Week 6 – Conventions Governing Carriage of Goods by Sea and Bill of Lading PDF

Week 6 – Conventions Governing Carriage of Goods by Sea and Bill of Lading Prepared by Dr. Kelvin Pang 19 September 2024 Learning Objectives 1. Understand the international conventions governing the contract of carriage by sea. 2. Explain what is a bill of lading. 3. Understand when and who to...

Week 6 – Conventions Governing Carriage of Goods by Sea and Bill of Lading Prepared by Dr. Kelvin Pang 19 September 2024 Learning Objectives 1. Understand the international conventions governing the contract of carriage by sea. 2. Explain what is a bill of lading. 3. Understand when and who to issue a bill of lading. 4. Discuss the functions of a bill of lading. 5. Describe the types of bill of lading. 6. Describe other transport documents in the carriage of goods. School of Civil and Environmental Engineering 1. Introduction School of Civil and Environmental Engineering 1. Introduction School of Civil and Environmental Engineering 1. Introduction School of Civil and Environmental Engineering 1. Introduction United Nations Convention on Contracts for International Sale of Goods (CISG) creates uniform law for international sale of goods. Bridges gap between different legal systems, i.e., civil law (French/German) and common law (English and American). Governs formation of contract, rights and obligations of buyer and seller incl. remedies. Came into force 1 January 1988. School of Civil and Environmental Engineering 1. Introduction Carriage of goods by sea regulated by a legal framework comprising international and domestic laws. E.g., In Singapore, Hague-Visby Rules (International) incorporated into Carriage of Goods by Sea Act and Bills of Lading Act (both domestic). Objective – protect the interests of shipper who may not have a choice but to accept any term imposed by carrier. Carriers protected by limitation of liability and certain defences. School of Civil and Environmental Engineering 1. Introduction Sale of goods in transit accompanied by transfer of bill of lading (B/L). Terms of contract of carriage and transfer of B/L directly related to the contract of carriage between shipper and carrier. Payment mechanism, usually by letter of credit (L/C) relates to sale and purchase contract between seller and buyer. School of Civil and Environmental Engineering 1. Introduction School of Civil and Environmental Engineering  LO 1 2. Conventions Governing Carriage of Goods by Sea School of Civil and Environmental Engineering 2. Introduction to Different Conventions (REMEMBER THE YEARS!!!!!) Rules set out minimum terms and conditions which carriers must adhere to so that shippers would not be disadvantage. Aims to regulate international carriage. Conventions control cargo claims that occur from commencement of loading to completion of discharge. School of Civil and Environmental Engineering 2. Introduction to Different Conventions Different jurisdictions ratified different conventions. (try to remember number of countries that ratified rules) Some have not ratified any convention (E.g., China) whilst others enacted domestic Conventions laws of Number inCountries line with Ratified one of the conventions. E.g., USA. Hague Rules 58 Hague-Visby Rules without SDR 7 Protocol Hague-Visby Rules amended by SDR 25 Protocol Hamburg Rules 35 School of Civil and Environmental Engineering 2.1 Hague Rules Before WWI, shipowners enjoyed dominance over shippers. Excluded themselves from all liability for loss or damage to cargo. After WWI, international community recognised need to address this imbalance. Maritime nations vs trading nations. School of Civil and Environmental Engineering 2.1 Hague Rules Brussels Convention of 1924 gave birth to Hague Rules. Objective – establish minimum mandatory liability of carriers. Adopted by nations such as Argentina, Bahamas, Cyprus. Many inherent weaknesses. School of Civil and Environmental Engineering 2.1 Hague Rules - Weaknesses 1. Scope of application and conflict of laws “The provisions of this Convention shall apply to all bills of lading issued in any of the contracting states.” Hague Rules apply to outbound shipment, i.e., from port of contracting states to a foreign port. Inward shipment, i.e., shipment from any port outside contracting states to any port in contracting states, do the rules apply? School of Civil and Environmental Engineering 2.1 Hague Rules - Weaknesses 2. Maximum limit of carrier’s liability is too low Limits liability of carriers to 100-pound sterling per package or unit or equivalent in other currency. If shipper make declaration of value, carrier’s liability is limited to the higher declared value. School of Civil and Environmental Engineering 2.1 Hague Rules - Weaknesses 3. Not compatible with container transport Containers may contain numerous packages/units, hence containers cannot be considered as a package/unit itself Hague Rules silent on the interpretation of ‘package or unit’. Important to ascertain whether whole container or each of the individual cargoes constitutes a ‘package or unit’. School of Civil and Environmental Engineering 2.2 Hague-Visby Rules 1968 Brussels Protocol brought Hague Rules more in line with needs of changed world. Amended Hague Rules now known as ‘Hague-Visby Rules’. Further amendments in 1979 to the Special Drawing Rights (SDR) unit. → calculate compensation. School of Civil and Environmental Engineering 2.2 Hague-Visby Rules Value of SDR measure in terms of USD/ounce of gold until 1974. Since July 1974, SDR defined in terms of basket of 5 major currencies chosen based on how important and widely traded. Review every 5 years. School of Civil and Environmental Engineering 2.2 Hague-Visby Rules - Reforms 1. Territorial application School of Civil and Environmental Engineering 2.2 Hague-Visby Rules 2. Carrier’s maximum liability School of Civil and Environmental Engineering 2.2 Hague-Visby Rules 3. Compatibility with container shipping Incorporate a container clause to recognize containerization. School of Civil and Environmental Engineering 2.3 Hamburg Rules Report requesting for revision of Hague Rules by United Nations Conference on Trade and Development (UNCTAD) published in 1971. Adoption of new convention, ‘Hamburg Rules’ aims to replace fairly outdated Hague-Visby liability regime. Did not succeed in unifying various national regimes. School of Civil and Environmental Engineering 2.3 Hamburg Rules Little significance in international shipping as leading shipping nations did not ratify and adopt Convention. Endorsing states are mostly developing countries and many are landlocked countries. E.g., Nigeria, Cameroon, Chile, Kazakhstan. Total share in world maritime trade estimated at about 5%. Perceived as a cargo-oriented liability regime – opposed by insurance companies and carriers. School of Civil and Environmental Engineering 2.4 Rotterdam Rules Next attempt to modernize and harmonise existing liability regimes. Rotterdam Rules capable of replacing other rules and turn into a single and uniform international code. Eliminates many of the defences which protected carriers and crew from liability. Need 20 countries to ratify to be effective but only 5 countries have done it. School of Civil and Environmental Engineering 3. Bill of Lading (B/L) School of Civil and Environmental Engineering  LO 3. Bill of Lading (B/L) 2 “a document which evidences a contract of carriage by sea and the taking over and loading of the goods by the carrier and by which the carrier undertakes to deliver the goods against the surrender of the document” School of Civil and Environmental Engineering  LO 3.1 When and Who to Issue B/L? 3 Shipp er/ Carri seller er Consignee/ buyer/ Cargo receiver flow B/L flow Payment flow School of Civil and Environmental Engineering 3.1 When and Who to Issue B/L? 1. Seller loads cargo into the carrier’s ship. 2. Master or his shipowner’s appointed agent issues three original copies of B/L to the seller. 3. Seller passes B/L to buyer in exchange for payment. 4. Buyer produces B/L at the destination port in exchange for the cargo. School of Civil and Environmental Engineering 3.1 When and Who to Issue B/L? Q1. If the cargo, after being loaded onto the ship and sent to designated point, differs from that describe in the B/L and also in the contract between seller and buyer, who should the buyer sue for remedies? Answer: → seller for breach of sale and purchase contract → shipowner for issuing an inaccurate B/L School of Civil and Environmental Engineering 3.1 When and Who to Issue B/L? Q2. If cargo loaded onto the ship in the right condition as stated in the B/L but was subsequently damaged whilst in transit on board the ship, who should the buyer sue? Answer: → shipowner for not performing his duty of care of ensuring goods arrive in the same condition as it was loaded School of Civil and Environmental Engineering  LO 3.2 Functions of B/L 4 1. Receipt of goods shipped Acknowledges receipt of the cargo by the carrier. Provides information about: → name of vessel; → port of loading/discharge → description of the cargo; → name of shipper → quantity received; → date shipped on board → shipper’s declared value (if any) → apparent condition at the time of receipt or shipment. School of Civil and Environmental Engineering 3.2 Functions of B/L 1. Receipt of goods shipped Signed by master or agent. Binding on carrier so that carrier will not be allowed to adduce evidence to rebut it. Ordinarily state cargo received in ‘apparent good order and condition (unless otherwise stated herein)’. School of Civil and Environmental Engineering 3.2 Functions of B/L 2. Document of title to the cargo being shipped Allows B/L to be sold and resold by its Yanbu Crude Oilholder while the goods are in transit Qingdao Terminal on board in the ship. Port Saudi Arabia She Exx BP ll on School of Civil and Environmental Engineering 3.2 Functions of B/L 2. Document of title to the cargo being shipped By issuing B/L, carrier gives an open undertaking that it will deliver the goods at the destination port against the presentation of the B/L. Undertaking link to two functions: (i) conferment on holder of B/L the immediate right to possession of the goods from the carrier. (ii) transferability of the bill. School of Civil and Environmental Engineering 3.2 Functions of B/L 2. Document of title to the cargo being shipped Holder of the bill need not necessarily be owner of the cargo. Buyer may commonly pledge the B/L to a bank that finances the purchase. Bank will, in the right of constructive possession, collect and sell the cargo or sell the B/L if the buyer defaults or becomes insolvent. School of Civil and Environmental Engineering 3.2 Functions of B/L 3. Best available evidence of contract of carriage B/L is evidence (only) of the contract of carriage. Never the contract. Actual contract between shipper and carrier would have been concluded before B/L came into existence. School of Civil and Environmental Engineering  LO 5 4. Types of Bill of Lading (B/L) School of Civil and Environmental Engineering 4. Types of B/L a. Clean B/L Each B/L states ‘in apparent good order and condition’ > refers to cargo. If statement not modified by shipowner (S/O), B/L regarded as ‘clean’ or ‘unclaused’. By issuing clean B/L, S/O admits his full liability under law. Favoured by banks for financial settlements. School of Civil and Environmental Engineering 4. Types of B/L b. Claused B/L If the S/O doesn’t agree with any of the statements made in the B/L, he may add a clause to this effect. Cause B/L to be termed as ‘dirty’ or ‘claused’ B/L. Reasons include: unprotected machinery; wet or stained goods. Unacceptable to a bank. School of Civil and Environmental Engineering 4. Types of B/L c. Stale B/L B/L presented to the consignee or his bank after the goods are due at the port is known as ‘stale’ B/L. Cargo cannot normally be delivered by S/O without B/L. Late arrival of B/L may have undesirable consequences, i.e., delays to release of cargo. School of Civil and Environmental Engineering 4. Types of B/L d. Through B/L Only one mode of cargo movement but has different legs, i.e., sea and inland waterways. e. Multimodal B/L Covers at least two modes of transport. E.g., ocean + rail or ocean + road. Carrier can sub-contract part of the transportation journey. School of Civil and Environmental Engineering  House B/L Ocean B/L 4. Types of B/L Custom er Freight Shippin Custom forward g er f. Ocean/Master and House B/L Custom er er compan y Often freight forwarder consolidates goods into a full container load (FCL) and sends to shipping line. Shipping line issues a ‘ocean’ or ‘master’ B/L – shows a number of consignments of groupage. Forwarder issues a ‘house’ B/L to respective customers. School of Civil and Environmental Engineering 4. Types of B/L g. Straight B/L Non-negotiable. Used when goods are paid in full and must be delivered to the name consignee. h. Order B/L Negotiable. Issued when goods purchased on credit and shipment being handled through a bank. School of Civil and Environmental Engineering  LO 6 5. Other Transport Documents School of Civil and Environmental Engineering 5. Other Transport Documents 1. Mate’s receipt Neither evidences contract nor is it a document of title. Mate’s receipt evidences that the carrier has taken possession of the goods. An interim document as it serves as a basis for the preparation of B/L on behalf of the shipper. After carrier dates and signs B/L, shipper return the mate’s receipt in exchange. School of Civil and Environmental Engineering 5. Other Transport Documents 2. Sea waybill Identifies the person to whom the carrier has to deliver the cargo. Consignee not required to produce waybill to the carrier to receive goods. Normally issued for cargo that is not likely to be resold while afloat (e.g., container trade). School of Civil and Environmental Engineering 5. Other Transport Documents 2. Sea waybill Solves problems associated with cargo arriving at the port of discharge before B/L. → carrier could not deliver goods without the production of a bill of lading. → may cause considerable delays, extra costs, and port congestion. → problems usually on short-distance routes like North Sea or Baltic Sea area. School of Civil and Environmental Engineering School of Civil and Environmental Engineering 5. Other Transport Documents 3. Delivery order Necessitated when bulk cargo under a B/L has to be sold by seller or resold by buyer, to several buyers in different quantities or weight. B/L covers bulk cargo as a single consignment and underlying contract may provide issuance of delivery orders. Delivery order does not assume any of the three characteristics of B/L. Contains instructions to the delivery of the cargo. School of Civil and Environmental Engineering Key Words/Terms Shipper Hague Rules Carrier Hague-Visby Rules Charterer Rotterdam Rules Owner Hamburg Rules Sales of Goods INCOTERMs Special Drawing Rights Carriage of Goods (SDR) by Sea Act Bill of Lading (B/L) Letter of Credit Freight forwarder (L/C) Sea waybill School of Civil and Environmental Engineering Next Week Carriers’ obligations, liabilities and limitations under Carriage of Goods Act. School of Civil and Environmental Engineering