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The following is the December, 1999 edition of "The Bulletin". Any questions or comments regarding content should be addressed to Alistair Macnab at 713-678-4300.
 The Editorial
You'd be surprised at how often I'm asked: "Just what does the Port Bureau do?" While this is not unexpected from the general public, it amazes me that the question sometimes also comes from Members. They are paying their subscriptions (God bless them!) yet they don't know what the Bureau does or what its mission is.
But much more worrying is the observation: "The Bureau doesn't do anything for me or my firm" and that's a warning bell if ever there was one.
Well. What does the Bureau actually do and why does it exist in the first place? Think of us, if you will, as the meat in the sandwich. On one side there are the public port authorities and on the other, the private sector port users; two slices of bread that don't add up to a sandwich without something in the middle to bind them together. And that's where the Bureau, "Lucky Pierre", comes in.
It's true; we can all be individualists and take care of our own business, thank you very much. But it's also true that when there is an overarching operational philosophy by which we can all prosper, then getting together and hashing out the details begins to make a lot of sense.
International commerce and maritime transportation are both fields in which rugged entrepreneurs and daring adventurers have famously left their individual mark for posterity. But for most of us, we look for a level playing field, as little legislative red tape as possible, and an opportunity to do what we do best. Of course, we do need a little help from our friends from time to time. We need to move our goods, berth our ships, and access our customers and for all of these things, we need a port in which to make it all happen.
On the other side, the 800-pound gorilla, the port authority, needs to be the facilitator for the flow of commerce. Its concerns for safety and access; for business growth and regional and international competition; for civic responsibility and accountability; for evenhandedness and environmental issues; all these and more might sometimes inadvertently get in the way of your own particular game plan and that's when the rub sets in.
Enter the Bureau. No we don't have a magic wand to wave away all problems. Nor do we have the ability to bring light into darkness. Miracles, in fact, take time and I'm not sure that we'd be able to pull one off.
But what we can do, and do very well, is to help the port user and the port authority to recognize that each shares the same goal. But there's more. We educate and inform; we facilitate and investigate; we bring people together or hold their jackets to keep them apart. Most of the things you'd like to do for yourself if only you had the time or that are outside your core competency, these are just the things the Bureau can do for you.
Maybe its not so much a question of what does the Bureau do as it's a realization that the Bureau can and will do whatever you require. You've brought the camels to the oasis by joining the Bureau. Surely we don't need to apply the bricks to get you and your camels to drink your fill?
Have a joyous and healthy Christmas and don't let the Y2K grinch detract from a spectacular millennium celebration (even if its one year too soon!)
Alistair Macnab
 Christmas in Mombasa
Coming from the long winter nights of the Northern Isles, the prospect of Christmas so close to the equator in East Africa was going to be a novel experience for a first trip apprentice aboard an inter-colonial passenger ship running between Africa and India.
Getting used to personal servants on shipboard was one thing, but observing the lifestyles of the last of the former empire builders as they congregated at the bar for noontime pink gins and burra pegs before lunching on mountains of hot curry and rice, was still a novel experience.
This first Christmas far away from home, would take place in port in Mombasa. As the half-way stage between Durban in South Africa and Calcutta in India, the passenger list was a heady mix of races: black passengers on deck, Indian and Asian passengers in second class, and, of course, the sahibs and memsahibs comfortably established in first class.
On this occasion, however, there was one first class lady who seemed to not quite fit in with the superficially open society of her fellow passengers. Despite her allusions to a Home Counties childhood and family connections in Capetown, her precise social standing in Calcutta and Darjeeling seemed vague and ill defined. It was widely rumored that she might very well be "chi-chi" and if so, what was she doing traveling in first class?
These things are mentioned merely to offer a flavor of the time and the location. To the ship's staff, the lady was always pleasant and gracious. She was, in fact, a bit of a favorite with the younger officers as she could always be counted on to ask for items on the dinner menu that were discretely coded "for passengers only" so as to pass them on to the appreciative apprentice seated at her table. It should be mentioned that owing to the comparative small number of European officers, that even humble apprentices were obliged to sit at table with the first class passengers even as certain menu items were reserved for the paying guests
On Christmas morning, there was an expectant bustle among the Purser's staff as an important personage of rank in the United Nations Organization was to board the ship for passage to Madras. This turned out to be a well-recognized Indian gentleman and his natural claim to one of the special first class suites on the boat deck was assured.
The Captain's cocktails that afternoon were especially lively as this high personage was sought out by all the diehard colonials and although he, as a Hindu, was abstemious, his share and a good deal more of the Captain's largesse, certainly flowed in other directions. As the gathering steadily gained momentum with each round, the crowd got somewhat boisterous and tongues became a little looser.
Wasn't he a real decent chap even if he was Indian?
Don't mind leaving the old place to fellows like him although I prefer Muslims, myself. Much sounder altogether.
The temperature might be in the nineties but everyone was beginning to look forward to a traditional dinner. There would be ham and turkey and, of course, steaming hot Christmas pudding with brandy sauce to follow. We'd all look forward to the formal toast to The Queen, God bless her.
Just then, our mystery lady entered and to the surprise of the entire assembly, she was magnificently dressed in a formal saree complete with a red dot on her forehead. Just as gracious as ever, she greeted even those who has been decidedly ungracious to her even as they speculated about her background behind her back.
Our distinguished guest immediately moved to her side in order to escort her into dinner and to the first trip apprentice just newly out from the Northern Isles, here was the conundrum of "The East": an Indian gentleman dressed as a British businessman, and a British lady dressed to look like a Maharani. Suddenly, the faded dowagers and retired colonels seemed to have lost their former luster and seeming invincibility.
The Captain's table had certainly become a study in revised priorities and in honor of the occasion; there were no coded menu items at the lower tables either.
 Logistics: Turning Traffic Management into a Science
Bringing corporate management to the certain realization that logistics management is not just another, and more expensive, way of describing Charlie and his aging group of paper shufflers down in the traffic department, is surely one of the greatest challenges facing purveyors and proponents of logistics today.
We've all read about the empowerment that supply chain management brings to the table but skepticism of its stated goal of achieving improved financial results remains high when managers are still faced with invoices from truckers, warehouses, railroads, steamship companies, or even from their chosen third-party logistics management service provider. Other than by buying the cheapest service that can be found, or by squeezing the last drop of value-added service from the contractor, how can a well-defined cost center magically metamorphose into a superior financial achievement?
In other words, if it costs real money to move goods from source to destination, where are the cost savings to come from, no matter how cheaply transportation services are bought?
But just suppose you could redefine "source" to be the original raw material supply point instead of at the location of your purchase of the manufactured good? And supposing the "destination" were not the point at which you sold the good on to a distributor or retailer but was actually at the final point-of-sale where is was sold to the end user? A supply chain will have been created that links the supplier to the manufacturer, to the wholesaler, to the retailer, and to the consumer with the packaging, transportation, documentation, duty, communication and storage all included as the links.
Now start eliminating stockpiling of raw material through just-in-time manufacturing processes, or warehousing because of point-of-sale inventory control. Intermediate packaging costs can also be eliminated by the early adoption of the final, ready-to-attract-the-consumer display and the cost of returning an unwanted or damaged good can be minimized by quality control procedures and pricing mechanisms.
All of a sudden, traffic management is "old hat" and logistics management is "where its at"!
The work of logistics is fundamental to supply chain success and supply chain success is where the cost savings, superior financial achievement and, yes, the profit will come from. Its not rocket science after all but it is the developing science of logistics and Charlie and his traffic department are being inexorably engineered out of the loop.
But there are pitfalls ahead for those who would aspire to fill Charlie's place. A shiny new face and a newly minted degree do not a valuable logistician make. After all, wasn't it Charlie who could telephone his pal at the railroad (the one who owed him favors, big time) and get the vital container released when all seemed lost? And couldn't Charlie get you space from Hong Kong to door delivery Cut-and-Shoot, Texas right at the height of the Christmas rush? By saying sayonara to Charlie, all the experience and favor-exchanges departed with him. Do or die in the cold gray world of today's logistics management now relies on communications, computer skills, global thought processes, and a controlling nature.
With endless data streams from raw material producers all the way to point-of-sale printouts, the logistics practitioner will orchestrate each stage of a good's progress from a lump of ore in the ground to the competitively-priced, must-have consumer product that is displayed in its own stand, packaged and bar-coded for a quick sale and with its replacement automatically reordered just as soon as the sale is recorded.
No wonder freight forwarders, customhouse brokers, steamship lines, railroads, and truckers all want to get in on the logistics game. If they stick to their core competency, they are going to be left behind. And let's not forget the specialist, third- party logistics services provider who has already seen the future and how its going to work for him.
The problem is that today, not many organizations are in charge of or have control over a full supply chain framework. Perhaps Walmart is the closest to this goal at this time. For most of us, however, we're all still working on pieces of the pie so when you hear about logistics failures and disappointments the full circumstances of the case usually reveal that promises were made that were impossible to keep and that too much control was conceded to weaker and less committed parties.
What is a merchant to do when the good doesn't arrive? In the old days you could always send Charlie over to buy lunch for your irate customer. Today, try telling him yourself that your third party logistics specialist goofed up and that you'd love to take him to lunch if only you had the time. If he tells you in short sharp words that his business was with you and not your third party logistics specialist, then you've discovered the downside of the science of logistics and belatedly rediscovered thevalue of good old Charlie who could keep a customer happy no matter what the calamity.
Logistics Management, then, is at best, an evolving science and you can learn a bit more about it at the Port Bureau's training seminar on Wednesday, December 15, 1999. This is the last advanced learning module of the 1999 season. Attendance costs $95.00 per person and a light lunch is provided. For more details, you can call Cynthia on 713.678.4300. This course will be repeated in February 2000.
 Port Bureau Personnel Thanked by Port of Houston Authority
In a letter dated November 29, 1999 to the staff of the Greater Houston Port Bureau, Ned. S. Holmes, Chairman of the Board of Commissioners of the Port of Houston Authority, expressed his thanks for the assistance provided by the Bureau in the run up to the recent bond election.
Mr. Holmes wrote:
"On behalf of the Port Commission of the Port of Houston Authority, I thank each of you, your friends and families for the support which you gave to the Port Authority during this month's bond election. Your participation in the Port's public awareness program and your service as an ambassador in your individual communities was critical in educating the public about this important issue. The significant resources for a strong public awareness campaign which were dedicated by Harris County business interests and other friends of the Port, combined with the strong influence of your grassroots support helped pass the bond issue by a vote of 60.1%.
"Thank you for supporting the Port Commission's vision of the future. You should be proud of the Port's historical accomplishments."
The Bureau's learning programs, public outreach skills, administrative services, and strong organizational abilities are available to all our members including regional port authorities, associations, and other business entities. Informational lunches and training seminars are regularly organized by the Bureau on behalf of clients. 1999's activities have certainly been highlighted by the Port of Houston's bond election campaign but the annual convention of the Certified Transportation Network (CTN) conceived and convened by the Bureau in Barcelona, Spain also offers another example of the Bureau's capabilities.
Our in-house Association Coordinator, Jeannie Angeli, surely has the magic touch when it comes to arranging for business gatherings. During November, she successfully mounted the Houston Customhouse Brokers and Freight Forwarders Association annual lunch at the Houstonian with Channel 13's Shara Fryer as the guest speaker. The Bureau solicits the opportunity to quote for your next business gathering or project launch. You may contact Jeannie on 713.678.4300 with your enquiries.
 Strong Demand for Steel Products Increasingly Met by Domestic Industry's Semi-finished Imports
Unable to keep up with the surging demand for finished steel mill products from their own resources, domestic steel producers continue to import semi-finished steel at record levels in efforts to produce value-added material for a strong domestic market.
End users and international steel traders, on the other hand, watch as traditional imports of finished steel mill products from worldwide sources continue to decline despite the strong market demand. What forces are at work here?
Despite the WTO, good old-fashioned trade protectionism is alive and well in steel. If you're a domestic steel producer or a steel workers' union, the importation of semi-finished steel by your own organization is "good" whereas the importation of finished steel mill products by others who would otherwise be your captive customers, is "bad". Thanks to a compliant government, spurious and selective anti-dumping measures and countervailing duty impositions are having their desired effect.
The October numbers just released by the Department of Commerce tell the whole story. Imports of semi-finished steel are up over 22% so far in 1999 at the same time as imports of finished steel mill products have fallen 22%.
Overall, steel imports are down 14.6%. This year's big losers internationally are Russia, Japan, and Turkey but there have been some modest upward adjustments in imports from Brazil, India, and Mexico. Interestingly, Canada and Mexico, our NAFTA partners, account for 24.5% of all steel imports.
Commenting on the recent numbers, Horst Buelte, President of the American Institute for International Steel (AIIS) observed that while domestic steel industry protectionists continued to cry "crisis", the only looming crisis he could see was the inability of domestic steel to import enough steel for their own operations.
Adding to his President's comments, AIIS' Executive Director, David Phelps noted: "We think the word 'hypocrisy' is a valid word to use. The U.S. steel industry's stance that foreign producers can sell their steel more cheaply in the U.S. because they are heavily subsidized by their own governments, has to be viewed against the billions of dollars in public subsidies from federal and state programs that U.S. steel producers are also receiving."
Phelps went on to outline the Emergency Steel and Oil and Gas Guaranteed Loan Program Act of 1999, the Steel and Aluminum Energy Conservation and Technology Competitiveness Act of 1988 as well as state programs in Illinois, Maryland, and Alabama.
The AIIS maintains that all subsidies are bad for the global industry and create an uneven playing field. One of the chief reasons that the global steel market is oversupplied, stated Phelps, is because steel companies in all countries, including ours, haven't been allowed to fail or succeed without taxpayer dollars.
For more information on steel matters you can call the AIIS in Washington DC on 202.466.6210 to speak with Eric Blomquist. The email address is:
 Chemical Tanker and Bulk Liquids Terminal Operators Meet in Joint Session
Chemical tanker operators and bulk liquids terminal operators have much in common. They share the same customers. They also share in the desire to maximize their respective assets and that translates into the need for a rapid and safe interchange of product between vessel and terminal. Time means money; either earned or lost.
The Port Bureau was honored to be instrumental in bringing together tanker and terminal interests and in hosting a lunch hour meeting which was held on Wednesday, December 1, 1999 in the Bureau's Board Room. While tanker and terminal interests had been meeting separately at the Bureau during the past year, last week's meeting was the first joint session where both parties were able to exchange points-of-view and examine ideas with each other for improving vessel turnaround and berth utilization.
Representatives from the principal chemical tanker companies and a cross section of bulk liquids terminal operators discussed several operational initiatives, such as the production of a uniform Ship Vapor Recovery Information Sheet and the introduction of a Notice Of Readiness Reference Numbering System.
It was also determined that an approach should be made to pilots, tugs, and linesmen with a view to shortening the notice time required to call in these services at the completion of cargo operations. Delegates were of the opinion that all possibilities of saving time should be closely examined.
If there was an overarching theme it was that honest and open communication should be constantly maintained between vessel and terminal interests. Separately, carriers and terminals should probably talk with each other at least once a week but in the broader scheme of things, a full-scale joint meeting might usefully be convened every two months to review progress.
In response to an enquiry from one participant, it was agreed that the Bureau would collate data of terminal arrivals and departures for a recent time period with a view to obtaining an overview of berth occupancy patterns.
Companies represented included Celanese, GATX, Jo Tankers, LBC PetroUnited, Odfjell Tankers, Paktank, Seagroup, Stolthaven, and Stolt Tankers with the Port Bureau acted as recording secretary.
Separate meetings of the tankers and terminals groups will be convened on an as-needed basis with the next joint meeting of both groups scheduled for a date in February 2000. For more information on this topic, you may call Alistair Macnab at the Port Bureau on 713.678.4300.
 The Port of Victoria, Texas
With direct connections to the Intracoastal Waterway, the Inland Waterway System, and all the deep-water ports on the entire Gulf Coast, the Port of Victoria and its Foreign Trade Zone offer a non-congested and protected waterway for barge traffic with an operating width of 125 feet and a 12 feet depth to match the dimensions of the Intracoastal Waterway.
For many, the Port of Victoria is an overlooked maritime asset but its strategic position on the mid-Texas Gulf Coast has attracted major chemical industries including Du Pont, Equistar, Air Liquide (formerly Big 3), BP Chemicals, Seadrift Coke, and Union Carbide.
The port and the Victoria Barge Canal are operated by the Victoria County Navigation District which is a pro-business, pro-industry political entity offering a competitive incentive program and build-to-suit acreage for long-term lease to incoming businesses.
For more information, you should contact Howard Hawthorne on 361.570.8855 or by fax on 361.570.8854. The Port of Victoria's website is available on
 Y2K Fatigue?
At the recent Clean Gulf 99 Conference in Galveston on November 10, 1999, an early morning seminar on Y2K readiness was sparsely attended. While the barbecue and open hospitality of the previous evening might have had something to do with the apparent lack of general interest, the speakers, who included Captain Wayne Gusman USCG and Captain Alistair Macnab of the Port Bureau, went to some length to assure the audience that while Y2K was nothing to panic about, it was also something to take seriously.
In his capacity as Captain of the Port, MSO-Houston-Galveston, Captain Gusman outlined the steps that the local Coast Guard and the area's maritime industry have taken throughout the year to encourage corporate scrutiny of all date-sensitive equipment and to prepare low-tech backup arrangements in the event of temporary system interruptions at year's end. While it now looked as if most organizations were comfortable with their own precautions, it was still necessary that there should be overall confidence that everyone was as well prepared as possible.
The Coast Guard will have its Y2K Vessel Risk Assessment registration and control program in operation and the Marine Safety Office will be on alert with a physical backup communications system organized throughout the Bay and Channel areas. As a review of existing arrangements, Captain Gusman has called for a meeting of industry representatives on December 16th. 1999 to provide yet one more opportunity for all parties to formally interact and to share final plans and operating procedures.
There will be time enough, noted Captain Macnab, for Y2K fatigue to be allowed to set in once the Y2K risk period has passed. Vigilance and preparedness were the watchwords as we plan for "Business as Normal with a Heightened Awareness", in the words of Steve Huffman of G&H Towing.
The USCG Marine Safety Office (MSO), Houston-Galveston, may be reached on 713.671.5152 with the contact: LT.JG Ty Gadsden, Y2K Coordinator.
 Customs Increasing Fines Against Importers for Purported Negligence
U.S. Customs is taking a tougher approach to enforcement of false statements, acts or omissions by importers through increased fines and penalties.
A recent $14 million fine assessed last summer against a Florida firm for mislabeling consumer electronic goods could be dwarfed by penalty assessments now being pursued by Customs of $50 to over $100 million against individual companies. These cases are very important since according to Customs, many importers have not complied with Customs' commercial rules on such requirements as product labeling and country-of-origin. Previously importers were normally able to negotiate penalties for such violations to a lot less than Customs originally assessed.
Although Customs claims the number of cases being pursued has not risen greatly since new commissioner Raymond Kelly took office, the amount of penalties being assessed is increasing as Customs seeks to make up lost duties.
The increased size of the penalties has prompted many corporate executives to voluntarily inform Customs of past infractions and writing checks to the government to cover the difference between what was actually paid versus what should have been correctly assessed at the time of importation.
This increased reliance on voluntary in-house compliance has led to an increased demand for customs specialists. Companies are seeking individuals who have both a customs broker's license and corporate experience, in addition, anyone having experience working for U.S. Customs itself is also highly in demand although this experience is not as important as the license and corporate experience.
 House Transportation Lawmakers Looking at Customs Duties for Harbor Tax Alternative
Key lawmakers in the House of Representatives have proposed to use U.S. Customs Service revenues to replace the Harbor Maintenance Tax.
This idea is attractive to lawmakers as the duties are an existing source of revenue and a collection system is already in place. This idea came about at a hearing in the House Water Resources and Environment Subcommittee. That hearing included testimony from the General Accounting Office which stated that U.S. federal agencies already levy 124 assessments on the maritime industry at a total cost of about $22 billion a year. This amount is estimated to be over 31 times greater than the annual cost of maintenance dredging at U.S. ports.
Many House lawmakers expressed support for the proposal although designating the fees for a specific purpose would require legislation. Also supporting usage of these fees, which go into the general revenue fund, was the American Association of Port Authorities.
 Washington Gives Importers Little Respect
There seems to be little respect for our nation's importers from those in Washington. The need for the Congress and others in the federal government to provide funding for a new Customs Service computer system is extremely urgent. The current Customs computer system and the program used to process imports, called the Automated Commercial System, is antiquated and overloaded. Customs has proposed a new automated system, the Automated Commercial Environment (ACE), and all seem to agree that it is urgently needed. The problem is in getting enough money to pay for it.
Importers were promised a new system almost seven years ago to process imports. Such a system would streamline processing and help realize millions of dollars in savings. In order to get the system and realize those savings, the importers along with customs brokers agreed to a major overhaul in Customs laws. That overhaul, the Customs Mod Act changed the way Customs processed shipments placing more legal responsibility upon importers for correctly processing and declaring the proper value on imported goods.
As a result, Customs has increased its enforcement efforts and pressured shippers to improve compliance. While this action is of course mandated by law, Customs has failed in its efforts to become more technologically advanced and importers are not realizing any of the savings that were promised when they agreed to the Mod Act.
The problem is that Congress is wary of major federal upgrades due to the failure of the IRS which spent nearly $4.5 billion into a new system which proved faulty and useless as well as a report by the General Accounting Office which questioned Custom's ability to design and implement a systems upgrade expected to cost nearly $2 billion.
A major share of the blame also must go to the Clinton Administration, which is trying to force the private community to pay for an upgrade by proposing increased merchandise processing fees on imports.
Although the chance for quick action on solving the problem is probably not very good, there is hope. The GAO has changed its mind on the new ACE program, claiming it is impressed with Custom's approach to the new program, and supporters of the new program are hopeful that once the current merchandise processing fee comes up for renewal within the next two years, much of the current $800 million which now goes directly into the general fund, can be restructured so as to send all or a major amount of that money back to Customs to use for modernization efforts.
 The African Initiative
As the new Millennium approaches, the Port Bureau is keen on developing an African Initiative that will facilitate and develop opportunities for Houston-based commerce and strengthen existing contacts with African countries. With the exception of Nigeria in West Africa, only South Africa has been a constant and big area of investment for U.S. companies. The major explanation is the existing traditional high potential of the Southern African region in banking, human and natural resources, trades of all kinds, and cultural wealth.
In post apartheid South Africa, The World Bank, the United Nations Organizations, the African Bank of Development and other international institutions are very often more inclined to loan their money to potential investors in that region than other African regions, just because the return on capital is extremely satisfying.
But, what about other African countries? Coastal West Africa - Senegal, Cameroon, Ivory Coast, Benin, Burkina Faso, Nigeria, Gambia, Guinea Bissau and so many other countries - all have a great potential to offer to international trade. But they need to be given the opportunity to harness all their human and intellectual potential through the continuous lowering of certain trade barriers and the opening of new trading opportunities. The current limbo status of the Africa Trade Bill is a great disappointment to so many involved in trade with that continent.
But there are, of course, other obstacles to be overcome such as the difficult access to modern communication tools available today in the rest of the world's international trade. The access is difficult not because of the lack of bright brains, but often because of the lack of financial resources.
The Port Bureau's Africa Initiative will start by offering port authorities and port marketing concerns with training and market analysis programs; offering its services and technical and educational know-how to African administrations, starting with Senegal.
The aim will be to upgrade the professional managerial skills of port personnel as they develop new approaches to market development and trade generation. It will be the Bureau's Mission to seek the participation of Houston's commercial, administrative, and educational interests in the development of this program, and to offer contacts to the Port of Houston that in the long term will lead to genuine business partnerships by promoting the region's assets and potential.
Such existing initiatives as the Houston Center for Maritime Education, and the projected Wheelhouse Simulator installation will feature in the package of learning opportunities on offer.
Putting up front such a technology and setting a neat example of what the expectations are for a modern port in the next millennium, can help in catching the interest of eventual African business partners for the Port of Houston.
There is a new generation of optimism and intellectual curiosity that is very keen in linking up with the modern world, and very aggressive in its approach to global trade. It could be a major step for the Port of Houston to create a strong connection with these progressive African regions to develop long term strategic alliances.
The Port Bureau through its African Initiative in 2000, hopes to lead the way.
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