Chap 4Intro to

International Shipping Laws and

Convention

Commercial law•Commercial law, also known as business law, is the body of law that: Defined as:• applies to the rights,• relations, and• conduct of persons and businesses engaged in

commerce, merchandising, trade, and sales.• It is often considered to be a branch of civil law and deals with issues of both private law and public law.• In recent years this body of law has been codified in the Uniform Commercial Code (UCC), which has been almost universally adopted by the U.S. states.

•Commercial law includes: within its compass such titles as - principal and agent; - carriage by land and sea; - merchant shipping; - guarantee; - marine, fire, life, and accident insurance;- bills of exchange and partnership.

• It can also be understood to regulate:- corporate contracts,- hiring practices, and - the manufacture and sales of consumer goods.

• Many countries have adopted civil codes that contain comprehensive statements of their commercial law.

•In the United States, commercial law is the province of both the United States Congress, under its power to regulate interstate commerce, and the states, under their police power.• Efforts have been made to create a unified body of commercial law in the United States;

The broad areas of businessCommercial law governs the broad areas of business, commerce, and consumer transactions. Specific law has developed in a number of commercial fields. These include:BankingBankruptcyConsumer creditContractsDebtor and creditorLandlord-tenantMortgagesNegotiable instrumentsReal estate transactionsSalesSecured transactions

http://www.law.cornell.edu/wex/commercial_law

Covers Thirteen ArticlesThe Uniform Commercial Code, which has been substantially adopted as statutory law in nearly every state, governs numerous areas of commercial law. Currently it is divided into thirteen Articles:Article 1 (General Provisions)Article 2 (Sales)Article 2A (Leases)Article 3 (Negotiable Instruments)Article 4 (Bank Deposits)Article 4A (FundsTransfers)Article 5 (Letters of Credit)Article 6 (Bulk Sales)Article 7 (Warehouse Receipts)Article 8 (Investment Securities)Article 9 (Secured Transactions)Article 10 (Effective Date and Repealer)Article 11 (Effective Date and Transition Provisions)

LC Issuance, Amendment, Cancellation, & Duration.(a) A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary. A letter of credit is revocable only if it so provides.(b) After a letter of credit is issued, rights and obligations of a beneficiary, applicant, confirmer, and issuer are not affected by an amendment or cancellation to which that person has not consented except to the extent the letter of credit provides that it is revocable or that the issuer may amend or cancel the letter of credit without that consent.

LC (c) If there is no stated expiration date or other provision that determines its duration, a letter of credit expires one year after its stated date of issuance or, if none is stated, after the date on which it is issued.(d) A letter of credit that states that it is perpetual expires five years after its stated date of issuance, or if none is stated, after the date on which it is issued

LC – How it Works

M’sia Japan

OR…….* A written commitment to pay, by a buyer's or importer's bank (called the issuing bank) to the seller's or exporter's bank (called the accepting bank, negotiating bank, or paying bank).• A letter of credit guarantees payment of a specified sum in a specified currency, provided the seller meets precisely-defined conditions and submits the prescribed documents within a fixed timeframe. • These documents almost always include a clean bill of lading or air waybill, commercial invoice, and certificate of origin.

• To establish a letter of credit in favor of the seller or exporter (called the beneficiary) the buyer (called the applicant or account party) either pays the specified sum (plus service charges) up front to the issuing bank, or negotiates credit• Letters of credit are formal trade instruments and are used usually where the seller is unwilling to extend credit to the buyer.• In effect, a letter of credit substitutes the creditworthiness of a bank for the creditworthiness of the buyer.• Thus, the international banking system acts as an intermediary between far flung exporters and importers.• However, the banking system does not take on any responsibility for the quality of goods, genuineness of documents, or any other provision in the contract of sale.

Charter party•Charter party (Latin: charta partita; a legal paper or instrument, divided, i.e. written in duplicate so that each party retains half), a written, or partly written and partly printed, contract between a shipowner and a merchant, by which a ship is let or hired for the conveyance of goods on a specified voyage, or for a defined period. • A vessel might also be chartered to carry passengers on a journey.• Also, a written contract between shipowner and charterer whereby a ship is hired; all terms, conditions and exceptions are stated in the contract or incorporated by reference.

• A charter party is the contract between the owner of a vessel and the charterer for the use of a vessel.• The charterer takes over the vessel for either a certain amount of time (a time charter) or for a certain point-to-point voyage (a voyage charter), giving rise to these two main types of charter agreement. • There is a subtype of time charter called the demise or bareboat charter.•In a time charter, the vessel is hired for a specific amount of time.

CP cont..

•The owner still manages the vessel but the charterer gives orders for the employment of the vessel, and may sub-charter the vessel on a time charter or voyage charter basis.* The demise or bareboat charter is a subtype of time charter in which the charterer takes responsibility for the crewing and maintenance of the ship during the time of the charter, assuming the legal responsibilities of the owner and is known as a disponent owner.* In a voyage charter, the charterer hires the vessel for a single voyage, and the vessel's owner (or disponent owner) provides the master, crew, bunkers and supplies.

US Law – on COGSA, • COGSA, the Carriage of Goods by Sea Act, does not apply of its own force to charter parties, but does apply to bills of lading issued to a shipper by the charterer (in the US) in conjunction with charterer's operations.• As a practical matter, many charter party forms stipulate the applicability of COGSA or the Harter Act to the relations between owner and charterer. * Such a stipulation is valid and enforceable even without the issuance of a bill of lading.

http://www.mcgill.ca/files/maritimelaw/Harter_Act.pdf

US Law – on COGSA

• Law suits brought for the breach of an obligation under a charter party are generally within the admiralty jurisdiction.• As long as the agreement is executory, for inadequate performance the remedy is in personam which allows the plaintiff to go to state court under the "saving to suitors" clause. If, however, a charter breach creates a maritime lien, the suit is in rem, against the vessel itself, with exclusive admiralty jurisdiction.

Bill of LadingA Bill of Lading (sometimes abbreviated as B/L or BOL) is a key document used in the transport of goods. As a document of title, it is also an important financial instrument. DescriptionAt its most basic, a Bill of Lading is a document generated by a shipper, detailing a shipment of merchandise, giving title to the goods, and requiring the carrier to release the merchandise to a named party at the destination.

History* While there is evidence of the existence of receipts for goods loaded aboard merchant vessels stretching back as far as Roman times, and the practice of recording cargo aboard ship in the ship's log is almost as long lived as the ship itself, the modern Bill of Lading only came into use with the growth of international trade in the medieval world.•The growth of mercantilism (which produced other financial innovations such as the bill of exchange and the Insurance Policy) produced a requirement for a title document that could be traded in much the same way as the goods themselves.• It was this new avenue of trade that produced the bill of Lading in much the same form as we know today.* The current regulations on bills of lading were codified by the Hague Rules in 1924.

Uses of BL

As a receiptThe principal use of the bill of lading is as a receipt issued by the carrier once the goods have been loaded onto the vessel. This receipt can be used as proof of shipment for customs and insurance purposes, and also as commercial proof of completing a contractual obligation, especially under Incoterms such as CFR and FOB.

As titleThe bill of lading confers title to the goods to the consignee noted on the bill. The bill of lading may also be made out "To Order", which confers title to the goods to the holder of the bill of lading

As a negotiable instrumentBecause the bill of lading represents title to the goods detailed upon it, it can be traded in much the same way as the goods may be, and even borrowed upon if desired. This is a very important and common document used in export and import trade globally.

Sea Waybills vs BLSea Waybills and Electronic Document Interchange (EDI)• In recent years, the use of bills of lading has declined, as they have been replaced in the most part with the sea waybill.• The main difference between these two documents is - that the waybill does not confer title of the goods to the bearer, so - no need for the physical document to be presented for the goods to be

released.• The shipping line will automatically release the goods to the consignee once the import formalities have been completed. • This results in a much smoother flow of trade, and has allowed shipping lines to move towards Electronic data interchange which greatly eases the flow of global trade.** However, for letter of credit and Documentary Collection transactions, it is important to retain title to the goods until the transaction is complete.** This means that the bill of lading still remains a vital part of international trade.

Other Definition of BLA legal document between the shipper of a particular good and the carrier detailing the type, quantity and destination of the good being carried. The bill of lading also serves as a receipt of shipment when the good is delivered to the predetermined destination. This document must accompany the shipped goods, no matter the form of transportation, and must be signed by an authorized representative from the carrier, shipper and receiver.** For example, suppose that a logistics company must transport gasoline from a plant in Texas to a gas station in Arizona via heavy truck. A plant representative and the driver would sign the bill of lading after the gas is loaded onto the truck. Once the gasoline is delivered to the gas station in Arizona, the truck driver must have the clerk at the station sign the document as well.

'Bill Of Lading'

We can distinguish the charter party from the bill of lading from the following facts :1. Contract And Evidence :-Charter party : Charter party is a contract between the ship owner and shipper about hiring the ship.Bill of Lading : Bill of lading is an evidence of receiving the goods.2. Transferable :-Charter party : Charter party is not transferable.Bill of Lading : A bill of lading can be transferred by endorsement and delivery.3. Title To The Goods :-Charter party : Charter party is not a document which declares the title of the goods.Bill of Lading : A bill of lading is a document which declares the title to the goods specified.4. Drawn In Sets :-Charter party : A charter party is not drawn in sets.Bill of Lading : A bill of lading is drawn in these sets.

5. Leasing Of Ship :-Charter party : A charter party may be for amount to a lease of the ship.Bill of Lading : Such type of intention is not conveyed in the bill of lading.6. Particular Destination :-Charter party : A charter party may be for the particular voyage.Bill of Lading : A bill of lading is related with the particular destination.7. Case Of Freight :-Charter party : In case of charter party the freight is usually paid when the ship reaches to the port.Bill of Lading : The freight is to be paid in advance, in case of bill of lading.

Standard Bill of Lading? •Neither the form nor the usage of the Bill of Lading (BOL) is standardized at present. • As various inconsistent documents pass through several channels and companies, pinpointing the data items required at each stop becomes challenging. The BOL has taken on even greater importance recently because it can be used for the scheduling and recording of shipments as well as input to carrier EDI transactions. • Many shippers can modify the form to fit the requirements of the carrier and the consignee for the scheduling and unloading of the shipment.

http://www.vics.org/guidelines/bol/ - FAQ on BL

Std. BoL cont…•However, a lack of consistency decreases the accuracy and productivity of recording shipment data on the forms, as well as making the extraction of data for billing and freight settlement purposes laborious.• The Standard Bill of Lading document and guidelines address these problems and aim to reduce processing time and increase data accuracy.• As shippers and carriers become familiar with a standardized form, extracting information from it will be quick and seamless.

International Convention•The International Maritime Organization (IMO), known as the Inter-Governmental Maritime Consultative Organization (IMCO) until 1982, was established in Geneva in 1948, and came into force ten years later, meeting for the first time in 1959• Headquartered in London, United Kingdom, the IMO is a specialized agency of the United Nations with 170 Member States and three Associate Members.• The IMO's primary purpose is to develop and maintain a comprehensive regulatory framework for shipping and its remit today includes:• safety, environmental concerns, • legal matters,• technical co-operation,• maritime security and• the efficiency of shipping.

Most important IMO Conventions

Most important IMO Conventions:i. International Convention for the Safety of Life at Sea (SOLAS), 1974, as amendedii. International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto and by the Protocol of 1997( MARPOL) iii. International Convention on Standards of Training, Certification and Watchkeeping for Seafarers ( STCW ) as amended, including the 1995 and 2010 Manila Amendments

The International Convention for the Safety of Life at Sea (SOLAS)•is an international maritime safety treaty. • It ensures that ships flagged by signatory States comply with minimum safety standards in construction, equipment and operation. • The SOLAS Convention in its successive forms is generally regarded as the most important of all international treaties concerning the safety of merchant ships.

* The International Convention for the Prevention of Pollution from Ships (MARPOL) is the main international convention covering prevention of pollution of the marine environment by ships from operational or accidental causes. •The MARPOL Convention was adopted on 2 November 1973 at IMO. • The Protocol of 1978 was adopted in response to a spate of tanker accidents in 1976-1977. As the 1973 MARPOL Convention had not yet entered into force, the 1978 MARPOL Protocol absorbed the parent Convention. • The combined instrument entered into force on 2 October 1983.• In 1997, a Protocol was adopted to amend the Convention and a new Annex VI was added which entered into force on 19 May 2005. MARPOL has been updated by amendments through the years. * The Convention includes regulations aimed at preventing and minimizing pollution from ships - both accidental pollution and that from routine operations - and currently includes six technical Annexes. Special Areas with strict controls on operational discharges are included in most Annexes.

The United Nations Convention on the Law of the Sea (UNCLOS), also called the Law of the Sea Convention or the Law of the Sea treaty, is the international agreement that resulted from the third United Nations Conference on the Law of the Sea (UNCLOS III), which took place between 1973 and 1982.* The Law of the Sea Convention defines the rights and responsibilities of nations in their use of the world's oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources.

Other conventions relating to maritime safety and security and ship/port interface 1. Convention on the International Regulations for Preventing Collisions at Sea (COLREG), 19722. Convention on Facilitation of International Maritime Traffic (FAL), 19653. International Convention on Load Lines (LL), 19664. International Convention on Maritime Search and Rescue (SAR), 19795. Convention for the Suppression of Unlawful Acts Against the Safety of Maritime Navigation (SUA), 1988, and Protocol for the Suppression of Unlawful Acts Against the Safety of Fixed Platforms located on the Continental Shelf (and the 2005 Protocols)6. International Convention for Safe Containers (CSC), 19727. Convention on the International Maritime Satellite Organization (IMSO C), 1976 8. The Torremolinos International Convention for the Safety of Fishing Vessels (SFV), 1977, superseded by the 1993 Torremolinos Protocol; Cape Town Agreement of 2012 on the Implementation of the Provisions of the 1993 Protocol relating to the Torremolinos 9. International Convention for the Safety of Fishing Vessels 10. International Convention on Standards of Training, Certification and Watchkeeping for Fishing Vessel Personnel (STCW-F), 199511. Special Trade Passenger Ships Agreement (STP), 1971 and Protocol on Space Requirements for Special Trade Passenger Ships, 1973

Admiralty law• Admiralty law (also referred to as maritime law) is a distinct body of law which governs maritime questions and offenses. • It is a body of both domestic law governing maritime activities, and private international law governing the relationships between private entities which operate vessels on the oceans.• It deals with matters including marine commerce, marine navigation, marine salvaging, shipping, sailors, and the transportation of passengers and goods by sea. • Admiralty law also covers many commercial activities, although land based or occurring wholly on land, that are maritime in character.

Admiralty law vs Law of the Sea•Admiralty law is distinguished from the Law of the Sea, which is a body of public international law dealing with: - navigational rights, - mineral rights, - jurisdiction over coastal waters and - international law governing relationships between nations.* Although each legal jurisdiction usually has its own enacted legislation governing maritime matters, admiralty law is characterized by a significant amount of international law developed in recent decades, including numerous multilateral treaties.

Trade Laws• International trade law includes the appropriate rules and customs for handling trade between countries.• However, it is also used in legal writings as trade between private sectors, which is not right. • This branch of law is now an independent field of study as most governments has become part of the world trade, as members of the World Trade Organization (WTO). • Since the transaction between private sectors of different countries is an important part of the WTO activities, this latter branch of law is now a very important part of the academic works and is under study in many universities across the world

Consumer Protection• Consumer protection is a group of laws and organizations designed to ensure the rights of consumers as well as fair trade competition and the free flow of truthful information in the marketplace. • The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors; they may also provide additional protection for the weak and those unable to take care of themselves.• Consumer protection laws are a form of government regulation, which aim to protect the rights of consumers. • For example, a government may require businesses to disclose detailed information about products —particularly in areas where safety or public health is an issue, such as food.• Consumer protection is linked to the idea of "consumer rights" (that consumers have various rights as consumers), and to the formation of consumer organizations, which help consumers make better choices in the marketplace and get help with consumer complaints.

Who are Consumers* A consumer is defined as someone who acquires goods or services for direct use or ownership rather than for resale or use in production and manufacturing.* Consumer interests can also be protected by promoting competition in the markets which directly and indirectly serve consumers, consistent with economic efficiency, but this topic is treated in competition law.* Consumer protection can also be asserted via non-government organizations and individuals as consumer activism

Consumer Law• Consumer protection law or consumer law is considered an area of law that regulates private law relationships between individual consumers and the businesses that sell those goods and services. • Consumer protection covers a wide range of topics, including but not necessarily limited to product liability, privacy rights, unfair business practices, fraud, misrepresentation, and other consumer/business interactions.* It's a way of preventing fraud and scams from service and sales contracts, bill collector regulation, pricing, utility turnoffs, consolidation, personal loans that may lead to bankruptcy.•Consumer protection law or consumer law is considered an area of law that regulates private law relationships between individual consumers and the businesses that sell those goods and services.

UNCLOS III• The Law of the Sea Treaty, formally known as the Third United Nations Convention on the Law of the Sea, or UNCLOS III, was adopted in 1982. • Its purpose is to establish a comprehensive set of rules governing the oceans and to replace previous U.N. Conventions on the Law of the Sea, one in 1958 (UNCLOS I) and another in 1960 (UNCLOS II), that were believed to be inadequate.* Negotiated in the 1970s, the treaty was heavily influenced by the "New International Economic Order," a set of economic principles first formally advanced at the United Nations Conference on Trade and Development (UNCTAD). • That agenda called for "fairer" terms of trade and development financing for the so-called under-developed and developing nations.* Another way the New International Economic Order has been described is "redistributionist."

•The Law of the Sea Treaty calls for technology transfers and wealth transfers from developed to undeveloped nations. • It also requires parties to the treaty to adopt regulations and laws to control pollution of the marine environment. Such provisions were among the reasons President Ronald Reagan rejected the treaty in 1982. As Edwin Meese, U.S. Attorney General under President Reagan, explained recently, "...it was out of step with the concepts of economic liberty and free enterprise that Ronald Reagan was to inspire throughout the world."* In additional to the economic provisions, the treaty also establishes specific jurisdictional limits on the ocean area that countries may claim, including a 12-mile territorial sea limit and a 200-mile exclusive economic zone limit. Some proponents of the treaty believe that the treaty will establish a system of property rights for mineral extraction in deep sea beds, making the investment in such ventures more attractive.