Freedom from assets keeps middlemen viable.

BYLINE: PETER T. LEACH

NVOs see opportunity to expand market share

Like container carriers, ocean freight intermediaries are seeing their cargo volumes drop. But unlike the carriers, their bottom lines are not dragged into the red by ships that must be laid up or by expensive vessel orders that will take years to pay off. As a result, transportation middlemen see opportunities in the current downturn.

Granted, it's no bed of roses for customs brokers, forwarders and non-vessel-operating common carriers. The downturn has hit them hard, and some will be forced to close, merge or be taken over. But even though their business has flattened out or is dropping and customers are taking longer to pay their bills, ocean freight intermediaries remain surprisingly optimistic in the face of the withering downturn in global trade.

"It's not all going to hell in a handbasket, despite what you see on CNN," said Jeffrey Coppersmith, president of Coppersmith Inc., a Los Angeles-based forwarder and customs broker. "We still have freight. There's still container traffic on the freeway. Our import department has slowed down, but our exports have been strong all year long."

While business is up for some intermediaries and down for others, the sector is becoming more competitive. Some of the weaker intermediaries are cutting rates to survive, while others are relying on quality service to retain and attract customers. But if the downturn in global trade volumes continues for another year, the weaker firms won't be able to survive by rate-cutting.

In these economic conditions, further consolidation is a given. "Some firms won't be able to withstand a long economic downturn," said Peter H. Powell Sr., chief executive of C.H. Powell Co., in Revere, Mass., and a former president of the National Customs Brokers and Forwarders Association of America. "They may decide not to try to swim uphill and will look for an acquisition or sell out. A lot will depend on the length of the downturn."