Admiralty_Davies_Fall_2019.docx - ADMIRALTY I PROFESSOR DAVIES I CARRIAGE OF GOOD A Carriage Under Bills of Lading 1 Historical Introduction Admiralty

Admiralty_Davies_Fall_2019.docx - ADMIRALTY I PROFESSOR...

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Unformatted text preview: ADMIRALTY I PROFESSOR DAVIES I. CARRIAGE OF GOOD A. Carriage Under Bills of Lading 1. Historical Introduction Admiralty Terms (a) Contracts of carriage / contracts of affreightment >>> contracts to transport cargo from one place to another (b) Players in the waterborne transport owners >>> the persons who own commercial vessels; charterers >>> persons who contract to use the carrying capacity of a vessel owned by another; shippers >>> persons who want their goods transported from one place to another (seller); consignees >>> persons who are entitled to receive the goods after they have been discharged from the carrying vessel; freight forwarders >>> transportation specialists who assist shippers by arranging for the transport of their goods; (NVOCC) nonvessel operating common carriers >>> person who untertakes to transport goods of shippers as though they had their own vessels but who, in reality, contract with owners or charterers of vessels to actually perform the transportation function. (c) Cost: both parties will probably pay about the same amount for carriage. However, the importer generally passes the coast on to the consumer. (d) Insurance: (i) Accident (ii) 1st Party Carrier: either party may obtain, and the cost gets passed on to the consumer. (iii) Benevolent Carrier: pay the insurance and freight yourself (then pass the cost on). (e) CIF: (Cost, Insurance, Freight) The exporter (supplier) pays insurance and freight to the specified destination. (a) FOB: (Freight on Board) Risk of any loss / damage passes from the seller to the buyer when the goods pass the ship’s rail at the port of loading. (b) Charter: Used when you have and entire ship-load: (i) Voyage charter party: charter for just one trip (i.e. taxi). (ii) Slot Charter: ex. chartering 100 cargo spaces (iii) Time Charter: Charter for a period of time, not just one voyage. It is up to the TC to find work for the ship. (iv) Demise/Bareboat Charter: Charter gets the “bareboat.” (Only vessel no crew) (h) Liner Service: ship that follows the same route over & over. (a) Tramp Service: roams from port to port on different jobs. (b) Bill of Lading: (i) serves as a receipt by the carrier that it has received the goods; (ii) embodies the K of carriage >>> contains K terms & conditions; (iii) document of title as well as document of delivery >>> whom and where to deliver. (k) Functions of carrier: (i) Navigational 1 (ii) Commercial (l) Non-Vessel Operating Common Carrier: carrier does not own or operate the vessel. It subcontracts out to an operating carrier. (a) Letter of Credit: Essentially, a promise from a bank to pay you for the bill of lading. Seller -------- Buyer (sales contract) Seller --------- Carrier (transporter) >>> carrier undertakes to deliver the goods on the Seller’s behalf to the Buyer (contract of carriage) Seller has now become the shipper, who arranged for the transport of the goods Buyer has now become the cosignee Carrier who has contracted to deliver the goods to the buyer-cosignee Bill of lading >>> a document issued by the carrier when the goods have been received by it for transport from one port to another. 2. Legislation >>> In U.S, carriage of goods by sea is governed primarily by three statutory regimes: The Harter Act 46 USCA 30702-30707, Pg. 3 2 COGSA 46 USCA 30701, pg. 6. The Federal Bills of Lading Act (the Pomerane Act) Note: U.S. have adopted the Hague Rules BUT HAVE NOT adopted the Visby Amendments 3. BILLS OF LADING 1. EXAM TIPS: (a) First, you must establish the regime applicable; (b) Then the identity of the parties. 2. Definition: a document which is signed by the carrier or its agent acknowledging that goods have been shipped on board a specific vessel that is bound for a particular destination and stating the terms on which the goods are to be carried. (a) Generally, whoever has provided credit for the deal has the BofL. 1. 3 Functions: (a) a formal receipt and acknowledgment that the goods of a certain kind, quantity, and condition have been handed over for shipment. (b) a memorandum of the contract of affreightment concluded between the carrier and the shipper. It is only evidence of the K. The actual K is formed before the issuance of the BoL. (c) a document of title to the goods themselves which enable the shipper to sell them by endorsement and delivery of the BoL (i.e. DELIVERY INSTRUCTIONS): (i) Negotiable: (“TO ORDER of a cosignee”) may be delivered to any person who presents the BoL. A person to whom the bill is negotiated acquires title to the goods, and the carrier who issued the bill becomes obligated to the person to whom the bill has been negotiated to hold the goods under the terms of the bill as if the carrier had issued the bill directly to that person. Carrier will be liable for mis-delivery. Reason why Order is still paper is so carrier still has it. (ii) Non-negotiable: (“STRAIGHT BoL” or “Sea-Way bill” >>> the goods are to be delivered to a consignee) consignee is 1 particular name to be delivered to. (no original needed, usually it is in electronic form unlike an “TO ORDER” which is still in Paper). Must contain the words “Non [or] Not-negotiable” on its face. Note: through bill of lading: for multimodal operators that take goods from door to door, on land and sea (Freight Forwarders, Sea Carriers now doing this) 3. Typical Contents: (a) names of shipper & consignee; (b) description of goods (i.e. shipping marks for i.d. purposes); (c) stipulations for payment; (d) details of the condition of carriage. 4. Private Carriage: 3 (a) Pomerene, COGSA, and Harter do not apply. (b) BofL may only serve as a receipt. 5. Common Carriage: (a) Constitutes a receipt & evidence of the K of carriage. 6. Interpretation: (a) Provisions strictly construed against the issuer or draftsman. (b) Separately negotiated or added terms will prevail over the printed form of the K. (c) BoL terms may supersede an earlier terms or agreements negotiated between the parties unless specifically preserved in the BoL. JCB SALES v. WALLENIUS LINES, p. 13 Facts: (i) there was damage to a machine and equipment being shipped. (ii) there was no BofL, only a data freight receipt, which is not a document of title; (iii) parties agreed that Hague would govern the document. Issue: (i) What law governed the DFR (SeaWaiver)? (COGSA? Hague Visby Rules?); (ii) Are DFRs contracts of carriage under COGSA? (iii) Did the parties intend to apply the higher limit under the Hague Rules? Court’s analysis: COGSA limits liability in the event of damage to or loss of cargo to $500 per package or per customary freight unit UNLESS the nature and value of such goods have been declared by the shipper before shipment and inserted in the BofL; Hague Visby Amendments increased the liability to the higher of the equivalent of 10,000 francs per package or unit or 30 francs per kilo of gross weight of the goods; Because US have not ratified the Visby Amendments the $500 liability controls in cases where COGSA applies. Court said that COGSA was N/A because the DFR was not a document of title. COGSA only applies to BoL’s and other similar documents of title. COGSA applies to all contracts for carriage of goods by sea to or from ports of the US in foreign trade. It regulates rights and liabilities under every BofL or similar document of title which is evidence of the contract of carriage. However, in this case, it did not matter whether the DFRs are bill of lading covered by COGSA because even if Visby (which the US has not adopted) is applied here, it does not offend COGSA because COGSA states that you may increase liability, but not decrease it >>> by agreement between the carrier and the shipper another maximum amount may be fixed; in no event the carrier shall be liable for more than the amount of damages actually sustained. 4 Thus, if the Hague Visby Rules were into the contract of carriage, that constituted an agreement under COGSA. The parties’ agreement to apply the higher liability under the Hague Visby Rules does not offend COGSA. 7. POMERENE BILLS OF LADING ACT >>> The Pomerene Act applies to bills of lading covering interstate transport and shipments departing from U.S. ports in the foreign trade. >>> It applies to water transports and to overland transport. >>> Does not apply to bills of lading issued for shipments inbound to U.S. (a) §80113(a): carrier issuing a BoL is liable for non-receipt of any part of the goods described in the BoL by the date shown OR for misdescriptions contained in the bill of lading. (b) §80113(b): Common Carrier is not liable: (i) when goods are loaded by the shipper; and (ii) when the BoL: (1) describes goods in terms of marks or labels or in a statement about kind, quantity or condition; or (2) is qualified by “contents of packages unknown,” “said to contain,” or “shipper’s weight, load, and count” or other words that indicate that the carrier is relying on shipper’s representations (shipper must show proper loading) (iii) to the extent carrier does not know whether any part of the goods was received or conform to the description. Note: Where goods shipped in a bulk are loaded by a shipper who makes available to a common carrier the means for weighing the goods, a request by the shipper for the carrier to make a determination of the kind and quantity of the goods precludes the carrier from subsequently qualifying the bill of lading by the insertion of such terms as “shipper’s weight.” In cases where the goods are loaded by a common carrier, the carrier is obligated to count the packages or determine the kind and quantity of bulk cargo >>> here, the insertion by the carrier of some qualification as “shipper’s weight” has no legal effect except for goods concealed in packages. C. HARTER ACT (§ 46 USC 190, et seq.) 1. Application: (a) K’s of carriage (transportation of goods by water) between U.S. ports and foreign ports and inland (between U.S. ports) water carriage under BOL’s. (b) Does not cover shipments entering US from foreign ports; (c) Applies outside the tackle to tackle period. The Harter Act does not apply to K for carriage of live animals. 2. Duration (a) Provisions are in effect from the time when the carrier receives the goods until the goods are properly delivered. 5 This is a longer time than just when goods are loaded on and off the vessel. (b) Proper delivery occurs when carrier or its agent: (i) discharges cargo onto a fit wharf; (ii) gives notification to the cosignee, (iii) segregates by bill of lading and count; (iv) makes accessible to consignee, and (v) allows the consignee a reasonable opportunity to take possession of cargo. (vi) proper delivery also occurs when the cargo is turned over to a designated authority pursuant to a regulation or custom of the port. 3. Exculpation: (a) Section 1: prohibits carriers from inserting any exculpation clauses in a BoL or shipping document completely relieving the carrier from liability for loss or damage to a cargo arising out of negligence or fault in proper loading, stowage, custody, care and proper delivery of the cargo. However, a carrier may insert into K of carriage a clause that provides that it is liable only for damage caused by its fault, or that it is not liable for any damage or loss that was not caused by its fault. The Harter Act has been interpreted as permitting a carrier to insert a clause into K of carriage that limits its liability for loss or damage to cargo caused by its negligence or fault to a specified amount, if such provision is reasonable. (Antilles Ins. Co. v Transconex Inc.) (b) Section 2: prohibits any exculpation clause whereby the carrier may relieve himself from exercising due diligence to properly equip, man, provision and outfit the vessel and to exercise due diligence in providing a seaworthy and capable of performing her intended voyage vessel. A Carrier may not limit its vicarious liability vis-a-vis the obligations of the master, officers, agents, or servants to carefully handle, stow, care for, and properly deliver the cargo. Although the Harter Act does not provide for limitation of liability, the courts have held that limited liability in exchange for a reduced freight rate, where reasonable, is valid under the Harter Act. (Antilles Ins) (c) Section 3: Defenses to the carrier: provides for exoneration of the carrier in certain circumstances IF the carrier exercised due diligence prior to the voyage to make the vessel in all repects seaworthy and to properly man, equip and supply the vessel (burden is on carrier): (i) NOT liable for damage or loss to cargo resulting from faults or errors in navigation of the vessel; (ii) NOT liable for errors in management of the vessel; (iii) NOT liable for losses arising from: dangers of the sea; acts of God (vis majeur); acts of public enemies; inherent defect, quality, or vice of the goods; insufficiency of packaging; seizure under the legal process; loss resulting from any act or omission of the shipper or owner of the cargo; saving or attempting to save the goods at sea. (d) Section 5: Penalty to carriers who do not follow this 6 (e) Section 7: this does not apply to the carriage of live animals D. COGSA (46 USC § 1300, et seq.) >>> must be international trade, domestic US does not apply > COGSA applies by force of law to K for the carriage of goods by sea, to or from foreign ports and U.S. ports. > COGSA expressly preempts the Harter Act with respect to all K for carriage pertaining to foreign trade. > Unlike the Harter Act, COGSA does not apply by force of law to voyages between U.S. ports, or to voyages on inland waters. > COGSA provides that the parties may incorporate its provisions into their K of carriage for voyages between U.S. ports >>> in such circumstances it is generally accepted that COGSA applies (Pan Am. World Airways v Cal. Stevadore & Ballast); Courts have held that the incorporation of COGSA as a contract term does not give the provision superior rank, but rather it is to be regarded as another term in the K (Commonwealth Petrochemicals v S.S. Puerto Rico). 7 In situations where COGSA does not apply by force of law, parties may by agreement incorporate by reference all of COGSA or selected provisions or modify the provisions of COGSA. > Even where COGSA is applicable by force of law, it may not apply to the entire time period during which the carrier has possession of (or is by contract responsible for) the goods. However, a carrier may insert in BoL a provision that COGSA applies during the entire period of time that the carrier is responsible for the goods >>> COGSA imposes certain duties on carrier but also provides them with a wide range of defenses, and it provides for limited liability. COGSA applies to K of carriage covered by BoL. Charter parties are not statutorily subject to COGSA. A BofL issued to the charterer by the owner of a vessel is regarded as a mere receipt while in the charterer’s possession >>> this BoL is not a K of carriage and is not subject to COGSA. (Unterweser Reederei Aktiengesellschaft v Potash Importing Copr. of Am.) o However, where such BoL is transferred to a third party, such as the cosignee of the goods, under circumstances that confer rights in the third party with respect to delivery of the goods, the BoL is then subject to COGSA, and it has become a K of carriage vis-à-vis that third party and the issuer of the BoL (the carrier). In such situations the charter party controls the legal relations between the owner and charterer, and BoL, subject to COGSA, controls the legal relations between the carrier and the cosignee. A charter party may incorporate the terms of COGSA in whole or in part. If incorporated in part, the COGSA provisions that are incorporated are treated as ordinary K provisions that must be harmonized with or subordinated to conflicting K terms. (U.S. v M/V Marilena P). A BoL may incorporate the terms of the charter party as to which the cosignee will be bound, provided the terms are not inconsistent with the provisions of COGSA; a cosignee may be liable to pay charter hire or demurrage, or be subject to an arbitration clause depending on the terms of incorporation. (Yone Suzuki v Cent. Argentine Ry.). An incorporation clause will be given effect so long as the charter party is adequately identified in the BoL (Lucky Metals Corp. v M/V Ave.) COGSA applies to the carriage of all goods, wares, merchandise, articles, or cargo other than live animals and goods carried on deck pursuant to the agreement of the parties. 1. COGSA Incorporated Hague rules into US law. (a) Purpose was to achieve international uniformity and to redress the edge in bargaining power enjoyed by carriers over shipper and cargo interests by setting out certain duties and responsibilities of carriers that cannot be avoided even by express contractual provision. (b) Very Pro-Carrier Statute. 2. Burdens under COGSA: Burden of going forward with evidence; Ultimate burden of non-persuasion; 3. Definitions 8 (a) “Carrier” may be vessel itself (invoking in rem liability), owner of the vessel or charterer of the vessel (or multiple parties) who enters in a contract of carriage with a shipper If the owner enters into K of carriage and issues BoL, it is the COGSA carrier. Where the charterer of the vessel (such as time charterer) enters into a K to carry a shipper’s goods, it is the COGSA carrier. It is possible for both the vessel owner and the charterer of the vessel to be held liable as COGSA carriers with respect to the same transaction >>> e.g.: where the charerer issues its BoL signed by the master, or signed by the chareterer “for the master” as authorized in the charter party, courts permit a shipper whose cargo has been damaged or lost to sue both the chareterer and the vessel owner (Pac. Employers Ins. V M/V Gloria). (b) “K of Carriage”: applies only to this particular shipment evidenced by a BoL. (c) “Good” is anything carried other than live animals. (d) “Ship” is any vessel used for the carriage of goods by sea. (e) “Carriage of goods” covers the period from the time when goods are loaded on to the time when they are discharged from the ship. 4. Application: (§§1300-1301) Applies to all K’s for carriage of goods by sea to or from ports of the US in foreign trade. (a) Period of Responsibility: Tackle to Tackle which “has traditionally meant from the moment when the ship’s tackle is hooked on at the loading port until the moment when the ship’s tackle is unhooked at discharge. If shore tackle is being used, that moment has traditionally been when the goods cross the ship’s rail.” (Tetley). “some physical act of possession associated with transfer of risk from a shore interest to a ship interest.” (KNAUTH). >>> COGSA applies only from the time goods are loaded on board the vessel to the time when they are discharged from it. (i) for chute, this is when it hits the ship’s end of the chute; (ii) with liquids, when ship’s pipe connects with phlange; (iii) on gangplank, when over hull. (iv) COGSA may be extended to other stages of the transaction by agreement of the parties: Mannesman Demag Corp. v. M/V Concert Express (5th circuit 200) a) Here cargo damaged after ocean voyage on trip from Md to IN, covered under a through B/L, Ocean carrier offering door to door service, so the truck is a subcontracted. b) Because COGSA applies tackle to tackle, the Harter Act in this case applies to the period between the discharge of the cargo from the vessel and “proper delivery.” c) In Mannesman, the court held that for a through Bill of Lading for multimodal transport, “proper delivery” for Harter Act purposes took places when the goods were handed over to the inland carrier. d) So here when the goods were damaged the Harter Act was not compulsorily applicable, and therefore the COGSA limit does not apply (because in K they tied COGSA limitation to when Harter is compulsorily in force). e) They could have limited liability for the entire trip, but where the...
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