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Friday, March 11, 2011

Some Maritime Terms Explained – Part 1

By Marilyn Raia
marilyn.raia@bullivant.com

Certain words and phrases are commonly found in marine insurance policies and maritime contracts, but may not be found in everyday parlance. Some have a long maritime history and others have arisen more recently as the result of court decisions in maritime cases. This multi-part series provides the background and meaning for some of those words and phrases.

Barratry
Barratry is a wrongful act willfully committed by a vessel’s master or crew to the prejudice of the vessel’s owner or charterer. It can be 1) an act committed by the master or crew involving a deliberate disobedience of the vessel owner’s instructions; 2) an act committed by the master or crew for a dishonest or unlawful purpose; or 3) a violation of the duty of the master or crew to the vessel owner arising from gross negligence.

Barratry is a covered peril under a vessel’s hull policy and the policy is not voided if, while committing barratry, the master or crew violates policy warranties. In U.S. Fire Ins. Co. v. Cavanaugh 732 F.2d 832 (11th Cir. 1984) Cavanaugh chartered his shrimp trawler to Ballard. Cavanaugh instructed Ballard about the 150-mile navigational limits in the vessel’s hull policy. Ballard intentionally took the vessel 400 miles beyond the navigational limits where it ran aground and burned. The Eleventh Circuit affirmed the trial court’s holding that 1) Ballard’s decision to operate the vessel beyond the 150-mile navigational limit amounted to barratry and 2) the resulting loss was covered under the hull policy. It rejected the insurer’s argument that the policy was void because of Ballard’s breach of the navigational limits.

The term “barratry” is used in another legal, but not maritime, context. It is also defined as the practice of bringing repeated legal actions to harass someone.


Bills of Lading
Bills of lading are documents issued by a carrier or someone acting as a carrier in connection with the transportation of cargo. Bills of lading can serve three roles: as a receipt for the cargo, as a document of title, and as a contract of carriage. Bills of lading are either negotiable (also known as “order” bills of lading) or non-negotiable (also known as “straight” bills of lading).

Bills of lading may be issued for different types of carriage including ocean, air, rail, and truck. A bill of lading may cover more than one type of carriage for a particular shipment and when it does, it is an “intermodal” bill of lading. A bill of lading covering the entire transportation of a shipment from the point of origin to the final destination and applying to all carriers of the shipment even if they are not named in the bill of lading, is a “through” bill of lading.

A bill of lading may be described as “clean,” which means there are no exceptions noted on it as to the condition or quantity of the cargo, or to the manner of packing or stowage. A “clean” bill of lading is prima facie evidence of the apparent good order and condition of the cargo when received by the carrier. When cargo is in a container or enclosed in another type of shipping unit such as a crate, a “clean” bill of lading is prima facie evidence only of the apparent good order and condition of the container or crate, not of the cargo itself.

A bill of lading may be described as “false” when it does not accurately state the facts about a shipment. For example, a bill of lading is “false” when it states a shipment has been laden on board a vessel but the shipment is still on the dock, or when it states a shipment is on board a particular vessel and it is not on that vessel. A bill of lading is also “false” when it does not contain any exceptions to the condition of the shipment and the shipment was damaged or short when delivered to the carrier. When a carrier issues a “false” bill of lading that is relied upon by the cargo owner, the carrier may lose its defenses, including the ability to limit its liability.

Bills of lading serving as contracts of carriage by vessel to or from the United States in foreign trade, are mandatorily subject to COGSA, described below.

COGSA
The United States Carriage of Goods by Sea Act, 46 U.S.C. § 30701 note, is most commonly known by its acronym, COGSA. COGSA was enacted by Congress in 1936 to govern the rights and duties of carriers and shippers of goods. It was based on an international convention regarding bills of lading known as the Hague Rules of 1924. Both COGSA and the Hague Rules addressed the efforts of carriers to exculpate themselves from cargo loss or damage, and attempted to strike a balance between the cargo owner and carrier interests. Most of the trading nations in the world have national legislation adopting the Hague Rules in some form.

By its terms, COGSA applies as a matter of law to contracts for the carriage of cargo to or from the United States in foreign trade. It does not apply to live animals, or cargo carried on deck and stated on the bill of lading to be carried on deck. By its terms, COGSA applies from the time the cargo is loaded to the vessel to the time it is discharged, otherwise known as “tackle to tackle”. The shipper and carrier may agree to extend the application of COGSA to deck cargo and live animals. They may agree that COGSA applies while the cargo is in the carrier’s custody but before it is loaded to the vessel and after it is discharged from the vessel. They may also agree COGSA will govern the liability of parties other than the carrier who are involved in the transportation of the cargo, such as stevedores and terminal operators.

COGSA sets forth the rights and duties of the cargo owner and carrier. Any term in a bill of lading that attempts to lessen the carrier’s obligations below the standards set forth in COGSA, is void. Under COGSA, a carrier has a duty to exercise due diligence to make the carrying vessel seaworthy. It must also properly load, stow, carry, and discharge the cargo. COGSA exempts a carrier from liability for cargo loss or damage caused by sixteen enumerated perils and a “catch-all” peril of all other causes without the carrier’s fault or privity or that of its agents or servants.

Under COGSA a carrier may limit its liability for cargo loss and damage to a minimum of $500 per package or if the goods are not shipped in packages, to $500 per customary freight unit, which is the unit actually used to calculate the freight. COGSA does not define the term “package”. The absence of such definition has given rise to much litigation.

Demurrage
Demurrage is a late penalty. It is assessed when a voyage charterer delays in loading or discharging a vessel beyond the “laytime” or the time allotted for such operations. It compensates the vessel owner for operating expenses incurred during the delay and the potential loss of revenue due to its inability to charter the vessel while delayed. It also refers to the daily charge assessed when a shipping container is not returned to the carrier in a timely fashion, that is, before the expiration of the “free time”.

Deviation
A deviation is a variation in the conduct of a vessel that exposes the cargo to greater risk of loss or damage. Historically, deviations were geographically based. They occurred when a vessel left the contracted for or customary voyage to stop at another port of call to discharge the cargo, or to take another route to the destination, or to save lives or property at sea.

The concept of deviation has, over the years, been expanded to include any variation in the performance of a contract of carriage whereby the risk of loss or damage to the cargo may be increased. It can involve handling of the cargo in a way that is not specified in the contract but exposes the cargo to greater risk of loss or damage. For example, the stowage of cargo on deck when a “clean” bill of lading has been issued is a deviation.

A deviation may be reasonable or unreasonable. When a vessel leaves its intended route to aid another vessel in distress, the deviation is usually held reasonable. When cargo is stowed on deck without the shipper’s approval and in the absence of a port custom for stowing such cargo on deck, the deviation is usually held unreasonable. An unreasonable deviation causes the carrier to lose its contractual defenses including COGSA defenses, and the carrier becomes an insurer of the goods. An unreasonable deviation also precludes the carrier from limiting its liability for loss of or damage to the cargo.

The next part of this series will continue the look at some words and phrases routinely found in the maritime context.

Marilyn Raia is of counsel to Bullivant Houser Bailey and specializes in maritime and transportation law. She can be reached at marilyn.raia@bullivant.com.

Vancouver USA Chief to Step Down, Successor Named

Port of Vancouver USA Executive Director Larry Paulson announced Tuesday that he will step down in April 2012.

The governing commission for the port announced at same meeting that Paulson, who has held the executive director position since 1999, will be replaced by current port Deputy Executive Director, Todd Coleman.

Paulson informed the port commission of his intention to leave the port in 2010 and a port-hired consultant has been assisting to help fill the post. According to the port, Coleman was an early front-runner in the process.

“We are more than confident that Todd’s the right person to serve as our next executive director,” Board of Commissioners President Brian Wolfe said. “The board has spent more than a year thoughtfully working through a process to determine how we transition leadership of the port in a manner that’s best for the port and the community.”

Joining the port in 2001, Coleman served as director of facilities before being promoted to deputy executive director in 2005. Prior to joining the port, Coleman was a partner in an engineering consulting firm, Coleman & Davido Engineering Consultants, in Estacada, Ore. He also held positions with Oregon companies URS, Inc. and Parametrix, Inc.

Paulson joined the port in 1992, acting as the primary attorney to the port while with the law offices of Schwabe, Williamson & Wyatt. He was named successor to retired Executive Director Byron Hanke in April 1997, and officially took the helm at the port as executive director in January 1999. In January, the port commission approved a 3 percent salary raise based for Paulson based on his 2010 salary of $165,600.

Oakland Port, Chinese Group Hold Symposium on Chinese Logistics

The first major domestic outgrowth of a November 2010 agreement between the Port of Oakland and China Merchants Holdings International occurred last week when representatives of the port and CMHI jointly hosted a symposium in Oakland.

Entitled “Blueprint for China’s Shipping and Logistics Growth,” the event focused on expanding trade volume to fulfill the port’s number one goal of growing its maritime business, while also supporting the objective of President Obama’s National Export Initiative that seeks to double domestic export volumes by 2015. The symposium detailed China’s demographic, manufacturing and sourcing trends; outlined the role of public and private enterprise necessary for transportation infrastructure and logistics facilities to meet future demand; and explored views on transportation and logistics challenges when importing from and exporting to China.

Oakland, one of the leading export ports for US agriculture products, signed the agreement with CMHI to strategically market and develop supply chain solutions for US exports, particularly agricultural commodities and perishable products.

Officially signed in a ceremony at China Merchants’ Hong Kong headquarters, the agreement focused on enhancing warehousing and logistics facilities and creating seamless cold chain services for US companies exporting their perishable products to China.

According to port officials, the agreement is part of the port's effort to "aggressively coordinating its activities" with the federal National Export Initiative signed by President Barack Obama in March.

China Merchants recently formed a joint venture – China Merchants Americold Logistics – in partnership with US-based Americold, one of the largest cold chain providers in North America. According to Oakland port officials, this venture seeks to solidify the joint venture entity as China’s premier third-party temperature-controlled logistics provider, operating an integrated platform across 15 cities in China.

RILA Wants No Cut Hours for Truckers

A major retailer trade association has told the Federal Motor Carrier Safety Administration (FMCSA) last week that proposed changes revising truck drivers’ current hours-of-service rules will not strengthen driver health and safety, but instead threaten to reverse gains made to safety on the roadways, congestion issues and environmental sustainability.

The Retail Industry Leaders Association (RILA), which represents more than 200 major retailers, product manufacturers, and service suppliers nationwide, told the FMCSA that while their members agree that driver health and safety is of the utmost importance, they strongly believe the currently proposed hours-of-service rules would not accomplish these goals.

“The proposed revisions to current hours-of-service rules would in reality cause more harm than good,” said Kelly Kolb, Vice President of Global Supply Chain Policy. “The most recent data from DOT shows that under the current system there have been significant gains in safety, making the trucking industry the safest it has ever been even as higher numbers of vehicles are on the roadways,” Kolb said. “Imposing these unnecessary changes deviates from the positive safety trends and sustainable advancements that the current system affords and comes at the expense of drivers and businesses, creating a string of future problems without making any valid improvements right now."

RILA submitted comments last week to the FMCSA voicing their concerns and asking the agency to retain the 11-hour daily driving limit and the 34-hour restart provisions as they currently stand.

Consisting of large supply chain users, RILA members depend on an efficient system to move the high volume of products throughout their supply chains. RILA argues that additional traffic woes only heighten the difficulty of delivering to stores in a just-in-time fashion. Increase the number of uncontrollable variables, the group said, while in the same instance narrowing the driver’s target drive time will exponentially intensify a driver’s stress level.

Crows Landing Developer Gets 15 Month Extension to Start Project

The developer behind the Central Valley’s Crows Landing freight development wrangled a 3-2 vote in the Stanilaus County Board of Supervisors allowing him 15 additional months to move forward with a now scaled-down version of the project.

As the head of PCCP West Park LLC, developer Gerry Kamalos has been fighting for more than three years to get the Crows Landing project to the construction phase and argued to the supervisors that he needs the 15-month extension to complete environmental documents needed before construction can begin.

Earlier this month Kamilos revealed sizable changes to the scope of the project.

PCCP’s original plan sought to remake the Crows Landing Naval Air Station into a 4,800-acre modern rail and industrial complex. A major component of the project was $52 million short-haul rail plan seeking to upgrade existing trackage along an 80-mile-long route running from Crows Landing to the Port of Oakland and back.

The rail component remains part of the project's first phase of construction and would likely take several years to complete. The original rail plan forecast for the completed complex to handle several 50-car trains or more per day via the proposed route between the Oakland port and the project site in Northern San Joaquin Valley.

Once the containers reached the Crows Landing complex, the plan envisioned the containers being loaded onto trucks for distribution throughout the Central Valley.

According to PCCP, Central Valley agricultural products and other regional products could be returned via the same rail line to the port for export.

Parts of the project have received heavy criticism from the local residents who worry about potential noise, congestion and pollution due to the complex's operations.

Kamalos addressed some of those concerns with the announcement of the scaled back version of the total plan.

The revised plan presented by Kamalos to the supervisors calls for two trains a day instead of six and a reduction of the total project size from 4,800 acres to 2,800 acres.

Kamalos also added an 850-acre solar power to be located on some of the 2,000 acres not included in the revised plans. Kamalos also said that an additional $7.5 million, $4 million from PCCP West Park and $3.5 million from outside investor Spinnaker Energy Group, has been acquired.

Monday, March 7, 2011

Pelosi Slams GOP Cuts, Calls for Investment In Ports

House Minority Leader Nancy Pelosi returned to San Francisco over the weekend, taking the opportunity to blast proposed Congressional GOP cuts in infrastructure investment and saying that the federal government needs to increase investment in the nation's ports.

Speaking at a press conference at Pier 70 in San Francisco, Pelosi used the backdrop of the one of the nation's largest floating drydocks to emphasize her point.

Officials from the drydock owner, BAE Systems San Francisco Ship Repair, said that the lack of dredging near the repair facility has limited the work the yard could take.

Pelosi said that investing in projects like dredging harbors is a missed opportunity "for commerce and jobs."

"Unless we invest in infrastructure, dredging, etc., we're missing the boat. We are missing the boat, literally and figuratively, on what we can do," Pelosi said.

Pelosi's visit comes only days after the latest Department of Labor figures showed that the economy added 192,000 jobs in February and the national unemployment rate fell to 8.9 percent. It was the 12th consecutive month of private sector job growth. Despite the positive nationwide jobs numbers, California continues to lag behind any recovery with 12.4 percent unemployment.

“Congressional Republicans would take our economy in the wrong direction by passing an irresponsible ‘So Be It’ spending bill that destroys jobs, weakens our middle class, and cuts investments in education critical to our economic future," Pelosi said in a statement following the release of the jobs report.

She reiterated similar charges at the port press event saying that Congressional Republicans want to cut federal spending and roll back federal regulations in the hope that the private sector will increase hiring and jobs creation.

San Francisco Mayor Ed Lee and officials from the ports of Oakland and San Francisco joined Pelosi at the event.

Commercial Real Estate Activity Following Port Rebounds

During the boom years of the Southern California ports immediately before the global economic meltdown, one of the ancillary impacts of the intense cargo growth was the tremendous development of warehouses and commercial real estate in the region. When cargo volumes at the ports of Long Beach and Los Angeles tumbled during the economic downturn, so too did the development, acquisition and lease of warehouses and commercial space in the area.

With both ports now in full rebound mode, warehouse and commercial property is again beginning to show some signs of following suit.

The latest example is the purchase of a 72,000-square-foot ports-area commercial building by a Chinese logistics firm.

The building, which has sat vacant for more than a year, was sold to Hong Kong-based third party logistics firm F.C.C. Logistics Ltd. for $5.3 million. Several firms were competing to purchase the building, which is located about five-miles from the neighboring ports.

According to research by CoStar, "pricing for commercial property sales in the top ten largest markets is recovering much stronger than the general market with the exception of retail." CoStar ranks the Los Angeles region as the number one market in the nation for commercial property.

Dr. Norm Miller, the Vice President of Analytics for CoStar said that the real activity typically seen moving in conjunction with increased port activity is commercial property leases.

"Purchases are more a function of the capital markets," Miller said, "but we have seen an increase in the Southern California lease activity as the ports have begun to rebound."

Long Beach Port Selects Four Firms Eligible to Build New Bridge

After more than a decade of planning, the posibility of a replacement for the aging Gerald Desmond Bridge at the Port of Long Beach is quickly moving toward reality.

On Friday, port officials announced that four teams of engineering and construction firms have been deemed eligible to compete for the contract to design and build the $950 million structure.

With the help of federal, state and local funds, port officials plan to demolish the current bridge, which serves as a main ingress and egress route for the port's Terminal Island facilities, and replace it with a new, six-lane, cable-stayed span adjacent to the current bridge site.

The $950-million project is a joint effort of the California Department of Transportation and the Port of Long Beach, along with the US Department of Transportation and the Los Angeles County Metropolitan Transportation Authority.

The four firms were selected by a group of Caltrans, Port and MTA officials from a field of seven firms that submitted qualifications earlier this year. Determinations were based on each firm's breadth of experience, personnel, resources and other key factors.

"To build the best bridge possible, we sought out the best firms from around the world," said Doug Thiessen, the port’s Managing Director of Engineering. “We had a very good response. We look forward to working closely with these four finalists during the final key phase of the selection process.”

The four teams are:
  • Dragados USA, Inc. (CC Myers, Inc., Dragados USA, Inc., Figg Bridge Engineers, Inc., Jacobs Engineering Group, Inc.).
  • Kiewit Infrastructure West Co. (Kiewit Infrastructure West Co., T.Y. Lin International).
  • Shimmick Construction Company Inc. (Shimmick Construction Company, Inc., FCC Construction S.A./Impregilo S.p.A., Arup/Biggs Cardosa).
  • Skanska (Skanska/Traylor/Massman, Buckland & Taylor Ltd., CH2M HILL Engineers, Inc.).
Caltrans and the port are currently preparing a request for proposals for the design and construction of the new bridge, ramp connectors and a bicycle/pedestrian path. The four teams will be invited to submit their proposals in late 2011, and construction could begin in 2012.

Built in 1968, the Gerald Desmond Bridge is outdated and, while deemed safe for commuters to travel on, it is increasingly likely that Caltrans inspectors could uncover a structural deficiency as the bridge ages that would require it to be shut down for major repairs. The bridge already suffers from a low "sufficiency rating" from Caltrans.

With millions of car, truck and port cargo trips annually crossing the bridge, the traffic now exceeds its operational capacity, posing safety, congestion and maintenance challenges.

The new bridge will not only provide emergency lanes, but also three main traffic lanes in each direction, and a reduction in the bridge's steep grades to improve the traffic flow and safety. The replacement will also have a higher span over the port's main channel, allowing the newest generation of cargo ships to access the port's back channels.

“This new bridge will relieve traffic congestion and improve goods movement in the nation’s two busiest ports,” said Caltrans Director Cindy McKim. “We are pleased to see this important project moving forward.”

Once construction begins, the project is expected to generate 4,000 jobs a year for five years of construction according to the Los Angeles Economic Development Corporation.

Retail Imports to Maintain Strong Volumes at Major Ports

Analysts are predicting the nation’s major retail container ports will continue to post strong import container volumes in March, indicating growing confidence of increased sales by retailers. At the same time, decreased oil production from North African is driving up the cost of oil and is likely to cause an increase in shipping costs.

Foreign import cargo volumes at the nation’s major retail container ports are expected to be up 11 percent in March over the same month last year, according to the monthly Global Port Tracker report released Monday by the National Retail Federation.

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

“These numbers show solid increases over last year and are evidence that our nation’s economic recovery is continuing to build momentum,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “Increases in imports are a clear sign that retailers expect sales to continue to climb in the next several months.”

US ports followed by Global Port Tracker handled 1.2 million TEUs in January, the latest month for which actual numbers are available. That was up 5 percent from December and 12 percent from January 2010. It was the 14th month in a row to show a year-over-year improvement after December 2009 broke a 28-month streak of year-over-year declines.

February, the report points out, is traditionally the slowest month of the year and is estimated at 1.12 million TEU–an increase of 12 percent over February 2010. March is forecast at 1.19 million TEU, up 11 percent from a year ago; April at 1.24 million TEU, up 9 percent; May at 1.32 million TEU, up 5 percent; June at 1.39 million TEU, up 5 percent; and July at 1.45 million TEU, up 5 percent.

The report predicts that the first half of 2011 will come in at 7.5 million TEU, up 9 percent from the first half of 2010.

In addition, the North African political turmoil is impacting the cost of oil and possibly the costs of shipping.

“Oil supply is going down as a number of nations have dropped out of the production cycle,” Hackett said. “Freight rates have been decreasing but that will not last long as fuel costs are factored in.”