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Dinesh Gautama
DEVELOPING TRENDS
From Port to Port to Door to Door From gold value to SDRs From Hague Rules to Rotterdam Rules UCP 600
FRANC POINCARE
Franc Poincare is defined as 65.5 milligrams of gold of finesse 900. It was a unit of account that was used for the international regulations on the Limitation of Liability. It was nearly equal to a French franc during the 1900s. It was named after Raymond Poincare, who served as President of France from 1913 to 1920.
SDR
SDR stands for Special Drawing Rights It was created by IMF in 1969 It is an international reserve asset It is neither a currency nor a claim on IMF. It is a potential claim on the freely-usable currencies of the IMF members. Holders of SDRs can get these currencies in exchange for their SDRs.
HAMBURG RULES
United Nations Convention on the Carriage of Goods by Sea, 1978 ( also called Hamburg Rules). It is signed by 21 countries. The countries are Botswana, Lesotho, Lebanon, Burkino Faso, Nigeria, malawi, Morocco, Barabados, Kenya, Senegal, etc. It did not take off well.
ROTTERDAM RULES
They are called United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea. They opened for signature on Wednesday Sept 23, 2009 in Rotterdam 15 Countries, including USA signed it on the first day.
ROTTERDAM RULES
Till 19th Nov 2009 1800 hrs IST, 21 countries had signed it. It will come into force in November 2010. Countries are USA, Spain, Switzerland, Greece, Netherlands, Denmark, Norway, France, Poland, Armenia, Cameroon, Congo, Gabon, Ghana, Guinea, Madagascar, Mali, Niger, Togo, Nigeria and Senegal.
ROTTERDAM RULES
The Rotterdam Rules are the result of intergovernmental negotiations that took place between 2002 and 2009. These negotiations took place within the United Nations Commission for International Trade Law (UNCITRAL) after the Comit Maritime International (CMI) had prepared a basic draft for the Convention. On 11th December 2008, the General Assembly of the United Nations adopted the Rotterdam Rules.
They say that : It conflicts with other conventions present unequal obligations and liabilities between shippers and carriers present a risk that carriers may significantly reduce their own limits of liability and obligations under so-called volume contracts' make proving fault harder for the shipper make it increasingly difficult for shippers to successfully make a claim for damages make shipper obligations far more onerous may deter shippers from integrating short-sea shipping into their door-to-door logistics due to obligations and limits of liability being worse than under individual modal conventions
AND OTHERS?
European Freight Forwarders feel it will add to supply chain confusion. They say that it is too complicated and in ship-owners favour. ICC and World Shipping Council want it. Ship-owners have broadly favoured it. DG Shipping (India) has asked for comments in a letter addressed to Indian Ship-owners.
WHAT IS DIFFERENT?
The Rotterdam Rules use descriptions such as "volume contract" and "maritime performing party" which will need to be clarified. The Rules seek to establish lines of liability for carriage from door to door. The emphasis in the Hague Visby Rules was from port to port from the point of loading to the point of discharge. The Rotterdam Rules seek to push responsibility for a wider carriage onto the carrier who would be responsible for the goods from the point of "receipt" until the point of "delivery". It is not clear whether this would have an impact on other conventions like CMR which seek to deal with the land based side of the transportation regime. In addition, the number of defenses available to a carrier from door to door is intended to be reduced. A carrier's ability to rely upon the negligent act of an employee due to a navigation error will be cut down.
WHAT IS DIFFERENT?
The liability compensation levels in the new convention have been raised. Under the Hague Visby Regime, the maximum liability for a carrier is limited to two special drawing rights (SDR's) per kilo or 66 SDR's per package, whichever is deemed to be the higher of the two. The Hamburg Rules attempted to increase those levels. Under the new convention, the carrier's liability is now limited to three SDR's per kilo and/or 875 SDR's per package. The time limit for initiating legal proceedings for claim has been extended from one to two years.
WHAT IS DIFFERENT?
There is a rather curious set of clauses within the Rotterdam Rules which basically says that where there are "volume contracts" parties are actually free to contract out of most of the liability regime detailed above as long as the contract provides a "prominent statement that it delegates from this convention". Carriers are not allowed to contract out of their obligations to exercise due diligence to make and keep the ship seaworthy or look after the crew and equip the ship accordingly. The ambit/extent of the "contracting out" is unclear.
WHAT IS DIFFERENT?
Shippers are clearly concerned that the "get out clauses" in relation to volume contracts will provide owners with an opportunity to contract out of the new rules. For their part, owners and operators are aware that the contractual obligations provided by the new convention goes wider than the current regimes but that there is an opportunity to narrow their effect.
UCP 600
The Uniform Customs and Practices (UCP) for Documentary Credits were first issued in 1933 by the International Chamber of Commerce. The purpose was to overcome conflicting national laws on letters of credit as well as to bring about uniformity in banking practices. The rules have been revised many times. Recent revision, UCP 600, took more than three years of consultation and the Consulting Group, which comprised more than 40 representatives from 26 countries. During its 24-25 October 2006 meeting, the ICC Commission on Banking Technique and Practice approved the new UCP 600 rules for documentary credits.
UCP 600
"UCP" is the common reference for the Uniform Customs and Practice for Documentary Credits. The objective of the UCP is to create a set of contractual rules that would establish uniformity to conflicting national regulations Effective from July 1, 2007
A reduction in the number of articles from 49 to 39 New articles on "Definitions" and "Interpretations" providing more clarity and precision in the rules A definitive description of negotiation as "purchase" of drafts of documents The replacement of the phrase "reasonable time" for acceptance or refusal of documents by a maximum period of five banking days New provisions allow for the discounting of deferred payment credits Banks can now accept an insurance document that contains reference to any exclusion clause.
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