Over the past several years, the later summer/early fall trans-Pacific shipping season has been chaotic. There is a rush to provide North America with goods, particularly clothing, for the busy winter season. Manufacturers in China and other areas of the Far East often book space for large containers aboard ships. Freight Forwarders often find that this is the busiest time of the year.
This year, however, those in the shipping industry believed that they would see a significant slowdown in trans-Pacific shipping due to the Trump tariffs. Specifically, there was a belief that the tariffs would cause a large price spike that would seriously hurt retailer prospects. However, this did not happen. In fact, prices did not spike and there is very strong demand.
In such an instance, contractual obligations between shipping companies, manufacturers, banks, and other interested parties become increasingly complicated. Because the circumstance is totally unexpected, the parties may be required to maneuver quickly just to meet the consumer demand in the US.
Initially, the Trump administration declared tariffs on items like Chinese steel and aluminum. Immediately, the Chinese government called for retaliatory measures. In turn, the Trump administration contemplated further tariffs in response to the Chinese tariffs. Pundits believed that this scrimmage would morph into a full-blown trade war.
Interestingly, major market indicators suggest that US consumers are not suffering from the trade war. While the reason for this is unclear, US consumers would likely continue as they have been and expect the continued flow of goods from the Far East at cheap prices.
Master Agreements
Often, parties create “master” agreements wherein they use the initial agreement to cover a wide variety of transactions and governs trade between the parties for a number of years. These agreements will often cover items like general trade terms, dispute resolution, contact information, and insolvency and bankruptcy of one or both of the parties. These master agreements almost always contemplate possible slowdowns in commerce and how those circumstances are governed.
Over the past few years, more and more entities have entered into the shipping arena. These entities are in the form of banks and other lenders providing guarantees, third parties that connect buyers and sells, and other significant players. When this occurs, the master agreements negotiated between the parties several years ago may not cover the contractual relationship between these parties.
To account for these parties on a contractual level, parties to master agreements will often amend those agreements to include other third parties. These amendments can act as master agreements as well and will govern future transactions between the parties.
Under these circumstances, when there is a surge of parties involved in a short time frame, there will be a surge of lawyer activity governing the contractual relationship between the various parties.
Governing Law
Whenever negotiating transnational contracts, it is helpful to clearly define what law governs in the event of a dispute. Many shipping companies choose American law as the governing law and will stipulate this in all the contracts. US law allows for such a stipulation.
Involved in the maritime business? Partner with a law firm that understands the maritime business. Partner with the Kolodny law firm.
Alan Kolodny is committed to representing injured clients in Texas and throughout the United States. Alan earned his B.A. from Rice University and his J.D. from Southern Methodist University.
He focuses his practice on representing plaintiffs in personal injury cases involving the following matters: maritime and offshore accidents, including those under the Jones Act; automobile and 18-wheeler truck accidents; and industrial site accidents, work-related accidents, and claims for injured railroad workers under the Federal Employers’ Liability Act.
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