 Ah, this is Rob Hack back with another episode of exporting from Hawaii. Today, I'm very pleased to have a guy who has been in the business of shipping from Hawaii for 50-something years, probably know more of an expert exists in Hawaii than Brian Suzuki, president of Hawaii Air Cargo. Thank you for being here with us today. Aloha. Aloha. Aloha. So companies that I consult to in Hawaii constantly hear me talk about shipping and I think that our local companies don't pay enough attention to shipping. Packaging is a big part of that, we'll talk about that too. Your company, Hawaii Air Cargo, is a freight forwarder. What is a freight forwarder? Can you explain that to the audience? A freight forwarder acts and I'm specifically an air freight forwarder and we ship by air, we do everything that the airlines are required to do except that we don't have our own aircraft. We use all the scheduled carriers and we have contracts with each and every one of them to get preferred rates and to get space. Believe it or not, space is very tight to get into the islands, I mean, this way. Going out, not that bad, we have so many tourists buying on wide-body jets that space is going out. We don't have too much manufacturing products. We can get favorable rates and I'll explain to that about that later. Okay. How old is Hawaii Air Cargo? Hawaii Air Cargo actually goes before I took over the company and I did take over the company in 1982. And so 37 years. But we're about the only locally owned company. We compete against a lot of mainland and international companies and we also compete in many respects with the FedEx, UPS and all the airlines. The only thing is that we consolidate and a brunt of the bulk of my business is actually shipping in from the mainland and you'd be surprised what air freighted in from the mainland to Hawaii. Air freight consists of only 2% of what's in and out of the state. But that 2% could be just inventory products. Nothing rushed as we might think, oh, air freight is expensive. We can't afford to ship air. But a lot of times it's cheaper than going by boat. And so it's actually something to look at. Same token when you ship to Asia. Because we have so many wide body flights, and they're empty with cargo. So what happens is that we can negotiate prices on behalf of our customers. And with that, we have, for instance, a rate from Tokyo to Honolulu coming this way is the same $2 a pound, or whatever it will be. Going from here to there could be 50, 60 cents a pound. A lot less and people don't realize because they said, oh, in Japan you want to sell your product. Hawaii flying it is too expensive. Because they know how much it costs to ship by air, within Japan, but also from states neighboring Taiwan or Korea. And the air freight is expensive because they actually go for a certain type of product. Here our air freight, since we have the space available, airlines want the business, whatever it might be. But they want to give us a pretty good price. So they do a lot of things that are helpful for our exporting. Although most of the exporters, the old-timers know, the new people getting into it, they just don't realize it. When they do get some kind of a prospective buyer without knowing the freight cost, wow, you know, air freight is going to be a lot more than we can do. Ocean freight doesn't allow less than container loads going back to Asia. So you have to fill a container, a 20-foot container, a 40-foot container, whatever. And that could be expensive for the buyer if you've got to load up so much stuff, you know. But there are no consolidations out of Hawaii. There are consolidations out of LA, the West Coast. Can you just one second explain what is a consolidation? Consolidation is, for instance, you buy a container, a 40-foot container, and then in there you put 10 different companies' products, you put it in there, you consolidate it into the container, you get a container rate, you may pay for a loading charge to have a company stage the container and load up. But it's a lot cheaper than shipping, you know, 1,000 pounds, you know, one time as opposed to shipping 20,000 pounds one time. So those are a consolidator. And they have a lot of consolidators, but unfortunately not from here to Asia. So the next best bet is we have very favorable air freight rate going back to Asia. What are the most common rates from Hawaii to Asia? I, of course, I hope to read Haneda. Yeah. Well, we have all different rate structures. For instance, Narita Airport is less expensive than Haneda Airport just because of the handling charges within the airport and maybe your ticket prices might be more expensive. And it's the convenience of being close to downtown Tokyo as opposed to Narita. But Narita Airport has all the customs, cargo, cargo, customs, and everything else. There's a big operation there with freight orders in Japan that have offers there. So it's very convenient. But at the same token, we can ship something for very inexpensively to Tokyo. And then next thing you know, their customs and clear out to have the delivery made might be more than double the price. And that's where negotiations has to be not only with the air freight, but also on the landings. So a freight forwarder such as Hawaii Air Cargo, are you working with customs clearance in the foreign countries? We do. But because we're an American company, we have to have an age agent, someone that doesn't kind of work. And then for the volume that we may have, it's very small compared to some companies in California, wherever. We try to ask the input of record, whoever's going to be the input, to do the shopping and maybe they order stuff from elsewhere and they already use a broker. And then with that, they can get a better rate. About domestic transportation in Japan, do you handle that as well? From Merida to... We could, through our agent. Through our agent. But again, it's a one-shot deal. So therefore, you have to look at, when I say one-shot, it may be this one time. And who knows when the next ship is going to be that you're going to deliver 500 pounds of candy or something. It's good to have a distributor that might be well aware of all the different companies that do that kind of work. A lot of Japanese stores, you can't deliver the whole order there. They're so... If you've been to Japan, you see the stores are small. They have very little storage room. So the distributor has to do the storing. And then as the order is placed, you might place an order for one week supply only. And so you have to have a regular delivery set up. Those additional costs, so sometimes you wonder, you go in, you look at one store and you see this product from Hawaii says, wow, you sell it for that much? Only because of all the intermediary costs. So that's going to serve. And then going back to shipping, handling of cargo is very important. Unfortunately today, there are a lot of contractors that do ramp service, cargo service. There are various other things that I would like to say the old days, if you went to a carrier, people that receive your freight, they know they're well aware. You should be in chocolate candies or you should be cut flowers or plants. You can't leave it out in the sun. You can't leave it in the sun. Yeah. So therefore they take pride in that some of the newer companies, we have to watch because I pay claims on that. Most freight forwarders in the islands, they don't play games because the airlines won't pay the claim. For melted chocolate and cat flowers. Yeah, they say that, oh, you have to hack it in a refrigerated container. And that costs money to rent a refrigerated container. So we're saying that why should we have to do that? If you can take that product, which is in a container already, usually we put a blanket of those foil blankets to repel the heat. And then we may even do in the summer. We put dry ice back that the coolness stays within the container. And that's a lot cheaper that way. But the main thing is don't take it out two hours before the flight departs. Because there's no way the plane's not even in and hasn't even landed. And here you are taking it out and it sits out in the hot cement apron. So those things are something that the freight forwarder has to be aware of. How about on the flip side? Just those used chocolate as the example of the flowers. Once they land in Japan, how do you know that they're not exposed to the hot tarmac? It's a good question. I give an example in Seoul, Korea. Well, Seoul, Korea was posted down. When they opened the inch on the airport, the new ones, it's far away. So luckily Korean Airlines, they're good friends of mine too. I said, I want to do a familiarization trip. All the chocolate candy, my customers, I want to take them to Korea. And you give us free tickets. Oh, no problem. We got free tickets to go over there. The shippers from here, they would pay for the hotel and stuff like that. But we went to the airport and we had cargo manager around. And I had about six companies, maybe 10 altogether from the six companies. And first things first, the time the plane arrives, what time does it get into the cargo area? And fortunately, we were there in about maybe April and the weather was nice. But it gets in the 100 degrees in the summer and hot and it freezes in the winter. The plane lands, they take out the cargo, get a tin of chocolate candy, leave it outside, right close to the plane, and they wait for everything to come off. And they take a train from the plane, meaning a tow-out tug, take all those containers back to the cargo. It takes a 15-minute drive, let alone the wait time out on the ramp. So it's either going to freeze or it's going to melt. And so that was an issue, first of all. And we got it solved. Ask the guy, how come it takes so long? Can we get it done faster? If you tell us by email or whatever, we send a message, actually, the home office here, the Korean Airlines office here, send a message, so JL, whoever's taking it, send a message to that airport that says we have chocolate candy and you take it into the warehouse right away. And they will have a specific tug driver, just to pull that container. And that will take just 15 minutes. So that's a lot less of our time. And during the summer, they'll put up a big blanket that would keep the heat off the top. But then the next question is, what about once you get to the warehouse? I'll note that there are five climatic zones in the warehouse in China. Five, ambient, whatever's outside, whatever is freezing or hot. The other side is they have minus 10 degrees Celsius, zero degrees. So it's at what temperature you have to list it on the airway bill and on the message. We want it air conditioned, it's about 19 degrees. Oh, we got that. So all those things got to be done to get that product in. Now we had a situation in Japan where a shipment went to Osaka. The big company that, you know, if you've been to Japan coming back, they have the departure lines, all these gift catalogs. And you say, oh, if you're going to Hawaii, you can order from the catalog. And then the catalog people would ship it, you know, whatever date you want. It's a give you a fulfillment type. You don't even have to buy it here. You can just go over there and order it. So we're shipping, and I said, I got back a word from one of those. And he said that we got a claim. I got 10 boxes of chocolate melted. And we shipped in that low 90. The company 10, definitely a little questioning, but we replaced it. I shipped the 10 boxes in the back over there, they're very happy. But a month after that happened, I was going to Osaka anyway. So I went to visit the importer. And the importer takes pride. He's got a seven-story building, all air-conditioning, air-conditioning. And then, I want to see the chocolate candy that came out. So he showed me the storage area. And there was a, from where the containers were, the containers of chocolate or the stock. It was an aisle of about maybe 10 feet wide. There was a big window, picture window. Sunlight. The sunlight was coming through and hitting. That's right, only 10 boxes was on the side, was hitting that constantly every day. And they'll pull it from the stock. So only the ones that were on that side got melted. And you get the chocolate butter bloom. But that was untailable because it looks like mold. And so I told the guy, can you move this chocolate in and stop everything after that? And the guy says, oh, I'm sorry. It was our fault. They're so gracious. He says, we'll pay for the replacement. I said, no, it's been replaced. I'm glad I came. Don't just keep it away. It has to be placed down. So things like that, good examples of what you have to do. Try to get out of your freight forwarder, too. A lot of times, we depend on our agent to do that away. But it sounds like you're doing a lot of consulting work. You decide just looking for rates. Well, I speak a little Japanese. And a lot of times, we have customers come in. We had a guy wanted to buy flowers, cut flowers. Well, let's hold that thought until after the break. Right now, we're going to take a break. Our exporting from Hawaii will be back in one minute. Thank you. Thanks to our ThinkTech underwriters and grand tours. The Atherton Family Foundation. Carol Mon Lee and the Friends of ThinkTech. The Center for Microbial Oceanography, Research and Education. Collateral Analytics. The Cook Foundation. Duane Kurisu, the Hawaii Council of Associations of Apartment Owners. Hawaii Energy. The Hawaii Energy Policy Forum. Hawaiian Electric Company. Integrated Security Technologies. Galen Ho of BAE Systems. Kamehameha Schools. MW Group Limited. The Schindler Family Foundation. The Sydney Stern Memorial Trust. Polo Foundation. Yuriko J. Sugimura. Thanks so much to you all. Aloha, this is Rob Hack, back with Exporting from Hawaii. We have Brian Suzuki, President of Hawaii Air Cargo with us. Again, thank you for being here. Before the break, we were talking a bit about Japan, but I want to jump ahead, and we'll certainly talk more about Japan. I'd like to open slide four, if we can, please, real quick. Let's talk about methods of shipping with air freight. We talked a bit about this passenger aircraft. I think that's obvious what that is, all cargo aircraft. I think that's also obvious. Then a freight forwarder. You could, as a freight forwarder, put cargo on either of these. Is that correct? And even on the integrator. So what is an integrator? An integrator is one that does not only air freight, the airships, the product, but it also picks up and delivers. So integrators are your UPS and FedEx. And they're an international, big company. We use them, believe it or not, to ship container loads. They give us a container aid. Like, for instance, I want somebody going from LA to Hilo. They have a flight to go to Kona. While you're talking about this, can we bring up slide five, please, as air containers? I think probably some people in the audience might not understand that there are different types of air containers and that it depends on the plane, actually, and the cargo door and the capacity. Maybe you want to explain a bit about that. Right, on this slide, in the middle, upper one, the M1, we ship about two of those a day in from LA. That's our biggest hub coming in. And the other ones we can go, what we call LD containers, lower deck. It goes in the bottom of a passenger flight. The M1s go on a cargo-only aircraft and that would be like the FedEx plane, the UPS plane, or Pacific Air Cargo. And also, Aloha Air Cargo have daily flights coming in from the West Coast. So, using these containers, we pay a flat rate whether we have like an LD3 container, lower deck, we can put up to 3,500 pounds. That includes the tear, the weight of the container. We can put 3,000 pounds in it or we can put 1,000 pounds. But we pay a flat rate. We have less weight, it's hard for us to get a good price per pound. If we had 3,000 pounds every day, wow, our price per pound is less. And we sell it per pound to our customers. So, we have to have a mix of customers. So, we have density rates, things that are very dense, heavy. We give them a preferred rate because they're heavy. Like honey, or something like that. Honey is something else here. Unfortunately, container rates are not available to Asia. So, we've shipped container rates to the East Coast and from there connect to another carrier that won't sell container rates, but they'll sell per pound rate and we can have it adjusted. But those are stuff that we have to look at the best price. Also, for our customers, they have the savings and our industry is not regulated. It's been deregulated since 1975. So, it's a buyer, the airside, yeah. It's a buyer-beware market. And so, when I say I'm not trying to scare you, but you could pay one customer saying, I'm paying 50 cents a pound, you can get a better that. I'm thinking no way you're getting that kind of price. So, what happens, you have a slide there, that slide, if you can bring that up. We charge- Slide seven, please. Yeah, slide seven. We charge by actual weight or what we call dimensional weight. And you see the dimensional weight, there's a formula, length times width times height in inches and then you divide by, domestic standard is 194, international standard is 166. Now, each carrier can have a different standard for what the divisor is. For instance, we use 194 for domestic, FedEx and UPS use 166. 166 goes more so your dimensional weight will increase. So, I have a quick question on this that all of this is in inches and pounds, but internationally you're not using that. So, when a customer calls you from Hawaii, they're probably speaking in pounds. Right, well we had to clarify that, because some people, when they give it out to their customers, they have to make sure that they change to, because we're the only country that uses a lot of pounds. Most other places, kilos, kilograms, that kind of stuff. So, it is important, that is very important. But, with that customer that was getting 50 cents a pound, actually a company they're using, uses a device instead of 194 was 94. He was, they were paying double the weight, large. And actually for their four shipments that I audited in one month, I would have saved them $5,000 because they were charged for the space it takes up. And I said, oh, my price is better, you pay for less bulkiness. And so, even going to Asia, some boxes, we talk about packaging, and if it's a good time to get into it, but packaging of your product is very important so that you know that if your product is bulky, you'll end up paying for the space it takes up. Companies that I consult to here, I tell them they should be thinking about packaging very early on in the process and working with their freight forwarder, shipping company to decide what kind of packaging is best to ship. Can we bring up slide nine, please? I think that this is a good one we can talk about for a second, hidden charges because you were just talking about this. So what are some of the things that companies need to look out for? Well, number one, documentation. Some companies charge just to cut an air bill. We don't charge for that, but you could, some people. Sorry, let's be basic. What is an air bill? Air bill, a bill leading. Air bill is what that particular shipping lies on. It's a house air bill, it's a Florida's house bill. You have an airline air bill and on and on. So who would do this paperwork? Would you do it as a freight forwarder, or is it the shipper filling all this out? The shipper can do it. We will give them an air bill number and they can go in and make it, this is the air bill number and use that for their tracking and tracing. And all the FedExVPS, they have, they're all billilating, but it's all electronic. And then for that, all you care about is the tracking number when it gets received, when it gets sent out, so you can make sure it gets to where it's supposed to be on time. So when you look at all those things, shippers export deck, the shippers supposed to be doing that, but then they can do it, they don't want to deal with it, so they'll ask us to do it, and which we do. But you have to have a value of $2,500 or more in that particular shipment for US customs. Everything that goes out of the US, they want to know what's going on. So they make it so that it's $2,500 or more. On the other hand, we have a lot of, and it has to be one SKU item, one particular type of item. You can have a mix of stuff that each one amounts to $1,000 but not $2,500, and you don't have to make an SCD. But all those things are stuff that documentation charge, of course you're gonna look at pickup delivery transfers. Some people charge just to take you from their facility to the airport. And another thing too, as a freight forwarder, we have to abide by all of the rules that the airlines do. So we are under the gun with TSA. All of our employees have to have background checks done and they have to know all the rules. They can make stops between our facility and say United's cargo office. We can't stop and pick up a drink or something somewhere. Has to be watched, monitored or locked. And then we do have TSA, believe it or not, would send someone in. And because we know most of the inspectors here, they end up sending and bringing somebody from the West Coast, coming for a few weeks and then they go and try to walk into our facility. Or they wanna order something. They'll call from the hotel, can you pick a pickup? I belong to IBM. We can't just take their word for it. So you're just testing here? They're testing us because we have to call the home office. Where do you work out of? We can't use you, even though it's a big name. And obviously there would probably be a known shipper. We have to watch them. But so we do all that kind of stuff for which you even get a cheaper rate than going to the airlines. So it's something that we have to be looking out for. And again, one of the things with Japan or anything else, once your product hits, they want all you have. And a lot of the producers here are not big time they can benefit from big stuff. I give an example, one customer of mine, they've been my customer from day one. And I'll say it's Hawaiian host. But you go all around Singapore, you go to Korea or whatever. The biggest sell of macadamia and chocolate is host. But it doesn't say Hawaiian host, Singapore host. It's all the same, we ship the stuff. Singapore host, Korea host, all that. Very smart and that's where packaging comes up. They look at the thing and they go, wow, that is terrific. And some of the, anyway, like in Seoul, the ancient airport, they have to pay for cashier there. They have a duty-free store, but each chocolate that's sold at that place shares in the cost of that sales person. So before we finish, can we bring up slide 10? This is how people can contact Brian and Hawaii Air Cargo. You say, you've been there for 37 years. That's great. There's nobody in Hawaii, in my opinion, that would know more about shipping by air internationally or even to the mainland than Brian Suzuki. So please contact him or his company if you have any shipment requirements. Is there anything you'd like to add before we wrap up? No, I think what you're doing, Rob, is great. I think more people should be watching your program. Thank you all the time. Because you share a lot of information that we try to share, but then we're limited. It's about, you know, time of year. But I can go on and on and on. And I've thought, I didn't make any money, but it was at the community colleges. I lectured at the University of Hawaii and all the university on the neighbor islands, too. But people just, the students, as far as that goes, are only looking at their own personal stuff. So what catches their attention is we have a lot of international students that when you graduate, they're gonna send your computer home, your books and stuff. Never thought about that. Then they have to get a shop around. Same thing with products from Hawaii. They have to shop around, look at what's going on. And I'm not saying that everybody in our staff can say everything that I know, but at least if they can, they'll ask me to talk to that person and try to see if we can get that customer to want to export. Because that's what we need more export. I agree completely. That's why we have this show exporting from Hawaii. So thank you again so much to Think Tech and to Brian Suzuki for being here today. We'll see you again in two weeks, at the same time. Thank you. Mahalo. Thank you very much. Thank you.