January 15, 2016

Amazon China subsidiary gets FMC approval to operate as ocean freight forwarder—report

"Amazon China" listed in FMC's registry of intermediaries, forwarder executive says.

By DC Velocity Staff

E-tailer Amazon.com Inc.'s Chinese operations have been granted authority by the Federal Maritime Commission (FMC) to operate as an ocean freight forwarder, according to a published report.

According to Ryan Petersen, CEO of Flexport Inc., a San Francisco-based freight forwarder and customs broker, "Amazon China" is now listed in the FMC's directory of "Ocean Transport Intermediaries." According to a blog post by Peterson yesterday, the official name on the FMC registry is "Beijing Century JOYO Courier Service Co. Ltd.," with the trade name "Amazon China" listed on its license. Peterson posted that a 2006 Securities and Exchange Commission filing showed that JOYO to be a "significant subsidiary" of Amazon.com Inc., and that it's currently doing business as Amazon China, Peterson wrote.

The global ocean freight market is estimated to be around $100 billion a year. It has been plagued by severe overcapacity for several years as vessel supply has far exceeded demand. U.K. consultancy Drewry Maritime Consultants Ltd. said on Monday that global containership growth surpassed world port activity for the fourth consecutive year, and that global box capacity is approaching a record 20 million twenty-foot equivalent units, or TEUs. Global container rates plumbed record lows in 2015 and show no near-term signs of rebounding.

The extreme imbalance in the global market has driven down ocean freight rates by about 30 percent year-over-year, according to investment firm Robert W. Baird and Co. Inc.

Theoretically, this could spell opportunity for a high-volume company like Seattle-based Amazon, which attempts to leverage its massive volumes to capture low prices from its shipping partners. Amazon has also expressed a desire to develop its own transportation and logistics portfolio to support the movements of its own orders and those of merchants that use Amazon for fulfillment services.

In recent weeks, reports have circulated that Amazon is building an air delivery network, under the project code name "Aerosmith." It has been reported that Amazon leased 20 cargo aircraft during the recently concluded peak delivery cycle, and is testing out an underutilized air cargo complex in Wilmington, Ohio, that had been the domestic U.S. hub of DHL Express, which abandoned the facility soon after ceasing domestic air and surface operations in January 2009. It has also been reported that Amazon has purchased the French parcel provider Colis Privé to expand its business-to-consumer delivery capabilities in Europe.

The notoriously secretive Amazon never comments on such reports. However, one analyst, who asked not to be identified, said the company uses individuals and outlets as "proxies" to disseminate information about its strategy and execution.

In March 2014, DC Velocity reported that Amazon was planning to build a transportation network to lessen its reliance on long-time providers like Memphis-based FedEx Corp. and Atlanta-based UPS Inc. At the time, it was reported that Amazon would use a mix of a large private fleet, regional parcel carriers, and the U.S. Postal Service. In October, DC Velocity reported that Amazon was assembling a group of high-level executive team to lead its push to develop a transportation network, plans for which would be announced later this year.

The Wall Street Journal reported in late December that Amazon hired more than 40 UPS supervisors, managers, and executives during the last three years; perhaps its most significant hire was Kniffen Kelly, a 16-year veteran working on engineering UPS' transportation networks, to become Amazon's director of sort-center engineering.

Amazon continues to be a sizable customer of UPS. However, it is believed to have reduced its exposure with FedEx, while increasing its involvement with USPS. For example, consultancy SJ Consulting Group Inc. said this week that about 70 percent of Amazon's holiday traffic was delivered using the Post Office's "Parcel Select" service, where packages are inducted by large-volume users deep into the postal pipeline for last-mile deliveries to residencies.

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