Carriage of Goods by Sea Contracts Dr. Iva Savić Department for Maritime and Transport Law Zagreb, April 9 2018

The background „It is well-known that Bills of Lading (hereinafter referred to as B/L) are treated as the documents of title; and the buyer takes delivery of the cargo by presenting the original B/L to the carrier. That is to say, before being fully paid, the seller should take control of the original B/L. In most circumstances, the B/L is issued by the carrier, and then be transferred to the seller by the cargo forwarder.

Understanding „… Nevertheless, under an FOB contract, the cargo forwarder is entrusted by the buyer, commonly in form of an agent-principal contract…In such circumstance, the FOB buyer is the contractual shipper, and the actual shipper shall be the FOB seller.” In 2015, the Supreme People’s Court held a judgment analyzing the issue above (2015) Min Ti Zi No. 19.”

Seller (consignor) Contract of Sale Buyer (consignee) Incoterms® Shipper Freight Forwarder Consignee Carrier

International Framework (i) International Convention for the Unification of Certain Rules of Law relating to Bills of Lading ("Hague Rules"), and Protocol of Signature, 1924 Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading ("Visby Rules"), 1968 („Hague-Visby Rules”) Protocol (SDR Protocol) amending the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading of 25 August 1924 (The Hague Rules), as amended by the Protocol of 23 February 1968 (Visby Rules), 1979

International Framework (ii) United Nations Convention on the Carriage of Goods by Sea ("Hamburg Rules"), 1978 United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the "Rotterdam Rules"), 2008 More information and texts available at: http://www.admiraltylawguide.com/interconv.html http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/2008r otterdam_rules.html

International framework – scope of aplication Hague Rules (1924) Hague-Visby Rules (1968) Hamburg Rules (1978) B/L issued in a state party Only for transport that includes issuing of B/L B/L issued in a state party Port of loading in a state party Only if agreed in the contract Port of discharge in a state party B/L or other transport document issued in a state party

National legal framework Maritime Code (Pomorski zakonik); art. 447-597 > national transport (Croatia) Contracting parties* carrier: shipowner/charterer - obligation to carry goods by sea consignor (shipper) – pays the freight Carriage „users”:person who has certain expectations from the carrier Elements of the contract: Object of carriage (type, volume) Voyage specification (mandatory, optional) Carriage by vessel Freight payment

Seller (consignor) Contract of Sale Buyer (consignee) Incoterms® Shipper Freight Forwarder Consignee Carrier

Basic procedure - documentation (i) Cargo interest => including freight forwarder, shipper … Shipper’s (agents’) inquiry with regard the available cargo space Cargo Booking Note – carrier’s confirmation on available cargo space Shipper’s Note – loading disposition Information on the cargo volume, type and designation Shipper liable to carrier for the provided information Shipping Order – cargo to be loaded onto vessel Mate’s Receipt – confirmation that the cargo has been loaded BILL OF LADING

carriage Pre-Carriage, Carriage, Post-Carriage

Basic procedure – pre-Carriage (i) Ensuring the vessel readiness for voyage Due care until the commencement of voyage Seaworthiness Cargoworthiness Loading and carriage preparations Including the presence in loading port (safe port) Ensuring the docking space (Liner trade – carrier’s responsibility; Tramp trade – shipper’s responsibility) Notice of Readiness – Laytime commencement

Basic procedure – pre-Carriage (ii) Loading of cargo Statement of Facts (time sheet) Laytime – cost included in freight Reversible Laytime (both the loading and destination port) Demurrage – cost not included in freight (Exceptional demurrage – due to newly arrived cargo) Despatch – time saved Risks and Costs – determined by contract (i.e. through Incoterms)

Basic procedure – Carriage Carriage of cargo Due care with regard to the cargo Voyage – as contracted or customary Possible to change the destination port (consignee’s interest) Deviation – if justifiable Cargo discharge and delivery To the authorized consignee If B/L issued > to the authorized consignee (duty to receive) If no B/L > to the person nominated as consignee in the contract > If no person nominated – consignor is the consignee

Basic procedure – discharge and Delivery Possible situations: Consignee not responding or present Consignee cannot be located Consignee unable to receive the cargo More persons are claiming to be the rightful consignee What then?

Basic procedure – Unloading and DElivery (iii) Carrier is under an obligation to: Seek instructions from consignor If instructions not given or unenforceable – at the end of demurrage the carrier is entitled to unload the cargo and store it (personal storage or contracted storage) Right of retention – including the right to sell the goods in order to settle the freight and related costs

Case law EXAMPLE (i) Undisputed facts Issued Bill of Lading, carriage of jute (natural fiber) from Calcuta (India), via Rijeka (Croatia), to Valparaiso (Chile; port of delivery per B/L) Goods discharged at San Antonio (Argentina; usual port of discharge*) First stored in customs warehouse, then carried by road to Valparaiso Both customs and road carrier declared the goods damaged

Case law EXAMPLE (ii) Disputed facts Whether the carrier has notified the consignee of the discharge Whether the carrier is liable until the goods are delivered to the port of delivery Whether the carrier can limit his liability in case he is held liable for the breach of contract

Case law EXAMPLE (iii) First and second instance courts Carrier liable for the cargo until delivered at the B/L stipulated port of delivery Carrier in breach of the contract Did not deliver the undamaged goods to the port of delivery Carrier’s liability not affected by the fact that the cargo on that route is usually discharged at a different port and then carried by road Unless specifically agreed by the parties, consignee has a duty to receive the goods at the port of delivery “Notify address” that the goods are discharged at the port of discharge does not affect this general obligation Consignee was never actually notified

Case law EXAMPLE (iv) If the cargo is stored at the port of discharge, carrier is liable both for the choice and work of the storekeeper Carrier did not follow the specific rules with regard the storage of goods Carrier had previous knowledge of the warehouse capacity in port of discharge (scarce closed facilities) Thus, his conduct constitutes not just a breach of due diligence, but also a breach of general duty of reasonableness and fairness, as well as a duty to act in accordance with fair trade customs

Case law EXAMPLE (v) Carrier found liable for the damage and was not allowed to limit his liability Carrier knew that the closed storage capacity is small, and that, therefore, the discharged goods will be kept in open (based on previous experience) Carrier knew that the nature of the goods demands closed storage in order to prevent the goods from being damaged Carrier knew that keeping the goods in open creates a real and high possiblity of damage occuring The courts found that the carrier knew and had to know that the damage will most probably occur, and nevertheless acted in a way that obviously exposed the goods to the danger and the subsequent damage

Contract termination Contract Fulfilment Ex lege (Vis Major caused inability to perform the contract) Mutual agreement Individual choice by each party to a contract (Consignor or carrier)

Documents Carriage Documents

Basic documents Bill of Lading (B/L) Seaway Bill E-commerce Other transportation documents

Bill of Lading (i) Confirmation that the goods have been accepted for carriage Obligation to deliver the goods to the consignee Proof that the contract of carriage exists (and its main features)* Negotiable document Issued and signed by the Master of Vessel or Agent, based on shipper’s instructions and on shipper’s request, after the loading has finished One or more originals

Bill of Lading (ii) – Main types Time of Issuance Loaded – standard Accepted for Loading (typical for liner trade, goods delivered to the carrier prior to the arrival of vessel, followed either by a new B/L, or a „loaded” clause in the original B/L) Port B/L – goods accepted in loading port, vessel already in the port Assignment On Name – named consignee On Order On Delivery

Evidentiary effect Hague Rules (1924) Hague-Visby Rules (1968) Hambrug Rules (1978) disputable (always) disputable BUT Conclusive when in hands of a conscientious (diligent) third party holder (different rules on signature)

Bill of Lading (iii) – Main types Clean B/L – no annotations Relevant for consignee in a good faith Goods accepted as entered into the B/L Relevant for banks, insurers and buyers Foul B/L – with annotations (marginal clauses) If justifiable doubt with regard the shipper’s note OR when no reasonable possibility to check the validity of data in the shipper’s note If data on cargo unclear or not enduring Guarantee Letter Shipper liable to carrier for carrier’s liability towards the consignee and other interested parties

Seaway bill Confirmation of receipt of goods for carriage Presumption that the contract of carriage has been signed into Non-negotiable, only On Name, one original follows the goods, issued by carrier