CMA CGM Seeks Credit Line

Ocean carrier CMA CGM is looking to shore up company operations with a $400 million loan as the carrier attempts to restructure its $5.6 billion in debt.

The family-owned Marseille, France-based carrier is looking for the additional credit line as founder and CEO Jacques Saadé has reportedly agreed "in principle" to changes in governance demanded by creditors that hold $4 billion of the firm's outstanding debt, according to French weekly business magazine Challenges. These changes include Saadé's ouster, an agreement to look for outside investors and renegotiation of 49 outstanding ship construction orders.

Two weeks ago, when media reports of the creditors' demands for his ouster surfaced, Saadé openly denied them.

“I can’t imagine that any of our financial partners would try to take advantage of this period,” Saadé said, especially considering that CMA-CGM expects to move into the black “in coming months.”

CMA CGM, the third-largest carrier in the world, spent $1.2 billion in operating expenses during the first half of the year. The firm reportedly had remaining reserves as of June 30 of $599 million, or $601 million short of the total amount needed to operate in the first six months of the year.

LA Port Reports 2005-2008 Air Emissions Down

The Port of Los Angeles said that total air pollution emissions from port operations were down 16 percent in 2008 compared to 2007, and down 23 percent compared to 2005.

The data was part of the port's latest annual air inventory report– covering the year 2008– that was released last week.

The report, available on the port's website, said that diesel particulate matter– often seen as tailpipe or smokestack soot– dropped 12 percent in 2008 compared to the previous year. Diesel particulate matter, according to the port, also fell 31 percent between 2005 and 2008.

The port, along with the neighboring Port of Long Beach, which issues its own air inventory reports, first began issuing annual reports in 2005. Subsequent studies use the 2005 report as a baseline of comparison.

The LA report also said that oxides of nitrogen, or NOx, a smog-forming emission, also fell in 2008 by 18 percent compared to 2007. NOx declined in 2008 by 20 percent compared to the 2005 numbers.

Emissions of oxides of sulfur, or SOx, another smog-forming component, increased in 2008 by 5 percent compared to 2007 but was down 32 percent compared to the baseline year of 2005.

All told, the Port of Los Angeles-generated emissions accounted for about 7 percent of the total Southern California air basin pollution in 2008, a 2 percent drop from 2007 according to the port figures.

It is worth noting that from 2007 to 2008, cargo volume through the port fell by 7 percent while increasing 5 percent from 2005 to 2008.

Maersk Seeks to Rejoin Trans-Pac Pact

Ocean carrier Maersk plans to rejoin the Trans-Pacific Stabilization Agreement, an industry discussion group of ocean carriers covering the majority of trans-Pacific cargo volume.

Maersk, the world's largest ocean carrier, left the group in 2004 over disagreements with TSA decisions regarding rates and stabilization in the trans-Pacific routes. The TSA has been trying to woo the carrier back since. Since a reorganization of the group in 2007 under Neptune Orient Lines CEO Ron Widdows, the TSA has attracted or lured back the world's three largest carriers, including Maersk, MSC and CMA CGM.

Maersk's membership would bring the TSA roster to 15 carrier members and boost the TSA's coverage to more than 90 percent of trans-pacific cargo.

The TSA, which is allowed under the auspices of federal maritime law to provide a legal forum for carriers to discuss such things as cost-savings measures and rates, cannot formally set rates or assign capacity.

The move by Maersk, which supporters believe will help bring more stability to the trans-pacific, comes at a time when trans-Pacific carriers have suffered losses on the order of $3 billion.

Special Feature: Insurance and the Law - Seaworthiness Defined

By: Marilyn Raia (As seen in the November issue of Pacific Maritime Magazine)

The concepts of seaworthiness and its opposite, unseaworthiness, can be found in many aspects of maritime law. Despite their pervasive presence, the concepts are not easily defined. A vessel that is seaworthy in one circumstance may not be seaworthy in another. Moreover, what was considered a seaworthy vessel a decade ago may no longer be so because of technological advances.

Over the years, the courts have fashioned various definitions of seaworthiness. In the mid-nineteenth century, the US Supreme Court in E.J. Dupont de Nemours & Co. v. Vance 60 US 162 (1857) agreed with the following standard for the seaworthiness of a cargo ship:

To constitute seaworthiness of the hull of a vessel in respect to cargo, the hull must be so tight, staunch, and strong, as to be competent to resist all ordinary action of the sea, and to prosecute and complete the voyage without damage to the cargo under deck.

In seamen’s personal injury cases, the courts have held that to be considered seaworthy, a vessel, including her crew and appurtenances, must be reasonably safe to use and perform her assigned tasks. Stated another simpler way, to be seaworthy, a vessel must be reasonably fit for her intended purpose. In the towing context, a seaworthy vessel is one that is sufficiently staunch to withstand the normal and expected rigors of the tow.

Presumption of Unseaworthiness

A vessel is not required to be in perfect condition to be seaworthy. Moreover, the mere happening of an accident aboard a vessel does not raise a presumption the vessel was unseaworthy. However, a presumption of unseaworthiness does arise if the vessel’s equipment fails under normal use. A presumption of unseaworthiness also arises if the vessel sinks without explanation in fair weather and calm seas. A certificate from a classification society or marine surveyor is not conclusive as to a vessel’s seaworthiness.

In any context, a deteriorated hull, inoperable equipment and missing equipment are obvious indicia of unseaworthiness. However, a vessel can be held unseaworthy for a wide variety of reasons, many not readily apparent. While not intended to be an exhaustive list of conditions rendering a vessel unseaworthy, below are some conditions not related to the hull or equipment, which should not be overlooked by the vessel owner.

Inadequate Manning

A vessel must have an adequate number of crewmembers who are properly licensed if required for their positions, and who are competent to perform their assigned work. The vessel owner must also assign the proper number of crewmembers to perform tasks aboard the vessel. For example, in American President Lines, Ltd. v. Welch, 377 F.2d 501 (9th Cir. 1967), the district court held the vessel owner 50 percent liable for the back injury suffered by the third assistant engineer. The third assistant engineer undertook repair of the lube pump, which the court found to be a two-man job. The vessel owner had not provided a second man to assist him for the entire task, resulting in a finding of unseaworthiness due to improper manning. The court also found the third assistant engineer 50 percent at fault for not requesting assistance. Other courts have declined to find an unseaworthy condition when the injured party fails to request assistance and other crewmembers are available to assist with a job requiring more than one person such as a heavy lift.

Safety Equipment

A vessel owner has an obligation to furnish the crew with protective gear as well as safety and lifesaving equipment aboard the vessel. The failure to do so can result in a finding of unseaworthiness. For example, in Lasseigne & Sons, Inc. v. Bacon, 1987 AMC 2251 (D. Or. 1987), a fishing vessel capsized and her crew of three drowned. The district court held the fishing vessel to have been unseaworthy because it did not provide a suitable life raft and survival suit for each of the crew members.

In Webb v. Dresser Industries, 536 F.2d 603 (5th Cir. 1976), a crew member of an ocean surveying vessel was ordered ashore in Seward, Alaska in winter to get supplies for the vessel. Large amounts of snow and ice had accumulated on the ground making the walking conditions very hazardous. While taking inventory of the supplies, the crewmember slipped on the snow and ice, injuring himself. The appellate court affirmed the trial court’s finding the vessel was unseaworthy because the vessel owner failed to provide the crew member with proper boots to wear while walking in the snow, particularly when wet weather gear was provided to the scientists working aboard the vessel. The court declined to impose a duty on the vessel owner to supply every crewmember with boots for shoreside conditions that foreseeably might be encountered. However, it did hold the vessel owner had a duty to provide appropriate footwear to those crewmembers who were ordered to work under reasonably foreseeable adverse conditions.

Manuals and charts

Modern day vessels can be equipped with many different types of equipment, some more technologically complex than others. Not every crewmember knows how to operate every piece of equipment aboard the vessel. The vessel should maintain adequate and current manuals as reference guides. Their absence could render the vessel unseaworthy.

A vessel can also be found unseaworthy due to the failure to have current or sufficiently detailed charts aboard. In re Complaint of Thebes Shipping, Inc., 486 F. Supp. 436 (S.D.N.Y. 1980), involved the grounding of the Argo Merchant off Nantucket Island on December 15, 1976. The November 1976 Pilot Chart of the North Atlantic Ocean was aboard the vessel but not the December 1976 issue. There were some differences in the direction of the currents in the area of the grounding on the two charts. The district court held the vessel to have been unseaworthy for many reasons including the lack of a current pilot chart. Similarly, in In re Complaint of Delphinus Maritima S.A., 1981 AMC 2362 (S.D.N.Y. 1981), the vessel went aground on a coral reef near Bermuda while seeking a port of refuge where the cargo on board could be re-secured. The court held the vessel unseaworthy for, among other things, failing to have a large-scale chart of Bermuda or its adjacent waters because Bermuda would be a logical port of refuge on the voyage from the US East Coast to the Mediterranean.

Vessel Scheduling

A vessel’s schedule can also be the basis for a finding of unseaworthiness. In In re Complaint of Armatur, S.A., 710 F. Supp. 390 (D.P.R. 1988) the master had been on the vessel for nearly one year without a break. The court held the vessel’s demanding schedule led to the master’s fatigue and grounding of the vessel while he was on watch, and rendered the vessel unseaworthy. Frequent violation of the federal law specifying the maximum hours a seaman may work may also render the vessel unseaworthy. That a seaman may have to work more than the maximum hours because of exigent circumstances may not necessarily render the vessel unseaworthy.

Establishing a published port of call schedule and pressuring the master to adhere to the schedule may also lead to a finding the vessel was unseaworthy if the vessel encounters heavy weather and the master does not reduce speed or change course in order to comply with the vessel owner’s instructions to meet that schedule. Further, a vessel sailing with the knowledge it may be subject to arrest or detention at a subsequent port because of outstanding debts, may be held “financially unseaworthy” and liable for cargo damage proximately caused by the arrest or detention.

Duty to Provide Seaworthy Vessel

The duties imposed on vessel owners regarding the seaworthiness of their vessels can vary depending on the circumstances. A vessel owner owes an absolute duty to crewmember-employees to provide them with a seaworthy vessel. But, with respect to passengers, there is no such duty. Rather, a vessel owner has a duty only to exercise reasonable care under the circumstances. With respect to the owners of cargo carried aboard a vessel, the vessel owner has a non-delegable duty to exercise due diligence at the beginning of the voyage to make the vessel seaworthy.

There are no fixed criteria setting the standard for a vessel’s seaworthiness. As a general rule however, a vessel will be found seaworthy if it is reasonably fit for its intended purpose, whether that be as a towed vessel, a towing vessel, a cargo-carrying vessel or a passenger-carrying vessel. In addition to deterioration of the vessel’s hull and equipment, conditions not directly related to the vessel’s hull and equipment may lead to a finding of unseaworthiness and the imposition of liability. Whether a vessel owner has a duty to provide a seaworthy vessel in the first instance and the effort needed to make the vessel seaworthy will depend on the circumstances.

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

No Further Retrofit Funds for Bay Area Truckers

Air quality officials in the Bay Area have sent out "so, sorry" letters to nearly 1,000 independent truck drivers that serve the Port of Oakland. Many of the drivers were notified last week in the Bay Area Air Quality Management District letters that the drivers would not be eligible for grants to upgrade their trucks to meet state air regulations that essentially ban the drivers– nearly a third of the nearly 3,000-vehicle fleet– from operating in the port as of Jan. 1, 2010.

The main reason for the rejection letters is that the $22 million fund on which the BAAQMD was drawing to provide the upgrades is depleted.

The fund was being used to help drivers of 1994 to 2003 model year trucks to pay for diesel smokestack filters– each costing from $10,000 to $21,000. Drivers receiving the grants were only responsible for the sales tax on the retrofit filters.

The fund was also used by the air district to provide $50,000 grants toward the purchase of a new truck, with the remaining $50,000-plus price tag for a new truck being borne by the drivers.

BAAQMD began accepting applications for the filter grants last year and stopped accepting applications Sept. 10 of this year. In reality, though, more than two-thirds of the grant applications were submitted last year and those still available this year were offered on a first-come, first-serve basis. To date more than 815 applications for retrofits have been approved while another 880 rejection letters have been sent out.

Another 190 new trucks have been tentatively approved for a $50,000 full vehicle grant, with more than 180 such applicants rejected.

The BAAQMD said additional funds are not likely to be found to continue the grant program.

Port of Oakland officials have also stated that the original fund was never anticipated to cover all the drivers. Based on current container traffic, officials estimate that the port only needs between 1,000 and 1,300 trucks to adequately service port terminals.

Washington State Ports: Election Results

Voters in the Seattle area have overwhelmingly re-elected John Creighton to the Port of Seattle governing board. Two new members to the port commission, Rob Holland and Tom Albro, were also elected in Tuesday's election. Though Creighton ran unopposed and garnered 98 percent of the vote, Holland and Albro both faced tough opponents. Holland beat out opponent David Doud by a 55 percent to 45 percent spread. Albro defeated opponent Max Vekich 57 percent to 43 percent.

In Tacoma, three seats on the port commission were up for grabs.

Incumbent Dick Marzano, running for his fifth term on the commission, posted a 61 percent to 38 percent victory over opponent Charles Kelly Creso. Connie Bacon, also an incumbent seeking her fourth term as a port commissioner, defeated rival Bill Casper 67 percent to 43 percent.

Newcomer Don Meyer, running for his first seat on the port commission, actually posted the strongest win of the night in the Tacoma races, defeating opponent Cathy Pearsall-Stipek 67 percent to 33 percent.

In Bellingham, political newcomer Mike McAuley stunned poll watchers by defeating 16-year member of the Bellingham port commission Doug Smith in a close 55 percent to 45 percent race. Voters also narrowly returned 18-year commission veteran Scott Walker to the board.

Walker defeated opponent John Blethen 52 percent to 48 percent.

Voters in Clark County elected unopposed candidate Nancy Baker to the Port of Vancouver USA commission, with 97 percent of the vote.

Buffett to buy BNSF

On Tuesday, Warren Buffet agreed to buy the 131-year-old United States Class I railroad Burlington Northern Santa Fe, the second largest freight railroad in the nation and one of the major rail players in the West and Mid West.

Buffett's Berkshire Hathaway conglomerate, which already owns 22.6 percent of the railroad, will pay $26 billion for the remaining 77.4 percent, paying $100 a share in cash and stock. Stock in the Fort Worth, Texas-based BNSF shot up 28 percent to $97 a share on the news.

Well known for sage investing that has made him a billionaire many times over, Buffett admitted to the New York Times on Wednesday that even this deal was pushing his financial limits.

"I stretched on this one," he told the Times. "I went to the last nickel."

To finance it, Buffett, often the man who sets the rules for other investors, will break one of his cardinal own: not to split Berkshire stock. To pay BNSF stockholders in the deal, Buffett will split Berkshire's class B shares 50-for-1. Berkshire will also borrow $8 billion in addition to using $8 billion of its own for the cash portion of the deal, with plans to pay off the debt in three annual payments.

Buffett first bought into BNSF in 2006 and also owns stock in Union Pacific and Norfolk Southern. Long a proponent of knowing any industry before investing, analysts at the time of the first small rail purchases believed that Buffett was in essence wading into the market with the intention of jumping in the deep end at some point. Eventually he amassed more than 76 million shares of BNSF before announcing the full plunge Tuesday.

Buffett predicted that though BNSF, like many in the transportation industry, have experienced a downturn due to the global economy, things would eventually pick up.

“We’ll make a good return, not a great return,” he told the Times.