UN Group adopts new draft cargo convention
Groups supporting both carriers and shippers say a proposed treaty for ocean cargo law is a “balanced” compromise that reflects the way shipping is being done today.
A United Nations Commission on International Trade Law (UNCITRAL) working group meeting in Vienna last week adopted a draft convention on contracts for the international carriage of goods wholly or partly by sea.
The working group has been meeting periodically since April 2002 to prepare a new treaty aimed at creating what UNCITRAL said would be “a modern and uniform law concerning the international carriage of goods, which include an international sea leg, but which is not limited to port-to-port carriage of goods.”
UNCITRAL said, “In addition to providing for modern door-to-door container transport, there are many innovative features contained in the draft convention, including provisions allowing for electronic transport records, and other more technical features to fill the perceived gaps in existing transport regimes.
“Harmonization and modernization of the legal regime in this area, which in many countries dates back to the 1920s or earlier, will lead to an overall reduction in transaction costs, increased predictability when problems are encountered, and greater commercial confidence when doing business internationally.”
The proposed convention will be circulated to governments for comment and will be presented to the annual session of UNCITRAL when it meets later this year in New York from June 16 to July 3.
If a final round of negotiations there are successful, it will be presented to the UN’s General Assembly later in 2008, and then have to be approved by individual countries.
The proposed convention has higher package liability limits than those provided under the Hague Rules, on which the U.S. law, the Carriage of Goods at Sea Act, is based. Most countries use a different regime called the Hague-Visby rules; a smaller group uses what are called the Hamburg Rules.
“There was a lot of give and take last week, but in the end I think we came away with a very balanced convention,” said Don O’Hare, vice president for the World Shipping Council, a group that represents major liner companies. “Nobody was completely happy with the final package but that is usually the sign of a good compromise.
“From the carriers’ perspective, we’re pleased that the convention will generally cover multimodal shipments and is not just another port-to-port convention. The liability limits are somewhat higher than we would have liked, but we will have freedom to negotiate volume contracts with shippers that can change those limits as well as other terms of the convention. And we have much more balanced burdens of proof compared with existing conventions.
“All in all, I believe it is a convention that should gain broad international acceptance, which was a primary objective of the U.S. delegation and many others when we started this process,” O’Hare said.
The National Industrial Transportation League, which represents shippers, notes that package limitations are pegged to the International Monetary Fund’s unit of value, Special Drawing Rights.
SDRs fluctuate like world currencies, and the NIT League said the current COGSA per package limit translates into about $550. Under the proposed draft convention, the per package limit for loss or damage would increase to 875 SDRs. At today’s exchange rate that’s about $1,385. On the basis of weight the proposed limit is 3 SDR per kilogram or about $4.75 at today’s rate.
That’s higher than the levels under either Hamburg or Hague Visby rules, and some major exporters, notably China, objected to the high package limit.
While the higher package limits can be modified in contracts, they are likely to become the default limits for shipments under tariff rates and the starting point or benchmark during negotiations.
In its weekly newsletter, the NIT League noted the UNCITRAL agreement was arrived at “only after protracted negotiations between countries that sought to keep limits at the Hague-Visby levels and those who supported higher limits as those provided for in the Hamburg Rules.”
The group said a breakthrough on an agreement was achieved when the limits were tied to the acceptance of the definition of “volume contracts.”
The league noted that most freight today moves under volume contracts and that the new agreement will give parties the right to derogate from the limits of the convention by allowing them to contract to either higher or lower limits for rights, obligations and liabilities, subject to certain conditions.
For example, those conditions would require a prominent statement that the contract derogates from the convention and would require the contract be individually negotiated. Shippers would have to be given the opportunity to conclude a contract of carriage under the terms and conditions of the convention without modification.
“It’s a comprehensive complex convention and you have to look at the whole picture,” said Peter Gatti, executive vice president of the NIT League. “I think the terms provided for the workshop provide a fair and balanced reflection of what shipping conditions are today. It will bring predictability and a more order to what has been a fairly well divided world in how they apply rules.
“It looks at door to door movements, which is how most people do business in the world today. The world did not need another port to port convention,” he said.
Gatti said the ability of shippers and carriers to deviate from the convention through contracts is recognition that “the overwhelming amount of business is under contracts and a reflection of the economic partnerships that exist in the world today — not just in the U.S., but other trades throughout the world.” ‘ Chris Dupin
UN Group adopts new draft cargo convention
