Addis Ababa University School of Commerce

Supported Distance Education Program

Tutor’s comments and score form (TCS)

NOTE: Attach one copies that are eligible

SECTION 1: To be completed by the student

Name: ZelalemBirhan Girma Course Title: Customer Clearing and freight

forward

TMA No:II
ID. NO :- GSD/1019/15
Tel: 0935509777 Tutor’s Name Dr. Busha K.

Section 2: TO be completed by the co tutor

SECTION 2: Marks for Each Part of the TMA
Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Part 8 Part 9

Total Score

CO- TUTOR’S GENERAL COMMENTS AND ADVICE TO STUDENT:

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Question 1: Transport. What roles transportation is playing in international trade? Which
mode/type of transport do you suggest for an Ethiopian exporter and importer respectively?
What do you suggest comparing one mode of transport to another mode? How do you see
transport during this pandemic- is it benefiting or exposing people?

Transport makes possible movement of goods from one place to another with great ease and
speed. Trade means exchange of goods and services. In trade there is movement of goods from
surplus areas to scarcity areas. The movement of goods is possible only because of transport. As
a landlocked country, Ethiopia uses Djibouti port as its main gateway for international trade.
Rapid economic growth for over a decade coupled with the creation of the African Continental
Free Trade Area and growth of Ethiopian cities has increased demand for freight and public
transport. The Ethiopian transport sector is heavily dominated by the public sector with road
infrastructure development, railway sector, maritime, and logistics as well as aviation sectors
heavily monopolized by the government. Private sector involvement in the transport sector was
limited to public and freight transport services, freight forwarding and chartered flight services
with small passenger aircrafts. This situation will change in the coming years as the current
administration has shown a promising commitment to liberalize the sector for private sector
engagement in different modalities. 

The Government of Ethiopia identified the transport sector as a game changer to maintain the
country’s impressive economic growth trajectory, and it formed a National Transport Council
that will lead the reform program in the sector. The Council chaired by the Minister of Transport
reports directly to the Prime Minister, and it comprises various other Ministers including
Agriculture, Finance, Trade and Industry, and Mines in addition to other stakeholders . In its two
years life span, the Council formulated and endorsed a national transport policy (March 2020), a
national logistics strategy (2020 to 2030) and policy, and the transport sector’s 10-year
perspective plan (2020 to 2030). 

The reform program spearheaded by the Transport Council opens up room for more private
sector engagement in port development, railways development and operation, maritime and
logistics services, and road infrastructure development.  In the coming years, international and
domestic private investors can engage in the Ethiopian transport sector in the form of full private
ownership, joint ventures with the government or other local entities or in public private
partnership (PPP) modalities.  According to the government’s 10-year transport perspective plan,
the country envisages to invest 3.0 trillion birr (approximately $58 billion) in the sector in the
next ten years and identified the private sector as an engine and active participant in this
development plan. Various funding sources are planned to be used for this ambitious plan with
70 billion birr to be generated from the revenues of the Ministry while the rest is planned to be
sourced from government budget subsidies, private sector involvement, foreign support, and
grants. 

The plan identified about 44 projects that will be open for private sector investment including in
dry ports development, dry bulk terminals, logistics city development, cold chain development,
freight forwarding and shipping agency services, cargo handling services at railways, maritime
training institutions and maritime services, railways development, railways rolling stock spare
parts manufacturing, private operators engagement in existing rail infrastructure, logistics city
development, auxiliary services at passenger stations and within the trains, rolling stock leasing,
urban mass transport services, cross-country public transport services, dry and fluid cargo
transport services, string-rail transport, pipe line transport development, express road ways
development, one stop border posts, air transport and aviation services, aeronautical information
management system development, aeronautical flight inspection development, ICT development
for port shipping and logistics sector development and expressway integrated traffic management
system development, bus rapid transit (BRT) corridor system and cable car system development
and many more.  

Ethiopia’s 10-year (2020 to 2030) transport sector perspective plan creates massive trade and
investment opportunities for U.S. companies seeking to do business in Ethiopia. U.S. companies
can engage in this development plan either as an investor or providers of technology, equipment
and know-how as contracting partners in the implementation of the plan. 

The GOE has steadily expanded its road network in recent years. As of the end of FY 2019/20,
Ethiopia had 144,024 kilometers (89,492 miles) of all-weather roads – about 41% of the required
road network in the country. In FY 2018/19, the GOE invested 37.3 billion birr ($1.1 billion) in
road construction. The Ethiopian Roads Authority plans to build an additional 10,000 kilometers
of road at a cost of 41 billion birr ($80 billion) in the coming year. In the past fifteen years, the
GOE has been vigorously engaged in new road construction as well as expansion of the existing
road network through Ethiopia’s Road Sector Development Programs (RSDP). 

U.S. firms have bid on tenders for road design, construction, auditing and supervision services. 
However, most of them have not been price competitive. Ethiopia will continue to need
construction vehicles (bulldozers, cranes, trucks, and forklifts), vehicle attachments, and
mechanized and non-mechanized equipment to level and pour construction materials. Most
projects open for international competitive bidding are funded either by the GOE or major
international financial institutions, such as the World Bank’s International Development
Association (IDA) and the African Development Bank (AFDB). 

Ethiopia is aggressively working to develop an extensive rail network. As a landlocked country,

Ethiopia primarily uses the port of Djibouti as a gateway for the vast majority of its
internationally traded goods (through which flow 90% to 95% of its trade), with most of the
goods essentially transported to and from the port by trucks. This situation has made Ethiopia’s
trade logistics very expensive and uncompetitive. Ethiopia’s reopening of diplomatic relations
with Eritrea has created the expectation of expanded logistics operations via the Eritrean ports of
Assab and Massawa. 

The Ethiopian Railways Corporation (ERC) under the Ministry of Transport is mandated to
create a modern nationwide railway network, replacing the Franco-Ethiopian railway that is no
longer in service. ERC completed a 656 kilometer railway network construction project that links
the capital city Addis Ababa to the port of Djibouti. This railway expansion project was carried
out by two Chinese companies, state-owned China Railway Group and the China Civil
Engineering Construction Corporation. The new rail system began commercial operations in
2018. Two Chinese companies operate and manage the $3.4 billion railway line through 2024 as
local employees are trained to takeover in due course.  

The Addis Ababa-Djibouti rail project was hoped to significantly improve Ethiopia’s
international trade by reducing logistical costs and time of delivery. The new electric railway
reduces transport time from Djibouti to Modjo (a dry port city 70 kilometers from Addis Ababa)
from 84 hours to just 10 hours. Cargo capacity on the rail network is 3,500 to 4,000 tons of
freight per train, with ERC anticipating 6 to 7 million tons of cargo per year in its first few years
of operation. Cargo volume will increase to 10 million tons in the mid-term. However, even
though the Chinese made rail network has a capacity to accommodate 21 pairs of trains per day,
it currently operates only 7 pairs of trains per day with an estimated annual freight volume of
only 5.6 million tons. 

One of the biggest impacts has been the reduction in passenger transport demand, due to a
combination of government lockdowns and fears of contracting and spreading the virus when
using mass transport modes. While freight transport has also been reduced, the drivers of freight
activity during the current crisis are complex, driven by both supply- and demand-side factors,
and in the latter, by the need to keep essential services operating. In contrast, passenger transport,
(for both leisure and business travel) is often optional, and more influenced by people’s decision-
making processes. The focus of this paper is therefore on passenger transport.

The crisis has affected all forms of transport, from cars, and public transport in cities, to buses,
trains and planes nationally and internationally. Global road transport activity was almost 50%
below the 2019 average by the end of March 2020 and commercial flight activity almost 75%
below 2019 by mid-April 2020. Public transport has also been affected. For example, the strict
lockdown imposed in the UK in March 2020 has led to a 95% decrease in underground journeys
in London. This is supported by data1 from one popular transport planning smartphone app
showing that trips are down by over 90% since the crisis began in many of the world’s major
cities.

Legal Conventions

Search for international conventions related to sea transport (Hague, Hague-Visby, and
Hamburg) and report on the improvements and why such improvements are necessitated. Also
comment on the implications of the modifications or improvements made. What did the
conventions say about the duties and responsibilities of shipper and carrier?
The topic of carriage of goods by sea under bills of lading has been the subject of compulsory
regulation, or proposed regulation, four times in the last 85 years. The proposals are all
associated with the names of cities in Northern Europe, in geographical order starting and
finishing with the Netherlands. They all involve interference with freedom of contract in this
area of commerce, that is to say, contracts governed by bills of lading.1 The first two, the Hague
Rules,2 and the Visby Protocol to them, i.e. the Hague–Visby Rules,3 have always been a major
topic of instruction at IMLI, and have strong associations with the CMI, which has been a strong
supporter of the Institute. Even though Professor David Attard, to whom this book is dedicated,
is a public international lawyer, and many of the students lean in their present and likely future
spheres of activity towards public law, they need to know something about these important
interferences with contractual freedom, and the effect they may have on the acts of shipowners
and others involved in maritime transport. Hence some reference to the four sources of
regulation, or possible regulation, seems appropriate to this volume, despite the huge amount that
has been written on them since 1924.

The stories of the first three, Hague, Hague–Visby and Hamburg,4 have been told many times
and it is not the purpose of this chapter to add yet another account to those already existing. 5
There is not yet much written on the proposed Rotterdam Rules, so it will be possible to say a
little more, though some of those most closely involved will shortly provide extensive comment.
But the intention of this chapter The other most conspicuous such interference is the Athens
Convention relating to the Carriage of Passengers and their Luggage by Sea of 1974.
International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading,
1924. Protocol to Amend the International Convention for the Unification of Certain Rules of
Law Relating to Bills of Lading, 1924, 1968. United Nations Convention on the Carriage of
Goods by Sea, 1978. E.g. B. Yancey, ‘The carriage of goods: Hague, COGSA, Visby and
Hamburg’, Tulane Law Review 57, 1983, pp. 1238–59. is rather to draw attention to the structure
and style of the four instruments referred to above, which between them show considerable
differences.

The Hague Rules set out to be a limited code for the obligations of carriers under bill of lading
contracts, with some, much less complete, reference to the obligations of shippers. They
represented the result of much work which had gone on at least from the production of a draft
‘Common Form Bill of Lading’ in 1882 by a Liverpool Conference of the ILA. 6 This was
unsuccessful, perhaps because of the many different types of trade for which bills of lading were
required. Later the ILA produced at a London meeting broader ‘London Conference Rules of
Affreightment 1893’. These again proved unsuccessful. As was written later, ‘It could hardly be
expected that the decisions of the Conference on a subject with regard to which the interests and
opinions of different sections of the mercantile community were so divergent should at once
commend themselves to all parties’7 and this problem has beset all subsequent attempts to
provide uniform rules.

The American Harter Act of 1893 was another interference with freedom of contract. It was
directed at unfair terms imposed by carriers (especially general exceptions for liability for
negligence),and gave a lead in the sort of techniques of regulation that might be adopted to
control bill of lading contract On the whole it seems that carriers were not in the last resort
opposed to imposed requirements for the provision of a seaworthy ship and care of cargo, but
firmly resisted any idea of making them liable for accidents of navigation, even when occasioned
by the negligence of the master and crew. This seems to have been based on the ideas that the
ship when at sea was out of the control of its owner, and that in many situations (especially in the
days of sail) it would not be possible to determine what had happened, or, when it was possible,
to establish negligence.

The Hague Rules

A report of the Maritime Law Committee of the ILA resulting from a Conference in the Hall of
Gray’s Inn in London was prepared in 1921, and subsequently adopted at a conference of the
ILA at The Hague later in that year: it is from this that the Rules take their name. After some
further modifications the proposed Rules went to a diplomatic conference at Brussels where they
were eventually

Discuss Incoterm 2020. What makes it different from the previous incoterm? Which
incoterm is best for Ethiopian exporters and importers?
Using international commercial terms ensures properly written contracts.

As an exporter, you need to make sure shipping and delivery responsibilities are written down
and clearly understood. Using international commercial terms (known as incoterms) in contracts
can help you do this.

Incoterms are a set of internationally recognised 3-letter trade terms. They describe the practical
arrangements for the delivery of goods from sellers to buyers and allocate the obligations, costs
and risks between the 2 parties. They are produced by the International Chamber of Commerce
(ICC) and updated periodically to reflect changing trade practices.

Elements of a contract

When you are negotiating a contract with a buyer, you'll need to discuss and agree:

 where the goods will be delivered

 who arranges transport
 who handles and pays for insurance
 who handles customs procedures
 who pays any duties and taxes

For example, an exporter might agree to deliver goods, at the exporter’s expense, to a port in the
customer’s country. The customer might then take over responsibility, arranging and paying for
customs clearance and delivery to their premises. The exporter might also be responsible for
arranging insurance for the goods until they reach the port, but pass this cost on to the customer.

Incoterms are used to ensure these responsibilities and handovers are clearly defined and agreed.

As well as delivery details, the contract should cover payment. This should include what
currency payment will be made in, how much will be paid, when payment is due and what
payment method will be used.
Contracts for service exporters

Exporters in the services sector cannot use incoterms, as there is no physical product that has to
be shipped.

Therefore, when you are negotiating contracts for service provision it is important to define
exactly what services you are providing and to what standards.

Commonly used incoterms

The latest version of incoterms, Incoterms 2020, came into effect on 1 January, 2020. The new
version is similar to the previous one, Incoterms 2010, but it takes into account developments in
commercial practice, and updates the rules to make them easier to use.

There are 11 incoterms in Incoterms 2020. The most commonly used are:

1. Ex Works (EXW)

The seller makes the goods available at the seller's location, so the buyer can take over all the
transportation costs and also bears the risks of bringing the goods to their final destination.

2. Free Carrier (FCA)

The seller is responsible for delivery of goods to a named carrier. Responsibility for cost and risk
then passes to the buyer.

3. Free Alongside Ship (FAS)

The seller must place the goods alongside the ship at the named UK port. The risk of loss or
damage to the goods passes when the goods are alongside the ship, and the buyer bears all the
costs from that moment on.

4. Free on Board (FOB)

The seller is responsible for all costs involved in the process up until the goods are loaded on to a
vessel at the named UK port. Once goods have been loaded, the buyer is responsible for any
costs and risks involved in the onward shipment.

5. Cost and Freight (CFR)

The seller must pay the costs and freight to bring the goods to the overseas port of destination.
The buyer pays costs and takes risk from then on.

6. Cost, Insurance and Freight (CIF)

This is the same as CFR. However, the seller must also obtain and pay for the insurance.

The default level of insurance cover under CIF is Institute Cargo Clauses (C). This applies to
both 2010 and 2020 Incoterms.

7. Carrier and Insurance Paid to (CIP)

The seller pays for the carriage and insurance to the named overseas destination point, but risk
passes when the goods are handed over to the first carrier.

The default level of insurance cover under CIP is Institute Cargo Clauses (A). This is a higher
level of cover for CIP than Incoterms 2010, which specified Institute Cargo Clauses (C).

8. Delivered at Place Unloaded (DPU)

The exporter arranges carriage and delivery of the goods, ready for unloading at the named
place. The seller is required to unload the goods at this destination.

After the goods’ arrival, the customs clearance in the importing country needs to be completed
by the buyer at his own cost and risk, including payment of all customs duties and taxes.

This is a retitling of the Incoterms 2010 term Delivered at Terminal (DAT), making it clear that
delivery can happen anywhere, not just at a terminal.
9. Delivered Duty Paid (DDP)

The seller is responsible for delivering the goods to the named place in the country of the buyer,
and pays all costs in bringing the goods to the destination.