THE ROTTERDAM RULES – WHERE DOES THE US STAND?

On 11 December 2008 the UN General Assembly adopted the “Convention of Contracts for the International Carrying of Goods Wholly or Partly by Sea” during a signing ceremony for the Convention which was held in Rotterdam, recommending the new Convention to be known as the “Rotterdam Rules”.

The purpose of the Convention was to extend and modernize the existing international rules relating to contract of maritime carriage of goods. The aim is that the Convention will replace The Hague Rules, The Hague-Visby Rules and the Hamburg Rules and that it will achieve uniformity of law in the field of maritime carriage.  Adopted by the General Assembly on December 11, 2008 and signed by the United States, France, Greece, Denmark, Switzerland and the Netherlands.  In all, the signatories make up 25% of world trade by volume.  Only three countries have ratified the treaty to date, a long way short of the 20 countries required for the rules to come into force. A general perception is that if the US ratifies, then a sufficient number of other countries will ratify as well.  The World Shipping Council is a prominent supporter and in 2010 the American Bar Association approved a resolution supporting U.S. ratification of the Rotterdam Rules.

Under the US Constitution, for the US to ratify a treaty, the President must obtain advice and consent of the US Senate, which requires two thirds approval in the Senate. To date, the President’s office has not sent the Rotterdam Rules to the Senate for consideration, mainly because some US port authorities and terminal operators oppose ratification. The ports and terminals are reported to believe that the Rotterdam Rules would impose on them risks of potential cargo damage liability that they do not already have under the current cargo liability statute, the US Carriage of Goods by Sea Act (COGSA). Article 19 of the Rotterdam Rules imposes liability for cargo loss or damage, in certain circumstances, on a “maritime performing party.” The definition of this term, under Article 1, includes ports and terminals when they perform “any of the carrier’s obligations under a contract of carriage with respect to the receipt, loading, handling . . . unloading or delivery of the goods.” COGSA does not contain a similar provision imposing liability on ports and terminals, and US ports and terminals are concerned about how this change would affect them.

The Main Provisions:

The Rules apply only if the carriage includes a sea leg; other multimodal carriage contracts which have no sea leg are outside the scope of the Rules.

It extends the period that carriers are responsible for goods, to cover the time between the points of origin to the point of destination (goods received and delivered).

It allows for more e-commerce and approves more forms of electronic documentation.

It increases the limit of liability of carriers to 875 units of account per shipping unit or 3 units of account per kilogram of gross weight.

It eliminates the nautical fault defense which had protected ocean carriers and crew from liability for negligent ship management and navigation.

It extends the time limit to file claims against the ocean carrier to 2 years following the day the goods were delivered or should have been delivered (presently 1 year).

It allows parties to so-called volume contracts to opt-out of some liability rules set in the convention.

It obliges ocean carriers to keep ships seaworthy and properly crewed throughout the voyage. The standard of care is not strict liability but due diligence.

Under the U.S. Constitution, for the U.S. to ratify a treaty, the President must obtain advice and consent of the U.S. Senate, which requires 2/3 approval in the Senate.  To date, the President’s office has not sent the Rotterdam Rules to the Senate for consideration, mainly because some U.S. port authorities and terminal operators oppose ratification.  The ports and terminals believe that the Rotterdam Rules would impose greater risks of potential cargo damage liability that do not exist under the present U.S. Carriage of Goods by Sea Act (“COGSA”).

As recently as last year, the U.S. State department indicated it was in favor of ratifying the Rotterdam Rules and ratification efforts were underway.  At this point we will need to wait and see how the new Administration will deal with this pending matter.  Certainly, from a shippers’ and insurers’ point of view, the Rotterdam Rules would be an improvement not only due to increased carrier responsibility (point to point) but also for the increased dollar amount recovery should the ocean carrier be found liable.

If you have any additional question concerning how these changes may affect your international shipments, should the US choose to adopt the Rotterdam Rules, please do not hesitate to contact us at sales@pnglc.com or 717-626-1107 x 3 .