7/25/2005

www.timetoair.com

Time-To-Air Corporation • International Link Service Incorporated • Time-To-Air International Logistics, Limited

“Secrets of Negotiating Freight Rates”presented by

Time-To-Air Group

Airfreight Negotiations

Agenda:1. Basics

2. Time-To-Air Group & Greater China 3. Airfreight Operations (HKG example)4. Common Negotiation Methods5. Thank You

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Knowledge is Power (Sect. 1)

• SUN-TZU: "THE ART OF WAR“

• If you know the enemy and know yourself, you need not fear the result of a hundred battles.

• If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.

• If you know neither the enemy nor yourself, you will succumb in every battle.

Know Thyself (Sect. 1)

• Historical and/or projected needs• Volume

• Ocean-freight (container/mo.)• Airfreight (tonnage/mo.)• Seasonal variation

• Transit-times required• Standard carton-size/weight• Special handling (GOH, quota items, perishables,

dangerous goods, livestock, etc.)

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International Freight (Sect. 1)

• Not as simple as FedEx overnight package shipping• Land, ocean, air carriers• Terminal operators• Freight stations• Customs brokers• Freight forwarders• 3RD party warehouses

Finding a Forwarder (Sect. 1)

• Centipid recommendations• Websites

• http://www.ncbfaa.org/. • http://www.forwarders.com/ • http://www.freightgate.com/directories/directories.tet • http://www.freightnet.com/

• Phone book• Word of mouth and referrals• Must take time to talk, meet with different

forwarders, perform due diligence, get quotes, etc.

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Search Tips (Sect. 1)

• Long-term geographic focus • Client references• Certification

• IATA (International Air Transport Association) • represents around 265 airlines comprising 94% of international scheduled

air traffic • regulates relationship between Member airlines and their Cargo Agents

• Cargo Network Service Corp. (CNS), provides regulations by whichindividual carriers select, contract and appoint agents

• Collect money and pay airlines• Adhere to FAA security program• Have adequate insurance to cover its liability for the liability for loss of, or

damage to, shippers cargo• Have satisfactory financial and credit standing

Time-To-Air Group (Sect. 2)

• Established by Mr. Peter Mak in 1985, the TTA Group of companies remain proudly family owned and operated

• Greater Asia and specifically China presence since founding• Currently operates from its JFK, LAX and HKG regional

head-offices with support from global agents• International freight transportation services include:

• Airfreight (Time-To-Air Corporation - IATA/CNS)• Ocean-freight (International Link Services - NVOCC)• Customs brokerage (In-house US certified broker)• Trucking & warehousing

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Marquee Clients (Sect. 2)

We have had the pleasure of serving many customers in numerous industries:

• Clairol (consumer goods)

• G.E. (industrial)

• JCPenney (general merchandise)

• Lightolier (lighting equipment)

• Nabisco (foods)

• Portolano(largest US woolen gloves and garments importer)

• Rubie’s Costumes (worlds largest halloween& carnival goods co.)

• Sam Ash Music Stores(electronics & instruments)

Customer References (Sect. 2)

• “…after almost 20 years of an excellent relationship, we are pleased to offer our unequivocal recommendation of Time-To-Air Corporation [and their subsidiaries] as the freight forwarder of choice.”Executive Vice President of an electronics manufacturer with facilities in Shenzhen China and Coral Springs FL.

• “For the last ten years, Time-To-Air has been serving our international transportation as well as our inland transportation needs in a most professional manner.”Vice President of a major toys manufacturer with offices in Hong Kong, California, Texas, and New Jersey

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“Made in China” (Sect. 2)

• China specific issues:• More Mainland China shipments driving rates up• Landing rights slow to come• Seasonality:

• Traditionally “Slack”, “semi-peak” vs. “peak”• Unstable due to quota garments

----------> Rates fluctuations• Global influences:

• Increasing fuel costs• Security needs----------> Surcharge fluctuations

West-Bound Shipping (Sect. 2)

Greater China to JFK Airfreight Rate Trends(Market Prevalent)

$0.50

$2.50

Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05

Date

Rat

es (U

SD

/ L

B)

HONG KONG

SHANGHAI

TAIPEI

BEIJING

7/25/2005

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Air Consolidation (Sect. 3)

• Volume contracts with carriers and “re-sell” to “co-loaders” and shippers

• Forwarders with their own carrier contracts as well as co-loaders offer economical airfreight rates

• We take goods from different shippers and build "consolidations” on pallets or containers

Sample ULD Equipment (Sect. 3)

AKE CONTAINER

ATA code LD3

Weight Limitation Inc. ULD Tare Weight 1,588 kg

Tare Weight 100 kg

Internal Volume 152 cu. ft. 4.3 cbm

Loadable Aircraft Type 747, 747F, 777, Airbus

, PGA Pallet

Size Base: 96" x 238.5" Height: 96" (Q6 Contour), 118" (Q7 Contour)

Weight Limitation Inc. ULD Tare Weight 11,340 kg

Tare Weight 480 kg

Loadable Aircraft Type 747F

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LD3 Consolidation (Sect. 3)

Q6/Q7 Consolidation (Sect. 3)

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New HKG Airport (Sect. 3)

HKG Super Terminal (Sect. 3)

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Upper-Deck Planning (Sect. 3)

747-Freighter Loading (Sect. 3)

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747-Freighter Loading (Sect. 3)

Import Consol Steps (Sect. 3)

• Contact shipper• Receive booking and plan

cargo• Pick-up• Receive in HKG warehouse –

weigh and measure (regulated fees for warehouse and consolidation fees)

• HKG handling –documentation, coordination, manifest airway bill

• Transfer – from warehouse to to super-terminal (regulated fees for transferring goods)

• Retrieve “pouch”• Retrieve ULD• Break-bulk – coordination of

pallet/container breakdown.• (Customs clearance)• Delivery

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Consol Charge & INCO (Sect. 3)

• Pick-up: per truck or per weight unit• HKG handling: per bill-of-lading• Terminal: per weight unit• Transfer: per weight unit• Airfreight: per weight unit• Fuel surcharge: per weight unit• Security surcharge: per weight unit• Airline documentation: per bill-of-lading• Import service: per bill-of-lading• Break-bulk handling: per bill-of-lading or per weight• Customs clearance: per bill-of-lading• Customs duty: per invoice and commodity• Delivery: per truck or per weight unit

EX-FACTORY

FCA ORGN LOCATION

FCA DSTN LOCATION

DDP

Basic Calculations (Sect. 3)

• Chargeable weight = greater of gross weight or volume weight

• Volume weight:• Inches: L*W*H / 166• Centimeters: L*W*H / 6000

• Conversions:• 1 kilogram = 2.2046 pound

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Consolidation Benefits (Sect. 3)

• Lower costs and/or higher profit margins to (master) freight forwarder• Theoretical example:

• Customer 1:• 30 Boxes • 42" x 30" x 24“per box• 98 pounds gross weight per box• Total gross is 2,940 pounds, total volume weight is 5,465.1 pounds

• Customer 2:• 300 Boxes • 36" x 24" x 6“per box• 50 pounds gross weight per box• Total gross is 15,000 pounds, total volume weight is 9,368.7 pounds

• Charging customers for 20,465.1 pounds but paying airline for 17,940 pounds

Getting Good Rates (Sect. 3)

• Year-round shippers with predictable cargo • “Good freight” is volume cargo or dense cargo• “Bad freight” is 1:1 cargo• Need shippers to make accurate bookings • Also need shippers to book early• Have 1-2 days flexibility• Last minute changes almost always COSTLY

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Contractual (Sect. 4)

• Provider: Express couriers such as UPS, FedEx, DHL, and certain forwarders

• Requirement: Large or consistent shippers • Result: Fixed dollar amount per weight (LB) for the

year or percent discount of “standard” rates• Good: Predictable• Bad:

• Not necessary the cheapest or best service • “Exclusivity” for certain period

Bid or Seasonal Guide (Sect. 4)

• Provider: Express couriers and forwarders• Requirement: If annual, consistent and accurately

projected volume• Result: Fixed dollar amount per weight unit in the

year or within “seasons”• Good: Predictable• Bad:

• Requires preparation, bid process, etc. • Some exclusivity for certain period

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Weight-Break Rate Guide (Sect. 4)

• Provider: Express couriers and forwarders• Requirement: Some idea of freight characteristics• Result: Fixed dollar amount per weight unit within

effective period• Good: Predictable• Bad: Subject to market rate fluctuations

One-Off Quotes (Sect. 4)

• Provider: Express couriers and forwarders• Requirement: Actual shipment details• Result: Quote per each shipment• Good: Accuracy and best market rate• Bad:

• Timely process • Subject to market rates fluctuations

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Cost-Plus (Sect. 4)

?Thank You (Sect. 5)

• Knowledge, understanding and some trust is the basis for a good relationship between yourself and your forwarder

• Questions and answer• Any other questions, please contact:

Alex ChouSales & Marketing DirectorTime-To-Air CorporationMobile: 510-757-6617alex.chou@timetoair.com