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Thursday, January 20, 2011

Seattle Port Set Container Record In 2010

The Port of Seattle set an all-time container record for itself in 2010, boosted by a nearly 50 percent increase in imports and nearly 20 percent increase in exports over 2009 numbers.

The port handled a total of 2.13 million TEUs in 2010, narrowly besting its previous annual record of 2.09 million TEUs handled in 2005. The 2010 totals were up 34.6 percent over 2009, representing an increase of just under 550,000 TEUs.

During 2010, the port handled 897,364 loaded inbound TEUs, a 46.6 percent increase over the 2009 calendar year. The port also moved a total of 548,179 loaded outbound TEUs in 2010, a 19.3 percent increase over 2009 numbers.

On a month-to-month basis, the port turned in double-digit increases in total container volume for each month from January to November, ending with an 8 percent increase in December 2010 the same period in 2009. The port moved a total of 62,733 loaded inbound TEUs in December, 2010, a 9.7 percent increase over the year-ago period, and 51,166 loaded outbound TEUs, a 4.9 percent increase for the month.

Report: Import Box Traffic to Continue Increases Through April

Following on the news of sizable gains in import container traffic at most major West Coast ports in 2010, analysts are predicting the upward trend will continue nationwide through the first four months of 2011, albeit at a slower pace.

Import cargo volume at the nation’s major retail container ports is expected to be up 8 percent in January over the same month in 2010, according to the monthly Global Port Tracker report.

Produced for the National Retail Federation by the consulting firm Hackett Associates, the report covers the US ports of Long Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Hampton Roads, Charleston and Savannah on the East Coast, and Houston on the Gulf Coast.

“While the economy clearly began to recover in 2010 and drove up cargo volume as retail sales improved, maintaining that momentum in 2011 could be difficult,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold.

“Consumers faced with continued high unemployment are expected to focus more on necessities than discretionary spending. Retailers will continue to carefully gauge consumer demand and adjust import levels accordingly.”

In addition to the 8 percent growth in import container traffic in January, the report predicts a 13 percent increase in import boxes during February, a 9 percent increase in March, a 7 percent increase in April and a 2 percent decrease in May.

“Our projections for 2011 remain firm, albeit not at the levels of the recovery rates of last year,” Hackett Associates founder Ben Hackett said. “Growth in the upper single-digit levels can be expected, particularly on the West Coast.”

The major West Coast ports all reported significant 2010 calendar year increase in total container volumes: the Port of Long Beach was up 23.6 percent over 2009; the Port of Los Angeles gained 16 percent; the port of Oakland was up 13.9 percent; and, the Port of Seattle saw an astounding 34.6 percent increase.

In each case, total import containers handled played a major part in growth seen over 2009 levels. The Port of Long Beach reported a 23.4 percent increase in loaded inbound containers during 2010; imports at the Port of Los Angeles were up 12.8 percent; the Port of Oakland reported imports up by 14.5 percent; and, imports through the Port of Seattle increased 46.6 percent.

Oakland Port Up 14 Percent in 2010

The Port of Oakland, boosted by 10 months of double-digit increases in total container traffic during 2010, ended the year up nearly 14 percent over 2009, eliminating the volume loses experienced since the global economic recession and coming close to breaking the all-time annual container record for the port set in 2006.

The port handled a total of 2,330,202 TEUs in 2010, a 13.9 percent increase over 2009. The 2010 numbers surpassed the port's end-of-the-year numbers for both 2008 and 2009, falling just 50,000 and 60,000 TEUs short of the year-end numbers in 2007 and 2006, respectively. The port record for total containers moved in a year was 2.39 million TEUs set in 2006.

The 2010 year-end numbers also make Oakland the third busiest US container port on the West Coast, coming in behind number one Los Angeles, number two Long Beach, and just ahead of number four Seattle.

During 2010, Oakland handled 802,917 loaded inbound TEUs, a 14.5 percent increase over 2009 numbers. The port also handled 802,917 loaded outbound TEUs, a 1.3 drop over the previous year.

Despite the positive calendar year numbers, the port actually turned in a sour final month for the year. In December 2010, the port handled a total of 187,953 TEUs, a gain of just 0.6 percent compared to December 2009. In addition, both import and export box numbers fell during December: total loaded inbound boxes fell 2.5 percent to 65,789 TEUs for the month; and, total loaded outbound box numbers dropped 6.6 percent to 83,069 TEUs.

Box Vessel Over-Capacity to Continue, Demand to Fall

Containership over-capacity is expected to persist for at least another 12 months with demand expected to slow down "significantly" in 2011, according to the latest report from Paris-based industry analyst firm Alphaliner.

"Containership capacity is expected to grow by an average annual rate of 8.7 percent over the next two years, with 1.26 million TEUs due to be added in 2011 and 1.33 million TEUs in 2012" said Alphaliner, noting that this is in addition to the 1.20 million TEUs added to the global fleet in 2010.

While the projected increases in capacity do not match the figures recorded in 2006-2008 – when an average of 1.37 million TEUs per year were added – Alphaliner believes that the level of capacity additions remains a key concern for the industry.

At the same time, Alphaliner predicts cargo demand will decline to less than 8 percent growth in 2011, a sizable drop from the 13.6 percent increase seen in 2010.

"A large part of the new capacity added in 2010 was absorbed by the increased demand that was caused by the rapid economic recovery," said the report.

"Throughput volumes at the world’s five busiest container ports grew by 18 percent on average in the first three quarters of 2010. However, the average growth at these ports has slowed to 8 percent in the fourth quarter, with the trend towards slower growth likely to persist into 2011."

The most recent Global Port Tracker report, prepared for the National Retail Federation by Hackett Associates, also predicts slowly declining single-digit cargo increases through April at major U.S. ports with possible declines beginning in May.

The slowing of demand in the fourth quarter of 2010 has already started to hurt carriers’ load factors, said Alphaliner. The report estimates of vessel utilization levels on the Far East-U.S. and Far East-Europe routes dropped to only 80 percent in December, the lowest levels recorded since May 2009.

"Attention must now be shifted to utilization levels in the next two months," said Alphaliner, "as these will determine the direction of freight rates after the Lunar New Year celebrations in the Far East."

Tuesday, January 18, 2011

Forum Selection Clauses in Maritime Contracts

By Marilyn Raia

The parties to a maritime contract have various options when trying to resolve a dispute. [See “Resolving Maritime Disputes”, Pacific Maritime Magazine, January 2010] They also have the option of agreeing on the geographic location for dispute resolution even if that location has no relationship to the dispute. The clause in a maritime contract designating the place for dispute resolution is called a “forum selection clause.” A forum selection clause might designate a particular country, state or court as the forum. It might also refer to the designated forum in more general terms such as the origin port or the destination port.

The parties to a maritime contract are not required to specify a forum for dispute resolution. If they do not specify a place, a court will consider alternatives including the place where the contract was made, or where the breaching party is located, or where the contract was to be performed. This article focuses on forum selection clauses in different types of maritime contracts.


Towage Contracts
The US Supreme Court first addressed forum selection clauses in international towage contracts in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). That case involved a towage contract between an American corporation, Zapata, and a German towing company, Unterweser. The towage contract provided: “any dispute arising must be treated before the London Court of Justice”. The towed vessel, Zapata’s drilling rig, suffered damage during the tow. Despite the forum selection clause in the towage contract, Zapata sued Unterweser in federal court in Florida. The district court held the forum selection clause to be unenforceable as against public policy, reasoning parties to a contract could not agree ahead of time to “oust the jurisdiction of the courts”. The court of appeals agreed with the district court. The US Supreme Court disagreed with both. It held the forum selection clause to be prima facie valid because it was freely bargained for. The US Supreme Court also recognized the party objecting to the forum selection clause had the burden of proving it unreasonable under the circumstances. That meant the objecting party had to show that trial in the contracted forum would be so “gravely difficult and inconvenient” as to deprive that party of its “day in court”. Even though the selected forum might be inconvenient for the parties, the inconvenience did not make the forum selection clause unenforceable because the possibility of inconvenience was known and contemplated at the time the parties agreed to it.

Since Bremen, forum selection clauses in other types of maritime contracts have been held enforceable.

Passenger Tickets
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) involved a ticket purchased in Washington for a California-Mexico cruise. The ticket provided that all disputes “shall be litigated, if at all, in and before a Court located in the State of Florida, USA to the exclusion of the Courts of any other state or country.”

Shute was injured during the cruise and sued Carnival in the federal court in Washington for negligence. The district court held the forum selection clause enforceable. The court of appeals disagreed, relying on the criteria in the Bremen decision and holding the clause was not freely bargained for. The US Supreme Court held the forum selection clause in the printed ticket enforceable. It reasoned the ticket was a routine form contract and the provision requiring litigation in Florida was reasonable under the circumstances. The circumstances included 1) Carnival’s interest in limiting the places it could be sued; 2) the minimization of confusion over the proper place for litigation; and 3) the reduction in fare reflecting the savings incurred by Carnival when limiting the places it could be sued. The US Supreme Court rejected the notion Carnival selected Florida as the forum for litigation to discourage passengers from pursuing their claims.


Bills of Lading
Bills of lading serve three purposes: a receipt for cargo; a document of title; and a contract of carriage. When serving as a contract of carriage to or from the United States in foreign trade, they are mandatorily subject to the United States Carriage of Goods by Sea Act, 46 U.S.C. 30701 et seq., [COGSA] which prohibits provisions in bills of lading that lessen the carrier’s liability below the standards set forth in COGSA.

Carriers routinely place forum selection clauses in the fine print on the reverse side of their bills of lading. Commonly selected forums include the United States District Court for the Southern District of New York and the High Courts of Japan or Korea. Until the US Supreme Court decided Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995), forum selection clauses in bills of lading were routinely held void on the ground they lessened the carrier’s liability below COGSA’s standards. The courts reasoned cargo owners would be discouraged from suing if required to sue in a distant forum, resulting in lower settlements for cargo claims to the carrier’s advantage.

Sky Reefer involved a bill of lading clause requiring cargo owners to arbitrate cargo damage disputes in Japan. The US Supreme Court held the clause enforceable finding it did not necessarily impermissibly lessen the carrier’s liability under COGSA. The court also noted the clause required only arbitration, which allowed the district court to retain jurisdiction to make sure the parties’ substantive interests were protected. Since Sky Reefer, courts have often extended its reasoning to uphold bill of lading clauses requiring litigation in a foreign country over which the district court would not be able to retain jurisdiction.


Employment Contracts
Forum selection clauses in maritime employment contracts also have been held enforceable. In Calix-Chacon v. Global International Marine, Inc., 493 F.3d 507 (5th Cir. 2007), a US company hired a Honduran seaman to work aboard its vessel. The employment contract provided that any claims would be brought exclusively in a court in Honduras. The seaman sued his employer in a federal court in Louisiana for personal injuries. The district court denied the employer’s motion to dismiss the case holding the forum selection clause unenforceable. The court of appeals held a foreign forum selection clause in a US maritime employment contract is not per se unreasonable and that the party objecting to it bears the burden of proving it unreasonable under the circumstances.

Dockage Agreements
Forum selection clauses may also be found in dockage agreements. In Ruble Heck-Dance v. Inversiones Isleta Marina, Inc., 381 F.Supp.2d 50 (D. P.R. 2005), the dockage agreement required all legal matters to proceed before a local state court. The marina sued its tenant in state court for unpaid charges and obtained a judgment. To satisfy the judgment, the marina attached the tenant’s vessel. Three years later, the tenant sued the marina in federal court alleging the marina had not followed proper procedures in the state court action. The marina moved to dismiss the action based on the forum selection clause in the dockage agreement requiring suits to be brought in state court, not federal court. The federal court dismissed the case, finding the forum selection clause in the dockage agreement applied to the facts of the case, that is, the allegations arose from the dockage agreement. It also found the forum selection clause “obvious and understandable” and within the tenant’s knowledge because it participated in the state court proceedings and did not object at that time.

Insurance Policies
A marine insurance policy is also a maritime contract in which a forum selection clause may be found and enforced. In Marco Forwarding Co. v. Continental Casualty Company, 2005 AMC 2669 (S.D. Fla. 2005), Marco was sued for negligence in stowing and securing a shipment. In turn, Marco sued its insurer, Continental, for denying coverage for its liability. Continental successfully moved to dismiss the case based on a clause in the policy requiring litigation of disputes in Canada. The district court held the inconvenience and economic hardship to Marco, who was located in Florida where the underlying cargo damage claim had been litigated, were insufficient to avoid the forum selection clause.

Forum selection clauses have been held enforceable in a wide variety of maritime contracts. They have been upheld in negotiated as well as non-negotiated contracts. Before negotiating a forum selection clause in a maritime contract, due consideration should be given to various factors including the convenience of the chosen forum to the parties and the availability there of necessary witnesses and evidence. A court’s subpoena power does not extend across state or country borders. Accordingly, the ability to prosecute or defend a claim can be severely compromised when witnesses and evidence cannot be compelled into the chosen forum.

The party facing an undesirable forum selection clause in a non-negotiated contract may have little choice. It can accept the potential need to litigate in an undesirable or inconvenient place as a condition of doing business with a company or not do business with that company because the forum selection clause is likely to be enforced.

Marilyn Raia is of counsel to Bullivant Houser Bailey and is located in the firm’s San Francisco office. She specializes in maritime and transportation matters and can be reached at marilyn.raia@bullivant.com.

2010 is Largest Single Year Box Gain in Long Beach Port History

Posting the largest single-year gain in total container volume in its history, the Port of Long Beach handled nearly 24 percent more containers in 2010 than the previous year, boosted by 12-solid months of growth in both import and export volumes. The year-end numbers also cemented Long Beach's status as the second busiest container port in the Western Hemisphere for 2010.

During 2010, the port handled a total of 6.3 million TEUs, a 23.6 percent jump over end-of-the-year numbers in 2009. In total, the port handled 1.2 million more containers in 2010 than it did in 2009, the largest single-year gain since the port began tracking TEU numbers in 1971.

Loaded inbound volumes rose 23.4 percent in 2010 to 3,128,860 TEUs, and loaded outbound volumes were up 15.6 percent to 1,562,398 TEUs.

Ending the calendar year, the port handled 523,311 TEUs in the month of December 2010, a 12 percent increase compared to December 2009, and the port's thirteenth consecutive month of gains. Port officials reported handling 256,889 loaded inbound TEUs in December 2010, a 10.4 percent increase over the year ago period. Total loaded outbound containers were up 14.7 percent in December 2010, to 141,140 TEUs.

“This was a tremendous rebound, and happened much faster than predicted,” said Port of Long Beach Executive Director Richard D. Steinke. “Best of all, the additional cargo has brought back thousands of port-related jobs throughout the supply chain – and we’re very optimistic that the job growth in this industry will continue in 2011.”

Three Cruise Lines Scale Back California to Mexico Service

Three cruise ship lines operating Southern California to Mexico excursions plan to end at least some of their service as a slumping tourist economy and drug-related violence in Mexico is driving customers to other destinations.

Royal Caribbean Cruises' high-end liner Mariner of the Seas departed Sunday for its last Mexico cruise from the Port of Los Angeles. Following the cruise, the ship will be moved to a new home in Galveston, Texas where it will offer western Caribbean excursions.

Norwegian Cruise Lines has also announced that in May it will discontinue Mexican Riviera service with its Los Angeles-based vessel Norwegian Star. The vessel will then be rebased in Tampa, Florida.

To the south of Los Angeles, Carnival Corporation announced that it plans to move its San Diego-based vessel Carnival Spirit to service in Australia in 2012.

The three vessels account for a large percentage of the cruise passenger traffic moving through the two ports, with the Mariner of the Seas alone accounting for just over 40 percent of the Los Angeles port's total 755,000 annual cruise passengers.

Estimates suggest that a cruise ship call at a Southern California port pumps between $1 million and $2 million in the local economy.

While industry watchers have pointed to the escalating violence in Mexico and the torpid world economy as logical reasons for the moves, other experts have also pointed to a general decline in passenger interest for the Mexican excursions.

Norwegian Cruise Lines said, while it plans to consider a return to Los Angeles at some point in the future, the departure of the Norwegian Star was directed by an "overcapacity in the market" and "decreased demand."

UP Buys 160 Acres in Bay Area for Possible Intermodal Facility

The Union Pacific Railroad Co. has purchased two parcels adjoining Tesla Motor plant in Fremont and plans to use the combined 160 acres of property for freight transportation activities, the Omaha-based Class I railroad said Thursday.

The railroad purchased the two vacant parcels – one adjacent to the car plant on the north, one on the south – on Dec. 29, 2010 from New United Motor Manufacturing Inc. UP operates a set of tracks that run next to both parcels, and the rail right-of-way could accommodate a second set.

The UP parcels are part of the former General Motors-Toyota joint venture NUMMI facility, which totaled 370 acres of land and a 5.5 million square foot factory. NUMMI, which operated at the site for more than 25 years, shuttered last April. Electric carmaker Tesla Motors purchased the factory in October 2010, with plans to begin production of their vehicles in 2012.

Fremont officials had hoped to eventually develop the two parcels, including using the larger northern parcel for a proposed new baseball stadium for the Oakland A's and residential development.

While UP has not stated the exact plans for the two sites, many people were already guessing that an intermodal rail facility was in the property's future. UP operates a large intermodal facility at the Port of Oakland and one near the Central Valley town of Lathrop.

"In California, we do a lot of intermodal, a lot of agricultural business, a fair amount of automotive," UP spokesperson Aaron Hunt told the Oakland Tribune. "We serve all kinds of customers. This property acquisition will help us to serve those customers at some point in the future."

Tacoma Port Down for 2010

The Port of Tacoma posted its fourth straight year of declining container cargo growth in 2010, reporting a 5.8 drop off in container volume compared to 2009 and a 30.7 percent drop off since the last reported year of annual growth in 2006.

Tacoma officials reported that the port handled a total of 1,455,467 TEUs in 2010, a decline of about 110,000 TEUs compared to 2009 and a drop of about 600,000 TEUs since 2006.

Port officials reported handling 476,746 loaded inbound TEUs in 2010, a 0.9 percent decline compared to 2009. The port also handled 337,538 loaded outbound TEUs in 2010, a 19.8 percent drop off from the previous calendar year.

Closing out the year, the port handled a monthly total of 130,332 TEUs in December 2010, an 11.8 percent gain for the month compared to the same period in 2009. It was the third straight monthly volume gain at the port and the first time the port has recorded three straight months of gain since the April to June period in 2008. The port posted declining monthly volumes from July 2008 to September 2010.

In December, 2010, the port handled 42,120 loaded inbound TEUs, a 14 percent decline over December 2009. The port also handled 37,089 loaded outbound containers in December, 2010, a 14.5 percent decline compared to the same month in 2009.

Containerized cargo tonnage also dropped 8.6 percent in 2010, compared to 2009 numbers.
Total cargo tonnage volume handled at the port, minus containerized cargo, fell to 16.5 million short tons in 2010, a 4.8 percent drop compared to the previous year.