticated systems. Wayside detector networks scan and report potential defects, such as hot wheels and shifted loads, which are then repaired before accidents occur. One of our latest developments, Machine Vision, is a system of high-speed cameras and lasers that produce detailed photos of passing trains and notify inspectors of trouble spots. Instead of spending hours inspecting arriving trains, yard personnel focus on making repairs to keep shipments moving to customer facilities. Positive Train Control (PTC) also highlights the rail industry’s high-tech side. Designed to automatically stop trains before certain human-caused accidents occur, railroads built the cross-functional system with multiple technologies from scratch. PTC will prevent train-to-train collisions, derailments caused by excessive train speed, unauthorized train entry into work zones, and movements through misaligned track switches. PTC is currently being installed across the country’s rail network, and employees are learning to use it. From steam locomotives of the 1860s to today’s remote-control switching engines, railroads are technology pioneers in the transportation industry. We will continue finding solutions to support customers and help America’s economy grow.

A significant trend affecting shippers, carriers, and providers of transportation technology solutions is the increase in e-commerce and the expanding Amazon-like business model. These options have created a consumer-driven business environment, with customers expecting and getting fast free delivery of goods of any kind. All indications point to these buying practices growing in 2018 and beyond. To remain competitive, retailers and manufacturers and the logistics service providers that serve them will need to implement technology solutions that optimize every aspect of their rapidly evolving supply chains. For example, with more local distribution centers being established to place products closer to consumers, companies will need transportation management system (TMS) solutions that provide advanced parcel capabilities and the ability to access multiple transportation modes using a single platform. Because speed is likely to be a factor in many shipments, companies will need easy, fast access to capacity. The practices of calling carriers or doing manual searches will continue to be replaced by TMS solutions providing access a wide range of options while also automating some tasks associated with selecting carriers or tendering loads. Seamless system integration will continue to be critical, with companies needing TMS solutions that integrate with other internal and external systems, including warehouse management system (WMS) or enterprise resource planning (ERP) solutions. This degree of connectivity is required to avoid disruptions in the supply chain. Finally, companies will look to glean true business intelligence from the information they are already capturing. Advanced TMS solutions will be required to support effective data management, making it easy to identify areas of opportunity and to enable more-informed strategic decisions. In 2018 and beyond, more demanding and sophisticated buyers will lead to smarter providers, empowered by advanced technology designed to support the future of delivery.

If there was one word I would use to describe the greatest impact on (or challenge to) the customs law sector of the international trade community, it would be “uncertainty.” It’s also probably fair to say that most lawyers don’t like to tell their clients “I don’t know” in response to a question — but recently I find myself in the position of having to respond to clients in that manner. A few cases in point: “Are we going to withdraw from NAFTA?” “Should we look for alternative sourcing options regarding our current (fill in the blank with a country name) suppliers?” One hates to resort to the response starting with “Well, if I were a betting man …” Customs’ Automated Commerce Environment, free trade agreements, anti-dumping/countervailing duty enforcement, de minimis, cross-border e-commerce, supply chain security — these are all subject to more questions than answers at the moment, at least in my book. What is interesting to me is that after almost 40 years in the trade community, there’s now a giant spotlight on what previously was pretty arcane stuff by most folks’ standards. When a dentist neighbor of mine recently asked me about the NAFTA rules of origin, and a relative who’s a nurse, asked me if I’d ever heard about “substantial transformation,” I felt a bit like our rather specialized, unique world of customs law has had the curtain lifted and is now center stage. My friend Marianne Rowden at the American Association of Exporters and Exporters sometimes affectionately calls those of us who work in this sphere “trade nerds.” I don’t know, Marianne, given today’s headlines, I think our community may be on the cusp of celebrity. Here’s hoping that at this time in 2018 there will be greater certainty, but if I were a betting man ...

The liner shipping industry can finally take a deep breath and rid itself of the unpleasant experiences over the past few years by reporting operational figures back in the black in 2017. With a majority of lines predicting positive results, expectations are high for a good positive momentum into 2018. However, it does not necessarily mean the industry will have a better year, given the global economic recovery is still lurching along its path despite the fact GDP growth is still on the rise. Needless to say, the most eye-catching industry dynamics in 2018 will be the emergence and full operation of the three super alliances. Mega-ships will gradually become requisite and an industry norm in the east-west trade lane for the alliances because of cost effectiveness. The recently increasing number of mega-ships on the order book supports this assumption. As a result, regional and niche carriers will probably be forced to relegate part of their trunk services to one of the alliances or seek to stand out by providing more customized services. This could be the key to remaining competitive with the industry giants. Furthermore, freight rates could also be depressed by the ripple effect of mega-ship deliveries accompanied by subsequent vessel cascading. With more demanding and stringent carbon emission control regulations, it is foreseeable that the cost of both building and operating a ship will inevitably increase. LNG-powered vessels may become a viable option in the future, while the industry prepares to deal with the short-term balance between operating costs and environmental issues — a very serious yet interesting question indeed, and one that requires the industry to identify the challenges and search for the best solution in the years to come.

The need for global standardization within customs agencies, government documentation requirements, hazardous cargo needs and classifications is clear in order for trade to work through regulatory obstacles.

Ports contribute to a strong US economy by providing access to commodities used to manufacture many of the goods we use every day. Three timely port topics include possible changes to trade policy, carrier consolidation, and intermodal options.

It can be said that 2017 has certainly been a year of change, growth, and some surprises as it relates to the US markets. The incoming process of a new US administration, the continued strong consumer confidence growth rate, improving overall unemployment rates, and related financial markets all seem to point to possible stabilization and rebounding of the economy. The changes in our own logistics environment continues to be one of innovation, and increased competitiveness, with some continued consolidation of players. We began the year with the sunset of the US participation in the Trans-Pacific Partnership. The continent closed the year with much uncertainty surrounding the future of the North American Free Trade Agreement. The shifting legal framework of international trade will continue in 2018. Nonetheless, trade will continue with economies building on the 2017 recovery, and opportunities will grow in industries old and new. Globally, we see 2017 as a year of recovery. Once believed impossible, the Hanjin collapse demonstrated the need for more mutually beneficial relationships between cargo owners and carriers. Continued industry consolidation left shippers with fewer choices. With rate recovery, we feel it is important to bear in mind the needs of the customer and keep a watchful eye on building a future together. Beyond the transactional relationships defined by products and services, it will be these relationships that become the hallmark of the 21st century supply chain industry. Overall, we look forward to 2018’s challenges with the potential for stable growth. Autonomous vehicles are a reality and their presence in supply chain and our everyday lives will increase. New software combined with web-enabled devices will yield the much discussed “big data.” Additive manufacturing (also known as 3D printing) will alter the cost picture of traditional sourcing patterns. All these factors set against the familiar rules of supply and demand lead to limitless possibilities. Companies that can understand disruptive factors and how they impact customer business will provide services outside the bounds of traditional supply chain thinking.

Keeping costs in check and terminals congestion free are two of the main drivers that will ensure ports’ success in the coming year.

The role of the trade compliance professional continues to evolve. Completely rewritten bilateral trade arrangements will perpetuate this exciting trend. Identifying experienced trade compliance talent, particularly export talent, continues to grow exponentially more difficult as companies add head count in this area and there are simply not enough qualified candidates to fill the roles.

Regulatory oversight for this industry is a challenge in terms of keeping pace with the changing business climate while also maintaining a focus on the Federal Maritime Commission’s core mission under the Shipping Act — to ensure a competitive and reliable international ocean transportation supply system that supports the US economy and protects the public from unfair and deceptive practices.

At a time when political discourse around the world is often polarized and reactive, one of the challenges for a global industry such as shipping is to find a way to help governments maintain enough consistency in regulation to allow the industry to continue to support the world’s economy without unnecessary disruption.

The NAFTA agreement is important not only on its own merits, but it will give a clear indication to the trade community on the current administration’s approach to other pending major trade issue.

Hiring in the maritime transportation industry was surprisingly steady overall in 2017. We are optimistic that it will remain so in 2018, and the lure of this ever-changing industry will continue to attract and retain talented professionals.

Collaboration and interdependence among industry segments will continue to be core elements of successful international trade in the future.

Mergers and acquisitions, changes in alliances, the emergence of a small number of very large shipping houses, and a strong focus on digitalization, present shippers with promises, challenges, and a lot of questions.

Maritime stakeholders must devote increased attention to seafarer mental health this year.

Ocean freight rate volatility in the US container trades is likely to increase this year, especially in the spot markets on which many non-vessel-operating common carriers and their customers rely.

Expect the outcome of pending trade deals, the accommodation of larger ships, and response to new regulation to continue to shape the industry in 2018.

2017 brought many important changes to trucking. Technology is pouring into our industry, and we must evolve to remain competitive. Driver capacity has tightened significantly, and we expect to see that continue into 2018, especially with the ELD mandate taking effect. The complexities associated with chassis provisioning remain an industrywide issue. • Technology: Trucks may not be self-driving yet, but we’re closer than most people expect. Technology that enables accident avoidance, lane changes, and cameras to monitor other vehicles and driver behavior are available. All trucks IMC Companies deployed and on order in 2017 come equipped with roll stability control and collision avoidance systems. We are using this technology to continually improve safety standards. We also hope that technology in the trucks will attract younger drivers to the industry. In addition, tracking technology gives us consistent data on how our trucks are performing and helps us to provide better data to our customers. • Driver capacity: Due to freight volumes accelerating, the ATA predicts a driver shortfall of 50,000 positions by year-end that will, if the trend holds, grow to more than 174,000 by 2026. It’s becoming increasingly difficult to recruit and retain drivers. The ELD mandate could exacerbate this problem. One recent article stated that the ELD mandate could “result in a 7 percent loss of capacity.” •Chassis provisioning: Chassis costs are not being fairly distributed, and motor carriers and some BCOs are being forced to pay above-market costs.

Looking three to five years ahead, there continues to be growing dialogue on driverless trucks and how they could impact the industry.

Numerous shifts in trade, transportation, and regulations are converging on the transportation industry.