Hello and welcome to the Robinson Roundup. Our regular series where we cover critical and timely topics in the transportation marketplace. My name is Ryan Hammett and I'm here with my colleague, Matte Leo. Well, Matte, it's much more spring like where you are down in Kansas City than here in Minneapolis, but just like flowers and trees starting to bloom every spring, we can also anticipate, call it certain seasonal events, that affect the transportation market.

We do cover several of these in detail in the April Robinson Report on our website, but let's talk about produce season and DOT International Roadcheck week. Yeah and first let's start with produce season. As Ryan mentioned, we are entering into the time where weather is starting to warm up and we start seeing things grow and bloom. So aside from this wreaking havoc on my allergies, we also see fruits and vegetables being harvested in large quantities. So, what does this mean for transportation? Well, the allergies maybe not so much, but for mass harvesting, this means that there's gonna be a surge in demand, outbound of these regions. And at the same time, the truck counts gonna remain relatively unchanged. This upsets the supply and demand which leads to capacity constraints and increased rates out of those areas. Even if you're not even delivering produce. Now, the flip side of this is that there could be a decrease of pricing inbound of those regions as carriers seek to reposition assets. And while it's true that most fresh fruits and vegetables will deliver in a temperature-controlled van, this still has an impact on the dry van market since many refrigerated trailers are used in the delivery of dried goods. The exact regions are gonna vary, but generally speaking, this will start in the south with Mexico and cross border freight and then it moves north as the temperatures increase. As far as commodities go, this again will be very regionally, but we provided a map within our monthly report for your convenience. We found that the key to success for shippers is providing as much lead time as possible and or allowing for a multi-day pickup window. Yeah.

The second event we wanted to mention is International Roadcheck Week which will take place this year May 14th the 16th across the U.S., Mexico and Canada. Now during road check week, the Commercial Vehicle Safety Alliance performs detailed vehicle inspections and regulatory compliance enforcement activities which sees an average of nearly 15 trucks and motor coaches inspected every minute across the country. Now, historically, this three-day period sees truck availability tightened for two reasons. The first well, trucks are being inspected so that takes time and impacts hours of service. The second reason is that trucks are temporarily removed from service either as a result of the inspection or from independent owner operators choosing to avoid the risk of inspection altogether. So this year, the publicised focus areas for inspections will be possession of alcohol and controlled substances and tractor protection systems which you can see is like safety elements related to the tractor like brakes, tractor supply valves, et cetera. On average, these three days typically see the load to truck ratio tighten 40% to 60% week over week. And coupled with what Matte just talked about with certain regions being affected by produce season can lead to quick changes in market conditions, specifically in spot market pricing.And beyond capacity constraints and the pricing increases,all shippers should anticipate the chance that drivers could be late. So you should communicate with your facilities that Roadcheck Week will be happening and encourage your facilities to be flexible and work drivers that miss scheduled appointments due to inspections. And if you're a carrier, we encourage you to check your maintenance logs, communicate with your shippers if you are selected for an inspection and be patient and polite with the officials to make sure that you can ensure a quick inspection.

Now, switching topics, let's move away from truckload and into the LTL market where the dynamics are very different. So as we all know the LTL carrier, Yellow, shut down last year which removed over 300 terminals from the marketplace. And an LTL supply can be determined by the amount of terminals within the network. So these closures have put a strain on available LTL capacity and thus leads to increased rates. Now, despite many of these yellow terminals have already been sold to other companies, this hasn't had an impact in the LTL environment yet. And this is because only a handful of terminals that were purchased from LTL carriers are even back to being operational again. And with these LTL carriers preparing to bring the remainder online, there's still a lot of terminals that haven't been auctioned yet and combined with some of them that were auctioned at LTL companies, there's still a lot that remains to be seen. Now, this combined total means that out of all of Yellow's terminals just under 98% of them still remain out of the market today. Crazy. So remember as you're executing your over the road transportation strategies, pricing fundamentals related to supply and demand are different for truckload and LTL. And this can be a challenging topic to explain to your procurement or finance counterparts so make sure you utilise the monthly Robinson Report to help you to tell that story.

All right, one final topic. This time we're going with international air Matte, I've got to ask, has your family ever used one of those new online retailers that ship directly from overseas for cheaper prices? Yeah, are you kidding me? I have a teenager at home so I'm constantly getting packages on my doorstep from these. Exactly. We have a colleague here that was talking about using one of these sites to plan for a Kentucky Derby party coming up. Right. So, the explosion of these mostly China based online marketplaces, some of which have had recent high-profile advertising. It's really having effects further than just in the retail industry. Now, for those of you not as familiar with what we're talking about. What we're looking at is ecommerce companies that have essentially created a producer to consumer marketplace, delivering from a manufacturing location in Asia straight to your house. And that's enabled by technology and manufacturing processes across thousands of vendors on the platform where they utilise AI to identify trends and then quickly manufacture small batches of product to match that current trend going through order production and delivering in as little as three days. And while the tech and the process empower the business model, the success in the U.S. of this producer to consumer model is enabled by an U.S. customs trade rule known as de minimis. Now, interestingly, the origin of de minimis is with tourism. So, it's the value of goods that you as an international tourist are legally allowed to bring back into the States without having to declare it and pay customs fees when you return. So for years, the value of goods that you could bring into the country was $200. But in 2016, the de minimis threshold was raised to $800 which caught the attention of internationally based companies. So through these ecommerce platforms, they were able to create a virtual store, ship product in small quantities and then avoid intermediaries in warehousing. So not only does de minimis allow them to avoid the tariffs, it also has less customised scrutiny compared to the call, the checks for forced labour and consumer safety and larger deliveries. So this perceived loophole has U.S. legislators considering what action to lower the de minimis value as they feel it unfairly affects U.S. businesses. But Matte beyond the customs legislation, these online international retailers are also having an impact on the transportation market. Yes, exactly. And while a couple of months ago, everyone was focused on how the Suez Canal situation resulted in the conversion of some of that cargo into the air freight market. The untold story this year is how much capacity is being taken up by China based ecommerce companies. And Congress recently estimated that 30% of all global long distance cargo aircraft capacity inbound into the U.S. was from Chinese Ecommerce platforms which equates to nearly 600,000 packages arriving in the U.S. a day. So this has caused demand and rates to increase from China to the U.S. while other regions have decreased year over year. This dynamic combined with the continued uncertainty around ocean freight reliability due to the situations in the Middle East and Ukraine is setting up for an interesting 2024 high season. Uh peak freight season as capacity commitments within certain lanes are already selling out. Freight markets are also highly interconnected, so trends like this originating in the retail industry can have far reaching impacts on say the automotive or manufacturing industries. So, if you regularly utilise air freight, securing consistent space for high season is a conversation that you really need to be having with your providers today. Exactly.

Well, thanks for joining us. Remember Robinson goes further than anyone else in providing you with global perspectives for how to manage your complex transportation strategy. For more details and additional insights on ocean, intermodal, customs, maybe even cross border reference, the Robinson Report on our website.