The Baltimore Bridge Collapse profoundly impacted the logistics and transportation sectors, highlighting the vulnerability of essential infrastructure. The collapse led to immediate and extensive consequences for freight and cargo movement, creating delays and logistical challenges.
This incident serves as a pivotal example for the logistics sector, illustrating the importance of contingency planning and risk management. Two major legal doctrines come to mind; force majeure and general average, which this article will explain in detail, examining their relevance to the collapse and their broader implications for logistics and transportation management.
What is Force Majeure?
Ocean carriers have invoked force majeure clauses, signaling a significant shift in the responsibility for cargo once it is rerouted to alternate ports.
Force majeure, a provision found in many contracts, releases parties from their obligations when circumstances beyond their control occur, preventing them from fulfilling their contractual duties. The term, meaning “superior force” in French, is a legal concept with roots in Roman law. It evolved from the Latin phrase “vis major” or “major force,” referring to events outside human control, like natural disasters, that exempted parties from fulfilling contractual obligations.
This legal concept has been thrust into the limelight as companies like CMA CGM, COSCO, and Evergreen declared force majeure following the incident. CMA CGM, for example, informed its customers that cargo on the water would be discharged at alternative ports, where the responsibility for pickup would then fall to the cargo owners, effectively ending CMA CGM’s contractual obligations as per their bill of lading.
Logistics companies now face the challenge of managing the diverted trade almost immediately. The urgency is compounded by the potential financial penalties, such as detention and demurrage fees, if the containers are not moved swiftly from the terminals.
What is General Average?
General Average (GA) is a maritime law principle that stipulates when an extraordinary sacrifice or expenditure is intentionally and reasonably made for the common safety of a sea voyage, the resulting losses or costs are shared proportionally by all parties involved. This concept may come into play following the Baltimore bridge collapse, where the container ship, Dali, might see its owner declare general average, thereby implicating all cargo owners in sharing the casualty costs.
The principle of general average dates back to ancient maritime law, serving as a way to distribute the financial burden of losses resulting from voluntary actions taken to save a vessel, its cargo, or both. In the context of Dali, where the ship struck a pylon of the Francis Scott Key Bridge, blocking the port entrance and causing significant damage, the application of general average means that all stakeholders in the sea voyage, including cargo owners, the shipowner, manager, and charterer, will bear a portion of the costs related to the mishap.
The process of declaring and executing a general average claim is complex. It involves assessing the value of the cargo on board to determine each shipper’s financial responsibility. This assessment can be intricate and lengthy, often taking several years, as it requires a detailed evaluation of the goods involved, many of which may have their specifics unknown until containers are opened and inspected.
General average remains an infrequent occurrence in modern shipping, yet it poses a significant risk, especially in situations of substantial disaster like the Baltimore bridge incident. Many shippers are unaware of this principle or inadequately insured against it, facing unexpected liabilities when general average is declared.
In Summary
The Baltimore Bridge Collapse has served as a stark reminder of the vulnerabilities in our infrastructure and the cascading effects such incidents can have on the logistics and transportation sectors. The principles of force majeure and general average have emerged as critical legal doctrines in the aftermath, underscoring the importance of contingency planning, risk management, and contractual awareness within the logistics industry.
Shippers must not only understand the intricacies of these legal concepts but also ensure comprehensive insurance coverage to safeguard against the financial strains of unexpected disasters. Adequate insurance acts as a critical safety net, providing financial stability and peace of mind in the face of unforeseen events.