General Rate Increases for 2019

From Intelligent Audit: UPS & FED EX rates rising about 6% overall in 2019

As we round out 2018 and head towards the new year, we felt it was important to make sure you were fully up-to-date on the latest General Rate Increases for 2019. Below you will find a detailed overview of these changes for both UPS and FedEx.

UPS

Coming in at the tail end of the year, UPS has recently announced their General Rate Increase for 2019. For most shippers, this is usually short notice for such an announcement - we don't you want to be caught off guard. 

Here's a high level overview, followed by some more in-depth information:

  • Nearly 5% (on average) increase rate for ground/air international services (starting 12/26)

  • Fuel surcharges will apply to Additional Handling, Over Maximum Limits, Signature, and Audit Signature Required... among others

  • Not-yet-announced fuel surcharge increase, to be detailed on 12/27

  • Processing fee will be applied when Package Level Detail is not provided

  • Significant increases to lightweight SurePost

  • Express and Ground minimum increases ranging from 3.7% to 10.08%

Minimum Net Charge 2019 Rates:

  • Next Day Air: $29.47 (5.36% increase)

  • Next Day Air Saver: $27.32 (5.44% increase)

  • 2 Day: $18.40 (4.01% increase)

  • 3 Day: $11.23 (4.47% increase)

  • Ground: $7.85 (3.70% increase)

  • SurePost (>1lb): $8.52 (10.08% increase)

  • SurePost (<1lb): $8.46 (9.87% increase)

Surcharge Rates for 2019:

  • Over Maximum Limits: $700 (40% increase)

  • Additional Handling, Weight (Over 70lbs): $23.00 (21.05% increase)

  • Additional Handling, Length: $14.25 (18.75% increase)

  • Additional Handling, Width: $14.25 (18.75% increase)

  • Additional Handling, Packaging: $14.25 (18.75% increase)

  • Large Package Surcharge, Commercial: $95.00 (18.75% increase)

  • Large Package Surcharge, Residential: $115.00 (27.78% increase)

  • COD: $14.50 (7.41% increase)

  • Ground Weekly Pickup (>$75/Week): $13.50 (8.00% increase)

  • Ground Weekly Pickup (<$75/Week): $27.00 (8.00% increase)

  • Address Correction: $16.40 (3.14% increase)

  • Delivery Area Surcharge, Commercial Ground: $2.80 (7.69% increase)

  • Delivery Area Surcharge, Commercial Air: $2.95 (7.27% increase)

  • Delivery Area Surcharge, Commercial Ground Extended: $2.80 (7.69% increase)

  • Delivery Area Surcharge, Commercial Air Extended: $2.95 (7.27% increase)

  • Delivery Area Surcharge, Residential Ground: $3.80 (8.57% increase)

  • Hazardous Materials, Air, Accessible Goods: $53.00 (10.42% increase)

  • Delivery Area Surcharge, Residential Air: $4.35 (7.41% increase)

  • Delivery Area Surcharge, Residential Ground Extended: $4.85 (8.99% increase)

  • Delivery Area Surcharge, Residential Air Extended: $4.85 (8.99% increase)

  • Residential Surcharge, Ground: $3.95 (9.72% increase)

  • Residential Surcharge, Air: $4.55 (9.64% increase)

  • Hazardous Materials, Air, Inaccessible Goods: $49.00 (5.38% increase)

  • Hazardous Materials, Ground: $35.00 (6.06% increase)

  • Dry Ice: $5.55 (5.71% increase)

  • Delivery Confirmation Signature Required: $5.00 (5.26% increase)

  • Delivery Confirmation Signature Required, Adult: $6.05 (5.22% increase)

  • Third Party Billing Fee: $4.50 (80.00% increase)

FedEx

In early November, FedEx also announced its General Rate Increases for 2019. 

Minimum Rate Increases:

  • Priority Overnight Letter: $24.40 (5.40% increase)

  • Priority Overnight: $29.18 (5.38% increase)

  • Standard Overnight Letter: $23.94 (5.00% increase)

  • Standard Overnight: $27.18 (5.39% increase)

  • 2 Day: $18.22 (4.00% increase)

  • Express Saver: $16.07 (4.01% increase)

  • Ground/Home Delivery: $7.85 (3.56% increase)

Surcharge Rates 2019:

  • Print Return Label, US Express and Ground: $1.00 (100% increase)

  • Oversize Charge: $90.00 (12.50% increase)

  • Additional Handling, US Express and Ground (Dimension): $13.50 (12.50% increase)

  • Delivery Area Surcharge, SmartPost: $1.40 (7.69% increase)

  • Ground Weekly Pick Up (>$75/week): $14.50 (7.41% increase)

  • COD: $14.50 (7.41% increase)

  • Address Correction: $16.00 (6.67% increase)

  • Hazardous Materials, Ground: $35.00 (6.06% increase)

  • Residential Surcharge, Ground: $4.40 (6.02% increase)

  • Residential Surcharge, US Express and Ground: $4.40 (6.02% increase)

  • Delivery Area Surcharge, Extended, Ground: $2.70 (5.88% increase)

  • Delivery Area Surcharge, Home Delivery: $3.65 (5.80% increase)

  • Dangerous Goods, Dry Ice: $5.55 (5.71% increase)

  • Delivery Area Surcharge, Extended, US Express Residential: $4.65 (5.68% increase)

  • Delivery Area Surcharge, Extended, Ground Residential: $4.65 (5.68% increase)

  • Delivery Area Surcharge, Extended, US Express: $2.85 (5.56% increase)

  • Residential Surcharge, Home Delivery: $3.80 (5.56% increase)

  • Dangerous Goods, Accessible, First Overnight, Priority Overnight: $98.00 (5.38% increase)

  • Dangerous Goods, Inaccessible, US Express: $49.00 (5.38% increase)

  • Direct Signature: $5.00 (5.26% increase)

  • Adult Signature: $6.05 (5.22% increase)

  • Non-Machinable, SmartPost: $3.05 (5.17% increase)

  • Dangerous Goods, Accessible, International: $153.50 (5.14% increase)  

  • Delivery Area Surcharge, Express Residential: $4.20 (5.00% increase)  

  • Delivery Area Surcharge, Ground Residential: $4.20 (5.00% increase)  

  • Dangerous Goods, Inaccessible, International: $75.50 (4.86% increase)

THE EMPLOYMENT SITUATION — NOVEMBER 2018

Released by the US Bureau of Labor Statistics on Friday, December 7, 2018

Total nonfarm payroll employment increased by 155,000 in November, and the unemployment rate remained unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in manufacturing, and in transportation and warehousing.

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Household Survey Data

In November, the unemployment rate was 3.7 percent for the third month in a row, and the number of unemployed persons was little changed at 6.0 million. Over the year, the unemployment rate and the number of unemployed persons declined by 0.4 percentage point and 641,000, respectively.

Among the major worker groups, the unemployment rates for adult men (3.3 percent), adult women (3.4 percent), teenagers (12.0 percent), Whites (3.4 percent), Blacks (5.9 percent), Asians (2.7 percent), and Hispanics (4.5 percent) showed little or no change in November.

The number of long-term unemployed (those jobless for 27 weeks or more) declined by 120,000 to 1.3 million in November. These individuals accounted for 20.8 percent of the unemployed.

Both the labor force participation rate, at 62.9 percent, and the employment-population ratio, at 60.6 percent, were unchanged in November.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.8 million, changed little in November. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In November, 1.7 million persons were marginally attached to the labor force, an increase of 197,000 from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 453,000 discouraged workers in November, essentially unchanged from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.2 million persons marginally attached to the labor force in November had not searched for work for reasons such as school attendance or family responsibilities.

Establishment Survey Data

Total nonfarm payroll employment increased by 155,000 in November, compared with an average monthly gain of 209,000 over the prior 12 months. In November, job gains occurred in health care, in manufacturing, and in transportation and warehousing.

Health care employment rose by 32,000 in November. Within the industry, job gains occurred in ambulatory health care services (+19,000) and hospitals (+13,000). Over the year, health care has added 328,000 jobs.

In November, manufacturing added 27,000 jobs, with increases in chemicals (+6,000) and primary metals (+3,000). Manufacturing employment has increased by 288,000 over the year, largely in durable goods industries.

Employment in transportation and warehousing rose by 25,000 in November. Job gains occurred in couriers and messengers (+10,000) and in warehousing and storage (+6,000). Over the year, transportation and warehousing has added 192,000 jobs.

In November, employment in professional and business services continued on an upward trend (+32,000). The industry has added 561,000 jobs over the year.

Retail trade employment changed little in November (+18,000). Job growth occurred in general merchandise stores (+39,000) and miscellaneous store retailers (+10,000). These gains were offset, in part, by declines in clothing and clothing accessories stores (-14,000); electronics and appliance stores (-11,000); and sporting goods, hobby, and book stores (-11,000).

Employment in other major industries—including mining, construction, wholesale trade, information, financial activities, leisure and hospitality, and government—showed little change over the month.

The average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour to 34.4 hours in November. In manufacturing, both the workweek and overtime were unchanged (40.8 hours and 3.5 hours, respectively). The average workweek for production and nonsupervisory employees on private nonfarm payrolls held at 33.7 hours.

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $27.35. Over the year, average hourly earnings have increased by 81 cents, or 3.1 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.95 in November.

The change in total nonfarm payroll employment for October was revised down from +250,000 to +237,000, and the change for September was revised up from +118,000 to +119,000. With these revisions, employment gains in September and October combined were 12,000 less than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 170,000 per month over the last 3 months.

Significant Southern Storm to Produce Heavy Rain as well as Areas of Heavy Snow and Ice

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From the NWS Weather Prediction Center in College Park, Maryland, at 130AM EST on Fri Dec 7 2018
Valid 12Z Fri Dec 7 2018 - 12Z Sun Dec 9 2018

Winter storm to bring ice and snow from the southern plains to the Appalachians, and heavy rain from eastern Texas to Georgia... A strong storm system crossing the Desert Southwest early Friday morning will take a southerly track across the southern plains to the Deep South and then the southeast U.S. coast through the weekend. Snow and freezing rain is forecast to overspread eastern New Mexico and the Texas/Oklahoma panhandles by late Friday, and continuing into early Saturday. The greatest snowfall accumulations through early Saturday are expected across the southern High Plains from eastern New Mexico and across parts of the Texas Panhandle, with amounts on the order of 3 to 6 inches and locally higher. In addition, ice accretion of about a tenth of an inch, perhaps higher, will be possible on the southern edge of the heavier snow band, roughly from Lubbock to Oklahoma City.

In the warm sector of the surface low, heavy rain is forecast across southeast Texas in response to a deep surge of moisture from the Gulf of Mexico. The Weather Prediction Center currently has a Moderate Risk of excessive rainfall for Friday and Friday night for much of southeast Texas, with several inches of rainfall expected. The rainfall rates are expected to be high at times, increasing the threat of flooding. Flash flood watches are also in effect for this region.

A slight risk of excessive rainfall exists through Saturday night for the central Gulf Coast region as heavy bands of showers and thunderstorms develop in conjunction with the surface low and a deep moisture surge ahead of it. As the surface low tracks eastward roughly along the Gulf Coast through late Sunday, a swath of accumulating snow and ice is expected to extend from eastern Oklahoma to the southern Appalachians.

Winter storm watches are now in effect from the Texas Panhandle to the Ozarks of northern Arkansas, and also for the southern Appalachians and adjacent Piedmont region. Travel will likely be severely affected across much of these areas, and some power outages are also possible. Elsewhere across the nation, some lake effect snow is likely across parts of Michigan and New York for Friday and Saturday as cold northwesterly flow crosses the warmer lake waters. Showers and mountain snow returns to western Washington and Oregon on Saturday as a cold front approaches from the eastern Pacific. Colder than normal temperatures are expected to persist across much of the central and northern U.S. through Saturday with a large Canadian surface high in place.

THE LATEST IN THE US/CHINA TRADE WAR DRAMA & THE GLOBAL SUPPLY CHAIN

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From Intelligent Audit on December 5, 2018

At the G20 Summit in Argentina, a huge announcement was made – a “pause” was put on the ongoing trade war between China and the United States.

The big concession by the Chinese government is that they will reduce the existing 40% tariff on automobiles and, potentially, remove it. According to Economic Advisor to the President, Larry Kudlow, “We expect those tariffs to go to zero.”

This latest act of the on-going drama between the administration of Donald Trump and the Chinese Government of Xi Jinping has brought about a collective sigh of relief from markets and the public at large.

Here’s a timeline of how we got to this point:

  • January: Initial “Safeguard Tariffs” on washing machines and solar panels are imposed to the tune of nearly $10 billion

  • February: China investigates its first response to Trump’s tariffs – $1 billion on US exports of Sorghum

  • March: US imposes a 25% tariff on steel imports and 10% on aluminum imports

  • April: China imposes a 15-25% on 128 products totalling $3 billion

  • April: China officially announces a 180% duty on imports of sorghum

  • May: China ends sorghum tariffs in an effort to promote negotiations to end the trade war

  • May: US and China pause trade war to help negotiations as China agrees to buy more US goods

  • May: US reinstates tariffs

  • June: Trump administration puts a 25% tariff on $50 billion of Chinese goods, China retaliates with similar measures

  • September: US announces a 10% tariff on $200 billion of Chinese goods, with to up that rate to 25% in 2019. There are threats to add $267 billion more if there is retaliation

  • September: China retailiates with tariffs on $60 billion in US goods

  • November: Wider tariffs on $200 billion in Chinese goods are threatned

And now, after the cooling of the trade war that began on December 2nd, President Trump has stated that China has indicated to his administration that they plan to get rid of tariffs on American cars – a significant step.

The question is, what happens next and what does it mean for the US economy?

What Happens Next?

This is not the first time in the last year that, for a brief moment, it looked like the trade war might be behind us – it happened back in May and lasted just about a month.

Is this “detente” a flash in the pan, or the beginnings of a robust trade deal that will be more favorable to the United States, as has been promised by the administration? There’s no way to know for sure.

However, if this pause fails in completely ending the trade war, we’re likely to see additional tariffs from both sides – benefitting neither.

What Effects Does this have on Supply Chains?

Trade tensions have always been a source of great concern when it comes to their impact on global supply chains, and this trade war of 2018 is no exception.

The concept of a supply chain means that each link in that chain is inexorably linked to the next; a disruption in one affects the entire chain.

Here’s a stunning statistic: supply chain disruptions can account for up to 80% of the potential impact on growth.

The most obvious impact on companies is the increased costs they incur; most often these costs end up getting passed off to customers. In addition, the unknowns of where this trade war goes makes forecasting for the future nearly impossible.

What Does This Mean for the US Economy?

The potential for completely getting rid of auto tariffs would be a huge coup for the Trump Administration.

The United States currently exports nearly $10 billion automobiles, which is a huge increase from the $8.5 billion in 2016 – even with the tariffs. A 0% tariff on automobiles could be a major boon for the US economy.

The optimistic take on this latest announcement is that it’s the first step towards a larger trade deal that would significantly lessen the tension between two of the largest economies on earth. If the Trump administration were able to negotiate a new, wide-ranging trade deal with China, it could give the US economy the kind of shot in the arm it needs to get back to the sustained growth it was seeing earlier in 2018.

Marriott and SF hotel workers reach agreement to end strike

 Marriott-affiliated hotel and hospitality workers strike outside of the Marriott Marquis hotel Saturday, Oct. 20, 2018 in San Francisco, Calif. before taking the streets in a massive march. Photo: Jessica Christian / The San Francisco Chronicle

Marriott-affiliated hotel and hospitality workers strike outside of the Marriott Marquis hotel Saturday, Oct. 20, 2018 in San Francisco, Calif. before taking the streets in a massive march. Photo: Jessica Christian / The San Francisco Chronicle

by Roland Li for the San Francisco Chronicle on Dec. 3, 2018

Striking hotel workers said they reached a contract agreement with Marriott on Monday to end the city’s largest hotel strike in decades.

The strike, which began on Oct. 4, spanned seven San Francisco hotels operated by Marriott and had reached its third month. Almost 2,500 workers marched outside the hotels, demanding higher pay, lighter workloads and preservation of existing health benefits.

Workers were set to vote to ratify the agreement on Monday, and if it passes, they would return to work on Wednesday, said Anand Singh, president of Unite Here Local 2, which represents hotel workers.

Details of the settlement weren’t immediately available. “We think it meets all of our goals and expectations,” Singh said. “This immediately sets the standard for hotel workers in this city.”

Six other locations also had Marriott strikes and reached labor agreements in the past few weeks: Oakland, San Jose, Detroit, Boston, Maui and Oahu.

The San Francisco strike encompassed some of the city’s largest hotels, including the Courtyard Marriott Downtown, the Marriott Marquis, the Marriott Union Square, the Palace Hotel, the St. Regis, the W, and the Westin St. Francis.

Events organized by the Communications Network, Shanti Project, Chicana Latina Foundation, Bay Area Wilderness Training and others moved out of Marriott hotels in solidarity with the workers.

Marriott bused in temporary workers from hours away to keep hotels running. Some temporary workers alleged they weren’t paid on time and were fired to in retaliation for speaking to union leaders. Complaints have been filed with federal and state regulators.

"We can confirm we have a tentative agreement. We look forward to welcoming our associates back to work," said a Marriott spokesman.

How was 2018 for container shipping? That depends.

by Gary Ferrulli, CEO, Global Logistics & Transport Consulting, for JOC.com on Dec 03, 2018 3:06PM EST

The year 2018 came into the ocean carrier’s world like a sacrificial lamb, first-quarter results showing significant losses primarily because of the failure of carriers to charge for rising fuel costs. They continued the error by extending the no-fuel surcharges to many favored shippers in the 2018-2019 trans-Pacific service contracts.

In the third quarter, carriers began to evoke some fuel surcharges, started controlling capacity, and raised spot market rates to more than $2,500 per FEU to the US West Coast and over $3,400 per FEU to the East Coast.

While those rates are what they rarely are — full cost recovery plus — they still don’t apply to most of the freight on relatively full vessels; those are protected by the “friendly” service contracts.

Recent available financial reports indicate there has been some improvement in the carriers’ bottom lines, with some still losing money albeit at lesser amounts and some reporting profits. While we generally focus on the trans-Pacific and tend here to forget the other major trades in the Asia-Europe market, the carriers not only didn’t capture the fuel increases during the first half of the year, they didn’t manage capacity in the same way as in the trans-Pacific and their spot rates decreased, not increased.

There were actions to manage capacity in the past few weeks, but the horse left the barn months ago. And container lines have already announced the return of withdrawn capacity for December.

This offers an interesting view of the same carriers in two different marketplaces taking different routes, one trying to rescue what was turning into a financial disaster into a modicum of success, the other ignoring virtually the same conditions and dragging down the gains in the trans-Pacific. It makes you wonder about the decision-making processes of carriers.

According to Drewry and other industry experts, the industry for 2018 will end up at a slight loss; Drewry says about $200,000. This follows 2017, which was the first year of profitability since 2010. The anticipated year-end losses are better than expected though after the poor results of the first and second quarters.

There will be losses by HMM, Ocean Network Express, and Yang Ming; for those who pay close attention, look at the details of the Cosco Shipping report with several notes on subsidies being injected into the profit and loss stream.

While these events took place, so did the continuation of deteriorating services, with recent reports on reliability hitting 40 percent for some, with a high of only 72 percent. Some of that is the result of the heavy trans-Pacific utilization and the relatively poor terminal productivity on the US West Coast impacting the entire system, with no increased vessel speeds to make up some of the lost time owing to high fuel costs with little recovery in place.

2018 — the year of blockchain

The other significant events relate to the push for advanced technology, with some carriers reaching to provide end-to-end services. On the technology side, the issue of blockchain was beginning to be better understood — it isn’t the silver bullet to solve all supply chain or container shipping ills.

And there are significant issues with the lack of standards in development, etc., and so many entities creating their own “best solution.” It is a work in progress with some difficult hurdles. Carriers have yet to address that the input will be coming from a multitude of sources, with many relying on inefficient and ineffective underlying systems to feed the “blockchain.”

I believe in five to 10 years there should be systems to cover all entities who must be involved in a complete supply chain or a complete international shipment. For those who think that is a long time to be completed, consider that the largest carrier in the world was fully digitized internally by 1996, yet we see many articles today on the requirement to digitize.   

Another work in progress is the end-to-end services some carriers desire. It’s been done before with varying degrees of success — and failure. Will this effort prove any more successful? Be patient.

From the vantage point of early December 2018, the current year will be a mixed bag of near disaster, continuing frustrations, and some glimmer of hope; it all depends on your position and perspective.

For carriers, in like a lamb and out like a … who knows? For shippers, if you had friendly service contracts, you avoided the fuel surcharges and much higher spot market rates — up to the point of your minimum quantity commitment. If not, well, you likely depended on your friendly freight forwarder, non-vessel-operating common carrier, or third-party logistics provider (3PL) and got some shocking increases along the way, with perhaps your cargo rolled a few times. All cargo was subject to the poor reliability, with high-volume service contract signatories getting better access to space and equipment.

Looking to the future, there still exists many unknowns, including the ongoing drama involving trade agreements. Agriculture exporters in the US were particularly negatively impacted in 2018; will that get better or worse? Imports are reported to be strong because of the increases in duties coming in April 2019, postponed from January 2019, as a result of the US-China 90-day ‘truce,’ but then what happens? Will the bottom drop out? Or will the negotiations mitigate the negatives?

Good News for FF&E Importers: 25% Tariffs Delayed 90 Days

The U.S. will delay a planned increase in tariffs on Chinese goods, as the two sides prepare for further negotiations.

 President Trump and administration officials attend a working dinner with Chinese President Xi Jinping in Buenos Aires. PHOTO: KEVIN LAMARQUE/REUTERS

President Trump and administration officials attend a working dinner with Chinese President Xi Jinping in Buenos Aires. PHOTO: KEVIN LAMARQUE/REUTERS

Presidents Trump and Xi Jinping met for a working dinner this weekend, resulting in a 90 day delay in the planned imposition of 25% tariff rate on many Chinese imports (currently paying a 10% additional tariff). This is good news for FF&E importers, and raises hopes that future tariffs may be avoided completely. More details below, in the statement issued by White House press secretary:

The President of the United States, Donald J. Trump, and President Xi Jinping of China, have just concluded what both have said was a “highly successful meeting” between themselves and their most senior representatives in Buenos Aires, Argentina.

Very importantly, President Xi, in a wonderful humanitarian gesture, has agreed to designate Fentanyl as a Controlled Substance, meaning that people selling Fentanyl to the United States will be subject to China’s maximum penalty under the law.

On Trade, President Trump has agreed that on January 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10% rate, and not raise it to 25% at this time. China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product from our farmers immediately.

President Trump and President Xi have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%.

It was also agreed that great progress has been made with respect to North Korea and that President Trump, together with President Xi, will strive, along with Chairman Kim Jong Un, to see a nuclear free Korean Peninsula. President Trump expressed his friendship and respect for Chairman Kim.

President Xi also stated that he is open to approving the previously unapproved Qualcomm-NXP deal should it again be presented to him.

President Trump stated: “This was an amazing and productive meeting with unlimited possibilities for both the United States and China. It is my great honor to be working with President Xi.”

Five Markets With the Most Hotel Construction

By the Staff of Lodging Magazine on November 12, 2018

Analysts at Lodging Econometrics recently reported the top five markets with the largest hotel construction pipelines for the third quarter of 2018. The number of hotel projects that are already under construction or scheduled to start construction in the next 12 months total 3,782 projects and 213,798 rooms—a high for the cycle. Reflecting the strong cyclical highs in the pipeline, Lodging Econometrics’ forecast for new hotel openings will continue to rise in 2018 through 2020.

With the exception of New York City and Houston, the other markets show that supply growth has begun to surpass demand. According to analysts at Lodging Econometrics, the variances in 2018 year-to-date are small but are certain to widen in the next two years, given the strength of these pipelines. All in all, 10 of the top 25 markets show supply growth minimally exceeding demand growth in 2018.

 1. New York City

1. New York City

 2. Dallas, Texas

2. Dallas, Texas

 3. Houston, Texas

3. Houston, Texas

 4. Los Angeles

4. Los Angeles

 5. Nashville, Tennessee

5. Nashville, Tennessee

  1. NEW YORK CITY

    The current total hotel construction pipeline for New York City is 170 projects and 29,630 rooms—the largest in the country. New York is also the market with the greatest number of projects already in the ground and scheduled to start in the next 12 months, totaling 145 hotel projects and 24,675 rooms. The city announced 12 new hotel projects totaling 1,857 rooms in the third quarter. In 2018, New York City is also expected to top the list for new hotel openings with 29 new hotels expected to open and 5,351 rooms.

  2. DALLAS

    In the third quarter, Dallas’ hotel construction pipeline stands at 157 projects/18,954 rooms. Dallas is second to New York for the most projects in the ground or scheduled to start in the next 12 months (112 projects/13,854 rooms). Following Los Angeles and Detroit, Dallas announced the third highest number of hotel projects in the third quarter—14 projects/1,529 rooms. Dallas is also expected to have the second highest number of new hotel openings in 2018, with 29 hotels totaling 3,187 rooms.

  3. HOUSTON

    With 150 projects/16,473 rooms, Houston has the third largest hotel construction pipeline among U.S. cities in the third quarter. Houston also has the third highest number of projects in the ground or scheduled to start in the next 12 months (103 projects/11,562 rooms). The city is expected to have the third highest number of hotel openings in 2018, with 27 projects and 3,259 rooms.

  4. LOS ANGELES

    With 141 projects/24,129 rooms, Los Angeles’ hotel construction pipeline is one of the largest in the country. The number of projects in the ground or scheduled to start in the next 12 months in Los Angeles stands at 92 projects and 14,249 rooms. Los Angeles added the most projects in the third quarter out of any U.S. city, announcing 22 new hotels totaling 6,457 rooms. Out of all U.S. cities, Los Angeles is expected to have the fifth highest number of hotel openings in 2018—12 projects/2,152 rooms.

  5. NASHVILLE

    Nashville currently has 115 hotel construction projects/15,179 rooms in its pipeline. The city has 88 hotel projects and 12,322 rooms that are already in the ground or scheduled to start in the next 12 months. Nashville is expected to have the fourth highest number of hotel openings in 2018 among U.S. cities—with 22 projects/3,018 rooms.

Additional Leading Markets 

In the third quarter, Detroit had the second highest number of new hotel projects added to its pipeline (18 hotels totaling 1,937 rooms ), while Atlanta had the fifth highest number of new hotel projects added to its pipeline (12 projects/1,354 rooms).

What to Expect in 2019 and 2020

In 2019, New York is expected to lead with the highest number of new hotel openings (59 projects/8,964 rooms), followed by Houston with 31 projects/3,098 rooms, and Dallas with 30 projects/3,379 rooms. In 2020, Dallas is forecast to take the lead for new hotel openings with 41 projects/4,809 rooms expected to open, followed by New York with 36 projects/5,978 rooms, and Los Angeles with 33 projects/4,292 rooms expected to open.

You Can Stay at the Actual Dirty Dancing Hotel, but it's Not in the Catskills

by MEGAN STEIN on November 12, 2018 03:30 PM for People.com

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The Catskills served as the setting for Baby and Johnny’s memorable summer in Dirty Dancing, but the Mountain Lake Lodge in Pembroke, Virginia, was the actual filming location for the resort.

And if you’ve been waiting to live out the vacation of your DD dreams we’ve got good news: the hotel is still very much open for business.

The rustic retreat opened in 1936 and boasted all of the outdoorsy charm that the location scouts were looking for (and upstate New York options lacked). While some scenes were filmed at Lake Lure, North Carolina — which also hosts a multi-day Dirty Dancing festival each year with live music, watermelon relay races and a lake lift competition — the majority of the exterior shots, including the Virginia Bungalow that the Housemans called home, took place at the Lodge.

The hotel even offers a Dirty Dancing-themed weekend package, which includes film tours, scavenger hunts and, of course, dance lessons.

If that’s not enough to convince you, the website promises this: “You will have the time of your life.” But you better act fast — there are already limited rooms remaining for the 2019 program.

California Wildfires Cause Hotel Evacuations, Freeway Closures

By Mark Madler on Friday, November 9, 2018, for the San Fernando Valley Business Journal

 Woolsey Fire Map Via Google Maps

Woolsey Fire Map Via Google Maps

Two wildfires straddling Los Angeles and Ventura counties have caused mass evacuations of homes and businesses in areas from Calabasas to Malibu. 

The Woolsey Fire and Hill Fire both broke out Thursday afternoon. 

The Woolsey Fire is the larger of the two having burned 14,000 acres south of Simi Valley by early Friday afternoon as strong Santa Ana winds whipped through the area, sending the flames south of the 101 freeway. 

The Hill Fire has burned about 6,000 acres between Newbury Park and Camarillo. 

Both fires have caused closures of the 101 freeway. 

The Four Seasons Hotel Westlake Village, at 2 Dole Drive, and the Homewood Suites by Hilton Agoura Hills, at 28901 Canwood St., were among the businesses being evacuated. 

Homewood Suites General Manager Vincent Singletary said the hotel had been fully booked having taken in residents evacuated from their homes until the mandatory evacuation notice required them to check out. 

Other hotels in the San Fernando Valley have also found themselves at capacity with evacuees. 

Michael Wilding, general manager of the Hilton Woodland Hills/Los Angeles hotel, said that capacity was high to begin with headed into the weekend.

“There are rooms opening up here and there and we try to accommodate people,” Wilding added. 

Cynthia Ordyke, vice president of sales and marketing for the Hilton Los Angeles/Universal City hotel, said she had been hearing updated evacuation numbers every hour that will put a heavy demand on all hotels in Los Angeles. 

“We have had numerous calls including from the fire departments for guest rooms as well as the city of Los Angeles reaching out,” Ordyke said. 

Hilton also has a property in Simi Valley that was sold out on Thursday afternoon, she added. 

“I think they were at 60 percent occupancy and ended up selling out because they are not that far from Thousand Oaks,” Ordyke said. 

The Four Seasons evacuation resulted in the cancellation of the Taste of Conejo event sponsored by the Greater Conejo Valley Chamber of Commerce. Also, the Los Angeles Rams football team cancelled its practice at California Lutheran University in Thousand Oaks due to the fires.

Six Trending Design Materials for 2019

By Lesley Hughes Wyman and Tamara Ainsworth for Lodging Magazine on November 13, 2018

If the patterns designers are seeing now continue to hold true, the hotel industry is in for a year of bold saturations, cork acoustical elements, and an increase of integrated biophilia. Below are six trends in design materials that the hotel industry can expect to see in 2019.

  Terrazzo flooring

Terrazzo flooring

  Wood tones at the Embassy Suites Amarillo (Photo credit: Robert Benson)

Wood tones at the Embassy Suites Amarillo (Photo credit: Robert Benson)

  Cork panels in the Embassy Suites Amarillo (Photo credit: Robert Benson)

Cork panels in the Embassy Suites Amarillo (Photo credit: Robert Benson)

  Bold accent colors at the Embassy Suites Denton Convention Center

Bold accent colors at the Embassy Suites Denton Convention Center

  Concrete tiles

Concrete tiles

  Biophilia in the form of a green wall at the Embassy Suites Amarillo (Photo credit: Robert Benson)

Biophilia in the form of a green wall at the Embassy Suites Amarillo (Photo credit: Robert Benson)

  1. Large-Format Terrazzo

    Playing up natural lines, seams, and whimsical patterns has made Terrazzo a well-known and popular choice among industrial designers. Large-format variations are becoming an of-the-moment selection for flooring. Making a particular mark in lobbies, transition spaces, and in-house dining offerings, large-format terrazzo is one to keep an eye on. Variations on a theme are also key with terrazzo, with the marketplace seeing porcelain alternatives emerge as a strong choice for its lower cost and enhanced durability

  2. Wood

    Wood tones are set to take the path less traveled, with lighter tones gaining popularity and traditional mahogany making its way out of fashion. Walnut serves as the middle ground, transitional selection, while oak is continuing to emerge as a top pick. Oak’s appeal has increased with the introduction of sophisticated finishing techniques, such as cerusing, and low-sheen, closed-pore finishes. The evolving preference of these woods are valued as flooring, wall paneling, and, most frequently, on the facades of reception desks and lobby furniture. In this space, these items are those that fit within typical seven- to 10-year renovation timeline, making for freshened feel, ambiance, and aesthetic when they’re changed out. As a result, the shifting tides for wood variations is not only commonplace but mirrors operational patterns for hoteliers.

  3. Cork Acoustic Panels

    While finishes and panels remain popular, traditional cork has anchored itself as a leading choice amongst hospitality designers. Founded in aesthetic appeal and supreme functionality, cork offers a solution that benefits all parties. The material is versatile in its application, finding popularity in guestrooms, nooks and crannies, and in expanded food and beverage areas that are exposed to high levels of traffic.

  4. Bold Accent Colors

    In contrast with the popular colors of recent years, warm tones are back in a big way. Set to make a splash, far from subtle hues are setting the scene for a robust return to the maximalist, the bright, and the vibrant. Top of mind and certainly a top choice for hospitality designers, poppy orange, chili red, and bright coral are among 2019’s set of up and coming colorways. Rich yellow tones and emerald greens are popular as well, playing a game of opposites attract with blue-based subtones.

  5. Concrete Tile and Countertops

    Taking off as a chic material for the home, concrete as a surfacing solution has returned to hospitality spaces. Concrete tile and countertops insert an urban ruggedness into refined spaces, while infusing necessary durability into high traffic areas. Bar areas have been home base for this trend, along with breakout workspaces with concrete as the surface for desk spaces. Particularly cost-effective and easy to maintain, this trend isn’t going anywhere

  6. Biophilia

    A trend that has truly taken root, biophilia is here to stay. Greenery is both a popular and necessary element today. Installed on walls and in planters both externally and internally, biophilia has redefined the marketplace in terms of using a natural material. Incredibly customizable and with health benefits for both guests and staff, the concept also has a textural quality, asserting a multi-layered feel in any space. Hotel lobbies and internal food and beverage zones are common for application, and traditionally higher ceilings serve particularly well for large-scale green walls and water features.

UPS Freight shippers took volume elsewhere as strike concerns loomed. Will they return?

November 12, 2018 by Mark Solomon, Managing Editor, Markets for FreightWaves.com

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As the clock ticked down earlier this month toward a threatened nationwide strike by 11,600 Teamsters at less-than-truckload carrier UPS Freight, parent UPS Inc., (NYSE:UPS) concerned about stranding freight in the unit’s system should a walkout have occurred as soon as today, advised its customers to seek alternate means of transportation.

Some customers took heed. For example, LTL carrier Estes Express Lines, also based in UPS Freight’s hometown of Richmond, Va., captured a meaningful amount of diverted freight, according to a source close to Estes. The carrier hopes to retain between 10 and 20 percent of that new freight, according to the source. Estes’ CEO, Rob Estes, did not respond to an e-mail seeking confirmation and comment

LTL carrier ABF Freight, a unit of Ft. Smith, Ark.-based ArcBest Corp., (NASDAQ: ARCB) also saw an undetermined share of diverted freight come its way, according to Kathy Fieweger, a company spokeswoman. Jeff Brady, who runs transport and logistics operations for e-tailer overstock.com (NASDAQ:OSTK), said today that he is aware of shipper colleagues who bailed on UPS Freight because they were too risk-averse to wait around for an outcome, especially so close to the holidays. Brady, who in a posting last week on the social media site Linked In criticized UPS and the Teamsters for putting shippers in a difficult position while the two sides sorted out their differences, said he has not used UPS Freight for years because its labor battles introduce too much risk into his operations. 

Brady, who has worked in high-level transport and logistics positions at various retailers over a 20-year career, said he prefers not to bring UPS Freight on board if he is choosing transport vendors from scratch, or he would work to replace it if he inherited a relationship with the carrier. Brady said he is a heavy user of UPS’ small-package services.

UPS did not return an e-mail request seeking comment.

UPS Freight is the nation’s fifth-largest LTL carrier with 2017 annual revenue of about $2.6 billion. It moved 2.8 billion pounds in the third quarter, according to company data. The labor tensions came amid a climate of tight capacity in LTL, which is a concentrated market with virtually all traffic controlled by the top 7 to 8 carriers.

Last night, UPS Freight Teamsters voted by a 77-23 percent margin to ratify an updated version of a 5-year contract that about 62 percent of the rank-and-file rejected about a month ago. The two sides agreed to a 30-day contract extension following the first vote. The extension, and the contract, was set to expire at 12:01 AM ET this morning. The union’s negotiating committee in charge of the UPS talks said it would have no choice but to call a strike should members reject the revised version. The union would not give a date as to when it would take such an action.

In response, UPS announced Nov. 1 that it would not accept pick-ups of any freight scheduled for delivery after Nov. 8. The unit also said it would clean out its pipeline by the close of business Nov. 9. 

The Teamsters for a Democratic Union, a Teamster dissident group that clashes with mainstream leadership and that has opposed the contract as being substandard, said last night that the dramatic shift in the two outcomes were due to rank-and-file concerns over a system shutdown and subsequent union job losses. Another factor, according to TDU, was the union’s ratification of the much-larger small-package contract, which covers 256,000 UPS employees. With those contract talks out of the way, UPS could focus its hardball tactics on UPS Freight members, who were hobbled by a lack of support from Teamster leadership, TDU said.

The small-package contract was the subject of its own controversy. The compact was rejected by about 54 percent of those who voted. However, Teamster negotiators invoked language in the constitution known as the “two-thirds” provision to ratify the agreement. The language states that as long as fewer than 50 percent of eligible voters cast ballots, a contract must be ratified unless at least two-thirds of those who vote reject it. About 42 percent of 209,000 eligible voters cast ballots.

The last-time UPS came this close to a nationwide walkout was in 1997, when the Teamsters staged a 15-day walkout that shut down UPS’ ground parcel network. (The company did not have a stand-alone LTL operation at the time). The strike forced UPS customers to go elsewhere for deliveries. A percentage of those shippers, many of whom had used UPS exclusively, either never returned or, in a more common practice, spread their parcel spend across multiple providers.

UPS Freight approve new labor contract, avoid strike

by Ben Tobin for USA TODAY Published 8:19 a.m. ET Nov. 12, 2018

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UPS Freight workers voted to approve a new labor contract, averting a potential strike that could have affected the shipment of packages across the country.

Though workers rejected the initial offer in October, the second round of negotiations — which included raising wages and limiting the amount of subcontracted work — proved more successful.

A total of 77 percent of workers approved the contract at local union meetings held between November 7 and 11, with 84 percent of eligible members voting, according to the Teamsters union.

The agreement covers approximately 11,600 workers.

"Our teams began contacting customers immediately after ratification," UPS said in a statement Sunday. "We thank our customers for their patience and loyalty."

19 decommissioned shipping containers become downtown Phoenix’s hottest marketplace

 All photos courtesy of the designer

All photos courtesy of the designer

from Building Design + Construction

JMC uses shipping containers every day. But what happens to those containers when they're no longer being used for their original purpose? The 14,000-sf urban infill development in Phoenix, Arizona, The Churchill, is the latest in a neighborhood meant to be constructed entirely from shipping containers.

September 1 marked the opening of downtown Phoenix’s newest restaurant and retail marketplace—and its latest commercial construction project to utilize decommissioned shipping containers as its primarily building form. The Churchill is a 14,000-sf urban infill development that caters to small Arizona-based businesses. 

The development is the latest in a neighborhood to be constructed entirely from shipping containers, and the third shipping container project delivered by Phoenix-based design-build firm Local Studio. 

The Churchill, located at 901 N. 1st Street, is comprised of 19 containers. Each maintains its original doors and wood floors, and parts of the containers were used to build the upstairs deck. The center courtyard is covered and cooled with evaporative coolers and large fans. Handcrafted tables and seats maintain the theme and were constructed with refurbished wood shipping pallets.

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“We saw The Churchill as an opportunity for placemaking in our own neighborhood,” said Local Studio Founder Brian Stark. “It’s an unexpected place that will bring people together to meet, eat, shop, and share experiences—and we wanted the structure itself to reflect that sense of community.”

The centerpiece of the development is 30-foot-tall steel container sculpture created by Phoenix artist Pete Deise. The container is propped up vertically on the southwest corner of the complex and features a paper-cutout aesthetic to expose the interior of the box. 

Stark says container-based construction is not just about aesthetics. He says the steel corrugated boxes are more durable than common building materials, and structures made with containers can be erected in half the time. 

“Using shipping containers is more than a trend—it’s been popular in Europe for decades,” said Stark. “These projects are built quickly, sustainably, and bring an authenticity to a neighborhood. Other cities are looking to Phoenix as a model for how to adapt their building codes to attract container projects.”

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FedEx hikes 2019 shipping rates, boosts fees on 56 accessorial services

by Mark Solomon, Managing Editor, Markets for FreightWaves, on November 05, 2018

FedEx Corp. (NYSE: FDX) said today it impose low to mid-range general rate increases for 2019 on its U.S. domestic shipping services and will also increase its fees on 56 “accessorials,” services that go beyond a traditional line-haul move.

Effective Jan. 7, so-called list rates for FedEx Express and FedEx Ground services will rise 4.9 percent, while prices for shipments moving via its less-than-truckload unit, FedEx Freight, will climb by 5.9 percent. For shipments moving via FedEx Express, the company’s air and international unit, the increases will apply to domestic U.S., U.S. import, and U.S. export services. 

Rates for shipments moving via “SmartPost,” a partnership with the U.S. Postal Service where FedEx shipments are inducted deep into the postal delivery network for last-mile deliveries to residences, will also increase, FedEx said. The company did not disclose the magnitude of SmartPost increases in today’s announcement. Rival UPS Inc.—which has yet to disclose its 2019 rate adjustments—has a similar relationship with the Post Office. USPS, which calls its service “Parcel Select,” performs the same function for various partners such as parcel consolidators. 

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The service is popular with businesses and providers because it is priced cheaply and because it relies on USPS’ universal service network, partners can offer last-mile deliveries without using their own assets.

The rate increases apply to shipments not moving under contract with FedEx. The impending list price increases are consistent with the increases taken in recent years. Contract rates fluctuate in a narrower band as big customers leverage their volumes to mitigate any increases. The higher LTL rates reflect the continued strong pricing power exhibited by carriers across the board.

Also on Jan. 7, fees will rise on 36 accessorial services imposed by FedEx Express and FedEx Ground, and an additional 20 at FedEx Freight. For example, FedEx Express and Ground will hike a surcharge for “additional handling’ to $13.50 from $12.00 per package, based on its dimensions. The charge for address corrections performed by either of the two units will increase by $1 per transaction to $16.

Although the individual increases are minor, their cumulative impact can become costly, and are treated by regular customers as a nuisance and an inconvenience. The number of accessorial fees imposed by FedEx and UPS have risen consIndividually over the year.

For the second straight year, FedEx will not impose per-package residential delivery charges on traffic moved during the peak shipping season, which at FedEx begins Nov. 19. FedEx will apply a $3.20 surcharge to U.S. express and U.S. and international ground shipments that require additional handling, a $150 per-package surcharge on "unauthorized" packages, or shipments with such outsized weight or dimensions that the company may refuse to handle them, and a $27.50 per package surcharge on “oversize” packages, items not as outsized and somewhat easier for the FedEx system to handle. The company imposed surcharges on the same services during the last peak.

The “unauthorized package” surcharge comes in the wake of a $300 increase in charge for the service during the 2017 peak cycle.

Last year, Memphis-based FedEx chose not to impose any surcharges on the standard small-parcel deliveries its infrastructure is essentially built to handle. Instead, it focused on "large format" items that are not conveyable, may require extra or special handling, or both. Delivery demand for those items is rising rapidly as retailers expand the stock-keeping units available for online purchases. As a result, FedEx was able to capture increased ancillary revenue from moving the large-format traffic

UPS FACES POSSIBLE STRIKE AS TEAMSTERS EYE VOTE NEXT WEEK

by APARNA NARAYANAN on 11/02/2018 for Investor’s Business Daily

UPS (UPS) faces a potential job action in its industrial trucking unit, though a UPS strike would affect shipping customers — not homes and businesses — who have been told to make alternative plans ahead of a union workers' contract vote next week.

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UPS Freight workers nixed a tentative contract in October and are set to vote on updated terms, the Wall Street Journal reported late Thursday. With a contract extension set to expire Nov. 12, the delivery giant faces the prospect of 11,000 Teamsters members going on strike.

It would be the first work stoppage at UPS since 1997. The freight division ships heavier goods and bulk shipments, including to retail stores.

The company told customers it will stop picking up heavy shipments Wednesday. It also said it can only guarantee ground shipments through Thursday. A spokesman said UPS "cannot afford to put our customers' volume at risk of being stranded in our system."

Residential and business customers won't be affected by the potential UPS strike.

Workers in the division that delivers packages to homes and businesses ratified their tentative contract last month.

For UPS, the strike comes at a particularly tough time. Besides the upcoming holiday season, delivery and trucking companies confront tight capacity and a driver shortage as volumes surge in a robust economy.

Shippers respond to volatile market by increasing lead times in the second half of the year

by Zach Strickland on November 03, 2018 for FreightWaves

Shippers combated higher rates and lower capacity this year by increasing their lead times on their orders by 3% according to the Tender Lead Time Index. It is widely documented that shippers incurred some of the largest increases in the past 20 years on their freight costs. Companies like General Mills and Pepsi citing increasing transportation costs as reasons for missing earnings targets in 2018.

ELD implementation, hurricanes, and a booming industrial economy all contributed to the perfect storm for reducing capacity in the U.S. in the past two years. One of the simplest ways to mitigate this albeit not always possible is to secure capacity earlier in the shipping cycle.

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It is not always easy to extend lead times. Production cycles vary, and it is difficult for carriers to pre-plan much more than two to three days in advance due to things like weather events, traffic, and delays at shippers. Depending on the product’s position on the supply chain, pre-production or post production, shippers see orders as far out as 21 days and can forecast weeks in advance when their freight is going to be ready to ship. Three weeks is too long to secure capacity for either party but adding a day or two can make a big difference when you can do so.

The average lead time from February through June was 2.57 days. From July through October lead times are averaging 2.65 days. This does not seem like a large jump as an absolute change, but it is a clear shift in behavior, looking at the chart. The increase in average lead time is clearly a long run change in behavior as opposed to a few short-lived extreme increases.

The increase in national lead time average is a sign that shippers are attempting to understand how they can work with carriers to lower their costs. This is a large shift in dynamic from previous years where the shipper held carriers hostage for price and service without much thought for what they could do to work with the carrier to lower these costs.

One other tool of tender lead time is for undertanding how much freight is handled in the spot market vs. contract market. Shorter lead times suggest that shippers are scrambling for more capacity, rather than being able to go to their routing guide on a consistent basis. Under the current market conditions, with tender lead times increasing, we are seeing less freight enter the spot market. Freight brokers and companies that operate primarily in the spot market, want to see shorter lead times. Shorter lead times mean more capacity volatility and thus higher rates.

(SONAR: TLT.USA)Tender Lead Time - USA. Tender Lead Time is the average number of days between load request date and requested pickup date. Longer lead times tend to lead to decrease tender rejection rates. From an analytical standpoint rapidly decreasing lead times can indicate unexpected surges of volume. When lead times decrease slowly it is an indication that capacity is prevalent as shippers are having little trouble securing trucks. Increasing lead times can mean shippers are having trouble securing trucks.

THE VERY REAL POSSIBILITY OF A UPS STRIKE

From Intelligent Audit:

As we’ve reported on several occasions over the last month, UPS management, the rank and file members, and the Teamsters leadership are embroiled in a contract dispute that has gone from bad to worse. 

While most experts thought the contract negotiations would be difficult, the possibility of a labor strike, especially right before peak season, was not on the table. 

But here we are. 

It seems that UPS is now preparing for the very real possibility that union members will go on strike in November. 

Here’s a recap of how we got to this point:

  1. May 2018: News begins to surface regarding the on-going negotiations between the Teamsters union and UPS. It becomes clear that there is a clear rift between Teamsters management and the rank and file members of the union regarding certain aspects of the contract. The new deal includes provisions for a two-tiered structure for drivers’ wages, effectively inhibiting full-time workers from making getting the same kind of overtime pay for weekend deliveries as they had previously.

  2. June 2018: It is reported that the Teamsters Union management agreed, in principle to the new contract. While it still required a “yes” vote from the membership, the management felt that they would be able to get the vote through

  3. October 2018: The vote did not go as planned; of the members who did vote, 54% voted “no” on the proposed contract. However, the union requires at least a 2/3 majority vote “no” if less than 50% of members vote, a threshold that was not met. As a result, the agreement was put into a state of limbo and the existing contract was extended in order to give the union more time.

  4. November 2018: As the November deadline approaches, there is little indication that union members and leadership are finding a way forward. Preparations are being put in a place for a strike after the mid-November vote.

We are now learning that UPS is, in fact, preparing for the worst. 

As of November 1st, UPS will not be picking up any freight volume that is set to be delivered after November 8th. This is due to the fact that, as of now, there is no extension to the existing freight contract in place. 

UPS is being “proactive” with customers to ensure that their freight does not get stuck on a truck during the potential strike. 

It seems UPS believes there is a very real possibility of a strike after the vote.

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East coast containers running at a discount due to overwhelmed west coast ships

October 27, 2018, by Zach Strickland for FreightWaves.com

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Last week the major west coast ports of Los Angeles and Long Beach reported all-time high volume for the month of September. With tariffs on Chinese goods increasing on January 1st from 10% to 25%, supply chain managers across the country have been trying to get as much inventory into their warehouses as possible. Possibly the most interesting price activity resulting from this is the decreasing “Panama Spread” value (FBX.PANA), the cost differential between shipping a 40-foot container from China to the North American West Coast (FBX.CNAW) versus the North American East Coast (FBX.CNAE).

This past week the Panama Spread dropped from $1,126 to $856, a 24% drop. Rates to the west coast are increasing while the rates to the east coast are decreasing. With the Savannah and Charleston ports reporting 9% and 10% increases in YOY volume respectively, one might wonder why this is happening.

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Many of the maritime carriers reduced capacity on transpacific lanes in August and early September in preparation for reduced volume resulting from tariff concerns. The tariffs have effectively split peak maritime shipping season in two. The result has been limited capacity going to the western ports this fall. Whether or not this was planned to be a way to increase rates and take advantage of the geopolitical situation is unclear.

The good news for the importers is that the maritime carriers are offering discounts to the east coast where capacity is more available. This is why we see rates declining in those lanes on the spot market.

Importers need a lot more time to adjust their supply chain dynamics than the maritime carriers need to alter their capacity on the water. Carriers may have anticipated a more rapid change in behavior than has occurred. In the near-term importers have been bringing in as much freight as possible while they try to figure out the long-term impact of increasing tariffs.