Distant Past or Future Trouble? Redefining Customary Trade Allowance in Maritime Oil Shortage Claims

By McCary, M. | The Review of Litigation, Winter 2001 | Go to article overview

Distant Past or Future Trouble? Redefining Customary Trade Allowance in Maritime Oil Shortage Claims


McCary, M., The Review of Litigation


Legal scholarship should promote rather than impede those market changes that will lead to improved technology and the modernization necessary to sustain a vibrant and healthy economy.

1. Introduction

Ship owners and carriers beware. Petroleum prices are on the rise.' Worldwide dependence on natural resources is climbing.' And with the increased costs of a barrel of oil come the watchful eyes of maritime cargo owners. A betting person would say it will not be long before courts and arbitral panels tackle yet another maritime oil shortage claim. Though an explosion of cases regarding the once hotly contested customary trade allowance is not likely to occur, confusion over its terminology will probably bubble to the surface of a future court opinion. Therefore, the legal community is wise to redefine this doctrine governing acceptable maritime oil loss levels.

Fifteen years ago the Third Circuit refused in Sun Oil Co. v. M/T Carlisle; to recognize a carrier's defense of customary trade allowance.4 The concept of customary trade allowance, advocated by the defendant in Sun Oil as an implied contract term, once permitted almost without question a carrier's unaccounted-for loss of one-half of one percent of its bulk cargo (.005 or 0.5%).5 But in Sun Oil, the Third Circuit declared that the customary trade allowance contravened policies outlined under the Carriage of Goods by Sea Act (COGSA).6

Today courts and arbitral panels are slow to apply the customary trade allowance to shield a carrier's liability.' Yet ruling panels continue to get bogged down in the legalese and muddled concepts of previous opinions.8 As history repeats itself, now is an appropriate time for the scholarly lighthouse to provide a beacon of clarification. A quick look at the impact of the customary trade allowance shows the importance of clarifying its terms.

Crude oil imports in the United States average approximately 8.2 million barrels per day (bpd).9 At approximately 24 U.S. dollars per barrel in 1999, corresponding daily contract values for this amount range as high as $196.8 million." Maritime shipping accounts for more than fifty percent of these U.S. crude oil imports." Although any individual maritime shipment is only a small percentage of this total, aggregate transactions play an important role in ensuring economic stability and certainty in business relations. Consequently, the numbers themselves tell the tale. If a 0.5% maritime customary trade allowance was inherent to every maritime contract, as critics of the Sun Oil ruling claimed,"2 it could permit an unaccounted-for loss of more than 20,500 barrels per day-a potential contractual value totaling more than $492,000.

In light of today's sweeping high-tech developments and market awareness, any trade custom that advocates a potential lack of accountability for more than 20,000 barrels per day of U.S. oil imports must be clarified."3 The legal framework governing petroleum transactions should be able to efficiently address the numerous issues arising from economic and technological changes in both the maritime and petrochemical industries. An efficient legal system cannot ambiguously address the terminology and concepts underlying the customary trade allowance.

This Article reflects on the Sun Oil decision and promotes clarity by advocating the replacement of customary trade allowance terminology with a total facts and circumstances test. It clears away the haziness surrounding the customary trade allowance doctrine by examining the historical evolution of the concept, discussing its application in other areas of trade, reviewing the modern developments in maritime cargo measurement, and examining some of the recent judicial and arbitral rulings. Together with a short analysis of contract clauses under contemporary charter party agreements, this Article justifies the reasoning behind the Sun Oil decision and argues that if courts and arbitral panels integrate "total facts and circumstances" terminology in future oil shortage claims, this will underscore the modern trends in oil shortage claims and sweep away the lingering judicial flotsam arising from previous discussions of customary trade allowances. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Distant Past or Future Trouble? Redefining Customary Trade Allowance in Maritime Oil Shortage Claims
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.