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 | EU to work on volcanic eruption response plan |
April 27, 2010 - (BRUSSELS) The European Union Transport Commission will begin work on how to respond to a similar icelandic volcanic eruption which recently forced the closure of European skies. EU Transport commissioner Siim Kallas said that he will begin working this week with colleagues to lay out a road map to deal with a similar disaster.
The list of questions he faces is long and complex: How to measure the density and trajectory of an ash cloud; how to determine the safety threshold for each kind of engine; how to weigh the potential economic fallout against the potential danger; how to balance passengers' rights against the industry's health; how to coordinate the response to a crisis?
Some answers almost certainly will compromise the jealously guarded sovereignty with which each nation has protected its air space, even as it relinquished an ever increasing share of control on the ground to the bureaucracy in Brussels.
Mr Kallas said that he will present preliminary thoughts to the EU's executive today. Among them, he will propose speeding up the plan to unify control over all European skyways.
'The absence of a single European regulator for air traffic control made it very difficult to respond to this crisis,' he told reporters last Friday. 'We needed a fast, coordinated European response to a crisis.
Instead, we had a fragmented patchwork of 27 national air spaces.
We need a single European regulator for a single European sky.'
A seamless EU air navigation system would straighten out Europe's zigzag air routes to reduce fuel and congestion in the sky that now keeps planes circling in a landing queue. It also would beef up the role of the European Air Safety Agency that now deals largely with planes' airworthiness, and would enable a single command centre to divert traffic and to provide detailed data to national air traffic centres.
The EU had planned to start putting the Single European Sky reforms into effect in 2012, but Mr Kallas said that the latest crisis showed 'we cannot afford to wait that long'.
It's unclear if the reform would have led to a different response than the nervous reaction by the national civil aviation bodies that went along with the blanket closure, at least with the knowledge currently available.
Travel services and import-exporters will study the lessons of improvisation. In the week when most European passenger and cargo terminals were closed, businesses such as DHL, the delivery service, engaged in creative routing to move essentials through the few open airports, mostly in Spain, and from there by truck. It's likely that more companies will look into emergency alternatives, including rail and refrigerated shipping for perishables.
There is an urgency in the work to be done. Eyjafjallajokull volcano in Iceland has a history of lengthy eruptions, alternately sputtering with lava and exploding with ash for months at a time. And geologists are expecting an even more powerful Icelandic volcano, Katla, to become active.
AP
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| Iceland's volcano - the impact continues to reverberate |
April 26, 2010 - The eruption on 14 April 2010 of Iceland's Eyjafjallajokull volcano (the second eruption in a month) has caused havoc throughout Europe and beyond. The impact of this first eruption in 190 years looks set to continue for the short to medium term, even though airspace restrictions have now been lifted.
Criticism has already been made of the regulators' decision to shut down airspace, which is costing airlines some $200 million per day from cancelled flights and causing the European economy to suffer massive losses in lost business. Interested parties may well be considering action against the regulators but, whilst these actions are possible, they will certainly not be without difficulty, particularly in this case where the issue of safety is given absolute priority.
In this briefing we take a look at some of the key insurance issues arising for businesses, in particular airlines and those handling cargo, as a result of this "act of God".
Damage caused by delay
Many cargo policies will not cover damage caused by delay, even if the delay has been caused by a risk insured against. Cargo owners may therefore find themselves uninsured. Will they then seek to bring claims against their forwarders and carriers and if so, how are those parties likely to respond?
Excluding and/or limiting liability
Freight forwarders acting in the capacity of a forwarding agent (or a carrier where they issue their own House Air Waybill) will seek to rely upon their terms of business to exclude and or limit liability (or the international conventions when acting as a carrier). Most terms of business will exclude liability for failing to adhere to agreed departure or arrival dates; contain a force majeure clause and will in any event limit liability (insofar as liability attaches).
Force majeure clauses
Force majeure clauses typically will only apply where the force majeure event is the sole cause of the loss. Potential claimants will therefore be looking closely at whether there has been an intervening event caused by the forwarder or carrier, which was in fact the actual cause of their loss. This might arise where the forwarder or carrier failed to store perishable cargo in the appropriate environment or where it can be argued that there were other means by which the cargo could have been carried. Each case will of course turn on its own facts.
International conventions - carriage by air
Cargo owners or their forwarding agents will similarly find claims presented to the airlines are rejected. In the context of international air carriage the relevant international conventions will provide airlines (and freight forwarders acting in the capacity of a carrier) with a defence where they can show that they and their agents had taken all necessary measures to avoid the damage (caused by the delay) or that it was impossible for it or them to take such measures. Even if liability does attach, liability will be limited to 19 SDR's per kilo (approx £18.75 per kilo).
What this means for insurance
Businesses impacted by the shutdown of airspace should:
Examine their insurance policies to determine whether they cover business interruption (including ICW/EE). Physical damage to property will only have occurred in relation to perishable goods. Otherwise, businesses will only be covered if the policy includes business interruption triggers that specifically respond to non-physical damage scenarios. This could mean that impact of supply chain disruption, as a result of airspace restrictions, is covered if the business interruption policy is appropriately worded and contains trigger language which deems the airspace restrictions to be treated as if it was first party property damage.
Examine their insurance policies to ascertain whether they respond to the increased costs of working/extra expenses incurred as a result of the shutdown, in addition to the loss of revenue (business interruption).
Air carriers may have similar triggers in their business interruption policies as they may have recognised from their risk assessment/ potential claims profiling work the implications of regulatory orders which restrict or curtail their operations, such as the seven day closure of US airspace that followed 9/11 in 2001. A regulatory preclusion on operations is a standard feature of many bespoke business interruption policies and may be broadly enough worded to afford coverage.
Air carriers may also consider whether their liability policies respond to the statutory liability that may exist for the provision of alternate travel.
Conclusion
With Europe's airspace gradually re-opening the impact of a six-day shutdown in the UK will reverberate for some time to come. The aviation industry is set to convene a working group to consider the safety issues surrounding this type of event. In the meantime, there will be much dialogue between insurers, brokers and insureds over claims that can be made. Transportation Intelligence
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| Antwerp Q1 box volumes near '08 level | |
April 22, 2010 - The Port of Antwerp said Thursday that first quarter container volume nearly matched that of the first quarter of 2008.
The port handled 2.01 million TEUs from January through March, a 15.9 percent increase on the same period in 2009, and just 3 percent lower than the 2.08 million TEUs the port handled in the first quarter of 2008 -- the highest volume the port recorded in the past decade during that period.
Liquid and dry bulk volume rose 7.8 percent to 14.3 million tons, roll-on/roll-off volume grew 1.8 percent to 807,157 tons, and car volume increased 22.7 percent to 197,472 units.
Only conventional/breakbulk volume was down on 2009, the port said.
American Shipper
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| Taiwan to seek more FTAs after pact with China | |
China deal to attract FDI, create jobs and allow Taiwan to stay competitive: Ma
April 28, 2010 - (TAIPEI) Taiwan will move quickly to start talks on free-trade agreements (FTAs) with other countries after a pact is signed with China, President Ma Ying-jeou said yesterday.
The island will set up a task force to seek free-trade deals to avoid losing out in Asia.
The government aims to court new partners after signing a so-called Economic Cooperation Framework Agreement (ECFA) with China, scheduled for June, Mr Ma said at a briefing in Taipei yesterday. Past attempts to forge deals with Singapore and Japan were unsuccessful because of China, he said.
He noted that Taiwan had approached many countries but had been told to 'wait until ECFA is done'. He said he would ask China not to block any free-trade agreements.
Taiwan's international relations are complicated by China's insistence that the island is part of its territory and that any attempt to treat it as a sovereign state is unacceptable.
'We can handle diplomatic isolation but economic isolation is fatal,' Mr Ma told a group of foreign journalists. 'We have to do something now to make sure we aren't cut off from the mainstream economic integration in this part of the world.'
Mr Ma has been pushing for the agreement with China to prevent export- dependent Taiwan from being 'marginalised' after a Chinese accord with Asean took effect this year.
North Korea and Taiwan are the two governments in the region that have not signed trade agreements with China and Asean. The number of such accords inked in Asia rose from three in 2000 to 58 in 2009, Mr Ma said.
The 59-year-old leader reiterated his mainland policy is one of 'no unification, no independence and no use of force under the framework of the Republic of China constitution'.
The signing of a trade pact with China 'is not a first step to ultimate unification as it has nothing to do with unification and more to do with maintaining status quo and increasing Taiwan's national competitiveness', Mr Ma said.
The proposed deal with China will attract foreign direct investment, create jobs and allow the island to stay competitive, according to Mr Ma. The ECFA will also help lower tariffs for Taiwan exporters to China, he said.
Taiwan exports about US$100 billion of goods to China a year and pays an average tariff of 9 per cent, while Chinese shipments to Taiwan are worth about US$30 billion a year, taxed at an average 4 per cent, according to the government.
Exports account for more than two-thirds of Taiwan's NT$12.8 trillion (S$556 billion) economy. China is its biggest investment destination and together with Hong Kong combines for about 40 per cent of the overall export market. Taiwanese businesses have invested an estimated US$150 billion in China since 1991.
Taiwan's Opposition is against the ECFA, arguing it will allow more Chinese imports into Taiwan and cost jobs. The Democratic Progressive Party on Dec 20 rallied about 100,000 people for a street march to protest against Mr Ma's pro-China policies and the trade agreement.
Mr Ma's administration said a government study showed the accord would boost the island's economic growth by between 1.65 per cent and 1.72 per cent annually, spur exports and create more than 260,000 jobs.
Reuters, Bloomberg
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| IHS Global Insight Forecasts 8.5 Percent Trade Growth | |
Shipping to recover in most lanes, with Asia-to-North America leading
April 27, 2010 - Economic recovery will generate 8.5 percent growth in global shipping volume this year, with Asia-to-North America volume rising 10 percent, according to a forecast by IHS Global Insight's World Trade Service.
The report forecast a 7.8 percent increase in global shipping volume in 2011.
Trans-Pacific shipments from Asia to North America fell 18 percent last year but began to pick up in the third quarter, and "solid growth" is forecast for westbound trans-Pacific volume, IHS Global Insight said in its report, First Quarter Trends in World Economy and Trade.
Trade volume on Asia-Europe routes is forecast to rise 8 percent in 2010, while Europe-to-Asia shipments continue to build on last year's increase, IHS Global Insight said.
Eastbound trans-Atlantic trade from North America to Europe is forecast to return to 2007 levels by 2013. However, westbound trans-Atlantic traffic will not rebound so soon.
Carriers are beginning to respond to the increase in global demand by restoring some of the capacity they trimmed last year when they racked up losses estimated at more than $15 billion.
In February and March, capacity of laid-up container ships dropped to 1.2 million TEUs or 9.1 percent of the container fleet on March 1, the lowest level since July 2009. Additional capacity is expected to be taken back into service in the near future as new services are opened and vessels reduce their speed, IHS Global Insight said.
Journal of Commerce Online
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| RILA: Tariffs on Chinese goods won't help | |
April 26, 2010 - The Retail Industry Leaders Association has warned that higher tariffs on imports from China, as a way to encourage Beijing to revalue its currency, would negatively affect U.S. businesses and consumers.
"Higher tariffs have never proven to be a wise solution for American economic growth," said Stephanie Lester, RILA vice president for international trade. "RILA supports economic engagement with China and addressing our trade gap with China. We firmly oppose legislation that threatens to cut off access to the U.S. market and drive up prices for consumers."
Lester's comments came in reaction to a hearing before the Senate Banking Subcommittee on Economic Policy on China's exchange rate policy and the current trade imbalance. The hearing addressed legislation that would allow duties to be imposed on Chinese imports to address currency undervaluation allegations.
"RILA members recognize that the valuation of China's currency is a significant concern, but policymakers intent on meaningfully addressing the inequities that contribute to the trade gap with China should focus on issues with a more immediate and direct effect, such as rectifying market access issues," Lester said. "RILA advocates balanced trade policies that will effectively address currency, as well as market access barriers and other unfair trade practices that affect U.S. companies, and at the same time recognizes the tremendous opportunities and benefits that trade and investment with China bring to the U.S. economy."
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Drewry indicates a "cautious recovery" for container shipping | |
April 23, 2010 - The latest quarterly Drewry Container Forecaster published this week by Drewry Shipping Consultants is "optimistic that a market recovery is under way" in the container shipping sector but cautions that "close monitoring of key market drivers is essential as the patient is not off the at-risk list yet".
In a statement announcing the core findings of the latest Container Forecaster, UK-based Drewry said the latest container trade data suggested "we may have entered a real recovery phase but comparisons with the depth of the recession in 2009 must be treated with caution".
"Until we see consistent month-on-month improvements on the main trades into this year's peak season period, we cannot seriously suggest the current global recession is over and that the container sector can heave a sigh of relief."
With a major carrier failure averted so far and container volumes on the upturn, continued Drewry, many believed this year would see a return to better times and profitability. "But, it is still early days; a large number of post-Panamax vessels are due for delivery this year and most of the all important transpacific rate contracts have still to be signed."
Drewry also warned that the relationship between carriers and shippers had never been as "fractious" as it was now, with both parties blaming each other over short shipments and so-called "phantom bookings". "It is clear that shippers will think long and hard before signing new contracts - some will change allegiances, other will seek comfort in using more partners as they try to secure their supply chains in 2010."
Transport Intelligence
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LAN: Strong Recovery Of Chile Passenger Traffic In 2H10 | |
April 28, 2010 - Chile will experience a strong recovery in passenger air traffic in the second half of the year, following late February's devastating earthquake, said the country's flagship carrier LAN Airlines (LFL, LAN.SN).
The massive 8.8-magnitude quake that assailed Chile's central-southern regions killed hundreds, left thousands homeless, caused damages estimated at $30 billion, and closed Santiago's international airport for days.
The natural disaster cost LAN nearly $25 million in lost passenger traffic, and although demand has remained soft in April, and they expect it to stay that way in May, it is gradually picking up, Alejandro de la Fuente, the airline's chief financial officer, said on the company's first-quarter conference call.
LAN's first-quarter net profit jumped 35.8% on the year, to $88.3 million, while its total operating revenue surged to $1.03 billion, from $882.2 million in the year-ago period.
Latin American carriers were among the few airlines to turn profits in recent years, as the global financial crisis hurt the industry.
LAN's passenger capacity is expected to grow 10% this year and an additional 12% in 2011, as new international destinations, including San Francisco and Paris, take hold, and its hub in Lima, Peru strengthens connectivity in the region, de la Fuente said.
Meanwhile, increased operations in Brazil and Europe, plus greater cargo fleet utilization and larger capacity in the bellies of passenger aircraft will see LAN's cargo capacity grow 18% this year and another 8% next year.
Because of low year-ago comparative figures, at the height of the global financial crisis, the airline's second and third quarter cargo revenue should jump 30%, the executive said. Comparative 2009 cargo revenue figures weren't provided.
Additionally, the impact on LAN's cargo business from the Icelandic volcano which grounded most of Europe's fleet earlier this month should be minimal, de la Fuente said.
One of LAN's planes, a Boeing 777, was stuck in Amsterdam for six days, but the company managed to compensate for the loss of the aircraft, he added.
Over the last 52 weeks LAN's shares have traded at a low of 5,232.40 Chilean pesos ($10.00) and a high of CLP9,697.40, while gaining 84% over the same period.
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| China Introduces New Regulations for Food Additives |
April 23, 2010 - The Chinese government says that the Ministry of Health of China has issued new regulations, setting more stringent requirements on the use and the approval of food additives. According to the new regulations, the ministry would approve new food additives only if they are proved to be necessary in food production and safe for humans in tests organized by the ministry; food producers are required to use the minimum amount of necessary food additives and are not allowed to use those that would reduce the nutritional value of food; and the ministry will reassess the safety of its approved food additives when their necessity and safety are questioned by new research results. The new regulations forbid the use of food additives to mislead consumers about the content and quality of food or to fake food content, and also forbid using food additives to disguise decaying and poor quality food. The new regulations came into effect yesterday.
Food quality in China has been a major concern after a series of scandals, the government says. Chinese authorities executed two people last year for their involvement in the sale of infant milk powder intentionally tainted with melamine. The contamination, which occurred in 2008, killed at least six children and caused illness in another 300,000.
Food safety authorities in China, in 2006, found seven companies producing salted red-yolk eggs with cancer-causing red sudan dyes to make their eggs look redder and freshe; and in 2004, at least 13 babies died from malnutrition in Anhui rovince and another 171 were hospitalized, after consuming infant milk powder that contained too little protein, the government says.
A new food safety law came into effect in China in June 2009, to intensify monitoring and law enforcement, and to curb repeated food scandals.
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| US shippers back Obama's export reforms |
Plans for single-agency operation to simplify procedures
April 22, 2010 - The American Association of Exporters and Importers (AAEI) is backing the Obama administration's export reform plan.
On Tuesday, US defence secretary Robert Gates outlined plans to introduce a single export control list, a single licensing agency, a single enforcement co-ordination agency and a single information technology system.
AAEI president and CEO Marianne Rowden said: "The international trade community is very interested in the efficiencies that would be truly realised with the administration's reforms.
"We think streamlining the system is critical to help small-medium size enterprises export goods and technology.
"But we are eager to see which existing agency will be charged with these responsibilities, or whether there will be an entirely new agency formed to handle export licensing."
It is anticipated that the single licensing agency will streamline processes and ensure that export decisions are consistent, as well as reduce exporters' confusion over where and how to submit export licence applications.
International Freight Forwarding Back to the top |
| Emission Regulation Adds to Trucker Costs | |
USA Truck sees costs rising on truck engines due to 2010 standards
April 26, 2010 - Truckload carrier USA Truck says the new emission regulation that took place starting in January is affecting its equipment costs and replacement strategy.
Chief Financial Officer Darron R. Ming said in a statement with the first-quarter earnings report that USA Truck increased its debt by $14.4 million since Dec. 31 to $118 million on March 31. That was to help fund a $19.2 million purchase, he said, of 191 replacement tractors with engines that were built before the end of last year.
That is what the industry calls a "pre-buy" of equipment manufactured ahead of tougher emission rules that can change engine design. It can also save fleet costs, Ming indicated.
The company is still obligated to buy another 114 tractors, he said, and most will come in this current April-June period. "Any engine manufactured on or after Jan. 1, 2010, must comply with the new emissions regulations, and we anticipate these engines will cost significantly more to purchase and maintain," Ming said.
Like many other transportation providers, USA Truck is seeing business improve this spring. It had 2,328 tractors and 7,214 trailers in service at the end of 2009. Ming said "the operating results we achieve during the remainder of the year will determine the number of tractors and trailers we purchase" for the rest of 2010.
The company's debt should recede through the second and third quarters, he said, "as our capital expenditures decline and after receipt of an anticipated $10.2 million in income tax refund."
Journal of Commerce Online
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