Category Archives: Law

A Proper Receipt Creates A Warehouse Lien

We are constantly being asked by NVOCCs, forwarders and warehousemen whether they have a legitimate lien on the cargo in their possession, such that that they can hold the freight until being paid.  The answers are not simple: you only have a lien on freight if it was  a)given to you by the cargo owner; or b) given to you by statute.  

Warehousemen have a statutory lien, which is generally the same throughout the country under the Uniform Commercial Code.  We will discuss Florida’s implementation of the UCC provision.  This is a simple outline of how to make certain that your warehouse receipt is compliant with Florida Statutes, and thus obtains for a warehouseman the full privileges the law can provide. Following the guidelines below should ensure that you obtain the full statutory warehouseman’s lien.

The general form that a warehouse receipt takes is in accordance with the following (Florida Statutes 677.202):

(1) A warehouse receipt need not be in any particular form.

(2) Unless a warehouse receipt embodies within its written or printed terms each of the following, the warehouseman is liable for damages caused by the omission to a person injured thereby (i.e., if you fail to include the following, you can be subject to loss of lien rights):

(a) The location of the warehouse where the goods are stored;

(b) The date of issue of the receipt;

(c) The consecutive number of the receipt;

(d) A statement whether the goods received will be delivered to the bearer, to a specified person, or to a specified person or his or her order;

(e) The rate of storage and handling charges, except that where goods are stored under a field warehousing arrangement a statement of that fact is sufficient on a nonnegotiable receipt;

(f) A description of the goods or of the packages containing them;

(g) The signature of the warehouseman, which may be made by his or her authorized agent;

(h) If the receipt is issued for goods of which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership; and

(i) A statement of the amount of advances made and of liabilities incurred for which the warehouseman claims a lien or security interest (Florida Statutes 677.209). If the precise amount of such advances made or of such liabilities incurred is, at the time of the issue of the receipt, unknown to the warehouseman or to his or her agent who issues it, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient.

-For the purposes of this section, you will want to include a statement saying that you retain a lien on all goods stored by you for the bailor (customer), regardless of whether or not they are those goods listed on this particular warehouse receipt.

In addition to the above listed provisions, it is advisable that you include a provision that advises your customers that they have the option to purchase additional insurance or to obtain insurance through a provider of their own choice.   Note that nothing in the above addresses limitation of liability, an entirely different topic.

For more information on this topic please contact our offices at 800-583-0250.

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Free Trade Agreement Series: Part 3- Andean Free Trade on a Roller Coaster

The Andean Trade Promotion and Drug Eradication Act (ATPDEA) was enacted in 2002 by the second Bush administration. This trade preference agreement sought to grant four South American nations preferential treatment when exporting goods into the United States. With the purpose to promote economic development and eradicate drug trafficking, the agreement targeted four Andean countries, Bolivia, Colombia, Ecuador, and Peru. However, by the beginning of this year only two of these nations remained eligible for duty free exemptions. ATPDEA has been revised, eradicated, and reinstated continually since creation, today leaving Colombia and Ecuador as the only two beneficiaries. The several revisions made to ATPDEA have become a source of problems, creating confusion and uncertainty for importers and exporters, and even as we try to explain it Colombia is set to exit once its own separate FTA (Free Trade Agreement) is in place, most likely Dec. 1 2013 if there are no other changes.

ATPDEA expired for all beneficiary on December 21, 2009. The only country that maintained duty-free benefits was Peru, which was covered by the Free Trade Agreement it signed with the United States. One week later, on Dec. 28, 2009, an amendment to 123 Stat. 3484; Pub. L.  111-344, title II, Sec. 201(a), was enacted restoring Colombia until February 2011 and Peru through the end of 2010. Then it changed again!  On January 7, 2011 the termination section of ATPDEA was amended to remove all benefits of ATPDEA from Colombia and Peru. Finally, a retroactive provision allowing Colombia, but not Peru, duty free access was enacted by H.R. 3078, 112th Cong. (2011) which further extended the expiration of the ATPDEA to July 31, 2013, and especially for preferential tariff treatment under the regional fabric provision for imports of qualifying apparel articles from Colombia and Ecuador only through September 30, 2012.

All of this back-and-forth has created reams of unnecessary work for Customs at the ports of entry, for customhouse brokers, and for importers.  It has also created a bonanza for U.S. Customs and Border Protection’s (CBP) CBP’s penalty workers, as brokers and importers struggle to pay the correct duties on time and avoid tripping penalty wires.   Manufacturers are caught both in the penalty world and an uncertain universe of where to produce.  Long-term planning is impaired, if not impossible.   Thanks again, Congress!

With the latest renewal of the ATPDEA, which took place on October 21, 2011, CBP issued a memorandum stating that it will refund duties paid on ATDEAP-eligible merchandise imported or exported between February 14, 2011 and November 4, 2011, the period in which the program last lapsed. The memo also stated that ATPDEA benefits would commence again on November 5, 2011, but only for two countries. Those who are seeking refunds have 180 days to send the required documentation to CBP.   Again, the confusion created by the constant change in the ATPDEA ‘s status has effected exporters and importers tremendously. For example, those companies that enjoyed ATPDEA benefits and used raw materials from Peru will no longer receive these benefits although it was a regular ATPDEA member and has an FTA.

The problem with altering these agreements is that many manufacturers are not aware of the changes made to these programs, causing the manufacturers costs to increase due to the extra duties, causing some companies major losses.  In addition, the tariff itself has an error whereby it tells users, primarily customhouse brokers, to continue entering Peruvian goods duty free when in fact they are dutiable.  We have pointed this out to their association (the NCBFAA) so that the defense is available to any penalized importers or brokers.

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CAN A FORWARDER INSURE A SHIPMENT AFTER A KNOWN LOSS?

CAN A FORWARDER INSURE A SHIPMENT AFTER A KNOWN LOSS?

This question was addressed last week in the case of I.T.N. CONSOLIDATORS, INC. versus NORTHERN MARINE UNDERWRITERS LTD. [i]

A cargo loss was made known to the forwarder ITN which promptly notified the insurance company writing its open policy.   ITN subsequently issued a certificate of insurance to the cargo owner binding the insurer to cover the goods.  ITN paid the insurance company the premium called for by its open policy, but the insurance company later refused to honor the claim and attempted to refund the premium.  A lawsuit ensued, and the United States District Court for the Southern District of Florida granted the insurance company relief, stating that it could not be forced to insure a known loss.  ITN appealed, however, and the lower court’s ruling was overturned.

The 11th circuit Court of Appeals said,  “The question raised by the case of insurance coverage in this case rests on whether Northern in fact agreed to insure the lost shipment. That question in turn depends on whether Northern accepted ITN’s premium payment, thereby consummating the contract to insure it. The district court should determine whether Northern in fact accepted ITN’s premium payment such that a contract to insure the lost shipment was formed.”

The higher court suggested that the insurance premium may have been accepted initially by the insurance company to keep ITN’s business.  Although the appellate court agreed that the insurance company could not normally be forced to insure a loss after all parties knew one had occurred, it stated that under this policy it had the option to do so if it chose.  The language allowing binding of coverage after the fact of knowledge of the loss (common in insurance contracts) was discretionary on the insurance company’s part, and having taken the premium was an indication of its intent to cover the known loss according to the appellate court.  It ordered the lower court to reevaluate the claim in the above light and issue its new decision accordingly.   The lower court still can rule for the insurance company, but it must follow the higher court’s reasoning in its new opinion.

Generally, forwarders can cover shipments after a loss occurs if they have no knowledge of it.   Insurance companies, however, like everyone else deposit received funds immediately and apply them later.  They even allow payment by credit card, which is obviously automated. In fairness, they don’t always know what shipments the payments cover, so how can they be held to have “consummated the contract” by receipt of an automated payment?  We wait to see how the lower court resolves the matter.   More on this to come.


[i] No. 10-15152 UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT I.T.N. CONSOLIDATORS, INC., I.T.N. OF MIAMI, INC., Plaintiffs – Appellants, versus NORTHERN MARINE UNDERWRITERS LTD, individually and as agents for Lloyds of London, Watkins Syndicate (WTK/457), Defendant – Appellee.

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Federal Maritime Commission Begins Rulemaking Process to Amend Regulations to Eliminate Filing of Rate Tariffs By Licensed NVOCCs

On April 29, 2010, the Federal Maritime Commission published a proposed rulemaking to implement its February 18, 2010, decision to relieve licensed NVOCCs from the costs and burdens of tariff rate publication. The April 29 rulemaking promulgated new and amended regulations that, when given effect, will establish the criteria that must be adhered to by NVOCCs that seek to be exempt from the tariff rate publishing requirement. Publication of rules tariffs would still be required under the regulations.

The proposed FMC regulations would recognize “negotiated rate agreements,” or NRAs, as a new type of instrument that, in function, would serve to set individualized rates as between a shipper and NVOCC. An NRA is defined in the regulations as a “written and binding arrangement between a shipper and an eligible NVOCC to provide specific transportation service for a stated cargo quantity, from origin to destination, on or after the receipt of the cargo by the carrier or its agent (or the originating carrier in the case of through transportation).”

For an NVOCC to avail itself the FMC’s newly-relaxed tariff rate publication requirement, it must follow certain rules outlined in the new regulations, namely:

  • The NVOCC must give notice to the public that it is opting out of rate publication by publishing that fact in a prominent place in its filed rules tariff. An NVOCC can also elect to invoke the exemption by filing with the FMC a Form FMC-1, which would then be reflected on the FMC website along with the NVOCC’s tariff location.
  • The rules tariff must be available to the public free of charge, or it must be provided with each of the NVOCC’s proposed NRAs or rate quotes.
  • NRAs must be (1) be agreed to by both parties; (2) be memorialized in writing; (3) include the applicable rate for each shipment; (4) be agreed and memorialized on or before the date on which the cargo is received by the common carrier or its agent (including originating carrier in the case of through transportation rates); and (5) include prominent notice of the existence and location of the NVOCC’s rules tariff.
  • NRAs and associated records must be retained for five years and are subject to the records availability requirements of the Commission’s regulations at 46 CFR § 515.31(g).

When these criteria are met, a NVOCC will be exempted from the requirement that rates tariffs be published in an automated tariff system. Associated tariff rate regulations, such as those governing the timing of rate increases and decreases, which would then be inapplicable insofar as there would be no published rate to adjust.

An NVOCC who fails to maintain its bond or license or has had its tariff suspended or cancelled by the FMC is ineligible to avail itself of the new exemption.

Interestingly, the new proposed regulations would only exempt licensed NVOCCs from the tariff rate publication requirement. Registered but unlicensed NVOCCs, which are those that have no physical U.S. location and are incorporated abroad, would not be exempt from rate publication even if the proposed regulations go into effect. The FMC has stated that it will consider whether to expand the exemption to cover registered, unlicensed entities. Already there have been some cries of discrimination from foreign NVOCCs due to this disparate treatment.

The deadline for interested parties to file comments concerning the new proposed regulations with the FMC is June 4, 2010.

The proposed regulations can be found on the FMC’s website at http://www.fmc.gov/userfiles/pages/file/NVOCC%20Tariff%20Exemption%20NPRM.pdf

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CBP Proposes Two Amendments To Broker Recordkeeping Requirements

On March 23, 2010, Customs and Border Protection issued a notice of proposed rulemaking wherein the agency proposes to amend certain of the Regulation’s recordkeeping requirements.

First, the proposed rulemaking would allow a broker to store his or her records at any location within the United States, so long as the recordkeeping contract identified in the broker’s permit application makes all records available to CBP within a reasonable period of time should they be requested.

Second, the proposed rulemaking would amend the Regulations as they pertain to a broker’s obligation to retain entry documents in their original format for 120 days from release of conditional release of merchandise. CBP recognizes that brokers today often maintain entry documents in electronic format. The same entry document may exist in paper format, too, which the current Regulations would require to be kept for 120 days following release or conditional release, without regard for the fact that the document is also stored in electronic form. CBP’s proposed rulemaking would eliminate the requirement that the paper entry document be retained, so long as the electronic version were readily available to CBP. Importers of record, however, would continue to be required to maintain original entry documents for the 120-day period.

The proposed rulemaking would not change a broker’s general obligation to maintain records relating to his or her customs business for five years. CBP has invited the trade to comment upon the proposed rulemaking on or before May 24, 2010.

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CBP Proposes To Eliminate The Mailing Of Liquidation Courtesy Notices

CBP’s Office of Regulations and Rulings, in a rulemaking notice of March 15, 2010, has proposed to amend the Code of Federal Regulations to discontinue the longstanding practice of mailing courtesy notices of liquidation to importers of record whose entries are filed by ABI. CBP has invited the public to comment upon its proposal.

CBP’s proposed move to eliminate the mailing of more than 6 million paper liquidation notices is estimated lead to more than $3 million in savings. Notices will still be mailed to the .4 percent of entry filers that do not use ABI.

Notices will still be sent electronically to ABI filers, which are often customs brokers acting for the importer of record. Without the knowledge that importers will be notified by CBP directly by mail regarding liquidation, it will become incumbent upon brokers to notify their clients of their entries’ liquidation. With the 180-day deadline to protest CBP’s treatment of an entry running from the date of liquidation, importers risk being caught unaware of a critical deadline that is jurisdictional in nature. In other words, because the filing of a timely protest is a prerequisite to judicial review of most of CBP actions, it is essential to for importers to know when entries liquidate, and if CBP’s proposed rulemaking is adopted, the only practical way for importers to be aware of this key date will be through communication with their broker.

That is, unless importers or their agents look for the posting of the notice of liquidation on the wall of the customshouse, which, according to the regulations, remains the only true legal evidence of liquidation. The Court of International Trade has held that when CBP fails to provide courtesy notice of liquidation, importers are still charged with knowledge of the date that a liquidation notice was posted in the customshouse. Fortunately, CBP has typically mailed courtesy notices in a consistent, reliable manner, eliminating the need to visit the customshouse, and this courtesy will surely be missed if CBP’s proposed rulemaking is adopted. One wonders if the Postal Service will file comments with CBP concerning the loss of postal revenue associated with CBP’s anticipated move.

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FMC Votes To Exempt NVOCCs From Publishing Rates

On February 18, 2010, the Federal Maritime Commission voted to approve a proposed rulemaking that would exempt non-vessel-operating common carriers (NVOCCs) from the longstanding requirement that they publish tariff rates. This move was motivated by the FMC’s desire to free NVOCCs from the substantial costs of publishing tariffs, thus saving jobs. The move may result in hundreds of thousands of dollars of annual savings to NVOCCs.

The new exemption would be voluntary, in that an NVOCC may continue to publish rates, although few will likely opt to do so. Additionally, the exemption would be limited to rates, meaning that tariff-publication rules pertaining to contractual terms and conditions governing shipments would continue to apply, and be provided to the public free of charge. For those NVOCCs taking advantage of the exemption, they will be required to publish a notice, within the text of their rules tariff, that they are opting out of publishing tariff rates. Unpublished rate agreements must then be agreed to in writing, including the applicable rate for each shipment, by the date cargo is received by the common carrier or its agent. This writing must also provide notice of the existence and location of the rules tariff. Unpublished rate agreements will be required to be retained for five years.

The move to exempt NVOCCs from rate tariff publication was proposed by the National Customs Brokers and Freight Forwarders Association via a petition filed with the FMC. Although the new rule is not yet final, it is expected to be warmly received by almost all in the OTI community.

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