Part 3 Chapter 4

Carriage of Goods by Sea

Contents

1â Introduction

The subject of carriage of goods by sea is one of paramount importance to international trade. Despite the existence of other forms of transport such as rail, road and air, sea carriage remains the most practical and often most financially viable option for traders. This is especially true where the buyer and seller are located in different countries. In 2009, world seaborne trade fell overall by 4.5 per cent following the economic collapse of 2008.1 The total goods loaded in 2009 amounted to 7.8 billion tons; this was down from 8.2 billion tons loaded in 2008.2 Although these figures may initially seem disappointing and indicate a lack of demand for seaborne transport, this is not the case. In its 2010 trend report, the United Nations Conference on Trade and Development (UNCTAD) stated that the figures for 2009 were not indicative of the overall picture for the future. Rather, statistics showed that developing countries (mainly those in Asia) continued to increase the amount of trade conducted despite the global economic upheavals. Asia holds a 41 per cent share in goods loaded

1 Maritime Transport Review (UNCTAD, 2010) 6.â 2â Ibid.

232 Carriage of goods by sea

worldwide.3 Also, the ever-growing demand for crude oil resulted in an upsurge in the tanker trade. Dry bulk cargoes, in particular ore used for steel, continued to drive demand in this area as well.

There are many issues to be considered when shipping goods by sea, including the parties involved in the process, the nature of the cargo, the type of vessel to be used, as well as the most suitable type of contract for the voyage.

(a)â Cargoes

There are a wide variety of cargoes shipped internationally every day. These include raw materials as well as manufactured cargoes. It is the nature and amount of cargo to be shipped which will decide what type of contract of carriage the parties will choose. If there is a large quantity of bulk cargo the shipper may choose to charter an entire vessel, whereas with smaller cargoes it may be more suitable to use liner trades which run on a fixed schedule. Dry bulk cargoes comprise two distinctions: major dry bulks, which include iron ore, coal, grain, bauxite/alumina and phosphate rock, and the minor bulk trades, which include manufactures, agribulks, metals and minerals. Within the category of dry bulk cargo there is a wide variation in the characteristics of these goods. For example, cargoes such as grain intended to be sold for consumption will require holds which are free of any type of contamination. Other types of cargo, such as coal, may be susceptible to inherent vice4 and may require storage in holds with cooler temperatures. Some agricultural goods such as potatoes may deteriorate in damp conditions or where the hold is likely to take in water. Goods may also be classed as dangerous and require special handling when loading or unloading.5

Cargoes such as liquid bulk cargo, mainly oil, will require special equipment to be transferred onto the tankers for transport. Once these cargoes reach their destination they will be discharged into terminals, and the oil is then pumped through a pipeline to a refinery for processing.

Not all cargoes will be large enough to require use of the entire ship; such cargoes will be shipped separately, using dunnage6 to store and secure them in the hold. Most modern transport methods however employ the use of containers to transport separate items; this helps to protect the goods, as well as speeding up the process of loading and unloading the goods.

(b)â Vessels

For the purposes of transporting goods in international trade there are several different types of vessels; the type and amount of cargo will usually determine

3 Ibid. 7.â 4â When goods react naturally to their environment.

5See the International Maritime Dangerous Goods Code.

6Materials such as wood, burlap or matting used to protect goods.

233 1â Introduction

the kind of vessel employed. One of the most common types are container ships; these ships, which carry most of the world’s manufactured goods and products, are usually operated through scheduled liner services. Container ships carry their containers both on and below deck.

Bulk carriers are another type of vessel used in the shipping industry. These vessels transport raw materials such as iron ore and coal. They are usually identifiable by the hatches raised above deck level which cover the cargo holds.

Tankers are used to transport crude oil, chemicals and petroleum products. Tankers are similar in appearance to bulk carriers, however the deck will be covered by oil pipelines and vents.

(c)â Parties

There are many parties who play a role in the international transport of goods by sea. Some parties will play a primary role while others are ancillary to the process. Typically, the buyer and seller in the sale contract will play a prominent role in the carriage process. The responsibilities of each party will depend on the applicable law or set of rules to the contract. For example, a seller in a CIF contract7 will be tasked with arranging for carriage as well as insurance for the goods. As the buyer and seller are located in different countries they may employ agents or brokers to conduct business on their behalf.

Another important party to the carriage transaction is the carrier; the carrier will enter into the contract of carriage with the shipper. The carrier can be someone employed in the liner trade or may be a charterer. On board the vessel there will be members of the crew responsible for undertaking the voyage; the most important member of the crew is the master who issues commands to the other members. He is also given the responsibility of signing bills of lading presented to indicate acceptance of the goods on board the vessel. The consignee will be the person named in the bill of lading to whom the goods should be delivered at the port of discharge. Most modern shipping practices employ the use of stevedores to load and unload the goods; such persons are usually treated as independent contractors and not as servants of the ship-owner.

(d)â Contracts

There are two main types of contracts of affreightment: bills of lading and charter parties. For shippers with only a small quantity of cargo, chartering an entire vessel will not be a practical option, instead they will choose to use liner services, which operate between major ports on a fixed schedule or tramp vessels, which sail from port to port in search of cargo.

7 See Part 3 Chapter 1 for further discussion.