LOGISTICS, TRANSPORTATION AND

RISK OF LOSSSALES CONTRACTS INVOLVING TRANSPORTATION CUSTOMARILY CONTAIN

ABBREVIATED TERMS DESCRIBING THE TIME AND PLACE WHERE THE BUYERS TAKE DELIVERY – TRADE TERMS SUCH AS FREE ON BOARD

(FOB)AND COST, INSURANCE AND FREIGHT (CIF)WE ALSO DEFINE A VARIETY OF OTHER MATTERS INCLUDING TIME AND PLACE OF PAYMENT,

THE PRICE, THE TIME WHEN RISK OF LOSS SHIPS FROM SELLER TO BUYER AND THE COSTS OF FREIGHT AND INSURANCE

TERMINOLOGY CAN BE CONFUSING

• IN THE UNITED STATES, FOR EXAMPLE, THE UNIFORM COMMERCIAL CODE (UCC) DEFINES TRADE TERMS FOR DOMESTIC AND EXPORT SALES.

• IN THE UNITED KINGDOM, THE TERMS ARE DEFINED BY REFERENCE TO CASE LAW.

• VIRTUALLY ALL DOMESTIC LAWS ALLOW THE PARTIES TO DEFINE THE TERMS THEMSELVES OR TO INCORPORATE DEFINITIONS FROM FOREIGN LEGISLATION OR FROM A SPECIFIC SET OF PRIVATE RULES.

• THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (CISG) SIMILARLY ALLOWS PARTIES TO INCORPORATE TRADE TERMS OF THEIR CHOOSING.

INCOTERMSTHE MOST WIDELY USED PRIVATE TRADE TERMS ARE THOSE PUBLISHED BY THE INTERNATIONAL CHAMBER OF COMMERCE (ICC)

THESE ARE REFERRED TO AS INCOTERMS

IF PARTIES WISH TO USE THESE TERMS THEY SHOULD EXPRESS THIS IN THEIR AGREEMENT

INCOTERMS ARE UPDATED FROM TIME TO TIME – THE LAST REVISION WAS IN 2000

COST, INSURANCE AND FREIGHT (CIF)

• THIS TERM IS DESCRIBED IN INCOTERMS 1990 PUBLISHED BY THE INTERNATIONAL CHAMBER OF COMMERCE (ICC); “INCOTERMS) STANDS FOR INTERNATIONAL COMMERCIAL TERMS

• THE GOAL OF INCOTERMS IS TO PROVIDE A SET OF INTERNATIONAL RULES FOR THE INTERPRETATION OF THE MOST COMMONLY USED TRADE TERMS FOREIGN TRADE

• THESE TERMS ARE USED TO ALLOCATE THE COSTS OF FREIGHT AND INSURANCE IN ADDITION TO DESIGNATING THE POINT IN TIME WHEN THE RISK OF LOSS PASSES FROM THE SELLER TO THE BUYER

• INCOTERMS ARE INCORPORATED INTO CISG THROUGH ARTICLE 9 (2)

CIF SINGAPORE• WHAT DOES THIS MEAN? – THIS MEANS THE SELLER DELIVERS WHEN

GOODS PASS “THE SHIP’S RAIL IN THE PORT OF SINGAPORE (SIMPLY USED AS AN EXAMPLE HERE – IT COULD MEAN ANY OTHER PLACE DESIGNATED AS THE POINT OF DESTINATION)

• THE SELLER IS RESPONSIBLE FOR PAYING THE COST, FREIGHT, AND INSURANCE COVERAGE NECESSARY TO BRING THE GOODS TO THE NAMED PORT OF DESTINATION, BUT THE RISK OF LOSS OR DAMAGE TO THE GOODS PASSES FROM SELLER TO BUYER UPON DELIVERY TO THE PORT OF SHIPMENT

• “CIF” REQUIRES THE SELLER TO OBTAIN INSURANCE ONLY ON MINIMUM COVER

“FREE” TERMS

• SEVERAL OF THE COMMON TRADE TERMS BEGIN WITH THE WORD “FREE”

• “FREE” MEANS THAT THE SELLER HAS AN OBLIGATION TO DELIVER THE GOODS TO A NAMED PLACE FOR TRANSFER TO A CARRIER

• NATIONAL LAWS SOMETIMES TREAT THE “FREE” TERMS AS INTERCHANGEABLE, SO IT IS IMPORTANT FOR CONTRACTING PARTIES TO IDENTIFY NOT ONLY THE TERM BUT ALSO THE SET OF RULES THAT APPLIES TO THEIR PARTICULAR TRANSACTION

FREE ON BOARD

THIS TERM IS USED ONLY IN THAT THE SEA(INCOTERMS)

AT COMMON LAW THE TERM IS USED FOR IN LAND CARRIAGE ABOARD ANY VESSEL, CAR OR OTHER VEHICLE

THE FOB DESIGNATION 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

EXAMPLE OF “FOB”

• F0B SINGAPORE REQUIRES THE BUYER TO NAME THE SHIP THAT WILL ACCEPT DELIVERY IN SINGAPORE AND THE SELLER MUST DELIVER THE GOODS ON BOARD THE SHIP AS REQUIRED BY THE PORT RULES IN SINGAPORE

• THE ESSENCE OF AN FOB CONTRACT IS THE NOTION THAT A SELLER IS RESPONSIBLE FOR GETTING GOODS ON BOARD A SHIP DESIGNATED BY THE BUYER – WHAT IS MEANT BY ON BOARD HAS BEEN THE ISSUE IN MANY CASES AND IS DESCRIBED IN DETAIL IN INCOTERMS – TRADITIONALLY GOODS ARE ON BOARD A SHIP THE MOMENT THEY CROSS ITS RAIL

• THE SELLERS RESPONSIBILITY DOES NOT END AT THAT POINT UNLESS THE GOODS ARE ALSO “APPROPRIATED TO THE CONTRACT” – THAT IS THEY ARE CLEARLY SET ASIDE OR OTHERWISE IDENTIFIED AS THE CONTRACT GOODS

FREE ALONGSIDE (FAS)

• THE TERM FREE ALONGSIDE OR FREE ALONGSIDE SHIP REQUIRES THE SELLER TO DELIVER GOODS TO A NAMED PORT ALONGSIDE A VESSEL TO BE DESIGNATED BY THE BUYER AND IN A MANNER CUSTOMARY TO THE PARTICULAR PORT

• ALONGSIDE HAS TRADITIONALLY MEANT THAT THE GOODS MUST BE WITHIN REACH OF A SHIP’S LIFTING TACKLE – THIS MAY, AS A CONSEQUENCE, REQUIRE THAT THE SELLER HIRE LIGHTERS TO TAKE THE GOODS OUT TO A SHIP IMPORTS WHERE THIS IS THE PRACTICE

• AS WITH AN FOB CONTRACT, THE SELLER’S RESPONSIBILITIES END UPON DELIVERY OF THE GOODS ALONGSIDE

COST, INSURANCE, AND FREIGHT (CIF)

• CIF IS THE MOST IMPORTANT AND MOST COMMONLY USED SHIPPING TERM

• THE CIF TERM IS PREFERRED BY BUYERS BECAUSE IT MEANS THAT THEY HAVE LITTLE TO DO WITH THE GOODS UNTIL THE GOODS ARRIVE AT A PORT OF DESTINATION IN THEIR COUNTRY

• A CIF PRICE QUOTE ALSO ALLOWS BUYERS TO COMPARE PRICES FROM SUPPLIERS AROUND THE WORLD WITHOUT HAVING TO TAKE INTO CONSIDERATION DIFFERING FREIGHT RATES, SINCE THE SELLER PAYS THE FREIGHT AND THE INSURANCE

• A CIF CONTRACT REQUIRES THE SELLER TO ARRANGE FOR THE CARRIAGE OF GOODS BY SEA TO A PORT OF DESTINATION AND TO TURN OVER TO THE BUYER DOCUMENTS NECESSARY TO OBTAIN THE GOODS FROM THE CARRIER OR ASSERT A CLAIM AGAINST AN INSURER OF THE GOODS ARE LOST OR DAMAGED

COST AND FREIGHT (CFR)

• THE COST IN FREIGHT (AT THE SPECIFIED PORT OF DESTINATION) IS THE SAME AS CIF EXCEPT THAT THE SELLER DOES NOT HAVE TO PROCURE MARINE INSURANCE AGAINST THE RISK OF LOSS OR DAMAGE TO THE GOODS DURING TRANSIT

• UNDER A CIF CONTRACT THE INSURANCE ONLY HAS TO COVER MINIMUM CONDITIONS (FPA OR FREE FROM PARTICULAR AVERAGE CONDITIONS (SO BUYERS WISHING TO PURCHASE MORE EXTENSIVE POLICIES WILL WANT TO USE A CFR CONTRACT

DELIVERED EX SHIP (DES)

• THIS IS ALSO CALLED AN ARRIVAL CONTRACT AND REQUIRES THE SELLER TO DELIVER GOODS TO A BUYER AT AN AGREED-UPON PORT OF ARRIVAL

• IN THIS TYPE OF CONTRACT THE SELLER HAS TO CAUSE DELIVERY TO BE MADE TO THE BUYER FROM A SHIP WHICH HAS ARRIVED AT THE PORT OF DELIVERY AND IS REACHED A PLACE THERE IN WHICH IS USUAL FOR THE OVARY OF GOODS THE KIND IN QUESTION – SO THE SELLER MUST PAY THE FREIGHT OR OTHERWISE RELEASE THE SHIP OWNER’S LEAN AND FURNISH THE BUYER WITH INEFFECTUAL DIRECTION TO THE SHIP TO DELIVER – UNTIL THIS HAPPENS THE BUYER IS NOT BOUND TO PAY FOR THE GOODS

• IN THIS TYPE OF CONTRACT THE SELLER MUST DELIVER THE GOODS TO THE BUYER – NOT THE DOCUMENTS – IN THIS THAT THE CONTRACT THE SELLER IS NOT OBLIGED TO OBTAIN INSURANCE FOR THE BUYERS BENEFIT – RISK OF LOSS DOES NOT PASS TO THE BUYER UNTIL THE GOODS ARE ACTUALLY DELIVERED TO HIM

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FREE CARRIER (FCA)• THE FCA TERM, WHICH APPLIES TO ANY FORM OF

TRANSPORT – MARITIME, INLAND WATERWAYS, AIR, RAIL OR TRUCK – REQUIRES THE SELLER TO DELIVER GOODS TO A PARTICULAR CARRIER AND A NAMED TERMINAL, DEEP HOLE, AIRPORT, OR OTHER PLACE WHERE THE CARRIER OPERATES

• THE COST OF TRANSPORTATION AND THE RISK FOR LOSS SHIP TO THE BUYER AT THAT TIME

EX WORKS (EXW)

• UNDER AN EX-WORKS CONTRACT A SELLER IS OBLIGED ONLY TO DELIVER GOODS AT HIS OWN PLACE OF BUSINESS – ALL THE COSTS CONNECTED TRANSPORTATION ARE THE RESPONSIBILITY OF THE BUYER

TRANSPORTATION

FREIGHT FORWARDER

A FREIGHT FORWARDER IS A FIRM THAT MAKES OR ASSISTS IN THE MAKING OF SHIPPING ARRANGEMENTS

THINGS FREIGHT FORWARDERS DO

• OBTAIN QUOTATIONS ON CIF AND CAF CONTRACTS

• DETERMINE AVAILABILITY OF SHIPS IN PORT FACILITIES

• ESTIMATING COST BASED ON GROSS WEIGHT, CUBIC FEET, VALUE, DESCRIPTION OF THE GOODS, AND THE PORT OF DESTINATION

• BOOKING SPACE

• PROCURING EXPORT LICENSES

• REVIEWING LETTER OF CREDIT TERMS

• TRACING IN LAND SHIPMENTS

• PREPARING SHIPPING DOCUMENTS

• PROCURING INSURANCE

INLAND CARRIAGE

• THE FIRST STAGE IN TRANSPORTING GOODS ALMOST ALWAYS INVOLVES IN LAND CARRIERS – EITHER TRUCKING COMPANIES OR RAIL COMPANIES – THEY MOVE GOODS FROM SELLERS PLACE OF BUSINESS TO AIRPORTS OR SEAPORTS

• THE INLAND CARRIER TRANSFERS GOODS TO A FREIGHT FORWARDER AT THE SEAPORT OR AIRPORT FOR SHIPMENT ABROAD

• IN THE ABSENCE OF UNIVERSAL CONVENTIONS, SEVERAL REGIONAL AGREEMENTS REGULATE TRANSPORT BY ROAD AND RAIL

REGIONAL AGREEMENTS

• IN EUROPE – ROAD TRANSPORT IS REGULATED BY THE 1956 CONVENTION ON THE CONTRACT FOR INTERNATIONAL CARRIAGE OF GOODS BY ROAD (CMR)–THIS CONVENTION APPLIES WHENEVER GOODS ARE SHIPPED BETWEEN TWO COUNTRIES, AT LEAST ONE OF WHICH IS A SIGNATORY TO THE CONVENTION – IT REQUIRES A CARRIER TO ISSUE A CONSIGNMENT NOTE WHICH IS NOT CONSIDERED A NEGOTIABLE INSTRUMENT

• RAIL TRANSPORT IS GOVERNED BY THE 1980 CONVENTION CONCERNING INTERNATIONAL CARRIAGE BY RAIL( COTIF)– PROVISIONS IN THESE TYPES OF CONTRACTS ARE ESSENTIALLY THE SAME AS IN CMR CONTRACTS

• SIMILAR AGREEMENTS EXIST IN OTHER PARTS OF THE WORLD WITH THE SIGNIFICANT EXCEPTION OF NORTH AMERICA

CARRIERS• IF A ROAD CARRIAGE CONTRACT INVOLVES THE USE OF MULTIPLE CARRIERS, EACH CARRIER IS

TREATED AS A PARTY TO THE CONTRACT AND EACH IS RESPONSIBLE FOR THE ENTIRE TRANSACTION

• CARRIERS ARE LIABLE FOR LOSS, DAMAGE, OR DELAY UP TO THE LIABILITY LIMITS SET BY THE CONVENTION, SO LONG AS THE CONSIGNMENT NOTE STATES THAT CARRIAGE IS GOVERNED BY THE CMR– THE LIABILITY LIMIT HIS 8.33 SPECIAL DRAWING RIGHTS (SDRS) PER KILOGRAM UNLESS THE CONSIGNOR DECLARES A HIGHER VALUE AND PAYS A SURCHARGE

• IF THE CONSIGNMENT NOTE FAILS TO INCLUDE A REFERENCE TO THE CMR THE CARRIER WILL BE LIABLE FOR ANY RESULTING INJURY – IN EITHER CASE THE BURDEN OF PROOF RESTS ON THE CARRIER WHICH WILL BE LIABLE UNLESS THAT IT CAN SHOW THAT THE LOSS DAMAGE OR DELAY WAS CAUSED BY THE CONSIGNOR OR THE CONSIGNEE, BY AN INHERENT DEFECT IN THE GOODS OR “DO CIRCUMSTANCES WHICH THE CARRIER COULD NOT AVOID THE CONSEQUENCES OF WHICH HE WAS UNABLE TO PREVENT”

CARRIAGE OF GOODS BY SEA

• MOST GOODS ARE TRANSPORTED BY A COMMON CARRIER – THIS IS A SHIP THAT CARRIES GOODS FOR ALL PERSONS WHO CHOOSE TO EMPLOY IT SO LONG AS THERE IS ROOM– ONLY A FEW SHIPMENTS ARE LARGE ENOUGH TO REQUIRE THE SHIPPER TO HIRE AN ENTIRE VESSEL

• THE CONTRACT TO EMPLOY AN ENTIRE VESSEL IS KNOWN AS A CHARTERPARTY

COMMON CARRIAGE

• WHERE THE OWNER OR OPERATOR OF A VESSEL IS WILLING TO CARRY GOODS FOR MORE THAN ONE PERSON, THE VESSEL IS KNOWN AS A GENERAL SHIP OR COMMON CARRIER

• UNLIKE PRIVATE CARRIERS, COMMON CARRIERS ARE THE SUBJECT OF EXTENSIVE MUNICIPAL LEGISLATION AND INTERNATIONAL CONVENTIONS

THREE TYPES OF COMMON CARRIERS

• CONFERENCE LINE – THIS IS AN ASSOCIATION OF SEAGOING COMMON CARRIERS OPERATING ON ESTABLISHED ROUTES THAT HAVE JOINED TOGETHER TO OFFER COMMON FREIGHT RATES

• INDEPENDENT LINE– THIS IS A SEAGOING COMMON CARRIER OPERATING OVER ESTABLISHED ROUTES WITH A STATED RATE SCHEDULE

• TRAMP VESSEL – THIS IS A SEAGOING COMMON CARRIER OPERATING WITH A STATED RATE SCHEDULE BUT WITHOUT ESTABLISHED ROUTES

BILL OF LADING• A BILL OF LADING IS AN INSTRUMENT ISSUED BY AN OCEAN CARRIER TO

A SHIPPER THAT SERVES AS A RECEIPT FOR GOODS SHIPPED, AS EVIDENCE OF THE CONTRACT OF CARRIAGE, AND AS A DOCUMENT OF TITLE FOR GOODS

• THE MULTILATERAL TREATY GOVERNING BILLS OF LADING IS: THE INTERNATIONAL CONVENTION FOR THE UNIFICATION OF CERTAIN RULES OF LAW RELATING TO BILLS OF LADING (THIS TREATY IS SOMETIMES CALLED TWO OTHER NAMES – 1921 HAGUE RULES AND THE BRUSSELS CONVENTION OF 1924)

• MOST COUNTRIES INCLUDING THE UNITED STATES ARE PARTIES TO THE 1921 HAGUE RULES

PURPOSES OF BILLS OF LADING

• FIRST – IT IS A CARRIERS RECEIPT FOR GOODS

• SECOND – IT IS EVIDENCE OF A CONTRACT OF CARRIAGE

• THIRD – IS A DOCUMENT OF TITLE

• THE PERSON RIGHTFULLY IN POSSESSION OF THE BILL IS ENTITLED TO POSSESS, USE, AND DISPOSE OF THE GOODS THAT THE BILL REPRESENTS

• EXAMPLES OF BILLS OF LADING CAN BE SEEN IN THE TEXT ON PAGES 586 TWO 589

AS A RECEIPT FOR GOODS

• DESCRIBES THE GOODS PUT ON BOARD A CARRIER, STATES THE QUANTITY, AND DESCRIBES THEIR CONDITION

• THE FORM IS USUALLY FILLED OUT IN ADVANCE BY THE SHIPPER

• AS GOODS ARE LOADED ABOARD THE SHIP THE CARRIERS TALLY CLERK WILL CHECK TO SEE THAT THE GOODS LOADED COMPLY WITH THE GOODS LISTED

• THE CARRIER IS RESPONSIBLE ONLY TO CHECK FOR OUTWARD COMPLIANCE – THAT THE LABELS COMPLY AND THAT THE PACKAGES ARE NOT DAMAGED

• IF EVERYTHING APPEARS PROPER THE AGENT OF THE CARRIER WILL SIGN THE BILL AND RETURN IT TO THE SHIPPER

• BILLS CERTIFYING THAT THE GOODS HAVE BEEN PROPERLY LOADED ON BOARD ARE KNOWN AS CLEAN BILLS OF LADING

CLAUSED BILL OF LADING

• IF, AT THE TIME GOODS ARE BEING LOADED, THE CARRIERS KELLY CLERK NOTES A DISCREPANCY THE NOTATION TO THIS EFFECT MAY BE ADDED TO THE BILL OF LADING – THIS IS CALLED A CLAUSED BILL OF LADING

• CLAUSED BILLS OF LADING ARE NORMALLY UNACCEPTABLE TO THIRD PARTIES INCLUDING THE BUYER UNDER A CIF CONTRACT OR A BANK THAT IS AGREED TO PAY THE SELLER UNDER A DOCUMENTARY CREDIT ON RECEIPT OF THE BILL OF LADING AND OTHER DOCUMENTS

M. GOLODETZ & CO., INC. V. CZARNIKOW-RIONDA CO., INC. (THE GALITIA)

• THIS CASE IS AN EXAMPLE OF THE USE OF THE BILLS OF LADING AND APPEARS ON PAGE 590 OF THE TEXT

CONTRACT OF CARRIAGE

• BETWEEN THE SHIPPER AND THE CARRIER, THE BILL OF LADING IS EVIDENCE OF THEIR CONTRACT OF CARRIAGE

• EITHER PARTY MAY REBUT THIS BY PRODUCING EVIDENCE OF OTHER TERMS

• HOWEVER AS IS THE CASE WHERE THE BILL FUNCTIONS AS A RECEIPT, THE BILL BECOMES CONCLUSIVE EVIDENCE OF THE TERMS OF THE CONTRACT OF CARRIAGE ONCE IT IS NEGOTIATED TO A GOOD-FAITH THIRD-PARTY

DOCUMENT OF TITLE

• STRAIGHT BILL OF LADING– A STRAIGHT BILL IS ISSUED TO A NAMED CONSIGNEE AND IS NON-NEGOTIABLE - THIS DOCUMENT GIVES THE TRANSFEREE NO GREATER RIGHTS THAN THOSE OF THE TRANSFEROR

• ORDER BILL OF LADING– THIS DOCUMENT IS NEGOTIABLE AND CONVEYS GREATER RIGHTS – THE HOLDER OF AN ORDER BILL OF LADING, PROVIDED HE HAS RECEIVED IT IN GOOD FAITH THROUGH TO NEGOTIATION, HAS A CLAIM TO TITLE AND, BY SURRENDERING THE BILL, TO DELIVERY OF THE GOODS

CARRIER’S DUTIES UNDER A BILL OF LADING

• 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

CARRIER’S IMMUNITIES

• THE LIST OF CARRIERS IMMUNITIES IS LONG – THE FULL LIST IS CONTAINED IN PAGE 595 OF THE TEXT – SOME OF THE MORE IMPORTANT IMMUNITIES:

• ACT, NEGLECT, OR DEFAULT OF THE MASTER, MARINER, PILATE, OR THE SERVANTS OF THE CARRIER IN NAVIGATION OR IN THE MANAGEMENT OF THE SHIP

• ACT OF GOD

• ACT OF WAR

• ACTIVE PUBLIC ENEMIES

• RIOTS AND CIVIL COMMOTIONS

• SAVING OR ATTEMPTING TO SAVE LIFE OR PROPERTY AT THE