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Connecting Carrier Agreement – to sign or not to sign

Jagan - March 25, 2014 - 0 comments

  1. Non Vessel Ocean Common Carrier (“NVO”) have been in the Asian Region for quite some time. They initially were focused in niche trades (ISC – ME Trade, Inter Asian Trade) and are now involved in almost all trades.
  2. Frequently,as is the case,theNVO’s will be acting as the Contractual Carrier and is responsible to the cargo interests from the time of shipment till delivery. In these cases, the NVO’s would issue Through Bills of Lading to the cargo interests.
  3. With respect to the actual carriage, the NVO’s would either book with the feeder/ vessel operator on a through basis (which means that the feeder / vessel operator is responsible right till the final discharge port) or on a port to port basis. If the shipment does not entail any transshipment, then only one feeder / vessel operator would be involved. If the shipment entails transshipment, then there may be two or more feeders / vessel operators with transshipment operations to be performed at the transshipment point. The NVO’s could decide to book with different feeder / vessel operators on a port to port basis with the transshipment being undertaken by themselves (generally the case with the NVO’s who have their own operational bases and / or dead freight / slot agreements with the feeders / vessel operators. In this case, the responsibility of the feeders is generally for the portion where they are involved and ceases once they have given delivery to the NVO’s or their agents.
  4. This article focuses on the practice of some feeders / vessel operators requiring the NVO to sign a “ Connecting Carrier Agreement” (commonly known as “CCA”) before they agree to accept the NVO’s booking for loading on their vessels. So the obvious question is what are CCA’s and what are the implications for a NVO?
  5. Generally the CCA would provide that the feeders / vessel operators contract on specific terms (akin to say a slot chaterparty) such as
    1. Imposition of The Hague Rules on the carriage contract
    2. Imposition of containers being a package instead of the actual no of packages or weight of cargo enumerated in the NVO’s B/L for limitation of liability
    3. Imposition of the NYPE Inter Club Agreement for the adjustment of cargo claims.
  6. There are various cargo conventions in place and which are either compulsorily applicable or incorporated into the contract of carriage.
    1. For example, any shipments effected under a Bill of Lading from Singapore, the Singapore COGSA would apply. The Singapore COGSA incorporates the Hague Visby Rules with some amendments and applies for all shipments effected from Singapore provided a Bill of Lading or a similar document of title is issued. In the case of countries which have given effect to other cargo conventions such as The Hague Rules or The Hamburg Rules, they would apply basis the provisions found in those Rules. (The latest convention is The Rotterdam Rules – while the signatures required for the convention have been fulfilled, it needs to be seen as to when it will come in force). The Hague Rules have a lower limitation amount compared to The Hague Visby or the Hamburg Rules. This being the case, the NVO’s may have a deficit in with respect to recovery against the feeder / vessel operator and this would obviously be prejudicial to their and their liability insurer’s interests.
    2. Again if the CCA’s provide that the container would be considered as an unit, the limitation amount between the NVO’s and the feeder / vessel operator may vary such that the NVO would have to settle for a higher amount and instead only be entitled to seek a lesser amount from the feeder / vessel operator.
  7. The NVO’s would generally be insured with Transport Liability Insurers for their role as NVO’s. One of the terms of the insurance contract would generally be that the NVO contract with their overlying carrier on no lesser terms than those which they contract with the cargo interests. This being the case, if the NVO’s contract with the feeder operators on lesser terms than what they contract with the cargo interests (as explained in 6 above), then them may be in breach of their liability policy.
  8. Further, the NVO’s liability insurance policy may exclude coverage of the NVO whilst acting as a slot charterer unless this has been specifically declared and cover sought. In the circumstances, if the NVO’s unknowingly sign any CCA’s, and if the CCA is considered equivalent to a slot charterparty, then they may be in breach of the policy such that they would be bereft of cover (Unless they are covered for Errors & Omissions and in which case, cover may be available provided that the signing of the CCA was an isolated act of error, but with the burden of proof being on the NVO’s).
  9. We would therefore suggest that the NVO’s prior to signing any CCA’s
    1. check the terms of the CCA to confirm that they contract with the feeder operator and cargo interests on similar terms such that they do not impose any additional liability to the NVO’s
    2. seek confirmation from the liability insurers that the wordings of the CCA’s do not breach any of the terms of the liability policy.

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