If you ship goods between Asia or South America and the United States, you are no doubt aware of the “Third Set of Locks Project,” which doubled the capacity of the Panama Canal by adding a new lane of traffic and increasing the width and depth of the existing lanes and locks, allowing larger ships to pass. The new Panamax ships are about one and a half times larger than the previous Panamax ships, and can carry over twice as much cargo.
The new expansion opened June 26, 2016 and the U.S. Eastern Seaboard, as well as the UK Ports of Southhampton and the Port of Liverpool, are gearing up and undertaking Port renovation projects to accommodate the size of the new Panamax ships. (If you drive in New Jersey, it’s the reason the Bayonne Bridge is closed every day after 3:00p.m.—the Port of NY/NJ is raising the roadbed an additional 64 feet to allow the larger vessels to pass underneath). The Ports of Jacksonville, Charleston, Savannah, and Miami have also invested in dredging and infrastructure improvements.
The expansion shortens the one-way journey by sea between the East Coast and Asia by an estimated five days and eliminates the necessity of rounding Cape Horn to access the Atlantic Ocean. The Boston Consulting Group estimates as much as a 10% increase in container traffic at Eastern US Ports by 2020.1 The expected increase includes refrigerated cargo from South America, such as fresh produce, fish, and meat.
For shippers/insurers/consumers of perishable products, there is always the chance of spoliation, infestation, and rot. In a recent case,2 a cargo shipper, in a dispute with insurers over a rotten wheat bran shipment from three African ports to Morocco, convinced an English Court to review the matter after a Moroccan Court had ruled against it. The insurer, RMA Watanya SA, sued the shipper, Golden, in a Moroccan Court over two contracts (bills of lading) which did not contain an arbitration clause, and was awarded the equivalent of $865,000.00. Golden then sued RMA in an English Court, stating it never consented to the proceedings in Morocco, and attempted to convince Judge Phillips that the disputes of the three bills of lading should proceed to arbitration (although only one of the three bills of lading had an arbitration clause).
The law governing cargo shipping in the U.K. are the Hague-Visby Rules. One of the arguments Golden attempts in its case before Judge Phillips is that suits filed in Countries that don’t use the Hague-Visby rules, such as Morocco (which uses Hamburg Rules) should not count. Under Hague-Visby, the time to file suit over damaged cargo is within a year of the delivery date. The law governing cargo shipping in the U.S. is COGSA.3 COGSA requires that a shipper provide notice of loss or damage to the carrier within three days from the date of delivery or the date the cargo should have been delivered in the case of a loss. Waiting longer than three days to notify the carrier creates a presumption that the goods were delivered in good order and condition, and also makes it more difficult for the carrier to investigate the claim. Not a part of COGSA, but mostly likely a part of your insurance policy and/or bill of lading, is a forum selection clause, where a lawsuit must be brought in a particular jurisdiction, such as New York, California or, potentially, a foreign jurisdiction like Japan, the United Kingdom, or France.
Always read your insurance policy to see if a forum selection clause is included. When shipping goods—either domestically or internationally—also read the bill of lading, front and back. Under COGSA and most bills of lading, what is called a “Himalaya Clause” will be included, which provides the same protections the carrier enjoys to its agents, including stevedores and port personnel.
1 Bratton, Burke, Ulrich, Raetz, and Laxmana, “How the Panama Canal Expansion is Redrawing the Logistics Map.” Web blog post. Bcg.perspectives. June 16, 2015.
2 Golden Endeavor Shipping SA v. RMA Watanya SA et al., case number CL-2014-000679, in the High Court of Justice of Engalnd and Wales, Queen’s Bench Division, Commercial Court.
3 Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300-1315.