Industry News
From The Cargo Letter

THE CARGO LETTER [#296] Air & Ocean FF News For 21 Feb '96

Good Wednesday Morning From World Port L.A. ! There is sobering news today. For the security of YOUR customer's cargo, the question is . . . do YOUR customers have proper marine cargo insurance? There's Pirate News today! Happy New Year......of The Rat........but don't tell Air Canada! McD

INDEX to The Cargo Letter:

  1. OUR Top Story
  3. 2. Cargo Letter's Freight Forwarder STOCK WATCH
  4. 3. Freight Forwarder Trade Briefs
  5. 4. U.S. Military Logistics '96
    OUR "B" Section: FF World Air News
  6. 5. Air Forwarder Beats Attempt to Invalidate House Bills of Lading --Thanks from the Industry to Right-O-Way and a Final Farewell
  7. 6. FF World Air Briefs
    OUR "C" Section: FF World Ocean News
  8. 7. Pirate Attacks Now Said "FEROCIOUS"
  9. 8. FF World Ocean Briefs
    OUR "D" Section: FF in Cyberspace

OUR Top Story


By Warren S. Levine for The Cargo Letter

Tensions are on the rise and armed forces are on the alert in China and Taiwan, as China has tightened security in a number of eastern provinces in preparation for live-fire "war games" sometime after the end of the Chinese New Year holiday. Taiwan has put its forces on a heightened level of alert in order to guard against anticipated "provocations" by China during those exercises.

China has reportedly airlifted up to 150,000 troops into provinces near Taiwan and over 200 aircraft are said to have been deployed along China's southeast coast. In the political arena, Taiwanese President Lee Teng-hui has been accused by Beijing of playing "children's games" with the lives of 21 million people by pursuing independence for Taiwan.

China considers Taiwan to be a renegade province, and while the official policy of Taiwan is toward "unification" with the mainland, some factions still favor independence. China has threatened to take action against Taiwan if the pro-independence movement wins the election on March 23.

In the face of this global public posturing by China, President Lee made a visit to Kinmen Island (the PRC refers to it as Jinmen), literally only a short swim from the coast of China, to inspect the Chinese military buildup. Taiwan's Premier Lien Chan said that the tensions were temporary and would ease once misunderstandings were cleared up.

But daily attacks in China's state-controlled press are attacking President Lee, the front-runner in Taiwan's first free Presidential election, calling him a "splittist" who prefers Taiwan independence while paying mere lip service to the idea of unification. These attacks have been made only against Lee and other politicians who are perceived to espouse independence, however, and not the idea of democracy. Although the Communist Party rules China, they consider themselves a democracy.

According to Taiwanese authorities, China has moved a missile platoon from Jianxi Province to Fujian, which is directly across from Taiwan. Last summer, China test-fired missiles from Jianxi to an area north of Taiwan, presumably in response to President Lee's visit to Cornell University in upstate New York.

In a campaign address at a Buddhist temple in Taipei on the second day of the new year, President Lee stated that his government should learn from the Buddhist goddess Kuanyin, "who can change her help people solve problems." Although Lee is a Christian, 45 percent of Taiwanese believers are Buddhist.

Experts hope that China's actions to this point are just a version of Peking Opera, in which threats are generally made loudly but the outcome is always safe and predictable. Interested observers would do well to read Sun Tzu's "The Art of War," a classic manifesto written over 2500 years ago, which is ingrained into Chinese culture. It is said to have been the inspiration for Mao's Little Red Book, and is required reading in many western MBA and political science curricula.

The effect on freight moving from this part of the world is that heightened tensions contribute towards ever greater shipping risks. It would be wise to urge your customers to purchase all-risks marine (or airfreight) insurance on their shipments in or out of China, Hong Kong and Taiwan, at least until the situation stabilizes. On February 19, a Chinese cargo vessel went down in the Taiwan Strait due to rough seas, and 30 crew members are still missing and feared dead. In this time of threatened instability in the region, this unfortunate accident could easily have mushroomed into the latter half of this century's shot heard 'round the world.

Our industry...and the world....awaits 1997
S. Korea will begin border military exercises this week
Bless the FREE societies
And Prepare for the Consequences

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

2. Cargo Letter's Freight Forwarder STOCK WATCH

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!.......but the entire group is continuing to suffer. We are surprised that Intercargo Insurance continues way into the dumps, contrary to our prediction. What about that APL?

The Cargo Letter 10








Airborne Express ABF 26 1/8 -91.63 907.66
Air Express Int'l AEI 24 1/8 -3/8 122.08 1,122.05
Am. Pres. Lines APS 20 3/4 -1/4 -153.03 846.80
Delta Air DALpC 59 3/4 1/8 41.32 1,039.65
FedEx FDX 73 5/8 5/8 -132.52 867.30
Fritz Companies FRTZ 37 3/4 -1/2 -13.07 986.78
Circle Int'l/Harper HARG 16 3/4 -3/4 -62.88 936.32
Intercargo Ins. ICAR 8 1/8 -1/8 -277.75 722.15
Interpool IPX 17 -1/4 14.92 1,014.90
Mercury Air Cargo MAX 8 3/4 -1/16 -102.56 897.40

And in related financial news . . .

Expeditors International (EXPD)...........has announced 1995 fourth quarter net earnings of $.40 per share, up from $.31 for the same quarter in 1994--an increase of 29%. Net revenues in the fourth quarter increased 26% to $42,783,000 as compared with $33,947,000 for the fourth quarter of 1994. Expeditors announced this morning that it has just opened offices in Vienna and Salzburg, Austria, and an international service center in Larnaca, Cyprus.

3. Freight Forwarder Trade Briefs

4. U.S. Military Logistics '96

With the Bosnia peace mission so much on our minds these days, it is interesting to see the extent to which defense planners have reengineered for inventory tracking, speedier deliveries, and reduced costs in four short years. Indeed, these dramatic changes mirror those our own industry. Has your organization kept pace? 1) DESERT STORM FISCAL `91 2) BOSNIA FISCAL '96 A. ORDER-TO-DELIVERY 25.5 days Now 7.1 days TIME TO EUROPE* B. INVENTORY TRACKING Key-punched Now Bar-code reading, manifest laser cards, radio-frequency tags C. WEIGHING PACKAGES By hand Now Automated FOR SHIPPING D. TRUCK MANAGEMENT By pencil and paper Now by computer AT THE DEPOT

*Average by air [DATA: Defense Distribution Depot, Susq,PA]

As expected, U.S. shipping firms have been involved in moving equipment to the former Yugoslavia. Sea-Land Service Inc. and Lykes Bros. Steamship Co. moved 392 FEUs to Bosnia and Van Ommeren Shipping (USA) Inc. has been using a combination breakbulk/containership to move 154 pieces of cargo weighing 4,700 tons to the area. Work continues with the volume to hit 400 TEUs weekly. By comparison 40,000 TEUs deployed for the Gulf War. World commercial fleet volume is 4,000,000 at any given time.

OUR "B" Section: FF World Air News

5. Air Forwarder Beats Attempt To Invalidate House Bills of Lading

Los Angeles - 20 Feb 96 - In a hard fought victory for the air forwarding industry, well known airfreight forwarder Right-O-Way Transportation, Inc. (ROW) prevailed this month in a major California lawsuit brought by Fireman's Fund Insurance Company to invalidate all HAWB "release rate" damage limitations for cargo moving via an alternate surface mode.

The serious implications were clear for our industry. Claimant Fireman's Fund took the formal position in its Orange County Superior Court case that the industry standard US$0.50 per pound domestic damage release rate for all air forwarders must be invalidated for any cargo moving via a licensed Interstate Commerce Commission (ICC) motor freight carrier, unless the airfreight forwarder itself has ICC operating authority. According to Fritz Kahn, Esq., former General Counsel of the ICC, this legal theory was "simply ridiculous".

Facts of the case were simple enough. There having been 47 prior moves for the shipper under a standard ROW HAWB, a single package marked "carpets" moved ex-LAX on a freight prepaid basis, NVD (no value declared), door-to-door, for discharge at DFW and local delivery. At LAX a ROW decision was made for motor freight carriage via a licensed national carrier due to considerations such as space availability, time of service, available equipment,etc. The single package was successfully delivered to the ROW DFW terminal, but subsequently lost during local delivery. Fireman's Fund paid a cargo claim to the shipper and then filed suit for US$117,000 against Right-O-Way in subrogation to recoup its payment.

In the lawsuit ROW pointed to its HAWB contract right to select routes and modes which best serve transportation needs of the shipper, but senior attorneys for Fireman's Fund were steadfast that any airforwarder which issues a bill of lading (as a carrier) for ultimate carriage by motor freight must be licensed in that particular mode as a carrier for that mode of transportation. ROW defense counsel Michael McDaniel of the Los Angeles Countryman & McDaniel firm argued "this lawsuit forgets that all forwarders were deregulated in 1986 and asks the Court to re-decide a definition of 'Freight Forwarder' which was set down by a ruling of the U.S. Supreme Court in 1949". ROW was assisted in the lawsuit by the Air Forwarders Association and successful expert testimony from its Executive Director Jim Foster.

After 1.5 years of litigation and an emotionally charged final hearing, the Superior Court finally agreed with ROW this month and dismissed the Fireman's Fund assault. "We always saw the Fireman's Fund position as silly", said McDaniel, "But unfortunately there was a real danger to all air forwarders due to the true art with which the position of Fireman's Fund was advanced." He added, "Right-O-Way showed a good deal of courage in fighting the unlimited resources of a major insurance company such as Fireman's Fund".

Unfortunately, at press time it appears that both Right-O-Way and its coast-to-coast operations are now closed as of 19 Feb '96 and lost to Chapter 7 Bankruptcy. We say a sad good-bye to Right-O-Way, but with a "THANK YOU" for one last great battle on behalf of our industry. May the rest of you please remain vigilant for the continued assaults against our industry by subrogating insurance companies such as Fireman's Fund.

6. FF World Air Briefs

OUR "C" Section: FF World Ocean News

7. Pirate Attacks Now Said "FEROCIOUS"

London's International Maritime Bureau (IMB) reports a dramatic surge in pirate attacks....... as doubling in 1995 to 170 (of those actually reported). Indonesia is the most dangerous area, with a huge increase in attacks for the China/Hong Kong/Macau area, while a new wave of piracy continues to sweep through Brazil's South American waters and into the Somali/Djibouti coastal districts. As previously reported in The Cargo Letter, these modern buccaneers are actually a greater problem than 100 years ago and employ a variety of high tech devices, tactics and weapons to pilfer and capture the cargo you are charged to deliver. Executions and other deaths from the pirates are losses beyond simple commercial measure. Your cargo is no match for machine guns, rockets and marine mines of the sort we see placing the customer cargo at risk. PLEASE encourage YOUR customers to buy first quality marine cargo insurance.

Indeed, at press time the Philippine Navy issued a bulletin that 15 additional gunboats & anit-aircraft vessels will be deployed at once to serve as "Anti-Pirate Ships". The threat is real, but mainly to feeder vessels. The world is a very dangerous place for YOUR cargo.

8. FF World Ocean Briefs

OUR "D" Section: FF in Cyberspace

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

Cargo List (About transportation - many links)

Rigos Chartering, Inc. (Capt Rigos Home Page etc.--Has Moved)

United States Merchant Marine Academy

World Time Clock (site showing time in 100 locations world-wide, updated every minute!)

......AND for fun>>>
Try a Virtual Yacht Cruise (Relax, explore..!)

Information provided by The Cargo Letter
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