World Maritime University The Maritime Commons: Digital Repository of the World Maritime University Books Library 2018 A Boxful of Rules Captain VS Parani Follow this and additional works at: https://commons.wmu.se/lib_books Part of the Transportation Commons Recommended Citation Parani, Captain VS, "A Boxful of Rules" (2018). Books. 3. https://commons.wmu.se/lib_books/3 This Book is brought to you courtesy of Maritime Commons. Open Access items may be downloaded for non-commercial, fair use academic purposes. No items may be hosted on another server or web site without express written permission from the World Maritime University. For more information, please contact [email protected]. A Boxful of Rules Captain VS Parani 0 A Boxful of Rules Captain VS Parani What the book is about? Are you involved with or studying the logistics and transport industry? Have you wondered what happens when things go wrong during the transport, such as when a shipment of televisions is received in damaged condition, a container of cigarettes is stolen, or, an important shipment of prawns is received a week too late for the local market? Well, this is what this book is all about! In the modern global economy, finished and semi-finished products are transported in large volumes across the globe. Things do go wrong during such transport; then what recourse does the cargo owner have? How much loss will be made good by the insurers and under which convention? On opening the container, a strange sight awaits the consignee at the destination! How and when did this cargo get damaged? Such situations complicate the liability regime in multimodal transport. Photo courtesy: Captain Förster, http://www.captainfoerster.de) 1 A Boxful of Rules Captain VS Parani Yes, there are separate international agreements regarding responsibilities and liabilities during the transport of cargo separately by sea, land, by rail or by air. However, it is not always clear which rule will apply in which circumstance. Matters are made worse when it is not known when and on which mode of transport the loss or delay actually occurred! This kind of uncertain recourse creates confusion, misunderstanding and eventually high insurance costs. Is there an easier way? This book looks at the different transport conventions, their history, their success and failures, and examines how well they work together. We will also see what solutions to this situation are possible. The book critically analyses the problems involved, such as the conflict of laws, lack of harmonisation of legislation on the various modes of transport involved, the question of whether a combined transport document fulfils the function of a document of title, and possible solutions and reforms. The work starts by examining the legal regime of each component mode involved in the multimodal transport chain to analyse the strength of the foundation based on which the 'secondary' layer of multimodal transport law regime is based. The following chapters explore the evolution, contents and the reasons for the failure of the multimodal transport conventions prepared so far and explain why the biggest hurdle for the 'ideal' multimodal convention is more of a political and commercial nature, rather than a legal one. 2 A Boxful of Rules Captain VS Parani This work is based on library research of cases, conventions and published accounts of legal difficulties faced by the multi-modal transport industry and its users. The situation is based on the prevailing laws and framework in 2010. You will see that though the book covers some complex topics, the logical flow and simple fashion is aimed to facilitate easy understanding. The author has over two decades of experience in the maritime and logistics industry, including having been the Captain of a container ship. He has multiple degrees in Navigation, Business Law and Business Administration. He is a Fellow of the Institute of Chartered Shipbrokers and the Nautical Institute. He is also a Member of the Institute of Marine Engineering, Science and Technology. For more information on the author, or to feedback on the book, visit www.parani.org. 3 A Boxful of Rules Captain VS Parani Table of Contents Serial Page Heading Number number 1 What this book is about? 1 2 Introduction 7 The various transport modes in a multimodal transport 3 13 and their international transport regimes 3a Shipping 14 3b Aviation 27 3c Road, Rail and Inland Waterways 33 The modes of carriage work together: The emergence of multimodal transport, containerization and new 4 38 transport law questions 4a The container as a deck cargo on a sea-carrier 41 4b The container as a package 43 4c Tackle-to-tackle application of the HVR to containers 44 The new role of the freight forwarder and the 5 45 emergence of the NVOCC. 5a MTO as a principal or an agent of the carrier? 46 5b Bills of lading in multimodal transport: 51 5c The through bill of lading as a contract of carriage 53 The combined or through bill of lading as a document of 5d 55 ‘title’? 4 A Boxful of Rules Captain VS Parani The central question: Who is exposed to how much risk 6 56 exposure during the multimodal transport? 6a Localized and Unlocalized loss 59 6b Unlocalized loss 60 6c Which convention applies 62 6d Difficulty in drafting a multimodal carriage contract. 67 Time for commencing litigation; which convention 6e 68 applies? 6f Liability Gap 69 7 The size of the problem 77 8 Possible approaches to the central liability question 78 8a Uniform Approach 79 8b Network Approach 83 8c Modified Approach 86 9 The multimodal conventions 88 9a The first steps 88 9b The Multimodal Convention. 91 9c The UNCTAD-ICC Rules 101 Review of the situation post MT Convention and the 9d 104 UNCTAD/ ICC Rules 10 Do we need harmonization at all? 106 11 The third doctrine of 'absorption' 110 Rotterdam Rules as a solution to the multimodal 11a 113 problem? 5 A Boxful of Rules Captain VS Parani 12 Conclusion 120 Appendix 1 123 Appendices Appendix 2 126 Bibliography 131 6 A Boxful of Rules Captain VS Parani Introduction Freight transport makes a vital contribution to the economy and society, and is at the heart of globalisation.1 The above graph shows the trend in transport of world trade. The amazing increase of transport of manufactured goods is shown by the Green Line. Transport of mining raw material and bulk grain is indicated by the Blue line. Graph made from information collected from the UNCTAD, IMF and WTO. 1 White Paper "European transport policy for 2010: time to decide", COM (2001)370. 7 A Boxful of Rules Captain VS Parani In 1980 container volumes were 13.5 million TEU and,2 by 2010 the global container throughput reached 560 million TEUs recording an increase of over 400% and a corresponding average annual compound growth of over 9%.3 International transport of goods by container, especially finished goods, is increasingly favoured by maritime and inland transport industries; the rapid growth of international trade has further boosted the eminence of the container transport industry.4 The technical and commercial advantages of the container are that the number of transport units which must be handled, such as bags or pallets (thus the time and manpower required to handle them) are now reduced to a consolidated shipping container. The containers themselves are sturdier transport units and are less susceptible to pilferage, weather and handling damage, therefore reduce transport losses. Improvements in transport management through information technology, innovative ship and other vehicle building methods (e.g. cellular ships, refrigerated containers, specialized lifting equipment, articulated lorries) have dramatically improved the economies of scale and specialization and generally, the efficiency of container transport. Similar developments in aviation have 2 http://www.unescap.org/ttdw/publications/tfs_pubs/pub_2398/pub_2398_ch3.pdf. 3 Rodrigue, J-P, C. Comtois and B. Slack (2009), The Geography of Transport Systems, Second Edition, New York: Routledge. http://people.hofstra.edu/geotrans/eng/ch3en/conc3en/worldcontainertraffic.html. Bruce Barnard, 'Global Container Traffic Hits All Time High', The Journal of Commerce Online - News Story, Apr 5, 2011, http://www.joc.com/maritime/global-container-traffic-hits-all-time-high. 4 J-P, C. Comtois and B. Slack (2009), The Geography of Transport Systems, Second Edition, New York: Routledge (ibid.). 8 A Boxful of Rules Captain VS Parani contributed to an annual average increase of 12.2% over the last twenty years in cargo shipped worldwide through air. It is further expected that world air cargo traffic will triple over the next twenty years.5 It is therefore no surprise that containers are predicted to remain a dominant means of transporting finished goods.6 Multimodal transport allows a seamless transport with minimal handling in the intermediate stages. Photo courtesy: Trans Link (http://www.translinklogistics.com.br/) 5 Boeing Commercial Airplanes, World Air Cargo Forecast 2010-2011, http://www.boeing.com/commercial/cargo/wacf.pdf 6 Long-Term Trends in Container Throughput, America's Container Ports: Freight Hubs That Connect Our Nation to Global Markets, Research and Innovative Technology Administration (RITA), U.S. Department of Transportation (US DOT), June 2009, available at http://www.bts.gov/publications/americas_container_ports/2011/html/long_term_trends.html. Also see Freight Intermodality, Results from the transport research programme, http://europa.eu.int/comm/dgs/energy_transport/index_en.html 9 A Boxful of Rules Captain VS Parani Perhaps the most significant paradigm shift was the evolution of multimodal transport; new operating terms such as non-vessel operating carrier, door-to-door delivery and changed customer expectations have blurred the traditionally held boundaries of various modes of transport. Using containers, cargo could be moved quickly over great distances, with little rehandling, and with efficient transfer between modes.7 It would not be incorrect to state that containerization has facilitated the emergence and widespread use of multimodal transport8.