Import volumes in Australia rose over 20% in February
Import volumes for Australasia and Oceania rose 21.5% in February 2015 compared with the prior corresponding period of 2014, with trade volumes worth 309,200 teu and 254,500 teu respectively. Yet the region’s import volumes in January which stood at 317,900 teu, remained relatively unchanged compared with the same month in 2014, which saw 320,100 teu in imports.
Export volumes from Australasia and Oceania also remained almost unchanged in January 2015 at 190,200 teu, compared with the prior corresponding period which saw export volumes of 190,100 teu. However, again, February 2015 saw a 4.3% hike in export volumes from the region which amounted to 216,600 compared with 207,700 the previous year. This data represents an increase in container volumes of 741 teu per month between February last year and February 2015.
And global trade in February 2015 saw an 11.8% hike in total trade volume at 10.3m teu, compared with 9.18m teu in the prior corresponding period. Whereas trade volumes in January this year reached 10.85m teu – a 2% decline on the prior corresponding period of January, 2014. From February 2014 to February 2015, global trade volumes have increased on average by 90,141 teu per month.
Source :Container Trade Statistics.
Maersk launches weekly Adelaide call
Maersk Line launched a new direct Adelaide call on its Australia-Asia Boomerang service. The Denmark-flagged Maersk Garonne (IMO: 9235579) departing today has a capacity of 3800 teu. South Australian minister for transport and infrastructure Stephen Mullighan formally welcomed the Maersk Garonne this morning. It is Maersk Line’s first vessel to dock at Flinders Terminal.
Mr Mullighan said the new direct Adelaide call is an important development for the state’s export businesses as the service will provide a direct link for cargo from South Australian regions to northern Asia. This trade previously required transhipping through other ports such as Melbourne and Singapore. He said the direct call to markets in South east and north-east Asia will have a significant impact on South Australia’s engagement with investors in those regions.
“The five north-east Asian ports included in this route are among the top 20 container ports in the world and there will be great possibilities for export commodities like grain, wine, tuna bait, citrus, hay, meat, oil seeds, and copper to use this route,” the minister said. Meanwhile, Maersk Line’s managing director Nicolaj Noes said the addition of the call demonstrates the company’s commitment to the South Australian market.
“We aim to connect Australian ports with key economic areas and the direct Adelaide call will ensure South Australia remains a strong location for imports and exports to the rest of the world,” he said.
The new rotation for this service is Tanjung Pelepas – Singapore – Fremantle – Adelaide – Melbourne – Sydney – Brisbane – Yokohama – Osaka – Busan – Qingdao – Shanghai – Ningbo – Brisbane – Sydney – Melbourne – Fremantle – Tanjung Pelapas.
Container detention charges –up in the air again
Shipping companies would find it difficult to keep container stock moving efficiently without charging cargo interests a daily rate for overdue containers. For the most part, cargo interests accept this as a necessary evil, but overprotective container detention terms cause friction and have received airplay in Australian courts.
The English High Court, meanwhile, has recently taken a fresh look at whether escalating and unending charges can be enforced regardless of the circumstances.
What does this all mean for Australia?
The current Australian position - Container demurrage had surprisingly little judicial consideration in Australia until 2010, when the NSW Consumer Trader and Tenancy Tribunal found that a daily container “detention fee” imposed by a bill of lading, was an unenforceable penalty, on the basis that it was extravagant and unconscionable in comparison to the greatest loss that could conceivably be proved to have flowed from the breach of contract by the shipper.
That decision was overturned on appeal to the Supreme Court of NSW on technical jurisdictional grounds. This meant that it was unnecessary for the court to deal with the central question about the enforceability of the charges.
However in 2011, the question returned to the tribunal in a different case and it was determined that daily charges payable for late return of containers were not penalties. It characterised them as agreed compensation for possession and use of the containers and found that the charges did not arise from a breach of contract.
In 2012, the New South Wales District Court made a similar determination concerning Cosco Container Lines’ ImportNet Agreement. Although it required return of the containers after 10 days “free time”, no amount was immediately payable if this was not done. This meant the charges were not penalties because again, they did not arise from a breach of the contract.
Accordingly, at this point, it appeared reasonably settled that a breach of contract was the necessary trigger to detention charges being determined to be unenforceable penalties. Then came Andrews v Australia and New Zealand Banking Group Ltd in which the High Court (in the context of bank fees and charges) found that the penalty doctrine may apply in circumstances where the payment is not triggered by a breach of contract.
The High Court also emphasised a distinction between a fee that is security for performance of an obligation and a fee under a pre-existing arrangement for the provision of further services or accommodation. There has as yet been no further judicial determination as to how this distinction might be applied in the context of container detention.
However, this might not be the case for long. The Australian law on contractual penalties continues to evolve with the Full Federal Court just (at the time of writing) having reversed the first instance decision in the bank fees class action Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50.
The English position - English High Court - MSC v Cottonex Anstalt [2015] EWHC 283
An English case decided late last year, concerned a cargo of cotton discharged at Chittagong in mid-2011. Luckily for Cottonex, it had been paid for most of the cargo just before a collapse in the price of cotton at that time. The consignee never made any attempt to collect the cargo and the Bangladesh customs authorities would not allow anyone to remove the containers without a court order.
In September 2011, the carrier, Mediterranean Shipping Company (MSC) notified both shipper and consignee that it reserved the right to dispose of the cargo if not collected holding each responsible for all costs and charges. Cottonex denied liability on the basis that title to the goods had passed on payment.
MSC’s clause stated: “The Carrier allows a period of free time for the use of the Containers in accordance with the Tariff… The Merchant is required and has the responsibility to return … the Container … before or at the end of the free time allowed at the Port of Discharge or the Place of Delivery. Demurrage, per diem and detention charges will be levied and payable by the Merchant thereafter in accordance with the Tariff.”
MSC also had the right to unpack and store the goods and, if they remained unclaimed, to abandon or dispose of them. After a 14 day “free” period, the applicable demurrage charge was US$10 per container per day for the first 10 days, US$18 daily for the next 10 days and US$24 daily thereafter.
By January 2015, the total demurrage claim had reached over US$1m, or approximately 10 times the value of the containers. The English High Court held that the parties intended demurrage to start to run as soon as “free time” ran out. Cottonex was in breach of contract from that time. It did not matter that no one had taken delivery of the cargo.
The English High Court held that the parties intended demurrage to start to run as soon as “free time” ran out. Cottonex was in breach of contract from that time. It did not matter that no one had taken delivery of the cargo. Unsurprisingly, Cottonex argued that the carrier had failed to take steps to mitigate its loss by unpacking the goods and retrieving the containers, or if necessary, buying replacement containers.
The court held that because the parties had agreed specific amounts payable by the shipper as damages for its breach of the contract, the mitigation principle did not apply and demurrage could accrue.
Any argument that demurrage ceased to be payable after a specific period of time must however be founded upon some legal principle capable of bringing the parties’ contractual obligations to an end.
Does detention continue indefinitely?
In MSC v Cottonex, Cottonex argued that its inability or failure to collect the containers amounted to a repudiation of the contract of carriage, which brought any obligation to pay demurrage charges to an end. The court agreed, finding that title in the cotton had passed to the consignee so that Cottonex had no right to take delivery. Nor could Cottonex have compelled the consignee to take delivery.
At that stage, Cottonex was wholly and finally disabled from further performance of the contact. The court determined that by September 2011 the delay in collecting the goods had become so prolonged as to “frustrate the commercial purpose of the venture”. Cottonex’s liability for demurrage continued only until then. “Legitimate interest” principle.
In response to a repudiatory breach, an innocent party may choose either to terminate the contract (from which point the parties are released from their obligations) and seek damages, or maintain the contract. The court confirmed that this choice is constrained to the extent that the innocent party must have a “legitimate interest” in maintaining the contract.
Had MSC elected to terminate, Cottonex would have been relieved of its obligations under the contract, including the obligation to pay ongoing container demurrage, and would have been liable to pay damages (the calculation of which would have been subject to the mitigation principle).
Ordinarily, where the carrier has control over its containers, it could exercise its rights to unpack the containers and re-take possession of them. Ordinarily, where the carrier has control over its containers, it could exercise its rights to unpack the containers and re-take possession of them. Once it became clear that there was no realistic prospect that Cottonex could collect the goods and return the containers, MSC no longer had any reason to keep the contracts in force other than to continue to claim demurrage.
The carrier’s election was entirely unreasonable, as it was not invoking the demurrage clause for a proper purpose, but rather to “seek to generate an unending stream of free income”. The court noted that it would be proper for a carrier to keep the contract in force and claim demurrage even after repudiation by the merchant, provided there was some basis for supposing that the carrier’s inability to use the containers was causing it to suffer ongoing loss.
In the circumstances of this case where the customs authorities had refused to allow the containers to be released (a matter outside Cottonex’s control) the court inferred that a reasonable carrier would have acquired replacement containers. Is an unlimited demurrage clause a penalty? The court also considered the separate question of whether MSC’s container demurrage provision amounted to an unenforceable penalty.
Hon Leggatt J found that a provision which allows demurrage to be recovered indefinitely even when no reasonable carrier would be suffering a loss, goes outside compensation, and he would hold such a clause unenforceable as a penalty.
Conclusion - If the decision in MSC v Cottonex is followed in Australia, it seems that where circumstances prevent a merchant from returning containers, or the delay is such that the contract of carriage has been repudiated, the carrier will not be permitted to keep the contract alive and recover ongoing demurrage unless it has a “legitimate interest” in doing so.
A carrier in that situation is unlikely to have the required legitimate interest unless it can show that it continued to suffer actual loss and damage that could not be avoided by taking repossession of containers or purchasing replacements. Considering the evolving judicial position in Australia on the question of penalties, container detention charges may once again be closely scrutinised.
Australian courts must also consider the High Court’s distinction between security for performance of an obligation and a fee charged for the provision of further services or accommodation. As this distinction is difficult to apply in the specific context of container detention charges, MSC v Cottonex could provide useful guidance to the industry.
Source: Lloyd’s List April 2015
Fremantle still has eight years of growth capacity – at least
Government expects the port of Fremantle to reach maximum container capacity in eight years even with a high average annual growth rate, Western Australia's transport minister Dean Nalder has told the state parliament. Government expects the port of Fremantle to reach maximum container capacity in eight years even with a high average annual growth rate, Western Australia's transport minister Dean Nalder has told the state parliament.
Mr Nalder said the current estimated annual capacity in 20ft equivalents for the port is 1.2m to 1.4m. In addition, the most recent truck survey taken in 2014, determined that an average of 2600 container vehicles were visiting the port each week day. And the state government key strategies to increase the percentage of freight moved by rail from Fremantle Ports, according to the minister, are: investment in railway infrastructure at the port and on lines running to a from the port; improvements in efficiency of rail operations; and continuing subsidies for containers moved by train.
Mr Nalder said the current market share for freight moved by rail is around 14%, but the target remains at 30%. “It is difficult for rail to compete effectively with road over the shorthaul distances which are involved with the greater part of the Fremantle container trade,” the minister said.
Piracy on the rise again in Southeast Asia
ReCAAP, the anti-piracy information-sharing group, reported 38 incidents of piracy or armed robbery in Southeast Asian waters in the first quarter of 2015, up from 29 in the same quarter last year. The incidents included four cases of siphoning of gasoil cargoes and two hijackings, the group said. Overall, ReCAAP classified five incidents in January-March as most serious, compared to no comparable incidents in the first quarters of 2012-2014.
ReCAAP said it was “concerned over the occurrence of the siphoning and hijacking incidents during January-March 2015". It added: "While this is not a new trend, it poses a danger to the safety of seafarers and incurs economic losses suffered by shipping companies.”
The London-based International Chamber of Commerce and Malaysia-based International Maritime Bureau sounded a stronger alarm, with a release on April 21 saying that one coastal tanker is hijacked every two weeks on average in Southeast Asia. It said six hijackings had occurred since the beginning of the year. Indonesia accounted for almost 40% of the attacks in Southeast Asia so far this year, with two vessels hijacked and 19 vessels boarded.
Indonesia accounted for almost 40% of the attacks in Southeast Asia so far this year, with two vessels hijacked and 19 vessels boarded. Vietnam has seen an increase in armed robbery incidents, the IMB said.
“More and more thieves are breaking into ships at anchor in and around Hai Phong and Vung Tau,” according to the group.
