INTERNATIONAL ECONOMIC LAW

chapter 3chapter 3

Trade TermsTrade Terms

• Use of Trade Terms: sales contracts involving transportation customarily contain abbreviated terms to describe: –When buyer takes delivery.–Who arranges for transportation.–Additionally:

• place of payment. • the price. • the time when the risk of loss shifts from the seller to

the buyer. • the costs of freight and insurance.

A. TRADE TERMS

A. TRADE TERMS • Trade Terms Used Inconsistently

– Domestic laws define trade terms for domestic sales. Some states define trade terms for international sales.

– Contracting parties may themselves define trade terms. By incorporating definitions from:

– foreign legislation.– Private rules. The most widely used private trade terms

are the “Incoterms” published by the International Chamber of Commerce.

Web address: www.iccwbo.org

Incoterms

• What is Incoterms ® 2010?– The Incoterms® rules explain a set of three-letter

trade terms reflecting business-to-business practice in contracts for the sale of goods, describe mainly the tasks, costs and risks involved in the delivery of goods from sellers to buyers.

• Classification of Incoterms ® 2010 – Rules for any mode(s) of Transport– Rules for sea and inland waterway transport

INTRODUCTION

• The Incoterms® rules explain a set of three-letter trade terms reflecting business-to-business practice in contracts for the sale of goods.

• How to use the Incoterms® 2010 rules• 1. Incorporate the Incoterms® 2010 rules into your

contract of sale.• 2. Choose the appropriate Incoterms rule• 3. Specify your place or port as precisely as possible• 4. Remember that Incoterms rules do not give you a• complete contract of sale

• EXW EX WORKS (…named place)*

FCA FREE CARRIER (…named place)

FAS FREE ALONGSIDE SHIP (…named port of shipment)*

FOB FREE ON BOARD (…named port of shipment)

The seller The buyer

A1 General provision of the seller B1A1 General provision of the buyer

A2 export licence … B2 licence

A3 carriage/insurance contract B3 carriage/insurance contract

A4 deliver goods B4 take delivery

A5 risk pass B5 bear risk

A6 cost before delivery B6 cost after

A7 notice B7 notice

A8 provide proof of transportion B8 evidence of receiving

A9 checking packing… B9 cost for pre-shipment inspection

A10 assistance B10 pay the costs

Any mode

• EXW EX WORKS• FCA FREE CARRIER• CPT CARRIAGE PAID TO• CIP CARRIAGE AND INSURANCE

• PAID TO• DAT DELIVERED AT TERMINAL• DAP DELIVERED AT PLACE• DDP DELIVERED DUTY PAID

Sea and inland waterway transport

• FAS FREE ALONGSIDE SHIP

• FOB FREE ON BOARD

• CFR COST AND FREIGHT

• CIF COST INSURANCE AND FREIGHT

Main features of the Incoterm®2010 rules

• 1. Two new Incoterms rules — DAT and DAP—have replaced the Incoterms 2000 rules DAF,DES, DEQ and DDU

• 2. The 11 Incoterms® 2010 rules are presented in two distinct classes

• 3. Rules for domestic and international trade• 4. Guidance Notes, Electronic communication,

Insurance cover,

• 7. Security-related Clearances and information required for such clearances. There is heightened concern nowadays about security in the movement of goods, requiring verification that the goods do not pose a threat to life or property for reasons other than their inherent nature.

• 8. Terminal handling charges

• 9. String sales

B. F.O.B.

• Free On Board (port of shipment) contract: requires a seller to deliver goods on board a vessel that is to be designated by the buyer in a manner customary at the particular port. – “On board” means that the goods:

• have been appropriated to the contracts.•

B. F.O.B.

– Use limited to seaborne commerce in most of the world.

• The Incoterms uses it only in connection with the carriage of goods by sea.

• In common law countries it is also applies to inland carriage aboard any “vessel, car or other vehicle.”

D. C.I.F.

• Cost, Insurance and Freight (port of destination): requires the seller to arrange for the carriage of goods by sea to a port of destination and to turn over to the buyer the documents necessary to obtain the goods from the carrier or to assert a claim against an insurer if the goods are lost or damaged.

D. C.I.F.

– Three document represent the CIF contract: • the invoice.

• the insurance policy.

• the bill of lading.

– Seller’s duties: deliver the documents to buyer

– Buyer’s duties: pay the seller on delivery of the documents

INTERNATIONAL ECONOMIC LAW

Chapter 4Chapter 4

Transportation

Contract for carriage by sea,air and land

• A . Introduction• International sales of goods often involves the

transportation of goods from one country to another by sea, air or land.

• Incoterms 2010 deals with the responsibilities of the parties performing the contract of int’l sales.

Modes of international transportation

– By sea• common carriage (bill of lading)• charter party,

– By air– By land– Multimodal transport of goods

• Unimodal/ multimodal transport

– Significance of classification:• indicates the complexity• parties responsibilities differ • different modes of transport are subject to different international

convention or custom, and relevant domestic laws,

Charter party• A contract for the hire of an entire ship for a particular voyage or a

set period of time• Governing laws: No international conventions apply.• a. The Hague and Hague-Visby Rules only apply if a bill of

lading issued by the ship owner comes into the hands of a third party.

• b. The charterer and the owner are free to set the terms of their contract.

• 1) Standardized contracts drafted at various conferences are commonly used. Examples:

• a) The Baltime.• b) The Gencon.• 2) Forum selection clauses and choice-of-law clauses are

common provisions.

Legal framework for carriage by sea

• It is presently regulated by both international conventions and domestic laws.

• Domestic laws ,vary between countries, • Maritime Code of the People’s republic of China • www.ccmt.org.cn, sponsored by the Supreme

People's Court of PRC , offering the latest trial information, authoritative judicial documents and the analysis of classical cases.

• Conventions:– The International Convention for the Unification of

Certain Rules of Law Relating to Bill of Lading 1924 (the Hague Rules ),

– The Brussels Protocol Amending the Hague Rules Relating to Bill of lading 1968(the Hague-Visby Rules) Hamburg rules 1978

– The UN Conventions on International Multimodal Transport of Goods 1980

– The UN Conventions on the Liability of operators of Transport terminals in international trade,1991

Legal framework for carriage by air

• The international air transportation is largely regulated by international conventions, – the Chicago System on civil aviation( 188 nations till

2002, <http://www.icao.int/icao/en/emembers.htm>)

– The Warsaw System on the liability of carriers （ 148 members, till 2000)

Contract of carriage by sea• It is a contract entered into between a shipper and the carrier for the

purpose of transporting goods from one place to another by sea.• Carrier: a person who undertakes the responsibilities of carriage

under a contract against the payment of freight.• Shipper: a person who is a party of a contract of carriage with a

carrier• Consignee: is a person who is specified as the recipient of the

goods in a bill of lading or similar document which may not be negotiable , but must evidence the carriage of the cargo concerned and satisfy the requirements for a similar document or a shipping document as set out in the relevant statutes or common law.– Or as defined in Hamburg rules: the person who is entitled to take

delivery of the goods

• Consignor : a person who indorses or transfers the goods under a bill of lading or similar document to a consignee.

• Most bills of lading are negotiable, a legal holder is able to sign his or her name on the bill and name another person as the consignee under it.

• Indorser and indorsee• The words above are not normally relevant to a contract

of carriage. However, so far as the negotiable instruments is concerned, they have the similar meanings to “consignor and consignee”

B. BILL OF LADING

• Bill of Lading Defined: an instrument issued by an ocean carrier and given to a shipper with whom the carrier has entered into a contract for the carriage of goods at the time the goods are delivered to the carrier.

BILL OF LADING

• Governing law– Internationally: International Convention for the

Unification of Certain Rules of Law Relating to Bills of Lading.• Adopted in 1924

–Known as the Hague Rules.–State parties: 78.

• Extensively amended in 1968 –Known as the Hague-Visby Rules. –State parties: 20– Web site:

http://www.comitemaritime.org/

BILL OF LADING

– Many states have supplementary legislation that also governs bills of lading in both municipal and international settings. US ： : legislation implementing the Hague and Hague-Visby conventions are commonly called Carriage of Goods by Sea Acts (COGSAs).

•  

BILL OF LADING

• Purposes(法律性质） :

–Receipt for the goods.

–Evidence of a contract of carriage.

–Document of title.

RECEIPT FOR GOODS

• Functions of a bill of lading:

–Describes the goods.

–States their quantity.

–States their condition.

. RECEIPT FOR GOODS

• Kinds of Bills of Lading– “On Board” Bill of Lading: certifies that the

goods have been properly loaded. • Bill is prima facie evidence that goods were

received by the carrier as described on the bill –Carrier can introduce rebutting evidence if

the bill has not been negotiated to a third party.

–Carrier is barred from introducing rebutting evidence if the bill has been negotiated.

–“Claused” Bill of Lading: One that notes a discrepancy on its face and is non-negotiable.• Discrepancy must refer to a problem noted at the time the goods are loaded. –Notations as to problems that occur later do not effect the negotiability of the bill.

–Case 11-4

M. GOLODETZ & CO., INC. v. CZARNIKOW-RIONDA CO., INC. (The Galitia)

• FACTS: The seller contracted to sell between 12,000 and 13,200 tons of sugar for delivery C & F Bandarshapur, Iran, and the buyer agreed to arrange for its bank to pay the seller (under a letter of credit) upon the seller’s presentation of clean “on board” bills of lading. After the sugar had been loaded on the carrier, a fire broke out and damaged 200 tons of the sugar. The ship then gave the seller two bills of lading: one for the 200 tons of sugar, the other for the balance shipped. The first contained a notation that the sugar had been properly loaded aboard the carrier but damaged thereafter. The buyer and its banks paid when the first bill was presented, but they refused to pay when the second (the one representing the 200 tons of sugar) was presented on the ground that it was not a “clean” bill. The seller then sued.

• ISSUE: Was this a clean bill of lading?

• EXPLANATION: Buyer’s contention that because two banks and the buyer had rejected the bill as being unclean is not a valid “practical” test for determining if the bill was clean or not. UCP Rule 16 is not helpful because it does not indicate when the notations must be made. Under a C & F contract, the seller is not responsible for what happens to the goods after they arrive on board. Thus, it seems that notations on a bill of lading made after the time of shipment should not make them “unclean.”

• ORDER: Seller is entitled to payment.

CONTRACT FOR CARRIAGE

• Bill of Lading is evidence of a contract of carriage between the shipper and the carrier.

– Carrier can introduce rebutting evidence if the bill has not been negotiated to a third party.

DOCUMENT OF TITLE

• Rightful possessor of a bill of lading has title and is entitled to possess, use, and dispose of the goods that the bill represents.

– Two main kinds of bills of lading:

• Straight bills of lading

• Order bills of lading（ OPEN BILL OF LADING）

• Straight bills of lading: a non-negotiable bill issued to a named consignee. –Transferee acquires same rights

as than those of his transferor.

DOCUMENT OF TITLE

DOCUMENT OF TITLE

• Order bills of lading: negotiable bill issued to a named consignee. – Transfer is by negotiation:

by endorsement and delivery.– Third party holder has title and the right to take

possession of the goods described in the bill. • Must receive the bill in good faith through due

negotiation.• Must surrender the bill to the carrier in order to take

delivery of the goods.

CARRIER’S DUTIES

• Exercise Due Diligence in: – Making the ship seaworthy.– Properly manning, equipping and supplying the ship.– Making the holds, refrigerating and cool chambers, and all

other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

– Properly and carefully loading, handling, stowing, carrying, keeping, caring for, and discharging the goods carried.

• Duties are strictly enforced.

CARRIER’S IMMUNITIES• Carrier is exempt from liability for damages arising

from “perils” such as:– Act, neglect, or default of the master, mariner, pilot, or

the servants of the carrier in the navigation or in the management of the ship;

– Fire, unless caused by the actual fault or privity of the carrier;

– Perils, dangers and accidents of the sea or other navigable water;

CARRIER’S IMMUNITIES

• Carrier’s Immunities are Strictly Construed: carrier is responsible despite any listed exemption if it fails to exercise due diligence in carrying out its fundamental duties.

CARRIER’S LIABILITY LIMITS

• Carrier Must Issue Bill of Lading –Limits set by the Hague Rules of

1924: • ₤100 per package, or• ₤ 100 per unit when shipped in “customary freight units.”

P. CARRIER’S LIABILITY LIMITS

• Limits set by the Hague-Visby Rules are the higher of: –10,000 gold francs per package

or unit,–30 gold francs per kilo of the

gross weight of the goods lost or damaged, whichever is the higher.

P. CARRIER’S LIABILITY LIMITS

• Limits do not apply if:

– Parties agree to higher amounts.

– Carrier acted either:

• With intent to cause damage, or• Recklessly and with knowledge that

damage would probably result.  

Q. THIRD PARTY RIGHTS

• Liability Limits do not Apply to Third Parties: Hague Rules and Hague-Visby Rules liability limits apply to the carrier only. – Third parties who help in the transport of the

goods, but who are not parties to the carriage of goods contract contained in the bill of lading, have no contractual right to claim the liability limits established by the Rules.

Q. THIRD PARTY RIGHTS

• Himalaya Clauses: Clauses added to bills of lading extending the Hague Rules or the Hague-Visby Rules liability limits to third parties. – Unenforceable in most other countries.

• Rationale: privity of contract.

The Hague Rules

Common Carriage/The Bill of Lading • APPLICATON• The Carrier’s Duties Under a Bill of

Lading• The Carrier’s Immunities• Liability Limits • Time Limitations(1 year)• Third-Party Rights (Himalaya Clause)

ASSIGNMENTS

• COMPARE THE RULES

• CASE READING

• PREVIEW CHAPTER 5

Contracts for the carriage of goods by air

• Introduction

• Warsaw System

– Warsaw convention

The Hague protocol 1955

Guadalajara convention 1961

• Objectives of Warsaw system

Carriage of goods under the Warsaw Convention

• Air Consignment of Note(CAN)

–Definition

–Issue of ACN

–Functions

Liability of the carrier

• Liability and the period of laibility

• Excluded liability

• Limited liability

• Liability of successive carriers

第八讲 Rights and obligations of the consignor

• Obliged to– Information – documents

• Entitled to – Take goods back– Stop the carriage of goods on any landing – Direct goods to the person other than the

consignee

• Limitation period– Incase of loss of or damage to

goods,complaint must be made within 7days after receiving the goods

– Later delivery 14 Ds

• Forum of action– The carriers ordinary residence;– The carriers principal place of business– The place the carrier’s rep. Actually made

the contract– The place of destination

INTERNATIONAL ECNOMIC LAW

Chapter 5 Chapter 5

INSURANCEINSURANCE