Chicago November 1st, 2017. Economic Update, Transportation Innovation, US Trade Compliance Insights. Port and Congestion Innovation and Insights. Cyber Security and Transportation Security. Global Financial Insights. US Foreign Policy.

1. Trade,Economics
andInnovation
The Innovation Economy

3. What Do Markets Long For?
• Certainty – We want to know we made the right choices, with our
money, our lives and our markets.
• Transparency – We want s much information as possible so that we
can have the most direct insight into the likely tactics of our rivals.
• Order – The more chaos we see in a market, the less comfortable we
are with long term decisions.
• Stability – Markets, like humans, crave stability.

11. What Are The Challenges?
• Education – specifically distance learning, the hive mind and
vocational educations – America needs to learn to make things again.
• Terrorism – most specifically Cyber-threats.
• Debt …..Consumer, Education and Foreign
• A focus on the RIGHT exports
• Entropy
• South American instability
• China! Section 301 under Tariff act of 1974 …. Oh boy ….

12. Transportation
Evolution
The Future of Manage d
Logistics

14. Evolution
• The single greatest change in the transportation industry since the
invention of the Ocean Container is happening now.
• This change is massive, it is global and it is the result of decades of
automation, trust and expansion.
• However, in the end – it will create less choice, less opportunity and
most likely, higher prices for the most common consumers of
transportation.

15. How did we get here anyway?
• The Container
• Consolidation
• True Integrated Logistics Providers
• Digitization, The World Wide Web, Visibility – Transparency
• Real Economic Globalization
• Many Markets – and the Need For Many Providers

16. Consumers Have Always Run the Market
• Dramatic shift in the retail world – direct to the middle market – then
direct to the consumer (AMAZON)
• Massive market creation where need meets the market but the
market isn’t always admitted for a price (GOOGLE)
• Social Media driven marketing – buying billions of dollars of things we
don’t even realize we want, and probably don’t need
(FACEBOOK/INSTA/SNAP/TWITTER)

17. The Race Started A Long Time Ago
• Every aspect of logistics is undergoing mass commoditization.
• The more transparency that is given to the consumer, the more it is
generally used to drive down costs – not to improve processes or
drive our inefficiencies.
• So that forces the providers of services to either play in that
expectation, provide for the market that needs more – or – change
the market.

19. Innovation
• Driverless and Autonomous Delivery
• “Making Technology Go Deeper”
• Vendor Management – Beyond VMI
• The Continued Consolidation of the Ocean and Air Market
• Faster Delivery – Higher Prices: We don’t care so much about how
much it costs to get the retail thing I want right now, just that we
want it RIGHT NOW.

20. Food, Omni Channel &
Ocean:
Predicting the Future

21. Topics Today
• Americans Dining Habits & The Impact on the Flow of Materials
• Setting the stage- Ocean Market Dynamics
• USWC- McDonald’s character
• USEC- Five Guys character
• Why This is Important to You

22. Omni Channel is to Logistics Flows what Fast Casual is to Fast Food
If you are a Gen X’er or older you grew up with Fast Food where they did it Their way
-Food Was Pre-Cooked with the goal of delivering your Big Mac Fries & Coke at the speed of light
-French Fries found under the seat of your car a year later looked amazingly the same as the day they were bought
-Differentiation was based on set menus and how far you were willing to drive to Burger King or Wendy’s
If you are a Millennial or younger you grew up with Fast Casual where they do it Your way
-Food was cooked to order, with a focus on the quality of ingredients and less choices on the menu
-It is a badge of honor that you shop at Whole Foods and buy bread that is moldy in 3 days
-Differentiation is based on how creative you can be to invent an off menu item like “animal style” & increase your Profile Hits
on your favorite social media ap.
Americans Dining Habits are a Leading Indicator for Logistics

23. Omni Channel is to Logistics Flows what Five Guys is to McDonalds
Omni Channel is simply a generic term for the supply chain re-engineering projects that allow
organizations to appear to be more responsive to consumer demand by aligning sources of
supply closer to the anticipated demand.
The definition of Omni Channel is different by company and industry, while mainly a retail
vertical concept, its applications extend well beyond into most supply chains.
In 3PL speak Omni Channel is a buzz word that means custom process for how to we work with
our client to leverage our asset network or facilities to create a “fenced” menu of options so a
consumer can get what they want, when they want it, and there is hopefully still margin dollars
left.
Because the emphasis is turning to final mile lead times, we see the advent of less traditional
distribution locations growing which impacts the flow of material.

24. Characteristics of the Future Supply Chain
1) Focus on Speed to Client/Consumer as a differentiator
2) Leverage of 3rd party networks and assets to create flexibility
3) Increased need for reliable replenishment cycles at a manageable cost
4) Greater Sensitivity/Intolerance to delays, especially due to congestion
5) Reliance on Technology/Data to drive decision making, thus emphasizing
Supply Chain connectivity and clear authoritative data sources
6) Security Both Physical & Cyber will be Emphasized

25. Setting the Stage
Market Dynamics

26. Reduced from 4 to 3
2M + HMM (33.4% Global Container Volume)
Maersk (Hamburg Sud) / MSC / Hyundai
OCEAN Alliance (26% Global Container Volume)
Evergreen / China Container Lines / OOCL / CMA (APL)
THE Alliance (16% Global Container Volume)
Hapag Lloyd / ONE (NYK / MOL / Kline) / Yang Ming
Vessel Sharing Agreements Post April 2017

27. The 15 Global Players & Why It Matters
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
Maersk MSC CMA CGM China
Container
Lines
Hapag
Lloyd
Evergreen OOCL Yang Ming MOL NYK Hyundai Kline ZIM PIL Wan Hai
Global Deployed Capacity
Ocean Carriers

28. Container Ships: Scaling
Average Size Vessels 2016-2017
 Transatlantic 5200 TEU
 Far East to East Coast 7700 TEU
 Far East to US West Coast 7500 TEU
 Far East to Europe 15000 TEU
 Far East to MED 10700 TEU
 Far East to Middle East / Latin America /
Africa 10000 – 13000 TEU

29. Historical Container Imbalances

30. Traditional Flows Pre 2016-17 Canal Expansion

31. New Flows Post 2017 Canal Expansion

32. Po
Predicting the Flow Shift (The McDonalds Character)
Port of Long Beach
Port of Los Angeles

33. Po
Predicting the Flow Shift (The McDonalds Character)
Key Issues
• Land Locked
• Labor Relations
• Tech Investments to
Increase Throughput
• Community Relations
• Traffic
• Pollution
• Political Climate

34. Source: You Tube: Behind The Digitization Of Shipping Logistics - In The Wild - GE
Example of the Change (The McDonalds Character)
Chris Chase- Marketing
Manager Port of LA

35. Po
Predicting the Flow Shift (The Five Guys Character)
Port of Savannah

36. Predicting the Flow Shift (The Five Guys Character)
1) Turning Drivers in 23 or 53 mins. (Drivers Getting 8 turns per shift)
2) 11,000 Trucks per day
3) Railroad Expansion Project
4) Turning New Panamax Ships in 30 hours (6500 Hooks)
5) Geographic Positioning as First Stop on Asian USEC rotations overtook Elizabeth, NJ this
year for vessel calls in Q1
6) Favorable Labor & Political Climate

37. Asia to USWC- 16-19 Days
Recovery in WC- 2-4 Days
Intermodal to EC- 10-14 Days
Delivery from Rail- 1-2 Days
Total: 29-39 Days ~ $4300.00 per 40
Asia to SAV- 26-29 Days
Recovery in SAV 1 Days
FTL Delivery 1-3 Days
Total: 28-33 Days ~ $3900 per 40
What is your daily cost of Inventory?
Predicting the Flow Shift (The Five Guys Character)

38. Why Does This Matter to You?
The growth of omni channel concepts in the industry are going to drive a focus on
reliable replenishment and more regional distribution points (de-emphasis on
gateways)
The carrier industry is driving towards a model of larger ships, higher capacity,
fewer ports of call
The USWC ports will struggle with volumes, we will see increased delays in
throughput. Shipper will struggle to get throughput from vessel arrival through to
container availability (3-10 days)
Distributing volumes to the USEC will become a key route for points of distribution
East of the Mississippi River

39. Tools
Last minute details
Tool Supports “Style”, “Color”, “Size”, & “Season” as well as standard “SKU” nomenclature
Tool Supports Blanket PO’s and partial shipments
Tool Supports PO’s placed to buying groups and shipping from alternative ship froms
Tool Support PO’s with Delivery Schedules
Tools supports EDI status messages back to customer ERP system
Tool support EDI messages back to customer for ASN.
Q&A

40. Trade&
Compliance
A Ne w Approach to an
Old Issue

41. Opportunities
• Bilateral Free Trade Agreements (UK, India, Japan – Possibly Brazil)
• UK/USA isn’t all Apple Pie and Roses …..
• Drawback and other duty minimization expansion.
• Resurgence of the USD as the only currency of choice.
• Europe in chaos and how this specifically effects Germany and France.
• Discussions underway to understand what an FTA with China could
look like….
• SAY WHAT???

42. US/CHINA
• The U.S.-China trade agreement could lead to worthwhile new market
access for U.S. exports to China.
• In particular, U.S. beef exports to China will resume, and there are
commitments to expand access for a range of U.S. financial services
and biotech products and to reduce regulation on U.S. exports of
liquefied natural gas to China.
• The United States agreed to accept imports from China of cooked
chicken.
• This also opens the door to greater access to infrastructure projects
for US Firms – especially regarding LNG infrastructure.

43. And the Trade Marches On …..
• The “Compliance Challenges” of 2017 are …. Well, fascinating.
• We no longer follow the old ideas of how and why an importer is
going to be audited.
• In their own way, Customs is taking a more “trade like” attitude
toward enforcement.
• Unlike ever before, they are watching, they are willing and they are
able.
• They are also under pressure, at the same time, to work intelligently
with the importer.

44. But Why?
• CBP has been the subject of tremendous ridicule and doubt by
legislators in DC:
• Border Security, something that never wanted has been mashed into their
over all mission.
• C-TPAT has been determined a failure by anyone who has academically
analyzed the outcome.
• The Centers of Excellence have come under fire as of late.
• Drug interdiction and enforcement is under scrutiny because of the heroin
epidemic.
• And then there is ACE …..

45. Where Does This Leave Us?
• The hunger for “wins” via enforcement have never been greater.
• Amidst a narrative of “cooperation” we find CBP more and more
insular in their approach.
• More and more competition for budget means that whoever gets it,
had better show results.
• People are uncertain about the stability of their positions.

46. “The Gloves Are Off Doc”
• “With great responsibility comes great power.”
• “Audit activities will be significant in 2018”
• “ISA is still a privilege, people seem to have forgotten that.”
• “ACE is $1 Billion over budget. We are past the point of no return.
People will use it, they will adopt it. Nobody has a choice anymore.”
• “The Trade has had enough time to get their (expletive deleted). It’s
time to walk the line or deal with the fines.”

47. The Nine Deadly Sins of Importing
1. Manufacturing Assists: Items supplied directly or indirectly and free
of charge or at a reduced cost for use in connection with the
merchandise. Examples are materials, components, tools, molds, and
engineering or design work undertaken outside the United States. The
cost of the assist is dutiable.
2. Additions to Price Paid or Payable: Modifications to the price of the
goods is very common in an import transaction. Issues such as missing
or damaged cargo can lead to a reduction or addition to the price
actually paid by the importer rather the price claimed at time of entry.

48. The Nine Deadly Sins of Importing
3. Non-Dutiable Costs: Various costs that are not subject to duty payments.
For instance, assembly and maintenance services after importation.
4. Country of Origin: Just because something was shipped from a country
doesn’t mean it was made there or that the importer can claim this
exporting nation as the country of origin. Know the country of origin for
products.
5. Classification: Inaccurate product classification can lead to disastrous
outcomes regarding import compliance. The incorrect use of special trade
program terms is just one example. Special trade program eligibility is often
predicated on the Harmonized Tariff Schedule (HTS) being applied to the
goods.

49. The Nine Deadly Sins of Importing
6. Free Trade Agreements: Wrong or inaccurate interpretation of
special trade programs. Does the product really qualify? What
means/processes and justification did the importer use to determine
that the goods qualified? Do you have the proper documents on record
at time of import to support this claim?
7. HTS Chapters 9801 and 9802: Outlines the rules for re-importing
goods of U.S. Origin. CBP requires tangible proof that the product was
originally manufactured in the United States and that they were not
advanced in any way while abroad. Not complying with the provisions
of these chapters is an easy way to trip up in an audit.

50. The Nine Deadly Sins of Importing
8. Related-Party Transactions: The price paid for a good when the buyer
and seller are related parties. For example, a transfer price
arrangement where the participants are part of the same organization.
9. Recordkeeping: You are responsible for keeping trade transaction
records for five years. Corporate guidelines should be followed. CBP
audits for consistency and compliance.

51. Centers of Excellence
• Effective July 10, 2017, Entry personnel that perform entry functions
such as collections, statement processing, broker management, etc.,
transitioned to the Centers of Excellence and Expertise (Centers).
• Organizationally, the Entry personnel fall under the chain of command
of the Center Director, who is operationally responsible for
performing trade processing functions and making entry summary
determinations within their industry sector.

52. C-TPAT (Or is it “CTPAT now?)
• C-TPAT for Exporters
• C‐TPAT has Mutual Recognition Arrangements with New Zealand,
South Korea, Japan, Jordan, Canada, the European Union, Taiwan,
Israel, Mexico, and Singapore.
• A bill that aims to increase security and decrease wait times at the
nation’s ports of entry was recently introduced in the House by U.S.
Rep. Martha McSally (R-AZ).

53. CyberSecurity
andCyberCrime
The Innovation Economy

54. “The new terrorism will not be guns and bombs, it will not be planes
driven into buildings or the kidnapping of senior politicians or their
children …
The new terrorism will be ones and zeros …. It will be information and
data.
It will be the sudden disconnection of the financial strength of our
nation.
It will be the ghost in the war machine, suddenly unresponsive when the
enemy transitions from trying to destroy our military –
To simply making it inoperable. Or worse yet, turning it against us.”

55. To Understand Where We Are ….
• The 1980’s and America’s First real focus into Counter Terror
• True gaps in national security
• Documents
• Focus on “soft targets”
• Physical security – especially on areas of high value
• Financial security – communications security
• Personnel Security

56. Networked Logistics Used to Be a Good Thing
• “If it touches the network – it touches the threat.”
• The recent debilitating attacks on forwarders and carriers were all the
result of updates to secondary systems outside the supply chain (tax,
finance).
• Logistics industry is incredibly integrated – from vessel to port to
warehouse to shelf. And now this even includes Federal Agencies
with ACE (including revenue [EIN] and foreign vendor data).

57. The Nexus Between Narcos and ISIS
• The danger of moving product versus moving money is an ever
present concern
• Highly trained personnel are not as expendable as you might think
• ISIS is – after all, a death cult with eyes on Armageddon
• But this requires money, and chaos
• Above all …. CHAOS
• They popped a carrier and numerous major forwarders ….

58. By The Numbers
• In 2016 roughly $228 Million in cargo was stolen.
• In 2016 rough $450 BILLION was stolen from Cyber Crime.
• We expect to lose $2Trillion within the year 2019.
• The worst part of this story – is that there does not appear to be any
real work being done by anyone - not consumers, banks,
intermediaries or retailers to manage the threat.
• However – the cyber threat only becomes more complex and more
advanced.

59. The Worst Part ….
• Espionage isn’t even tracked
• Most “Ransom-ware” isn’t ever reported
• Consumers seem unconcerned…….
• It is almost all entirely avoidable with the most simple of oversite –
but overlooked or ignored.

60. And Something Awful Will Happen
• Lets be honest – it’s been pretty amateurish ….
• Autonomous Cars….Ships…. Planes
• Retail Systems
• Medical Care/Pharma
• Banking/Trading
• Satelite/Communications/Internet
• Defense/Public Safety
• Utilities/Transportation Infrastructure

61. Dealing With It …. Best Practices ..
• Patches and Updates
• Vulnerabilities Scans
• Penetration Testing
• Up To Date Anti-Virus Software
• Restrict Permissions
• And Use the Concept of “Least Privilege”
• Thumb Drives
• Kids on Work Computers

62. Third Parties
• Networked EDI
• Mobile Phones
• Hackers …. Just for fun
• Drones
• Know who you hire and who you fire
• Mergers and Acquisitions – full reviews
• Buying refurbed equipment

63. Contact Information
Pete Mento
Vice President
Global Trade and Managed Services
Washington D.C. Office
978-317-3250
Pete.mento@CraneWW.com