SHIPPING REFORM
WAYBILL LIMIT OF LIABILITY
INAPPLICABLE
11/01
A decision from the New South Wales
Supreme Court (Australia) found the FIATA air waybill limit of liability
(also part of the internationally accepted Warsaw Convention) of US$20
per kilo did not cover the situation of a truck dropping cargo off the
back due to poor strapping even though the trucker was affiliated with
the freight forwarder whose waybill was intended to transport the cargo.
The cargo was en route to a bonded warehouse. The forwarder argued the
term “Airport” as used in the Warsaw Convention provided coverage
even though the cargo was not physically on airport grounds. The court
rejected that argument finding the cargo was being handled outside the
dimensions of Melbourne airport.
The trucker also argued the terms of the
waybill provided that even if the Warsaw Convention did not apply, the
carrier’s liability could nonetheless be limited to US$20 per kilo.
The court found this argument, too, did not apply because the term air
carriage did not apply to truck movement to a bonded warehouse.
GREATER PORT EFFICIENCY SOUGHT
01/01
Even though the Ports of Los Angeles and Long Beach move more cargo
than just about any other ports, the speed and efficiency of that
movement often leaves much to be desired coastwide. Seeking greater
emphasis to upgrading the speed and efficiency of the regional ports but
also trying to address the congestion and unreliability problems which
seem wide spread, a new coalition has been formed. Called the West Coast
Waterfront Coalition, its mission is to facilitate communication among
and between members of the supply chain plus help opinion leaders
understand the need for technology improvements at the ports. For more
information, see www.portmod.org/. The West Coast longshore contract is
up for renewal later this year. One of the key issues for negotiation
between the PMA and the ILWU is the expanded use of technology.
FEDERAL COURT UPHOLDS MIAMI EXPORT INSPECTION FEE
01/01
while the harbor maintenance fee was found unconstitutional as a tax on
exports, the Court of Appeals for the Federal Circuit has ruled that a
Dade County vehicle inspection fee is valid. The matter arose because
Customs was allowed to place a trailer on port property to use for
outbound vehicle inspections. The port began charging to recoup its
costs and Auto Cargo, Inc. sued saying that, although the fee was
characterized as a user fee, it was really nothing more than a ruse to
raise taxes. In the end, the court may have been influenced by the
modest amount involved ($7.50) but nonetheless held that it was
reasonably related to the port services provided "[a]s long as
those who use the Port are required to pay the inspection fee, there is
a reasonable nexus between those who pay the fee and Dade County."
JUST WHEN MAY A CARRIER LIMIT ITS
LIABILITY
3/00
The typical limitation of liability
language appears on the bill of lading or air waybill, but what happens
when the shipper does not see either? Such was the situation in
Read-Rite Corp and American Homes Assurance Company v. Burlington Air
Express Ltd., et al, 9th Cir. C.A., D.C. No. CF 97-03113-Cw/BZ. The
goods were to move by air out of London (Heathrow) airport but ended up
trucked to the continent before being air freighted from Luxembourg to
San Francisco. The shipment was damaged en route. Does the Warsaw
Convention limit of liability for air shipments govern? The court said
no because the damage occurred other than in conjunction with the
transportation of the goods by air. The court therefore turned to
federal common law and the Airline Deregulation Act to find there is a
limit of liability in the contract itself, the air waybills involved.
Even though the shipper never actually saw those air waybills, its agent
(Burlington) prepared one which was deemed notice to the shipper.
Burlington also saw the master waybill. As a result, the shipper was
deemed to have knowledge of that waybill, too. The court also found the
shipper had purchased a separate insurance policy which constituted, in
the court's eyes, notice of the limitation of liability on both
waybills.
SHIPPING ACT CONFIDENTIALITY PROVIDES PROBLEM
11/99
Importers are reminded that if their cost of goods
includes freight, carriers are relying on the Ocean Shipping Reform Act
of 1999 in declining to provide customs brokers with the actual prepaid
freight amount. As a result, importers in this situation should make
sure that their commercial deal obligates their supplier to state the
actual freight cost. Customs has repeatedly stated that only the actual
amount of freight may be deducted and, if it cannot be determine, duty
should be paid on a value which includes the freight. The alternative is
to purchase on an F.O.B. or exworks term of sale which provides the
additional benefit of controlling freight costs.
SHIPPING REFORM HAS UNINTENDED SIDE EFFECT
8/99
With the advent of confidentiality in ocean shipments,
many importers are having trouble determining the amount of ocean
freight included in the cost of their goods. This fact has presented a
problem in calculating dutiable value. If an importer purchases goods on
terms of sale which include prepaid freight, the only way he can safely
deduct the freight charges is to be able to document the amounts
involved. However, shippers are now reluctant to provide those numbers.
In the past, bills of lading were rated so the importer would know what
to deduct. However, when the Ocean Shipping Reform Act took effect last
May, rate confidentiality was allowed so often bills of lading are no
longer rated, ostensibly out of concern that others could learn freight
rates and use them to their competitive advantage. As a result, if the
importer guesses at the amount of freight included, he runs the risk of
being penalized by Customs for not being able to support his
declaration. If he guesses high, he pays too little duty. If he guesses
low, he pays too much. In other words, an importer cannot exercise
reasonable care by guessing.
OSRA
UPDATE
6/99
On April 29, 1999, the Federal Maritime Commission published
a final rule clarifying that a foreign nvocc may become licensed under the
Ocean
Shipping Reform Act by establishing an office resident in the
U.S. Freight forwarders are not similarly impacted because, by definition,
a forwarder renders export services from the U.S. In other words, within an
office in the U.S. a forwarder could not meet its responsibilities to its
customers. The FMC also clarified that all nvoccs which are properly bonded and
tariffed by April 30, 1999 will become ocean transportation intermediaries (OTI). If it is determined an OTI is not properly qualified, license revocation
proceedings will be undertaken by the FMC.
OCEAN SHIPPING REFORM
ACT
5/99
Wondering about some of
the important changes under OSRA for forwarders, nvoccs and shippers?
Visit our website for an article which summarizes some of those
revisions.
OCEAN SHIPPING REFORM
ACT
4/99
For forwarders and nvoccs, the big changes are as
follows:
1) the two capacities have been merged to one - ocean
transportation intermediary (OTI), a term which is to be used to define either
set of services;
2) All OTIs must be licensed;
3) The services
subject to license are those associated with the transportation of cargo to or
from the United States;
4) The distinction between a forwarder and an
nvocc is maintained. While no single factor makes the difference, the one
mentioned as associated with being an nvocc is whether or not the service
provider holds himself out as carrying the goods;
5) As the key is
providing services to and from the United States, the new regulations offer two
different
definitions:
a)
if the company or individual "is resident in or incorporated or established
under the laws of the United States"
or
b) if the
company or individual "is incorporated in, resident in, or established under the
laws of the United States, or otherwise maintains a physical presence in the
United States;"
6) Under the first definition, if an unlicensed foreign
based OTI uses a U.S. based agent, the U.S. agent has to be licensed. In some
instances, the U.S. agent is a document handler and so does not qualify as an
OTI. In those cases, the foreign based OTI must itself become licensed, change
US agents to a licensed party or the U.S. agent must become licensed;
7)
Under the second definition, only freight forwarders and nvoccs as currently
defined would have to be licensed;
8) To be licensed, the OTI must have
three (3) years of experience providing the requisite services. All freight
forwarders who are currently licensed and file the necessary bond by May 1, 1999
will retain their licenses. NVOCCs must submit a license application and file
their proof of financial responsibility before the May 1, 1999 deadline. If they
do so and have a valid tariff and proof of financial responsibility timely on
file, they will be provisionally licensed until the FMC completes processing
their license application;
9) Any nvocc without the necessary experience
may continue operating after May 1,1999. However, the OTI license application
must be filed no later than April 30, 1999 and the person supporting the nvocc
application may not act as a qualifying individual for another OTI until he or
she obtains the necessary three (3) years of experience.
10) The OTI bond
is available to pay any "judgment for damages arising out of an NVOCC's
activities as an ocean common carrier providing ocean transportation services."
A company may offer both nvocc and other services. The other services, however,
need not be covered by the nvocc bond.
11) There are new claims
procedures and time limits.
12) There are also new financial
responsibility
levels:
a) For
OTIs operating as freight forwarders - the new bond amount is
$50,000;
b)
For OTIs operating as nvoccs - the bond amount is
$75,000;
c)
For unlicensed foreign based entities -
$150,000;
d)
For groups or associations -
$300,000;
f)
For each additional unincorporated branch office - $10,000;
13) Tariffs
will no longer be filed with the FMC but must be made available on the Internet.
Carriers will be able to contact the FMC to verify an nvocc has the appropriate
financial responsibility on file. The FMC may publish a list of the locations of
all carrier and conference tariffs as well as the OTIs;
14) The cost to
process an application for a license is $778 and $362 for an
amendment;
15) When the OTI is employed to perform services on behalf of
the agent of the party responsible to pay for the services, a copy of the OTI's
invoice must be transmitted to the party paying his invoice;
16)
Licensees are prohibited from preparing, filing or assisting in the preparation
or filing of any documents the OTI has reason to believe are false or
fraudulent;
17) Any OTI who has reason to believe its shipper or
principal has made false statements, errors or misrepresentations is obligated
to notify his shipper or principal of that belief and must decline to
participate in any transaction involving that document until the matter is
properly resolved;
18) An OTI must have express authority to endorse or
negotiate any draft, check or warrant drawn to the shipper or principal's order
and must also account to its shipper or principal regarding any overpayments,
adjustments to charges, reductions in rates, insurance refunds, COD proceeds,
drafts, letters of credit or any other sums due to the principal or shipper;
and
19) Freight forwarders are allowed to provide in-plant placements but
may not fee split or reduce fees. Freight forwarders must be identified as the
shipper's agent.
Tariff filing abolished -
1) Tariff rates need no
longer be filed with the FMC. However, service contracts must be confidentially
filed and contain essential terms: origin and destination ports, commodities
involved, minimum volumes or portions and duration;
2) Non-conference
carriers are allowed to enter into service contracts as may unrelated multiple
shippers without being members of shippers' associations;
3) Service
contracts with nvoccs are subject to the OTI financial responsibility
requirements;
4) Carriers are prohibited from subjecting shippers'
associations or OTIs to "unjust discrimination or unreasonable prejudice or
disadvantage based upon their status;" and
5) Carriers no longer file
their tariffs with the FMC but must instead publish their tariff rates in
private, automated systems. Shippers should be able to used the information to
compare rates and assess whether there is discrimination so the database must
have search capabilities by text or number. All basic and accessorial rates are
to be listed. Increased rates take effect thirty (30) days after publication
while no change and rate reductions take effect upon publication. NVOCCs are
required to state if they co-load and must so state on their bills of
lading.
SIMPLE ERROR CAUSES SIZABLE
DAMAGES
1/99
A shipping agent was instructed to carry out
pre-shipment inspections on frozen swordfish. The buyer required the shipping
agent to warrant that at least five (5) percent of the fish had been tested for
mercury content. The laboratory technicians opened the correct number of boxes
to meet the percentage requirement. However, the shipping agent forgot to tell
the laboratory the samples had to be analyzed separately rather than together as
would be normal laboratory practice. Upon arrival in the U.S., the swordfish was
found to have too high a mercury content and so was rejected as unfit for human
consumption. The importer sued the shipping agent. The insurance company finally
paid $412,500 plus $247,727 in legal fees.
INSIST ON THE ORIGINAL BILL OF
LADING
1/99
A shipping agent released goods to a consignee
upon the consignee’s assurance the original bill of lading was lost. The
consignee submitted the usual indemnity agreement. Eventually the shipper
informed the agent the consignee had not paid for the goods and the original
bill of lading remained with the bank. The agent demanded the return of the
shipment. The consignee responded with a copy of his letter to the shipper
containing allegations of serious shortages and excessive quantities of plastic
and dust in the nickel silver scrap. The bank took the position it only verified
the consignee’s signature and did not itself join in the indemnity. It also
advised that when it informed the consignee to pay, he disappeared. The shipper
filed claim for the loss of his goods which the insurance carrier eventually
paid. The moral to this story is do not accept a letter of indemnity
unless it is from a bank.
SHIPPING ACT REFORM
SIGNED
10/98
Earlier this month, President Clinton signed
into law Shipping Act reform legislation. The biggest change for most shippers
will come from the fact that service contracts will now be confidential. The
rates a specific carrier charges to a given customer will no longer be
publically available. As a result, there is concern that carriers will be able
to discriminate between shippers, something not possible under the current
scheme because all rates are currently public information.
Many small
shippers and consolidators (nvoccs) are concerned they will be charged higher
non-competitive rates because they will not know what others are being charged.
The answer to this concern is expected to be the formation of many more shippers
associations which allow groups of shippers to band together and use their
buying clout to negotiate more favorable rates from carriers.
CAN THE FMC DO
ANYTHING?
9/98
The container and space shortage for goods
coming out of Asia is seen as causing what some have called “greed” on the part
of the carriers. Complaints are being heard from small shippers and
consolidators about subtle pressure allegedly being placed on them to pay more
than they feel they should to get containers and move cargo. The Federal
Maritime Commission (FMC) has voted to look into the matter on an expedited
basis. The FMC has received information suggesting carriers are asking for spot
payments to provide empty containers or to stow loaded containers for transport.
Companies have advised the FMC they are being required to pay from $300 to $1100
extra for these services which have a variety of names such as container
repositioning, slot reservations fee and peak season surcharge, to name a
few.
For the FMC, one key is whether any shipper or consolidator is
willing to go on record about what is supposedly going on. Representatives from
many of these companies perceive that to do so will result in retaliation, i.e.
the loss of containers or space allocations. From the FMC point of view, the
question is whether the carrier is allowed to assess the charge. A carrier may
do so as long as the charge is provided for in its tariff or service contract.
Also to be investigated is whether carriers are discriminating between shippers
by only asking small shippers or consolidators to bear these costs. For
consolidators who do pay these charges, they, too, must make sure they can pass
the charges on to their customers by having a comparable provision in their
tariffs. Other forms of subtle pressure have been reported to the FMC such as
recommendations for the renegotiation of existing service contracts to provide
for higher rates. It is also rumored that goods are being misdescribed so as to
be subject to higher freight rates.
The FMC is still in the process of
formulating how it will investigate this situation.
SHIPPING REFORM
4/97
As part of Republican attempts to balance the budget,
efforts have been underway to eliminate the Federal Maritime Commission (FMC).
The theory is the agency is no longer needed and what few functions are
worthwhile retaining can easily be transferred to the Surface Transportation
Board (STB)[the successor to the Interstate Commerce Commission]. Efforts at
reform failed last year. However, those efforts have taken on new vigor in the
current session of Congress. In early May, the Senate Commerce, Science and
Transportation Committee will meet to approve the text of a reform measure. The
Committee is expected to act so that its bill is considered by the full Senate
before the May 23rd Congressional recess. The reform bill allows confidential
contracting between shippers and individual ocean carriers, but not with groups
of carriers. It requires that tariffs be made available through private services
and need no longer be filed with the government. Finally, the FMC would be
abolished and its surviving responsibilities transferred to the STB.
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