StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

The Machinations of International Trade - Essay Example

Cite this document
Summary
The focus of this paper “The Machinations of International Trade” is to critically evaluate and compare the central documents utilized in international trade contracts and consider the appropriate use of each and the protection given by each to the trading parties…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.7% of users find it useful
The Machinations of International Trade
Read Text Preview

Extract of sample "The Machinations of International Trade"

The machinations of international trade and shipping agreements are inherently complex and the use of documents play a central role in determining allocation of risk, insurance, rights and obligations of the parties. The focus of this analysis is to critically evaluate and compare the central documents utilised in international trade contracts and consider the appropriate use of each and the protection given by each to the trading parties. In commercial contracts, the certainty of contractual obligations is paramount particularly in determining rights regarding payment and redress. The sales invoice serves this purpose in international goods contracts in stipulating quantity and price1. Moreover international trade contracts are commonly governed by FOB or CIF contracts, where the legal status of the documents is paramount to the obligations of the trading parties. The UK has not ratified the Vienna Convention on Contracts for the International Sale of Goods (the Convention)2 which places the UK in an anomalous position vis-à-vis its primary trading partners, often leading to pressure to accept the law of a contracting party that is a signatory to the Convention3. This has led to a marked difference between the approach in international trade law to contract termination and buyer remedies under the Convention, in contrast to the position under CIF and FOB contracts, where the role of documents is paramount to obligations of the trading parties4. Firstly, with regard to the certificate of origin, under CIF contracts, the part of the seller’s primary obligation is to insure goods, delivery them to the shipping company and arrange for freight of goods5. Arguably most important is the bill of lading, which is essentially a transport document and covers movement by sea and constitutes documents of title and evidence as to who has title, which is vital to obligations under CIF and FOB contracts6. If a bill of lading is consigned to a named party, they are known as “straight consigned”7. Moreover, bills of lading can be categorised according to the mode of transport specified under the contract8. For example, marine bills of lading cover shipment by sea and can be issued by the shipping company, captain or master of the vessel or party acting as agents for the carrier9. Alternatively, the “received for shipment” bill of lading evidences receipt of goods by the issuer however does not evidence that goods are en route10. Finally, “shipped on board” bills of lading constitute evidence that documents are on route, however will not suffice as grounds for enforcement of documentary credits. Accordingly, the bill of lading is paramount to the passing of risk, title and enforcement of documentary credits. Under the CIF contract a seller’s obligation after delivery is to send the bill of lading and insurance policy along with the invoice and certificate of origin to the bank. These documents are generally as part of commercial practice norms delivered to bank against payment of the seller as goods will pass to the buyer upon delivery of the documents11. Moreover, the certificate of origin serves as an important role in completing part of the documentary requirements under CIF contracts12. In contrast, a standard shipping note is a note addressed by the shipper to the chief officer of a vessel requesting them to receive on board certain goods, along with a receipt for signature, which is referred to as the “mate’s receipt”13. This is then surrendered by the shipper for the bill of lading as therefore important in confirm receipt of goods on board as part of the seller’s obligations under CIF contracts14. Moreover, a sea waybill is traditionally a document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods15. Typically it will set out the name of the consignor and consignee and sets out the destination of the route and method of shipment. It does not however serve as evidence of title16 and will not therefore impact the obligations regarding passing of risk and documentary obligations under CIF contracts. Nevertheless, the sea waybill is important as evidence of compliance with delivery obligations under contract. Additionally, the Export Cargo Shipping Instruction effectively serves a multi-purpose function in international commercial contracts by providing instructions regarding export services and specific responsibility for such services17. The overriding purpose is to save exporters time and money and serves an importance purpose in the project management of goods movement in international goods by carriage at sea. However, the status of the bill of lading is arguably paramount to the position of trading parties under contract particularly with regard to the buyer’s right to reject documents and goods18. In general terms, if the Convention is not applicable, international sale of commodities contracts are usually concluded on c.i.f. or f.o.b. terms19. The CIF (contract, insurance and freight) contract requires the seller to arrange the carriage of goods and their insurance in transit, and all costs of such arrangement are included in the contract price20. The essential elements of a CIF seller are to obtain a bill of lading, a policy of insurance and any other document such as the certificate of origin or the sea waybill required by the contract, and to forward these to the buyer who pays on the invoice when they receive the shipping documents21. Indeed, if a seller has agreed to sell goods under a CIF contract, the performance obligations are effectively in “broadly, two stages. First, the seller will have to supply information concerning the cargo, which is being appropriated to the particular contract… Secondly, the seller will have to tender the corresponding shipping documents22”. Furthermore, CIF contracts are often concerned with the sale of unascertained goods, and issues concerning the passing of risk and property are often involved23. However, a common problem arises where unascertained goods are lost before the CIF seller has appropriated the goods to the contract, yet submits the correct documents24as the right to reject documents is distinct from the obligation to deliver goods under a CIF contract. Whilst the sea waybill itself will not discharge these obligations, submission of the bill of lading will, which creates uncertainty. Indeed, as a result of this paradox within the bifurcated acceptance system created by the role of shipping documents under CIF terms, it has been argued that the FOB contract in contrast is more flexible in balancing the competing interests of seller and buyer, which is fundamental to the facilitation of smooth international trade25. Moreover, the central feature of the FOB (free on board contract) is that the seller fulfils their contractual obligations when they deliver goods conforming to the contract over the ship’s rails26. The essential prima facie distinction between the FOB and CIF contract is the duality of obligations under the CIF contract, which stipulates that once a CIF seller has the shipped goods or bought goods afloat, they effectively perform the contract by tendering conforming documents to the buyer27. This performance obligation in itself would appear to support the assertion that the FOB contract is one for the sale of goods and the CIF contract is effectively a contract for the sale of goods performed by delivery of documents, of which the bill of lading is a central part. However, notwithstanding the unequivocal distinction under the CIF contract terms between the right to reject documents and the right to reject goods; there is no UK statutory definition of FOB or CIF contracts and their application has been developed somewhat inconsistently, subject to ad hoc judicial opinion28. The result of this has led to the blurring of the distinction between the two separate performance obligations whereby judicial authorities addressing the right to reject documents have focused on the right to reject goods under FOB contract principles, thereby using the right to reject an “unclean” bill of lading as a tool to enable the buyer to automatically reject the goods29. If we consider the case law, it has been acknowledged that the fundamental feature of a CIF contract is that once a seller has shipped the goods, they have “performed” the contract by tendering conforming documents to the buyer30. Indeed, it was described in the case of Hindley v E India Produce Co. Limited31 as “a contract for sale of the goods performed by delivery of documents”32. The documentary obligations require the seller to procure and submit to the buyer the exact documents stipulated in the contract33. Furthermore, in the case of The Julia34, Lord Porter asserted that in the absence of a provision in the contract to the contrary, the documents provided should include a bill of lading, an insurance policy and an invoice. Under English law, a CIF contract entitles buyers to reject a tender of shipping documents on grounds of the document being “defective” or alternatively, where they are tendered late35. With regard to the definition of “defective”, various scenarios have addressed this, including a non-genuine bill of lading36, a bill of lading failing to provide the buyer with “continuous documentary cover”37, all of which have been found to be “defective” documents, further highlighting the importance of the bill of lading to the obligations of trading parties under contract. Indeed, in the Julia case itself, it was asserted that the sea waybill was merely evidence of the contractual obligations and did not give the buyer a right to reject per se. Accordingly, the buyer’s right to reject a tender of shipping documents hinges on whether they are submitted late or “defective”38. Furthermore, in the Hansa Nord case39, Roskill L.J asserted that “the seller’s obligation regarding documentation has long been made sacrosanct by the highest authority and….. The express or implied provisions in a c.i.f. contract in those respects [are] of the class ….. Any breach of which justified rejection”40. With regard to “non-conforming” documents, the bill of lading is of prime importance in cases involving the buyer’s right to reject the documents under the CIF contract and the central issue is whether the bill of lading is “clean”, which is generally determined on a case by case basis41. For example, in British Imex Industries Limited v Midland Bank Limited42, it was asserted that the definition of a clean bill of lading was where the bill does not contain any reservation as to the apparent good order or condition of goods or the packing. Additionally, the time to which the reservation must relate to prevent a bill of lading from being clean is that of shipment43. This was evidenced in the Galatia case44, where a bill of lading was issued stating that the goods had been shipped in apparent good order and condition, however included a notation on the bill that the goods had been subsequently damaged. The court held that the notation did not prevent the bill from being clean for the purpose of rejecting documents. If we consider the practical implications of this scenario, whilst the bill of lading may be clean for the purpose of documentary acceptance, this arguably places a seller in a stronger position than under a FOB contract. Whilst the buyer under both contracts can reject the goods, the compliance with documentary obligations entitles the seller to payment under the CIF contract prior to their right to reject goods being triggered45. Conversely, it is arguable that the FOB right to reject goods is inherently limited since the implementation of section 15A of the SGA which will be considered below. With regard to the CIF contract on the other hand, in the Hansa Nord case itself it was held that a CIF buyer could reject documents disclosing a defect even where the defects in the goods would not in itself justify rejection of the goods, which further compounds the practical problems of the duality of obligations under the CIF contract. The documentary obligations and right to reject goods is further significant in terms of the passing of risk under international trade contracts46. Theoretically, once the documents have been accepted on the passing of risk on shipment prevents a buyer from claiming against the seller for damage caused after shipment47. However, in the case of Kwei Tek Chao v British Traders and Shippers48 it was asserted that if a buyer is entitled to reject the goods, this results in the discharge of the contract and as such, the rights in the goods re-vest in the seller, notwithstanding the previous passing of risk to the buyer on shipment or the fact the documentary requirements have been complied with. It is further important to consider electronic bills of lading in maritime contracts. The Committee Maritime International (CMI) implemented Rules for Electronic Bills of Lading in 199049however these Rules are voluntary and therefore dependant on agreement of the parties to a contract of carriage by sea. Under the CMI rules, electronic bills of lading operate by way of the carrier issuing the bill of lading to the shipper the electronic bill of lading, by the use of an electronic message and private code, entitling the bill holder to control the goods50. The “right of control” under the code is then transferred after notification by the shipper to the carrier, whereby the original code is cancelled. Once this process is completed, a new code is created and given to the person entitled to control the goods51. To this end, “the key holder should have the same rights as the bill of lading holder52” and is useful in addressing the individual rights of buyer, seller and carrier under the contract. Whilst electronic bills of lading are useful in contemporary maritime contracts, Lievemore argues that the CMI Rules “lack provisions dealing with the issues of what constitutes an actual receipt of an offer and subsequent acceptance. The Rules also have no guideline in the event of system failure”53. The Rules are distinct from the BOLERO central registry system (Bills of Lading for Europe) which comprises a network of shipping companies, banks and telecommunications companies54. The BOLERO system provides for an online registration system of bills of lading and is founded on the exchange of electronic data interface (EDI) messages between the central registry and users, which are primarily carriers, shippers and banks.55 The BOLERO system provides a secure platform whereby registered users are able to send and receive messages directly and validate messages received. The aim of the purposes “is to address the special legal issues that arise when paper negotiable documents are converted to electronic form….. and also increase the levels of security against fraud”56. Additionally, the carriage of the goods by sea is also regulated by the provisions of the Carriage of Goods by Sea Act 1971. Under this Act, every contract of carriage which is covered by a bill of lading is subject to the provisions of the Hague-Visby Rules (“the Rules”). The Rules set out the liabilities and responsibilities of parties under these contracts. Under the Rules, the carrier will be liable to a buyer for the loss to the goods. Under the Carriage of Goods by Sea Act 1971, if the carrier issues the bill of lading to the consignee of goods, the carrier is liable for any damage to the goods. Accordingly, whilst the sea waybills and certificate of origin are important in clarifying the parameters of contractual obligations, the bill of lading is central to enforcement of obligations. Moreover, the interaction between the various commercial documents in maritime contracts is vital to the performance of obligations and certainty of contract. However, the variances in the documents in terms of legal consequences highlight the importance of the bill of lading to the obligations of trading parties under international shipping contracts, particularly the right to reject goods, which is important in terms of risk allocation. BIBLIOGRAPHY R.I.V.F Bertrams, (2004). “Bank guarantees in international trade: the law and practice of independent (first demand) guarantees”. ICC Publishing. Michael Bridge (2007). The International Sale of Goods: Law and Practice. 2nd Edition Oxford University Press. Indira Carr., & Peter Stone (2005). International Trade Law. Routledge Cavendish Chitty on Contracts (2007). 29th Edition Sweet & Maxwell. Jason Chuah (2005). Law of International Trade. 3rd Edition Sweet & Maxwell. Livemore, J & Euarjai, K. (1998). Electronic Bills of Lading and Functional Equivalence. Journal of Information, Law and Technology. C. Murray., L. D’Arcy., & B. Cleave., (2007). Schmitthoff’s Export Trade: The Law and Practice of International Trade. Sweet & Maxwell. L.S Sealy, Hooley., (2003) “Commercial Law Text, Cases and Materials, 1st edition Sweet and Maxwell. Simon Schnitzer (2005). Understanding International Trade Law. Law Matters Publishing. P. Todd (2003). Cases and Materials on International Trade Law. 1st Edition Sweet & Maxwell. G H. Treitel., (2007). The Law of Contract. 12th Revised Edition Sweet & Maxwell. Wilson (2007). Carriage of Goods by Sea. Longman Carriage of Goods by Sea Act 1971 The Vienna Convention on Contracts for the International Sale of Goods 1980. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The Machinations of International Trade Essay Example | Topics and Well Written Essays - 2500 words”, n.d.)
The Machinations of International Trade Essay Example | Topics and Well Written Essays - 2500 words. Retrieved from https://studentshare.org/business/1721036-maritime-law-essay-a-comparison-between-shipped-negotiable-bills-of-lading-straight-bills-sea-waybills-through-bills-and-combined-transport-documents-inclu
(The Machinations of International Trade Essay Example | Topics and Well Written Essays - 2500 Words)
The Machinations of International Trade Essay Example | Topics and Well Written Essays - 2500 Words. https://studentshare.org/business/1721036-maritime-law-essay-a-comparison-between-shipped-negotiable-bills-of-lading-straight-bills-sea-waybills-through-bills-and-combined-transport-documents-inclu.
“The Machinations of International Trade Essay Example | Topics and Well Written Essays - 2500 Words”, n.d. https://studentshare.org/business/1721036-maritime-law-essay-a-comparison-between-shipped-negotiable-bills-of-lading-straight-bills-sea-waybills-through-bills-and-combined-transport-documents-inclu.
  • Cited: 0 times

CHECK THESE SAMPLES OF The Machinations of International Trade

Government Should Regulate Internet Content

“…those who trade in child porn or bombmaking recipes don't do so in the public domain but swap their information on obscure message boards or by way of peer-to-peer file-sharing sites” (Heacock).... 20 June 2011.... Government should regulate internet content Internet has exposed the society to a lot of risks which have served to retrograde the society morally....
5 Pages (1250 words) Essay

Judges, independence and the Power of Common Law

In essence, the dependence of judicial accord on the outer machinations of the greater body of governance implements a system of checks and balances into the legislative form intended to disallow abuse of power; however, the positive functioning of JI is powered by the public belief in the efficacy of the system and its ability to mete out justice accordingly....
4 Pages (1000 words) Essay

International Trade

In most cases the benefits of international trade overweighs the limitations and hence its continuity.... This implies that Rodamia will benefit from the advantages of international trade and at the same time suffers from the effects of the trade due to its limitations.... Limitations of international trade are difficulties or barriers that prevent free trade.... … international trade Reasons for trade between countries can be simple as well as complicated depending on countries objectives....
4 Pages (1000 words) Essay

The Basic Framework of the Melitz Model

The model lays emphasis on the manner in which exposure to the international trade is likely to induce the entrance of more productive firms into the export market.... hellip; The framework of the Melitz model focuses on analysis of intra industrial effects of the international firms on trade.... This analysis further puts focus on long run effects of this type of trade on performance and behavior of firms under different levels of productivity....
6 Pages (1500 words) Essay

A Study of Effectiveness of Performance Related Pay in National Health Service

People evaluate how well a job is done to set performance standards.... The practice of performance appraisal started years ago in the early 20th century.... This procedure of evaluation of work dates back to a maximum of 60… Performance appraisal can be called an ancient art.... Performance appraisal was started as a simple method to provide income justifications, i....
10 Pages (2500 words) Essay

Vaccinations

In other words, vaccination boosts the body's immune system.... Through vaccination, the body builds an immune response to pathogens.... A vaccine therefore… However, the protection does not last a life-time.... Whilst vaccines accelerate the release of antibodies to fight the pathogens, their effect in the body is short lived, as with time, the pathogens Vaccinations Vaccinations • Why do vaccinations, such as the flu shot, not provide protection to a person for his or her entire lifetime?...
1 Pages (250 words) Research Paper

International Trade

Trade barriers such as tariffs and quotas are other political tools that are used by governments to control the amount and composition of international trade happening in their economy (Oh & Reuveny, 2010).... international trade however, not only flourishes competition in region, it also enhances choices and variety for consumers thus… World Trade Organization (WTO) is an institution that has been set up to regulate and look after this aspect of trade....
1 Pages (250 words) Essay

Logistics and multinational association safety authority

Happy Pet Products Ltd - The Home of Pet Toys and Accessories for the Pet trade | Happy Pet.... The research and analysis of data was conducted under the surveillance of qualified international researchers within a period of 3 months (1st January to 31st march 2014).... The regulation has satisfactorily been met and we believe that application of the recommended strategies will be of utter significance in bolstering security at the company and rekindle Widgets local and international reputation....
2 Pages (500 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us