Comment on Terms of Carriage on BOL

Below I am posting the comment made from Mr. John M. Daley in the discussion Did you ever read the backside ( risks, obligations, jurisdictions ) of you Bills of Lading which  has been opened at the  Freight and Logistics Professionals group of Linkedin.

Comment on Terms of Carriage on the backside of the BOL

by John Daley

Since I frequently write the terms and conditions on bills of lading for my clients (including motor carriers, NVOCC’s and ground and air freight forwarders), I am pretty familiar with the terms on bills of lading for all modes domestically, and for air and ocean internationally.

Although carriers do try to limit their liability, they are restricted from doing so by various laws (including the Carmack Amendment for motor carriage) and international carriage (e.g., the Montreal Convention for air carriage and Hague Rules for ocean carriage, adopted in the U.S. as the Carriage of Goods by Sea Act). For example, under the Carmack Amendment, motor carriers must offer shippers a “choice of rates” to enforce a limitation of liability. Although COGSA does not have a “choice of rates” requirement, the $500 per package limitation is more than adequate for many situations, although not all.

There is a historical basis for these limitations, and there are always ongoing discussions about whether the limitations should be increased. For example, the U.S. and several other countries recently signed off on the “Rotterdam Rules,” which, if adopted, will increase both the amount and the scope of the ocean carriage limitation of liability (if you are interested, I have a discussion of the Rotterdam Rules in an article posted on my web site at www.johnmdaley.com). In 1995, the U.S. Department of Transportation conducted a study of cargo loss limitations, but nobody seemed all that interested in doing anything about it.

So what should a shipper do? In many cases, shippers have the option of increasing the limitation of liability by paying a higher rate. In ocean and motor carrier, shippers can also enter into contracts with carriers. For many shippers, however, the best option is to carry appropriate cargo insurance.

As Mr. Serfass points out, however, policies of insurance (including those issued to carriers, by the way) always have limitations and exclusions, so anyone who purchases a policy of insurance should be sure to read the policy as soon as it arrives, before there is a claim. If a problem is noted (e.g., if a shipper frequently ships a product which is excluded from coverage), it is frequently possible to obtain a rider which will resolve the problem, sometimes at no additional cost.

If you are a shipper and have an ongoing relationship with a carrier and are concerned with a specific term or condition, you should bring the problem to the carrier’s attention and see if it can be modified. Since we are no longer in a government regulated tariff environment, individual modifications are possible.

Risks, obligations, jurisdictions of the Bill of Lading

Recently I have followed an interesting discussion in Freight and Logistics Professionals group of Linkedin. The discussion has been opened by Mr. René Woestenburg and the topic is:

Did you ever read the backside ( risks, obligations, jurisdictions ) of you Bills of Lading.

The discussion attracted many interesting comments from various participants in the ocean transportation – freight forwarders, insurers, lawyers, shipowners, bankers etc.

One of the main points which has been commented was that today’s Terms of Carriage, risks, obligations and liabilities are outdated and do not properly reflect the new realities and relationships in the ocean transportation.

It seems that Carrier is not responsible for almost anything and one of the participants in the discussion has even made the statement that this is not the way to make a long term relationships.

From the otherside however we should admit that the Carrier should consider many factors influencing the safety and security of vessel and that the voayage is subject to many unpredictable influences like wheather, political situation and various legislations governing the carriage of goods by sea.

The most active and interesting comments were made by:

Bruce Serfass who did not saved the critics towards the insurance companies enaged in covering transportation risks.

Mr. John Daley has made a detailed explanation to the terms and the logic behind them.

Kay Nasseir who presented the bankers point of view.

Sushil Baboo who looked at the issue from shipowner’s viewpoint.

I hope this resume of the discussion to help you to find the most useful moments in it.  This discussion makes you think about something which I am sure you rarely do when you ship freight – what are your rights as a customer and what are the responsibilities of all participants in the chain from your warehouse to your customer’s door.

Time Critical Logistics

When you plan for the transportation of your loads normally you take into consideration the ocean and road transportation from the cost viewpoint.  The lead times concerning these ways of transportation are calculated in the overall lead time for processing of your product or for the accomplishment of your project.  But what you do when something goes wrong and it appears that a vital material is missing and production can not continue or the supplier of an important part is delaying delivery.  In situations like this all plans and lead times crash.  The production line stops or the project goes out of any schedule. At the end big money are lost and somebody has to pay the bill.

When situation becomes critical, emergency logistics takes place. Now the question is not about the money but a matter of time. The shorter, the better.

There are many services provided under the label of Time Critical Logistics but the uniting point is – squeezing of the delivery lead times as shorter as possible.

Depending on where your load is and where it should go and how limited your time is you may choose from a variety of options:

Air Charters

Chartering whole airplane for a single load might not seem as the best cost solution but might be the best time saving one.  And the only one you can take in order to get within the time frame. There are varieties of aircrafts that can lift from several packages (for example Cessna Citation) up to two hundred tones (AN225 – Mria).  But be careful. Various aircrafts are not always available at the time you need them and at the nearest airport. When calcualting the overall lead time you should consider the time for negotiation (because at the end money are also important though not the most important) and time for air plane pre-base.  There are also many regulations which can harm your planning if not taken into consideration.  Position of the aicraft, crew rest hours and of course flight regulations. For example, chartering Ukrainian operator of AN12 from Bulgarian airport might seem saving of couple of thousand dollars or euro but this might be not your best  solution having in mind that Bulgarian operators might object in front of the CAA which in  order might not grant a permission.  Who will pay your time, efforts and eventually your cancellation fees.  Planning a cargo charter is not an easy task so if you have never done this or if you have less experience but huge need of it better turn to some specialized companies who can assist you.  But here come specialized companies who can assist you. Such companies are the airlines themselves (but careful, they market their fleet only) , cargo brokers (good choice if you are looking for airport-to-airport solution but always read the small letters  text below the proposal)  and freight forwarders who offer chartering or emergency logistics in their services protfolio – like KG CARGO for example.

Charters are priced per flight (very often round trip) and the final amount might look very difficult to swallow. Especially for the Chief Accountant. But the moment you compare with the alternative cost of penalties or loss of future orders things become a bit more brighter (especially for your Emergency logistics Provider 🙂 )

On Board Courier

this option is very good alternative to the charter flight especially when you have smaller loads and suitable passenger schedules.   This option is very good solution from both time and cost prospective when we are talking about loads of up to 100 kilos, though even higher loads have been moved this way. You will save time from handling and from faster customs processing if you need some.  For smaller loads this option is may be the most effective from time and cost point view.  Of course you have to consider the final destination and the possibilities the passenger flights have.  Budget airlines might not be the best choice. Also always ask the airline whether they will accept your excess luggage – if you carry more than the allowed amount.  Some airlines have restrictions on this despite the huge excess luggage fees.

Dedicated Vehicle

if you have 500-800 kilos which need to be delivered within EC within 48 hours this is a very good solution. You would receive a door-to-door rate with time dedication. But be careful. You need to receive a serious engagement from your logistics supplier. Because if something happens no one can compensate your penalties if the occur. In case of delay caused by accident or break of the vehicle you might save the transportation charge of 1000 eur but how you will compensate penalties for  1 000 000 (one million) eur?!

In any of the three cases bear in mind that the carrier might provide you with a lower cost but to what extend can they engage with a door-to-door delivery. Forwarders can both engage with the time frame you ask for and can provide you an integrated package of services securing the whole logistic but the air carriers, for example can secure only an airport-to-airport movement.

For more information or requests please contact us.

When situation becomes critical, emergency logistics takes place. Now the question is not about the money but a matter of time. The shorter, the better.