Global Trade This Week – Episode 267
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Pete Mento 0:01
You're watching Global Trade this week with Pete Mento and Doug Draper. Hello, everyone, and welcome to Global Trade this week. I am Pete Mento. With me is my co-host and friend, Doug Draper. Doug, we're both home. We're both home.
Doug Draper 0:20
I know. Yes, your background is a little more sporty than mine, but the the internet at my co-working space crashed, and I'm like, I got to get home because the show must go on, as they say.
Pete Mento 0:31
The show must go on. I'm only home for a little while. I'm flying out today to DC, so excited, excited to be have my butt in my own chair with my saint's lids behind me, that makes me happy.
Doug Draper 0:43
Yes, sir. Yeah, there's 46578. How many helmets back there?
Pete Mento 0:49
Yeah, I think there's eight. But I've got about I don't know 200 upstairs in storage in the third room, and about another 800 in sports storage in New Hampshire. So it's a problem. It's a problem that I think I need an intervention for. But if anybody's into the NFL or NCAA, and there's a particular team you like and a particular person you like, let old Uncle Pete know. Odds are I have their lid.
Doug Draper 1:14
Yeah, yeah. Well, in that room back there, with my fingers pointing, that's the Jayhawk room. There's so much Jayhawk with my daughter and her rowing back in the day. There's so much Jayhawk crap in that room up on the walls. You couldn't imagine.
Pete Mento 1:27
Correct me if I'm wrong, Douglas, but your son also attended Kansas, did he not?
Doug Draper 1:31
He did. Yep, he went there. I went there. My brother went there. My dad went there. I think that we've given the lovely institution about eight the equivalent of eight degrees over the course. I got one. Everybody else has two or three degrees in my family, so that's why I'm stuck in the.
Pete Mento 1:48
That's a lot of pressure. It's a lot of pressure.
Doug Draper 1:52
Yeah,
Pete Mento 1:53
great. It's a lot of pressure for those
Doug Draper 1:55
poor kids. Great school. I love Lawrence, but that's not here while we're talking. So I'm going to jump into it. I know you got a tight, tight time, my friend. So I'm going to talk about something that I saw on a post the other day. I'm like, you know what? This is a feel good story for a couple different reasons. But the Georgia Port Authority, right, and Norfolk Southern Railroad, they just developed this inland port that is about 300 miles away from the port of Savannah, and it's essentially taking cargo from vessels and taking it inland to to town called Gainesville, Georgia, and it's like northeast of of the Atlanta metro area. Big manufacturing production there, and the reason it caught my attention it's $134 million investment. And in this day and age, if you're not talking bees and as in billions, you're kind of like, well, what's that getting for you, right? So it's a a terminal about 100 acres. It's 300 miles on existing track, and the big sweet spot there is they're going to take right out of the gate 26,000 truckloads off of the road and put them on rail. And as this thing develops over the next couple years, their max capacity is a quarter of a million trucking transfers between those two locations that they're going to take off the road and put it on the rail. 300 miles. The transit time it's a little a little long. It's 50 hours five zero. So you're talking two days from the time that the vessel bumps the port to the time that you can get it in Gainesville, Georgia. You can grab the container. It's good for both import and export, and I think it's pretty cool. You know, it's this little thing, this little solution down there that's helped. You know, with the cost of fuel and everything else, and trains can move uses less fuel, less diesel than over the road. And I thought it was pretty cool. I know this is global trade; that is certainly part of global trade because it is the supply chain. But it caught my attention. I wanted to bring it to the show and say, you know what? Good on you. Good on you. It's a big manufacturing region. Let's try something different that's not going to cost a gazillion dollars. And I think that the Georgia Port Authority has done that. So I don't know if you've heard about it. If you have any take on it,
Pete Mento 4:23
I did not until you brought it up, bud. And I've just started looking deep into it. And here's the feel good part of it, right? You and I talk about rail intermodal all the time. We are big fans, and being able to find maybe a place a little bit off the beaten path that's easier to get to to get stuff on and off and on, this is a great playbook for other parts of the United States to consider. For I'm not saying it's a small amount of money, but in comparison to a major upgrade of of your infrastructure, it is, and it's going to bring not just the cargo, but the drivers, the repair costs, the gas, all the other things that go. That work in those particular terminals. I just think it's a home run all around, and I hope that other parts of the country might find themselves in a similar geographic situation where they could offer that as well. Big fan. Yeah, happy here.
Doug Draper 5:14
Yeah, really cool. I mean, 134 million. That's a big chunk of change, but in the big picture, it's not a whole lot to do what they're doing. So, yeah, and
Pete Mento 5:21
I'm sure there were grants and state funding and federal funding to do it. It didn't all come out of someone's pocket. Some of it did, I'm sure. But yeah, it's a it's a real great story, and I hope that people are paying attention because there's other geographies that could probably do something similar.
Doug Draper 5:33
Absolutely, absolutely. All right, what's your first topic?
Pete Mento 5:37
Oh man, my first topic is kind of a downer. So, as it yeah of course Doug talks all this feel good crap Pete's like oh doom and gloom everything sucks
Speaker 1 5:46
oh my goodness
Pete Mento 5:47
I'm I'm not so sure that FTZs are what FTZs used to be I I'm not a big fan let's just start off right there I've been on the record a great deal saying I'm not the biggest fan of foreign trade zones but foreign trade zones have lost a lot of the cachet and a lot of the usefulness that they used to have because of the very specific requirements in all of these section tariffs: 230 2s, 300 1s, 338, probably IEPA. It made it impossible to use the zone in a way that was beneficial as it was originally intended. The tariffs are subject. The goods are subject to the tariff on the date that they went in, not when they came out. So if it turns out the tariff went away, you're still paying it and going back and getting refunds, and you're still paying those huge tariffs. We talk to folks all the time about implementing one for manufacturing, which tends to make the most sense. But when you do the math, it turns out you're still paying those tariffs. So I'm sitting here faced with the idea that man, our foreign trade zone is dying, and what's going to take to get them back?
Doug Draper 6:48
When I first saw your comment, I was like, "What are you talking about?" As a warehouse guy, I've gotten a gazillion phone calls, but then I I paused and I said, "You know, bonded warehouses, free trade zone. What everybody's thinking about right now in the last 18 months is in how do I defer my duties? How do I get it into the U.S. Not into the U.S. commerce per se, but how do I get it here and defer my duties? But that's not the core competency or the the original purpose of the free trade zone, as you made mention. And with the the clause and the connectors that are in all of these different tariff rules. To your point, let's do something, manipulate it, change it. Nothing wrong with that, right? We're manufacturing in a trade zone, and some of those benefits are just getting stripped away that we've seen in the last 18 months. I don't know if it's dying. It may take you know everything kind of does this in life, and I think that you know things will change with with the tariffs, and I think it'll come back. But it for big manufacturers that truly used the free trade zones as it was designed for its intent. Absolutely, there has been an impact For sure, yeah, absolutely, cool. All right, that brings us to halftime. Brought to us by Cap Logistics. Every week, they're here for us, which is means they're here for you to put this show on. We hope you enjoy it because we certainly appreciate their support. Pete, what's your halftime all about today?
Pete Mento 8:18
I live in a 227-year-old house. I'm going to say that again. 227-year-old house. It is exceedingly rare that there is not a week that goes by that something doesn't break, something doesn't need immediate attention, or it's going to break, or I am looking for the next thing that needs immediate attention before it breaks. And I consider myself to be a relatively handy guy. I can do a lot. Going to a school that taught you how to fix things on ships, I'll admittedly not the best at it, but I can do a lot of work. So I'm constantly shocked by the people in this neighborhood that freak out when I say I'm pretty sure I can handle it. So there's a level though I ain't touching. So the first question is, Doug, and I'll get to the second. Do you consider yourself a handy guy? I'd
Doug Draper 9:08
give myself a C minus, C plus, right? So, but when I the first house, first home that we owned when I was in my late 20s, yeah, you were just too dumb to know. Like, oh, tear up the tile. I've never done this before. Go run something at Home Depot. End up making 25 trips to Home Depot because I forgot this or forgot that. So I was a little bit more daring. Now, not so much. You know, I can do some basics, but C minus.
Pete Mento 9:40
I think I'm probably around a C, maybe not much better. You know, I'll patch a hole in a wall. I can paint really well. I can do basic plumbing. I will not touch anything with electricity in
Doug Draper 9:50
it.
Pete Mento 9:50
That's like that. That's a hard stop for me. I know I can just turn everything off, but I just don't trust it. And then, you know, anything that involves real serious power tools, like if you expect me to. Frame something, or there's a great story about me trying to drywall my daughter's room before she was born, and it was an absolute disaster. I had to hire someone to come fix it all, and the guy walked in and said, "Let me guess, you tried this yourself, did?" Yeah, I was like guilty. I was like, "Well, now you know better." And to see him knock something out in like three days that I had spent two months trying to do was truly. I mean, it was it was humiliating. But there, I'm a job creator. That's the way I look at myself. When there are certain things, I would just rather hire someone to do it because I know they're going to do a better job than I.
Doug Draper 10:32
Yeah, yeah. I'm about the same line. You know, there was some Wayne's coating I was going to put on the top of our deck this summer, and I didn't have any of the tools. I'm like, I'll just saw it. You know, you got to have the right tool to do this stuff, right? And so I started. It was a disaster. I said I'm going to triple the cost of my materials because I'm going to f it all up. So I just called a guy and had him take care of it. So, yeah, that's very similar to what you had just said.
Pete Mento 10:57
That mrs. Draper was a lot happier you had done that.
Doug Draper 11:00
Correct. It looks great. It got done. It got done. And
Pete Mento 11:08
nothing runs with husband.
Doug Draper 11:10
Yeah, I like that one. I've I've heard the first half of that, but not the second. So very cool. Awesome. Well, hey, my halftime is related to my son was that this past weekend, he's a great kid. He comes up just because he wants to hang out with his parents. But we live in Steamboat, so I think that has part of the draw. Anyway, we were talking about his goals and everything he's trying to do, and at the end of it, it reminded me. And I don't even know if you're a musical savant. I don't know if you remember a gal in the mid to late '90s named Alana Davis. Yeah, it's kind of folky type of stuff, and she had this song called Turtle that we used to listen to, right? And the whole premise is there's one line that she said in the song, which says, "With the shorter past, there's a greater hurry." Shorter past meaning younger in life. The past and what you've experienced is shorter, so your perception of what needs to be done is a greater hurry. The shorter the past, the greater the hurry. And the song was all about the temptation or the urge to rush through life. Right? It doesn't matter if we're young like my son or aged like us. We're always looking forward to the next thing and often overlooking the moment. And so I made that comment to him, and that I gave him that lyric, and he's like, "What are you talking about, old man?" And kind of explained it, and it was it was pretty cool. He kind of got it, and it made me think a little bit about you know enjoy the moment. My daughter, who's kind of into country music a little bit, says, "Be where your boots are," and I think it's a good stop to say you know what, stop and smell the roses. Whatever you want to do over the time, but rushing through life and trying to think what's the next, what's the next, enjoy where you are. Take advantage of the beauty of of the moment. And I don't know. It struck me enough that I wanted to bring it up today on halftime. So that's it,
Pete Mento 13:12
Doug. This is the problem with being like a music nerd and being just an absolute curmudgeon prick about it. That's just so derivative of every other damn song. When you said that, all I could think of was "Cats in the Cradle." Yeah, that was a song when you and I were kids that our parents listened to on AM radio, and they were driving their, you know, whatever American-made gigantic hunk of steel on the highway, saying, "Your son's going to grow up before your eyes, and you're not going to make time for him now. There's going to come a time where he's not going to make time for you." There's a million songs like that, and I'll listen to it. I'm sure it's beautiful. Yeah, that's a core. That's a core thing. You know, I read a lot about it. We don't realize how fast life's moving around us until we realize we don't have a lot of life left, and then we do everything we can to savor it and feel like a jackass for not doing more than we were earlier. I tell every young person I meet, just slow down, just slow, just slow down, and they don't listen. I didn't listen. You didn't listen. What makes us think that they are, buddy?
Doug Draper 14:07
I don't know. I guess it makes us feel good. Yeah. Even while you're saying that, I mean, Ferris Bueller had an amazing, amazing quote in his movie too. Right. Yeah. Life
Pete Mento 14:15
goes by real fast.
Doug Draper 14:17
Yep. Yep. Exactly. So, all right.
Pete Mento 14:20
Stop. Notice you might might miss it.
Doug Draper 14:22
Yep, something like that. All
Pete Mento 14:23
right, but next topic. All
Doug Draper 14:24
right, next topic. Let's talk about this one. So it's related to fast fast fashion. This popped up just yesterday afternoon that Europe, right? So we did the de minimis and we bumped it up to 800 bucks, and anything underneath that is no longer duty free, so Europe just came up with a second iteration of fees related to fast fashion, is how they define it. But we know exactly it's Shein and Temu that it's really focused in on. So it's not a huge amount. You still got to pay the VAT and the taxes that are. Involved with that per country, but now there's a total of $5 additional fee on on low value, and they their definition of low value is under 150 euro, and so yeah, it's interesting. So I don't know if this is tightening the screws to get those additional warehouses to be present in the in the in the EU, or if it's not enough money that people just say, "Well, hell, it's a cheap sweater anyway, so I'll pay an extra five bucks, and who cares?" And you go about your business, but it's not a huge disincentive or penalty, if you will. But it caught my attention that the EU, which is generally into sustainability far more than the United States, is taking steps to defer the specifically. It's not I'm using the term fast fast fashion, but it's any you know cheap type of commodity that you may buy that's under 150 euro from different parts of the world. So anyway, just something caught my attention. I wanted to bring it up.
Pete Mento 16:04
Yeah, man, de minimis is de minimis, and everyone's looking for some way to make it work. But I had a guy at a speech I spoke at recently. He was from France, and he said, "You know, the U.S. is just catching up with the rest of us. That's all. This is just catching up with the rest of us." And I think this is a great way of trying to find balance between the two, along with deeper enforcement on forced labor and slave labor. I think you know the European Union, as they normally do, is taking this a little more deliberately than we are. You know, our our our shots originally at forced labor I think were for forced labor, but now with the 301 tariffs, it's more about revenue and leverage, but I think we'll come around as well. In a world where e-commerce is so important for the growth of retail, we have to come up with compromises, and that compromise might mean we get our stuff a little faster, a little bit cheaper, but the enforcement is going to be a little bit tougher. That's what it sounds like the European Union's doing. I got a feeling we'll probably follow suit, buddy. Yeah. All
Doug Draper 17:01
right. Bring us home.
Pete Mento 17:04
Yeah, man. Now this is an interesting topic. So, can you imagine being a BCO and you've got like I don't know 5000 containers a year, and you got to roll into rate season, into contract season under the current environment. No one has a damn clue what's going to happen. Is the Congress going to cut the funding for the war in Israel in order to get the straits opened up again? Is that going to lower fuel costs? What should I do about BAFF? I mean, all this stuff. This has got to be just. It's got to make your brain bleed if you're out there right now trying to negotiate this because there's just too many competing factors. I'll be at TPM like I normally am, and normally when I go to TPM, I'm not paying attention to those conversations. I'll be very honest, everybody. Like I know you're all there for that reason. I'm there to give a speech about trade, shake hands, try to sell some business. But I am going to ask questions about how the negotiations are going because at that point the new Congress will have been in session for a couple of months. We'll have a better idea of what the agenda is. I would not want to have that job this year. When I was at Wayfair, you know, I bought 200,040 foot ocean containers a year. No joke. We bought a lot of freight, bro. And looking back on it now, I can't imagine having to do it in the middle of just complete and utter chaos, no one's got a clue what's going to happen. And last year it was pretty crazy too. It's nothing compared to this. So I'm looking forward to it, Doug. And I'm praying to whatever God is listening that maybe next year things are a little more normal because this is getting this is getting ridiculous. It's just bananas at this point. Every year it gets weirder and weirder.
Doug Draper 18:43
Yeah, yeah. When you first shot that over, I'm like, okay. Well, my mind went to what type of strategies can you do on either side, right? I think it's going to be a buyer's market first of all because of that uncertainty. I think it's going to lean towards the buyer of services, not the seller of services, and I think that rather than say here's my commitment for the year, I think companies are going to say here's my commitment for each quarter. Right, I'll give you 250,000 containers this year, but the rates I'm going to talk about is just for this three to four month period, and I'm not that well versed on the nuances of everything, but I would imagine that there's some indexes out there that they could tie their the contracts to, right? Just like the what do they call it? The Texas crude. I forget the the term. You use
Pete Mento 19:40
Fredos as an example. Yeah,
Doug Draper 19:42
yeah. So okay, I'll commit that, but we're only going to be willing to pay $150 more per this benchmark, right? So I think there's going to be some of those strategies, and yeah, it should be should be interesting to see what comes out. But the two biggest things, in my opinion, it's going to be a buyer's market. I think those annual terms that you and I grew up with are going to be more like quarterly commitments and a reevaluation, and then tying it to an index for protection. But it'll be interesting. I think the buyers are going to be in the driver's seat this year.
Pete Mento 20:16
From your mouth to God's ears, brother.
Doug Draper 20:17
All right, that brings us to the end of global trade this week, Pete. It's amazing you're at home. I'm at home. That doesn't happen very often, and it's good to see you. And I appreciate you. I'll be
Pete Mento 20:30
home next week too.
Doug Draper 20:31
Wow! Hey, hey. So yeah, yeah, yeah, yeah. And tomorrow, Veterans Day. Want to thank all of our veterans out there, and if you're listening to the show, we appreciate that. And if it's happening in global trade, mr. Mento, as you say, we'll be talking about it on global trade this week. So, thank you, sir. Travel safe.
Pete Mento 20:54
Thank you, buddy. We'll see you soon. All
Doug Draper 20:55
right. Catch everybody later.
Transcribed by https://otter.ai