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by Alicia Rudnicki, Editor, The IRTA Report
"Once again I fell for the lie that it would be raining," said Journal of Commerce Executive Director Willie Morgan, in a dapper British accent, as he opened the first day of presentations at IRTA's fifth annual meeting held June 13-15 in Seattle.
The bright blue skies of the convention's opening days were just one of a number of surprises that awaited those who attended.
Morgan, turning serious, noted that less than five percent of the produce grown worldwide makes its way to market, despite forty percent of the world's population being malnourished. His comment gave perspective to one of the main purposes of the convention: to help improve those statistics by helping corporations and workers involved in refrigerated transport to improve their business.
One of the meeting's early surprises was the keynote speech by Washington apple shipper Patrick Hanemann of Majestic Valley Produce. There was nothing ho-hum about the way Hanemann woke up his audience with his lively analysis of the United States' 1998 Ocean Shipping Reform Act (see page 5 for the keynote address).
Hanemann was highly involved in the passage of the Ocean Shipping Reform Act (OSRA). However, he noted that although OSRA has improved shipper/carrier interactions, the relationship between the two industries is not yet "a happily ever after" one.
Nor is the relationship perfect between any of the many links in the refrigerated transportation business. But IRTA's convention allowed experts from a wide range of industries to air their criticisms, compare notes and try to get a little closer to the goal of creating win-win business relationships.
As Port of Seattle Executive Director Mic Dinsmore said earlier in the meeting "when you talk about feeding the world, it's the people in this room that get the job done."
Those people ranged from shippers to carriers, port administrators to trucking executives, fumigators to cold storage specialists, logistics/forwarding specialists to heads of shipping associations, and reefer manufacturers to remanufacturers. There were agriculture professors, lawyers, maritime arbitrators, business journalists, and many others among the nearly 200 attendees.
Wide Variety of Topics
Although OSRA was a dominant topic, the meeting was also packed with information about cold chain logistics, reefer technology, emerging fumigation techniques such as irradiation, high-tech tracking of container shipments, ways to avoid problems with the U.S. Customs Service, and arbitration of maritime trade disputes (see "Mock Arbitration" on page 10).
The speakers provided valuable insights into their industries and how to improve relations with those links in the transportation chain. For example, in a session on "shortfalls," Newton Bayless of the Salinas, California-based Century Truck Brokers, said that shippers and consignees must improve their treatment of truckers. If not, Bayless said, they risk the loss of trucking businesses because of a lack of drivers. In particular, Bayless noted that drivers are not compensated for the time involved in loading and unloading cargo, and that because of delays in this process, long-haul truckers put in about forty hours a week for which they are not paid.
Criticism of ILWU
Perhaps the biggest surprise of the convention came during the acceptance speech for IRTA's Executive of the Year award. The recipient, John C. Rosling, is president of CITYICE Cold Storage, a huge freeze facility at the Port of Seattle that handles fish and other food products (see "IRTA Takes Chilling Tour" on page 11).
After thanking IRTA "for the honor and the recognition this represents" and thanking his "very dedicated group of employees," Rosling went on to talk about his company's labor difficulties with the International Longshore and Warehouse Union.
Being careful to note that his company has had "successful relations" with the Teamsters Union, Rosling attacked only the ILWU. He criticized the union for a number of concerns including standing in the way of improving money-saving mechanization at West Coast ports.
Rosling also alleged that the ILWU has applied "illegal union pressure tactics" to get CITYICE to hire union workers to unload cargo from breakbulk vessels and fishing trawlers that have traditionally been unloaded by the ships' crews. Finally, he worried about the threat of an ILWU strike this summer, which he said would be "regrettable...especially for Alaska" because over-the-water trade is "their lifeblood." (Editor's note: As of publication time the ILWU is involved in a labor slowdown on the West Coast.)
Initiating a Dialogue
Rosling said that he raised the topic of his company's troubles in order "to initiate a dialogue that needs to occur for the health of the industry."
Indicating that the ILWU is not alone to blame, Rosling softened his position somewhat by saying that except at contract negotiation time, "I think that so many of us have not engaged the unions in a productive way."
In an article about Rosling's comments, which appeared in The Journal of Commerce on July 18, the JOC's West Coast Editor Bill Mongelluzzo quoted Larry Hansen, president of ILWU Local 19, as refuting Rosling's charges.
by Robert C. Mirone
Now that our annual convention is behind us, I wish to thank IRTA's membership and Board of Directors for making this our most successful and dynamic year. Not only has our membership expanded, but we are also on a firmer footing. As an example, I mention the new format and coverage of our newsletter. In addition, the ability to employ the management and convention services of Mark Stone and his company, Milestone Presentations, made the preparations for the Seattle convention far more efficient and cost effective.
Speaking of the convention, I came away from it with the feeling that we have struck a responsive chord. I heard many speakers and attendees mention the problem of the "dissatisfied customer" who makes his message known more often than the one who is pleased with the goods and services. Without getting into a "chicken versus the egg" debate, it seems that both suppliers and customers need to speak to each other in a frank and open manner.
Thought-Provoking Speech
One example was presented by John C. Rosling, President of Seattle's CITYICE Cold Storage, who received our annual Refrigerated Transportation Executive of the Year award for his contribution to refrigerated transportation and his efforts to introduce students to the workings of a free economy.
During his acceptance speech, Mr. Rosling noted that a disagreement between management and labor leads to dissatisfied customers, a strained work place and, in an extreme example, the loss of employment and investment. He also pointed out an important shortcoming on our part. IRTA does not have union representatives among our active membership nor have we addressed the labor/management issue by organizing appropriate panels for both sides to air their views.
Our association can and will establish the panels, but we cannot make the determination as to who should become a member. Thus, I ask that, if anyone reading this newsletter is willing to reach out to labor to join our organization and supply speakers, we would welcome those persons.
A Tale of Two Airports
While speaking of dissatisfied customers, my introductory remarks at the Executive-of-the-Year luncheon recounted the difficulties and expense that I encountered attempting to take United Airlines flights from the White Plains airport in Westchester County, New York, to Seattle. Sorry members, but you had to attend the convention to relive my tribulations vicariously. I did state that two paths of redress were open to me. One was to register a complaint with the Department of Transportation, which I have done. The other, which I now repeat as a challenge to the Chief Executive Officer of United Airlines, is for United's CEO to relive what a dissatisfied customer goes through.
I suggest that United's CEO book a flight on his own airline, from White Plains airport, and try to arrive in Seattle in a timely manner, however his flight and later flights must be canceled and he must have no other means of transportation to LaGuardia Airport where he will be told that he may be able to get a flight. However, United must not provide its CEO with the means to traveling the 20 to 30 miles between the two airports and it must be at his own expense. Of course, he must be issued a ticket at White Plains which is not honored at LaGuardia because the LaGuardia flight is sold out. As part of the rules of this challenge, he may not travel in an official capacity nor make his name known. No minion of United Airlines may perform any part of this journey. As an inducement, IRTA will gladly publish his account of his travels in our newsletter.
Keynote Topic: OSRA
Getting back to the convention, our keynote speaker was Patrick Hanemann, CEO of Washington state's Majestic Valley Produce and a prime mover in gaining passage of the 1998 Ocean Shipping Reform Act (OSRA). Mr. Hanemann pointed out that, though OSRA is an improvement over prior legislation and places shippers on a more equal footing with carriers, especially conference carriers, there is still uncertainty for both carriers and shippers. He emphasized that not only is cost a necessary element in the negotiations between shippers and carriers, but service is becoming more prominent. Mr. Hanemann noted that is particularly important when perishable goods are involved.
Mr. Hanemann deserves a large measure of thanks for helping to get our convention off to such a productive start as do all the panel moderators and speakers who worked so hard.
Also, our Board would like to thank the convention's many sponsors and supporters, including Captain Hans Trey of Hapag-Lloyd (America) Inc., who provided us with a 40-foot reefer unit for inspection. (On behalf of IRTA, I must add a disclaimer that the organization does not take any responsibility for the scratch to the unit which appears to have been caused when it was positioned across from the hotel!)
A Site for the Year 2000
Our board, the Journal of Commerce and Milestone Presentations are working on the venue for the year 2000 convention. Our primary choice is Baltimore, Maryland. We are investigating that site and reasonable hotel rates. Look for more information in future issues of The IRTA Report and on our association's web site: www.irta.org.
by Patrick Hanemann, CEO, Majestic Valley Produce, Wenatchee, Washington
When I was first approached to deliver this keynote address, I was taken aback. Quite frankly, I had trouble imagining why the invitation had been extended to a guy from Wenatchee with a relatively modest apple and pear marketing cooperative.
Perhaps, I thought, it was the idea of the steamship community, wanting to reward one of its best and highest-revenue customer industries. But as I reviewed the export statistics, I noticed that apple exports for the 1997-98 season were down almost 35%, with ocean shipments down by over 10,000 FEU for the year. Hardly deserving of special recognition, I thought; must be some other reason.
Then I thought that perhaps it was out of a desire on the part of the carriers and service providers to show solidarity with a loyal supporter who had fallen on hard times. While this made some sense from the point of view of the northwest treefruit industry, I was forced to look back on my own personal history with the liner carrier industry.
Personal History in Shipping
If carrier interests were going to extend an invitation to me, I realized, it was more likely to involve patrolling a border between Kosovo and Serbia, than standing at a microphone before them in beautiful downtown Seattle.
Litany of Woes
But while I was preparing for my comments, I began to notice a pattern emerging in the challenges facing the carrier community: deregulation; over-capacity in westbound Pacific lanes; natural disasters to California citrus and Central American bananas, further aggravating capacity imbalances; economic crises throughout Asia, Russia and Latin America; Congressional hearings on abuse of anti-trust immunity; Federal Maritime Commission investigations on abuse of eastbound contract shippers during the 1998 holiday shipping season; historically low rates in multiple trade lanes; and virtual disappearance of the conference structure.
As I pondered this litany of woes, a childhood refrain welled up from my subconscious: "I cried because I had no shoes, till I met a man who had no feet." And suddenly the light came on---mine is the industry that has no feet! And failing to uncover someone who could make them feel better, the refrigerated transportation industry had settled on someone who could provide their misery with lots of company.
With this mission in mind, I'd like to start with a review of current depressed conditions in the apple industry 100 miles east of us, then pass on to prospects for recovery to my industry, before concluding my remarks with some observations on the first six weeks of our new lives together under the Ocean Shipping Reform Act of 1998.
Big Ups and Downs
Over the past ten years there has been steady growth in Washington state's apple crop. From 1988 through 1996 that growth averaged 5% per year, increasing from 64 million fresh cartons in 1988 to 95 million in 1996. During the same period, North American consumption of our apples increased by less than 2% per year, accommodating only 25% of the overall production increase. Salvation came in the form of dramatic increases in worldwide export markets, which averaged growth of 28% per year, growing from 10 million cartons in 1988 to almost 34 million in 1997.
During the course of the 1997-98 crop year, however, the wheels came off the export train. The anti-dumping action brought against us by apple growers in the state of Chihuahua led to a three million carton decline in shipments to Mexico. Brazil's apple-producing neighbors in Argentina and Chile fought to reverse earlier losses to our product, leading to a drop of nearly one million cartons.
But these losses paled in comparison to the collapse of the Southeast Asian markets as a result of the Asian economic flu, where we wound up with a year-on-year decline in excess of seven million boxes.
In place of the customary 28% annual growth in export volumes, our export sales declined by nearly 35%---a staggering 13,700 FEU year-on-year decline. Our only consolation came in the form of a 15% smaller crop, which mitigated the impact of these declines and allowed our industry to maintain the previous year's FOB average of $14 per carton on all varieties combined.
Record Low Prices
This season, however, we were far less successful in dodging the bullet. We started by setting the biggest apple crop in Pacific Northwest history, greater than the ten-year average. While there has been some improvement in overall exports, the gains have been achieved principally outside of the "premium" markets in the Pacific Rim. Moreover, record low prices for apple concentrate, due to a worldwide oversupply fueled principally by mainland Chinese production, cut off a potentially important safety valve, forcing yet more production into fresh channels.
While the North American market has reluctantly risen to the challenge of consuming record volumes of fresh apples, the resulting damage to FOB prices has been dramatic. Through the first of June, average prices for all fresh apples had suffered a year-on-year decline of 23% with our flagship Red and Golden Delicious varieties down by 27% and 29% respectively.
What does this mean to the typical eastern Washington grower of Red Delicious apples? If you assume a farmgate production cost, on a debt-free orchard, of $75 a bin with additional costs of $6.50 per carton for packing and marketing, the average cost to produce a carton of Red Delicious apples runs to just over $11. If you finish out the season at today's average revenue of $9.22 per carton, the state's Red Delicious growers will register cash losses in excess of $100,000,000.
The near-term outlook is grim. A disproportionate share of the pressure created by these losses will fall on the smaller, older, less productive Red Delicious orchards. Under-capitalized growers with above-average costs and below-average returns will be driven out of the industry. Anecdotal evidence would seem to indicate that this is already taking place, with acreage on the market at historically high levels and actual sale prices at 30 to 50 % of the levels I found when I first arrived in Wenatchee only six years ago.
The economic dislocation over the next twelve months will be substantial. But the agricultural industry is every bit as incurably optimistic as the maritime industry. Even in its darkest moment, we cannot ignore some small sources of light.
Small Sources of Light
Still the variable of greatest importance to my industry, and to the refrigerated transportation industry as well, concerns the activity levels in export markets for the coming season.
If Things Get Worse in Asia
Remember that much of the collapse in fresh apple prices is tied to the earlier collapse in demand for our products overseas. Since 60% of the volume decline in apple exports from 1997 to 1998 was due to reversals in our Asian markets, let's look at prospects for recovery there.
Many of you will remember that the crisis among the newly industrialized economies of Asia coincides with the devaluation of the Thai Bhat in July 1997. This sparked economic turmoil that spread over ensuing months to Southeast and East Asia, Russia, South Africa, Israel and parts of Latin America.
Many of the commercial woes which U.S. agriculture and ocean transportation have suffered since then can be traced to this sequence of events. How far has the recovery in Southeast Asia come over the past 24 months? Based on most economic commentaries, the answer is mixed, but generally positive.
In Taiwan, Hong Kong, the Philippines, Malaysia and Singapore, GDP growth fell back sharply in 1998, with slow to gradual recovery this year. In all five countries, the pace of recovery toward pre-crisis growth levels is forecast to pick up speed.
In Thailand and Indonesia, the joint epicenters of the crisis in Asia, meltdowns in both economies in 1998 have been replaced by marginally positive growth in 1999, once again with a gradual return to stronger positive growth expected for next year. These seven economies normally account for 95% of our apple exports to Asia. Thus their recovery is essential to restoration of normal export volumes for our industry.
If we've learned anything from previous crises in worldwide export channels, recovery is measured in years rather than in months. While demand and movement trans-Pacific should continue to grow, it could well take two more years before pre-crisis export levels are achieved, barring any adverse developments in the mean-time. Let me mention three specific adverse possibilities which are particularly menacing.
Adverse Possibilities
First, what if Japan fails to restore political and economic stability? While Japan is of no importance as an apple market for us, it is the largest economy in Asia. Any downturn or even a prolongation of the current turmoil within its economy will, at least, delay the recovery in Southeast Asia.
Second, what if China devalues the yuan? While Japan may have the largest economy in Asia, the Chinese yuan is arguably the most influential foreign currency for the Southeast Asian nations that comprise our most important overseas customer base. China has repeatedly declared its intention to defend the yuan at current levels. But independent speculation about the likelihood of devaluation is as prevalent as ever.
Third, what if China and Taiwan accede to the WTO? While we are all generic advocates of expanded free trade, and the accession of China and Taiwan will be positive in many important ways, there will be one devastating effect on my industry. Of the four million cartons each year that we ship to Taiwan, over 80% are Fuji apples. More significantly, Taiwan alone constitutes almost 90% of our worldwide Fuji exports. Throughout the rest of Southeast Asia, our high quality, high value Fuji apples have been replaced by the lesser quality, but far less expensive, Fuji apples from China. Once Taiwan and China reestablish anything approaching normal commercial relations, our Fuji apple exports could dwindle to nothing.
You may remember my comment earlier about varietal apple returns representing one of the few bright spots in a very troubled industry. If the Northwest treefruit industry loses the Taiwanese market for our Fujis, that bright spot would be darkened considerably. …
Summing up then, our present is miserable, but our future will be much better. The trick will be to survive until we get there.
What Do Shippers Want?
Since May 1, we have all been operating under the new rules embodied in the Ocean Shipping Reform Act of 1998 (OSRA). I would like to conclude by reviewing how the recent experiences of shippers have forced us to modify our thinking with regard to the affects of OSRA.
What Shippers Want
I would like to begin this review with a reading from a presentation I made to freight forwarders at a convention in 1991. My talk, which was titled "What is it we shippers want? What do we agree on?", included the following comments:
"1) We agree that changes to the Shipping Act of 1984 are essential, not only to enhance the competitiveness of U.S. exporters and importers in foreign markets, but also to improve the financial health of U.S. ocean carriers, our natural partners in servicing world trade.
2) We agree on the need to regain freedom to contract with individual ocean carriers. Basically, we need to be able to deal with the people who are going to carry our cargo.
3) We agree that the terms of our contracts should be confidential, not publicly disclosed as current law requires.
4) We agree that we should be able to change contract terms whenever the two parties involved agree such changes are called for.
5) We also agree that limits should be placed on super conferences and talking agreements. These arrangements have undermined the important leavening role that non-conference carriers have historically played. This alarming pattern of ocean wide super-cartels must be stopped."
When I made these remarks, carrier sentiment on the same panel was fairly blunt. The carriers said that changes to the 1984 Act were not needed; that shipper objectives would never be met in new legislation; and that if such changes were ever enacted, they would deal a mortal blow to the liner carrier industry.
Fast forwarding to May 1, 1999, we see that the new Act has incorporated most of the desires which we shippers have been articulating since the 1984 Act first took effect. But despite this apparent victory, on May 1, shippers were showing brows more furrowed than ever, nervous over the interpretation which the act would be given by the Federal Maritime Commission in its final rules.
An Informal Survey
To examine whether these shipper concerns regarding constraints on contracting freedom were indeed justified, I conducted my own informal, unofficial, unscientific poll of shippers, shipper associations, forwarders and carriers in early June. Please note that my inquiry was limited to contracts covering Pacific westbound shipments of fresh fruits and vegetables only. Each group was asked to respond to the following questions.
First, how valid was speculation that we would wake up on May 1, 1999 to a 100% contract-based shipping environment? Overstated as of mid-June, estimates of cargo moving under service contracts varied from 60 to 70%. While this was a much higher percentage than had operated under the TWRA, it was well below the level of coverage for Pacific eastbound cargo.
Second, were small shippers at as much of a disadvantage versus large shippers as had originally been expected? To the contrary, I heard of more problems where big shippers were outraged that small shippers had achieved the same rates and conditions for 100-FEU contracts as had been negotiated by large shippers in 1,000-FEU deals.
Third, how difficult had it been for carriers and shippers to "bury the hatchet" after 15 years of antagonism? Not difficult at all. Carriers got high marks from shippers and associations for their positive and active involvement in the contracting process. While certain carriers were better prepared than others to deal with the new rules of engagement, even the least prepared were making a credible effort.
Fourth, in the initial round of contract negotiations, how much attention was being paid to non-rate service issues? Very little. The rate-centered issues were thought to be taking up the majority of attention during this initial round of contract negotiations, with estimates ranging from a low of 50% to a high of 99.9% of time and effort being expended on rate-related issues.
Fifth, several issues had been identified as potential sticking points in contract negotiations, including liquidated damages, mid-term revisions, and confidentiality. Had these issues been difficult to deal with? While no blatant violation of confidentiality was cited, there was a general lack of confidence in the ability to keep terms confidential. In some cases, shipper "A" was able to infer the rates negotiated by shipper "B" by comparing the differentials between its own C&F quotations against those which its importer/customer had received from shipper "B." In other cases, the importer/customer himself suddenly elected to convert from C&F terms to FOB terms. Given the transparency of product and ancillary charges in our industry, it has not been difficult for shipper "A" to derive the freight advantage that shipper "B" or the importer/ customer had obtained. This, of course, led to a demand by shipper "A" to his carrier for a revision in contract rates in order to restore shipper "A" to a competitive footing. Shippers and carriers alike complained that rate revisions were requiring far more time and attention than the initial contract negotiations, with most contracts experiencing multiple revisions during their initial weeks in operation. As for liquidated damages, given the opportunity to revise terms at any time prior to the contract expiration date, it was generally agreed that damages provisions would be neutralized by revision before they ever became due.
Not "Happily-Ever-After"
On the one hand, there was virtually unanimous agreement on how contract-friendly the immediate post enactment period has been as viewed from nearly every angle. No less striking, however, was the near-universal recognition that this first round of contract negotiations should not lead us to formulate a "happily-ever-after" expectation.
Today, we find ourselves in an unusually shipper-friendly market, at least as far as westbound reefer traffic is concerned. Rates remain depressed, and utilization remains well below capacity. But this situation will not last forever. The true test of our new rules of engagement will not come until rates and utilization begin to improve in response to improved demand overseas for our products. Clearly, this shift toward a more carrier-friendly environment will lead to several changes.
These changes will include: higher percentages of cargo moving under contract; more emphasis on service and, especially, on space allocation, in contract negotiations; and less automatic agreement to requests for revision of contract terms.
These developments should be viewed as normal given the cyclical nature of our businesses. Indeed, we should hope that these developments occur sooner, rather than later, since they will signal recovery for the businesses of shipper and carrier alike.
But if we know that this shift in equilibrium between carrier and shipper is inevitable, we are much less certain regarding the change this new equilibrium will produce in the role played by "talking agreements" in the shipper-carrier relationship. Specifically, shippers and shipper associations will be looking to see whether individual carriers in the same trade lanes announce general rate increases, peak-season upcharges or increases in other ancillary charges, in what appears to be a concerted fashion.
Scrutinizing Contracts
Similarly, contracts will be scrutinized to ascertain whether the voluntary, non-binding guidelines disseminated by talking agreements metamorphose into widely used and non-negotiable boilerplate across a broad range of carrier-drafted contracts within a given trade lane.
If developments such as these accompany the inevitable shift in the shipper-carrier balance, then the progress being made today in restoring a partnership relationship between shipper and carrier will be reversed. If on the other hand, carriers resist the temptation to convert their talking agreements into super-conferences---and, instead, stake their future on their relationships with preferred customers---then the focus and energy we can bring to the expansion and development of our worldwide markets could lead to a new era of prosperity for both sides.
It will be interesting to see which path we choose.
by Monica A. Fekete, Esq., Brown, Sims, Wise &White, P.C.
Professionals should consider ways to effectively and efficiently resolve disputes which inevitably arise in any business. During the negotiation of a contract, the parties may choose whether or not to include a clause requiring that any resulting disputes be submitted to arbitration rather than to the courts.
Arbitration offers many of the same benefits as a trial in court including an enforceable award, a procedure for seizing vessels or other assets, and the opportunity to present evidence and legal arguments. An advantage of arbitration is that the parties may choose arbitrators who are more familiar with the specific disputes than a typical judge.
In order to make an informed decision of whether to send cases to the courts or to seek arbitration, the parties ought to be familiar with the arbitral process. To help familiarize IRTA members with the process, the association's Law and Legislation Committee and the Committee for Insurance and Claims presented a mock arbitration at the recent Seattle convention.
Yum Yum v. Fast & Cool
The fictional case concerned a dispute between a shipper exporting oranges from Morocco (Yum Yum Oranges) and a carrier (Fast and Cool Lines, Inc.). The shipper alleged that the oranges were damaged aboard the carrier's ship (M/V Smooth Sailing). The mock arbitration panel had to decide whether the cargo owner or the vessel should bear responsibility for damages to oranges.
The presentation featured the following participants:
The presentation followed the format of a typical arbitration: first the attorneys gave opening statements, then they presented witnesses and documents and, finally, the attorneys delivered their closing arguments.
Arguing Liability
The vessel owner argued that the cargo owner should bear the loss as the oranges had been inadequately packed by the cargo owner. The cargo owner claimed that as all of the damage appeared to have occurred during the time between the issuance of a clean bill of lading and discharge, the vessel owner bore full responsibility for the loss.
After an hour long battle, the arbitral panel voted in favor of the cargo owner, but the audience voted in favor of the vessel!
Throughout the presentation, the panel of arbitrators explained arbitration rules and procedures. Important points included:
1) An arbitrator does not have to be an attorney. Instead, many are commercial men and women. Thus, the parties can choose arbitrators who have the experience and knowledge necessary to under-stand the specific issues in a dispute.
2) An arbitration panel usually consists of three arbitrators, but the parties can agree to present their dispute to either a solo arbitrator or even two arbitrators and an umpire.
3) The arbitral process commences when one party designates an arbitrator. The other party must then appoint an arbitrator. The two arbitrators choose and appoint the third arbitrator.
4) Prior to the initial submission of evidence, all arbitrators are required to disclose any circumstance which could impair their ability to render an unbiased award. Even though two of the arbitrators have been picked by the parties, the arbitrators must agree to render an opinion based solely upon an objective and impartial consideration of the evidence.
5) Arbitration follows the same basic outline as a court trial. However, much of the arbitration process is handled through written submission of evidence and arguments rather than oral presentation during the hearing.
6) As soon as practical after the exchange of reply briefs and the closing of the proceedings, the arbitrators meet. They will deliberate as often or as long as necessary to arrive at a decision. The decision may be either unanimous or based on the majority's consensus.
7) The award is generally rendered within 120 days from the last exchange of briefs at the closing of proceedings.
8) Once the panel of arbitrators has issued the award, the award is final. The panel may correct inadvertent clerical or math errors which are apparent on the face of the award. However, the panel may not hear additional evidence or reconsider its award.
9) It is extremely rare for a court to vacate an award. A party would have to show something as extreme as fraud in order for an award to be vacated. A mistake in law or fact is not a ground for vacating an award. Federal policy strongly favors arbitration; for this reason, the U.S. Congress has severely limited the ability for parties successfully to attack an award made in the United States. Similarly, by reason of international convention, awards are enforceable in virtually all jurisdictions throughout the world.
Further Reading
For further, more detailed reading on the subject of arbitration, we suggest the following sources: the United States Arbitration Act, 9 U.S.C.A. 1-16; the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958; Maritime Arbitration Rules, Society of Maritime Arbitrators, Inc.; "Maritime Arbitration in New York," (3rd Edition, 1997), Society of Maritime Arbitrators, Inc.; and the Inter-American Convention on International Commercial Arbitration.
The Society of Maritime Arbitrators, Inc. is located at 14 Wall Street, Suite 8A-15, New York, New York 1005-2101, telephone (212) 587-0033.
by Alicia Rudnicki, Editor, The IRTA Report
Brrr. It was an appropriately frosty finale to a convention focused on refrigerated transportation. IRTA's Seattle convention concluded on Tuesday, June 15, with a tour of the Port of Seattle's Terminal 91 Chill Facility and the nearby CITYICE Cold Storage company.
Outside the port's dockside warehouse, it was a hot, sunny day as a reefer ship from Chile, the Summer Flower, unloaded 2,200 pallets of apples for storage. The chill facility, which is the only West Coast, USDA-certified cold treatment site, is kept busy year round with north-south trade. Fruit, eggs and flowers are the main products stored there.
At the CITYICE plant, tour-goers' eyeglasses frosted up like winter windowpanes as they stepped into a -14o F deep freeze full of pollack eventually headed for American fast food restaurants and Asia.
"This is where we take all of our customers who want to negotiate rates," said CITYICE Vice President Kim Suelzle before leading us back out into the relative warmth of the loading room.
Suelzle said that this was the coldest of CITYICE's three frozen storage warehouses. The other two are kept at -10oF and -6oF. He noted that the warmer freezers are used for products such as salmon and crab, which tolerate higher temperatures.
John C. Rosling, founder and president of CITYICE, received IRTA's 1999 Executive of the Year award.
Duty Sought on Chinese Apple Juice
Reprinted with permission from The Journal of Commerce
U.S. APPLE JUICE PRODUCERS in June filed a petition asked the Clinton administration to impose a 91% anti-dumping duty on imports of apple juice concentrate from China. The petition filed with the U.S. Commerce Department and the U.S. International Trade Commission (ITC) alleges that China sells apple juice concentrate in the United States at 91% less than its cost of production.
The petition could lead to anti-dumping duties on imports from China as early as October if the Commerce Department agrees that dumping has occurred and the ITC determines that the imports threaten U.S. producers.
The petitioners were Coloma Frozen Food Inc., Coloma, Michigan; Green Valley Packers, Arvin, California; Knouse Food Cooperatives Inc., Peach Glen, Pennsylvania; Mason County Fruit Packers Cooperative Inc., Ludington, Michigan; and Tree Top Inc., Selah, Washington.
Census Cites Reefer Success in Seattle
Reprinted with permission from The Journal of Commerce
THE PORT OF SEATTLE, which handled 813,059 metric tons of refrigerated exports last year, was the nation's top exporter of reefer cargoes in 1998, according to the U.S. Bureau of Census.
Census figures show that Seattle was followed by Oakland, with 794,857 metric tons of reefer exports, and Long Beach, with 565,181 tons.
In terms of both exports and imports of refrigerated cargo, Seattle last year ranked second with 871, 680 metric tons. Los Angeles, with 872,582 tons, was first, and Long Beach, with 845,338 metric tons was third. Major commodities handled at Seattle's refrigerated facilities include fruit, vegetables, fish, meat, poultry and french fries.
U.S. Targets EU Beef, Pork for Tariff Retaliation
Reprinted with permission from The Journal of Commerce
U.S. TARIFFS ON PORK, BEEF and other European Union foods went into effect July 29 in retaliation for the refusal by Brussels to allow imports of U.S. beef from cattle treated with growth hormones.
The U.S. Trade Representative's office has imposed 100 percent duties against cattle and pork from EU nations as part of a total $116.8 million in annual retaliatory tariffs. Other foods targeted include truffles, Roquefort cheese, goose liver, roasted chicory and prepared mustard.
The United States has unsuccessfully battled the European Union for a decade to win market access for American beef from cows treated with growth hormones. EU officials have blocked the imports because of concern over potential health risks but U.S. scientists and the WTO say that the beef is safe.
Earlier this year, Washington slapped $191.4 million in retaliatory tariffs on EU goods ranging from handbags to bed linens after EU rules on banana imports were found in violation of WTO rules.
Air Carrier Slapped with Hazmat Fine
Reprinted with permission from Traffic World
IF THE LABEL SAYS "THIS END UP," it means that end better be pointing up. American Airlines is looking at an $82,000 fine from the Federal Aviation Administration in part because a box containing hazardous materials was stored on its side and not vertically as the label stated.
The fine stems from a March 1997 shipment of fish livers contaminated with the infectious substance Breve Toxin. Breve Toxin causes what is known as "red tide" or the massive kill-off of fish and other sea life when released into waterways. The shipment, which originated in New Zealand, was destined for a researcher at the University of Miami.
The shipment consisted of seven boxes containing 13 small metal containers holding the infectious substance. Once the shipment arrived in Miami after making stops in Los Angeles and Dallas, a ramp worker discovered the substance had spilled. American called a hazmat clean-up crew to repackage the boxes in biohazard bags but failed to notify the FAA and the Centers for Disease Control within the time specified by the rule.
During a routine inspection at American Airlines' Miami cargo facility a week later, the FAA found that the "this end up" label had been ignored, therefore violating hazardous materials regulations. Three other violations were subsequently uncovered.
Perishables Need More Air Cargo Support
AIR CARRIERS HAVE INCREASED ROUTES and capacity for air cargo generally but most don't give enough support for perishable commodities, a shipping company executive said in an interview with Reuters reporter Patrick Burnson while attending IRTA's fifth annual convention last June.
Burnson, who attended the meeting as a panel moderator as well as a reporter, quoted Don Ehrlich, president of Seattle's Perishables International as saying that "aircraft are becoming too 'passenger friendly' for our liking."
Ehrlich said that airlines are now increasing their calls to destinations that may be great for tourism and business travel, but are of little overall use to cargo shippers He added that the problem has been compounded by the lack of qualified forwarders for perishables. He noted that some major players are getting out of the air cargo perishables business.
"The margins are too slim," Ehrlich told Burnson, "and the risk is too high. [Forwarders] would rather concentrate on the ocean side of their operations," he added.
Many smaller forwarders rushed to woo perishables shippers when the Asian financial/currency crisis was at its worst.
Ehrlich said his company was approached, but forwarders wanted to sub-contract with his firm.
"They thought this would be a good hedge when there was less demand for other kinds of exports," Ehrlich said. "But the attraction wore thin once they realized that this is a 24-hour a day business that never closes."
Port of Wilmington Improvements
TWO MAJOR CHANGES AFFECTING FRUIT importation at the Port of Wilmington were announced in the port's winter 1999 issue of Port Illustrated---the opening of a permanent fumigation facility and the completion of a state-of-the-art cold storage warehouse.
Last November Royal Pest Management (RPM) of New Castle, Delaware, opened a new permanent operation center at the port to oversee and direct fumigation of imported fruit and produce. Royal has been the principal fumigation contractor for fruit importers at the port since the mid-1980s.
In February 1999, the port completed construction of a $17 million cold storage "Warehouse E" that includes two sealed rooms for controlled atmosphere (C-A) storage of fruit. The latest technology in fruit storage, controlled atmosphere halts the ripening process for several months through the use of a filtration system that replaces oxygen and ethylene with nitrogen.
Last winter, the warehouse stored shipments of Chilean grapes and other produce carried to Wilmington by the Pacific Seaways group, one of Chile's largest shipping groups.
RPM handles fumigation of all imported produce at the port as directed by the U.S. Department of Agriculture. USDA regulations specify fumigation of certain cargoes upon arrival as a means of eradicating harmful insects and pests that could affect U.S. agriculture. Certain regions of Chile are still considered by the USDA to be a potential risk for the Medfly pest, so they require that all imports of Chilean grapes undergo fumigation either in Chile or upon arrival at U.S. ports.
The Port of Wilmington is currently one of the nation's largest ports for Chilean grape and fruit imports. Warehouse E has increased the port's overall cold storage capacity to more than 700,000 square feet (14 million cubic feet), making Wilmington one of the world's largest shipside cold storage terminals.
Reprinted with permission from The Journal of Commerce
Backers of a bill that could allow 97,000 pound trucks on U.S. highways are doing their best not to pick a fight with railroads, which are sworn enemies of such a plan.
Peter Vroom, director of Americans for Safe and Efficient Transportation (ASET), tried to steer away from a confrontation last June at a Transportation Table luncheon sponsored by The Journal of Commerce as he sought support for legislation allowing states to raise allowable weights by 21% from the current nationwide 80,000 pound standard.
When HR1667 was introduced in May by Reps. Merrill Cook (R-Utah) and Collin Peterson (D-Minn.), railroads and their allies attacked the bill, claiming it would create safety problems, harm rail profits and exacerbate problems with trucks not paying their fair share of highway costs.
"Truck and rail may be natural competitors, but they should not be adversarial when their customers' needs are at stake," Vroom said. "It's time to stop fighting."
Behind Closed Doors
The meeting did not generate the heated debate that has occurred in the past when railroad and trucking interests have taken up truck size and weight issues. In the current environment, trucking and rail trade association leaders are meeting behind closed doors to discuss service and productivity issues.
Rather than squabble with the rails, Vroom urged everyone to "keep an open mind. This bill is really about us removing an illegitimate obstacle to progress and greater productivity for truckers," he said. "We want to do this (get the bill passed) with safety as our first, second and third priority."
"We aren't dumb enough to think that anything will get through Congress without safety as a priority," he said. "Safety must come before everything else or we will lose the ball game before the first pitch."
Vroom's group has more than 40 members, including shippers, motor carriers and trade associations. They argue that the bill would produce $15 billion in annual productivity benefits with only 4% diversion of rail traffic.
Walk in the Park?
Approximately 60% of the bill's funding comes from shippers, who hope to capitalize on productivity gains if greater quantities of heavy products such as grain, steel or forest products can be placed in a single trailer.
"No one is under the illusion that this is going to be a walk in the park to get this legislation passed," Vroom said. He predicted that the bill will move forward far enough to have hearings, perhaps later this year.
ASET argues that the bill will enhance safety by reducing the number of trucks on the road as existing freight volume is carried in fewer vehicles. Addition of a sixth axle to existing five-axle trailers should reduce the wear and tear on pavement, he said.
If passed, the House bill would give each state the option to raise their weight limit.
Vroom maintained the bill could replace a piecemeal approach in individual states that allow higher weight limits for specific goods or on an individual permit basis.
Reprinted with permission from The Journal of Commerce
It did not take long for changes to begin at the Port of New York and New Jersey once Sea-Land Service Inc. and Maersk Line decided late last spring to build their North Atlantic container hub there.
Sea-Land planned to expand its truck gate operation at its existing terminal at Port Elizabeth, N.J., by at least 20% by reintroducing flexible gate hours at its terminal beginning in June. The changes meant that gates were open for a full 12 hours, from 6 a.m. to 6 p.m., instead of the former ten hours daily.
Under the offer that the global partners accepted last May, the Sea-Land terminal will be expanded to roughly 350 acres, allowing it to handle up to 500,000 containers a year by 2003 under a lease that would run through 2027.
While all other container terminals at the port have some form of extended truck gate hours, Sea-Land had previously begun and then ended a flex-time program. It had told truckers that further gate expansion hinged on the Sea-Land/Maersk decision whether to remain at the port.
Congestion Costs Truckers
The Bi-State Carrier Conference of port truckers, which handles some 75% of the port's truck traffic, had been pressuring Sea-Land for more than a year to expand its gate hours. Congestion had cut into trucker productivity, Bi-State Executive Director Dick Jones said earlier this summer.
The ability for truckers to pick up and discharge containers is particularly important at New York-New Jersey because some 85% of the port's cargo moves within a 285-mile radius and virtually all of that is handled by truck. Î
Because of the congestion at the Sea-Land/Maersk terminal, members of the Bi-State trucking group collectively were losing $250,000 a week based on trucker's standard costs of $50 an hour, Jones said.
Expansion Projects
"Sea-Land told us that they had several expansion projects in the works involving things like more berth space and more container handling equipment that should ease the back-up at the gates," Jones said.
Jones said that "the congestion and the lack of terminal space" was taking at least 30% of our productivity away from us. Local truckers often have to wait up to two and a half hours before they get to the terminal.
Truckers say Sea-Land told them in monthly focus groups that it was ready to pump an estimated $20 million into terminal and equipment expansion over the next two years to ease the congestion.
The terminal could expand to handle as many as 700,000 TEUs if current projections of cargo growth justify additional expansion over the next four years.
The gate issue is compounded by limited space and Sea-Land's extensive use of grounded containers that are stacked on top of one another, Jones said. That system is slower than wheeled terminal operations, where empty containers are pre-mounted to chassis.
Are you interested in writing for The IRTA Report or in sending us a press release? You can contact us by e-mail (irtamail@aol.com), by regular mail (The IRTA Report, 4255 South Buckley Rd., Suite 118, Aurora CO 80013), by FAX (303-690-3278) or by calling us at 303-690-3233. We look forward to hearing from you.
IRTA would like to thank the following companies for their support of our 1999 convention in Seattle
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Please note the following updates to your IRTA membership directory as of August 1999.
Deletions:
Accidental Omission:
- Lyons, Skoufalos, Proios & Flood
- 1350 Broadway, Suite 1507
- New York, NY 10018
- (212) 279-8880 (office)
- (212) 279-0670 (FAX)
Changes and Corrections:
- new address: 442 West Kennedy Blvd., Suite 290, Tampa, FL 33606
- new phone: (813) 253-3122 (office)
- new company: Nowell Amoroso Klein Bierman, P.A.
- 155 Polifly Road, Hackensack, NJ 07601
- new phone: (201) 343-5001 (office)
- (201) 343-5181 (FAX)
- e-mail: nakb@Errols.com
- new address: Marconistr 33, Rotterdam 3029 AG
- new address: 210 West Washington Square, 13th Floor
- Philadelphia, PA 19106
- new phone: (215) 928-9100 (office)
- (215) 928-1488 (FAX)
- e-mail: k mfekete@brownsims.com
- new address: Maynard Drive, Park Ridge, NJ 07656
- new phone: (201) 391-0800 (office)
- (201) 391-0356 (FAX)
- new address: P.O. Box 7745, New Bedford, MA 02742-7745
- new address: P.O. Box 6727, San Diego, CA 92166-0727
- new address: West Lancaster Avenue, Devon, PA 19333
- new phone: (610) 225-2746 (office)
- (610) 225-2793 (FAX)
- e-mail: k dennis.puccio@gecapital.com
- e-mail: sasala.s@portseattle.org
- new phone: (925) 254-0544 (office)
- (925) 254-5177 (FAX)
- David Wright replaces Palle Mathiesen
- Kelly Lunn replaces Jennifer Steeves
- John O'Callaghan replaces Mark Bennett