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Expeditors International of Washington, Inc.
(206)
674-3400
1015
Third Avenue, 12th Floor
Seattle, Washington 98104
www.expeditors.com
Sales
$2.6
billion
Business Description
Expeditors International of Washington, Inc. is engaged in the business of
providing global logistics services. The Company offers its customers a
seamless international network supporting the movement and strategic
positioning of goods. The Company’s services include the consolidation or
forwarding of air and ocean freight. In each U.S. office, and in many
overseas offices, the Company acts as a customs broker. The Company also
provides additional services including distribution management, vendor
consolidation, cargo insurance, purchase order management and customized
logistics information. The Company does not compete for domestic freight,
overnight courier or small parcel business and does not own aircraft or
steamships.
The Company, including its majority-owned subsidiaries, operates full
service offices. Full service offices have also been established in
locations where the Company maintains unilateral control over assets and
operations and where the existence of the parent-subsidiary relationship is
maintained by means other than record ownership of voting stock. In other
cities, the Company contracts with independent agents to provide required
services and has established over 120 such relationships world-wide.
Airfreight Services
Airfreight services accounted for approximately 37, 42, and 42 percent of
the Company’s 2003, 2002, and 2001 consolidated revenues net of freight
consolidation expenses (“net revenues”), respectively. When performing
airfreight services, the Company typically acts either as a freight
consolidator or as an agent for the airline which carries the shipment. When
acting as a freight consolidator, the Company purchases cargo space from
airlines on a volume basis and resells that space to its customers at lower
rates than the customers could obtain directly from airlines. When moving
shipments between points where the volume of business does not facilitate
consolidation, the Company receives and forwards individual shipments as the
agent of the airline which carries the shipment. Whether acting as an agent
or consolidator, the Company offers its customers knowledge of optimum
routing, familiarity with local business practices, knowledge of export and
import documentation and procedures, the ability to arrange for ancillary
services, and assistance with space availability in periods of peak demand.
In its airfreight forwarding operations, the Company procures shipments from
its customers, determines the routing, consolidates shipments bound for a
particular airport distribution point, and selects the airline for
transportation to the distribution point. At the distribution point, the
Company or its agent arranges for the consolidated lot to be broken down
into its component shipments and for the transportation of the individual
shipments to their final destinations.
The Company estimates its average airfreight consolidation weighs
approximately 3,500 to 4,500 pounds and includes merchandise from several
shippers. Because shipment by air is relatively expensive compared with
ocean transportation, air shipments are generally characterized by a high
value-to-weight ratio, the need for rapid delivery, or both.
The Company typically delivers shipments from a Company warehouse at the
origin to the airline after consolidating the freight into containers or
onto pallets. Shipments normally arrive at the destination distribution
point within forty-eight hours after such delivery. During peak shipment
periods, cargo space available from the scheduled air carriers can be
limited and backlogs of freight shipments may occur. When these conditions
exist, the Company may charter aircraft to meet customer demand.
The Company consolidates individual shipments based on weight and volume
characteristics in cost-effective combinations. Typically, as the weight or
volume of a shipment increases, the cost per pound/kilo or cubic
inch/centimeter charged by the Company decreases. The rates charged by
airlines to forwarders and others also generally decrease as the weight or
volume of the shipment increases. As a result, by aggregating shipments and
presenting them to an airline as a single shipment, the Company is able to
obtain a lower rate per pound/kilo or cubic inch/centimeter than that which
it charges to its customers for the individual shipment, while generally
offering the customer a lower rate than could be obtained from the airline
for an unconsolidated shipment.
The Company’s net airfreight forwarding revenues from a consolidated
shipment include the differential between the rate charged to the Company by
an airline and the rate which the Company charges to its customers,
commissions paid to the Company by the airline carrying the freight and fees
for ancillary services. Such ancillary services provided by the Company
include preparation of shipping and customs documentation, packing, crating
and insurance services, negotiation of letters of credit, and preparation of
documentation to comply with local export laws. When the Company acts as an
agent for an airline handling an unconsolidated shipment, its net revenues
are primarily derived from commissions paid by the airline and fees for
ancillary services paid by the customer.
The Company does not own aircraft and does not plan to do so. Management
believes that the ownership of aircraft would subject the Company to undue
business risks, including large capital outlays, increased fixed operating
expenses, problems of fully utilizing aircraft and competition with
airlines. Because the Company relies on commercial airlines to transport its
shipments, changes in carrier policies and practices such as pricing,
payment terms, scheduling, and frequency of service may affect its business.
The Company also performs breakbulk services which involve receiving and
breaking down consolidated airfreight lots and arranging for distribution of
the individual shipments. Breakbulk service revenues also include
commissions from agents for airfreight shipments.
Customs Brokerage and Import Services
Customs brokerage and import services accounted for approximately 37, 34,
and 35 percent of the Company’s 2003, 2002, and 2001 consolidated net
revenues, respectively. As a customs broker, the Company assists importers
to clear shipments through customs by preparing required documentation,
calculating and providing for payment of duties on behalf of the importer,
arranging for any required inspections by governmental agencies, and
arranging for delivery. The Company also provides other services at
destination including temporary warehousing, inland transportation,
inventory management, cargo insurance and product distribution.
The Company provides customs clearance services in connection with many of
the shipments it handles as a freight forwarder. However, substantial
customs brokerage revenues are derived from customers that elect to use a
competing forwarder. Conversely, shipments handled by the Company as a
forwarder may be processed by another customs broker selected by the
customer.
The Company also provides custom clearances for goods moving by rail and
truck between the United States, Canada and/or Mexico. The commodities being
cleared and the time sensitive nature of the border brokerage business
require the Company to continue to make enhancements to its systems in order
to provide competitive service.
During 1996 the Company established a subsidiary, Expeditors Tradewin, L.L.C.,
to respond to customer driven requests for high-end customs consulting
services. The demand for these services was stimulated by the changes made
by the U.S. Customs Service in response to the 1993 Customs Modernization
Act. Fees for these non-transactional services are based upon hourly billing
rates and bids for mutually agreed procedures.
There is a noticeable trend, prompted by customer demand, to quote rates on
a door-to-door basis. Management foresees the potential, in the medium- to
long-term, for fees normally associated with customs clearance to be
de-emphasized and included as a component of other services offered by the
Company.
Ocean Freight and Ocean Services
Ocean freight services accounted for approximately 26, 24, and 23 percent of
the Company’s 2003, 2002, and 2001 consolidated net revenues, respectively.
The Company’s revenues as an ocean freight forwarder are derived from
commissions paid by the carrier and revenues from fees charged to customers
for ancillary services which the Company may provide, such as preparing
documentation, procuring insurance, arranging for packing and crating
services, and providing consultation. The Company operates Expeditors
International Ocean (“EIO”), a Non-Vessel Operating Common Carrier (“NVOCC”)
specializing in ocean freight consolidation from the Far East to the United
States. EIO also provides service, on a smaller scale, to and from any
location where the Company has an office or agent. As an NVOCC, EIO
contracts with ocean shipping lines to obtain transportation for a fixed
number of containers between various points during a specified time period
at an agreed rate. EIO solicits Less-than Container Load (“LCL”) freight to
fill the containers and charges lower rates than those available directly
from shipping lines. EIO also handles full container loads for customers
that do not have annual shipping volumes sufficient to negotiate comparable
contracts directly with the ocean carriers. The Company does not own vessels
and generally does not physically handle the cargo.
Expeditors Cargo Management Systems (“ECMS”) supplies a sophisticated ocean
consolidation service. The Company owns and maintains software that allows
it to sell ECMS to large volume customers that have signed their own service
contracts with the ocean carriers. As an ocean consolidator, ECMS may obtain
LCL freight from several vendors and consolidate this cargo into full
containers. The Company’s revenues as an ocean consolidator are derived from
handling LCL cargo at origin and from the fees paid by customers for access
to data captured during the consolidation process.
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Expeditors International
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