Industry News
From The Cargo Letter

THE CARGO LETTER [301] Air & Ocean FF News For 1 July '96

Good Tuesday Morning from our Observation Deck, overlooking "Cargo City"............. and Runway 25-Right at Los Angeles International Airport! Contribute to The Cargo Letter. McD

INDEX to The Cargo Letter:

1. OUR Top Story
   
2. U.S. and China Reach Agreement on Intellectual Property Rights Issue, Congress Approves Renewed MFN for PRC
   OUR "A" Section: FF World Trade, Financial & Inland News
3. Cargo Letter's Freight Forwarder STOCK WATCH
   • The Cargo Letter 10
4. Intercargo Insurance Breaks New Ground In Support of Forwarders & Brokers
   • New Protective FF/CHB Coverages
5. U.S. Supreme Court Rules On Assessment Of Taxes On Goods In Export Transit
6. Freight Forwarder Trade Briefs
   OUR "B" Section: FF World Air News
7. FF World Air Briefs
   OUR "C" Section: FF World Ocean News
8. Shake-up At S.A. Port Authority
9. FF World Ocean Briefs
   OUR "D" Section: FF in Cyberspace
   OUR "E" Section: The Forwarder/Broker World
10. The Valuation Clause In Cargo Insurance Policies
    • Back To The Basics

OUR Top Story

1. U.S. and China Reach Agreement on Intellectual Property Rights Issue, Congress Approves Renewed MFN for PRC

--by Warren S. Levine for The Cargo Letter

30 June - The U.S. House of Representatives approved President Clinton's May 31st renewal of China's Most Favored Nation status last week, in a move which surprised nobody. Over the past month, relations with China have been much less confrontational.

On June 17th, American and Chinese negotiators once again headed off a major confrontation, when Beijing agreed to take more forceful measures against Intellectual Property Rights (IPR) violators.

Upon conclusion of her meetings in Beijing with Chinese Vice-Foreign Minister Shi Guangsheng, Acting U.S. Trade Rep. Charlene Barshefsky stated, "China's recent actions represent necessary and important steps [in the enforcement of copyright infringement]."

Fifteen Chinese factories said to have been involved in pirating American goods were closed recently, according to the Chinese delegation. Beijing also pledged to cooperate with U.S. Customs officials in their efforts to protect IPR. The United States has held training sessions for Chinese Customs officials, concentrating on identifying pirated goods.

The most common violators have been computer, audio and video CD and videotape duplication factories located in southern China, primarily in Guangdong Province. The flood of counterfeit goods into Hong Kong and other markets has cost copyright holders billions of dollars in royalties.

Despite the 1995 agreement and the recent crackdown, illegally-copied videotapes are easily available for rental or purchase in most major Chinese cities, and pirated CDs made in southern China are still offered for sale on hundreds of Hong Kong streetcorners.

OUR "A" Section: FF World Trade, Financial & Inland News

2. Cargo Letter's Freight Forwarder STOCK WATCH

• The Cargo Letter 10

Here are today's Stock Watch Report AND progress on our "Cargo Letter 10" portfolio. [portfolio represents $l000 purchase of each stock at close on 3 Nov 1995]

[INDEX: 1st & 2nd Number are last price & daily change............3rd & 4th Number represent how our $1000 investment in each stock is doing and our win/loss to date.]

Our "Cargo Letter 10" winner AGAIN this week is Air Express Int'l! (29% gain in 7 mo's).......with Interpool second.....but the entire group is continuing to suffer.

And in other financial news.......

Interpool Subsidiary Will Go Public...............with a proposed initial public offering (IPO) of 7.65 million shares of Interpool Limited's common stock at an offering price of $14-16 per share. Upon consummation of the offering, public investors would own approximately 22.4% of Interpool Ltd's common stock, and Interpool, Inc. would continue to own 77.6% of Interpool Ltd's common stock. Interpool, Inc has two separate business -- the international container leasing business, by Interpool Limited, and the domestic intermodal equipment leasing business, by Interpool, Inc.

3. Intercargo Insurance Breaks New Ground In Support of Forwarders & Brokers

• New Protective FF/CHB Coverages

--by Michael S. McDaniel for The Cargo Letter

Intercargo Insurance Co. (NASDAQ:ICAR) has announced unique new products as enhanced business protection for the transportation specialists (e.g. customs brokers, freight forwarders, freight consolidators, etc.) which it has served since 1980. For the first time in our industry, Intercargo will now provide...... Foreign Agent Liability, Bailee Liability, Packing Liability, Container Coverage, Customs Liability, and Third Party Liability coverages.

In 1993, Intercargo introduced the International Transit Liability (ITL) Policy as a means of combining Forwarder Legal Liability Insurance (for damage to goods moving under your house bill) and Errors & Omissions (E&O) Insurance (for your negligence) into one package policy. Intercargo was the first U.S. insurance company to offer this type of combined coverage to transportation specialists.

A newly renamed Integrated Transit Liability Policy (ITL) will continue to feature E & O/Forwarder Legal Liability protectioins, plus these one of a kind optional coverages:

1) Foreign Agent Liability: A new product to protect your reliance on relationships with overseas agents......and damages caused by their mistakes and oversights
2) Bailee Liability: Coverage for direct physical loss or damage to property while it is in your care, custody, or control; e.g. temporary storage in your warehouse or transport of goods in company-owned vehicles.
3) Packing Liability: A new product to eliminate coverage gaps found in most insurance policies, it provides coverage for physical loss or damage to cargo as a result of insufficient packing, crating, or container stuffing activities by you or your agents.
4) Container Coverage: Provides all-risks coverage for physical loss or damage to containers & similar equipment you own or lease.
5) Customs Liability: Protects the you from fines or penalties assessed for alleged or proven violations of transportation laws or regulations. (Not currently available in the U.S. & Canada.)
6) Third Party Liability: Provides coverage for damages and consequential loss resulting from accidental bodily injury, accidental property loss or damage, and contractual liability.

In proof of its leadership in our industry, Intercargo Insurance Co. has the exclusive endorsement of the National Customs Brokers & Forwarders Association of America (NCBFAA) and the International Association of Non-Vessel Operating Common Carriers (IANVOCC). The company's primary products include: U.S. Customs Bonds, Marine Cargo Insurance, Property & Casualty Insurance, and Professional Liability coverages.

Information concerning these new liability protections for your company may be obtained from Trade Insurance Services Inc. (TIS), a subsidiary of Intercargo at (800) 338-4904

4. U.S. Supreme Court Rules On Assessment Of Taxes On Goods In Export Transit

--by A. Blaine Prentiss for The Cargo Letter

Los Angeles - 10 June - The United States Supreme Court has ruled in the case of United States v. International Business Machines (IBM) that the Export Clause of the U.S. Constitution does not permit the nondiscriminatory assessment of federal taxes on cargo in export transit. In a similar case, the U.S. Court of International Trade (CIT) has held that assessment of the Harbor Maintainance Fee (HMF) also violated the Export Clause of the United States Constitution. [U.S. Shoe v. United States]

5. Freight Forwarder Trade Briefs

• Circle Gets The Gold.............as the first athletes to arrive for the 1996 Centennial Olympic Games galloped into Atlanta last week.......literally. Circle International and Lufthansa Airlines teamed together to arrange the first charter flight of 40 equine athletes set for Equestrian Competition. As the Official Customs Broker and Freight Forwarder for the 1996 Olympic Games, Circle will move 220 of the million dollar horses to Atlanta on several Lufthansa charters, coordinate the pre-entry blood testing required for import permits and perform customs clearance. Circle will also manage the Atlanta Equine Quarantine Facility at the Atlanta Hartsfield Airport. Go Circle !
• Expeditors Announces & Explains Growth........with the opening of two new offices in Karachi and Lahore. Since Expeditors began its Middle Eastern region five years ago, it has grown to encompass offices, agents and international service centers in 29 cities. Citing a difference with the aggressive acquisition philosophy of competitors Fritz & Circle, the US$600M Seattle based Expeditors stresses the long term value of "organic growth" from within the 95 office organization. "We have the money to go out and buy anybody, but I always say, 'why buy what you can kill?'" Expeditors CEO Peter Rose told Reuters last week. Rose added, "We do a deal that is mutual -- as opposed to spending millions of dollars to just buy them out and watch the [staff and accounts] go away."
• Do It Yourself Brain Surgery?.......................or at least your own Canadian customs entries is being suggested by Clerkware Canada Inc. which will offer the software package "CUSTOMS ACCOUNTING 2000" to importers for entry of their own goods at a claimed cost of as little as US$12 per transaction. The company WWW home page is http://www.pathcom.com/~waynes/homepage.htm.........or by e-mail to waynes@pathcom.com.

OUR "B" Section: FF World Air News

6. FF World Air Briefs

• The Sky's The Limit.........as Boeing Co issued a forecast last week that world air cargo traffic will grow at 6.7% a year until 2015. Boeing claims the 1996 slowdown is merely temporary.
• Dig Deeper On AA.............since today is the day that American Airlines says it will impose a 4.3% fuel surcharge on domestic cargo and priority parcel services to help offset a 15% increase in average fuel prices since last year. Involved are all shipments originating and terminating within the continental U.S., Hawaii, Puerto Rico and the U.S. Virgin Islands
• Route Dominance By AA & BA?..............is the question as a proposed world cargo pact between British Airways and American Airlines takes shape. Industry sources estimate that BA and American moved between 30% to 70% of two-way airfreight between the three London airports and the U.S. in 1994 & 1995. This pact could allow the carriers to take advantage of over-capacity and drive down rates to capture additional market. It is noted that BA lost its ISO 9002 quality accreditation for cargo handling earlier this year but vows to regain the title by fall '96.
• UPS Strengthens EU Hand.............by a letter of intent with Swiss forwarder Danzas Holdings AG. Under the cooperative operations agreement, Danzas will handle all UPS moves over 70kgs.........a part of the market given up by UPS last year. UPS now has about 15% of the EU express business.
• India's No. 6 Airfreight Company?.........its Burlington Air Express' wholly-owned India subsidiary which leapt into sixth place among India's air cargo exporters. Burlington's India revenues were up 18% last year, moving it from No. 10 to No. 6. Burlington is India's only ISO 900O Certified Forwarder.

OUR "C" Section: FF World Ocean News

7. Shake-up At S.A. Port Authority

--by Pete Bower for The Cargo Letter

Capetown -30 June - Neil Oosthuizen, the CEO of SA's national port authority Portnet, has resigned effective August 31. His deputy Philip Venter is also reliably understood to have resigned. The pair are believed to have resigned following a board meeting of Portnet's holding "company" Transnet last week.

Transnet has recently been vigorously following a policy of affirmative action in senior appointments, with a number of key managing positions recently filled by blacks. Portnet itself has been a part of the process, with the port managership of Africa's busiest port, Durban, and Portnet's human resources executive at head office, now being affirmatively filled. Portnet staffers are speculating whether the resignations of Oosthuizen and Venter are not part of the same process.

8. FF World Ocean Briefs

• More Mexican Ports Go Private.....................After turning over operations of a number of container and multi-use terminals to private interests, the Mexican government has auctioned off long-term concessions to run the cruise ports of Acapulco and Puerto Vallarta to Transportacion Maritima Mexicana (TMM) which will control about 78% of the Acapulco port, including docks and warehouse facilities, and a 24-acre harbor facility at Puerto Vallarta. Expect more cargo to move through these cruise ports.
• BIFA Defers Commission Issue...................In a sign of changed relations between conference lines and UK forwarders, the British International Freight Association (BIFA) has downgraded the issue of the payment of agent commissions. In the rest of the EU, payment of an agent commission is standard practice, but almost all conference lines have traditionally refused to pay it to UK forwarders. But now the larger forwarders are able to strike deals with conference lines.
• Monsters Will Roam The Earth..............as P&O Containers Ltd. has announced that it placed an order for two 6,674 TEU capacity containerships at 82,000 D.W.T. (984 feet) the largest in the world....674 more TEUs that the current largest container ships owned by Maersk Line. Meanwhile, Celebrity Cruises has laid the keel of its 74,000 gt M/V Mercury [Note: RMS Queen Mary is 46,000 gt], the last of 3 new buildings. Higher volumes - lowered costs.
• On The Yangming Crime Beat....................French customs officers have discovered 7.5 tons of cannabis in a container carried by Yangming's 29,872 gt M/V Ming Galaxy, at Le Havre, among a cargo of crockery. [Yes, it appears the cargo owner intended to become crocked.] The Taiwan-flag vessel had moved ex-Far East, via Colombo. Meanwhile Taiwan officials are trying to prevent the officers of Yangming's M/V Maersk Dubai, being extradited to Romania on murder charges for throwing stowaways overboard in the mid-Atlantic. Six officers were arrested at Halifax when an R.M.C.P. assault team stormed the vessel after Capt. Cheng Shiou refused to dock, citing orders from Taiwan. The murders of two Africans in 1991 are also alleged.
• Largest U.S. Ctnr Port Continues Expansion.............. as the Port of Long Beach continues its historic growth by increasing the landmass at Pier "A". Construction and engineering have begun at the breakwater for the "ITS Landfill Project" which is slated to welcome container vessels in 1998. Tons of materials are quarried and barged in from 26 mile distant Santa Catalina Island each day to create 140 new port acres at a cost of $5 billion dollars. This new expansion will allow for more containerized cargo to be processed faster and then speeded off to destination. L.A. continues its leadership! [ by A. Blaine Prentiss ].

OUR "D" Section: FF in Cyberspace

Here are The Cargo Letter transport World Wide Web sites of the week...........

• Italian Freight Forwarder Issues (Offers of space & cargo)
  http://www.transport-on-line.com
• Int'l Assoc of Marine Economists (Ports & Logistics)
  http://www.venuewest.com/iame96

OUR "E" Section: The Forwarder/Broker World

9. The Valuation Clause In Cargo Insurance Policies

• Back To The Basics

--by Charles Veigel, Esq. for The Cargo Letter

Seattle - 30 June - Continuing in the series of articles on cargo insurance, this article will discuss how a cargo policy is valued.

As most of you are aware, a marine cargo insurance policy is issued at a stated value. In the event of a total loss of the goods, the insurer will pay the holder of the policy the face amount stipulated in the policy. The face amount is stated in the valuation clause. Typically, the amount is formulated as follows:

1) invoice amount; plus
2) the prepaid/collect freight charges; plus
3) an advance (often 10% of the invoice/pre-paid freight to cover claims expenses, profits)

The insurance company is obligated to pay the face amount reflected in the policy in the event of a total loss even if the loss surpasses the face amount of the policy. In order to prevent fraud, the insurer reserves the right to demonstrate that the goods were worth less than the stated invoice value.

The predetermined amount often does not cover customs duties. Consider this: a container load of chairs is shipped from Hong Kong to Oakland. The chairs arrive damaged and in a condition beyond repair. If the goods are not surrendered to U.S. Customs, the consignee, usually the buyer of the goods, must pay duty and clear the goods through U.S. Customs. Even if the endorsement to the policy is made to cover the customs duties, the insurance company may place an obligation on the consignee to seek a refund/drawback of the duty from Customs.

Above we indicated that the typical marine cargo policy will include approximately 10% to the invoice amount and prepaid/collect freight charges. A shipper or consignee may want to insure for lost profits. Often a shipment is worth much more than the value stated on the invoice. The cargo is lost or damaged, and the shipper/consignee not only lost the invoice value but also significant profit having sold the goods in advance at the port of destination. An endorsement reflecting the percentage increase to the value of the goods is appropriate.

Ocean/Air forwarders often issue marine cargo certificates to their customers under open marine cargo policies issued by the insurance company. Under these cargo policies, numerous shipments are made, each of which is separately valued. Separate shipments are reported by the forwarder to the insurance company on a set schedule. The policy will extend for a specific period and the insurer will be liable for all losses under a set limit. If a shipment is partially damaged and valued below the set limit, the insured is responsible for compensating the holder [shipper/seller/consignee/buyer] for the percentage damage/loss and effectively reducing the set limit by the amount paid.

A careful review of the cargo policy to determine the appropriate value of the goods is an important duty of any ocean/air forwarder. An ocean freight forwarder is under a duty to exercise due diligence to ascertain the accuracy of any information it imparts to the principal [shipper/client] regarding the forwarding transaction. 46 C.F.R. 510.22 (c). An air freight forwarder is under a similar duty. Our advice: read the cargo policies and explain them to your clients. Not only is this a good business practice, but you are also under a duty to do it. [Charles Veigel is a partner with the Brusanowski & Veigel law firm - Seattle] [an error occurred while processing this directive]