Savoring a rare victory

Savoring a rare victory

Thomas Timlen Asia liason officer, BIMCO tt@bimco.org

On Second Thought'

The past couple of years have been particularly tough on ship owners. The industry has faced numerous challenges, including overcapacity and its impact on ocean freight rates, pirate attacks continuing against ships navigating the Gulf of Aden and Indian Ocean, and the many regulatory burdens stemming from environmental concerns in force. Meanwhile, proposed further requirements, including introducing market-based instruments aimed at further reducing emissions, could further complicate our business.
   So it was encouraging news to see Chris Dupin's declaration of a 'Victory for carriers' in the August Shipper's Case Law (online at www.AmericanShipper.com/links ). The issues involving national and international cargo documentation and related regulations are significant, as they all play a key role in the facilitation of international commerce.
   Few consumers are aware the through bill of lading at the heart of the story makes it possible for them to enjoy fresh produce cultivated far from the point of purchase, as well as affordable garments and the latest electronic gadgets. Multimodal transport's efficiencies enable the transportation cost for such goods to usually amount to less than 2 percent of the purchase price.
   This can only be achieved through systems that function well on an international basis, and is exactly why ocean transport works as efficiently as it does, even in the hard times. These systems include documentation and regulatory instruments focused on contractual and operational responsibilities.
   BIMCO, established by ship owners in 1905, is often still seen as an owners' association despite that its membership includes a significant number of shipbrokers, port agents, protection and indemnity clubs, law firms, and even educational institutions in about 125 countries.
   Two things BIMCO strives to achieve relating to documentation and regulations are the maintenance of standardized shipping contracts and the promotion of internationally applied shipping regulations, preferably developed and enforced by the International Maritime Organization's (IMO) member states and other United Nations bodies.

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   With regard to shipping documentation, the international nature of our business creates a situation in which companies throughout the world benefit greatly from the use of contracts that have been standardized and are worded in a balanced manner, ensuring that obligations between carriers and shippers are equally allocated and no party to the contract is disadvantaged.
   BIMCO plays a key role in ensuring charter parties, bills of lading and other shipping contracts meet these criteria. There are more than 100 such contracts that BIMCO has approved, many created by its Documentary Committee, and others have been used in the marketplace and deemed worthy of such approval. Companies using BIMCO-approved documents are less exposed to disputes that can arise from poorly worded and biased contracts. More than 75 percent of transactions within the shipping industry use these approved documents.
   So while BIMCO seeks to promote the use of contracts that can be understood and utilized globally, we also seek to promote internationally applied regulations for the industry. On the operational side, owners can best comply with equipment, manning and training requirements that apply at all the world's ports. Fortunately, IMO member states in most cases uniformly apply internationally agreed regulations and as a result ships can trade globally with few regulatory surprises.
   Which brings us back to Dupin's August column. The case was brought before the U.S. Supreme Court to determine whether the carrier appearing on a through bill of lading could limit his liability regarding damages to cargo caused by a train derailment to the package limitation specified under the Carriage of Goods by Sea Act (COGSA). Claimants hoped to apply the U.S. Carmack Amendment, which applies to domestic U.S. road and rail carriage. Carmack has no limit on liability.
   The court found COGSA applied, hence, in this case, a victory for carriers.
   This case reminded me of my days as a cargo claims handler for a European carrier running containerships between Europe and Asia. Protecting our carriers' interests, we diligently explored available regimes to find the lowest package limitations that could somehow be used to begin settlement negotiations. A particular favorite in those days was a Greek package limitation amounting to a very small number of drachma; the challenge was how to justify applying it to the particular claim. This was possible then, and is still possible to some degree today (except that you won't be able to settle in drachmas any longer), as there is no globally applicable regime specifying the applicable limitations.
   Soon this may change if 20 countries ratify the Rotterdam Rules, also mentioned in the column. Ratification would trigger the rules entering into force one year later.
   BIMCO colleagues participated in the rules' development to protect carriers' interests, and in recognition of the advantages a single globally applied liability regime would create for all stakeholders. The rules constitute a balanced compromise and the only viable international solution and therefore we support their ratification.
   Our work, however, is far from complete. We will have to evaluate all BIMCO-approved contracts to determine whether revisions would be required to take into account changes from the Rotterdam Rules. Meanwhile, everyone involved with multimodal carriage should get acquainted with the rules' intricacies, which will require tweaking of procedures and affect operators' respective obligations and responsibilities. Failure to do so in a timely manner could open the door to unwelcome consequences.