Article


by T.O. Lee

In my article in the previous DCInsight (Winter 2010), I discussed several criticisms of the UNCITRAL Convention on Contract for the International Carriage of Goods Wholly or Partly by Sea, commonly known as the Rotterdam rules (the Rules). In this, the second part of my article, I will point out several more articles in the Rules that practitioners should treat with caution.

Different provisions for carriers and goods

It should be noted that the provisions concerning "Carrier", "Goods", "Carriage under Charter Parties" and "On Deck Carriage" are not the same in the Hague Rules, the Hague/Visby Rules, the Hamburg Rules and the Rotterdam Rules.

In the Hamburg Rules, carriers are classified into an (a) "Actual Carrier" that provides the carrying vessel for sea transport or actual performance and (b) "Contrac ting Carrier" that does not provide actual performance but is named as a carrier in a house bill of lading issued by a freight forwarder. However, the contracting carrier is responsible for the acts of the actual carrier under the Hamburg Rules. In these Rules, goods include live animals and carriage on deck is allowed. Article 2 (3) in Part 1 of the Hamburg Rules does not cover carriage under charter parties in general, but does cover a bill of lading made between the carrier and the holder who is not the charterer.

In both the Hague Rules and the Hague/Visby Rules, the carrier "includes the Owner and the Charterer who enters into a contract of carriage with a Shipper". These two sets of rules also govern bills of lading issued under charter parties, but exclude live animals and goods actually carried on deck.

In the Rotterdam Rules, the carrier "means a person that enters into a contract of carriage with a Shipper". The carrier is not responsible for the carriage over land, although it also covers this kind of carriage. Goods "means the wares, merchandise, and articles of every kind whatsoever that a carrier undertakes to carry under a contract of carriage and includes packing and any equipment and container not supplied by or on behalf of the Carrier". Live animals are excluded with certain exceptions. On deck carriage is allowed. The Rules exclude carriage under charter parties, whether in whole or in part (i.e., space charters).

Transhipment, road and rail carriers

In through bills of lading involving transhipments, the first carrier that issues the bill of lading is responsible only for the first part of the sea carriage. Consequently, it is difficult for the consignee or holder to claim for any loss or damages made by the second carrier. Under the Rotterdam Rules, by contrast, it is much easier to claim on the second carrier, that has a new role as the "Maritime Performing Party".

Since the Rules do not cover carriage over land, the road/truck carrier (CMR) and rail carrier (CIM) are not parties in the Rules; hence, it is difficult for the shipper or consignee to claim on them.

Freight forwarders

Only a freight forwarder working for the carrier is bound by the Rules in the capacity of a "Performing Party". However, a freight forwarder working for the shipper, consignee or any "Controlling Party" other than a carrier is not a "Performing Party" and is not bound by the Rules. That means that forwarders working for the conglomerate buyers, such as WalMart in Asia, are not "Performing Parties". Instead, in a novel provision, they may be considered to be "Documentary Shippers" if they handle the shipments as a shipper on behalf of WalMart, for example. They may also act as the "Controlling Party" by giving instructions to the carrier on behalf of their principals. This would confer on them a legitimate position, but in exchange they have to take on new responsibilities under the Rules.

The container depots, CY and CFS

In the past, the container yard (i.e., CY handling FCL shipments) and the container freight station (i.e., CFS handling LCL shipments) were not parties to a contract of carriage by sea. Now, under the Rules, they become a "Performing Party" after their "receipt, loading, hand ling, stowage, unloading or delivery of the goods at the Carrier's request". This means the shipper, consignee or holder of a transport document may sue them directly under the contract of carriage.

Sea-worthiness and cargo-worthiness

Under the Hague Rules and the Hague/ Visby Rules, the carrier is held responsible for the seaworthiness and cargo-worthiness of the carrying vessel only for the short period "before and at the beginning of the voyage", so that after the vessel has set sail, the carrier is no longer responsible for either of the two. Consequently, any loss of or damages to the goods thereafter would be treated as "Acts of God", which the insurer, not the carrier, has to cover.

Conversely, under the Rotterdam Rules, the carrier's responsibilities to exercise due diligence for seaworthiness and cargo-worthiness are extended to cover the whole voyage by sea, "before, at the beginning of, and during the voyage by sea ... ".

Electronic transport records

Under the Rotterdam Rules, the shipper has the option to request that electronic transport records be issued in lieu of paper transport documents and vice versa. Moreover, the electronic transport records can be in negotiable form.

The "Maersk Clause"

In some seaports, a carrier has to surrender the goods to the customs authorities upon demand before making delivery to the consignee. As a result, Maersk Line introduced a new clause in its bill of lading to allow such delivery where necessary. This clause may be refused by some banks in letter of credit operations. Some L/C experts contend that the clause should not be the basis for refusing payment, because document checkers are not required to check the terms and conditions of carriage. The ICC Banking Commission did not take a position on the question, because no consensus could be reached from ICC national committees.

However, under the Rotterdam Rules, "Maersk Clause" delivery is allowed. Some bankers may argue that such a bill of lading is not acceptable because it is no longer a negotiable document of title. Since some bills of lading in future may be subject to the Rotterdam Rules, this could force the ICC Banking Commission to take a position on the clause.

Carriers responsible only for sea leg

Even though the Rules also cover carriage by land, under them the carrier is not responsible for any other mode of carriage except for that by sea. Transport over land is subject to local law that may differ from one country to another. If such carriage over land covers more than one country, then more than one applicable law may apply, making claims much more complicated. Moreover, it can be difficult to determine in which of these countries the loss or damages has actually occurred.

Charter parties

The Rules mainly cover liner carriage and are not applicable to sea carriage under charter parties or "space charter" (where only part of a ship is hired). It is possible that a charter party bill of lading subject to the Rotterdam Rules would be discrepant under UCP 600, though the UCP is silent on this issue. The future revision of ISBP may not deal with this issue because, under the UCP, terms and conditions of carriage need not be checked by document checkers.

Transport documents

Under the Rules, a "transport document" is a document issued by a carrier or a performing party (performing at the request of and for the carrier only, not retained by the shipper or the consignee) evidencing (a) receipt of goods and (b) a contract of carriage. In this sense a forwarder's cargo receipt (FCR) or for warder's certificate of transport (FCT) issued by a freight forwarder (similar to a "Contracting Carrier" under the Hamburg Rules) is not a transport document. This is consistent with the opinions of the ICC Banking Commission.

However, sub-article 14 (l) of UCP 600 allows a freight forwarder to issue a transport document as a carrier (covering a house bill of lading acting as a "Contracting Carrier" and retained by the shipper or the consignee, other than as a true "Performing Party" working for the "Actual Carrier"). This UCP 600 provision is different from the equivalent provisions in the Rules that do not cover house bills of lading issued by a control ling party. Consequently, when parties use the term "transport document" in their contracts or correspondence, to avoid confusion they may have to clarify their intent, as to whether the document is based on the Rotterdam Rules or the UCP 600. For prudence sake, if house bills of lading (that may be subject to the Rotterdam Rules) are not acceptable, sub-article 14 (l) of UCP 600 could have to be modified (replacing "Carrier" with "Performing Party" or "Maritime Performing Party" (as the case may be) under the Rotterdam Rules) to avoid inconsistency with these Rules.

T. O. Lee (FAE MCIArb MITD) was a member of UCP 600 Consulting Group, is a Fellow of the Academy of Experts, Gray's Inn, London and a member of the UN International Multimodal Transport Association, Geneva.
His website is www.tolee.com