Global Trade This Week – Episode 244
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Keenan Brugh 0:01
You're watching Global Trade this week with Pete Mento and Doug Draper. All
Doug Draper 0:08
right, hello everybody. Welcome to another weekly edition of Global Trade This Week. My name is Doug Draper, coming to you from the great city of Steamboat Springs, Colorado. I am only one of your hosts for the show. The other one is in an apartment that looks vacant. So, Pete, I'm not sure if you were moving out, moving in, or getting evicted. So, I may have to have you jump in and give us some, some color on what's going on with your life.
Pete Mento 0:38
In the words of the great Billy Joel, I'm moving out, so after a year here in Virginia, I will be moving out. I'm going to set up my shop full time in New Orleans, so I will be in New Orleans probably three weeks out of the month, and BC one week out of the month. I don't need to be here all the time. One of the main driving factors for being in Virginia was the fact that my daughter went to school here, she is transferring with an academic scholarship, yes, to a very, very good, very old, mostly women's school in Massachusetts. So that being the case, really no reason to be here all the time. So I work out of her office in Tysons, probably a week out of the month, and then other than that, I'll be living in New Orleans. See how one I can.. what's the over under on how many months it takes for me to drink myself to death? I don't know. We'll find out.
Doug Draper 1:30
Well, Pete, I am an advocate of Pete Mento, so I think the over.. it's going to be a long way, my friend. We have many more weeks to do this show, and many more people to hopefully motivate and inspire related to global trade.
Pete Mento 1:45
It's funny, people, people think that, like living in Vegas or living in New Orleans, you're gonna, you're gonna be wild all the time. It's not how it works. There's a lot to do. There's exciting stuff to do every weekend, but during the week, it's still a place where people live and work. So, I don't find, I don't consider myself at this advanced age the party man I was when I was in my 20s. Now, if I was 25 saying I was moving to Orleans, Doug, you might want to take out a life insurance policy, I'm going to pay off that mortgage, but I think I'm going to be okay, buddy.
Doug Draper 2:15
Yeah, good, good age equals wisdom, so I'm glad that all right, my friend, let's get the show started. Why don't you kick us off for topic number
Pete Mento 2:25
one? Yeah, topic number one has to do with the recent Customs House Brokers exam that was, that was proctored back in April. There was what's considered to be statistically an abnormally high pass rate, so generally speaking, the pass rate is never more than 5% It usually hover somewhere between two and a half to 5% and that's something that people are proud of. I'm proud of the fact that I had a 3% pass rate the year that I took, proud that I passed, and that's fine. But this year it came out around 22% so about 22% of the people who took the test passed it. I haven't seen the test, I don't know that it was particularly difficult, they're not difficult, but here's what's really gotten, here's what really grinds my gears, you know, really bothers me is people saying horrible things, people that I consider friends that are on LinkedIn and on Twitter, or whatever they call it now, X, Jesus, I can't keep up, saying, well, the test was too easy. Clearly, it was too easy. These folks don't deserve it. You know what? Stuff it. Honestly, I'd like to see people that have been brokers for 20 years sit down with this test with the two hours allotted and take it and pass it. I don't care who you are. I don't care how long you've been a broker. This test is very hard, and maybe they just prepared very well, or maybe it was, maybe not the most complicated exam. The exam was too hard to begin with. It doesn't, in any way, you know, lessen or dilute the fact that these people pass the test, and they should be proud. We should be proud of them, not for the least of which is because there aren't a lot of people that are brokers anymore. So, the fact that we have more people taking the test and passing is a good thing. We want that. We want more people deciding they want to be involved in this industry, because we're dying. More people retire or leave the industry of customs house brokerage or pass away every year that pass that test. So, whatever we can do to encourage people to become customs house brokers, we need to get out there and beat our chest, and say, yes, please do more of it. And for those of you, I mean, I address most of them individually in direct messages, saying, yeah, take this down, you can't say things like that. It's not cool, man. It's an accomplishment. I'm proud of those people. I know anybody with a license should be proud of those people. Most of them are, but this is a time where we should be supportive and not obnoxious, and that's really what would be..
Doug Draper 4:41
well, I think in general, haters gonna hate
Pete Mento 4:44
haters, gonna hate
Doug Draper 4:46
hater is haters are gonna hate. So, it'd be curious to see what the pass rate is on the LSAT or the GMAT, or some of these others, but I would.. I, that's a big jump, Pete. But you know what? Just get them in. Get them out there, get some real world experiences. Lord knows we need good, smart people to help navigate the uncertainty of what comes to our plate every single day. So, you know what? I agree 100% and my halftime relates a little bit to this, where there's an aging workforce out there in this specific line of work, and to me, like, you know, let's get them out there. It's a difficult test. It's kind of like admission rates at some of the Ivy Leagues, right? Everybody gets pissed off because the admission rate, I don't, you know, went from I'm just using some numbers, right, 20 to 15 to 10, and I think the admission rate to Harvard, and some of these is like 7% now, and there seems to be some pride in that, right? I think tides are turning, and I would agree with you, my friend, that let's let's get some well knowledged, if that's the right word to use, people in our industry, and let's go, and let's control the niche, but let's get some good people in there, so they can do the right thing and help companies on all levels, right, and not worry about the pass rate.
Pete Mento 6:06
It's no different than your driver's license, Doug. You know, when I was 16, I passed the test, but it took me a long time to be confident and to be probably, probably any good at driving. It's just the entrance into that world, it's a hard entrance, and then once you got it, you'll develop the skills and get exposed to things that make you a real quality broker. You can't do that till you have the license. So, yeah, we need to encourage people and not discourage them based on the percentage impacts. And I'll thus endeth my lecture. It really got under my skin this week, and that's why I wanted to bring it up.
Doug Draper 6:36
Nice. Good. All right. Well, hey, I saw something in the news the other day, I guess it was late last week, that everybody's talking about the Strait of Hormuz, and oh my gosh, what's going on, and then there's chatter about what can we do to bypass it, and, and, and move oil and crude in a different way. Well, lo and behold, the UAE is doing it right. I saw that they are building a pipeline from one of their major, not refineries, one of their oil fields, and it's cutting right across their country and bypassing. So, think of it like a triangle, because the Hormuz goes up and then it goes down, and the pipeline is going to cut right across. It's 250 miles, 400 kilometers, it's 55 0% complete, and the whole thing's going to be done by 2027 So all these people are saying, well, why can't they do this? Why can't they do this? Oh, by the way, the UAE is doing it right, and oh, by the way, they just pulled out of OPEC, right? So I think their mantra of like we want to, we want to turn on the jets, we want to start selling as much crude as we can in oil and not be restricted by compliance with with the association. I had no clue, everybody's chirping about it. What are the options? What are the options? UAA is doing it, and it's going to be done in 2027 which is next year, and it jives well with their purpose and reasoning for leaving OPEC. It's above ground, right? So, I don't know if this is conflict-proof logistics, if that's the right term to use. I've never.. I've not seen it. I don't know if it's like technically underground or whatever, but you know, just like drones, somebody could pop them out of the air, maybe somebody could sever a pipeline, but good on them, you know. In the spirit of Little John, because I just saw a commercial for Hyundai last night. Okay, UAE, okay, I see you. Good deal,
Pete Mento 8:42
let's call it conflict resistant. Doug, how about that? You know, you've got so many lessons that we can learn from history about logistics and changing how logistics works. One of the most important, and I'm going to nerd out, so just deal with it. The Ottoman Empire, the Ottoman Empire, modern day Turkey controlled the spice, the spice logistics. They controlled the ability to use that overland route forever. If you wanted to get to Europe with spices or anything from the east, you had to go through the Ottoman Empire to get there. They took a massive toll for that. They became the wealthiest part of the world by far. And then the Portuguese just decided, you know what, we should probably take a ship, we should probably try to move this stuff on a ship, and they bypass the Ottoman Empire, which we all know what happened. I mean, Turkey, certainly not the UAE, and that'll happen because of that. So many, the container, you know, the idea of using containers the way that we use them now. And then, you know, World War Two, what happened with Germany in the rail system? They realized that Great Britain controlled pretty much all the transportation in the world, and as long as they controlled the oceans, they needed to find a separate way of managing their logistics, which created their incredible Iran or Iraq - was it Iraq, care which one it was - pipeline via rail, so they created rail that went out there to get the oil back and forth. So that Great Britain couldn't mess with their supply chains. This is another great example of looking at a problem, saying there must be an alternative, and fortunately for the UAE, they got the cash to do
Keenan Brugh 10:10
it.
Pete Mento 10:10
Put those two things together, I think it's going to be an amazing change to how we look at energy distribution. I think more countries should consider it, including our own.
Doug Draper 10:19
Yeah, great history lesson, my friend. Appreciate that. All right, that brings us to halftime, brought to us by Cap Logistics. Kenan and his team make this show happen every single week. We appreciate it, pushing buttons, pulling levers every single week. Check out caplogistics.com Halftime, my friend, what do you got? I have no idea what you're going to talk about.
Pete Mento 10:40
Yeah, we're talking about moving. Can we just talk about moving? I know you did a couple of years ago. You made a big move, and I am a person who doesn't have a lot of stuff. I don't like clutter. I don't really care for a lot of things. It doesn't matter. It's still a pain in the ass. I mean, I, I've spent most of my adult life, my professional career engaged in the moving of things when it comes time to move my own stuff. What a pain in the ass, the inflated rates to do it, the people that show up to do it, the lack of care that goes along with it. But then realizing I have all these things I really don't care about. Why are they still here? Why am I still holding on to these things? Why is it still around? So I've taken this opportunity to really get rid of a lot of things I didn't care about and lessen my load as far as the material crap that I moved from place to place, but dear God, moving is an expensive pain in the ass, dude, and I hope I don't have to do it again for a very long time.
Doug Draper 11:33
Yeah, yeah, if it, you hold it up and if it hasn't given you joy in the last year, get rid of it. So,
Pete Mento 11:42
why do I have.. why do I have a manual potato masher?
Doug Draper 11:47
Oh no,
Pete Mento 11:48
why I had a bed frame for a single mattress. I haven't had a single mattress in 20 years. That's all I have a bed frame for. Yeah, Doug, it was just ridiculous.
Doug Draper 11:57
Good for you. Yeah, yeah. When we moved from Denver up the steamboat. Denver was our home, where we raised our family, and Steamboat is now a house that we happen to live in, but we, when we were moving, you know, in the closet you had the pencil marks of your kids growing up, and the dates, and how whenever we saw that and realized it was on the wall, and we couldn't move, that we lost our, you know what, and we sat there for probably two hours reminiscing, talking stories. I'm not afraid to say it, Pete. We cried, I'm sure my wife was like, "We're not leaving this behind, so she got out a chainsaw. I'm kidding, I'm kidding. We got a piece of cardboard, and we remarked it, so we have that with us, and it's, it's in our new house. So, my whole point with that story is that moving can be expensive, it can be emotional, the whole nine yards. So, good on you for ditching all the stuff that you haven't used.
Pete Mento 12:56
Yes, sir. What do you got for us, sweet duck?
Doug Draper 12:58
So, Memorial Day was this past weekend we always joke that we're never supposed to time stamp these shows, but we do it every single week, right? So we, we actually went to a memorial, you know, a memorial day here in Steamboat on Sunday, and it was pretty cool. It was relatively quick, 45 minutes, had some good speakers, and then the two things that caught my attention. Number one is they told stories about individuals here in Route County that were both in World War One and World War Two, which was very entertaining, I guess. Three things. The second thing is there were this old timer that he was highlighted in the newspaper, 91 years old, he was kind of just off to the right, that guy stood the whole time. People came over and said, "Hey, you know, why don't you sit down? He was standing fully, you know, in his blues. He was a.. he flew planes in Vietnam. He refused to sit down. Right next to him is oxygen tank, his walker, and I was behind him, and he was kind of swaying a little bit, so I didn't know if that was like an old person sway or the guy was about to go over. I told my wife, like, I'm beeline in to help this guy if anything happened. 45 minutes, and it was pretty hot, sun was out, pretty cool. And the last thing, Pete, which gave me a little bit of pause, every single person there that was speaking was probably over the age of 65 and then you had the Boy Scouts, which were young kids, you know, like elementary and middle school, where were the people our age, right? And I was like, what's going to happen whenever the folks that bring that put on these type of events every single year kind of age out. There was no middle-aged men or women that were really engaged with the event, so I was talking to some other folks about it. I'm like, that, that makes me nervous, and gave me a little pause, so I just wanted to throw that out there. But overall, it was really cool. I hadn't been to one of those in probably a decade, and it really made me proud to be an American and experience that, and learn, learn, so. Stories of people that helped us, you know, freedom isn't free, and it was really cool to hear the story.
Pete Mento 15:05
Well, I live in very, very conservative, very prior service Northern Virginia, so there's a lot. There's a lot for Memorial Day here, and I was at the NCAA Division One lacrosse final on Sunday, Notre Dame against Princeton, not a very good game, but they asked anyone who has been prior service to stand, and the number of people that stood was incredible, but you're right, most of them appeared to be Vietnam era. There weren't a lot of folks from Desert to Shield, Desert Storm, that were standing. I don't think that we have the same. That war was a real bastard, dude. World War Two, World War One, they were nasty, so was Korea, so is Vietnam, and the fact that we, we really don't consider history, history moves away from all of us, you know. Over time, the importance, importance of it begins to move away. Our grandparents were old enough to remember World War Two, maybe even World War One, but I think over time we forget the incredible devastation that it had on the populations of the countries who fought it, and now wars are they're miserables as they've always been. People die as they always have, but I don't think that we bring the same level of gravity to what those people sacrificed, and I think it's a shame.
Doug Draper 16:12
Point taken. Good point. All right, that was halftime brought to us by Cap Logistics. Check them out@caplogistics.com We are officially in the third quarter of the show, Pete. So, what do you got?
Pete Mento 16:24
Doug, is Pete gonna peak? Last year we had the weirdest peak, maybe in my career. It was a strange peak. A couple years before that, we had the peak that never ended in Covid, and now we're sort of coming forward, getting up to that peak time. It's happening and starting. Are we going to see a weird peak again? I really don't know. In talking to importers, there's a real fear that's starting to bubble up to the surface of consumer sentiment, you know, the fact that people aren't buying like they used to, transportation costs that are associated with energy costs rising constantly. Doug, I don't know that we're going to have the kind of peak that we were expecting. I think that this, along with the fact that so many contracts remain unsigned, even now coming up on June, is peak at a peak. Doug, I don't think it's going to,
Doug Draper 17:09
yeah. When you posed that question earlier, I'm like, I don't really, I don't know, but here's my two cents on it, right. So it's essentially, again, we're going to timestamp the show first of June, and peaks coming in a couple of months, at least the start of it, and everybody in my industry. Pete, here's what's transpired in the warehouse business: everybody's kind of hunkered down, and I think I spoke about this before, right? They may dabble and say, can we get a quote for this or quote for that, and it's more of an exercise to validate where they stand now, so lots of interest, not much movement. We saw last peak that people were just kind of adjust in time, right? They're not building a tremendous amount of inventory, and I think that the companies that had success doing that, rather than having, you know, a 1x purchase order last year, they trimmed it down to a point seven five or a point five. If they were successful in doing that, I think it's going to happen again. I think there will be a peak. It won't be anything like you and I used to see back in the quote unquote the day, right? But I don't know, something crazy should happen, but if, but purchase orders are starting to happen now, and if you're not committed to buying it, factories aren't committed to make it, and at some point those decisions are going to happen in the next month, and then, and then we'll go from there. So, I think it'll be muted, I think it'll be a little bit better than last year, as far as the bump goes, but Who the heck knows? The world pivots so quickly nowadays. I don't know what to tell you.
Pete Mento 18:44
Yeah, man. Well, a guy works in warehousing, we know about inventory backups, so you know if those warehouses are chock full, it tells you a thing or two about inventory at peak.
Doug Draper 18:55
Yeah, yeah, for sure. All right, so mine is about this, is more domestic related, but it's about the other giant, the other elephant in the room, which is Walmart, as it relates to supply chains and logistics. So they just launched a new inbound consolidation program to basically consolidate all these suppliers that send them LTL shipments, and they want to send them to the DCS as full truckload. So, back in the day, we work with a client that every single week on Sunday night, they'd get their POS for 42 warehouses to Walmart. You go into the routing system at Walmart, you'd basically put the POS in, they'd say what trucks are coming, because Walmart would control it, and you're like, "Oh, crap, you know, the PO going to this DC is going to pick up on Monday, so we got to prioritize the picking with that order. And it was, you know, 42 individual purchase orders going to regional DCS. Now they're basically saying, "Just give us one national PO, and we're going to pick it up. We're going to take it to consolidation points, not a DC, a consolidation point, which will then go to the DCS, right? So they're essentially gaining, I don't know, tighter control over the first mile, if you will. They're controlling the inventory allocation, the replenishment, and there's all kinds of automation they're putting into these sorts centers. The other piece is, if you do want to control it right, they're not going to change the terms of your sale, but they're going to mandate you have to use authorized carriers, you know. So, Johnny Blow's LTL company, that does a really good job in Southern California and goes into the Inland Empire DC can't do that anymore. You can imagine it's CH Robinson, and I think JB Hunt's one of them, but authorized vendors. So, if you want to control the customer, you got to use these guys, or we'll charge you kind of like a cost per case to pay for the consolidation, the movement within the consolidation DC, so I don't know. I think it's steadily pulling. So, here's the forward-thinking piece of it. Pete, they're pulling suppliers deeper into their own logistics ecosystem, and that's kind of something out of the Amazon playbook. I think there's going to be more control for Walmart to bring product into their buildings and out to their DC, so they're going to be mandating more and more requirements of suppliers, they're going to feed the big boys as far as the big carriers and the brokers out there, and it should be pretty interesting. So, there'll be a little chatter about it, people will complain, they got to pay an extra five cents, I'm just making that number up per case to get through the consolidation, and it should be interesting to see how this plays out. So, I don't know. You heard about that? What's your take on Walmart controlling, quote unquote, the first mile?
Pete Mento 21:53
Haven't heard about it, Doug, but it sure doesn't shock me. Walmart's a beast, right? They're beasts, they have so much freight, and they control so much volume, ocean air, over the road, warehousing, right? They have their monolith, and their ability to move the market is unheralded. You've only got them in Amazon, really, as far as two companies that are able to move the market so well. So, where they have the opportunity to control more of that market, control the cost for it, of course. They're going to take it, and they get their customers can free ride off of it, and so can other people. Everything that they do fascinates me. Everything, because in the long run, it usually works out pretty damn well for them. Yet to be seen for Amazon with some of the changes they've made, but again, never underestimate them. For Walmart, though, they have a very long track record of just kicking ass in the market, and I think this is going to be another one of those things that we look back on five years from now and say, "Wow, what a great decision. And other companies try to emulate whatever size that they can.
Keenan Brugh 22:53
Yeah, valid.
Pete Mento 22:55
All right, well, that's going to do it for us this week on Global Trade. This week, I want to thank everyone in Caplogistics for their unwavering support for Kenan back in the booth, doing his best, his best to make sure the show comes out well every week. I want to thank my co-host, Doug, for always keeping it level here on me, and thank all of you for listening and sharing this podcast. Check out Cap logistics@caplogissix.com and we'll be back next week. And, as we always say, if it's happening in global trade. We talked about it on global trade this week. All
Doug Draper 23:24
right, safe move, my friend.
Pete Mento 23:26
Thanks, Pal. Bye.
Transcribed by https://otter.ai