The Panama Canal - What Would International Trade be Without It?

I just returned from scuba diving in the beautiful reefs of Little Corn Island in Nicaragua. Since I was heading to Central America, I decided to stop in Panama to take a ride through the Panama Canal. It was awesome!

As I enjoy looking at large ships, seeing the multitude of vessels everywhere was fascinating to me. For a live view of the canal, click here.

SEA VICTORY VALLETTA - NYK DEMETER - MAERSK HONOUR SINGAPORE - NCC SUDAIR PANAMA - AS JUTLANDIA - these are just a few of the ships I saw while going through the canal!

Starting from the Pacific Ocean in order to cross to the Atlantic Ocean, we approached the canal and waited with many other boats for our turn to enter the canal at the Flamenco Station.

During this time, a Panama Canal Officer comes on board to both direct where to drop the anchor and to advise how long the wait will be. This is because on average, the wait can be up to 24 hours unless a reservation is made in advance for a specific date and time for entry in to the canal, which can be done up to a year and a half in advance.

Of course, a hefty premium must be paid for booking ahead of time, and in the event the ship arrives late – which is always a possibility with ocean transit - the toll is forfeited, payment to cross through the canal must be made again, and a ship must wait for its turn in the line up anyway. According to the tour guide, the average cost to transit through the canal for a commercial vessel is $120,000, with the most expensive crossing being $437,000 in 2009.

The cost of crossing the canal depends on a ship's weight and size, as well as the type of cargo it is carrying, and a captain must show the ship's manifest to a Panama Canal Officer to verify what type of cargo is on board. Dangerous cargoes, such as fertilizers or other chemicals, cost more as do cruise ships carrying people (since “people are the most valuable cargo” the tour guide explained).

For vessels who only have partial cargoes that need to cross through the canal, they have the option to dock at the port of Panama Ports Co. to unload only that portion of cargo and thereby save the cost and time of crossing.

For ships making the transit, once clearance to enter has been granted, a Panama Canal Pilot boards the vessel and takes over its control in order to navigate it safely though the canal’s locks. Every ship must have a pilot on it during the entire duration of the transit, and large vessels such as container ships or oil tankers must also hire a tug boat at a cost of $3,000 per hour. A tug boat is not optional but rather is a safety measure required by the canal operators.

The “locks” are steel gated chambers which fill with water in order to raise ships up 80 meters to a man made lake called Lake Gatun. It is roughly a 50 mile distance between the Pacific and Atlantic oceans and ships must ascend up 3 “steps” in order to get to the Lake, which is 0.5 miles wide and made from excavated land.

The first two (2) steps take you to the Miraflores Lock, with a third lock, the Pedro Miguel Lock, being the final third step before arriving at Lake Gatun. The journey requires three (3) steps up on the Pacific side, and three (3) back down on the Atlantic side.

It takes roughly 8 minutes to fill the chamber and unload it. For the average container ship, there is only 24 inches (that is, 12 in. on either side of the ship) for the vessel to fit in the chamber. To ensure that the ship remains safely in the chamber, electric “mules” (which sort of look like a modern day mini-version of a locomotive) are connected to either side of the boat for this purpose.

Ships are to use their own power to travel through the canal, so it is just a matter of maintaining a position where movement through the locks can be done without hitting the sides of the chambers, and thereby avoid causing damage to either itself or the canal locks themselves.

There are 46 boat transits that happen every 24 hours and 52 million gallons of water are required to fill the lock’s chamber each time a vessel goes into it. Water for the chambers is supplied by Lake Gatun and this water is thereafter released into the Pacific Ocean. As Panama has roughly 60 ft. of rainfall each year, it depends on this rain to provide water into Lake Gatun.

Interested in traveling there? Check out the company I went with called Panama Marine Adventures.

For more information on the history of the Panama Canal click here.

Questions/comments? Post below or email me at clark.deanna@gmail.com

New Requirements for Wine and Other Alcohol Importers and Wholesalers

I was doing some research on a wine region I particularly like called Rias Baixas which derives from both Spanish and Portuguese wine regions.

While red wine had traditionally been my preferred type of wine, the juicy white wines from this region have become my all time favorite. In so doing this research, I came across the following new regulation.

A new requirement for wine and other alcohol importers and wholesalers went into effect last month regarding the inclusion of certain corporate records when submitting an application to the government to operate as one of these entities.

Irrespective of the type of legal entity formed, i.e., corporation, partnership, etc., the submission of the following records is now mandatory:

1. Source of Funds Documentation
2. Trade Name Registration (if required by State or local government)

Also obligatory is the submission of additional organizational records, the requirements for which, vary depending on the entity’s type as follows:

Corporations:

* Articles of Incorporation and Certificate of Incorporation/Formation
* By-Laws
* Certificate to Operate in a Foreign State (if organized in a different state)

Partnerships:

* Partnership Agreement

Limited Liability Corporations (LLCs)

* Operating Agreement
* Articles of Incorporation and Certificate of Incorporation/Formation

While these rules went into effect on February 14, 2011, the federal agency, the Alcohol and Tobacco Tax and Trade Bureau (TTB) who enforces these rules, has granted a grace period through April 15, 2011 in order to allow businesses an opportunity to adapt to the new requirements.

For those who have submitted applications without the above documentation, TTB will grant the submission of such records through April 15, 2011. After this time, applications without these documents will be considered "incomplete."

To give a little background on TTB, it is the federal agency responsible for the labeling, advertising, and marketing of alcoholic beverages. TTB is also mandated to enforce the laws and write the regulations on the collection of alcohol, tobacco, firearms and ammunition excise taxes.

For more information on TTB regulatory compliance specific to wine click here and for those specific to importing or exporting wine click here.

For some nice images and to learn more about visiting this area, click here. (This is not an endorsement, though it is a nice website!) - Have I mentioned the Iberian peninsula is my favorite part of the world to spend time in?

Questions/comments? Post below or email me at clark.deanna@gmail.com

Importing Gray Market Goods – The Omega v. Costco Case

"Critical Implications of Costco v. Omega on the Gray Goods and the First Sale Doctrine" CLE Program is now available at lawline.com here

Lawline.com now has available a continuing legal education (CLE) course that I served as faculty on regarding a case that dealt with an importation of “gray market goods.” Specifically, it had to do with the Supreme Court’s December 2010 affirmance of the case heard in the 9th Circuit Court of Appeals entitled, Omega S.A. v. Costco Wholesale Corp., 541 F.3d 962 (9th Cir. 2008). (For more information on gray market goods, see my Dec. 20, 2010 post)

To give a little background, Omega, a popular high end watch company, is the owner of a “Globe” watch design that is registered with the US Copyright Office. It also has its trademark registered with the US Patent and Trademark Office.

Omega had a production of watches manufactured overseas that bore the Omega trademark and the copyprighted Globe design.

Costco thereafter purchased the foreign manufactured Omega watches bearing the copyright and trademark, and imported them into the United States for sale in its US stores at a price of $1,299, which was significantly less than Omega's US retail sales price of $1,995.

Costco did so however, without the authorization of Omega, which according to Omega, was in violation of the Copyright Act’s prohibition on unauthorized importations.

In its defense, Costco raised what is known under Copyright law (and not Customs law) as the “First Sale Doctrine.” This doctrine places a limitation on the exclusive rights of a copyright owner (19 USC §109a) which in this case is Omega.

Ultimately, the 9th Circuit Court of Appeals position was that using this defense was permissible only where the disputed copies of a copyrighted work were either made or previously sold in the US with the authority of the copyright owner. That is, Costco could not use it as a defense in this instance.

The Supreme Court agreed.

For an in-depth discussion on some possible implications of this decision on imports, check out our program on lawline.com by clicking here.

Questions/comments? Email me at clark.deanna@gmail.com or post below.