Global Trade This Week – July 5th, 2023
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Keenan Brugh 0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Pete Mento 0:09
Hello everyone, and welcome to global trade. This week. I Pete manto and as me as me with always with me as always is, it's my very youngest actually dressed. I gotta tell you, you're looking pretty. Really pretty snazzy there, buddy. Yeah, we bought the razzle dazzle today with with a hoodie. Doug Graber looking good, pal.
Doug Draper 0:39
Thanks, man. Yeah, we flipped usually I'm in the the collared shirt, and you're rocking a black T shirt and a baseball cap. So something has changed in your life, which we'll discuss a little bit later on in the show.
Pete Mento 0:55
My friend? Yeah, yeah. But given how we have a pretty, pretty big far reaching topic. For the first topic, we're gonna, as we do from time to time, tag team it. So let you get started on this first topic, my friend. All right.
Doug Draper 1:11
Well, the big tag team is like 2020 threes turning into the year of the Union. Right. So we've talked a little bit about the UPS thing, which we'll expand upon. But the one thing that caught my attention, just the last couple of days is yellow freight, and a little bit of the chaos. It's been under the radar a little bit Pete. And the press has been there. But it's almost like the potential of what's happening is monumental for domestic transportation in the LTL market, but it doesn't seem to be getting that much attention. Anyway, it's so yellow, is having some challenges with their union. And it's pretty much at a at a standoff, right? So yellow, yellow is the holding company for YRC and roadway and all the other entities that they're they're part a five and a half billion dollar revenue about 20,000 employees. And so the gist is, is that yellow says, Listen, we're running out of money we need to do well, let me back up. They've talked about doing some some system changes, which consists of consolidating operations and closing terminals and redefining work rules. And they're doing that in in in two phases to help curb costs and get the get things back in back on line, phase one was kind of the West Coast that's been complete. And everything else and phase two is taking that same mentality to the East Coast. Now, when I say east coast, not just the coast itself, but the eastern half of the United States. That represents 70% of all of the revenues and the workforce. And everybody's like, nope, the union is basically saying, we're not going to deal with it since 2008, we've given up billions of dollars in wages, different concessions with pension, and benefits. And we're not budging. And then yellow, saying, Hey, we're gonna be like out of money by the middle of July, unless these changes happen. And so yellow, just wrote a letter to Biden, and basically is asked the US government to step in and force the union to come back to the negotiating table to come up with with a resolution. So fact that yellow, and when I'm talking about the beginning of my comments, Pete is that catastrophic is probably too too strong of a word. But if yellow is truly in a position, they're going to run out of money, and there's going to be dramatic system changes by the middle of July. That's bad news now, is the capacity in the LTL market to absorb in my opinion, there is just for a lot of the reasons that we spoken about. But you take competition out of the mix, and rates are gonna go up. And there's probably a little bit of a panic, I'm not directly involved with sourcing LTL transportation right now, but there's probably a little bit of a panic going on. And so I was thinking to myself beat that. If you're in the LTL industry, and part of your compensation plan is based on commissions or performance, and you're an LTL company that's not called Yellow, you're probably going to have a pretty good third quarter. Because even if things get worked out, between the union negotiations, there are going to be customers that are hedging their bets because of experiences with COVID that they're not going to have all their eggs in one basket. And so there's going to be a lot of freight and business that's going to migrate away from yellow into other companies coffers, and it's going to benefit those guys but It'll be interesting to see if yellows just calling the bluff of running out of cash. I'm not financially savvy enough, I'm not read any of their, their their financial statements. This is just some sales guy in Denver given his two cents, but it's going to be interesting. We'll see if it's just another play and Biden's gonna step in and the government to force negotiations or not. So anyway, I don't know what's your take on all that?
Pete Mento 5:26
How bad are things you got to ask the government to step in? You're like, why don't we do? I don't know. Let's call the government. Yeah, I mean, I got a lot to say about this. This is this is sort of a perfect storm of, of labor stuff. We've got Canada right now you got the West Coast port strike in Canada, you call it a strike, because they're not calling it a strike. But there is there's work disruptions that are happening in Vancouver right now that are associated with a demand by their their port laborers, for a change to their contracts. A bit of a different environment for them in that Canada is very pro labor, very pro union. And that was on some calls last week with clients, where they were asking my opinion, they said, so, you know, first of all, do you think that we're gonna see some action therapists? Absolutely. I mean, this is Canada, baby. But they're there, they're not going to hold back, you know. And then second of all, that, I think we're gonna see some some sympathy actions by the West Coast ports in the USA, probably not for because President Biden's told both these guys don't act like knuckleheads, you know, the management in the West Coast, as well as the port, port workers. And then you've also, along with the folks at yellow, Doug, you've got the UPS, the UPS workers who have broken off negotiations with the management. So you've got the Teamsters, the UPS management that have walked away from the table. And man, they're, I mean, the rhetoric that's going on there, they're just like, you put us in a situation where people were risking their lives during what was a very dangerous time for them. People lost their lives. People were keeping the world's economy moving, and it's time for you to pay up. So we're in the middle of the beginning of July right now. So this is not necessarily the busiest time for E commerce, but it's going to hurt. Come August and get back to school coming. People get their clothes showing up for the kids that go back to school. This is a tough time you think about it. You've got a major LTL provider, you've got one of the most important West Coast ports and now you've got arguably the most important e commerce provider all wrapped up in the woods. Doug, you brought a topic. I think it was probably in the wintertime right when FedEx was around knocking on doors saying you might want to get some REITs put in place because a FedEx really does come to strike. You're out of luck, kid. We're gonna we're gonna make you pay. So why don't you put them in place now people like, I don't know, man. I bet they're wishing they had now because it's starting to look like this is going to come home to roost. This like you said it's the year labor 2023 is turning out to be the year labor and they're getting a while the getting's good, because I think we're going to forget pretty soon with with the corporate earnings statements, and as such, we're going to start to forget how much money these companies made with these negative earnings statements, and it's going to be harder to negotiate.
Doug Draper 8:36
Yeah, yeah, I agree. It's, it's funny. I'm just waiting for you got planes. Or excuse me, you got you got all the modes of transportation except for the airlines in the aircraft. So we'll have to see how that transpires. But and it's, it's, they're all happening right now. Right. And coincidentally, all before things are getting put into place for q4 and back to school, like you said, so it'll be an interesting July, for sure. Yeah, so I don't think we've ever gone from one topic into halftime as fast as we just did, Pete, but we're busy. It's a short week with the holidays. So believe it or not, we are already at our halftime presented and sponsored by CAP logistics. Please visit cap logistics.com You and I wouldn't be here. I wouldn't be in this three by three box talking to you without their support. So please visit cap logistics.com All right. So Pete, you tell me you got big news. You can go for you. You want to go before first or last?
Pete Mento 9:42
I'll go last before we do have time decay about Happy Birthday America. Oh, good. Yeah, happy birthday. Happy Birthday America. Yeah. So that real quick, right? Yeah. Happy Birthday America. We're coming up on 250 years. You're looking Little girl, America. What's that? You go ahead and go first.
Doug Draper 10:06
All right. Well, in classic American fashion, I wanted to talk about the world's largest gas station that was just opened up this past weekend. Now buches spelled b u c, comma e. Yeah. I have not heard of them and I always thought it was a why. But I'm starting to understand why people are so excited. So several year SCV i e r Ville helped me pronounce that several Bill though, VA. Anyway, it's in Tennessee, it's just outside of Knoxville. And it is the world's largest gas station. 74,000 feet is the footprint 120 gas pumps that's in that's I can't even imagine that you saw some pictures. 350 employees never closes. I mean, they're selling and service and pretty much anything that you can think of. During one of the the videos I looked at apparently, barbecue is a big deal. So they have their own pitmaster in the store, cutting up barbecue and the whole whole nine yards. And they're opening one in Texas and obviously everything is bigger in Texas and that one is going to be 75,000 square feet. So bucklins was started in Texas. Everybody's heard about him there primarily in the south being out in Colorado. I had never really heard of him before. I'm a cutie. I'm a quick trip fan. But buches whole My God when I saw that, super impressive. And of course, bigger is better down south and Texas is going to come with the the world's largest ones sooner than later. So anyway, I thought that was pretty cool. And had to bring it up.
Pete Mento 11:58
There are 30 I just looked at our 34 buches in Texas done. All right, they are glorious. They are. It's one of those things, right? Where there are so many things about being a Texan that I am proud of. There are a lot of things I'm not proud of as a Texan. But I am very proud of buches. And it's sad that one of the things I have to be proud of is where we go to take a leak when we're on the road and get gas. But things about bikinis that rock, the cleanest bathrooms. And I know that sounds like a strange thing. But Doug, I'm telling you, man, the cleanest gas station bathrooms you will ever see. So there are people who whose job it is in bikinis to keep them clean. And these are men and women who take it seriously. And because we're Texans, and we're not jerks, we treat these people with respect. So, you know, it's just it's just folks that work full time that are in there keeping it spec spotless, just spotless, and it's wonderful. The jerky and it's like everything from ostrich Shirky to bison jerky that cater jerky. It's on point. It's wonderful. And every little doodad and crappy little thing you'd ever want. They've got it. They're like just just crap. The coldest, fountain drinks, and it's one of the few places where you can get Dr. Pepper zero. Drink. It's just it is like the most Texan crap buches I have actually planned my road trips to get from like Dallas to Houston, or Dallas to Texarkana or whatever. Or in New Orleans. I've actually planned my routes in order to maximize the number of buckets. Yeah, even though it might take an extra hour. Yeah, well,
Doug Draper 14:00
one of the things that they said one of the statistics is that people will drive up to 17 at least the one that I saw up to 17 minutes out of the way, so they can refill and rejuvenate and a buches So Pete, here's the here's the most important thing. clean bathrooms totally get that. What type of ice do they have it buches is the cracker.
Pete Mento 14:21
The Cracker ice
Speaker 3 14:22
Go, okay, cool. Good. Yeah, good, good.
Pete Mento 14:26
It's awesome. Now if you could have bikinis and water burger in the same place, I would be the happiest guy ever. Those are two of my absolute favorite things. And my buddy Hector Estrada, who's Reshma listens to the show. And he's taught me that there's like a secret water burger menu. It can only be ordered in Spanish, but some of the best late night drunk as hell times I've ever had some of the best meals ever kept an order on the secret menu, but Unbelievable. Unbelievable. Duck. Yeah. buches is the greenest? So, please Coloradans all of you. Moving to Texas, please don't ruin buches Please don't ruin buches Californians. Please don't ruin buches I'm begging you. Please don't run but you're already ruining water burger. You're doing it. You tried to turn it into In and Out Burger, which is trash. Please do not ruin buches. I'm begging you.
Doug Draper 15:26
Right? Hey, let me get a quick cassava Anita update in and then we'll end with your important information. So first customers are in, I think it was June 30. The feedback is food is good entertainment is good. I saw somebody referred to it as the Willy Wonka golden ticket moment for her. But the thing is, Pete, it's still gonna be invitation only you gotta get on their email list. So Miguel walk ins like you and I just want to go there. That's still months now. I would think it's post labor day before the hype settles down. But it is a officially open. It's limited hours, but there are people moving through the line with their tray, as if they're moving through the cafeteria. So anyway, it's good. It's open.
Pete Mento 16:18
For the last time done. We're people who know people we are. We are minor. D league celebrities. Can someone do something about this?
Doug Draper 16:29
Yeah. Yeah. Well, yes. Somebody out there. Get us in there. Get us a back room. Kenan said he could bring in his an equipment and we could run a show from from Pasadena. So we'll, we'll figure it out. All right. Okay. All right, Pete. So this is it. You got some big news for everybody?
Pete Mento 16:47
I do I do. So I've started a new job. I am pretty excited to do it. It's pretty big deal. It's actually a very big deal. So in the vein of winning LeBron James left the Cleveland Cavaliers I have I'm excited to say that I'm I'm taking my talents to DSP. You like that?
Doug Draper 17:15
I do. Perfect.
Pete Mento 17:17
Yeah, I'm taking my talents to DSP. I am going to be in charge of commercial, commercial, kind of what I would say operations, but activities regarding international trade and customs. And I'm very excited. So if you're going to be interacting with us with regards to customs, it's all thing. Duty minimization, recovery, and international trade activities. I'm your guy. So pretty much looking forward to that and having 75,000 of my brothers and sisters behind me 80 countries around the world and working with the second largest freight forwarder on planet Earth. And this is a pretty big deal for me and it's like coming home. I am the first freight forwarder ever worked for Douglas panel. Pina. I was paid a panel Pina and now unpeated DSP. So 25 years later, I guess, back where I started. So excited to be here. And I'll be seeing all of you out there, waving the flag for the dance. So
Doug Draper 18:24
I could just just in the time that we're getting set up your feet, you got a little swagger and your staff little twinkle in your eye, you're back in your element doing freight forwarding and normal bit. So congratulations. That's great.
Pete Mento 18:36
That's pretty exciting stuff, man. So good. Good. All right. Yeah. So let's, let's get the second half here.
Doug Draper 18:43
All right. Well, this relates to, to your new employer and cap logistics to some degree because they specialize in some of this cargo. But there are new. So we've talked about parcel LTL, and ocean. So this is the segment where we talk about air freight. So there's some new security rules now that we're in third quarter. Because this is happening at October, November, no, I guess, after the first month, first part of fourth quarter anyway, new security rules for air cargo screening take effect on November 1, or the lack of rules. And on October 31. So basically, back in June of 21, the TSA mandated that all air cargo that was originating from the United States and destined to non US locations needed to be screened before loading on the aircraft. That's not a new topic. Everybody's been talking about that. But the cargo that couldn't be screened because of size or weight or volume. It was impractical. And so they pretty much got to pass and now the pass is being revoked. Effective November 1, and I was looking at the air freight borders Association, a website. And they were saying there's really three options out there. So what do you do now you have three options, you can join one of the TSA is authorized security programs, where they would essentially go in and give you the authority after an inspection to say that you can do your own free cleaning, related how you package thing up. So that would be, you know, manufacturers, assemblers, things of that nature. Option two is you can ship everything, ocean, keep it out of the air and keep an eye on the water or option three is you just don't ship. They're saying that these rules are a hard line, they're not going to change. And so there is an extreme sense of urgency to be prepared. Whether you're a forwarder, a manufacturer assembler, your world could be turned upside down in less than three or four months. So I think we need to take note, but here's my take on this, Pete, is that I think I've used this term before is that, you know, rules are really important to follow until they're no longer convenient. So if you're the United States government, and you're contracting with a third party to move some massive piece of equipment for the well being and the security the United States, and you're not set up, I bet you'll probably get another pass or a deferment. So we'll have to see they're saying it's a hard line. But when push comes to shove, and something really important needs to be moved, or the US government or some other entity that has national security, I bet there's going to be some anyway. But who knows. So so we'll see that the concept of prescribing trade is not new, pre screening, oversize, and how to gauge the past is over the gigs up. And we'll see how things transpire. So, now that you're in the 14 rack and again, Pete, what what's your thoughts on all this? And DSPs? Take if you have one?
Pete Mento 22:05
I don't know if DSPs tape but let me start by saying this done. If you can't follow the screening regulations, no soup for you. All right, this is about most most air cargo goes on passenger aircraft. Right. And if it doesn't, it's going to cargo aircraft, which if something goes wrong, can fall out of the scale where people live. Sorry. And I highly doubt that even government cargo is going to find some sort of dispensation in the eyes of whatever military or project cargo This is. This is it's gotten to the point now, it's ridiculous that we've waited too long. Enough is enough. If we're serious about security, we have to do the secure thing. And it's easy for somebody who works for a big massive player to talk that way. But you gotta you gotta do the right thing. No matter how big or small you are.
Doug Draper 22:58
Yeah, sorry. We'll see. I think they'll probably be some a lot of news as this comes down with, it seems like a long way out Halloween seems like a really far. It's not. It's not, you know, I don't even know how many days it is, but it's gonna hop on it's
Pete Mento 23:15
time to buy equipment, train people, informed clients of the requirements. I mean, it's not enough time. And but the thing is, we should have been preparing for it as a business for quite some time. No soup for you. All right. I'm gonna, I'm gonna pull a audible on my last topic,
Doug Draper 23:33
do it. That's that's the beauty of this show is that we don't prepare anything. We just kind of wing it. So go
Pete Mento 23:39
for breaking news, Doug. The Port of Nagoya in Japan was hit with a ransomware attack today. And port operations and container operations were stopped. This marks the first time publicly that a container operations port was publicly that we know of hit with a cyber attack. It is 10% of all of the cargo leaving Japan leaves to the port of Tokyo of Nagoya. More importantly, almost all of Toyota's freight goes technically. So we've been saying for a long time some of this was going to happen. happened today. We don't know if they paid it. We do know that it's not operating. And this will not be the last time it happened. Yeah, but imagine buddy, one of the most important global ports on planet Earth. It's a top 10 port. Yeah, got hit and shut down today. Oh, wow. Breaking news, global trade this week. Breaking news. I've got three sources. So
Doug Draper 24:51
well, the things that come to mind on that piece one, their reaction is going to be super important. It's going to set the tone of how other entities, regardless of country, are going to be handling something like this. Because like you said, whether we have known about it or not something maybe not to this degree has happened. So how they mean? Are they going to pay it? Are they going to pound? Are they going to pound the pound sand? Or or what else? The interesting. And the other piece is the fact that you just said Toyota, right? With so much product coming in and out of there. It'll be interesting to see what that does to the auto industry specifically with Toyota if they're going to minimize it and just say, Oh, it's no big deal, or if we're going to see the ripple effects of that. Those are two things that
Pete Mento 25:35
deal. Pete phone's going nuts right now. Yeah, it's such a big deal. It's a big deal. We'll have to see. Anyway, Dad, take us out.
Doug Draper 25:50
All right. Well, that's it. It's a short week. It's a short episode. I'm looking at my clock here. 25 minutes is where we are usually you and I, Pete pushed like 35 minutes. So short week, short show. Super excited. I seriously, you're the twinkle in your IP. Don't read too much into that terminology. But you're, you're in your element. I'm glad you're somewhere in the lovely state of New Jersey. So look forward to your successes. And this speaking of successes, this show would not be one without kept logistics. So we want to thank them for putting this all together. And again, everybody, happy Fourth of July. And I think that's it for this week. So we will leave you with that. Take care of my
Pete Mento 26:35
friends. Thanks. Bye, everybody.
Transcribed by https://otter.ai