Global Trade This Week – Episode 191
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Pete Mento 0:00
You're watching global trade this week with Pete mento and Doug Draper, Hello everyone, and welcome to Global Trade this week. Brought to you by our friends at CAP logistics. I'm Pete mento, and luckily, we don't have to have Keenan on this week. We're both here with me is my my co host, and the other side of my brain. Doug Draper, Doug, how you doing, buddy? Good.
Doug Draper 0:25
I'm good. We are bi coastal, literally, this year, this week, I'm in the great city of Fresno, California, enjoying the 88 degree weather. How come we always talk about the weather every time, every time, every time you got to talk about the weather wherever you are, I apologize to our audience on that one we're old
Pete Mento 0:46
and you got to California. I mean, I imagine Colorado still probably pretty chilly and snowy, right?
Doug Draper 0:50
Yeah, yeah. It snowed a little bit up in Steamboat this past week, but, you know it, it works out just fine. So looks like you and I, switching gears to travel. Looks like you and I are both traveling on Easter Sunday yesterday.
Pete Mento 1:04
Yep, I am in Summit New Jersey giving one of my clients an audit, so I had to fly out in order to make the meetings this morning. And, yeah, yeah. I mean, it wasn't a big deal. I got to see my daughter in the morning. We had a lovely brunch, and but I did have a lot of delays. I guess Newark Airport was down to one runway yesterday. It's all right, man, I got so many damn emails sent me anywhere for 10 minutes, I'm going to be trying to clear through them. It's just the way it is. But being stuck in an airport sucks. It really does.
Doug Draper 1:35
Yeah, I was taking the train, so I flew out of Denver, not steamboat, and I'm taking the train in to the airport. And literally, when I'm getting off at the airport, I get a text from the airline, we're flying in a crew, and your flight is delayed five and a half hours. Oh, and I'm like, Okay, I got really no options here. So just hung out at the airport, ate some donuts and just walked around, got my steps in.
Pete Mento 2:06
Were they special donuts? Doug,
Doug Draper 2:09
yeah, for those that may know, is Voodoo Donuts. Do you ever heard of Voodoo Donuts? I've heard
Pete Mento 2:13
of them. I see people traveling with their boxes sometimes, like, that's what your big deal they are. I've never had them, though. Yeah,
Doug Draper 2:20
you know donuts, a donut, but you know they, they're very proud of their donuts because it is incredibly expensive, but that may just be the airport too.
Pete Mento 2:30
Yeah, man, you're stuck there. You need to treat. You're going to spend nine bucks on a couple of donuts, I guess.
Doug Draper 2:34
Yeah, yeah, agreed. Alright, man, let me get this thing started so we can keep rolling. My first topic is related to shocker indirect with the tariffs, but we've talked a little bit about the US ports and kind of what's at stake with the US ports during all this craziness, right? I think you've seen it probably more so, more so than I have. I'm on the warehousing side. Obviously you're in the forwarding, so you're at the front line, but you know, this massive flood that's come in, and now the teu bookings are dramatically down, right? I think that we've spoken about patients is or panics more costly than patients. You've said that. I've said that before. So I think people are just like, we're not sure what's going to happen. Things pivot. Things pivot on a dime related to this topic. But I think you're going to see bookings just slowly, slowly, slowly decrease, right? The other thing I think Pete's going to decrease is, you know, the the port to call, right? They're just going to basically say, you know, it's the same thing that happened in the past, right? Okay, we're just going to cut down our vessels. We're going to blank sail. We're just going to roll into the big ports, the LA is the Oaklands, the Houstons and the New Yorks, which will impact transit, right? You only have so many choices to come into, into the US. It's going to be limited. So I think that's going to, going to be problematic. And then, you know, the increased pressure on the port finances is something that that I was reading about the other day, right? So, and I almost say, you know, break out the contract for the for the new union negotiations and the contract that was signed last year. But if you don't have as many vessels coming in, because there's not as not as many imports, all the funds generated at the port are going to go down. So how's that going to impact the support around, not only the physical labor, through the unions, but everything else that's tied into the port on the domestic side, right? I think that there's going to be, you know, some some issues there, but, you know, LA and Long Beach, still America's gateway, right? So I think that they are kind of the most exposed, but I think they're going to be, you know, not now they think about that Pete, I was going to say they were most exposed, but it's the mothership, right? Mean, like I said, It's the gateway into America related to ports, so it will go down, but maybe the reroutes and the blank sailings will happen at other ports and just get the stuff into into LA and Long Beach. But it's going to be interesting, because this is a supply chain, and this is global trade, and so everybody talks about the tariffs, and in the front half of this supply chain, but the back half, when it hits the port and then moves into a domestic mode, is going to be impacted as well, but we won't be talking about that, or at least the news media won't be talking about that for several more weeks. So I don't know what's your take on the port situation, as bookings just start to plummet. Fascinated
Pete Mento 5:42
by Doug so friend of the show, Pete church, well, at the Journal of Commerce put up a wonderful tweet, or whatever we're calling him on LinkedIn, where he said that bookings appear to be down about 50% that's, that's, that's huge, right? So he also mentioned that a lot of the empties are just sitting here, you know, they're just, they're just just sitting here with with nothing going in them, and that's going to be a problem too. A lot of the carriers apparently have shifted their capacity to Southeast Asia and other places not affected by the tariffs. And it is affecting capacity even for people who want to ship out of China right now. And what I find fascinating Doug is, if you think about it, right, all that capacity sitting on the capacity, all those orders are still in China. So, you know, people might have canceled orders, or they might have postponed shipping them, but it's all still sitting in China. And eventually there'll be a pause on the tariffs. Just eventually it's bound to happen. You know that China and the US will find some kind of common ground. And one would expect that President Trump would put a pause on the 125% reciprocal. And when that happens, I think people are going to just gobble up all the capacity they can get their hands on. They're going to go nuts and say, Okay, well, let's get this stuff, get it on a ship and get it here before he changes his mind. And then you have peak and everything else with it. It is. It feels like another COVID Buddy, like it feels like you're going to have fewer ships and a demand for capacity, and the prices are going to go wacko. And, you know, the carriers aren't stupid. I imagine that there was some calculus that went into this. It's somewhat, you know, some tension here, because they they're going to find a way to make their money back. So I wouldn't be surprised if if rates went absolutely bananas after we had some kind of a pause, and then this stuff you were just talking about happens again, poor congestion, the drayage problems, spaces and warehouses, right? It's going to back up. So how many times we have to say it? Right? We learned zero lessons from COVID Zero, right? It's just going to happen all over again, and we're going to be sitting here with our fingers up our noses, like, oh, this happened. We know how it happened. It happened the same way last time. We just haven't done anything to fix
Doug Draper 7:54
it, yeah, the repositioning, I think, is going to be bigger you make, excuse me, you make a good point of that, right? You're not moving the containers because there's no revenue to be generated at this time, so you're going to have an imbalance, yep. And it's like, hey, it's going to take us a little bit of time to get containers from this part of the world to that part of the world. And I think that's going to exasperate things for sure.
Pete Mento 8:16
Crazy times, man, yeah, yeah. All right, what do you got? Okay, so Customs has stepped on the pedal with regards to enforcement. They've they're not dumb. Okay, they're not stupid. So they know that tariffs like this are going to get people to probably do dumb things, and also it's going to highlight the dumb things they've been doing anyway. So the inspections, with the physical inspections, but of stuff coming from Canada and Mexico are through the roof, and they're doing that because much of this stuff isn't supposed to be tariff because it qualifies for the free trade agreement. What we're learning is Canadian and Mexican suppliers are just sort of re exporting stuff they imported from Canada, and either because of ignorance or on purpose, they're claiming that it qualifies for usmca when it doesn't. So it's supposed to be getting hit with these Chinese tariffs. So what does customs do? They have excellent targeting systems. You start catching everything. And the other thing that's happening are, they're called CBP 28 Customs and Border Protection form 28 after you import something, customs will send you a, you know, a little note. It says, Hey, here's the stats that you use for this import. We have a couple of questions. Those are getting just whipped out, but they're all over the place, right? All these CB 20, and it's for things like classification. So you imported the same thing all the time from this foreign supplier, and the same value, the same weight, the same piece, count, same description. All of a sudden, out of nowhere, your Harmonized Tariff code change from this to that. Hmm, I wonder if you try to avoid the tariffs, you know they're not dumb. They're not dumb at all. Or, I love this one too. You were importing everything up until a couple of weeks ago from this supply. In China. Now, all of a sudden, you've got a supplier in Vietnam or Cambodia who's exporting the exact same thing, same value. Come on, man, right. So, you know, I've done a couple of the webinars the last couple of weeks, and I just keep telling people they're not dumb. Customs isn't dumb. They've heightened enforcement. They're looking for it. They really, really want to catch you. Why would you make it worse by tempting them by doing something so blatantly and obviously try to get around the rules? Doug, it's a tough time to be an importer, between the tariffs, the increases in inspection and investigation and really customs attitude that they're not going to get played like punks over this. They're going to catch you doing something stupid, yeah.
Doug Draper 10:42
And I think that the resources available will have some of that process on the front end, right? You just spoke about forms that get sent out on the back end. But hey, what normally took two or three days to move it to a CES and, you know, hey, we're kind of backed up, so we'll get to that 10, 1214, days. And then it's talking about charges that start racking up. Right? It's just incredible. And then the last thing that I'll comment on this one is that on the warehousing side, everybody and their dog is trying to figure out where's a bonnet facility, or who has an FTZ, and so to try to find a port and a storm is just non existent. I mean, I've heard of stories that people are getting 100, $125 per pallet per month in some of these locations. So it's my point is, is all that space is getting gobbled up. So it's just, where do we put this stuff when we want to inspect it? Because the traditional holding areas are just jam packed, and so just another situation, like you said, if you're an importer nowadays, man, you're getting hit left and right. We
Pete Mento 11:50
learn nothing. Doug, we learn nothing,
Doug Draper 11:53
no. Well, what we can learn today Pete is some fun banter on our halftime, which is brought to us by CAP logistics. As you said, the beginning of the show, there are big supporters. We wouldn't be here without them. So I want to thank thanks to cap logistics. So what do you got on your halftime agenda for today?
Pete Mento 12:12
So my daughter calls me in a panic on Friday and says, Dad, did you hear the new Nintendo Switch two has been delayed. We're not going to get it for like, extra months, and it's all because of these dumb tariffs. And then I said, Okay, what's a switch? I know what Nintendo is. What's a switch, so remember, you had to go find me that gaming system forever ago. And I said, Yeah. And she goes, Well, the new version is coming out, and here's what sucks, dad, like all the new games will only play on the new version, so if you don't have the new switch, can't play the new games. And my friends and I want to play Mario Kart, and it was sort of like when I talked to her about my job I got, maybe I understood maybe, like, 5% of what she said. I'm like, Okay, so what's the problem? Well, I wanted to pre order one, and I've been saving my money for it, and now they're saying it's not going to happen for months, and there's going to be delays on shipments. And even if you get one, you might not get it till the fall. This sucks. Was like, Yeah, I guess it does. I mean, can't you go to the arcade? Dad, what do you like? 1000 we don't go to the arcade anymore and play games. It's like, oh, you know. So it got me thinking, like, I don't have a game console now, Doug, I don't trust myself with one. I have far too much going on. I have too much work to do. I don't have time for games. But when I was young, I loved them. I really, really loved them. And I remember, well, going to the arcade with my buddy, Sean, and this was even in high school. We'd spend hours in rolls and rolls of quarters playing particular video games. So my question, Doug is, did you have a home game system? And if you did, what did you play on it? And then, when you went to the arcades, what was your go to game? Yeah,
Doug Draper 13:48
so yes, I did have a console, and it was in television.
Pete Mento 13:53
Oh, yeah, one television football was awesome.
Doug Draper 13:57
Yeah, that's they, you know. And I don't know, it felt to me like it was the poor man's version of Atari, right? It's like, Here you go. And had this little, I don't even know, you just moved it with your finger. It wasn't a joystick. I mean, I had loads of fun. Doesn't matter what it was. You had a you had a gaming console, and you were off and running. So in television, which is a little niche, but when you were talking about the arcade. There was a godfathers pizza maybe a couple blocks from me in Wichita, Kansas, and they had the sit down Miss Pac Man Machine, where you would sit down across from each other, and it was like a table, and we would come in there and just drop quarters like a pool table, and you'd make your mark, and then we'd be eating pizza, and you come over and your hands are all greasy from pizza, a coke would spill on it, and it was total chaos, but it was amazing fun. And we would sit there for hours. And then the other one, that was a stand up version, was defender.
Pete Mento 14:53
Love that game. It's hard, though. Defender was hard, yeah, yeah. So those are the two I feel like we've. Talked about this one before, but you know for me, my my go to games were battle zone, the tank one where you had the two joysticks. I love that. I loved Galaga and glax, Galaxia, I think was the other one. I love those and any of the fighting games. So like karate fighter, that was a fun one where you had the two joysticks to do the moves. But I, too, loved Pac Man, and I can remember being in the car with my mom in the song Pac Man fever came on the radio. That's how big Pac Man was that that a song about it like made the top 40. We were all going crazy for Pac Man. My first console that I ever got? I had an Atari, the 1500 right, that we played pitfall and Space Invaders and stuff. But then I got a VEC tracks, which was all one system together. That was, that was not a very good gaming system. But then I do remember very well in college, and I wonder if you had this too, the Nintendo 64 or whatever it was, the Nintendo machine, we would play tech mobile and drink beer. So tech mobile was like a football game, and you always wanted to be the Oakland Raiders because you got Bo Jackson, but it was so much fun. And we would drink beer, and you look at the graphics now, dude, it's like watching a video game of an actual football game, and we would just play tech mobile constantly. It was so much fun. Not a lot to do in casting name buddy, were you guys playing tech mobile?
Doug Draper 16:32
Not to that level? I know of it, but no, not. I guess the answer is no, I didn't. I know of game, but we didn't. We didn't roll up and and drink beer. We usually at the bars with our fake IDs.
Pete Mento 16:47
Do you play any games now? No, no, I don't. I don't
Doug Draper 16:51
play. I've been playing games forever. I probably haven't played games since I was 14.
Pete Mento 16:55
Wow, wow. Yeah, I just know I can't do it Doug, if I, if I get them, I'm I'll get sucked in, and then I won't get anything done. So I don't put myself up. You know, Keenan is probably, like, fired up for the new Grand Theft Auto, whatever the hell it is, or something, saving up all of his paper route money so he can buy it with his Christmas
Doug Draper 17:12
when it comes to probably playing video games right now, probably,
Pete Mento 17:16
yeah, he's not doing any of the actual producing. He's on his phone playing Candy Crush, or whatever the kids do these days. Yeah, yeah. Alright, Doug, what's your halftime?
Doug Draper 17:26
My halftime is the Boston Marathon, right? I saw that was happening today. I've never ran a marathon. I don't really have any interest to run a marathon, but Boston is is, if not the biggest one, right? Or the most prestigious, it's definitely up there. I think Chicago is a big one, obviously New York and Germany and maybe Tokyo or some other big ones. But to me, Boston Marathon is, you know that the creme de la creme, but I didn't realize that you need to have a qualifying time. And you know, you're not messing around. These things are are fast. And I looked right before the show here, you know, in the key demographic, which is like eight or the key age grade age group, which is like 18 to 35 or something, you got to run that thing in like three hours, right? And the same age range for females is like three hours and 30 minutes. Now to me, that seems pretty fast. You can kind of just multiply three by 60 divided by 26.2 and that's a pretty fast freaking mile of running. So I didn't realize there was a time and maybe there's other ones that have a time requirement, but So my take to you, Pete, because you're up in that in that neck of the woods, do Bostonians just think they're better than everybody else related to the Boston Marathon and they have this time qualification?
Pete Mento 18:52
No, that's not it at all. Buddy. Marathon day in Boston, it's right now. It's like the best day to be in town, because the race gets off, and then there's usually a Red Sox game that starts at about 1130 so everybody goes to Fenway, and they're hanging around that area. Used to be called yaki way, and laying it down. I don't know what they changed the name to, but it all the bars are open. It's a day off for a lot of people. So that day is actually evacuation day in Boston. That's the day that George Washington kicked the English out of Boston. So it's a state holiday. Schools are closed, and you'll go to the you'll go to the baseball game. And then when the baseball game is done, you walk to the you walk to the finish line and cheer people on. And then, if you're lucky, and this hasn't happened in a while, you'll get either a Bruins or a Celtics game, a playoff game that night. So it's just like an awesome Sports Day. And I really do love it. I know that there's, there's a lot of people who run that don't have to qualify, but I think for that, you have to raise, like, a lot of money for charity. So there's a lot of people who who raise just like, like, there'll be a team of people raise like, you know. Whatever, 25 100 grand, whatever, and then they get to run it. But do we think we're better than everyone? There might be those that do, but I think it's more about the fact that that particular day is just full of celebration in Boston, it's a lot of fun. I can remember being in my 20s and taking that day off and just it was a drunken blackout Brawl of gear and sports and all your friends are out. It was usually, like the first really nice day that we'd had for baseball. So there were other games, but it was cold, but usually Patriots Day, it was kind of warm, and you're already absolutely trashed by around lunchtime, and there'll be live music people everywhere. It was just such a fun day. Doug, I loved it. Nice.
Doug Draper 20:43
All right. Well, I didn't realize such a big deal out there, and it's good to know that Bostonians don't think that they're better than everybody else, because that
Pete Mento 20:50
surprises me. Bostonians have an inferiority complex to New York. But, like, you know that's why, that's why we hate each other so much. It just really comes down to New York's, like the really big, awesome town. We're pretty cool too. And as you know, I deeply prefer Boston to pretty much any other city but New Orleans. I'm a big fan pal. Big fan. Yeah, good,
Doug Draper 21:12
good. Alright. Well, that was brought to us by CAP logistics, right? A little video games, a little running. And of course, we gotta bring in alcohol and getting drunk, right? That's usually par for the course. So, yeah,
Unknown Speaker 21:26
yeah, alright, let me jump into
Doug Draper 21:28
my next one. This is pretty quick, and then we can end up with with your final one. But what we're starting to see in the news is the, I don't know if it's an unintended consequence, but it certainly is a consequence, where companies are starting to lay people off, right? The whole job situation, the auto industry starting to be impacted. Volvo, just this morning, said they're laying off 800 people Mack Truck. Mack Trucks is several 100 stellantis. You know, Boeing is losing a big client, China, right? I think there was a flight that was actually turned around where they didn't accept the delivery. There was a steel plant in Canada that was starting to to light, lay some folks off. And, you know, don't even forget about footwear, apparel, things of that nature, right? I mean, VF corporations here in Colorado, and their stock is just getting hammered, right? And if you're not importing and sales are dropping, then people are going to be following soon, there's going to be layoffs. So I think we're going to start seeing more of that, which may go to the narrative of what's happening here, but, yeah, I think we're going to start seeing more and more and more. Because if you're trying to reduce cost and you need to do something immediately, you know, you can't fire to to get profitable, right? That's, that's a bad, a bad play for a business, right? You can't fire yourself to profitability. But I think we're going to see more and more of these. And once they're gone, it's hard to bring them back, right in the sense that, well, we were able to survive without 500 people doing this. We can now do it with 300 people. So I think that's going to be something we're going to see more and more of. It's just the layoffs. Is just collateral damage for what's happening.
Pete Mento 23:20
We've said this a million times. The supply chains are complex, and they're very well thought out, particularly for the kind of companies you've just talked about, automotive and aerospace. They think in, you know, multi year plans. And when you have a disruption like this, and you can't get a hold of the things that you need in order to make the products that you've already got slated to go to market, it could be a year from now. It causes an immediate ripple effect that ultimately ends up with, you know, financial calamity for individuals with these jobs. And it's, it's, it's incredibly sad Doug, like it's, you know, I personally have a hard time these days. I don't want to talk about tariffs when I'm not working. So if I'm at a bar or I'm at a restaurant or I'm at a party or whatever, and people like, oh, it's Pete, hey, can we talk about these tariffs? And I just, I don't want to talk to people, because they usually have a deeply politically motivated attitude about whether they're right or wrong, rather than understanding the underlying economic issues and and the human side of this. You know, the number of people who are like, Yeah, stick it to China and no, there's, there's a, there's a real personal human cost to these decisions. And even if it is short term, it still matters to somebody who's not getting their paycheck, not making the rent, and it's a sad situation to be in. And then for the shareholders of these companies, you forget, most of us have our retirement wrapped up in 401, KS that are associated with a lot of blue chip stocks that have been suffering. I don't care who you are, right? This trade war ultimately, you know, ultimately it will be resolved. Ultimately all the parties will probably get more out of it. But in the meantime, it is hurting individuals, Doug and it's hurting bad,
Doug Draper 24:56
yeah, yeah, and the small businesses that are just. Shutting down. Those are the ones you don't hear about. But I mean, there's, and I would assume there's 1000s that either it's a side hustle or they decided to go with their passion and a leap of faith to go and and start a business on their own that are getting just destroyed. So those are the ones that, like you said, the stories and the individual impact. We don't hear about those, but they are many, many, many of them out there. Yeah, okay, bring us home, my friend.
Pete Mento 25:30
So DHL, over the weekend, made an announcement that they're not going to be doing international packages over $800 you know, there's many facets to this. A lot of it has to do with the end of de minimis. You know, you have international postal services that are no longer calling on the United States, because next month, in June, there's going to be significant impact on fees that will be brought in on commercial shipments. These are, these are strategic decisions that are being made by transportation services in order to avoid this chasm that they see coming and the the complications of actually doing the work. If you're importing e commerce right now, you're probably doing it in ocean container, maybe an aircraft, and you're going to have 10s of 1000s of lines for one shipment, and that's incredibly expensive to process and to pay for it's also very difficult and hard to do. And companies like DHL that are shifting over to this, this model, in order to avoid de minimis and doing real entries, you know, it's hard to get people spun up and ready to do it, particularly when you have a very, a very stated, you know, solid process, and this is so far outside the process. I tell everyone, if you see a customs house broker, give them a hug. If you come to like, the Office of your freight forwarder, your broker, it's like, Hey, man, I know you're going through it, and I know our clients are going through it too. And I try to, I try to be a very sympathetic ear to them. But you know, if I'm in an office, or if I'm talking one of our operating people, I'm like, I know how hard this is for you right now. I'm really sorry. So imagine you're one of these big, monolithic couriers who's not used to doing that kind of work, and now all of a sudden, you've got to manage this. It's got to be a nightmare. Doug, so I can understand how the decision came. But the next thing is, are other couriers going to follow suit? Are FedEx and UPS going to do the same thing? And what's that going to mean for that hole in the marketplace? Someone's going to have to innovate a way to deal with it.
Doug Draper 27:24
Yeah, yeah, the juice isn't, isn't worth the squeeze anymore, right? I mean, like you said, we, we spoke about the resources and Customs Border Protection, that's, you know, going through things with a fine tooth comb, same type of thing. I don't blame DHL at all, right? Like you said, literally 1000s of lines that would be coming in an ocean container. I can do the same thing, right? It's just not, it's just not worth it anymore, and focus your efforts and your resources in a more profitable aspect of your business. Because who knows what's going to happen two weeks from now, two months from now? And then you say, Okay, we're back in business with this aspect of our supply chain, and you go from there, but it'll be interesting. The de minimis situation that's going to pop up is going to be really, really interesting.
Pete Mento 28:12
Great buddy. Yeah, cool. All right. Doug, bring us home.
Doug Draper 28:15
All right. Well, that ends our show. We appreciate it. We're, you know, we're consistently under 30 minutes nowadays. Pete, so hopefully that's beneficial to our listeners. But regardless of our time, we try to bring you the best insight for global trade. Because if it's happening, and there's a lot of it happening nowadays, if it's happening across the world, and trade is related to it, we're going to be talking about it every single week. And Pete, there's nobody better I'd love to be talking about is you. I appreciate you and your time because you're kind of in that customs brokerage thing. So I am. I'm extending my gratitude to you, my friend, because you talk about this 24/7 so thanks for being part of the show. I really appreciate
Pete Mento 28:53
it. Oh, Doug, I wouldn't want to be anywhere else, bud. I mean, where else can I give you, know, Keenan crap than on this live airways every week and hanging out talking with you. You do some for 30 something years, you get pretty good at it, so I've just seen what. Don't know if I know a lot, but thank you, Doug, Yeah,
Doug Draper 29:11
agreed. All right. Well, thanks everybody to joining us today, and we will catch you next week on another edition of global trade this week. Take care. You.
Transcribed by https://otter.ai