Thursday, September 15, 2011

Long Beach Cargo Volume Drops Off in August

Cargo volumes at the Port of Long Beach took a sizable tumble in August, ending a streak of month-over-month increase that began in March.

August has typically been the sweet spot between the typical mid-year back-to-school cargo increases and the holiday season peaks, either as the strongest month of the year or leading into the strongest months of the year. In the 15 years between 1995 and 2010, August has come in as one of the port's three strongest months of the year 11 times: four times as the strongest month of the year, four times as the second strongest month, and three times as the third strongest.

The dip in August now puts the month at the fourth highest for 2011 with four months, and the meat of the peak season to go before the end of the year.

The port's total container volume levels in August dropped 12.3 percent compared to August of last year, with a total of 535,929 TEUs moved.

Exports and imports levels both took a hit during August, with import levels – so important moving into the peak season – dropping over 14.2 percent compared to the year-ago period, with 267,198 loaded inbound TEUs handled.

Things fared only slightly better on the export side of the ledger, with the port handling 121,277 loaded outbound TEUs in August, a 3.8 decline from August of 2010.

Still, the port remains in positive growth territory for the calendar year, with a total of 4,076,426 TEUs handled since the start of the year. However, the drop in August cut the port's calendar year-to-date growth to just 2.1 percent above the January to August period last year.

Los Angeles Box Totals Dip in August, Exports Jump

Cargo volumes at the Port of Los Angeles, the nation's busiest container port, slipped just over 5 percent in August compared to August 2010, and virtually eliminated the port's calendar year-to-date growth.

While total box numbers and import box numbers for the month were down, the port scored a significant double-digit percentage increase in imports over the same period last year.

Port officials reported handling a total of 723,171 TEUs in August, a drop of 5.3 percent over August 2010.

On the import side, a critical number as the port moves into the peak shipping season as orders are filled for holiday goods, the port dipped 5.8 percent in August, with 376,190 loaded inbound TEUs handled.

Exports were a different matter entirely. The port moved a total of 184,232 loaded outbound TEUs in August, a massive 24.8 percent jump over export numbers posted in August of last year.

The port remains up a bare 0.4 percent for the calendar year-to-date, moving into virtual parity with the same eight-month period in 2010. The port has moved a total of 5,178,724 TEUs in the January to August period.

TOTE Names Tacoma Terminal In Honor of Longtime Exec

The Federal Way, Washington-based shipping line Totem Ocean Trailer Express has named their Port of Tacoma terminal the Robert P. Magee Marine Terminal in memory of and tribute to the longtime TOTE executive, who passed away in November, 2009.

The new name is displayed on signs at each gated entrance to the 47-acre terminal, as well as in front of the facility's administration building.

TOTE will hold a formal dedication ceremony on Sept. 21 at the newly christened terminal.

Robert Magee joined TOTE in May 1986 as Vice President of Marine Operations, going on to become President and CEO of TOTE. He later became Chairman of Sea Star Line and then Chairman & CEO of American Shipping Group, the parent of TOTE.

Magee received numerous maritime and community leadership awards during his long career. These awards are on display in the lobby of the terminal administration building.

The Robert P. Magee Marine Terminal, specially designed to serve the ro/ro vessels TOTE operates, was built by the port in the mid-1980s and significantly upgraded in 2003 with a $12 million port investment. Most recently, TOTE, the Environmental Protection Agency and the port joined forces in 2010 to outfit the terminal berths with ship-to-shore power systems. The completion of this more than $5 million project now allows TOTE to plug at-berth vessels into the landside power grid and shut off their auxiliary engines, thereby significantly reducing vessel emissions while calling at the port.

ILWU Reaches Labor Agreement With PacNW Grain Operators

The International Longshore and Warehouse Union and the Pacific Northwest Grain Elevator Operators (PNGEO) on Wednesday reached agreement on a labor agreement, officials from both sides announced.

The agreement covers six grain facilities in Portland, Seattle, Tacoma and Vancouver that are owned or operated by PNGEO members Cargill, CLD Pacific Grain, Columbia Grain, Louis Dreyfus Commodities, and United Grain.

Noticeably missing from the agreement is EGT Development, the operator of a new $200 million grain terminal at the Port of Longview that has been locked in a contentious labor battle with the ILWU since the summer.

The ILWU/PNGEO agreement effectively isolates EGT, making the Longview operator the only grain export facility in the region without a labor agreement with the ILWU.

The agreement announced Wednesday, which covers wages, benefits, staffing and other issues, remains subject to ratification by 4,000 members of the ILWU in the Oregon and Washington areas. A ratification vote is expected in the next several weeks.
Specific terms of the agreement were not released.

"This collective bargaining agreement between the union and the grain industry shows that there’s a positive relationship that meets the needs of both the workers and the employers," ILWU’s coast committeeman Leal Sundet said in a statement.

"This productive relationship between the union and the employer maintains stability in the industry."

Tuesday, September 13, 2011

Some Maritime Terms Explained – Part 4

By Marilyn Raia

September 2011

This is the last in a multi-part series in which the meaning of some terms commonly used in marine insurance and maritime contracts is explained.

Proximate Cause
The proximate cause or “efficient proximate cause” is that cause which sets others in motion to result in loss or damage. It is not necessarily the cause closest in time to the occurrence of the loss or damage.

Efficient proximate cause must be determined when loss or damage may be attributable to multiple causes, not all of which are covered perils under an insurance policy. Courts are to use “common sense and reasonable judgment” to isolate a single cause as the efficient proximate cause of the loss, and then determine whether that cause is a covered peril. A frequently cited case illustrating the analysis is Commodities Reserve Co. v. St. Paul Fire & Marine Insurance Co. 879 F.2d 640 (9th Cir. 1989). In that case, shipments of chickpeas and cumin from Turkey were carried aboard a vessel bound for Venezuela. During the voyage, the vessel took on a shipment of munitions. The vessel was detained by Greek authorities because of the violation of Greek regulations regarding the carriage of munitions in Greek waters. The vessel owner refused to release the chickpeas and cumin for forwarding, without a waiver of liability. The cargo owner eventually obtained a court order for release of the shipments which were then transloaded onto another vessel. No infestation of the chickpeas and cumin was noted at that time. The cargo owner then sought reimbursement from its cargo insurer for various expenses associated with the transloading, arguing they were incurred to prevent infestation, a covered peril under the cargo policy. The court held the proximate cause of the transloading expenses was the detention of the vessel, a peril not covered by the policy. Accordingly, there was no coverage for the transloading expenses. However, the court held the proximate cause of the expenses incurred to obtain the court order to release the cargo was not the detention of the vessel, but the vessel owner’s refusal to release the cargo, a covered peril.

Reinsurance is insurance bought by an insurance company from a reinsurance company as a way to shift the risk of loss to the reinsurer. The insurance company and reinsurance company enter into a reinsurance agreement, the terms of which provide the circumstances under which the reinsurance company will reimburse the insurer for a loss that the insurer is obligated to pay. Sometimes reinsurance companies buy reinsurance from other reinsurance companies as a means of further shifting the risk of loss.

There are two types of reinsurance an insurance company can buy: 1) treaty; and 2) facultative. Treaty reinsurance is an agreement between an insurer and a reinsurer that all risks of a certain type will be automatically reinsured as soon as the insurer agrees to insure them in the first instance. The amount of the treaty reinsurance may be all or a percentage of the underlying amount insured.

Facultative reinsurance involves an individual risk that might not fall within the types of risks covered by treaty reinsurance. The insurance company seeking facultative reinsurance offers a risk to the reinsurance company, which has the option of accepting it or rejecting it. When a reinsurance company buys its own reinsurance, it can also buy treaty or facultative reinsurance.

In the insurance context, subrogation is an equitable right acquired by an insurer upon the payment of a claim. When an insurer pays its insured’s claim, and to the extent of the amount paid, the insurer acquires all of the rights its insured had against the party causing the loss or damage giving rise to the claim. The insurer may pursue recovery in its own name from the wrongdoer. When seeking a recovery from the wrongdoer, the insurer is said to “stand in the shoes” of its insured. That means the insurer has no greater rights against the wrongdoer than its insured had, and the insurer is subject to the same defenses the wrongdoer could have asserted against the insured.

There are some circumstances in which an insurer may not pursue its subrogation rights. An insurer may not subrogate against its own insured. That is, an insurer may not sue the insured whose claim it paid on the theory the insured caused its own loss or damage. Nor may an insurer sue another of its insureds who was the wrongdoer. When doing so, the insurer would be shifting the consequences of a loss from one insured to another which amounts to an impermissible favoring of one insured over another.

An insurer also may not subrogate when its insured has entered into a contract containing terms providing for a waiver of subrogation rights. Such provisions are commonly found in leases of real property but also are commonly found in towing contracts. Maritime law does not permit the parties to a towing contract to contractually exculpate themselves from liability. However, courts have held that a clause requiring each party to 1) have an insurance policy naming the other as an additional insured; and 2) waive subrogation rights against the other, does not violate the prohibition against exculpatory clauses.

Sue & Labor Clause
A sue and labor clause is commonly found in cargo and hull insurance policies. It obligates the insured to take steps to avoid a loss from a covered peril that is imminently threatened, or to minimize a loss from a covered peril that has already occurred. It also obligates the insurer to pay, in addition to the policy limits, the reasonable expenses incurred by the insured to avoid or minimize a loss due to an insured peril. In the case of a threatened loss, the insured cargo or hull need not have been actually damaged for sue and labor expenses to be payable under the insurance policy. Conversely, the insurer may be obligated to reimburse sue and labor expenses even if the insured’s efforts were not successful in avoiding or minimizing a covered loss.

The failure of the insured to fulfill the duty to sue and labor may result in reduced, or no coverage at all, under the policy. For example, in McGrath v. Reliance Insurance Co., 671 F.Supp. 669 (N.D. Ca 1987), the insured vessel struck a submerged object but the insured took no steps to immediately haul, inspect, and repair the vessel. The vessel took on water for several months thereafter and eventually sank. The surveyor retained by the insurer attributed the damage to the failure of the insured to repair the damage caused by the submerged object, and the failure of the insured to maintain the hull and protect it from marine borers. The court held there was no coverage for the sinking because the insured failed to comply with the policy’s sue and labor clause which required reasonable steps to be taken to protect the vessel when a loss occurred.

There are many different types of expenditures that may be recovered from an insurer under a sue and labor clause. For example, the expenses incurred to recondition and repackage cargo damaged by an insured peril, to enable the cargo to be sold as intended, are normally recoverable as sue and labor expenses under a cargo policy. And, the expenses incurred to pump a vessel taking on water are normally recoverable as sue and labor expenses under a hull policy. The recoverability of expenses incurred by an insured under a sue and labor clause primarily depends on whether the peril necessitating the expense is a covered peril and whether the expenses were reasonably incurred.

Uberrimae Fidei
Uberrimae fidei is a Latin phrase meaning “the utmost of good faith”. It is the motto of Lloyds of London. Unlike other types of insurance, marine insurance is subject to the longstanding doctrine of uberrimae fidei. Under the doctrine, the insured has a duty, even if not asked, to reveal every fact within his knowledge that is material to the risk, and to provide accurate information on the application for insurance. To be material, the misrepresented fact must be something that would have controlled the insurer’s decision to insure the risk. The theory behind the doctrine is the greater knowledge the applicant has about the risk to be insured and the practical inability of the marine insurer to personally verify every material aspect of it.

Under federal maritime law, the failure to disclose material information, whether intentional or not, allows the insurer to void the policy. Many courts have held marine policies void when the insured failed to disclose or misrepresented what might seem to be an inconsequential fact. Moreover, many courts have held marine policies void even if the concealed or misrepresented fact is not causally related to the loss.

Marilyn Raia is of counsel in the San Francisco office of Bullivant Houser Bailey. She specializes in maritime and transportation-related matters. She can be reached at

AAPA Conventioneers Get Pranked

An unknown group of political, environmental and labor activists pulled a bit of a prank on some attendees to the American Association of Port Authorities annual convention being held this week in Seattle.

On Monday, copies of a three-page fake agenda for the entire conference were slipped under the doors of all 900 rooms at the Seattle Westin Hotel, where the event is being held.

The slickly produced faux agenda accurately recreated the style of the conference's real agenda and listed fake events at the conference focusing around the activists' perception of environmental, social justice and economic abuses by ports and their leadership.

The fake agenda touted such conference events as "The 'Green Washing' of the Cargo Supply Chain Award," "Wall Street on the Waterfront," and "Panicking Over Panamax: Lessons in Leveraging the Panama Canal."

The main targets of the fake agenda were the issues of port drayage drivers, the high salary of Seattle port CEO Tay Yoshitani, and accusations that ports are not doing enough to improve port-area environments.

The AAPA trade group represents the port authorities of more than 150 ports in the Western Hemisphere. The annual conference, celebrating the group's 100th year, runs through Thursday.

LA/LB Congestion Myth Lingers On Campaign Trail

Some myths just won't die, especially on the political campaign trail.

Take for example Bob Filner, a six-term Congressional House Democrat representing the southern San Diego area, who has been on the campaign trail running for mayor of San Diego since June.

One of his frequent go-to-points is a call for infrastructure development at the San Diego commercial port he claims could attract more cargo from other West Coast ports. San Diego now handles about 2 percent of the annual cargo levels seen at the Long Beach and Los Angeles ports to the north.

In interviews, Filner has said that, if properly developed, the San Diego port "could live off the droppings of LA and Long Beach."

In a recent television interview he was asked if the San Diego port would be a difficult sale to customers already at other ports.

Filner said no, because it takes ships "six days of waiting before you can get into LA or Long Beach."

Filner was called to task on his statement by the Voice of San Diego news website.

The Marine Exchange of Southern California, which serves the Southern California ports in a role similar to air traffic controllers, slammed Filner's comment as both inaccurate and horribly out of date.

"I don't want to call a congressman a liar," Marine Exchange executive director Capt. Dick McKenna told the Voice, "but that's just not true."

McKenna explained that for roughly five months in 2004 a longshore and rail labor shortage at the two ports cause significant delays at the Long Beach and Los Angeles ports. At the peak, more than a hundred ships piled up at anchorages outside the ports waiting to get to dock, some waiting up to eight days – although McKenna said that a three to four day wait was more common.

To solve the problem, thousands of new longshoremen and rail workers were hired and the congestion problems evaporated by the end of 2004.

Only the myth remains.

"It has stayed in the vernacular that these [Southern California] ports are congested and nothing could be further from the truth," McKenna told the website. "It's amazing to me how longstanding this [perception] has become. There's no waiting here."
The Voice of San Diego notified Filner's campaign of the information, but received no reply.

Bay Area Scores Second Electric Car Maker

The Bay Area has secured its second electric auto manufacturer, with the Monday announcement that electric car start-up Coda Automotive has selected Benicia as the location for final assembly facility for its cars.

The Santa Monica-based Coda signed a deal with auto processing firm Amports to have the electric cars processed at the 140,000-square-foot Amports Benicia Terminal, located about 30 miles north of the Port of Oakland.

While the financial details of the Benicia deal were not released, it was indicated that it carried a term of three years.

Expected to create about 50 jobs, the Amports facility will receive an estimated 10,000 to 14,000 nearly completed Coda cars in containers from China via the Port of Oakland. Major drive-train components, including the battery system, will be installed by Amports technicians at the Benicia facility.

The roughly $45,000 – before government incentives – four-door electric sedans generate zero tailpipe emissions and have a range of up to 150 miles on a full charge. The car is largely built in China with parts from more than 30 countries, including a 35 percent made-in-America content.

The city of Los Angeles had also been vying for the Coda work, but Coda officials said they went with Benicia mainly to take advantage of the Amports facility and the experience of the Amport workers in final assembly.

Los Angeles also lost out to the Bay Area early last year when electric carmaker Tesla Motors purchased the former NUMMI manufacturing facility in Fremont instead of several potential sites in Southern California.

Washington Cargo Ops Back To Normal After Longview Labor Unrest

Cargo operations at Washington state ports appeared to be back to normal after a one-day wildcat strike by union dockers on Thursday shuttered marine facilities at Seattle, Tacoma, and Everett.

The one-day walkout by members of the International Longhsore and Warehouse Union was a show of support – albeit one not officially sanctioned by the union leadership – for ILWU members in Longview protesting EGT Development, the operator of a new $200 million grain export terminal at the port.

EGT signed a lease with the port that calls for the firm to use ILWU labor for roughly 25 to 30 jobs in the terminal, but eventually hired a different union to provide the labor. ILWU members have been protesting against EGT since June.

The protests have at times become contentious, with both sides claiming the other was escalating the situation. More than a hundred protesters have been arrested for various violations since the protests began.

Federal District Court Judge Ronald Leighton issued a temporary restraining order against the protesters two weeks ago, admonishing the protesters from engaging in violent action, damaging EGT property, impeding business at the terminal or preventing access to and from the grain terminal.

Last Wednesday, in apparent defiance of the restraining order, several hundred protesters prevented a BNSF train loaded with grain from moving through Vancouver on its way to the EGT terminal in Longview. After protesters relented and allowed the train to progress, another group of about 200 protesters blocked the train again as it entered the Longview port. Following a tense hour and a half standoff with police in riot gear, the train was allowed to continue and eventually pulled into the EGT terminal Wednesday night. Nineteen protestors were detained by police at the Longview incident.

Early the following morning, a group of between 400 and 500 protesters stormed the EGT facility, broke down the gates, broke windows in the guard shack, damaged a security vehicle, cut brake lines on the grain train and dumped a large amount of the grain from the rail cars before fleeing.

Local police have promised to make arrests over the incident.

Later the same day, Judge Leighton made the temporary restraining order a preliminary injunction and expanded the order to include all ILWU locals on the West Coast. A violation of the injunction could carry charges of federal civil contempt and up to $25,000 per violation.

Leighton called the ILWU actions over the previous 48 hours "patently illegal," angrily telling union attorneys Thursday that there is a proper way to protest.
"It requires some restraint. Your clients have none of that," Leighton said. "They have to obey local laws. They must restrain themselves from violence, threats, vandalism and the like."

Leighton also scheduled a Sept. 15 hearing to determine if the ILWU was guilty of civil contempt in violating the original restraining order.

EGT, which was in the final start-up phase of the terminal when the protests began, said late last week that it now plans to bring the facility fully on-line.