Chap 4

Intro 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 business
Commercial law governs the broad areas of business, commerce,
and consumer transactions. Specific law has developed in a
number of commercial fields. These include:
Banking
Bankruptcy
Consumer credit
Contracts
Debtor and creditor
Landlord-tenant
Mortgages
Negotiable instruments
Real estate transactions
Sales
Secured transactions

http://www.law.cornell.edu/wex/commercial_law
 Covers Thirteen Articles
The 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 Lading
A 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.
Description
At 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 receipt
The 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 title
The 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 instrument
Because 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 BL
Sea 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 BL
A 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 amended
ii. 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),
1972
2. Convention on Facilitation of International Maritime Traffic (FAL), 1965
3. International Convention on Load Lines (LL), 1966
4. International Convention on Maritime Search and Rescue (SAR), 1979
5. 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), 1972
7. 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), 1995
11. 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.