Pawluch Revised Forum


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  • Pawluch Revised Forum

    1. 1. HKCBA National Business Forum 2007 “A Winning Strategy for Canada: Hong Kong and Fujian” Metro Toronto Convention Centre April 23, 2007 Legal Aspects of Intermodal Transportation and Logistics in Canada/China Trade by Catherine A. Pawluch Partner Gowling Lafleur Henderson LLP
    2. 2. Trade and Transportation – Trends <ul><li>Canada is becoming increasingly trade dependant, as world trade growth outpaces general economic growth </li></ul><ul><li>Canada has experienced a sharp rise in import-driven trade with China </li></ul><ul><li>Source: Statistics Canada: Feeding the Dragon, 2005 </li></ul><ul><li>· </li></ul>
    3. 3. Trade and Transportation – Trends <ul><li>China’s development has revitalized much of Canada’s resource sectors </li></ul><ul><ul><li>Chinese imports of crude materials have more than tripled since 1998, accounting for nearly one-third of total growth in Canadian exports to China </li></ul></ul><ul><li>Capturing a larger share of China’s US-destined container traffic is a strategic goal for our transportation industry and nation. </li></ul><ul><ul><li>US is our top trading partner, buying 84% of Canada’s exports but our position is precarious as in 2 years, it is predicted China will take over Canada’s top spot. </li></ul></ul><ul><li>Source: Statistics Canada: Feeding the Dragon, 2005 </li></ul>
    4. 4. Trade and Transportation – Trends <ul><li>U.S. Trade 2006 (in billions of US Dollars) With Canada </li></ul><ul><li>Trade Balance U.S. Exports U.S. Imports - $ 72.8 $230.6 $303.4 </li></ul><ul><li>With China </li></ul><ul><li>Trade Balance U.S. Exports U.S. Imports </li></ul><ul><li> - $232.6 $ 55.2 $287.8 </li></ul><ul><li>Source: Office of the U.S. Trade Representative 2007 Report . </li></ul>
    5. 5. Trade and Transportation – Trends <ul><li>Value of Canadian exports to China increasing : </li></ul><ul><ul><li>Between 1998 and 2004, Canadian exports to China more than tripled to more than US$7 billion with annual growth averaging 21% </li></ul></ul><ul><ul><li>Rose 40% in 2004 and was one of five occasions since 1990 that export growth surpassed imports </li></ul></ul><ul><ul><li>Still, Canada is China’s 16th largest source of imports and accounts for only 1.3% of the Chinese Import Market </li></ul></ul><ul><li>Source: Statistics Canada: Feeding the Dragon, 2005 and WESTAC Report (March 2006) </li></ul>
    6. 6. Trade and Transportation – Trends <ul><li>Imports from China are increasing as well: </li></ul><ul><ul><li>In 2004, imports grew nearly twice as fast as in 2003 and has increased by more than 500% since 1995 </li></ul></ul><ul><ul><li>In 2004, Canada’s imports from China rose more than most other top trading countries, trailing right behind US </li></ul></ul><ul><ul><li>Major driving force behind the growth in international container traffic in Canada </li></ul></ul><ul><li>Source: Statistics Canada: Feeding the Dragon, 2005 and WESTAC Report (March 2006) </li></ul>
    7. 7. Trade and Transportation – Trends <ul><li>Growing Chinese demand for raw materials is contributing to rising prices for resource commodities such as coal and base material </li></ul><ul><li>Dramatically increased China’s interest in investing in Canadian resource sectors </li></ul><ul><ul><li>Example: China Paper Group $100 million investment near Prince Rupert, B.C. </li></ul></ul><ul><li>Source: Statistics Canada: Feeding the Dragon, 2005 and WESTAC Report (March 2006) </li></ul>
    8. 8. Exports from Canada Source: Statistics Canada: Feeding the Dragon , 2005 - fastest growing Canadian export commodity - responsible for 17% of total export growth since 1998 - Chinese imports from Canada has grown from 0.9% in 1998 to 3.8% in 2004  Canada emerging as global leader Organic Chemicals - leading export product - Chinese production of paper and paperboard has more than doubled since 1998 but China is still a net importer - Canadian exports increased from US$251M in 1998 to US$965M in 2004  China now number two export market for wood pulp Wood Pulp - fell in 2003 to US$36M but soared in 2004 to over US$600M, second largest supplier to China Wheat - Canada has overtaken Russia to become leading exporter of nickel to China - 28% of total Chinese imports - Export revenue rose from just over US$770 M to US$2 B in 2004 Metal Exports (nickel and iron ore) Growth Rate Commodity
    9. 9. Imports from China – Canada is the 10 th largest importer from China in 2004 Source: Statistics Canada: Feeding the Dragon, 2005 - increases due to increases for computers, telecommunications equipments, industrial machinery and measuring and control instruments - $300M steel products - half of the increase in pipes and tubes used in O&G industry Machinery and Equipment - imports risen from nearly nothing in 1995 to $300 M in 2004 - major contract between Canada and China (CAMI and Shanghai GM Co) Auto sector - shrinking role in Canadian-Sino trade - Clothing’s share of all imports from China fell from 33% in 1993 to less than 15% in 2004 Consumer Goods - $1B rise led by petrochemicals (hydrocarbons and nucleic acids), plastics as well as iron and steel - China is the world largest steel producer Industrial Goods Growth Rate Commodity
    10. 10. Canada’s Pacific Gateway Strategy <ul><li>We are in an era of seamless global supply chains </li></ul><ul><li>Success in international commerce depends on efficient transportation systems </li></ul><ul><li>Canada is positioning itself as a gateway to North American Markets </li></ul><ul><li>Important part of supply chain potential between North America, Hong Kong and China </li></ul><ul><li>New container terminal being constructed in Prince Rupert, B.C. to be operational in 2007 $590 million investment </li></ul><ul><li>Source: Government of Canada – Pacific Gateway Strategy </li></ul>
    11. 11. Intermodal Transportation <ul><li>Case Law </li></ul><ul><li>Boutique Jacob Inc. v. Pantainer Ltd. et al ., [2006] F.C.J. No. 292 </li></ul><ul><li>Good One Express Canada Ltd. v. 1355930 Ontario Inc . c.o.b. L.K. Import & Wholesale 2004 Carswell Ont 4054 (Ont SCJ) </li></ul><ul><li>Valmet Paper Machinery Inc. v. Hapag-Lloyd AG , [2002] B.C.J. No. 1271 (B.C.S.C.) </li></ul>
    12. 12. Boutique Jacob v. Pantainer <ul><li>The Facts </li></ul><ul><li>Boutique Jacob through its freight forwarder, arranged for a shipment of women’s apparel to be transported from Hong Kong, People’s Republic of China, to Montreal, Canada </li></ul><ul><li>Freight forwarder engaged Pantainer Ltd. to perform the transportation </li></ul>
    13. 13. The Facts … Cont’d <ul><li>Pantainer issued Express Line bill of lading to Boutique Jacob </li></ul><ul><li>The value of the cargo was not declared </li></ul><ul><li>Pantainer engaged and paid Orient Overseas Container Line (OOCL) to transport the shipment from Hong Kong to Montreal </li></ul><ul><li>OOCL issued an electronic waybill, referring to its website for the applicable terms and conditions </li></ul>
    14. 14. The Facts … Cont’d <ul><li>OOCL in turn engaged and paid CP Rail pursuant to the Confidential Rate Contract between OOCL and CP Rail </li></ul><ul><li>CP Rail moved shipment by rail from Vancouver to Montreal </li></ul><ul><li>As a result of a train derailment, the cargo was destroyed </li></ul>
    15. 15. The Facts … Cont’d <ul><li>No dispute that the damages occurred during the rail carriage </li></ul><ul><li>Boutique Jacob commenced an action against Pantainer, OOCL and CP Rail </li></ul>
    16. 16. Liability of Pantainer and OOCL <ul><li>The Court found that both Pantainer and OOCL were exempt from any liability for the loss suffered by Boutique Jacob </li></ul><ul><li>The court relied on an exemption clause found in Pantainer’s bill of lading </li></ul><ul><li>The Court reaffirmed the Canadian law with respect to “Himalaya clauses” </li></ul>
    17. 17. Liability of Pantainer and OOCL … Cont’d <ul><li>They are enforceable by the courts notwithstanding a third party’s complete ignorance of the existence of a clause granting it a benefit at the time of the performance of its own contract. </li></ul><ul><li>They have long been recognized by the highest British Courts </li></ul><ul><li>They have been endorsed by the Supreme Court of Canada </li></ul>
    18. 18. Liability of CP Rail <ul><li>The court dismissed the plaintiff’s claim as against Pantainer and OOCL </li></ul><ul><li>Court considered the obligations of CP Rail as a common carrier in the context of section 137 of the Act and the Railway Traffic Liability Regulations . </li></ul><ul><li>Court found that CP Rail was clearly responsible for the loss or damage to the Plaintiff’s cargo </li></ul>
    19. 19. Liability of CP Rail … Cont’d <ul><li>CP Rail argued that it was entitled to benefit from the terms and conditions found in its Confidential Rate Contract with OOCL, in CP Rail’s published Tariff, in OOCL’s bill of lading or in Pantainer’s bill of lading </li></ul><ul><li>Court held section 137 of the Canada Transportation Act clearly provides that a railway company shall not limit or restrict its liability to a shipper except by means of “a written agreement” </li></ul>
    20. 20. Liability of CP Rail … Cont’d <ul><li>There was no written agreement as between Boutique Jacob and CP Rail </li></ul><ul><li>CP Rail was not entitled to rely on its Tariff (which would have limited its liability to $1,432.89) because it did not have a signed agreement with Boutique Jacob </li></ul><ul><li>Court held that CP Rail could not invoke the Himalaya clause in Pantainer’s bill of lading nor in OOCL’s terms </li></ul>
    21. 21. Liability of CP Rail … Cont’d <ul><li>Court held that application of Himalaya clause to a railway carrier would defeat the purpose of s.137 of the Canada Transportation Act </li></ul><ul><li>CP Rail has appealed the decision to the Federal Court of Appeal </li></ul>
    22. 22. Appeal of CP Rail <ul><li>Issues on Appeal </li></ul><ul><ul><li>interpretation of section of 137 and definition of “shipper”, “association of” or “body representing shippers” </li></ul></ul><ul><ul><li>right of railway to invoke the Himalaya clause found in ocean carrier’s bill of lading </li></ul></ul><ul><ul><li>right of railway to enforce the terms of confidential contracts that it has with an ocean carrier when sued by the owner of the damaged or lost cargo </li></ul></ul>
    23. 23. Appeal of CP Rail … Cont’d <ul><li>Court granted leave to intervene to ocean carriers Zim, Moller-Maersk, Sufmarine, Hapag-Lloyd and P&I Clubs </li></ul><ul><li>Awaiting date for hearing of appeal </li></ul>
    24. 24. Good One Express Canada Ltd. v. 1355930 Ontario Inc. <ul><li> This decision examines a contract of carriage that incorporates the Hong Kong Association of Freight Forwarding Agents' (&quot;HKAFFA&quot;) Standard Trading Conditions . </li></ul><ul><li>Facts: </li></ul><ul><li>     Plaintiff, an air freight forwarder, sued for payment on invoices for transportation of 224 cartons of goods from Hong Kong to Toronto. </li></ul><ul><li>   Although Defendant conceded that the invoices were not paid, it counterclaimed alleging the Plaintiff: </li></ul><ul><li>       breached its contract in increasing the fixed freight rate; and </li></ul><ul><li>       did not deliver all of the goods; and </li></ul><ul><li>     failed to ship the Defendant’s goods in a timely fashion. </li></ul>
    25. 25. Good One Express Canada Ltd. v. 1355930 Ontario Inc. <ul><li>Facts – continued . . . </li></ul><ul><li>Defendant argues that it had ordered goods for Christmas season and due to late delivery, sales were lost. </li></ul><ul><li>Certain goods were detained and others seized by Canada Customs. </li></ul><ul><li>Plaintiff had been transporting goods for the Defendant on a regular basis from Hong Kong to Toronto for two years. </li></ul><ul><li>Plaintiff, testified that the Defendant was kept apprised of rate fluctuations and that HKAFFA Conditions were set out on the back of each air waybill. </li></ul>
    26. 26. Good One Express Canada Ltd. v. 1355930 Ontario Inc. <ul><li>Facts – continued . . . </li></ul><ul><li>    Condition 19.6 by the HKAFFA made it clear that: </li></ul><ul><li>         Quotations are given on the basis of immediate acceptance by the Customer and are subject to withdrawals or revisions by the Company. Further, unless otherwise agreed in writing by the Company, the Company , notwithstanding acceptance of the quotations by the Customer, shall be at liberty to revise quotations or charges with or without prior notice in the event of changes occurring in currency exchange rates, rates of freight , insurance premiums or any changes applicable to the goods. </li></ul>
    27. 27. Good One Express Canada Ltd. v. 1355930 Ontario Inc. <ul><li>Facts – continued . . . </li></ul><ul><li>       The Plaintiff stated that goods coming to Canada are subject to Canada customs inspection. </li></ul><ul><li>      They are transferred in bond from the airport to the Plaintiff’s warehouse pending customs clearance. </li></ul><ul><li>      The Plaintiff testified that when the goods were cleared they were delivered to the Defendant. </li></ul>
    28. 28. Good One Express Canada Ltd. v. 1355930 Ontario Inc. <ul><li>Court Ruling: </li></ul><ul><li>   The Ontario Court enforced the HKAFFA Standard Trading Conditions. Held that the Plaintiff did not breach terms of its contract with the Defendant </li></ul><ul><li>The Court found that the Plaintiff was not responsible for the action of Canada Customs </li></ul><ul><li>The Plaintiff had no control over the activities of Canada Customs prior to its release of bonded goods </li></ul>
    29. 29. Valmet Paper Machinery Inc. v. Hapag-Lloyd AG , [2002] B.C.J. No. 1271 (B.C. S.C.) <ul><li>Facts: </li></ul><ul><li>Valmet Paper – Plaintiffs who purchased Winbelt Rewinder Frame and wanted to ship the 26, 460kg, $1.25M Frame from Helsinki to Port Alberni, B.C. </li></ul><ul><li>Frame was shipped on various vessels, remained undamaged until 10km short of arriving, it fell off the tractor-trailer unit owned by Davis. After which, completely damaged and useless. Valmet suing to recover value. </li></ul>
    30. 30. Valmet Paper Machinery Inc. v. Hapag-Lloyd AG , [2002] B.C.J. No. 1271 (B.C. S.C.) <ul><li>Facts: </li></ul><ul><li>Davis – Defendants who claimed responsibility and liability but seeking to limit liability based on provisions of the bill of lading with Hapag-Lloyd </li></ul><ul><li>Hapag-Lloyd - contracted Davis to carry the Frame overland from Vancouver to Port Albani, provided insufficient information and is now being charged with contributory responsibility by Davis </li></ul>
    31. 31. Valmet Paper Machinery Inc. v. Hapag-Lloyd AG , [2002] B.C.J. No. 1271 (B.C. S.C.) <ul><li>Issue: Is the Hapag-Lloyd bill of lading applicable in limiting liability? </li></ul><ul><li>Analysis and Conclusion: </li></ul><ul><li>Limitation clause indicated once Rewinder was unloaded at Port of Vancouver, the bill of lading ceased to apply </li></ul><ul><li>Careless completion of bill of lading as it was questionable as to whether the bill of lading was for ‘port-to-port’ shipment or ‘multimodal’ transport </li></ul>
    32. 32. Valmet Paper Machinery Inc. v. Hapag-Lloyd AG , [2002] B.C.J. No. 1271 (B.C. S.C.) <ul><li>Analysis and Conclusion: </li></ul><ul><li>Analysis of Himalaya Clause </li></ul><ul><li>Davis found to be not privy to contract between Hapag and Valmet hence no protection by limitation clause </li></ul><ul><li>Attempted to bring in Motor Carrier Regulations to limit liability but inapplicable in this situation </li></ul><ul><li>Although information transferred by Hapag was sparse, it was not causative of the loss and no fault for the condition of the trailer can be attributed. Judgment was only made against Davis. </li></ul>
    33. 33. CATHERINE PAWLUCH Partner Gowling Lafleur Henderson LLP Direct Phone: (416) 862-4371 Direct Fax: (416) 863-3471 E-mail: #6575272.1 Thank You