SOLAS  New Container Weighing Requirements

Change is on the horizon in the shipping industry, and it is important to make sure you are staying informed. Effective July 1st, 2016, changes adopted by the International Maritime Organization (IMO) regarding verified container weights will become effective. These changes were first introduced at the 2014 Safety of Life at Sea (SOLAS) Convention, but it is now time for implementation. The full text of the applicable SOLAS regulations can be found here

These regulations initially came about as a result of safety issues within the shipping industry. There were problems regarding overweight/underweight containers, misreported freight, poor weight distribution within containers, and more: see “Safety and Shipping Review 2014“. Ideally these changes will help accomplish a reduction in loss of containers from vessels, increased assurance to all parties within the supply chain, and overall improved safety.  These new requirements will apply to all 171 IMO member countries, as well as the three associate members of this organization.

The responsibilities of the shipper (as designated by the bill of lading) under these new regulations are particularly important. The shipper will now be required to verify the gross mass of each container via a signed document; this document must be physically signed (stamps will be unacceptable), and the form must be submitted in time to be used by the master and terminal representatives in the ship’s stowage plan.  The shipper has the option of submitting the container weight via the shipping instructions to the line, or in a specific communication such as a weight certificate. Regardless of submission method, the weight included must be designated as the “verified gross mass” and authorized by the accompanying signature. The shipper is able to determine whether they would prefer to weigh the contents of the container prior to or after loading, but the critical designation is that estimated weights are not permitted. The equipment used to weigh contents must meet national certification requirements, and the party verifying container weight is not permitted to use weight provided by a previous party. Click here for the Implementing Guidelines issued by MSC

The execution of enforcement for this new requirement will be put on the shoulders of the carriers. Essentially, carriers are highly encouraged to refuse to load containers for which a signed weight verification is missing. Refusing to carry these containers will encourage shippers to abide by the new requirements set forth by SOLAS. As July is only a few months away, it is important for shippers to begin proactively planning how they will adjust their processes to abide by these new requirements.


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Free Trade Agreement Series: Part 3- Andean Free Trade on a Roller Coaster

The Andean Trade Promotion and Drug Eradication Act (ATPDEA) was enacted in 2002 by the second Bush administration. This trade preference agreement sought to grant four South American nations preferential treatment when exporting goods into the United States. With the purpose to promote economic development and eradicate drug trafficking, the agreement targeted four Andean countries, Bolivia, Colombia, Ecuador, and Peru. However, by the beginning of this year only two of these nations remained eligible for duty free exemptions. ATPDEA has been revised, eradicated, and reinstated continually since creation, today leaving Colombia and Ecuador as the only two beneficiaries. The several revisions made to ATPDEA have become a source of problems, creating confusion and uncertainty for importers and exporters, and even as we try to explain it Colombia is set to exit once its own separate FTA (Free Trade Agreement) is in place, most likely Dec. 1 2013 if there are no other changes.

ATPDEA expired for all beneficiary on December 21, 2009. The only country that maintained duty-free benefits was Peru, which was covered by the Free Trade Agreement it signed with the United States. One week later, on Dec. 28, 2009, an amendment to 123 Stat. 3484; Pub. L.  111-344, title II, Sec. 201(a), was enacted restoring Colombia until February 2011 and Peru through the end of 2010. Then it changed again!  On January 7, 2011 the termination section of ATPDEA was amended to remove all benefits of ATPDEA from Colombia and Peru. Finally, a retroactive provision allowing Colombia, but not Peru, duty free access was enacted by H.R. 3078, 112th Cong. (2011) which further extended the expiration of the ATPDEA to July 31, 2013, and especially for preferential tariff treatment under the regional fabric provision for imports of qualifying apparel articles from Colombia and Ecuador only through September 30, 2012.

All of this back-and-forth has created reams of unnecessary work for Customs at the ports of entry, for customhouse brokers, and for importers.  It has also created a bonanza for U.S. Customs and Border Protection’s (CBP) CBP’s penalty workers, as brokers and importers struggle to pay the correct duties on time and avoid tripping penalty wires.   Manufacturers are caught both in the penalty world and an uncertain universe of where to produce.  Long-term planning is impaired, if not impossible.   Thanks again, Congress!

With the latest renewal of the ATPDEA, which took place on October 21, 2011, CBP issued a memorandum stating that it will refund duties paid on ATDEAP-eligible merchandise imported or exported between February 14, 2011 and November 4, 2011, the period in which the program last lapsed. The memo also stated that ATPDEA benefits would commence again on November 5, 2011, but only for two countries. Those who are seeking refunds have 180 days to send the required documentation to CBP.   Again, the confusion created by the constant change in the ATPDEA ‘s status has effected exporters and importers tremendously. For example, those companies that enjoyed ATPDEA benefits and used raw materials from Peru will no longer receive these benefits although it was a regular ATPDEA member and has an FTA.

The problem with altering these agreements is that many manufacturers are not aware of the changes made to these programs, causing the manufacturers costs to increase due to the extra duties, causing some companies major losses.  In addition, the tariff itself has an error whereby it tells users, primarily customhouse brokers, to continue entering Peruvian goods duty free when in fact they are dutiable.  We have pointed this out to their association (the NCBFAA) so that the defense is available to any penalized importers or brokers.




This question was addressed last week in the case of I.T.N. CONSOLIDATORS, INC. versus NORTHERN MARINE UNDERWRITERS LTD. [i]

A cargo loss was made known to the forwarder ITN which promptly notified the insurance company writing its open policy.   ITN subsequently issued a certificate of insurance to the cargo owner binding the insurer to cover the goods.  ITN paid the insurance company the premium called for by its open policy, but the insurance company later refused to honor the claim and attempted to refund the premium.  A lawsuit ensued, and the United States District Court for the Southern District of Florida granted the insurance company relief, stating that it could not be forced to insure a known loss.  ITN appealed, however, and the lower court’s ruling was overturned.

The 11th circuit Court of Appeals said,  “The question raised by the case of insurance coverage in this case rests on whether Northern in fact agreed to insure the lost shipment. That question in turn depends on whether Northern accepted ITN’s premium payment, thereby consummating the contract to insure it. The district court should determine whether Northern in fact accepted ITN’s premium payment such that a contract to insure the lost shipment was formed.”

The higher court suggested that the insurance premium may have been accepted initially by the insurance company to keep ITN’s business.  Although the appellate court agreed that the insurance company could not normally be forced to insure a loss after all parties knew one had occurred, it stated that under this policy it had the option to do so if it chose.  The language allowing binding of coverage after the fact of knowledge of the loss (common in insurance contracts) was discretionary on the insurance company’s part, and having taken the premium was an indication of its intent to cover the known loss according to the appellate court.  It ordered the lower court to reevaluate the claim in the above light and issue its new decision accordingly.   The lower court still can rule for the insurance company, but it must follow the higher court’s reasoning in its new opinion.

Generally, forwarders can cover shipments after a loss occurs if they have no knowledge of it.   Insurance companies, however, like everyone else deposit received funds immediately and apply them later.  They even allow payment by credit card, which is obviously automated. In fairness, they don’t always know what shipments the payments cover, so how can they be held to have “consummated the contract” by receipt of an automated payment?  We wait to see how the lower court resolves the matter.   More on this to come.

[i] No. 10-15152 UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT I.T.N. CONSOLIDATORS, INC., I.T.N. OF MIAMI, INC., Plaintiffs – Appellants, versus NORTHERN MARINE UNDERWRITERS LTD, individually and as agents for Lloyds of London, Watkins Syndicate (WTK/457), Defendant – Appellee.


FMC Votes To Exempt NVOCCs From Publishing Rates

On February 18, 2010, the Federal Maritime Commission voted to approve a proposed rulemaking that would exempt non-vessel-operating common carriers (NVOCCs) from the longstanding requirement that they publish tariff rates. This move was motivated by the FMC’s desire to free NVOCCs from the substantial costs of publishing tariffs, thus saving jobs. The move may result in hundreds of thousands of dollars of annual savings to NVOCCs.

The new exemption would be voluntary, in that an NVOCC may continue to publish rates, although few will likely opt to do so. Additionally, the exemption would be limited to rates, meaning that tariff-publication rules pertaining to contractual terms and conditions governing shipments would continue to apply, and be provided to the public free of charge. For those NVOCCs taking advantage of the exemption, they will be required to publish a notice, within the text of their rules tariff, that they are opting out of publishing tariff rates. Unpublished rate agreements must then be agreed to in writing, including the applicable rate for each shipment, by the date cargo is received by the common carrier or its agent. This writing must also provide notice of the existence and location of the rules tariff. Unpublished rate agreements will be required to be retained for five years.

The move to exempt NVOCCs from rate tariff publication was proposed by the National Customs Brokers and Freight Forwarders Association via a petition filed with the FMC. Although the new rule is not yet final, it is expected to be warmly received by almost all in the OTI community.


Goodbye COGSA, Hello Rotterdam Rules

By passing the Carriage of Goods by Sea Act of 1936 (COGSA), the United States adopted as domestic legislation the Hague Rules, which govern liability for loss in ocean carriage. At that time, ocean cargo was transported largely by barrel and crate, and bills of lading covered cargo from port to port. Today, cargo is containerized and may travel long distances by rail or truck before or after ocean transport on through bills of lading. Despite the advent of multimodal transportation, COGSA, and the domestic law of most nations, has remained largely unchanged and grounded in the transportation realities of more than a half century ago.

The United Nations sought to bring transportation law into the modern era by promulgating the Rotterdam Rules. The Rotterdam Rules are an international convention that was adopted by the United Nations General Assembly on September 23, 2009. Twenty-one countries, including the United States, have signed the Rotterdam Rules, although the United States and many other countries have yet to ratify them. If and when they go into effect following ratification by 20 countries, the new Rules would replace the substance of COGSA as U.S. law as well as other countries’ Hague Visby-based legislation.

If the Rotterdam Rules go into effect, how will the law change? Below, we discuss several substantive changes concerning the rules’ broader scope, period of responsibility and limitation of liability.

The Rotterdam Rules’ scope of application is broader than COGSA in that the Rules would cover carriage of goods where no bill of lading or electronic record has been issued. COGSA, on the other hand, applies only to documents of title. The Rotterdam Rules mirror COGSA in that they would apply to all shipments to or from the United States.

COGSA applies from “rail to rail,” which means from the time of vessel loading to the time of discharge. Because modern multimodal shipping is door-to-door, the Rotterdam Rules would make the carrier responsible for goods from the time it receives them for carriage, and end the period of responsibility only when the goods are delivered. Thus, the period of a carrier’s responsibility would be broader under the Rotterdam Rules than COGSA.

The Rotterdam Rules would additionally modify COGSA’s package liability limitation of $500, instead imposing a limitation based upon a “unit of account” per package that would be tied to the Special Drawing Right of the International Monetary Fund. This converts to approximately $1,400 per package. While raising the liability figure, the Rotterdam Rules would at the same time make it more difficult for a claimant to avoid its limiting effect, meaning that the package limitation would be unenforceable only when the loss at issue was caused by a personal act or omission that was done with the intent to cause such loss, or done recklessly and with knowledge that such loss would probably result. In other words, unless a cargo claimant can show that a loss was caused by a carrier’s bad intent or by a carrier’s reckless actions, the limitation provision would be effective. The Rotterdam Rules would extend its limitation of liability to all “maritime performing parties,” which would include terminal operators and stevedores. Inland carriers, however, would not be automatically protected under the Rotterdam Rules, and they would remain subject to legislation covering inland transport, such as the Carmack Amendment.

Substantively, many of the changes that would be brought about by the Rotterdam Rules are minor departures from COGSA. Accordingly, federal courts can be expected to look to existing case law interpreting COGSA in applying the Rotterdam Rules, were they to become the law of the land. Forwarders have spoken out against the Rotterdam Rules because, in their view, the regime is too complex. This is true, but it is also true that multimodal transportation has become increasingly complex since the era when COGSA was enacted, and the Rotterdam Rules are an admirable, multilateral proposal meant to bring transportation law up to date.