This tweet has caused problems for Turkish shippers one of whom was recently in the process of loading steel on a ship destined for the US. One wave of Trump’s twitter wand caused that sale to fail. The shipper was left with cargo on a ship, no buyer and a big problem.
We have seen many other similar issues between the US and China. In many cases shippers have long term contracts with US buyers or vice versa. Those contracts are now under threat as tariffs reduce demand for imported goods. The US recently increased its tariffs on Chinese imported goods with the latest charges coming into effect on 23 August 2018. The US has now imposed tariffs on US$50 billion of Chinese goods with China retaliating on a tit for tat basis. The main driver of disputes is the US tariffs on steel and aluminium which remain at 25% and 10% respectively (save for Turkey!) and reciprocal tariffs on US soybeans exported to China.
The headaches that result from this ongoing and escalating trade war are not just felt by shippers. They extend to charterers and ship owners. Most of the recent disputes centre around claims for freight, dead freight and demurrage. In our Turkish example the ship was part loaded so the claim was for freight, dead freight and demurrage. In this context, the carrier’s most important weapon to get paid is his lien on the cargo itself. However, the lien does not guarantee payment. There are all sorts of legal problems to consider in connection with the exercise of the lien. We covered this in one of our recent blog posts.
Another problem we have seen is where the voyage or the long term COA is repudiated before any cargo is loaded. In such cases, the lien is of no use and the ship owner or time charterer are left with a claim against the voyage charterer. We have dealt with a number of these cases and, although liability is not usually contested, points often arise on whether the ship owner has mitigated and what the real loss is. If the ship has ballasted to the US/ China to load only to find the intended cargo is no longer available due to import tariffs in the country of destination then it is not so easy to find a mitigating cargo.
Finally, Trump’s tariff brush and the mad scramble to adapt will invariably lead to litigation under numerous sale contracts. In our Turkish steel case there is already a claim against the US buyer and the usual force majeure arguments are being raised. We expect to see many similar claims as sale contracts often incorporate shipping terms thus enabling a seller to pass on any liability to the buyer.
Like others, we are monitoring the latest Trump tweets so that we are ahead of the curve in terms of the legal issues likely to arise from the ongoing and escalating trade war. Many of these legal issues fall squarely within our specialist areas of shipping and trade. Over the last few months we have recovered several million dollars for clients under aborted long term sale contracts and contracts of affreightment. Many of those relate to US tariffs on steel and reciprocal tariffs imposed by China on US origin soybeans.
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