Overview

Carriage of Goods by Sea

The contract of carriage may be a contract for the transport of the goods by sea,air or land or a combination. Multi–modal transport refers to combined methods of transport.

Most modes of transport are governed by international Conventions. The Hague / Hague Visby rules relate to bills of lading in sea transport. The Warsaw Convention applies to air transport. The CMR Convention applies to transport by land and road.

The method of sea transport depends on the nature of the goods. If they are carried in bulk, a whole vessel may be hired by means of a charter party. If individual goods are to be carried, they are usually loaded in the ship’s hold and are carried under bills of lading. In the case of carriage by air, an air consignment note or air waybill is used. In the case of international carriage of goods by road, consignment notes are used.

Container carriage is extremely common. The ICC Uniform Rules for Combined Transport Documents are usually applied to the relevant contract.  A single operator takes responsibility for the entire transport. It may be negotiable or non-negotiable.


Contract of Carriage

In export transactions, the contract of carriage is commonly arranged by the exporter.  It is entered with a ship owner or charterer (who may have hired the ship).  The sums payable to the shipowner or charterer are known as freight.  The ship owner is known as the carrier. The exporter is the shipper.

The exporter /shipper usually instructs a freight forwarder to procure freight space for the cargo. The shipowner will typically employ an agent/loading broker to obtain cargo. The loading broker advises the shipper or its agent of the name of the ship and the place where they should be sent for loading.

A sailing card is notice giving details of the last days upon which the goods will be received for loading. The shipowner is entitled to exclude the goods if they are not delivered in time, even if the ship has not sailed.


Bill of Lading

The Bill of lading has a special role in international trade. It evolved in and has been a feature of mercantile practice for several centuries.Besides providing evidence of the contract of carriage, it acts as a title document to the goods. It also acts as a receipt by the carrier for the goods.

By mercantile custom, the possession of a bill of lading is in many respects equivalent to possession of the goods.  It has the same effect as delivery of the goods themselves.  The transfer operates as a transfer of possession but not necessarily a transfer of ownership.  The transfer of the Bill passes such rights as the transferee intended to pass.  It may only be the right to claim delivery of the goods but not property in them.

When the goods are loaded on the ship, the bill of lading is usually airmailed to the consignee in the port of destination. There may be a financing arrangement involving payment against the bill. The bill is a title document and enables the buyer to take possession of the goods.  goods.  The buyer may pledge the goods or resell them.

Shipping companies publish their printed forms of bill of lading which are revised from time to time.  The shipper or agent usually completes a set of two or three original bills of lading in respect of a consignment.  The bills are signed by the loading broker or another agent on behalf of the shipowner and handed to the shipper.

Particulars of all bills of lading are entered in the ship’s manifest.  It must contain particulars of marks, numbers, quantities, content, shippers, and consignees. The ship’s manifest is produced to port, customs and consular authorities at the port of arrival.  It contains complete details of the ship’s cargo.


Hague Visby Rules

The Bill of lading is subject to The Hague Rules, The Hague- Visby rules, the Hamburg Rules of the Rotterdam Rules. Each is the subject of an international convention. The Hague Rules of 1924 were updated in 1968 to become the Hague-Visby rules. These are the rules most commonly used in international trade. Some States have not yet ratified The Hague-Visby rules so that trade with them may be governed by the Hague rules.

The Hague-Visby rules were significantly revised by the UN Convention on the Carriage of Goods by Sea (the Hamburg rules).  The Hamburg rules have not yet been ratified by the United Kingdom, Ireland and must EU States. The Rotterdam Rules was adopted by the United Nations in 2008 but have not been ratified by many states.

The Hague Visby rules have the force of law in Ireland and the United Kingdom. Some States adhere to the older Hague rules.  The Hague Visby rules apply under Irish and UK law to all shipments where the contract provides for the issue of Bill of Lading or a similar document of title.  They apply under Irish law to any bill of lading if the contract contained in or evidenced by it expressly provides that the rules shall govern the contract.

They rule apply in relation to any receipt which is a non-negotiable document marked as such if the contract contained in or evidenced by it is a contract for the carriage of goods by sea which expressly provides that the rules are to govern the contract as if the receipt were a bill of lading (with some modifications).


Transfer of Title

The Bill of Lading, as a document of title, enables the holder to dispose of goods which are not in his possession. The bill is negotiable in the same way as a cheque or bill of exchange. The transfer of a bill of lading passes title to it, to the transferee. It effectively makes the goods themselves negotiable.

Although a holder of a negotiated bill of lading does not obtain better title than the transferee, it carries many of the benefits of a negotiated bill of exchange.  There are two limited circumstances under the Factors Act and the Sale of Goods Act whereby the person acquiring goods may obtain title notwithstanding that the transferor did not have title.


Loading

When the goods are sent to the docks, the shipper gives instructions to the shipowner in a shipping note. It sets out the particulars of the shipment to the superintendent of the dock. It advises of the arrival of the goods, the particulars and the ship for which they are intended. When the goods are delivered to the shipowner, the shipper receives the documents and issues a receipt.

When goods are delivered to the docks for loading, they are inspected by tally clerks who take down records of the date of loading, identification marks, package numbers, weights, and measurements. Defects or other comment regarding the goods, in particular notes of any damages to packages, lack of protection, etc. are identified.

When loading is completed the ship’s, mate signs the mate’s receipt based on the notes of the tally clerk and any comments and clarifications received.  If the mate’s receipt is qualified, it is said to be “claused” or “unclean.”  Otherwise, it is stated to be a “clean” receipt.  The qualifications set out are incorporated in the bill of lading and make the document a “claused” / “unclean” or “clean” bill.

The mate’s receipt is evidence of the receipt of the goods in the stated condition and is evidence of ownership.  A shipowner is entitled to assume that the holder of the receipt or the person named, is the owner of the goods and is entitled to receive the bill of lading in exchange for the receipt


Bill of Lading Procedure

Bills of lading are issued in a set of two or more originals.  Unless payment is arranged under a letter of credit, the various parts are forwarded by the consigner by airmail to the importer.  The consignee must have at least one copy of the bill of lading available at the time the ship arrives. This authorises the carrier to deliver the goods to him unless the bill of lading is given to him.

Alternatively, one part of the bill together with the other shipping documents may be dispatched in the ship’s bag in an envelope addressed to the overseas buyer or its representatives. It is delivered to the addressee by the ship’s master, who if he has not already received a part of the bill of lading before, delivers the bill of lading to the ship owner’s representative. The representative issues a delivery order which the holder presents to the ship’s officer in charge of unloading.

If the sale is financed under a letter of credit, the seller usually delivers the various parts of the bill and the other necessary documents to the advising or nominated bank, which forwards the same by airmail to the issuing bank. Where various parts of the bill of lading are held by different persons, the shipowner may deliver the goods to the first person presenting the bill provided that he has no notice of any other claims to the goods or of circumstances which raise a question.  If a shipowner delivers to the named consignee without the production of the bill of lading he does so at his own risk if the consignee is not in fact entitled to the goods.


Delivery of Goods

The shipper’s duty is discharged when it delivers the goods in accordance with the contract of carriage to the consignee as evidenced in the bill of lading or by law. Delivery to a docking company or warehouse on behalf of the consignee may be sufficient in some cases.

On presentation of the delivery order, the goods are delivered to the person authorised by it to take delivery from the ship.   The ship owner’s responsibility ceases only when the goods are delivered. There is no duty to notify the consignee of arrival unless this is agreed or customary. The consignee is presumed to take delivery over the ship’s rails and bears the cost of unloading, subject to the terms of the contract.


Charterparties and Contract for Carriage

Charterparties are governed by common law rules.  They are subject to whatever might be provided and agreed in relation to limitation of and exemption from liability, subject only to the general principles of law, which impose minimal constraints.

Contracts of carriage evidenced by bills of lading are subject to legislation.  The legislation restrains the shipowner from introducing exemptions from his liability beyond those allowed by the rules relating to bills of lading, the Hague-Visby Rules.

Generally, the contract for carriage will have been concluded prior to the issue of the bill of lading.  The bill of lading evidence is the terms of the contract which has already been agreed and partly performed.


Freight I

Freight is the carrier’s charge. It is presumed that freight is not due unless the entire contract is performed. It is the sum payable to the carrier for the safe carriage and delivery of the goods.    Freight will not be due if the goods are lost or if they arrive in such a state, that they are not any longer merchantable under the contract.

Lesser damage does not disentitle the carrier to freight.Freight is earned if the cargo arrives although damaged. The shipowner is entitled to freight unless the damage is so serious the goods are not of merchantable character. The carrier becomes entitled to full freight if it delivers or is ready to deliver the goods at their destination.

Freight may be a lump sum or per quantity. Freight is usually calculated by weight or measured in accordance with the carrier’s tariffs. In the absence of agreement or custom, the delivery weight applies. The carrier has a lien on the goods to secure payment of freight.

Freight may be and usually is pre-payable under the contract. Commonly, it is provided that freight is payable at the port of loading in cash without deduction even if the ship or goods are ultimately lost.  Under this common practice, advance freight is payable on the sailing of the ship. It is repayable, only if the ship never sails or if the goods are lost before freight becomes due or are lost other than by an excepted risk.


Freight II

The shipper is primarily liable for the payment of freight.  The consignee is not generally a party to the contract of carriage.  Under a FOB contract, the shipper concludes the contract as agent of the consignee.

Under certain circumstances, the shipowner may be entitled to demand freight from the consignee. The shipowner has a lien; a right to retain goods in his possession for payment of freight. This common law lien is for freight payable on delivery of the goods together with expenses incurred in protecting and preserving the goods.

Bills of lading usually contain a special clause dealing with the ship owner’s lien.   The lien embodies a right to retain and ultimately to sell the goods for all freight fees and other related charges.


Seaway Bill

A seaway bill is a non-negotiable transport document. It has the advantage that it is not required to be presented by the consignee in order to take delivery of the goods.  It is not a document of title but is evidence of the contract of carriage between the shipper and carrier.

A Seaway Bill may be issued as evidence of receipt of the goods where payment is not by way of a documentary collection. A Seaway Bill is not as acceptable to banks as a bill of lading since it is not a document of title.  However, in modern times the use of a non-negotiable seaway bill issued by the carrier has increased.

The carrier must exercise due diligence to make the ship seaworthy with proper equipment and duly manned. It may, for example, require the necessary refrigeration cold chambers, etc. for chilled or frozen goods.  Goods must be properly and carefully loaded, stowed, kept and discharged.  The ship must be seaworthy and cargo worthy.