Somalia Piracy: “We are not scared of the U.S. troops or any other troops stationed off our waters. Why should we be scared?”

This is why countries need to get tough on modern piracy, particularly as it applies to Somalia. That includes companies, too, who only perpetuate and encourage further piracy by making criminals rich with ransom payments. Via Philly.com:

The spoils of a career as a pirate off Somalia’s high seas were simply too good for Abdi Muse to pass up. He bought two Land Cruisers and a new home, then married two women in one passionate week.
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To some pirates, the prospect of international force is not particularly daunting.

“We are not scared of the U.S. troops or any other troops stationed off our waters. Why should we be scared?” asked Siyad, a Somalian pirate who asked that his full name not be used for fear of reprisals.

“They have weapons, but so do we. And we are the ones with the human shields,” he said, noting that troops are loath to use force because it risks harming hostages.

Key quote:

Noel Choong, head of the agency’s piracy reporting center in Kuala Lumpur, said simple economics can explain much of Somalia’s burgeoning piracy.

“At the end of the day, you hijack a ship, you get paid ransom,” Choong said. “These pirates aren’t frightened, because the returns are so big.”

It’s a tough one for companies, because there is undoubtedly tremendous pressure to get the hostages out of harm’s way as quickly and safely as possible. The easiest way to do this is simply to give in to the pirates demand for ransom, especially if the company involved has K&R Insurance, which I would assume most large companies do, particularly if they sail in dangerous waters. However, as clearly illustrated above, this only emboldens the pirates and makes it more popular than ever. The proper response after securing the release of the hostages is to hunt down those responsible and bring them to justice, much like the French did after the hostages of the CMA-CGM yacht Ponant were released.

Risk of intermodal capacity crunch?

According to this article in Logistics Today, quoting extensively from BNSF Executive Vice President John Lanigan, Jr., that’s a possibility if infrastructure doesn’t build up fast enough:

In just five years, Lanigan points out, China built a container port, from concept to ribbon cutting, with a capacity of 20 million TEUs (twenty-foot-equivalent units). The average highway project in the US takes 13 years and other infrastructure projects average 10 years, notes Lanigan. BNSF’s own efforts to site an intermodal operation in Southern California are in the fifth year and the railroad still doesn’t have a permit to build. Each year, BNSF re-budgets the project, and each year the costs go up dramatically based on projected materials, labor and other cost factors.

The growth in sourcing from Asia (and particularly China) is part of the reason port traffic has increased 400% since 1980. BNSF has seen 25% more shipments in the last five years, says Lanigan. “It took 150 years for the rail industry to get to 8 million shipments and just five years to go from 8 million to 10.5 million,” he continues.

Regarding BNSF’s plans in Southern California: good luck getting anything done, ever. Thanks to ignorant commissioners, political priorities, and a generally anti-business and pro-regulation environment, Southern California ports risk making themselves irrelevant. All-Water demand to the East Coast is strong, with many companies actively trying to avoid the headaches of inland rail connections via Southern California. Prince Rupert is actively marketing themselves as an alternate gateway to the mid-west. Cargo will always follow the path of least resistance.

Of course, as this story mentions, the biggest reason for intermodal’s increasing growth is the ever rising cost of fuel and the price of trucking that goes along with it. While intermodal tends to be slower and less reliable, many companies are finding that the cost savings are worth the longer transits and occasional operational headaches.

Despite shipper perceptions that include an observation that, “Rail organizations are pushing rates beyond the pale of reasonableness just because ‘they can,’” intermodal is on the rise. The rate of increase for intermodal growth may have slowed from the pace of just two or three years ago, but that appears to be more a reflection of the state of the economy and not dissatisfaction with service. Intermodal prices remain about 15% lower than truckload, says Morgan Stanley, but the gap is more like 20% with fuel surcharges. And, improved service could drive pricing and also allow railroads to compete more in shorter lanes where motor carriers had the service advantage.

Presidential Election: Supply Chain issues

Logistics Management has an excellent rundown of the U.S. Presidential candidates on some key issues that could affect your supply chain.

As the elections approach, here are a few topics that you should watch closely as you seek to position your business for success:

* Card check: the new unionization drive
* 100% inspection: cargo screening and the growing cost of compliance
* Free trade frozen: threats to NAFTA
* The taxman cometh: the likelihood of tax hikes

I highly recommend reading the whole thing, which includes a handy “Supply Chain Scorecard” at the end of the article.

The 2008 elections have the potential to bring about major change, with significant implications for the supply chain sector. The risks of Card Check, NAFTA rollbacks and tax hikes all loom large. How should you respond?

Personally speaking, I think if the Card Check bill passes it will be to the detriment of the economy as a whole and disastrous for smaller companies, not to mention reducing the competitiveness of U.S. businesses in the global market. 100% screening of Air Cargo will be difficult and costly to implement, and could add significant costs to the supply chain, all of which will be passed on to the consumer. However, until it actually starts hitting consumers pockets, this is one that will most likely be broadly supported by a public largely ignorant of how the global supply chain works. And no one in Congress wants to appear soft on security. The protectionist and anti-free trade talk I hear on the campaign trail disturbs me as well. While this article talks about the Bush tax cuts with a particular emphasis on the capital gains tax, I’d like to see some discussion about candidates proposals to reduce the Federal Corporate Tax Rate. So far I believe only McCain has discussed cutting the rate from 35% down to 25%, which would be a boon to the business community and bring the U.S. down to a more competitive level compared to the rest of the world (currently the U.S. has the second highest corporate tax rate in the world, only Japan is higher).

Vietnam raises import tax on automobiles and auto parts

But according to the dealers in Vietnam, it’s not expected to have any impact on sales:

Deputy Finance Minister Do Hoang Anh Tuan, in a decision Thursday (17 Apr), increased tax on wholly assembled cars to 83% from current 70%, said a ministry official who identified himself only as Tu.

Just last month, the government raised the import tax on imported cars from 60% and Prime Minister was urging for more tax hikes to cut surging trade deficit.

The government also raised the tax on imported parts by 3%-5% to 25%, the official said. The new tax rates take effect on Tuesday (22 Apr).

“This new measure aims to cut the soaring trade deficit as instructed by the prime minister,” he said.
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“The new tax rates are unlikely to affect our sales,” said Nguyen Hoai Anh, sales manager of a Toyota dealer in Hanoi.

“At the moment, demands for our cars exceed our production capability, our customers have to wait three to five months to have their cars delivered,” he said adding Toyota Vietnam is unlikely to raise prices considering the small increase in import tax on car parts.

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