Global Trade This Week – Episode 151
What’s going on in Global Trade this Week? Today Trade Geek Pete Mento & Doug Draper of Inland Star Distribution cover:
3:25 -E-Commerce Disruption from CBP Enforcement
7:57 -USPS is Going to Try Reversal Logistics
14:44 -Halftime
22:49 -Why the US is Winning the Chip War
26:24 -Mediterranean & Asian Port Congestion
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0:00
You're watching global trade this week with Pete mento and Doug Draper. Hello, everybody. This is global trade this week commonly referred to as GTW. I am Doug Draper. Out in Steamboat Springs Colorado. I am only half of the show. The better half of the event is actually in his house in his home in the great Washington DC. Metroplex is Mr. Pete mento. Pete, how you doing today?
0:34
I'm good, buddy. And I think we can refer to you as the better half duck. I'm okay. Yeah, definitely, um, the piece on the other half of the Pop Tart that you give to your little brother. Not quite as big, maybe, you know, maybe a little burnt, probably not as much frosting on it. I can live with that. Like,
0:52
I love it. That's exactly it. So for the first time in a long time, you are not traveling today. So that's awesome.
0:59
I'm not traveling this week. So I'm going to be mostly doing a lot of zoom car teams, calls, teams, whatever. And following up on stuff, and I got a lot to write this week. So next week, I'll be in DC and in Salt Lake, and then Minneapolis after that. So I will be on the show.
1:22
So awesome. Yeah. So you got a crayon and Big Chief tablet ready to go?
1:31
I am. And you should probably tell everybody where you are. But like this is. This is a new studio location for you.
1:38
Yeah, so I officially have officially moved to Steamboat Springs, Colorado. I've been kind of half and half out for several several months. But I am here fall lock stock and barrel. So this is the new cubicle, right? Or the new phone booth where you can come in and close the door and have a little bit more quiet. So I'm hoping it Kenan is a wizard so I'm sure it'll sound okay. But yeah, it is beautiful. And steamboat and looking forward to doing the show. First, global trade this week in Steamboat, we better make it a good one. Pete That's all I gotta say. I'm
2:15
sure we will I speak on behalf of all of our viewers and listeners when I ask when will the actual Troy come back?
2:25
Oh, you know, he is. I brought him in the guy that owns this place. It's called the ski locker. And he's like, what's the deal with that? And I'm like, It's Troy. You know, speak to him politely. No Cussing. And he was cool it so I don't know this. I got to figure out if this board can withstand him. But yeah, maybe he'll come out. Full full lock, stock and barrel on the next show.
2:48
I wonder if Troy's like Annabelle, the dollar the horror movies? don't taunt him. Don't think negative thoughts about him? Don't look them directly in the anime. That kind of thing?
2:59
Yeah, yeah. I'm sure his facial expressions will change regardless, or whatever you say to him. You get like, is he smiling? And he just laugh? Is he mad? All of those things happen simultaneously.
3:11
So that might haunt your dreams?
3:13
Yeah, yeah. Yeah. Cool. Well, one thing we won't do. This is a horrible transition is hot dreams on the show, Pete. So I'm gonna let you go first with your topic.
3:22
Thanks, buddy. So last week, I was in Phoenix and I was in San Francisco. Over the weekend, you know, the nerd phone starts buzzing a lot with people asking me do I know anything about this customs action regarding the de minimis brokers all over the country, and I said, Well, I've heard a little bit from some of the brokers, but really the the news broke being on Monday. So the number of customs house brokers that did significant de minimis entries, those entries under $800 for E commerce, a number of them got, you know, kicked in the nards last week and told that they're out of the out of the program for 90 days, until they can show the government that they have a you know, a cleaner process for managing possible contraband, one of them has already back in, they were able to do whatever they needed to do to prove the government that they're good actors, but from what I understand the other ones are still struggling to get back in. But it's an excellent illustration of why chapter 86 de minimis entries are so reviled by so many people, you know, finding, you're finding fentanyl, we're finding contraband merchandise, maybe some stuff that goes against copyright, gun parts, cow pornography, and there's a lot of creepy scary things that they're finding in this stuff that sneaking in under the de minimis because customs doesn't inspect everything. You'll have a consolidated entry with possibly 1000s of different packages in it. And they're not going to have the time or the people to inspect every little bit of it. So this is the first shot across the Now, I guess to get people who are doing it to pay more attention. But I think it's also an excellent indication that the government has the will and the ability to put on Customs House brokers, a deep respect for the real meaning of what the program was. I don't think it's going to go away, the US can see a much deeper enforcement of it over the course of the next couple of quarters, that hopefully what happened? So it's not a strategy. But you know, what I'm hoping happens does is that we collaborate with customers to come up with a more secure way of using this program. Yeah,
5:31
I like your term shot over the bow, because I think you're at you're nailing I mean, it is so open it on the table about how companies are taking advantage of the de minimis. And I wouldn't say taking advantage that seems kind of negative in some instances, but they're just working within the rules. And it's crazy that you can import product into a neighboring country and does zippin orders all day, every day 1000s And not have to pay the duties and taxes. So I don't know, I don't think let me actually speak Do you think they'll ever go back and say, well, oh, 800 is a little too high, we're gonna bump it down a little bit, or is the value of irrelevant, it's just more about oversight. I
6:14
think it's a flux right now, I think anything's possible, though, I think it's possible that they would drop down to minimum step, you know, back under $100, that that's a possibility. What I think is more likely to happen here is that you're you're going to have strict enforcement, because the companies that are providing the service, aren't necessarily doing enough work to understand who's using it. And the broker will normally act as the importer of record, in these instances. So they're taking out a liability and responsibility. They do realize that when they're offering the service, and I think that's what customs is trying to do is to bring a little more individual responsibility to deciding a broker is gonna do this kind of work. But nothing would surprise me. Like, it wouldn't surprise me if they eliminated because, you know, Ted Cruz has that bill out there trying to eliminate chapter 86. For anything originating in China. I mean, any anything's possible. This is this is really starting to get people's attention, because of the Fentanyl crisis. You know, because of all the counterfeit stuff that people are buying all the time. I don't think this is going away. But I think you're gonna see just stricter enforcement. And we'll keep our eyes on it for the show. But anything could happen about anything. Yeah, it's
7:23
interesting yet to be defined as the importer of record. That's a heavy, heavy weight to bear. Right. And I don't know a freight forwarders understand the implications. I mean, the larger ones do for sure the multinationals but some of them a little ones. Smaller. That's that's serious stuff. If you're acting as the importer of record on 1000s of shipments, you don't really know what they are. Yeah,
7:45
that's tough. Yeah, it's tough. Getting forewarned, and all right. Hey, Dad, can't wait for this topic. Read your notes. So go ahead. But yeah,
7:58
well, they're two good ones. I'm gonna just we'll just jump into it here. And I just want to let you know, this morning, I got a fax from the United States Postal Service about a cool new strategy they're moving forward with it's called assisting with reverse logistics in the E commerce market. Did
8:17
you actually get that? Was that? Did you actually get a fax
8:24
from the government? I did? No, I didn't. Yes, no, maybe? I don't know. But my point is, it is irrelevant as getting a fax right from from the from the post office. Listen, this is like a 20 year old strategy like this would have been news and of interest. 20 years ago. Now. It's just embarrassing, right? The post office? I did they have so much potential. And they I don't know if it's leadership policy, handcuffed or whatever. But they come out and say, Hey, we want to participate in the reverse logistics of E commerce, like that was of interest decades ago. Right? And so I don't know where they're coming from, or why this is even news. You know, they have this amazing machine. They have a juggernaut of drivers everywhere they touch every single address. There's so much potential with the post office, and they're just pissing it away. Every single time I turn around and read some press release. It's embarrassing. So that's the one piece the other piece on this returns. Thank you. I was at a conference in Philadelphia last week on E commerce and it was more towards larger furniture and bulk items. Think of like knocked down furniture from Ikea, where or purple mattresses that come to you in a box or a couch that's in three boxes and you put it together. So the underlying theme is re commerce and once it's in market key In market, don't try to figure out how to reverse the supply chain and get any item, whether it's a couch or a large item or a cell phone case back to the warehouse, just keep it in market and get creative on ways to liquidate it, or recommerce it. And so there's a lot of push around that there's a lot of push about the impact to the environment. And so maybe it's this, the juxtaposition of this is that the 2024 approach of returns, is keep it in market get creative, and re commerce. And the post office comes out with a press release says, Hey, we want to participate in the reverse logistics world and help get everything back to a warehouse that's 1500 miles away from the point of origin. So this is a you can do better post office, the United States postal system. But it's also a comment on kind of where returns are going in general, keep it in market, we commerce, and don't invest the time the money or the implications on the environment to try to move it back to another location where you're just going to do something with it and then bring it back out. So I was a little bit all over the board on this one, Pete But what's your thoughts on reverse logistics? First of
11:13
all, Doug, but a shout out to the US Postal Service moving 8.6 billion packages a year. Okay. A year buddy, the year? That's 28 million packages a day. Think about that. Okay. Where was the other statistic I looked up, it's something ridiculous like, like 2400 packages a second. And about 20% of that is international, you know, that this this this argument that the Postal Service has such potential, any company of that size has such potential, you have to keep in mind that their competition is focused on a different market. Much of what the US Postal Service has been set up for is domestic movement. And I think where reverse logistics comes into play. It's a smart decision. If they put the thought into it, because they already have the infrastructure. I don't know what kind of process engineers are involved in figuring this out for people. But I don't think it's a bad idea, Doug, I think anything that the US Postal Service can do to get their incredible infrastructure more involved in international and an E commerce even its domestic, the better.
12:22
Yeah, well, I bet the process process engineers favorite show right nowadays is Quincy. That's probably how I viewed it. Their whole process and concept is
12:32
Oh, Doug, come on. First of all, how dare you to file the name of Jack Klugman? Quincy Medical Examiner, one of the best shows of the 1970s always has tidied up every 60 minutes. I bet we could bring Quincy back because everyone loves these. What are they called? The special SVU stuff. We can bring Quincy back. I can play Quincy, you could be the big detective. It'd be fantastic, man. Yeah.
12:59
Yeah, I like it. I like it. You're never
13:03
ending assault on the postal service dog. I'm telling you, like, show me on the doll where the where the bad person touched you. It's gotten to the point where it's gotten personal. Do they like did they lose your application approval to Notre Dame or something when you were a kid, like what happened?
13:18
Now, you know, it's, it's, it's I don't have a vendetta, I just see these press releases and the things they talk about which are so obscure and out of date, and missing the mark, and missing the opportunity. It just drives me insane. Right? I want them to succeed. They have this horsepower that's unbelievable. That does. It's unmatched compared to FedEx and UPS and they just don't do anything with it. Or they come up with some crazy thing that is completely irrelevant, like reverse logistics. And we're here to help solve the problems of the world. If he were from the government, and we're here to help. I mean, that should be their tagline.
13:57
This fall, Doug, you're coming to DC. A couple of things. We're going to have lunch with my friends at the Postal Service. You're gonna get to ask any questions you want and hopefully get some answers that are better than what I can give you. Because, you know, this show has gotten to the point now where it's just become like a trope. I'm gonna defend them and you're gonna stomp on them. And I think you know, maybe you should look the enemy in the eye and have a conversation, my friend.
14:22
All right, that's, that's fair. That's fair. Okay.
14:27
So now that pivots to suit to halftime, brought to you by CAP logistics. This is the segment of the show where Pete and I can just grab whatever topic comes top of mind and just pontificate about our personal I can't even think of a funny funny word to use. But it's halftime. Brought to you by CAP logistics. Pete. You want to rent man, I'll let you go first.
14:50
We remember we did the tear system for Halloween candy a while ago? Yeah, okay. I have. I've been craving cereal. I haven't had it but I've been craving cereal and so I wanted to introduce my four tiers of cereal. Now the first tier being the lowest up to tier one. So tier four. This is mostly made up of your adult cereal. So these are, these are my favorite adult cereals. Okay, so in here you have Raisin Bran, which I think is just a classic, positively wonderful Special K, also in my adult cereal bin Cracklin, oat bran. Fantastic, absolutely fantastic. And also I'll put in here, Mini Wheats, not the frosted ones, but many weeds because you can put a lot of fruit in there, it's a winner. Now to number three. These are kids cereals, masquerading and being disguised as not kid cereals. So this is something that you can sit there and eat and feel like I'm doing something good for myself. In that we get the honey nut cheerios of the world, the the frosted Mini Wheats, which come in a number of different flavors. Right now I am partial to the strawberry myself special came with the chocolate or the dehydrated strawberries, that's also in there. But you also have rice krispies and rice puffs, which I think are an abomination. The only time you should ever consume Rice Krispies is when they are in the rice krispies square, which is basically just a method of getting more marshmallow in your body. Now tier two are the second tier, Saturday morning cereals that we all grew up with. In there I'm going to put in Lucky Charms, sugar smacks Honeycomb, all the all the pebbles, Fruity Pebbles, chocolate, choco cocoa, pebbles, those also go in there, as well as on forget Oh, the Count Chocula is the blueberries. Those are anything that has a marshmallow and then kibble basically like alphabet. That's gonna go into your two. Right now Tier one is it's a very small tear, okay. And this is going to be controversial. But that's what this show is about. It's about controversy. All right. So first of all, any of the Captain Crunch brands, any of them crunch berries, extra crunch berries without crunch berries, Captain Crunch is a fantastic serial number two also in that vein, might not be very popular buddy, but I'm gonna put frosted flakes in there. They are indeed great, as Tony said, and I find them to be positively Fantastic. Now another one that sneaks into number one that might should have been a number three. Either the normal or the cinnamon life. Mikey loves it. I love it. Everybody loves it. But it's so sugary. It's really a kid's one. But it's so good that I'm going to put it right there up on number one. And one last one. And this is for your consideration. I think this may be one of God's perfect foods. All right, are the any of the granola cluster reason? Like raisin nut crunch? Raisin granola crunch? Any of those? That's basically like 1000 Calorie bowl of cereal. masquerading something good for you. But it's so sweet, but it's fantastic. Now a couple of ones want to put into and then I'll hand it over kicks is trash. I don't care for it in the slightest. And the other one I put in there are are the the Grape Nuts. What the hell is a great nut? Why are we including the cereal aisle? Whoever decided this should be a child breakfast needs to be drugged out of their house and have the bottom of their feet beat with a cane. So there you go down the four tiers of breakfast cereals. Wow.
18:29
Yeah, I like them all to two quick comments, one, the cereal that's a gigantic wafer of fiber that just sits on the ball. It's like this big right? And I think you have to be north of 70 in order to purchase that in the grocery store. The second piece is I was just thinking this I'm not even kidding. I'm not even kidding with this. My parents used to smoke and they had those beanbag ashtrays right you know the ones that you could put it in, they would just form wherever they are. And I remember my mom pouring a bowl of Cookie Crisp while she's smoking a grit and putting it out by the beanbag while she's filling my Saturday morning cereal Cookie Crisp. So that that's that that's a whole lot of information I just shared about my family history that may or may not supposed to be shared. But
19:27
Cookie Crisp goes into another category of cereals. It tastes better without milk. I like Cookie Crisp bread out of the bag. I'm also a fan of cinnamon toast crunch that way, but if you put if you put milk on them, they just they fall apart too quickly. So you'll call call me a call me a conservative breakfast guy. Silesia, holed up in milk.
19:50
Yeah.
19:57
Along the theme of food, there was something that's popped up That's Siracha sauce, again, for the third time in three years is ceasing production until after Labor Day, and it happens about the same time, because they need peppers, right? And pepper shortage, bad season for peppers. But if you start peeling the onion back a little bit, no pun intended on that is I think it's just really bad management of the company. There's kind of this fight between their main pepper distributor, and that who want foods I think, again, I don't have it right in front of me. But anyway, I think that they're pitching the fact that there's a problem with the pepper itself. But I think in reality, it's a vendor management issue. And there, they haven't diversified. So they're in a pissing contest with one of their largest pepper suppliers, and they took each other to court and, and Suratul lost. And it's just, it's a little bit a little bit naughty. So anyway, it's a big sauce. It's like the third most popular sauce in the United States, and they are ceasing production until after Labor Day. So it's going to be like toilet paper during COVID. Man, you better get to the grocery store and reach on that third or fourth level. So you can grab the extra Siracha sauces, because it's going going gone for the summer.
21:25
So that the only time I enjoy this Siracha sauce is when I have FDA, the Vietnamese soup. I enjoyed a great deal, in that. You know, and this is another time where I just want to say that people see we told you supply chains matter. Were listening to us. Your life is about to be a little less tasty, because of supply chains because of purchasing. Right? So this is why what we do matters now for me, there are two sauces and there are only two sauces. I'm a crystal guy that's in New Orleans, hot sauce vinegary, much like Tabasco is a little bit tiny bit different flavor. I love Tabasco, too. But I'm more of a crystal guy. And I love something called Tiger sauce. If you've never had it before, it's very big in the Caribbean. It's a little spicy, but it's just got a lot of different flavor to it. I love hot sauce. I think that you and I should you should do a version of that hot one show you ever seen that where they need the wings to get wrestling harder? I think that would be great. I would tap out pretty quick. I don't think I would I don't think I'd make it as far as you would you are a much more stoic person. I don't think I would make it as far as you.
22:33
Yeah, I'm all in Walmart, we'll see how the post office can handle that and are face to face meeting.
22:39
If they beat you guys stop talking trash about them, though. All right,
22:42
Sibley possibly. All right, let's get to the back half of the show. Topic number two, Pete, once you got that topic
22:50
number two, for me was a bit of a learning experience. Last week, it was an industry I thought I understood. But honestly, Doug, I didn't. I spent a lot of time in Phoenix last week, and our offices there do a great amount of work with the semiconductor industry, both the finished goods as well as the machinery and the materials that go into making them. And I learned a lot, I learned a whole lot just listening to these companies, and what they're doing and why it matters for America's economy moving forward, the United States leads the world. And I don't really understand this stuff. We lead the world and really advanced chip technology. So the really small, you know, really hard to make very expensive, very advanced semiconductors. That's an American thing. And we're working hard as a nation, the Department of Commerce BIS and these companies themselves to control that technology to keep it out of the hands of primarily China, who's having a very difficult time managing any type of real competition with us, because they can't get the machines that make the really cool difficult to make stuff. And they can't get the technology to make the machines. I mean, it's a it's a whole, like you said supply chain from start to finish. And since chips are in everything, and they keep getting smaller and smaller and more and more advanced. It's a there's a good reason, right? Why the United States has invested so heavily in quickie more fabrication facilities and getting involved I was at a facility last week that had 30,000 new employees basically done just like out of thin air, and they're going to be fine, another 30,000 On top of that. So lots of good jobs, lots of great leading edge technology jobs here in America, based on the innovation economy, but also a lot of hard work when it comes to compliance. Because we're always talking about what we think is gonna happen. I believe over the course of the next 24 to 36 months, you're gonna see a real lockdown, because it was 301 tariffs and all the rest of it are really locked down on ensuring that this technology doesn't leave the US just even more efforts are working hard to ensure this advanced technology doesn't leave the country.
24:54
You know, very cool. You hear like the chips act that came in a couple of years ago. Just talks in generalities of it. So that's nice to get a chance to do a little bit of education, you know, maybe semi chip, that's kind of the secret sauce, right? And maybe that'll help expedite domestic manufacturing or nearshoring, in the sense that we already got the magic sauce, we had the secret ingredient that's going to make this device or this item, or this toaster, or whatever. more efficient, more effective and better all the way around. Maybe having that secret sauce here in the United States developing it I don't the plan down there in Arizona is just ungodly, huge and powerful, and to the economy and everything else. So maybe this is the quote unquote, secret sauce, sauce that will help elevate domestic manufacturing. Again,
25:46
I agree duck and the sheer brainpower that goes into these the knowledge I was in a meeting, where one of our customers was explaining how their machine work. And it was a pretty clever guy, Doug, but just to sit there. And first of all, who thinks this stuff up like what type of, of Mensa genius just sits there and says, here's, here's what we're going to do for this next level of technology. And then the fact that they're, they're just getting better and better at making those leaps into how technology goes, it was just an incredibly impressive display of what the human mind can do. It was incredible. It's incredible.
26:22
Good, good.
26:25
Yeah, I'll wrap it up with you know, with some ocean freight. You and I spoke about it last week with your you and I were kind of on a joint. I wouldn't call it a sales call, but logistics education with a friend. And we talked a little bit about it. But ocean freight and rates and you better look out, it's starting to come around as far as the spot market seen. rates starting to creep up and creep up pretty pretty darn quick. Well, in addition to that there was Maersk just came out with the press release that said, Yeah, we got some problems with congestion and scheduling. And we're going to implement some blank sailings, we're going to cancel some scheduled demand operational issues. This is finally the result of the Suez Canal and in line starting to go around South Africa, things aren't quite where they're supposed to be. These mega vessels are designed to go into certain ports only. And now they can't. So there's like some transloading going on. So mega ship comes in. And they're putting the product on smaller ships to get to these ports. And we're seeing the trickle down effect of everything. We talked about it. Several months ago. Now we're seeing the implications, and it's happening right before peak season. And so everything's out of whack, right. And in order to try to rebalance, sailings are starting to be canceled, you know, blank sailings going on in the fact that Maersk, who was absolutely a top tier provider is publicly explaining this and making a statement that they're having trouble. You guarantee that all the second third tier steamship lines are like, Oh, all right, well, if mares can say it, then we can now finally say it. And I think you're gonna see a lot more press on this and a lot more things percolating to the top, where the schedule imbalance, the chaos of these port closures and not going through the Suez Canal is starting to reap its ugly head. And it's happening right before peak season. And even if you're not in the spot market, there's going to be implications and indeed, increased costs. So it'll be interesting to see the last thing and I'm not even going to comment on this, because maybe we could talk about it in the future is, is this a strategy to bump the bottom line of some of these companies? Or is it or is it real? Now that that's a little bit of a different topic, we don't have to get into it. But the big picture is chaos is suing and we are going to be paying a lot more on ocean freight rates in the upcoming months. Yeah,
29:06
you know, the whole conspiracy theorists about the cartel quote, unquote, you know, of ocean carriers are just using this as an excuse to raise rates. I don't want to buy into that, right. And I've had a lot of my friends that that love to buy into that I want to believe that this is a supply and demand issue. But they're being smart about not putting too much demand out there. And we want them to make money. You know, where this has really been getting my attention is when I sit in on sales calls. And I'm talking about ocean freight. You know, that's we have much, much smarter people in my organization that do that. I have a counterpart Dan Kaufman, he's incredible and they'll talk your ear off about it. But with regards to that, that issue, what I keep hearing is companies that decided they were going to play on the spot market because of how soft it was. You know, the bet 60 70% of their bundle. They're going after spot are really getting it in the teeth right now. They're really getting punched hard. But then there's also people who are being told that their contract rates are going to get messed with, right, there's going to be all kinds of unforeseen increases based on what's going on in the global economy. And that's this, you know, we're reliving COVID. Again with that. I thought I had agreed space. But I hadn't agreed rate. I thought we had all this on a contract. But they're being told that that's not necessarily the case. And there's nothing that will more quickly erode trust in a provider than a bait and switch on capacity, and on costs. So I really hope that the combined industry learned their lesson during COVID. And hopes on strategy. I've said that a million times a week. But someone should be thinking a little harder about where this is going to end up when it comes down to trust. So I think we're eroding even more of it as we speak duck, and it's a problem. Yeah,
30:52
well, I guarantee and every one of those contracts, there's a force majeure clause that probably says something about war. And that's exactly what's happening. And that's why they're, we're in these these situations. So there opens up the opportunity, even if you think you're protected because you have contract rates. Force Majeure, war, doesn't matter. Here's your new rate type of thing. So but the bigger piece is the trust factor, who can I trust? If I thought I was protected in a contract rate environment? Great, great. But
31:23
read it. And those contracts, as you pointed out, another great point, there's all sorts of things that float like that, you know, you've got, you've got all kinds of adjustments that happened with GRS throughout the year. So there are opportunities to make changes. But normally we see those coming, having your contract rate played with? Yes, we're both saying it just eliminates a lot of trust between the two parties. So another great show, another great halftime another day of my life spent with Doug bashing the USPS. So there's some consistency here. But more importantly, a great show. We want to thank everyone at CAP logistics for their enduring support our need as the two old men in the balcony and The Muppet Show to just complain about things every week. I want to thank all the listeners and all the viewers, all the people that stopped me at my seminars and asked me for a picture, Doug, if you can believe that. Because, yes, yes. We want to thank them all. And thank you for telling your friends to watch. But more importantly, thank all of you. And remember we back next week with another episode because it's happening and global trade. global logistics for the economy. We're talking about right back over trade this week. Looks like
32:29
Okay, thanks, everybody. Have a good day.
Transcribed by https://otter.ai