Industry News
From The Cargo Letter

THE CARGO LETTER [300] Air & Ocean FF News For 31 May '96

For the first time..........Good Friday Morning from our new offices & "The Observation Deck".....overlooking Runway 25-Right and air cargo operations at Los Angeles International Airport! After 17 years, we've got a new home!!

It's time to celebrate EDITION No. 300 of The Cargo Letter.........our new LAX home..........and World Trade Week!!

What began years ago as an occasional, paper, client newsletter........The Cargo Letter has become an accredited forwarding industry periodical read by over 950 companies & individuals world-wide! Forwarder/Brokers from Iceland to Bolivia to the P.R.C. subscribe to The Cargo Letter. Our other courtesy services to the forwarder/broker industry include The Cargo Letter-Interpool Trade & Transportation International Resource site on the World Wide Web which is relied upon 24 hours a day for industry research & communications by over 430 users each day from around the world. Our recent on-scene China reports from Sr. Correspondent Warren Levine gained international acclaim and were reported by the international press! More, in the last twelve months alone, The Cargo Letter has provided courtesy assistance, consultation or expert witness service in numerous lawsuits across the country where FF/CHB rights were involved. All of this........for FREE.

We're very proud of these accomplishments, but they come at a tremendous cost to us each year. For this reason we say THANK YOU to the many volunteers whose contributions of information assist this effort. Thanks also to continuing assistance from our friends at Fritz Co's, Circle Int'l, Panalpina, Expeditors, Intercargo Insurance Co. and so many others who appreciate the value of a voice for the Forwarder/Broker. Special thanks to our computer whiz....Webmaster Ed Graham of Interpool-IPX......our valued corporate sponsor! Indeed, your e-mail contributions are the KEY to this effort. Please keep the e-mail coming ............all "info tips" and company news are important! Indeed, only YOU can keep The Cargo Letter fresh and topical.

While industry news plays an important role, today we return to our more modest roots by celebrating Edition No. 300 with the original premise of The Cargo Letter......... Forwarder/Broker operational support. PLEASE report back to us on the value of this information for YOU and YOUR staff. E-mail allows you to respond/contribute with it!


INDEX to The Cargo Letter

  1. OUR "A" Section: Forwarder/Broker News
  2. U.S. Considers Punitive Duties on Chinese Goods - But Clinton Renews MFN Status For China
    Our Top Story
  3. The Cargo Letter Announces New Services
  4. Freight Forwarder Briefs
    OUR "B" Section: The Forwarder/Broker World
  5. The Cargo Letter "TOP 10" Forwarder Liability Tips
  6. Marine Cargo Insurance Exclusions OUR "C" Section: FF in Cyberspace


OUR "A" Section: Forwarder/Broker News

1. U.S. Considers Punitive Duties on Chinese Goods - But Clinton Renews MFN Status For China

by Warren S. Levine, for The Cargo Letter

Denver-30 May 1996-In what has already been a difficult shipping year, the Clinton Administration this month has taken steps to further muddy the waters of international trade by, on the one hand, publishing a list of Chinese goods on which US$3 billion in punitive duties will be imposed, and on the other renewing Most Favored Nation status for China for another year.

In a statement issued on May 15, Acting U.S. Trade Representative Charlene Barshefsky announced a list of goods on which these duties will be imposed, " a result of China's failure to satisfactorily implement the 1995 Intellectual Property Rights Agreement." She called China "the largest pirate of U.S. intellectual property."

The list of goods includes surgical and medical gloves; woodenware; stationery; jewelry; iron and steel kitchen, cooking and tableware; electrical heating apparatus and appliances; telephones, accessories and parts; fax machines; cellular phones; bicycles; and a wide range of sporting and outdoor goods, in addition to 26 quota categories of textile products.

The final list of commodities will be revised after a period of public comment and opportunity for the Chinese to cave in, which expires on June 17. The original US$3 billion will be reduced to US$2 billion at that time. The threatened sanctions, if they are indeed followed up on, will affect less than 2% of U.S. imports from China. In 1995, China exported US$45.6 billion in goods to the United States.

Beijing is clearly not adhering to its pledge last year to shut down factories which produce pirated software, music and video CDs, making public only a few factory closures and merchandise seizures over the past year.

When this reporter visited China in March it was easy to obtain rentals of uncensored American movies such as "Basic Instinct" and "Fatal Attraction," which would be considered pornographic by the Chinese government, except they were black-market versions, smuggled into China, copied and easily available to the public. In the Tsim Sha Tsui section of Hong Kong, virtually every street corner is crammed with tables of pirated music CDs, brought down from Guangdong Province.

Earlier this month, Secretary of State Warren Christopher refused to impose sanctions on China for shipping nuclear-related materials to Pakistan. The reason for his leniency was that he believed the Chinese leadership might not have been aware of the shipment.

Christopher's definition of "leadership" was not specified, but it is widely believed that the titular leader of the People's Republic of China, Deng Xiaoping, is not fully functional. Various factions are jockeying for control in anticipation of Deng's demise. That someone in a position of power in China would be aware of the international sale of nuclear-related material is almost assured.

Still, last Monday President Clinton renewed China's Most-Favored Nation status for another year, stating, "We cannot walk backwards into the future. We must not seek to isolate ourselves from China." Congress has 60 days in which to attempt to overturn Clinton's MFN extension.

Domestic critics of Clinton's policy towards China have used words like "schizophrenic," "wishy-washy," "random," and "incoherent." Asians are likewise confused by Washington's hot-and-cold approach to relations with Beijing.

In defending Clinton's policy towards China, White House spokesman Mike McCurry described it as "...a multi-dimensional relationship that doesn't fit into a black-and-white box. We're not doing one thing and then another."


Our Top Story

2. The Cargo Letter Announces New Services

Relocation of The Cargo Letter to Runway 25-Right at LAX will mean more than just a change of address for 950 world-wide members who subscribe to the Forwarder/Broker newsletter. This move is intended to place both The Cargo Letter and transport attorneys Countryman & McDaniel in the very center of cargo issues on the West Coast. This move is intended to provide a HOME for traveling Forwarder/Brokers and their customers.

For all The Cargo Letter subscribers we now announce COURTESY services for local and traveling Forwarders & Brokers which will include:

  1. FREE use of "The Observation Deck"........our vista conference room with a sweeping 180 degree view of LAX.........exactly what the LAX Control Tower sees! Radio monitoring of all international arrivals & departures! Courtesy coffee and snack service for all conferences. Let your customers know you are serious about transportation! You will step off the plane and into the conference room! Just call in advance and conduct your next Los Angeles business meeting....... where the international freight moves..............on "The Observation Deck"! You'll be proud to make us your LAX home.
  2. FREE shuttle from YOUR LAX flight to "The Observation Deck" at our The Cargo Letter offices. Provide convenience to YOUR visitors and business associates.
  3. Special discount room rates at our neighbor.........the four star Crowne Plaza Hotel ! And.......on the special The Cargo Letter Program........stay one night at LAX (coming or going) and receive a full seven days FREE secured parking!!!

LAX is a crossroads of the world...........cross it with The Cargo Letter! We have moved to LAX to serve the Forwarder/Broker Industry...............................McD

3. Freight Forwarder News Briefs


OUR "B" Section: The Forwarder/Broker World

4. The Cargo Letter "TOP 10" Forwarder Liability Tips

by Michael S. McDaniel, Esq. for The Cargo Letter

We first ran this "Cargo Letter Top 10" list in a July 1994 edition of The Cargo Letter. Since then these FF/CHB liability tips have become a standard training aid in many U.S. companies. Here is the 1996 version. Please send us your own comments and liability tips!

  1. "TERMS & CONDITIONS OF SERVICE": This is the FF/CHB's ONLY protection against liability where no house bill has been issued. This is the only way to take full advantage of U.S. law drafted for your benefit. Since passage of the MOD Act, even CHB customs practice (U.S.) is believed limited by "Terms & Conditions" ["T & C's"]. We recommend use of standard NCBFFA "T & C's". Are your T&C's up to date? Do your T&C's contain all the available damage limitations, lien rights and time limits? Do your T&C's protect you from lawsuits in distant cities? Are your T&C's printed on all applicable documents? Contact your transportation atty or The Cargo Letter.
  2. The Errant Trucker: Inland/delivery losses spawn a growing number of lawsuits, especially as hi-jacking and crime escalate. Where the FF/CHB has not issued a house bill, you do not want to suggest inland responsibility for which there will be no financial reward. We recommend you (a) discourage the term "house trucker" when speaking to customers (b) adopt procedures favoring customer approval of the drayman (c) suggest customer selection from among several draymen, especially for unusual loads and (d) demand proof of inland cargo insurance. If your "T & C's" are up to date and binding, you are generally only responsible for careless trucker selection........but pay close attention since litigation expense can be significant.
  3. The Proper Insurance: Don't be caught alone on a loss when your packers, CFS, trucker, surveyors or other special vendors have no liability insurance. These service providers are often alleged to be YOUR agent, with YOU claimed responsible for their proper selection and conduct. Make sure YOUR own insurance covers all aspects of the operation and pays for the legal defense......whether YOU are responsible or not. Use a single industry broker who knows how to cover all the angles . . . at the right price for all your business. There are a few truly "transport-wise" brokers. We like Trade Insurance Services (800-338-4904). Remember, one big loss can exceed many years worth of insurance premiums. Buy the right insurance! Please!
  4. Letters of Indemnity: Accepting these instead of original bills of lading at the time of ocean arrival/freight release is a risky practice. Don't do it! Don't even think about accepting these unless (a) there is a verified reason (b) a personal guarantee is given if the cgnee is a corporation and (c) you arrange contractual lien rights to the cargo pending surrender of the original bill. You can even arrange to keep a security interest over the released goods, but this is complicated. There is a big danger here and your misdelivery liability is great. Be creative with customers in designing protection for your company.
  5. The C.O.D. Air Problem: We are always working cases with the FBI or Secret Service where the air shipment was exchanged for some counterfeit payment instrument. You are most always claimed to be responsible. Here are some tips: In court "cash" is not the same as a "cashiers check". A "certified check" is not a "cashier's check". Suspect loads such as a $100,000 C.O.D. "hotshot" to the Mexican border at night. Might you call ahead to the cgnee to get bank approval on his payment instrument? Too much trouble? Press your shipper to request a bank wire instead. The risk is great and the bad guys are usually smarter than we are. Why risk lawsuit involvement just to earn a US$15 C.O.D. fee? Establish company rules.......and follow them.
  6. Oral Change Of Service: We understand the incredible pressure of your business. Still, a good mind-set is to issue a short fax every time the customer telephones with some new "important" instruction. Hand written is okay. You judge what is "important". We have many lawsuits which prove that once a loss occurs, existence of the "important" telephone instruction is usually denied. Show the customer you are a professional!
  7. Release to the Bankrupt CGNEE: It is a nightmare when you release to a cgnee who immediately files bankruptcy . . . owing you and/or the shipper big money. This is a daily occurrence. WARNING: The lawyer must be called the same day this problem is discovered! You might be able to save the situation by reclaiming the cargo, etc., but each day, each hour, reduces your ability under U.S. law. Act at once for any cargo released by "mistake".
  8. Document Security: Here is a new problem and the cause of several lawsuits in this age of hi-jacking and cargo theft. Who has access to such documents as your pre-arrival Delivery Orders? We have lawsuits where the packet of D.O. documents was left in a public area, copied by crooks and used to clear cargo. Beware that the power of your documents cannot be allowed to fall into the wrong hands! The bad guys are smart.
  9. Communications Security: Time and time again we began to handle a liability loss only to find that our FF/CHB client and the overseas agent are exchanging fax letters which share "private thoughts". All communications (except with your attorney) must be turned over to the claimant in a U.S. court. Cases can be lost even when you have no responsibility because someone used the wrong words in a fax after the loss. Consider all faxes public! Another problem is the "apology". There are certain cultures in which a kind "apology" or expression of regret by the freight forwarder to the customer is an expected courtesy. Be careful, an "apology" can often be misunderstood to be an "admission" of fault!
  10. Sins of The House Bill: YOU are usually alleged responsible for the consequences of HB/L & HAWB misuse by overseas agents.......and local employees. Suspect and carefully monitor any overseas agent wishing to issue YOUR house bill. Exclude the prospect of a money problem for your agent, sequentially number your house bills and watch the money! Want to do the customer a favor by issuing an order house bill before the goods arrive for movement? Don't. Any problem may result in the allegation of a "false bill" and the possible loss of all your liability protections. Handle your house bills as if they were money.......they are.

5. Marine Cargo Insurance Exclusions

by Charles Veigel, Esq. for The Cargo Letter with Michael McDaniel Esq.

Seattle - 29 May '96 - Marine cargo insurance is a contract where the insurance company [known as the "underwriter"], undertakes for compensation the risk of loss to the insured [usually the shipper/CGNEE]. Marine cargo insurance is customarily purchased by shippers because ocean/air carriers/indirect air carriers/NVOCCs/consolidators [i.e., issuers of bills of lading] are not held to the responsibility standard of an actual insurer of goods. Carriers frequently invoke their bill of lading limitation of liability provisions (under COGSA, Warsaw, etc) and other defenses to minimize risk of responsibility for damage and loss claims.......which makes the marine cargo insurance necessary. Usually the insurance is arranged through a freight forwarder as part of the service provided. In an "all risk" marine cargo insurance policy, recovery is permissible for all losses not resulting from fraud or misconduct unless there is a specific exclusion. Shippers are often taken by surprise upon learning that their cargo insurance may not cover the incident causing the loss or damage.

Shippers must be aware of the exclusions or limiting clauses in marine cargo insurance policies. Cargo insurance policies always exclude risk of war, men of war, enemies, rebellion, piracy, seizure, arrest, restraint, confiscation, etc. Specific coverage for these special risks can be obtained through special war risk insurance.

Any loss resulting from strikes, lockouts, labor disturbances, riots & civil commotion is frequently excluded or limited. Likewise, the policies usually exclude losses due to delay. Shippers must request "delay" coverage expressly in writing if they are transporting time sensitive goods. Air/Ocean freight forwarders should instruct their customers on this important point.

Improper packaging is another classic exclusion. It is helpful for shippers to take photographs and obtain supporting documentation such as a pre-shipment survey to confirm proper packaging. Also excluded are losses caused by the inherent vice of the goods and sometime even for mysterious disappearance.

Shippers & air/ocean forwarders should be aware of the IMPORTANT duty to supply proof in claiming loss or damage under their marine cargo insurance. This is to say that the claimant/insured has certain obligations which are peculiar to marine insurance. The cargo claimant usually must prove each of the following to recover on a claim:

  1. that the claimant has made an immediate report to the underwriter and requested a survey;
  2. that claimant is the owner of the goods and/or is entitled to make the claim;
  3. that the goods were in good order upon shipment;
  4. that the goods were discovered damaged upon delivery;
  5. the physical extent of the damage;
  6. the actual monetary value of the loss or damage; and
  7. that the ORIGINAL certificate of insurance has been surrendered to the underwriter. (Note: often there are no certificates issued in connection with air moves.)

After the claimant supplies required proof, the underwriter has the burden of proving that damage occurred from an excluded cause. Proof that the goods were in good order upon shipment is an area in which many shippers fail to properly protect themselves. Often a shipment is rushed to the port of loading and precautions are not taken by the shipper to protect its rights. In any event, freight forwarders should instruct their clients to carefully read the Marine Cargo Insurance Certificates and keep proper documentation for all shipments. [Charles Veigel is a partner with the maritime law firm of Brusanowski & Veigel, Seattle]


OUR "C" Section: FF in Cyberspace

Air Forwarders Association

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