CINEC – Foreign Trade Insurance*

(6-2) – INSURANCE COVERAGES

Liability of Carriers – International Conventions

The owner of Cargo, or the Insurers under subrogation, have rights of recovery against the Carriers for loss or
damage to the goods. Apart from any liability which may arise from the contract of carriage or local
legislation there are certain conventions covering the international carriage of goods.

a. Hague Rules or Hague Visby Rules for the international carriage of goods by sea
b. Warsaw Convention - by air
c. C.M.R. - International Convention for the carriage of goods by road
d. C.I.M. - International Convention for the carriage of goods by rail

(a) The International Carriage of Goods by Sea

The original Hague Rules were formulated in the early 1920's and ratified by many countries. A subsequent
Protocol in 1968 known as the Hague - Visby Rules, superseded the original rules. Ratified by Sri Lanka on
21st January 1982.

The following remarks relate to the Hague-Visby Rules:-

The Carrier is responsible at the commencement of the voyage to exercise due diligence to:-
a). make the ship seaworthy
b). properly man, equip and supply the ship
c). make the holds, refrigerating and cool chambers and all other parts of the ship in which goods are
carried fit and safe for their reception carriage and preservation. The Carrier must also properly and
carefully load, handle, stow, carry, keep, care for and discharge the goods.

Where a Shipowner has issued an under-deck Bill of Lading and yet shipped the goods on deck he will be
liable for any loss or damage to the goods and will not be able to limit his liability to the normal monetary
limits (see below).

The Carrier is not responsible for loss or damage resulting from:-

a. Act, neglect, or default of the master, mariner, pilot, or the servants of the Carrier in the navigation or
in the management of the ship.
b. Fire, unless caused by the actual fault or privity of the Carrier.
c. Perils, dangers and accidents of the sea or other navigable waters.
d. Natural Perils (Act of God).
e. Act of War.
f. Act of public enemies.
g. Arrest of restraint of princes, rulers or people, or seizure under legal process.
h. Quarantine restrictions.
i. Act or omission of the shipper or owner of the goods, his agent or representative.
j. Strikes or lock-outs or stoppage or restraint of labour from whatever cause, whether partial or
general.
k. Riots and civil commotions.
l. Saving or attempting to save life or property at sea.
m. Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of
the goods.
n. Insufficiency of packing.
o. Insufficiency or inadequacy of marks.
p. Latent defects not discoverable by due diligence.
q. Any other cause arising without the actual fault or privity of the Carrier, or without the fault or
neglect of the agents or servants of the Carrier, but the burden of proof shall be on the person

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claiming the benefit of this exception to show that neither the actual fault or privity of the Carrier nor
the fault or neglect of the agents or servants of the Carrier contributed to the loss or damage."

The Assured should note that: "Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the Carrier or his agent at the port of discharge before or at the time of the removal of
the goods into the custody of the person entitled to delivery thereof under the contract of carriage, or, if the
loss or damage be not apparent, within three days, such removal shall be prima facie evidence of the delivery
by the Carrier of the goods as described in the Bill of Lading.

The notice in writing need not be given if the state of the goods has, at the time of their receipt, been the
subject of joint surveyor inspection.

In the case of any actual or apprehended loss or damage the Carrier and the receiver shall give all reasonable
facilities to each other for inspecting and tallying the goods."

As has been stated, in Section 1 under the Institute Cargo Clauses, if the Assured fails to take such action as
would allow a recovery to be made against the Carrier then the Insurers may:

i) Reject the claim on the grounds of breach of policy warranties.

ii) Settle the claim less a deduction equivalent to the sum which would have been recovered from the Carrier.
iii) Settle the claim in full, but the basis of it being "without prejudice" to future claims, or make an 'ex gratia'
payment.

As is normal for international conventions for international transport, the Carrier's liability is limited to a
maximum amount unless the value of the goods is specially declared to, and agreed by, the Carrier.

Whether the Carrier is liable under The Hague or Hague-Visby Rules depends on the legislation enacted in the
country where the voyage commenced.

Provided action is taken as set out above and the claim is not excluded, the recovery should not present any
particular problem except in cases where the Carrier is unable to settle the claim due to his lacking assets to
meet his liability.

In the case of most ship owners their liability to Cargo owners is covered by a Protection and Indemnity
Association (P&I Club), but in the event of a potential substantial recovery the Cargo owners may threaten to
arrest the vessel before she leaves the port of destination unless the
Club, or some other party, puts up suitable security covering the amount claimed. Once a vessel has sailed the
Ship owner may have no assets in the country concerned and action is necessary in order to guarantee
satisfaction of the claim.

(b) The International Carriage of Goods by Air - Warsaw Convention and Montreal Convention

The advantages of air transport are the quicker transport and the saving arising from that. However air
transport is expensive for many types of cargo except those goods which are light and valuable.
International carriage of goods by air by the Warsaw Convention and freight depends of weight, volume and
distance.

If the carriage involves an ultimate destination or stop in a country other than the country of departure, the
Warsaw Convention and the Montreal Convention may be applicable, and may limit the liability of the carrier
in respect of loss, damage or delay to cargo to 250 French gold francs per kilogram or 17 Special Drawing
Rights (SDRs), unless a higher value is declared in advance by the shipper and a supplementary charge paid if
required.

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The liability limit of 250 French gold francs per kilogram is approximately USD 20.00 per kilogram on the
basis of USD 42.22 per ounce of gold.

 “Warsaw Convention” means the Convention for the Unification of certain Rules relating to International
Carriage by Air, signed at Warsaw, 12 October 1929. “Montreal Convention” means the Convention for
the Unification of Certain Rules for International Carriage by Air signed at Montreal, on 28 May 1999;
“SDR” means a Special Drawing Right as defined by the International Monetary Fund.

 Applicable laws (including national laws implementing the Montreal Convention), government
regulations, orders and requirements;

If the sum entered on the face of the air waybill as “Declared Value for Carriage”, this shall constitute a special
declaration of value and in this case carrier’s limit of liability shall be the sum so declared.

Subject to conditions herein, the carrier shall be liable for the goods during the period they are in its charge or
the charge of its agent.

The person entitled to delivery must make a complaint to the carrier in writing in the case:
- of visible damage to the goods, immediately after discovery of the damage and at the latest within
fourteen (14) days from receipt of the goods;
- of the damage to the goods, within (14) days from the date of receipt of the goods;
- of delay, within twenty-one(21) days of the date the goods are placed at his disposal; and
- of non-delivery of the goods, within one hundred and twenty (120) days from the date of the issue of
the air waybill.

Any rights to damages against carrier shall be extinguished unless an action is brought within two years from
the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the
date on which the transportation stopped.

(c) The International Carriage of Goods by Road

C.M.R. This is the convention governing the International Carriage of Goods by Road signed at Geneva in 1956.
There must be a crossing of an international frontier by a Road Vehicle for the convention to apply, and the
vehicle must start, finish or pass through a country which has ratified the convention.

The contractual document is known as the C.M.R. Consignment Note and where a "clean" Consignment Note is
issued and accepted then this is prima facie evidence of receipt of the goods by the Carrier in good order, even
in the example of a sealed container. Claims against Carriers must be made within seven days of receipt as far
as claims for damage or partial loss are concerned. Where goods do not arrive within 30 days of the estimated
time of arrival a claim can be made upon Carriers for non-delivery. This can be extended to 60 days by agreed
extension of the contract of carriage. An overall time limit of one year applies within which the Claimant must
present his claim with "best possible particulars."

(d) The International Carriage of Goods by Rail - C.I.M.

This is the convention covering the International Carriage of Goods by Rail signed at Berne in 1970.

The Carrier is liable for loss, damage or delay unless he can prove an expected peril. The limit of liability is
Gold Francs 50 per kilo. The relevant contractual document of carriage is known as "International Sheet
NO.1" and this must be produced when presenting a claim to Carriers.

A reserve must be made within 10 days of delivery and there is a general time bar of one year during which
time a fully documented claim must be submitted.

If goods fail to arrive within 30 days of the estimated time of arrival (or 60 days if subject to Special Contract)
a claim may be made for non- delivery.

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 CINEC – Foreign Trade Insurance*