Global Trade This Week – Episode 162
What’s going on in Global Trade this Week? Today Trade Geek Pete Mento & Doug Draper of Inland Star Distribution cover:
1:07 -Domestic Cargo Theft is Out of Control
7:37 -Increased Enforcement on US Importers
12:33 -Halftime
20:05 -Tariffs on Chinese EVs
22:57 -China to Expand Belt & Road Initiative
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Keenan Brugh 0:00
You're watching global trade this week with Pete mento and Doug Draper,
Pete Mento 0:08
Hello everyone, and welcome to what I'm sure is going to be a blockbuster, groundbreaking, dare I say, historical episode of global trade this week. I'm Pete mento, and with me is the best co host any guy could ever ask for. Doug. Draper, Doug, how you doing, buddy? I'm
Doug Draper 0:24
good. I'm good. You set the bar pretty damn high with those. The intro there. So
Pete Mento 0:31
I had, I had decades of introducing comics on stage, Doug, so you know, I can pump anybody up, but I believe it when I say about you, when I say it's actually me being honest.
Doug Draper 0:42
Yeah. Thank you very much. Well, it's, it's fun is that a one gallon or two gallon drink that you just pulled up
Pete Mento 0:52
might be three that keeps the old chemical water cold all day. So I love it.
Doug Draper 0:57
Nice. Very good. Very good. Good for good. All right, man, let's just get this thing started this week. How about that?
Unknown Speaker 1:03
Let's do it, bud.
Doug Draper 1:04
Let's do it. Let's do it. All right. Well, um, I'll jump in. So Pete, here's the bottom line, cargo theft, domestic North American cargo theft, out of control, right? I know people have talked about it, and, hey, there's all these metrics and stuff like that, and it's getting worse and worse, right? And the thing that talks to to make mention is the data is obviously underreported, right? Some people, for a variety of reasons, don't want to say that they had a problem with their load. Something got stolen, pilfered, whatever it may be. So any numbers that you see out there always under reported, and we talked about this at a conference down in in in Florida last December. I think it was. But anyway, so here's some stats, and then I'm going to jump into my two cents on it, right? So there's a 49% increase, and this is from a company called overhaul, which does part of their business is logistics, software and data intelligence, right? I'm trying to make a better a better effort to recognize some of the sources that we come from. So that's why I bring that up with overhaul. But they'd indicated 49% increase from the first half of 2023 to the first half of 2024 so 49% more theft. The average loss has gone up too. It's 115k Pete, 115,000 I think I would have thought that'd be a little bit higher, to be frank with you based on the type of commodities that are being stolen. But the average load, that's the average that's an 80% increase, 83% to be exact, electronics, appliances, auto parts. Those are kind of the big ones. And here's a shocker, Southern California, as far as the US goes, 35% of the total loads stolen. Here's the one thing that really caught my attention. In Canada, 90% of all the theft loads come out of Ontario, which is, like, it's like, huge, right? So my whole point in this thing is that we talk about connectors, and on the show we've talked about, we're in the middle of peak season, and when we reflect on that. We're primarily talking about ocean freight coming into the US, right? So the vessel does not take your product all the way to the warehouse. So those vessels stop and they get put primarily on trucks, right? There is some rail piece of it for land bridge and things that nature, but by the vast majority, things are putting on trucks and getting to their final destination. So that means the truck traffic is going to spike in a couple of weeks or a month from now, and you don't think that the bad guys know that that's going to happen. So my point is, yes, there's peak season. Now that we've talked about theft is not really a concern. It hits the dock. There is a connector, which is a truck that will move the goods inland, and the bad guys know about it. And so I think that people need to be really diligent. I think carriers need to vet or brokers need to vet their carriers very carefully. And I think we're going to see a spike a little bit earlier than normal this year, but it's all about connectors, Pete, we talked about ocean freight for the peak season. What about that middle mile, so to speak? And so we just don't want the bad guys out there to have an early shopping season, if you know what I'm talking about. So it continues to go up. Theft continues to become a broken record. To this to this point, with the noise level amplified, it just gets more and more, and the cost of goods being stolen is is ever increasing. So what's your take on all the the cargo theft and pilferage and Flat Out Stealing trucks to get their cargo? Well, you know, you
Pete Mento 4:57
went, you mentioned, we went down to Florida. We were at the top. Conference. And going back to when CT Pat started, I never thought that I would get wrapped up into all this stuff with cargo security, but it became an important part of my life. I'm not in any way an expert like those cats we met down there. I mean, these are guys that spend all day long managing risk, managing recovery, doing everything they can to try to make their supply chain more resilient against theft. It's a full time job, and they're the ones that get together and talk about strategy based on their past experiences. And that's been a big change, probably going back 30 years, I'd say at this point, maybe even less than 25 where people collaborated, they talked about their losses and try to get information from each other. You know, Chuck Forsyth, friend of the show. You met him down at tapa. He he started a group called PCSC that really focused on that, that focused on, hey, I lost something. Can you guys help me recover it? And for an organization that's working in pharma or healthcare, you may not be able to use it anymore, but it's off the street, so you have to worry about your name being part of a bad situation, the the criminals always seem to be one step ahead. You know, they're they're so sophisticated. Nate white, another friend of the show, he constantly sends me these fantastic articles that talk about how AI is being used to take over cargo theft, how machine learning is being used, how the technology is just becoming such an important part as we develop these tools. I think it's only going to become more prevalent. And so much of what we do on the dock is still rooted in 1990s security technology. And these guys are using 2027 stuff at this point, you know. So the numbers are staggering. Doug, when you talk about that. I mean, that's a 40% increase over last year, which was an unprecedentedly terrible year for the types of thefts we're seeing. So yeah, there are alerts that come out of PCSC, that come out of HDA, that you get from tapa. I suggest that all of you get on those mailing lists, join tapa, if you haven't already, and do what you need to do, because as they get smarter and as technology gets better, this only gets worse, though. It only gets worse.
Doug Draper 7:03
Yeah, yeah. It used to be a gang of guys sitting behind a car and jumping a truck at a truck stop. Now it's guys in the basement, guys and gals in the basement, manipulating the flow of data and redirecting the truck. Why right where they want it to go. So it's a whole nother level, like you said. But yeah, tapa, some of those speakers down there were amazing, and I was thoroughly impressed with the services and support that organization brought. So absolutely good, good call out. All right, man, what's your first topic?
Pete Mento 7:37
My first topic is one that has the forwarding world have been on edge at this point, Customs has really stepped up enforcement on third parties, on customs, house brokers in particular, the rules have changed on us since 2022 we have a greater responsibility to collaborate with CBP. We have a greater responsibility for our licenses and for how we conduct ourselves. We're beginning to see them. Get more and more engaged and involved with us as Customs House brokers coming in, reviewing documentation, wanting to have meetings with us and have a brief discussion. You know, brokers have a new requirement that if we if we believe an importer is committing an illicit act, we're not only supposed to stop working with them, we're supposed to report them. So we're supposed to fire them as a customer and then let CBP know of what we believe and then cooperate in pursuing them. And that's a relatively new phenomenon. Doug, it wasn't the case like that for most of my career, so I'm calling it now the age of cooperation. The Age of collaboration with CBP has ended that we had a good run. We had roughly 24 years of it. It's over. They are going back to enforcing importers, as they did prior to 911 they are looking for opportunities to collaborate, sure, but they're back in full enforcement mode. There's just too much going on with tariffs, too much going on with these punitive tariffs and and non barriers to entry that they're enforcing, we're only going to see them get more and more engaged, and again, with technology, as their algorithms get more and more fine tuned, they're going to find more companies and more Customs House brokers to go ahead and engage on. So it's overdue. The Age of collaboration with CBP is over
Doug Draper 9:19
interesting, so I think you had used a word, not just now, but in an email you sent to me about tempo, right? So when you say tempo, are you referring to? Is this the speed in which they're out there or talk? What do you mean when you say tempo? Because that word caught my my attention, they're
Pete Mento 9:37
able to identify people because of the algorithms they use in technology. Really a customs entry is just data, so they're reviewing the data, and they're able to put their resources where they need them quicker than ever, those resources have more information generally than the people they're talking to, not Customs House brokers, but a lot of importers, even though that information is public. Available, so they have a much faster way to review things there. If you don't get back to them, they're just going to immediately assume that the problem was correct, and they're going to increase the tempo of enforcement. And if you don't get back to them in time, you don't do the right thing, you're going to end up with a, you know, request for liquidated damages and eat your cream corn, buddy. Eat your cream corn. It's scary, but it's it's really the way they're looking at this. Now, if you're not going to cooperate, we'll give you a fine, then we'll see if you cooperate, yeah,
Doug Draper 10:29
yeah, yeah. One that I talked to a friend the other day. So this is kind of relative, right? And we're talking about the de minimis and the $800 and how that's becoming more and more of a topic. Saying is that the right number, is there a right number? And if there is, what is it? And she had indicated that the the the genesis behind it is really about fentanyl, right? And the amount of drugs that are coming in, and just the drug trade that has just peripherated, proliferated, with, you know, putting things in, stuffed animals and things that nature. So her take on this is that, look out, the de minimis is going to be changing in the near term. Right near term could be a year or two out. But anyway, what's your take on that? And then we can switch topics on the de minimis. That's a whole nother thing. So just like 30 seconds on your take with resetting that. I've
Pete Mento 11:23
been pretty vocal about this in public. I think that there's going to not only be a reset of the number, it may go down, probably not dramatically, but go down. But more importantly, there's going to be a change in the way that customs reviews these goods. The information is going to have to be here earlier. They're going to use targeted enforcement to catch things, because it's become that cheat code to get any kind of contraband, whether it's counterfeit goods or drugs, into the country, and it's going to be beloved by both sides of Congress. So not only are you going to be are you going to be keeping drugs out of people's hands and hopefully saving lives, but you're also helping corporations by eliminating people stealing their intellectual property and just importing it. It's a it's a win win for both conservatives and Republicans. It's a win win forever as president next, and unfortunately, it's a lose, lose for consumers who are beginning to really enjoy the use of this de minimis as a means of having inexpensive retail. Yeah,
Doug Draper 12:21
yeah. I think the cooperative nature and the nonpartisanship, if you will, will push this thing Fast and Furious through so that'll be probably a topic we'll continue to discuss as it goes on. But another topic that we like is halftime. It's brought to you by CAP logistics. They're the ones that push the buttons and pull the levers to make all this happen. Pete and I wouldn't be here every week without those guys. So we want to give a shout out. Check them out at CAP logistics.com. With that, we jump into halftime. So I don't know, is it you or me that want to go first? You go. How about this? Pete? I'll jump in because I like your topic. So the other day, I saw this article that just popped, and I saw my attention is that there is a Russian spy beluga whale that was found dead on September 1, and they named it Voldemort, V, a, l, D, I M, I R, and it's a combination of a Norwegian word for whale, and then Vladimir Putin right. And they believe that the whale was being trained on covert tactic, tactics by Mother Russia to do some spying. And this whale was like 15 or 17 years old, and usually beluga whales age to maybe 30, is kind of what I had read. So there's a little like, what's going on there? A little funny business. But they first found this whale back pre covid, like 2019 it literally had a GoPro strapped to its body. And on that GoPro, it said equipment of St Petersburg, you know they so I started doing some some work on this, and actually training sea mammals for military use is not new, right? The US has used dolphins and and sea lions to locate mines and do general Intel and things of that nature. And so I was shocked that they're they're using sea mammals both sides to do recon work. It was very, very interesting. So I wanted to bring it up on this topic. And they're doing an investigation. I don't know if it's an autopsy, if that's what you call on a on a beluga whale, but they're going to try to find out what the cause of death was. But they think there's a little funny business, because the whales you should, should, should age twice as long as that one. So I know, did you hear about it?
Pete Mento 14:52
I didn't hear about this one. Doug, but classmates that watch the show, please do comment if you remember this. 19. 92 casting main, main Maritime Academy. You have a massive waterfront like you would imagine, right for boat school. And one day, there was a cage sitting on one of the docks. In the Cage had an opening that went to the water, but you couldn't access it any other way, and that was full of sea lions. And there was a sign out that said, Department of the Navy do not approach so what do we do? Right? We're idiots. We're idiot midshipmen. Of course, we're gonna approach this thing and we hear this voice say, hey, that's signs for your safety. They bite all right, stay away from them. And there was some guy in Navy uniform, you know, he didn't want to talk to us about it, but what we would learn is they were there training them, using our training ship on how to go around chips. And you know, if you really dig deep into this, we used to use seals to put limpet mines or magnetic mines on chips. And I always wondered if that's what they were training them how to do. But yeah, man, like, I got a class one day, and there were a bunch of seals, like, not, not um Ross seals, but, you know, seals on the on the pier. And I've always thought to myself, Man, what our government won't do to get an edge on the Soviets, huh? So, yeah, doesn't surprise me at all, though, not in the slightest.
Doug Draper 16:10
Yeah, yeah. I thought it was, you know, it's bad, you know, it's sad to hear that story, but it's just crazy. In this day and age, with all the technology and things that we've talked about on the show to basically strap a GoPro to a beluga whale and take care of business. I thought that was worthy of bringing up on today's halftime. So that being said, What's your halftime topic for this week?
Pete Mento 16:33
Well, my halftime topic is a fun one for a change, Doug, I went and got some more ink work done on my my nautical sleeve yesterday. Shout out to compass rose. And I was sitting there getting tattooed, and I noticed that most of the other gentlemen that come in a little bit scruffy, you know, I'll go so far as to say, you know, maybe, maybe a little bit squirrely, you know, lots of fishermen, lots of cats that were a little more rough than me. And I'm 53 years old, Doug, and I'm walking around working on sleeves for my tattoos, which is not something that you would think a customs house broker would do. And I had a call with a friend of mine last night, and he said, man, you're just a real bad boy now, aren't you? And I thought to myself, I don't think anyone's ever used that term to describe my behavior ever. So as a young man, I was very much a juvenile delinquent, but I was not a bad boy. You know, I was not, I was not the cool kid with the souped up car and the slicked back hair causing all kinds of trouble. And now at my age, I am still not a bad boy. So Doug, were you back when you were driving, you know, in your buddy's IROC, listening to White Snake?
Doug Draper 17:50
Were you a bad boy? No, not really. Maybe I thought I was being in Wichita, Kansas, zipping around. You had a VW thing. I had a VW Bug. It was a convertible. And believe it or not, because I have no hair now, I actually had a ponytail for a period of time when I was in high school. So other than, you know, drinking Mickey's wide mouth, as I would go to parties in my car, and I don't advocate any drinking and driving. This was a long time ago, but that was probably about as bad a boy as I ever was. I'm pretty, you know, Midwestern clean cut guy, so you know, I'm sure we could go back and think of some crazy stories that were involved, but for the most part, it's just pretty average kid zipping around in my convertible bug in Wichita, Kansas. I
Pete Mento 18:39
don't think anybody would have mistaken, either one of us, for, you know, a possible petty criminal or anything like that. I, I wanted to be David Bowie, you know, I didn't. I didn't want to be Charlie Sheen. It was, it was very different for me. So, yeah, I might write a Harley. I might have played rugby and now going to college, very much, trying to do a horrible person for a little while there, but send you to sailor school. What do they expect? Right? That's just like, it's like getting a PhD in delinquency, going to it, going to boat school. But no, and I think it'd be fun if Keenan was on camera right now, because he could surprise us. He might, he might have had a bit of a jaded past, but I, you know, I can't imagine he was one either, and he does not have any tattoos. We learned today. Do you? Doug, do you have any tattoos? No,
Doug Draper 19:26
I do not. Nope. No tattoos. So, yeah, yeah. Well, officially, global trade this week is not a bunch of ruffians or hooligans. We are not bad boys. We're bringing the truth every week to you guys.
Pete Mento 19:39
Yeah, think we're the farthest thing for bad boys. Doug, yeah, yeah, for sure. That brings us to our next topic. So, Doug, go ahead and fire away, buddy. Yeah,
Doug Draper 19:48
yeah, yeah. So again, we get all of our topics. Well, I get a lot of my topics just from staying, you know, up to speed. And I probably get 15 emails in the morning from all. Different publications that talk about different topics, and so that's where I pull a lot of my my content. But this one struck me a little bit, because if you know this is related to Chinese electric vehicles, and Canada and the US recently imposed 100% tariff on any EV made in China. The EU is not far behind. I don't think they'll ever hit 100% they're dabbling, you know, below 50. And it's a little bit unique with the with the whole EU trying to come settled with what they want to do. But the question is, are these tariffs going to slow down the Chinese EV machine that is up and running? And my personal take on it Pete is it's not, it's not going to do a whole lot to the overall sales on a global market for Chinese electric vehicles. It's government subsidized, which is part of the whole reason we're doing these tariffs, right? So there's this unfair advantage that they have. And the one thing that I did a little research on Pete is they're starting to open up plants, manufacturing facilities, Asia, South America, Hungary, and it takes billions and billions of dollars to make a car production plant, right? I mean, look at Tesla and the amount of money they've put in there. And then you remember DeLorean back in the 80s. Obviously, everybody knows that from Back to the Future, but I think that John DeLorean tried to set up an operation in like Ireland or something in the UK. And the amount of money, I don't think it was the UK, you may know this, and we can talk about it, but the amount of money that they spent to try to get that up and running, so the fact that they're dropping billions to set up operations all over the world. And yeah, it'll be a deterrent, but I don't think it's going to impact their overall growth strategy. They're all about batteries, semiconductors and electric vehicles. They've said, that's their new mantra, and they're going to forge forward. So although we're doing these tariffs, and they will have an impact the overall global economy related to Chinese electric vehicles is not going to be impacted to the level that we're going to see here in the United States.
Pete Mento 22:09
So I 100% agree with you, Doug, I should probably start there. I don't think it's going to stop anything when the typical price of one of these things still comes in around $17,000 with all these tariffs, and at the high end, probably more like 35,000 and another shout out, going back to our youth, I can remember when Hyundai first started selling cars in America with the Hyundai Excel and the the Hugos, right? The the inexpensive cars sold because Americans could be as patriotic as they want. They're going to buy what they can afford. And I think these EVs at the price point that they've got coming in are going to be wildly popular with young people. So no, Doug, I don't think it's going to stop anything at
Doug Draper 22:49
all. Yeah, interesting. That'll be a fun one to follow, for sure. So all right, bring us home, my friend. What you got for your final topic?
Pete Mento 22:58
Well, speaking of China, Doug, our friends in China have decided that they're going to begin the next phase of the expansion of the Belt and Road Initiative. For the uninitiated, the Belt and Road Initiative was a massive, massive foreign investment that was made by China in ports, in long range highways, airports, and any other type of infrastructure that they could find throughout the world in order to allow for Chinese products and goods to freely flow out, and for raw materials to freely flow in. And it sounds like they're going to start going more into the interior of Africa. They're going to be starting to look deeper into getting closer to the Indian subcontinent. These guys are going to expand again. So a country that's already in tremendous financial peril because of an over investment is going to do what, double down and over invest some more Doug. That's what they're going to do. So, you know, logic be damned, let's get some more stuff out there built. I think it will matter in the long run. You know, having that infrastructure 2030, years from now could be along with what we just talked about, China's desire to get more engaged in manufacturing. It's an investment in their future, and they're making it, logic be damned. But they're out there, and they're doing it, and I'm going to go on record right now saying that it will end up being a very smart decision down the road.
Doug Draper 24:17
Yeah. Well, we during covid. We talked about all the companies that are out there that were developing their own infrastructure, right? Like, hey, we're just going to use our own planes. We're going to increase our private fleet. We don't have time to mess with the chaos of during covid. And this is an example that they are figuratively and literally owning the rails, right? So they're going to control the mechanism, and think about what that did as the expansion in the United States, whenever the rail went east to west, and the impact that it had. So I think it's kind of scary with the potential. And I love the fact, because I was going to bring this up, they're doubling down, right? I mean, that's the perfect word to use. Is that alls we. Hear about is the over investment and the real estate collapse and all this kind of stuff. And they're like, yep, that's fine, but we're gonna crank out some EVs. We're gonna build this infrastructure. The one thing that caught my attention is that, does that mean that the Chinese currency is going to be more prevalent on an international scale when they're just driving their infrastructure through these third world countries and trying to get things up and running. So now you got to pay, you know, in Chinese currency versus US currency or another one. So that was something else like, Yeah, I think that could have an impact. But getting another trillion
Pete Mento 25:39
dollar in debt Doug is certainly going to help evaluate their currency and make their exports cheaper. Yeah, but, you know, it never ceases to amaze me. They're not a typical economy. We can't compare them to what we would do, and you have to disassociate yourself from what you would expect, like a Western country to do. They're just, they're not going to do it, they're not going to do it. And they're, you know, you're talking about doubling down that term, it's a gambling term, right? We're going to double down. And I've not spent a lot of time in casinos. When I do, it's normally at the sports book. But when you see that guy that's down to his last chips, and he puts all that money down and he loses, it is, it is palpable, like you can feel it in your soul. When that guy just sculpts away from the table. When they win, what do they do? Put more money down on the table. They don't walk away, right? So I'm wondering at what point China is going to realize that it's time to walk away and be a little more insular in how they're doing their investment.
Doug Draper 26:31
Well, based on these two topics that we came up today with, vehicles and this infrastructure, doesn't sound like that's going to happen anytime soon. Nope, no. But what is going to happen very soon, like right now, Pete is ending the show. It's been another great edition of global trade this week. Pete, I love how you say always that if it's happening in global trade, you're going to hear it here first. We're always going to have a forward leaning perspective, and what that means is we're going to talk about the impacts of what's going to happen, at least in our opinion, not what happened. That's easy to do, so I love the fact that we press the envelope. Aren't afraid to express our opinions and really appreciate our listeners to to engage. And if you have comments, make your comments on these posts. Take a listen to us. And I think that's a wrap. So Pete, thanks again, brother and we will chat with you next week.
Pete Mento 27:24
All right, buddy. Thanks, everybody.
Unknown Speaker 27:25
Okay, take care. You.
Transcribed by https://otter.ai