International Trade Regulation and Practice: Legal Framework Analysis

This report delves into the intricacies of international trade regulation and practice, examining the legal frameworks governing the carriage of goods by sea, air, and land. It explores key conventions such as the Hague Rules, Hague-Visby Rules, and the Hamburg Rules, highlighting carrier and shipper liabilities. The report analyzes different modes of transport, including multimodal transport, and the associated contracts. A significant portion of the report focuses on a case study involving Specialist Goods, an importing company, and Grays, a chocolate retailer, analyzing the legal implications of delayed delivery and the responsibilities of each party under the Carriage of Goods by Sea Act. The case study explores issues such as carrier liability for damaged goods, the application of Incoterms, and the potential for exceptions to liability due to unforeseen circumstances like industrial disputes or acts of God. The report also discusses the obligations of both shippers and carriers, the importance of bills of lading, and the implications of various international conventions in shaping international trade practices.

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INTERNATIONAL TRADE REGULATION AND PRACTICE
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International Trade Regulation and Practice
Introduction
There is a certain fundamental framework for the regulation of international trade and
practice. There exists an interaction between domestic principles, practices and regulations
and international practices and regulations which govern international trade. This includes
practice in transport, import and export and insurance documentation such as bills of
exchange, types of contract, dispute resolution, conflict of laws and bills of lading.
Contracts for Carriage by Land, Sea, and Air
When goods are internationally transported from one destination to another, the mode
of transport is referred to as unimodal transport. On the other hand, if more than a single
mode is used, this mode of transport is known as multimodal transport. The United Nations
Convention on International Multimodal transport of Goods 1980 stipulates that it is usually
the responsibility of the seller to make delivery of the goods and to ensure that the different
modes of transport are properly and appropriately used.
The use of different modes of transport may be considered firstly because they serve
as an indicator of the complexity of the various modes of transport in use in any contract of
sale. Secondly, the responsibilities of the parties differ according to the used mode of
transport. The different modes of transport may be classified as carriage of goods by land, air,
sea, inland water and multimodal transport. Most of the carriage which takes place internally
is by sea though land carriage may be relied upon for complete success of the carriage. This
means the involvement of many contracts.

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Legal Framework for Carriage by Sea
Carriage by sea applies both international and domestic law. There must be
uniformity which is achieved by a variety of conventions such as the International
Convention for the Unification of Certain Rules of Law Relating to Bills of Lading 1924 also
known as The Hague Rules which had the impact of imposing minimum standards on
commercial goods carriers by sea. These rules apply to the carrier’s liability. The exceptions
to this liability include the master’s fault on the ship or the pilot’s fault while navigating, the
ship’s management and an act of God, riots, strikes, war, saving life or even property in the
sea.
Another convention is the Brussels Protocol Amending the Hague Rules Relating to
Bills of Lading 1968. This was also referred to as the Hague-Visby Rules and it provided the
circumstances for the application of each bill of lading which relates to the carriage of goods
from one port to another between two different States (Article X).
The Convention on the Carriage of Goods by Sea 1978 also known as the Hamburg
Rules provides the general rule that liability for carrier’s loss or damage on the ship is not on
the shipper unless the loss or damage was as a result of the fault or negligence of the shipper,
his agents or servants (Article 12). Australia has however not yet ratified the Hamburg Rules.
The Hague and Hague-Visby Rules provide that the carrier’s only liability for the risks
involving the goods is when the goods are being carried.
Legal Framework for Carriage by Air
The international air transportation has a wide regulation of international conventions
as it covers a wide and diverse scope and geographical area, thus involving several states and
jurisdictions in the process. Such conventions include the Chicago System which is handy in

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maintaining peace and order in the international civil trade. The convention lays out the
uniform rules when it comes to sharing, using and controlling national airspace. It also looks
at the relationships between states for the promotion of opening and sharing airspace to be
utilised by international commercial carriers. Another international convention is the Warsaw
Convention dealing with the international aspects of civil and safety issues.
Legal Framework for Carriage by Land
The international conventions which currently apply to the use of land for the carriage
of goods include the International Convention to facilitate the Crossing of Frontiers for
Goods Carried by Rail which covers carriage of goods using the railway line.
Legal Framework for Multimodal Carriage
This mode of transport is covered under the United Nations Convention on
International Multimodal Transport of Goods. This convention is however not yet in force in
Australia. In multimodal transport, a forwarder or a carrier enters into a contract with the
consignor, often the seller, where he or she accepts the liability to carry the cargo using any
necessary means of transport to the destination which is agreed upon.
The transfer of the Swiss chocolate eggs from the point of their manufacture to the
point of the buyer, which is Grays, would involve a multimodal transport. This is because it
involved the shipment of 500 packaged eggs by sea and another shipment of 400 at a later
date. There was a delay and therefore Specialist Goods, the importing company tasked with
delivering the eggs to the retailer, instructed the freight forwarder to despatch all the eggs to
the retailer by air immediately the second shipment arrived.
Carriage by Sea Contracts

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Such contracts are entered into between shippers (either buyers, sellers, or the sellers’
or buyers’ agents) and carriers (ship owners, charterers of vessels or their agents or freight
forwarders). The purpose of such contracts is to transport goods from one point to another by
sea. The transportation of goods can be either entirely or partly. Australia applies the
international law for goods carried by sea.
A carrier is a term used to refer to any natural or legal person who is responsible for
the transportation of goods from one point to the other with the reliance of a carriage
contract. This goes with the payment of the freight charges and is important for the
determination of each party’s responsibilities. The Hague-Visby Rules define a carrier more
narrowly than Hamburg Rules. The former define a carrier to include the owner or charterer
entering into a carriage contract with a shipper. Additionally, under the same rules, the agent
of the owner of the ship or the charterer is not considered as a carrier. In the case of Cabot
Corp v. Mormacsan (1971), it was held that the parties to a contract of carriage by sea may
provide the meaning of a carrier themselves in the contract or even a bill of lading.
The Hague-Visby Rules define a shipper as a legal or natural person who is part of a
carriage contract with the carrier. Under the Hamburg Rules, a shipper is defined as a person
to whom or on whose behalf there has been a conclusion of a carriage by sea contract with a
carrier or who has made actual delivery of goods whether personally or through an agent, to
the carrier as per their contract (Article 1(3)).
A consignee is the recipient of the goods specified in a document such as a bill of
lading showing the cargo carried and satisfying all the necessary requirements as stipulated in
the applicable statute or common law. A consigner, on the other hand, is the person in charge
of the transfer of the goods to the consignee as stated in the bill of lading or a similar
document.

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Bill of Lading
This refers to a document which is signed by a carrier or the carrier’s agent and issued
to a shipper or the shipper’s agent for the acknowledgement of having received the goods in
the stated condition and setting out the terms the goods are to be carried. It can either be
negotiable or non-negotiable. In the case of Khoo Teck Seong v. Hung Yue Bank, a bill of
lading is seen as a document of title.
Carrier’s Liability
The Hague-Visby Rules refer to a carrier as a bailee of goods as agreed to be
transported. They provide that the carrier is liable for any risk that arises from carrying the
goods. This has an effect on the parties to a contract as was seen in the case Tasman Express
Line Ltds v. JI Case (Australia) Pty Ltd (1992) where it was seen that the method of
discharging the cargo is not a sufficient deviation to the negative effect of the exclusion
clause.
The carrier is also liable for loss which results from damage or delay in delivery of the
goods if the damage, loss or delay took place while the carrier was in charge of the goods
(Article 5 (1). The carrier may be exempted if he or she proves that he, his agents or servants
took all reasonable measures in order to avoid the loss, damage or delay.
The Hague-Visby Rules provide that a carrier has a wide duty of due diligence.
Article 3 (1) of the Rules provides the carrier’s responsibilities which include making the ship
seaworthy, proper staffing, equipping and supplies for the ship, and proper refrigeration and
cooling chambers for effective carriage and preservation.

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Obligation to Issue and Deliver
A carrier has the obligation of issuing a bill of lading, on a shipper’s demand after the
taking over of the goods by the carrier. The obligation of delivering the goods as per the
conditions and state stipulated in the bill of lading is implied in the carriage contract even
without express wording.
Shipper’s Liability
The shipper has the obligation of providing accurate information as covered under the
Hague-Visby and Hague Rules. The shipper has a general liability for any damage or loss
caused by his fault or negligence or that of his servants or agents. The shipper has the basic
obligation of paying the freight charges as was seen in Shipping Co. V. China International.
Case Study
Specialist Goods, an importing company, owed Grays’ due diligence and had the duty
of delivering to 900 Swiss chocolate eggs as ordered by the retailers. When Specialist Goods
failed to make timely delivery of the order before Easter, it owed Grays’ the duty of returning
the deposit and compensating the retailer for the loss and delay as covered under Article 5(1)
of the Hague-Visby Rules.
The delay by Specialist Goods to deliver the package of eggs to Grays’ before Easter
resulted to Grays not selling the eggs at the price they intended to sell them before Easter
each at a retail price of $25. Having not realised this profit as a result of Specialist Goods
failing to make timely delivery, they ought to compensate Grays’ for the loss. There may be
an exception to the compensation if Specialist Goods successfully establish that they could
not do anything to save the situation of industrial dispute at Melbourne and if the delay could
not be avoided.

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Under Article 4 of the Carriage of Goods by Sea Act 1991, the carrier or the ship shall
not be responsible for damage or loss of goods resulting or arising from factors such as act of
God, war or accidents and dangers of the sea. Therefore, the carriers of the package of eggs
may be relieved from paying for the damaged eggs as a result of the hot sun. However, if the
melting of the eggs was as a result of their negligence, then they will have to cater for the loss
and damage of the melted eggs.
The demand by the freight forwarder for the tripling of the freight cost may be
justified because the initial agreement that the package of eggs was to be shipped to Grays’.
However, after the delay, Specialist Goods instructed the freight forwarder to despatch all the
eggs by air which is more expensive and therefore an extra cost had to be incurred.
Innisbruck, which was a well known Swiss chocolate manufacturer, did not manage to
deliver the package of chocolate eggs to Specialist Goods on the agreed time frame. This has
broken the business relationship between Specialist Goods and its customer, Grays’. The
delay by Innisbruck caused Grays’ to reject the eggs which implies a loss to Specialist Goods.
Therefore Specialist Goods is justified to demand for a refund of its deposit though
Innisbruck may as a result first demand for the return of their products.

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Reference list
Burnett, R. & Bath, V., 2009. Law of International Business Australasia, The Federation
Press, Sydney.
Brussels Protocol Amending the Hague Rules Relating to Bills of Lading 1968
Cabot Corp v. The Mormacsan (1971)
Carriage of Goods by Sea Act (1991) No. 160
Convention on the Carriage of Goods by Sea 1978
Davies, M. & Dickey, A., 2004, 3rd edn., Shipping Law. Lawbook Co., Sydney.
DHL International (NZ) Ltd v Richmond Ltd (1993).
Dixon, M & McCorquodale, R., 1991. Cases and Materials on International Law. Blackstone
Press Ltd, London.
International Convention for the Unification of Certain Rules of Law Relating to Bills of
Lading, 1924
Khoo Teck Seong v. Hung Yue Bank
Murray, C. 2012. Schmitthoff’s Export Trade: The Law & Practice of International Trade,
12th edn.
Shipping Co. Of Tianjin v. China International Engineering and Materials Corp and Tongli
Development Co.
Tasman Express Line Ltds v. JI Case (Australia) Pty Ltd (1992)

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Turner, C., 2013, Australian Commercial Law, 29th ed, Lawbook Co.,Sydney.
Wilde, K.C.D.M., 1995. International Transactions, The Law Book Company, Sydney.
United Nations Convention on International Multimodal transport of Goods 1980