Industry Update. Volume 4 Issue 10. October KWE Ireland Celebrates 10 Year Anniversary. KWE Canada: PARS Status Available Online

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1 Volume 4 Issue 10 Industry Update October 2008 KWE Ireland Celebrates 10 Year Anniversary Inside This Issue 1 KWE Ireland Celebrates 10 Year Anniversary 1 KWE Canada: PARS Status Available Online 2 Establishment of KWE (Czech) Prague Head Office and Pilsen Branch Office 3 Expansion of KWE Narita Terminal 4 Removal of KWE Offices/Warehouses 5 KWE Opens 2 nd Canada Warehouse 5 United States to Join Pacific Trade Group 6 Hurricane Ike Weakens Rail Traffic 6 Strike Threatens St. Lawrence Seaway 7 U.S. Steel Imports Fall 7 Asia Pacific Aviation to Recover by Japan s August Exports Show Decline 8 China Files Dispute Against U.S. at WTO 9 Carrier News 10 Updates: BAF, IFC & CTF 10 Holidays Left to Right: Mr. Thomas Weppelmann (MD Ireland & Director of Business Development KWE Europe), Mr. Michael Tallon, (Warehouse Manager, Dublin), Mr. Shinya Aikawa (Director KWE Ireland and General Manager KWE Europe,) Mr. John O shaughnessy (Operations Manager, Ireland), Eamonn Grogan (Import Manager, Dublin) KWE Ireland celebrated its 10 th year anniversary by treating staff to A Day at the Races at the famous Curragh Race Track, Home of Irish Horse Racing. Each member of the KWE Ireland Team received a commemorative engraved Silver Cross Pen to mark the occasion. Five members of the Ireland staff have also been with KWE Ireland throughout its successful journey and each received silver watches in recognition of their continuous loyal service. KWE Canada: PARS Status Available Online Carriers and/or dispatchers can now check the status of their PARS prior to arriving at the Canadian border via the KWE Canada website ( These enhancements provides carriers and dispatchers PARS status 24/7 and allows trucker to reduce border delays. KWE Canada Brokerage and Surface Logistics continues to advance tracing capabilities to provide our customers more tools to keep their goods flowing through their supply chain.

2 Page 2 Establishment of KWE (Czech) Prague Head Office and Pilsen Branch Office KWE is pleased to announce the establishment of a new locally registered company within the Czech Republic, Kintetsu World Express (Czech) s.r.o. ( KWE (Czech) ) that commenced operations on October 1, During the 90s, KWE expanded into the Czech Republic by commissioning operations to a local agency through a tie-up agreement. In 2002 as a branch of KWE (Germany), KWE s own business site was established in Prague, the capital of the Czech Republic, to provide direct services within the region to our clients. In line with increases in the volume of cargo handled and to further strengthen sales to Japanese, Korean and Taiwanese corporations who have continued to expand their presence within the region, KWE (Czech) has been established. The rapid economic growth of countries within Central and Eastern Europe is particularly notable in the Czech Republic, with more than 200 Japanese-based corporations establishing manufacturing bases within the country. In recent years an every increasing need for parts and materials supply and distribution to these manufacturing hubs has been seen. To date KWE (Germany) has continued through its Czech branch to provide high-speed transport services by airfreight forwarding through the gateway terminal in Frankfurt, Germany. In addition future expansion into businesses such as a truck transport service from these manufacturing hubs to major commercial markets such as Germany and Russia as well as distribution and logistics services as a transshipping center for cargo transported from the Ukraine and Romania, being countries adjacent to the Czech Republic, is expected. KWE (Czech) having leased over 10,000 m2 of warehouse space is already providing electronic component related logistics services. In the future in addition to international airfreight forwarding, continued business expansion is forecast for KWE (Czech) in businesses such as truck transport within Europe, provision of logistics services centering on Japanese corporations but also targeting Korean automobile related companies and provision of services to Taiwanese EMS companies. At the same time as establishing KWE (Czech), a branch office in Pilsen, a city located in the east of Bohemia, where many foreign capital companies have established manufacturing and other bases, was also established. KWE (Czech Republic) continues its efforts to expand its network within Central and Eastern Europe. Outline of the KWE (Czech) Head Office Name : Kintetsu World Express (Czech) s.r.o. Capital : 3,500,000 CZK (Czech Koruna) Head Office : Airport Logistic Park Knezeves Stredokluky, Czech Republic TEL. : FAX. : President : Hirohide Terunuma Business Details : Airfreight import and export forwarding. Truck transport. Logistics. Number of Employees : 8 Commencement of Business : October 1, 2008 Outline of the Pilsen Branch Office Name : Kintetsu World Express(Czech) s.r.o. Pilsen Branch Address : Hala BP4 Podnikatelská 1184/ Plzen, Czech Republic TEL. : FAX. : (*At present telephone and fax services are provided through the KWE (Czech) head office.) Person-in-Charge : Lubos Houdek/Marketing Manager Business Details : Airfreight import and export forwarding. Truck transport. Logistics. Number of Employees : 3 Commencement of Business : October 1, 2008 from public sources and is believed to be true and accurate. KWE is not responsible or liable for any inaccurate information contained herein.

3 Page 3 Expansion of KWE Narita Terminal KWE has decided to expand its Narita Terminal (tertiary construction) as indicated below. I. Planned construction site Location: 157-1, Osato, Shibayama-Cho, Sanbu-gun, Chiba II. Overview of expansion plan A. Enlargement scale and structure 1. Structure: Five-story steel framed building 2. Building area: 4, m2 (approx. 1, tsubo) 3. Floor area: 14, m2 (approx. 4, tsubo) B. Facilities (expanded area and existing area) Floor Enlarged section Existing section Total Roof m m m2 5th 3, m2 8, m2 12, m2 4th 3, m2 8, m2 12, m2 3rd 3, m2 9, m2 12, m2 2nd m2 1, m2 1, m2 1st 4, m2 11, m2 16, m2 14, m2 40, m2 54, m2 Total (Approx. 4, tsubo) (Approx. 12, tsubo) (Approx. 16, tsubo) *The terminal will be among the largest single facilities in the Narita area. III. Start of Construction Planned for the middle of December 2008 IV. Completion Planned for the end of October 2009 V. Purpose of Expansion To strengthen the airfreight forwarding services and to expand sales of logistics services Aerial view of the Narita Terminal (The red lines depict the planned expansion) Frontal view of the Narita Terminal Article continues on Page 3. from public sources and is believed to be true and accurate. KWE is not responsible or liable for any inaccurate information contained herein.

4 Page 4 Expansion of KWE Narita Terminal (continued) After expanding the floor area of the terminal, a second unit load device (ULD; an airfreight pallet) workstation will be added on the first floor in addition to the existing one. This will enable us to operate one ULD workstation designated exclusively for export freight and one exclusively for import freight, thereby strengthening our ULD intact transportation service. In an exporting country, a ULD intact transportation service is a service in which a forwarder assembles individual freight items into a ULD at its own facilities and delivers the ULDs to the airline company. In an importing country, it is a service in which ULDs of imported freight that have arrived at the airport are sent on to the forwarder s own bonded warehouse without being broken down at the airport s common bonded warehouse (i.e. shed). The individual pieces of freight are then unloaded in-house by the forwarder. This service enables shorter import and export times and better prevention of freight damage compared to the conventional work done at airports. With the additional warehousing space on the third through fifth floors, KWE will strengthen its provision of high value-added logistics services, including leveraging its location close to the airport for cross dock operations that must be managed in units of time, work done in bond, and freight inspection work. Upon completion of the tertiary construction, the KWE Narita Terminal will be one the industry s largest single facilities in the Narita area. The company is determined to develop services that meet the needs of customers and expand sales by positioning the Narita Terminal as Japan s largest state-of-the-art strategic logistics base. Removal of KWE Offices/Warehouses Please view the details of the removal of the following KWE offices/warehouses below: Kintetsu World Express (Xiamen) Co., Ltd. Name of Warehouse : KWEXMN Domestic Warehouse (for international Cargo) New Address : Modern Free Zone, Xiamen, Fujian Province, P.R. China Telephone : , ~7 Fax : PIC : Mr. Tommy Zhou Kintetsu World Express (Vietnam) Co., Ltd. Name of Warehouse : Hai Phong Satellite Office New Address : 1st Floor Business Center, Nomura Haiphong Industrial Zone. An Duong Dist. Hai Phong City, S.R. Vietnam Telephone : Fax : PIC : Mr. Clement Quang Kintetsu World Express (Deutschland) GmbH Name of Warehouse : Hamburg Branch Office (Air Freight) New Address : World Cargo Center, Niendorfer Strasse 172, Norderstedt Hamburg Telephone : Fax : PIC : Mr. Hans Koebke from public sources and is believed to be true and accurate. KWE is not responsible or liable for any inaccurate information contained herein.

5 Page 5 KWE Opens 2 nd Canada Warehouse Kintetsu World Express (Canada) Inc., has opened a new warehouse in Milton, near Toronto. The 9,290-square-meter Halton Hills Distribution Warehouse, Kintetsu World Express (Canada) s second such facility in Milton, was established to meet growing demand for its logistics services in the area, close to freeways and the Toronto International Airport. The Canada unit's first warehouse in Milton, the 6,500-square-meter Milton Warehouse, was established in December Outline of Halton Hills Distribution Warehouse Name Address Person-in-Charge Warehouse Space Operation Details Number of Employees Commencement of Business Kintetsu World Express (Canada) Inc. Halton Hills Distribution Warehouse 8039 Fifth Line North Halton Hills, Ontario L7G OE2 TEL FAX Mr. Brian Wood(Also Manager of the Toronto Sales Office) 9,290 m2 Logistics services including cargo storage, sorting, etc. 10 August 1, 2008 United States to Join Pacific Trade Group The United States will soon begin negotiations in order to become a member of the Comprehensive Trans- Pacific Strategic Economic Partnership Agreement. Current countries within this group include Singapore, New Zealand, Chile and Brunei, and was the first trade pact involving a group of countries in the Pacific Rim. The agreement was originally signed between Singapore, Chile and New Zealand in 2005 and by Brunei in Commonly known as the P-4, its broad goal is to dismantle trade barriers among its participants within a decade. Washington's participation in the agreement is expected to strengthen efforts currently underway within the 21-member Asia-Pacific Economic Cooperation (APEC) to create a Free Trade Agreement of the Asia Pacific. The APEC bloc comprises the United States, China, Russia, Chile, Japan, Canada, Australia and key Southeast Asian economies, all of which border on the Pacific Ocean. The U.S. has bilateral free trade with both Singapore and Chile but not with New Zealand or Brunei.

6 Page 6 Hurricane Ike Weakens Rail Traffic Freight traffic on United States railroads fell sharply from a year ago in the week that ended on Sept. 20, due to the effects of Hurricane Ike. Carload freight for bulk materials and equipment hauls fell 7.8 percent for large U.S. carriers, as western lines saw such load counts sink 10.4 percent while eastern lines felt a 4.3-percent drop. Intermodal traffic continued to weaken, off 6.2 percent in the latest week, despite what should be the beginning of the peak-season build-up of year-end retail holiday shipments. Ike struck a wide swath around the Gulf of Mexico region on Sept. 13, but hit hardest at Galveston and Houston, Texas. It took railroads most of the following week to get the Houston-area service back to normal, though many area shippers are still struggling with their own damage and power outages. It was the second hurricane in the month of September to disrupt the rail freight system, after Gustav struck Sept. 1 near New Orleans. Repairs are not yet complete in the lines of that area, making it necessary to divert trains to alternate gateway connections with other railroads. Canadian carriers saw carloads plunge 13.9 percent, although intermodal traffic gained 2.1 percent. Total U.S. rail volume of an estimated 32.8 billion ton-miles fell 6.8 percent from the comparable week in Strike Threatens St. Lawrence Seaway Unionized workers are threatening a shutdown of the St. Lawrence Seaway early October over plans by management to introduce new technology along the binational waterway. A total of 445 Seaway employee-members of the Canadian Auto Workers voted to strike on 72 hours' notice any time after Oct. 10. The agency is preparing contingency plans to ensure an orderly shutdown of the system should a contract agreement not be reached. The chief issue in renewing a labor contract that expired March 31 is the agency's intention to introduce new technology to replace the work of some 150 employees on the 13 Canadian locks in the system. No current employees will lose their jobs, but will be offered retraining as canal services technicians, performing maintenance and working with the new technology being introduced in handling ships transiting the locks. The new technology includes automated mooring, which uses vacuum pads to hold a vessel in a lock, and replaces three employees per 12-hour shift who use lines to secure vessels. The system was tested over two seasons on the eight-lock Welland Canal part of the system. Other technology to be introduced uses laser scanning to record the positions of ships entering the locks, instead of employees on the lock walls calling out the positions to ship captains. The most recent contract specifies that three employees must be present when a ship enters a lock. The technologies potentially could eliminate those positions. The Seaway hasn't seen a strike by employees since 1969.

7 Page 7 U.S. Steel Imports Fall United States imports of steel in August totaled 2.3 million tons, down 19.4 percent from 2.91 million tons in July, and 11.4 percent from a year ago, due to strong demand and limited supplies in the U.S. and international markets during the months of April and May. As international and domestic steel prices hit their peaks during this time, imports from NAFTA sources accounted for the largest declines. Imports from Canada fell by nearly 20 percent and by 27 percent from Mexico from July to August, reflecting much more closely U.S. market conditions in August than non-nafta sources, which typically have a three- to five-month lag. One exception to the trend was China, which increased its shipments of steel to the U.S. in August. Imports of semi-finished products dropped by 33.9 percent in August from a year ago. Year-to-date, semi-finished steel imports decreased 7.7 percent from 4.70 million tons in 2007 to 4.34 million tons in Asia Pacific Aviation to Recover by 2009 The financial outlook of international aviation industry released by the International Air Transport Association (IATA), suggests the traffic growth in the Asia Pacific region should recover by the next year. However, the down side is that overall, the airline industry is heading into a period of over-supply, and airline load factors (and yields) will fall as a result, putting further pressure on the industry bottom line. Worldwide domestic or international traffic (passenger and cargo combined) is expected to grow just 2.9% in 2009 (down from a previous forecast of 4.5%) on the back of 2.2% growth in capacity. This indicates that IATA expects that the world s airlines will try to maintain load factors in the increasingly tough economic environment. Asia Pacific is one of just two regions (with Africa) that are expected to report a better domestic or international traffic and capacity performance in 2009 than 2008.

8 Page 8 Japan s August Exports Show Decline August exports in Japan posted a trade deficit of 324 billion yen ($3.06 billion) as exports almost leveled off and imports surged due to escalating prices for crude oil and other raw materials. It showed the first monthly trade deficit since January (when Japanese exports tend to drop because of the New Year holidays), but excluding the month of January, it was the first monthly deficit in nearly 26 years, since November Japan s exports to the United States suffered their biggest decline on record on a year-on-year basis. Exports to the European Union fell for the first time in two months, although at a much slower pace than those to the U.S. China supplanted the U.S. in July as Japan s largest export market for the first time since the end of World War 2. Exports to the U.S. dropped for 12 months running in August, down 21.8 percent to trillion yen ($10.27 billion). The rate of decline was the biggest since 1980, the oldest year for which comparable figures are available. Japan s imports from the U.S. rose for the first time in two months in August, increasing 6.4 percent to 716 billion yen ($6.77 billion). As a result, Japan s trade surplus with the U.S. shrank 48.2 percent to 371 billion yen ($3.50 billion) for the 12th consecutive monthly decline. China supplanted the U.S. in July as Japan s largest export market for the first time since the end of World War 2. Exports to China surpassed those to the U.S. again in August. Japan s exports to the rest of the world increased for the second month in a row in August on a year-on-year basis, totaling about trillion yen ($66.70 billion). But the pace of growth slowed to only 0.3 percent. The decline in exports was led by autos and auto parts, which plunged 6.4 percent and 13.5 percent. Overall imports soared 17.3 percent in August from a year earlier for the 11th consecutive monthly gain, totaling about trillion yen ($69.76 billion). The growth in imports was led by crude oil, which jumped 64.3 percent. Meanwhile, Japan s exports to China expanded for 39 months on end in August, increasing 8.8 percent to trillion yen ($11.56 billion). China Files Dispute Against U.S. at WTO China filed dispute complaints at the World Trade Organization against the United States, arguing that antidumping and countervailing measures imposed on imports of Chinese-made steel pipes, tires and laminated woven sacks violate global trade rules. According to WTO procedures, the U.S. and China will have up to 60 days to try to solve their dispute through consultations. If those efforts fail, China can ask the WTO to convene a panel to investigate the case and issue a ruling. This is the second time that China, which joined the WTO in 2002, has filed a dispute complaint against U.S. trade measures. Last September Beijing challenged Washington's measures against imports of Chinese coated sheet paper. In that case, after consultations, the U.S. determined that there was actually no injury to its paper industry, therefore invalidating such measures. As a result, the U.S. then decided not to apply such measures against imports of Chinese coated sheet paper, and the case did not have to be considered by a WTO panel.

9 Page 9 Carrier News Japan Airlines plans to reduce its cargo flights between Japan and the US in January 2009 amid shrinking demand due to the US economic slowdown and higher fuel costs. The airline currently operates seven cargo flights a week between Narita and New York, including those going through Chicago. No New York cargo flights will fly from January, and the number of Los Angeles flights will be reduced to 10 per week from 19. JAL's cargo flight operations between Japan and North America had kept growing after a brief contraction due to the collapse of the bubble economy. At the end of 2007, there were 21 cargo flights on eight routes. However, flights to Atlanta and San Francisco ended in January this year. From January 2009, there will be only flights to and from Los Angeles and Chicago. JAL expects the reduction will enable it to decrease the number of freighter aircraft to 10 from 11 and slash costs by US$18.8 million a year. The company has no plans to cut cargo flights bound for China and Southeast Asia, which enjoy robust demand, and those to Europe, which JAL operates jointly with Lufthansa and other airlines. In the United States regulators have approved a request by American Airlines to delay launch of new nonstop service between Chicago and Beijing for a year because of high fuel costs and problems in the airline industry. American, the nation s largest airline, already flies between Chicago and Shanghai, and last year it won the rights to add the Chicago- Beijing route. American is the latest carrier to delay China flights, including United Airlines, US Airways and Northwest Airlines. U.S. carriers are expected to post multibillion-dollar losses this year due to higher fuel costs and a weakening U.S. economy that could undercut demand for travel. Donghai Airlines has launched its inaugural flight between China and Hong Kong, starting its four-times-a-week freighter service on the Shenzhen-Hong Kong-Chengdu route. Hong Kong Air Cargo Terminals will be the air cargo terminal operator at Hong Kong International Airport, providing physical cargo handling services. The launch of this new route aims to enhance the air cargo flow between Chengdu and Hong Kong, providing a better support to the post-earthquake rehabilitation works at the affected area as well as the re-engineering of the economic development of west China.

10 Page 10 UPDATE : Emergency Bunker Adjustment Factor (EBAF) Inland Fuel Charge (IFC) and Clean Truck Fee Notice of fuel surcharge increases by ocean carriers for export shipments. There are two separate charges. One is the standard Quarterly Emergency Bunker Adjustment Factor (EBAF), which it is for ocean sectors. The second is a new Inland Fuel Charge being assessed due to continue rising fuel costs in the USA for intermodal (truck & rail) sectors. These two increases will be effective October 01 October 31, EBAF: Eastbound (to USA) Westbound (from USA) 20 container USD USD container USD USD HQ container USD USD container USD USD IFC: Inland transported by truck: $119 per container Inland transported by truck and rail combination: $411 per container CTF: A Clean Truck fee (CTF) is to be assessed effective November 1, 2008 on cargo moving by truck to/from/via the ports of Los Angeles or Long Beach, California, by the ports and marine terminal operators in order to reduce congestion and improve air quality in and around these ports. In order to cover our compliance and administrative costs, we, at Kintetsu World Express, regretfully will assess the following revised charges accordingly: Applicable to: Not applicable to: cargo moving by truck to/from/via the ports of Los Angels/Long Beach cargo moving via rail through the Alameda Corridor to/from the ports of Los Angeles/Long Beach WM PER 20' PER 40' PER 40'HQ PER 45' CTF CTF Processing Fee per B/L per cntr per cntr per cntr per cntr Should you have any questions or require further clarification on the above increases please contact your local KWE office or your account executive. Holiday Schedule October October Columbus Day United States 13 October Thanksgiving - Canada 27 October Deepavali Singapore 27 October Halloween Ireland 1 November All Saint s Day -- Germany Recently we have been seeing announcements from several carriers regarding pending Fuel Surcharge increases. The continued fluctuations of the global barrel prices are the driving force behind these actual and anticipated increases. KWE will continue to monitor the situation and provide updates as soon as more specific information is available. If you have any questions, please feel free to contact your local KWE office or Sales representative