Transport of Goods

Derecho Mercantil internacional # Multimodal Transport of Goods. UN (United Nations) Convention. Liability of the parties. Jurisdiction. Arbitration

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Multimodal Transport of Goods

Introduction

Trade is essential to any production-consumption cycle. From raw material or commodity, through intermediate manufacturing or processing, up to the final consumer product, goods are subject to a number of sales/purchase transactions. Each of these transactions constitutes a trading opportunity not only for the buyer and the seller, but also for any third-party services provider concerned by the transaction.

As the result of a transaction, goods are moved to a new place where they will be transformed, stored and made ready for the next transaction. There is hardly to think in trade without transport, and transport may become an obstacle to trade for various reasons: non-availability or excessive cost; non-convenient, transport-related commercial practices or customs of the trade and a non-favourable regulatory environment on commercial activities.

Whereas such requirements are relatively easy to achieve in the context of national unimodal transport services, they are more difficult to satisfy in the context of international transport services using two or more transport modes.

Based on the Convention of the United Nations Organisation on International Multimodal Transport of Goods, this work will explain the most important terms of this form of transport, as well as its origin.

Description

The United Nations Convention on International Multimodal Transport of Goods was celebrated in Geneva, on may 24 of 1980. The states parties to this convention mainly recognising that international multimodal transport is one means of facilitating the orderly expansion of world trade that we are facing actually due to treaties signed between different countries.

The drafting of the Convention was strongly influenced by the Hamburg Rules concerning the carriage of goods by sea.

According to the 1980 United Nations Convention on International Multimodal Transport of Goods, an “International multimodal transport" means the carriage of goods by at least two different modes of transport on the basis of a multimodal transport contract from a place in one country at which the goods are taken in charge by the multimodal transport operator to a place designated for delivery situated in a different country. The operations of pick-up and delivery of goods carried out in the performance of a unimodal transport contract, as defined in such contract, shall not be considered as international multimodal transport.

They are three terms, "intermodal transport" (widely used in the USA), "combined transport" (common in Europe and appearing in the UCP 400 Article 25, 26 & 29) and "multimodal transport" (appearing in the UCP 500 Article 26) same in practice, meaning "door-to-door" delivery involving more than one mode of transport. They can also mean "terminal-to-terminal" delivery, containers now being used extensively in multimodal transport.

Multimodal transport (MT) has the following unique elements, which distinguish it from traditional sea, air or surface transport:

  • MT involves more than one mode of transport, either sea and air, sea and surface, or air and surface;

  • MT has only one carrier, the Multimodal Transport Operator (MTO), who takes full responsibility for the whole journey, from start to finish. The MTO meets all claims by himself and makes counter claims to the sub-carriers;

  • MT involves only one transport document, covering all modes of transport - sea, air and surface. It can be issued in negotiable or non-negotiable form;

  • MT has one freight rate, covering different modes of transport, although the freight rate for each individual mode may be different;

  • The MTO can be a contractual carrier or an actual carrier or both (under the Hamburg Rules definition);

  • A MT document (MTD) is governed by the UNCTAD/ICC Rules for Multimodal Transport Documents, ICC Publication No. 481, only when they are so incorporated and when:

  • In terms of claims per package for damage and loss, the MTO's maximum liability varies depending on whether or not sea transport is involved. The standard limit is 2 SDR per kilogramme or 666.67 SDR per package, whichever is higher. If there is no sea or inland waterway transport involved, then the limit is increased to 8.33 SDR per package;

  • If there is damage to the goods and the damage is not apparent, notice in writing should be given six consecutive days after the receipt of the goods;

  • The time bar for bringing suit for damages is nine months after delivery.

  • In case of conflicts in the terms and conditions between the ICC MTD Rules and other contracts, the ICC Rules override, unless the terms in the contracts increase the responsibility of the MTO.

  • Application

    According to article 2 of the Convention, referring within to the scope of application, this shall apply to all contracts of multimodal transport between places in two States, only if the place for the taking in charge of the goods by the multimodal transport operator as provided for in the multimodal transport contract is located in a Contracting State, or if the place for delivery of the goods by the multimodal transport operator as provided for in the contract is located in a Contracting State. Said of another form, if the contract does not stipulate that the exit place or delivery place of goods is within one of the involved parts, the convention is not applicable. When a multimodal transport contract has been concluded which according to article 2, the provisions of this Convention shall be mandatorily applicable to such contract.

    Documentation

    According to the article 5, when the goods are taken in charge by the multimodal transport operator, he shall issue a multimodal transport document which, at the option of the consignor, shall be in either negotiable or non-negotiable form. This document shall be signed by the operator or by a person having authority from him, if not, it is not valid.

    As we saw they are two kinds of multimodal transport document: negotiable and non-negotiable. The first one shall be made out to order or to bearer, If it's made out to order it shall be transferable by endorsement; If it's made out to bearer it shall be transferable without endorsement. This will allow to the operator (or a person acting on his behalf) to demand the delivery of the goods. In the other hand a non-negotiable multimodal transport document shall indicate a named consignee.

    The article 8 of this Convention stipule the contents of the document and it shall have:

    • The general nature of the goods, the leading marks necessary for identification of the goods, an express statement, if applicable, as to the dangerous character of the goods, the number of packages or pieces, and the gross weight of the goods or their quantity otherwise expressed, all such particulars as furnished by the consignor

    • The apparent condition of the goods

    • The name and principal place of business of the multimodal transport operator

    • The name of the consignor

    • The consignee, if named by the consignor

    • The place and date of taking in charge of the goods by the multimodal transport operator

    • The place of delivery of the goods

    • The date or the period of delivery of the goods at the place of delivery, if expressly agreed upon between the parties;

    • A statement indicating whether the multimodal transport document is negotiable or non-negotiable

    • The place and date of issue of the multimodal transport document;

    • The signature of the multimodal transport operator or of a person having authority from him;

    • The freight for each mode of transport, if expressly agreed between the parties, or the freight including its currency, to the extent payable by the consignee or other indication that freight is payable by him;

    • The intended journey route, modes of transport and places of transhipment, if known at the time of issuance of the multimodal transport document

    • The statement referred to in paragraph 3 of article 28

    • Any other particulars which the parties may agree to insert in the multimodal transport document, if not inconsistent with the law of the country where the multimodal transport document is issued.

    When the operator, with intent to defraud, gives in the multimodal transport document false information concerning the goods or omits any information required to be included, he shall be liable, without the benefit of the limitation of liability provided for in this Convention, for any loss, damage or expenses incurred by a third party, including a consignee, who acted in reliance on the description of the document issued.

    The consignor shall be deemed to have guaranteed to the operator the accuracy, at the time the goods were taken in charge by the operator and also the consignor shall indemnify to the operator against loss resulting from inaccuracies in or inadequacies.

    Liability of the parties

    According to this Convention, the responsibility of the multimodal transport operator for the goods covers the period from the time he takes the goods in his charge to the time of their delivery. This article include also to operator servants or agents or any other person of whose services he makes use for the performance of the multimodal transport contract.

    The multimodal transport operator shall be liable for loss resulting from loss or damage to the goods, as well as from delay in delivery, if the occurrence which caused the loss, damage or delay in delivery took place while the goods were in his charge, unless the operator proves that he, his servants or agents or any other person at his service took all measures that could reasonably be required to avoid the occurrence and its consequences. Delay in delivery occurs when the goods have not been delivered within the time expressly agreed upon or, in the absence of such agreement, within the time which it would be reasonable to require of a diligent, having regard to the circumstances of the case. If the goods have not been delivered within 90 consecutive days following the date of delivery determined, the claimant may treat the goods as lost.

    When the multimodal transport operator is liable for loss resulting from loss of or damage to the goods, his liability shall be limited to an amount not exceeding 920 units of account per package of other shipping unit or 2.75 units of account per kilogram of gross weight of the goods lost or damaged, whichever is the higher.

    The operator will not be able to enjoy the benefits of the part fourth of this convention if it is proved that the loss, damage or delay in delivery resulted from an act or omission of the multimodal transport operator done with the intent to cause such loss, damage or delay or recklessly and with knowledge that such loss, damage or delay would probably result.

    Also the consignor shall be liable for loss sustained by the multimodal transport operator if such loss is caused by the fault or neglect of the consignor, or his servants or agents. Any servant or agent of the consignor shall be liable for such loss if the loss is caused by fault or neglect on his part. The consignor has the responsibility of mark or label the dangerous goods as dangerous. The consignor shall inform to the multimodal transport operator (or any other person acting on his behalf) of the dangerous character of the goods and, if necessary, the precautions to be taken. If the consignor fails to do so and the multimodal transport operator does not otherwise have knowledge of their dangerous character the consignor will be responsible of all the consequences that this can bring.

    Jurisdiction

    Based on the article 26 of this Convention, in judicial proceedings, the plaintiff, at his option, may institute an action in a court which, according to the law of the State where the court is situated, is competent and within the jurisdiction of which is situated the principal place of business of the defendant; or the place where the contract was made, provided that the defendant has there a place of business or the place of taking or delivery of the goods. In fact, we can say that the jurisdiction applied in contracts based in this Convention, it's the same that in any other international sales contract. It's important to say that an agreement made by the parties after a claim has arisen, shall be effective even if they already designates the place where the plaintiff may institute an action.

    Arbitration

    With respect to arbitration, parties may provide by agreement evidenced in writing that any dispute that may arise relating to international multimodal transport. The proceedings shall be instituted at the option of the claimant at one of the following places:

    • A place in a State within whose territory is situated the principal place of business of the defendant or even the place where the multimodal transport contract was made.

    • The place of taking or delivery of the goods in charge for international multimodal transport; or any other place designated for that purpose in the arbitration clause or agreement.

    The multimodal transport of goods and the incoterms

    When negotiating an international sales contract, both parties need to pay as much attention to the shipping terms as to the sales price.  To make it as clear as possible, an international set of trade terms (INCOTERMS) has been adopted by most countries that defines exactly the responsibilities and liabilities of both the buyer and seller while the merchandise is in transit. The purpose of "Incoterms" is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree. Frequently parties to a contract are unaware of the different trading practices in their respective countries. This can give rise to misunderstandings, disputes and litigation with all the waste of time and money that this entails. In order to remedy these problems the international Chamber of Commerce first published in 1936 a set of international1 rules for the interpretation of trade terms. These rules were known as "Incoterms 1936". Amendments and additions were later made in l953, l967, 1976, 1980, 1990 and presently 2000 in order to bring the rules in line with current international trade practices.

    Incoterms 1990 are divided into four basic groups:

    Group E: Departure term. Where the seller makes the goods available to the buyer at the seller's own premises

    EXW - Ex Works*

    Group F: Shipment terms - Main carriage unpaid. Where the seller is called on to deliver the goods to a carrier named by the buyer, (FCA, FAS and FOB). These are shipment contracts with the shipment point named, and carriage unpaid by the seller.

    FCA - Free Carrier*

    FAS - Free Alongside Ship

    FOB - Free On Board

    Group C: Shipment terms - Main carriage paid. Where the seller has to contract for carriage, but without assuming the risk of loss of or damage to the goods or additional costs due to events occurring after shipment and dispatch, (CFR, CIF, CPT and CIP). These are shipment contracts with the destination point named, and carriage paid by the seller. There are two critical division points, one for the division of costs, the other for the division of risk. Costs being assumed by the seller until the destination point; risk being transferred to the buyer at the point of shipment. CIF and CIP are the only Incoterms related directly to insurance cover. In these the seller arranges the contract of carriage and payment of freight and is regarded as being in a better position than the buyer to arrange insurance.

    CFR - Cost and Freight

    CIF - Cost, Insurance and Freight

    CPT - Carriage Paid To*

    CIP - Carriage and Insurance Paid To*

    Group D: Arrival Terms. Where the seller has to bear all costs and risk needed to bring the goods to the country of destination, (DAF, DES, DEQ, DDU and DDP). These are arrival contracts.

    DAF - Delivered At Frontier*

    DES - Delivered Ex Ship

    DEQ - Delivered Ex Quay

    DDU - Delivered Duty Unpaid*

    DDP - Delivered Duty Paid*

    *Suitable for Any Mode of Transport including Multimodal

    Conclusion

    Tougher international competition and expansion of geographical markets have forced manufacturers to focus on integrated production and transport logistics strategies in order to reduce costs, and -at the same time- to obtain higher service standards. The need to control transport costs has become as important as the need to keep down other production costs. The emergence of reliable and competitive door-to-door multimodal transport services can contribute to, and foster, new trading opportunities.

    Trading opportunities can be improved by implementing transport logistics operations, by leaving the responsibility for the entire transport operation to only one trading partner, and by an appropriate legal environment which stimulates the provision of efficient local transport services taking advantage of joint ventures. By managing these potential improvements under a multimodal transport approach, synergies can be created resulting in unexpected trading opportunities for both local traders and transport services providers to the benefit of their national economy.

    The multimodal approach is more than just transport logistics; it requires the support of buyers and sellers, and it is based on a minimum legal environment. An approach to international transport is probably the only means to integrate the scattered improvement potentials into a powerful new transport system that will facilitate transactions for traders, open new transport services opportunities for local transport providers, and bring about a reorganization of the existing legal and institutional organization of the transport sector of developing countries.

    Bibliography

    J.-G. Castel, OC, OO, QC, FRSC General Editor

    The Canadian Law and Practice of International Trade

    Emond Montgomery Publications Limited

    Toronto, Canada 1997

    Carol Xueref

    Les contrats de vente internationale de marchandises

    "Multimodal transport operator" means any person who on his own behalf or through another person acting on his behalf concludes a multimodal transport contract and who acts as a principal, not as an agent or on behalf of the consignor or of the carriers participating in the multimodal transport operations, and who assumes responsibility for the performance of the contract.

    "Multimodal transport contract" means a contract whereby a multimodal transport operator undertakes, against payment of freight, to perform or to procure the performance of international multimodal transport.

    "Multimodal transport document" means a document which evidences a multimodal transport contract, the taking in charge of the goods by the multimodal transport operator, and an undertaking by him to deliver the goods in accordance with the terms of that contract.

    "Consignor" means any person by whom or in whose name or on whose behalf a multimodal transport contract has been concluded with the multimodal transport operator, or any person by whom or in whose name or on whose behalf the goods are actually delivered to the multimodal transport operator in relation to the multimodal transport contract.

    "Consignee" means the person entitled to take delivery of the goods.

    Article 28, paragraphe 3 “The multimodal transport document shall contain a statement that the international multimodal transport is subject to the provisions of this Convention which nullify any stipulation derogating therefrom to the detriment of the consignor or the consignee”.

    The unit of account referred to in article 18 of this Convention is the Special Drawing Right as defined by the International Monetary Fund.