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ICL Unit-2

1) Unimodal transport refers to transporting goods using a single mode like sea, rail, or road. Intermodal transport uses at least two modes under a single contract from pickup to delivery. 2) Multimodal transport is the carriage of goods using at least two different modes of transport defined by international agreements. A key difference from intermodal is that multimodal uses a single operator responsible for the entire journey under one contract. 3) There is a need for multimodal transport as it helps facilitate international trade by providing a single operator to coordinate transport using multiple modes, reducing costs and complexity for traders.

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0% found this document useful (0 votes)
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ICL Unit-2

1) Unimodal transport refers to transporting goods using a single mode like sea, rail, or road. Intermodal transport uses at least two modes under a single contract from pickup to delivery. 2) Multimodal transport is the carriage of goods using at least two different modes of transport defined by international agreements. A key difference from intermodal is that multimodal uses a single operator responsible for the entire journey under one contract. 3) There is a need for multimodal transport as it helps facilitate international trade by providing a single operator to coordinate transport using multiple modes, reducing costs and complexity for traders.

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Chanderprabhu Jain College of Higher Studies

&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

E-NOTES

Class : BBA LL.B VIII Semester

Paper Code : LLB 410 (C)

Subject : International Commercial Law

UNIT-2

CARRIAGE OF GOODS

Unimodal Transport
Unimodal transportation refers to transportation wherein the goods are transported by a single
mode of transport, including by road, railways, sea, inland waterway, air, space, and pipeline. In a
nutshell, it refers to the transportation of goods through a single mode of transportation.

In sea shipping, where the goods are transported by a single carrier that issues its own transport
contract, a bill of lading from one port to another is the common situation, however, If there are
several carriers, such as for carriage from one port to another port (transshipment at intermediate
port) and then to the ultimate destination port, the very first carrier in control may issue a via bill of
lading containing the whole transport with complete responsibility and liability for the complete
port-to-port transport. This is also known as Unimodal transportation.

Intermodal Transport
Two or more modes of transportation, such as road, rail, sea, and air, can be combined to provide
the most efficient shipping feasible. Multimodal and intermodal transportation are the two types of
combined transportation.

They can be utilized for long-distance deliveries as well as when the client has a tight delivery
deadline or a package that requires special care.

It is a sort of transportation that transports commodities from one location to another across
international borders using at least 2 forms of transportation. It entails transporting freight in an
intermodal container or vehicle across an intermodal transport chain, which allows the integration
of several transportation networks, while avoiding any handling of the freight itself while changing
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Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

modes.

The goal of intermodal transportation is to eliminate cargo handling throughout transit, improve
cargo protection, increase security, and decrease commodity damage and loss. Furthermore, it
would improve transportation performance by utilizing the most productive modalities. Long-haul
transport, for example, may be done by rail or inland canal, while delivery flexibility and efficiency
will be handled by truck.

Containerized rail transportation is sometimes referred to as intermodal in North America. Instead


of a series of legs, each indicated by an independent transport operation with distinct sets of
paperwork and freight charges including carriers, intermodal transport focuses on a single full trip
with a single carrier contract.

Multimodal Transport
“European Conference of Ministers of Transport (ECMT) defines “Multimodal Transport” as “the
carriage of goods by at least two different modes of transport.”

“The United Nations Convention on International Multimodal Transport of Goods, 1980 or MT


Convention” defines as “the carriage of goods by at least two different modes of transport on the
basis of a multimodal transport contract from a place in one country at which the goods are taken in
charge by the multimodal transport operator to a place designated for delivery in a different
country. The operations of pick-up and delivery of goods carried out in the performance of a
Unimodal transport contract, as defined in such contract, shall not be considered as international
multimodal transport.”

The definition of International multimodal transport in “United Nations Convention on


International Multimodal Transport of Goods” is the same as in “ASEAN Framework agreement
on Multimodal Transport.”

At the core of the scheme, the Multimodal Transport Operator must be able to design, evaluate, and
schedule transportation systems, as well as provide efficient transportation at a reasonable expense
and in less time on specific routes. Multimodal transport, by legal standard, “is a contract for the
carriage of goods that includes an agreement by a carrier known as the Multimodal Transport
Operator to conduct carriage of goods using at least two separate modes of transportation from the
point where the goods are taken in care to the point of delivery.” This means that the carrier accepts
responsibility for the whole carriage in the complete transportation chain, even though the carrier
only performs part of the carriage or none at all. Although the consignor may only receive one
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Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

transport document for the whole journey, the multimodal transport operator can accept several
documents from the sub-carrier or his subcontractors.

In essence, International Multimodal transportation is mainly composed of:


 It should be an international transport among two or more nations,
 A minimum of two means of transportation must be used,
 It must be carried out by a Multimodal Transport Operator who is in command of the whole
carriage,
 Carriage of Goods Contract, Certificate of Title, and Cargo Receipt are all included in a single
document.

What is the difference between Intermodal and Multimodal Transport?


The primary distinction among intermodal and multimodal transportation is the form of contract
used and the quantity of transportation administration required. Let‟s take the case of a shipment
from the United States to Italy.

The item is collected by a truck and driven to the port, where it is then sent to Europe by sea and
delivered by railway to the consignee‟s city. When using intermodal shipping, each part of
transportation must be organized separately with distinct carriers, each according to their own
agreement. Although intermodal shipping necessitates additional logistical work, it allows the
sender to negotiate terms with every logistics provider.

If a firm picks multimodal transportation, the entire cargo will be covered by one contractual
arrangement with only one logistics provider. This indicates that only one logistics provider is
accountable for the whole transportation, even if some portions are outsourced to sub-carriers
known as “real carriers.” Because the entire transit is coordinated by a single organization, this
method of transportation involves less logistics coordination.

Why is there a need for Multimodal Transport?


Trade is vital at every stage of the supply chain, from raw materials through interim production or
processing to ultimate consuming of commodities, and it involves a number of parties, including
seller, buyer, and service provider. It is difficult to dispute that transportation aids trade, and that
trade never progresses without it. Transportation can be a barrier to commerce for a variety of
reasons, including transportation rules and regulations, common carrier service availability,
physical connectivity, excessive cost, and established practice.

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Chanderprabhu Jain College of Higher Studies
&
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An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

To ease the transport difficulty, traders may seek 3PLs (Third Party Logistics Service Provider) to
lend a hand in logistics operations. Thus, traders may focus on their main business and cut in
logistics expenses because of greater expertise of Multimodal Transport Operators or 3PLs.
Specialized 3PLs are becoming increasingly focused on making the most efficient and effective use
of their own transportation network. The cost and quality of transportation are improving as a result
of using multimodal transportation to improve trade movement from one location to another.

What are the documents required for Multimodal and Intermodal Shipping?
The Bill of Lading is one of the most crucial papers to have when exporting cargo overseas. It
includes the consignee‟s, carrier‟s, and shipper‟s names, as well as details regarding the sort of
items being transported.

There will be just one contract and one Bill of Lading when employing a multimodal service. The
document is issued by the competent logistics provider, commonly known as a multimodal
transport operator (MTO). In this instance, it is called “multimodal or combined transport Bill of
Lading”. When using an intermodal service, the only distinction is that rather than only
one document, you‟ll have multiple Bills of Ladings, one per carrier.

Advantage and Disadvantage of Unimodal Transport


Transportation, it goes without saying, facilitates foreign commerce by transferring products from
supplier to customer. When the economy becomes globalized, there are benefits and drawbacks to
using Unimodal. Unimodal transportation, in most instances, offers port-to-port or terminal-to-
terminal service rather than point-to-point service, unless road transport is used from the beginning
to the end of the journey.

If land transportation is used, unimodal transport will provide door-to-door shipment. However,
where there is no physical connection for a truck to drive and trucking costs are not in the economy
range, there are limitations. Unimodal shipping, on the other hand, is mostly used to transport
goods from one terminal to another or from one port to another.

If goods are either delivered from port to port or terminal to terminal, unimodal transport is much
more cost-effective; however, when goods must be transported beyond the ports or terminals,
multimodal transport is more cost-effective when a single deal is made and the Trader does not
need to locate carriers to take over the shipment for the second leg of transportation and so on.

What types of transport can be combined in Multimodal Shipping?


According to the path and timing, many modes of transportation may be chosen. Express goods are
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Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
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An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

usually shipped by air, although intercontinental goods may be shipped by water. In an ideal world,
all modes of transportation might be merged to provide the most cost-effective option. Road, sea,
and air transportation are the most common modes of freight transport. When sending single
parcels, however, a mix of trucks and airplanes is typically the best option.

Advantages of Multimodal Transport


 Consulting with one operator, When working with different operators or common carriers, this
tends to prevent misunderstanding and complication of all matters relating to transportation.
 This will also help with one-stop contact for tracking and tracing items before and after their
journey.
 Considering with one single document, The consignor or consignee will work with a single
paper, the Multimodal Transport Bill of Lading, published by the Multimodal Transport
Operator. It would not only potentially prevent the burden of numerous paperwork along the
entire transportation line, but it would also prevent the burden of other formalities on each
transport leg associated throughout the transportation chain.
 Various times, owing to poor supply chain and logistics management in many situations, the
consignor‟s production is delayed, and the arrival period is insufficient for the Maritime
transport transit time. Using air mode to reach the distribution deadline is too expensive. As a
result, multimodal transportation is an alternate form of transportation that combines two
modes of transportation to ensure that the package arrives on schedule. Multimodal Transport
also benefits from the Operator‟s technical support, which allows for a shorter transit time.
 Dealing with a single service provider will allow a consignor or consignee to spend less time
preparing and arranging different segments of the transportation chain while remaining worry-
free.

Disadvantages of Multimodal Transportation of Goods


 Not feasible
 It will not be possible to select a sub-provider that works on a specific section of the route.
 No Negotiation
 Every provider‟s pricing cannot be negotiated.

The Law’s Journey from Unimodality to Multimodalism


Items can be delivered using a single service or a set of vendors of one kind simpler or special
modes, based on the kinds of carriage agreements to be signed between a consignor and a service.
The unimodal shipping agreement is the classic or traditional form of such an agreement, in which
an unaccompanied service involves items from one point of dispatch to another point of

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Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

destination. If the service is provided by a ship, such considerations are unquestionably distinct
ports.

In the traditional multimodal shipping, the shipper prefers to deal with only one party to coordinate
the whole shipment. The criminal issues that may arise in the case of unimodal delivery are minor
in contrast to those that may arise if the deal were for multimodal delivery. In the latter case,
products are delivered by at least one or more modes of transportation, such as buses and ships,
cars and ships, or airplanes, among others.

A shipment can be shipped using either method of transportation, depending on the circumstances.
Freight forwarders, providers, and multimodal operators facilitate these types of contracts. A
freight forwarder could also serve as the shipper‟s agent and contribute to the compilation of
carriage contracts for each provider, which would then be issued to their corresponding criminal
regimes. Items could be shipped at the expense of the shipping owner under such arrangements,
with no private legal liability on the freight forwarder‟s part.

When multimodalism evolved, providers adopted practices for the issuing of multimodal bills of
lading. Historically, most ocean carriers have provided bills of lading that account for legal
responsibility of services entirely dependent on a “community device” of appropriate legal
responsibility regimes (the legal responsibility gets limited by choosing community device). The
legal obligation of each connecting provider is governed by the legislation applicable to each step
of transportation under this scheme.

Among the providers, the rights of indemnity and contribution are governed likewise. Under those
cases, each provider restricts its legal liability to the process that it conducts, and the applicable
legislation is specified to tour with the shipment in a few situations, in comparison to the
community device of liabilities, multimodal bills of lading which furthermore indicate that the
issuing provider takes legal responsibility all over the whole period of transportation. This is
known as the uniform system.

Documents of carriage of goods by sea


The Most Important Shipping Documents:

Commercial Invoice is one of the most important documents when shipping your ocean freight. It
is the invoice that is issued by the seller (exporter) to the buyer (importer). It is required in the
customs clearance process.

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Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

The Packing List is another important shipping document when transporting ocean freight
internationally. It is a detailed overview of the cargo mentioned on the Commercial Invoice above.
It also includes information on how the shipment has been packed and which marks and numbers
are noted outside of the shipment boxes.

An Export or Import Customs Declaration lists details of the goods which are imported or
exported. This declaration is especially important when shipping international freight. Describing it
in legal terms, with a Customs Declaration a person shows the wish to place goods under a given
customs procedure. The Declaration is used for customs clearance and to calculate the duties or
taxes applicable to the cargo. It is prepared by a customs broker using the invoice and packing list.

The Bill of Lading is a detailed document which you will receive from us. It is the transportation
contract and important details on the shipment are included in it. It is another relevant part of the
ocean freight and proof that the carrier has received the goods from the shipper in good condition.
The party holding this document is also the party controlling the cargo.

A bill of lading (BL or BoL) is a legal document issued by a carrier to a shipper that details the
type, quantity, and destination of the goods being carried. A bill of lading also serves as a shipment
receipt when the carrier delivers the goods at a predetermined destination. This document must
accompany the shipped products, no matter the form of transportation, and must be signed by an
authorized representative from the carrier, shipper, and receiver.

The Importance of Bills of Lading


The carrier need not require all originals to be submitted before delivery. It is therefore essential
that the exporter retains control over the full set of the originals until payment is effected or a bill
of exchange is accepted or some other assurance for payment has been made to him.

A bill of lading, therefore, is a very important issue when making shipments to move the cargo or
freight from one point to the other. On one hand, it is a contract between a carrier and shipper for
the transportation of goods and on the other hand, it serves as a receipt issued by a carrier to the
shipper.

Hence, the bill of lading is considered a legal document which provides all the vital details to the
shipper and the carrier to conveniently process the freight shipment through different maritime
countries and invoice it correctly.
The original copy of the bill of lading is provided to the carrier, and a copy of the same should also
be ascribed to the packaged freight.Negotiable and Non-negotiable bill of lading, Negotiable bill of
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Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

lading: In this type of bill, clear instruction is provided to make the delivery of the goods to
anyone having the possession of the original copy of the bill, which itself signifies the title and
control of the freight. In this type of bill, the buyer/ receiver or his/her agent has to acquire and
present an original copy of the bill of lading at the discharge port. In the absence of original bill
copy, the freight will not be released.Non-negotiable bill: This type of bill of lading fixes a
specific consignee/name of the receiver to whom the freights will be shipped and delivered. It,
however, does not itself serve the ownership of the goods. Under this type of bill, the assigned
receiver/ buyers can claim the cargo by confirming their identity.

Purpose of Bill of Lading:


The bill of lading document is meant to act as a transport document enacting as the evidence of the
contract of carriage of the goods. A negotiable bill of lading has the following legal qualities:
 It acts as a piece of evidence for the carriage contract containing the terms and condition under
which the goods transportation will be carried out
 It represents as a receipt which endorses that the carrier has received the cargo as per the
contract and the goods are received in good condition.
 It is a document of title, permitting the sale of goods in transit and the raising of financial
credit.
 Most of the local and international system does not consider a bill of lading as a document of
title. It provides the right for the delivery to be made to the possessor

Types of Bill of Lading


The bill of lading can be classified on the basis of “how it is executed” and “Method of operation”-

On the basis of execution:


1. Straight bill of lading reveals that the goods are consigned to a specified person and it is not
negotiable free from existing equities. It means any endorsee acquires no better rights than those
held by the endorser. This type of bill is also known as a non-negotiable bill of lading, and from the
banker‟s point of view, this type of bill of lading is not safe. This type of bill is prominently used
for military cargo.

2. Open bill of lading – This is a negotiable bill of lading where the name of Consignee can be
changed with consignees‟ signature and thus transferred. This can be transferred multiple times.
Switch bill of lading is a type of open bill of lading.

3. Bearer bill of lading is a bill that states that delivery shall be made to whosoever holds the bill.

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Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

Such bill may be created explicitly or it is an order bill that fails to nominate the consignee whether
in its original form or through an endorsement in blank. A bearer bill can be negotiated by physical
delivery. They are used for bulk cargo that is turned over in small amounts.

4. Order bill of lading is the bill uses express words to make the bill negotiable. This means that
delivery is to be made to the further order of the consignee using words such as “delivery to A Ltd.
or to order or assigns. The cargo is only delivered to the bonafide holder of the bill of lading, and it
has to be verified by an agent who issues delivery order and the verified bill of lading. The order
bill of lading:
– Is the most modern type bill which is widely used all over the world
– Ensures the safety of delivery of cargo to a bonafide holder of B/L
– Since the ship visits several foreign ports where the language, practice, procedures may be
different the master might be inconvenienced during the delivery of the cargo. People might
fraudulently collect the cargo.
– To overcome this difficulty and avoid future cargo claims and litigations, the consignee or the
holder is required to surrender the bill of lading to the ship‟s agent at the discharge port who
will verify the genuineness of the bill of lading. When satisfied the agent will issue a delivery
order and the verified bill of lading. Now any person can collect the cargo from the ship by
surrendering the bill of lading and the delivery note to the ship.

As the bill of lading is made to “to order” of the consignee, it is a negotiable instrument of title.
This means that the ownership of the bill of lading can be transferred from one person to another
by authorising signature and delivery of the bill of lading.

All goods which have not been paid in advance and are shipped under “To order” of the bill of
lading can be categorised into two types:
 To Order, Blank Endorsed: not consigned to any named party but „To Order‟ of the consignor,
with the intended – consignee‟s name given under „notify party.‟ The consignor must stamp
and sign (endorse) this B/L so that its title can be transferred.
 To Order, Bank: consigned to a bank with the intended consignee‟s name given under „notify
party.‟ The bank endorses the B/L to the intended consignee against payment of (or a pledge to
pay) the amount of the accompanying bill of exchange. „To Order‟ B/Ls are used commonly in
the letter of credit transactions and may be bought, sold, or traded, or used as security for
borrowing money from banks or other lenders.

OnThe Basis Of Method Of Operation:


Received for shipment bill of lading–This bill is sent from agent /charterer to shipper. The
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endorsement of this bill ensures that the carrier has received goods but does not confirm it is
onboard of the assigned vessel

Shipped B/L – This bill of lading is Issued when cargo is loaded on board. It binds the shipowner
and the shipper directly

A clean bill of lading is one which states that the cargo has been loaded on board the ship in
apparent good order and condition. Such a bill of lading will not bear a clause or notation which
expressively declares a defective condition of goods and/or the packaging. The opposite term is a
soiled bill of lading. It reflects that the goods were received by the carrier in anything but good
condition.

Through B/L – This bill of lading is a legal document that allows for direct delivery of cargo from
point A to point B. The bill allows transportation of goods both within domestic borders and
through international shipment as it serves as a receipt of the cargo, a contract of carriage, and
sometimes title for the products as well

Combined transport B/L – This bill gives information about cargo being transported in large
containers by sea and land, i.e. through multi-model transport
Dirty bill of lading: If the shipowner raises an objection about “the condition of the cargo is in
good order”, he/she can include a clause thereby causing the bill of lading to be “claused or dirty”
along with the remarks as per the finding of the cargo condition. E.g. torn packing, broken cargo,
shortage in the quantity of the goods etc.

Sets of Bill of Lading:


This is an old practice where the bills are signed in the sets of three originals to facilitate the goods
are timely delivered even when the original is lost. They are stated as the first original, second
original, third original on top of the bill. A duplicate copy with a stamp – “Non-negotiable” may
also be distributed.

The master will sign the original bill of lading, and when the master of agent signs the three-bill of
lading, all other copies are considered void. This clause is clearly written on the bill of lading
which is supplied in sets.

This is a reason why the bank, negotiating a letter of credit that covers the cargo, will always ask
for the full set of B/Ls. This is to prevent other B/L holders from legally claiming the cargo before
the bank does.
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An ISO 9001:2015 Certified Quality Institute
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Bill of lading as Contract Of Carriage:


The contract between the carrier and the shipper is already created before issuing the bill of lading
when the cargo is loaded on the ship. This is done to safeguard the shipper in case the cargo is
damaged before loading it on board the vessel and to help the shipper in the claim process. For the
carrier and the consignee, the bill of lading will act as the actual contract of carriage.

The popularly used conventions and rules which covers the contract of carriage for carrying goods
by sea :
– Hamburg Rules
– Rotterdam Rules
– Hague Rules
– US COGSA
– Hague – Visby Rules

The convention which governs the contract of the carriage is usually stated in the first page of the
bill of lading. Upon booking space for shipment by the consignee the carrier sends a booking
confirmation which states Clauses sent by the carrier, it will indicate the terms and conditions that
will govern the booking and contract of carriage.

Contents of Freight Bill of Lading:


 The bill of lading comprises of the following details:
 The complete name and official address of the receiver and the shipper.
 The Purchase orders or special reference/ invoice numbers which helps the shipper and the
consignee to release the goods for pickup or accepted at delivery
 The date of the pickup which acts as a reference to track the freight
 The details of the item including the number of unit being shipper, weight and dimension of
the product, along with the nature of the cargo being carried, i.e. dangerous goods etc.
 If the goods are hazardous, Department of Transportation hazardous material designation is
tagged, and it is cited on the bill to follow special rules and requirements when shipping
 The details of the packaging used such as crates, palates, cartons, pills, drums etc.
 Any special notes or instruction for the carrier

Bill of Lading Tracking:


Different companies use different forms of bill of lading which makes it difficult to track them
unless a specific tracking service is provided by the carrier. There are few companies which tie-up

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Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

with the shipping carriers to track the bill of lading for easy trade.
However, these precautions must be taken before signing the bill of lading.

Electronic Bill of Lading:


With the modernisation of the shipping industry as a whole, the bill of lading is also modernised to
the electronic bill of lading to solve the issues occurring while using a paper bill of lading under the
latest iteration of International Group of P&I Clubs. The problem faced when using a paper bill of
ladings are:
– The paper bill uses printed bills of lading which are both costly. The bill has to be couriered
which is an additional cost
– The slow movement of the paper-based bill of lading.
– Carriers are obligated to release the goods only on the production of an original bill of lading,
which if not received in time will slow the process.
– The paper bill can be forged, and delivery of goods against a forged bill of lading will lead to a
huge loss

What are incoterms?


Incoterms are the selling terms that the buyer and seller of goods both agree to during international
transactions.These rules are accepted by governments and legal authorities around the world.

Understanding Incoterms is a vital part of International Trade because they clearly state which
tasks, costs and risks are associated with the buyer and the seller.

The Incoterm states when the seller‟s costs and risks are transferred onto the buyer. It is also
important to understand that not all rules apply in all cases.

Whereas others only apply for sea and inland waterway transport (FAS, FOB, CFR and CIF)

Why are Incoterms vital in International Trade?


Incoterms are referred to as International Commercial TermsThey are a set of rules published by
the International Chamber of Commerce(ICC), which relate to International Commercial Law
According to the ICC, Incoterms rules provide internationally accepted definitions and rules of
interpretation for most common commercial terms used in contracts for the sale of goods‟.
The 3 most common Incoterms you should understand:

CIF (Carriage insurance, Frieght) means that the seller delivers when the suitably packaged goods,
cleared for export, are safely stowed on board the ship at the selected port of shipment. The seller
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must prepay the freight contract and insurance.

Despite the seller paying for the freight contract to the selected destination port, once the goods are
safely stowed on board, responsibility for them transfers to the buyer.

The seller is only obliged to procure the minimum level of insurance coverage. This minimum
level of coverage is not usually adequate for manufactured goods. In this event, the buyer and seller
are at liberty to negotiate a higher level of coverage.

CIF (Cost Insurance and Freight)


Seller
It is a term identical to CFR, but with the supplementary obligation for the seller to provide
maritime insurance against the risk of loss or damage caused to the merchandise. The vendor pays
the insurance premium. Under the CIF rule of Incoterms® 2020, the seller is required to obtain
limited insurance coverage in accordance with Clause C of the Institute Cargo Clauses or any other
similar set of clauses. However, the parties are free to agree on a higher level of cover.

Buyer
He is responsible for the cost and risk of transportation from the moment that the merchandise is
delivered alongside the ship at the loading port. He receives and takes the merchandise from the
carrier at the named destination port. The buyers appreciate this Incoterm because they are released
from logistics formalities.

CIP (Carriage and insurance paid to) means that the seller delivers the goods to a carrier or
another approved person (selected by the seller) at an agreed location.

The seller is responsible for paying the freight and insurance charges, which are required to
transport the goods to the selected destination. CIP states that, even though the seller is responsible
for freight and insurance, the risk of damage or loss of the transported goods transfers from the
seller to the buyer the moment the carrier receives the goods.

The seller is only obliged to procure the minimum level of insurance coverage. Should the buyer
want additional insurance, they are responsible for arranging it themselves.

Seller
CIP is identical to CPT, but the seller must supply, in additional, a transportation insurance. The
Campus: Plot No. OCF, Sector A-8, Narela, Delhi-110040
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Chanderprabhu Jain College of Higher Studies
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An ISO 9001:2015 Certified Quality Institute
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seller settles the transportation contract, pays the freight and the insurance premium. "Under the
CIP rule of Incoterms® 2020, the seller is required to obtain limited insurance coverage in
accordance with Clause A of the Institute Cargo Clauses or any other similar set of clauses.
However, the parties are free to agree on a lower level of cover.

The risk of damage or loss is borne by the buyer from the moment that the merchandise is loaded
into the first carrier. After that, the buyer takes care of the import customs clearance and the
unloading expenses.

Insurance Coverage
According to the term CIP, the seller is not obliged to apply for insurance but for a minimum
coverage. If the buyer wishes to protect himself by a superior coverage, under these circumstances,
he would need to obtain the agreement of the seller or apply on his own for a complementary
insurance.

CFR (Cost Insurance, Frieght) means that the seller delivers when the suitably packaged goods,
cleared for export, are safely loaded on the ship at the agreed upon shipping port.
The seller is responsible for pre-paying the freight contract. Once the goods are safely stowed on
board, responsibility for them transfers to the buyer, despite the seller paying for the freight
contract to the selected destination port. The buyer must be informed of the delivery arrangements
with enough time to organise insurance.

He chooses the transportation, contracts and pays for the freight up to the named port of
destination; the unloading of the merchandise is not included. The loading of the merchandise after
customs clearance into the vessel is his responsibility as well as the shipping formalities. However,
the transfer of risk is the same as in FOB.

He is responsible for the risk of transportation from the moment that the merchandise is delivered
alongside the ship at the loading port; he receives the carrier and picks up the merchandise
delivered at the designated destination port.

CPT (Carriage paid to) stands for when the seller delivers the goods to a carrier, or a person
nominated by the seller, at a destination jointly agreed upon by the seller and buyer. The seller is
responsible for paying the freight charges to transport the goods to the named
location. Responsibility for the goods being transported transfers from the seller to the buyer the
moment the goods are delivered to the carrier.

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Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
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School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

If multiple carriers are used, risk passes as soon as the goods are delivered to the first carrier. The
seller‟s only responsibility is to arrange freight to the destination. They are not responsible for
insuring the goods shipment as it is being transported.The seller should ensure that they make it
clear on their quotation that their responsibility for the goods ends at loading and, from this point
forward, the buyer should arrange appropriate insurance.

The seller controls the logistic chain. After having taken care of export customs clearance, he
chooses the cargo carrier and pays the charges up to the designated place.

The risk of damage or loss is borne by the buyer from the moment that the merchandise is loaded
into the first carrier. After that, the buyer takes care of the import customs clearance and the
unloading expenses.

Unloading fees
It is important to clarify the concept of who is responsible for the unloading charges into the frame
of the transportation contract. Normally, the buyer must be responsible for these charges unless
they are included in the transportation fee. In this case, they are charged to the vendor. The vendor
must clarify this question with the buyer in order to prevent finding himself in a situation where the
receiver refuses to pay and the cargo carrier turns back to the provider (the seller) to demand his
part of the payment for the unloading charges as well as the eventual fees for the vehicle's
immobilization while waiting for the problem to be solved.

DAT(Delivered at Terminal) is a term indicating that the seller delivers when the goods are
unloaded at the destination terminal.

„Terminal‟ can refer to a container yard, quayside, warehouse or another part of the cargo terminal.
The terminal should be agreed upon accurately in advance to ensure no confusion over the location.
While there is no requirement for insurance, the delivery is not complete until the goods are
unloaded at the agreed destination. Therefore, the seller should be wary of the risks that not
securing insurance could pose.

DAP (Delivered at Place) means that the seller delivers the goods when they arrive at the pre-
agreed destination, ready for unloading.

It is the buyer‟s responsibility to effect any customs clearance and pay any import duties or
taxes. Additionally, while there is no requirement for insurance, the delivery is not complete
until the goods are unloaded at the agreed destination. Therefore, the seller should be wary of the
Campus: Plot No. OCF, Sector A-8, Narela, Delhi-110040
Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

risks of not securing insurance.

The seller has to deliver the merchandise and place it at the buyer's disposal into the inland freight
transportation carrier ready to be unloaded at the designated place of destination. He has to take
care of the export customs clearance; however, he is under no obligation of performing the import
customs clearance. The seller must bear a contract for the transportation of the merchandise up to
the named destination and unload it from the transportation carrier at its arrival. The seller has no
obligation towards the buyer of obtaining an insurance contract. Nevertheless, he must provide the
buyer, at his own expense, the documents that will allow him to pick up the merchandise delivered.
The Incoterms® 2020 rules explicitly allow for the necessary transport to be performed under a
contract of carriage or to be arranged by own means (without the involvement of a carrier acting as
a third party).

He has to pay the price of the merchandise as stipulated in the sales contract and he has to pick up
the merchandise once it has been delivered.

DDP (Delivery duty paid) means that the seller delivers the goods to the buyer, cleared for import
and ready for unloading, at the agreed location or destination. The seller maintains responsibility
for all the costs and risks involved in delivering the goods to the location. Where applicable, this
includes pre-shipment inspection costs and import „duty‟ for the country of destination. Import
duty may involve customs formalities, the payment of these formalities, customs duties and taxes.
DDP holds the maximum obligation for the seller. While there is no requirement for insurance, the
delivery is not complete until the goods have been unloaded at the destination. Therefore, the seller
should be wary of the risks that not securing insurance could pose.

The seller has, in this case, the maximum obligation; he is responsible for all transfer charges and
risks until the merchandise is delivered to the buyer. The import customs clearance is also under his
charge.

The Incoterms® 2020 rules explicitly allow for the necessary transport to be performed under a
contract of carriage or to be arranged by own means (without the involvement of a carrier acting as
a third party).

The buyer picks up the delivery at the designated destination place and pays the unloading fees. He
must request from the seller to furnish him with all the information required in relation to the
security which he will need for the export, import and transportation of the merchandise until its
final destination.
Campus: Plot No. OCF, Sector A-8, Narela, Delhi-110040
Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

EXW (Ex Works) means that the seller has delivered when they place or deliver suitably packaged
goods at the disposal of the buyer at an agreed-upon place (i.e. the works, factory, warehouse, etc.).
The goods are not cleared for export.

The seller is not required to load the goods onto a collecting vehicle and, if they do, it is at the
buyer‟s expense. EXW is the only Incoterm where the goods are not required to be cleared for
export, although the seller has the duty to assist the buyer (at the buyer‟s expense) with any needed
documentation and export approvals.
After collection, the buyer must provide the seller with proof that they collected the goods. From
collection, the buyer is responsible for all risks, costs and clearances.

The only responsibility of the seller is to prepare the merchandise for the buyer, at his own
premises, suitably packed for export shipping purposes (in general, the price includes loading the
merchandise in the pallet).

The buyer is responsible for all the charges and risks involved in the shipment of the merchandise
from the moment it leaves the seller's warehouse until it reaches its destination place.

The term EXW represents a minimum obligation for the seller. However, if the parties agree that
the vendor insures the loading of the merchandise at the point of departure "EXW Loaded", and
make the vendor responsible of these risks and charges, they have to precise this issue very clearly
on an explicit clause included in the sales contract (ex: EXW Paris loaded, ICC 2020).

The seller is expected to provide for the buyer, at his request and at his charge and risks, all the
assistance required to obtain an export license, insurance and provide the buyer with all the useful
information in his possession which will allow the buyer to insure the export of his merchandise in
full security.

FAS (Free Alongside Ship) stands for when the seller delivers the goods, packaged suitably and
cleared for export, by placing them beside the vessel at the agreed upon port of shipment. At this
point, responsibility for the goods passes from the seller to the buyer. The buyer maintains
responsibility for loading the goods and any further costs.

The seller may procure a freight contract at the buyer‟s request or, if the buyer fails to procure one
by the date of a scheduled delivery, the seller may procure one on their own initiative. The buyer is
responsible for the cost and risk associated with the freight contract.
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Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
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The obligations of the seller are henceforth fulfilled when the merchandise is placed, after customs
clearance, alongside the ship at the dock or at the lading of the designated port of shipment.

From this moment on, the buyer is responsible for all charges and risks of loss or damages, from
the moment that the merchandise is delivered alongside the ship, especially in the case of a ship's
schedule delay or the cancellation of a port of call. The buyer designates the carrier, arranges the
transportation contract and pays for the freight.

Obligations of place and moment


The seller does not deliver FAS if the vessel is not at the dock. It is a responsibility of time and
moment (From Marseilles to Anvers, where every company offers at least one weekly departure,
bringing the delivery eight days before the date of the departure of the ship chosen by the buyer is
too premature).

License acquisition
The acquisition of an export license or any other official authorization is at the charge and risk of
the seller. In the same way, the buyer is responsible for the import license. The buyer must provide
the vendor with all the information regarding the name of the vessel, the loading place and the time
chosen to deliver the merchandise within the period accorded.

Documents fees
The seller must, should the case arise, provide for the buyer, at the right time, all the assistance
needed to obtain all the documents and information regarding the security requirements for the
export and/or import of the merchandise and/or for its transportation to its final destination. The
cost of the documents furnished and/or the assistance given are costs and risks paid by the buyer.

FCA (Free Carrier) means that the seller fulfils their obligation to deliver when the goods are
handed, suitably packaged and cleared for export, to the carrier, an approved person selected by the
buyer, or the buyer at a place named by the buyer. Responsibility for the goods passes from seller
to buyer at this named place.

The named place may be the seller‟s premises. While the seller is responsible for loading the
goods, they have no responsibility for unloading them if the goods are delivered to a named place
that is not the seller‟s premises.

The seller may procure a freight contract at the buyer‟s request or, if the buyer fails to procure one
Campus: Plot No. OCF, Sector A-8, Narela, Delhi-110040
Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
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by the date of a scheduled delivery, the seller may procure one on their own initiative. The costs
and risks of this freight contract fall on the buyer. The buyer must be informed of delivery
arrangements by the seller in time for the buyer to arrange insurance.

If the delivery takes place at the seller‟s premises, it is the seller, who handles the loading of the
suitably packaged goods into the vehicle provided by the buyer, (specify “FCA seller‟s premises”).
Export customs clearance is the responsibility of the seller.

The buyer has chosen the type of transportation and the carrier with whom he has signed a
transportation contract and pays for the main transportation (if applicable). The transfer of charges
and risks takes place at the moment when the carrier picks up the merchandise. The parties must
agree upon naming a place where to hand over the merchandise (the carrier‟s terminal or the
vendor‟s premises).

The seller must, should the case arise, provide for the buyer, at the right time, all the assistance
needed to obtain all the documents and information regarding the security requirements for the
export and/or import of the merchandise and/or for its transportation to its final destination. The
cost of the documents furnished and/or the assistance given are costs and risks paid by the buyer.
The Incoterms 2020 rules explicitly allow for the necessary transport to be performed under a
contract of carriage or to be arranged by own means (without the involvement of a carrier acting as
a third party).

Variant
"FCA seller's premises".
This Incoterm was officially added to the revised version of Incoterms 2000: it is the responsibility
of the seller to load the merchandise.

FOB (Free on Board) means that the seller delivers the goods, suitably packaged and cleared for
export, once they are safely loaded on the ship at the agreed upon shipping port. At this point,
responsibility for the goods transfers to the buyer. The seller may procure a freight contract at the
buyer‟s request or, if the buyer has failed to procure one by the date of a scheduled delivery, the
seller may procure one on their own initiative. The buyer is responsible for the cost and risk of this
freight contract.

The seller must inform the buyer of delivery arrangements in good time to sort out insurance for
the shipment.

Campus: Plot No. OCF, Sector A-8, Narela, Delhi-110040


Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

FOB is a frequently misused term. If a supplier insists FOB needs to be used for containerised
goods, the buyer should make certain that the selected insurance covers the goods „warehouse to
warehouse‟.

He has to deliver the merchandise at the designated loading port, on board of the vessel chosen by
the buyer and fulfill all the formalities of export customs clearance, if there are any.

Under a contract type FOB, the seller fulfills his delivery obligation when the merchandise is on
board of the vessel at the designated loading port, or in the case of successive sales, the vendor
obtains the merchandise and delivers it, as well, in order to have it all transported up to the
designated destination place indicated in the sales contract.

He selects the vessel, pays the maritime freight, the insurance and he takes care of the formalities at
the arrival. He is also responsible for all the charges and risks of loss and damage that could arise
to the merchandise from the moment it was delivered.

Variant
For information, the "ARRANGING FOB" is the term used by the freight brokers to indicate that
the operations that take place prior to placing the merchandise aboard have been done and
accomplished, as well as the export customs clearance operations, if needed. All these operations
represent an extra cost, to be paid by the seller, which is sometimes called "fee of placing into
FOB".

The "FOB STOWED" and/or "FOB STOWED and TRIMMED" are variations. The seller is
responsible for the total charges incurred by the merchandise at the loading port. However, it has to
be stipulated in the contract at which point the transfer of risks takes place.

The seller must, should the case arise, provide for the buyer, at the right time, all the assistance
needed to obtain all the documents and information regarding the security requirements for the
export and/or import of the merchandise and/or for its transportation to its final destination. The
cost of the documents furnished and/or the assistance given are costs and risks paid by the buyer.

Hague-Visby rules
The Hague Rules set an important precedent to maritime issues that were otherwise plagued by
chaotic turn-of-events. Drafted and passed in the early 1920s, the international maritime law was
originally outlined and is still formally known as the „International Convention for the Unification
Campus: Plot No. OCF, Sector A-8, Narela, Delhi-110040
Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

of Certain Rules of Law Relating to Bills of Lading.‟The Hague Protocol was amended in the late
1960s and the maritime law post its amendment came to be known across global maritime channels
as the „Hague-Visby Rules.‟

The Hague-Visby Rules stipulate the extent of the governance of the waybill for a cargo ship being
chartered alongside the liabilities that stand to be potentially imposed on the parties agreeing to the
charter. Thus it follows that in order for the Hague-Visby amendment to be applicable to a
particular cargo charter; the waybill is required as the primary document of verify the authenticity
of the consignment and all the other details as provided by the concerned personnel chartering the
vessel.

Though almost every country engaged in maritime activities across the world, follows the outlining
of the provisos of The Hague Protocol, certain countries haven‟t accepted all the stipulations of the
international maritime law. Some of these countries either;Follow the stipulations of the original
Hague Rules or,Have established a separate law dealing with the governance and ambit of
waybills, whilst including the stipulations of the Hague-Visby protocol or,Have outright not
sanctioned the acceptance of the provisos of the Hague-Visby protocol. Each of the 10 articles of
the Hague-Visby law, outline in detail the requirement on the part of the shipping corporate that
engages the vessel for the necessary operation and the chartering company that provides the
required cargo ship.

As per the stipulations specified, the shipping corporate is expected to supply up-to-date and the
most accurate of data pertaining to the cargo potentially being consigned. If shipping corporate
fails to do so, then as per the stipulations of the Protocol, neither the chartered vessel nor the
operator of the vessel will be held culpable for any loss arising out of any accident during the
course of the transit.

At the same time, on the part of the operator of the cargo ship, it is expected, as per the rules of the
law that the vessel engaged is:
 Thoroughly suited to be utilised for the cargo transiting operation
 All the vessel‟s cargo decks are suitable to be loaded with the necessary cargo load and are
appropriately equipped with the required infrastructure
 In terms of the ambit of the terminology of cargo, as per the outlining of the international
maritime law, all objects and commodities except cattle, fowl and all those variants of cargo
which would be required to be placed in the open decks come within the stipulations of the
Hague Protocol.

Campus: Plot No. OCF, Sector A-8, Narela, Delhi-110040


Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com
Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi& Approved by Bar Council of India)

Criticisms and Skepticisms about the Hague-Visby Rules


As imposing and binding as the Hague Rules are, maritime experts and shipping conglomerates
argue that the law is greatly in favour with the cargo ships‟ operators than the shipping companies.
This argument stems from the fact that while the law requires the shipping companies to disclose
thorough information about their cargo, in case of any lack of information so provided and a
mishap occurring, the operators are absolutely exempted from being liable for the loss of cargo.

Similarly even in case of a shipping organisation providing all the required cargo details in the
waybill, operators have been exempted from paying recompense to the aggrieved shipping
company on the basis of several defined points.

In case the cargo has to be thrown into the open sea on account of any maritime emergency, the
cargo ship‟s operators are required to provide partial compensation to the shipping corporate
incurring the loss, as per the Hague-Visby Rules.

Such recompense however can be claimed by the shipping corporate either on the basis of each
parcel of the entirety of the cargo shipment or on the basis of each kilogram of the total gross cargo
tonnage carried by the ship.A shipping corporate claiming financial recompense also needs to note
that its claim will be accepted and validated only if the exact quantitative details about the cargo
have been provided and listed in the waybill.

Additionally, the monetary value for the recompense depends on the cost of similar cargo in the
market, while the currency utilised to calculate the amount of recompense depends on the
geographic location where the accident has occurred.

Campus: Plot No. OCF, Sector A-8, Narela, Delhi-110040


Ph: 91-11-27284333 / 34. Toll Free No. : 1800117677. Website: www.cpj.edu.in. E-mail: cpj.chs@gmail.com

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