Multimodal Transport in South America. Original note of 2007, which has not changed untol 2011

Note prepared for the International MultiModal Transport Association Newsletter of 2007, which can be repeated without a single change in 2011.

The only change would be the ongoing debate, whether South American countries should ratify or reject the Rotterdam Rules, about which you can find some notes elsewhere in this website.

Multimodal Transport in South America.
This continent has most regional, subregional and national laws on Multimodal Transport in the world, but very little cargo is transported under a Multimodal Transport Document. In fact, according to an UNCTAD study of 2001, all these different regulations have only caused a great deal of confusion. See http://www.unctad.org/en/docs/posdtetlbd2.en.pdf. The lack of advance of Intermodal and Multimodal Transport is worrying the Governments of the region, who wish to participate in the advantages that Multimodal Transport reportedly offers in other zones of the world. In order to investigate the real situation and propose measures to bring improvements, ALADI (The Association for Integration of 12 countries in Latin America) opened in April 2007 a Virtual Forum to discuss questions around Multimodal Transport in this region and has requested several people to give their opinions.  To enter the Forum, which is in Spanish, use: http://foros.aladi.org/Foros/ForoMultimodal/marcosmultimodal.htm
At the end of January 2008 the first part was completed and it was ascertained that in fact none of all those regulations has any practical application. In the middle of February the Coordinator of the Forum handed the first report to the governments with the first findings and the different suggestions of the participants of what should be done. These suggestions show that it is nearly impossible to get agreements on the main points (the nitty gritty questions around Multimodal Transport) and the Forum only served to express the opinions of the participants, but did not advance at all in bringing the parties together in order to come up with an unanimous proposal. Many made suggestions for even another set of Regional Multimodal Transport Rules, which would only bring more confusion. Others suggested to scrap all the existing regional regulations and revise all the national transport laws and bring these in line with for example C.M.R. of Europe, as Germany has done in 1998. This seems to be the best way forward. There were several interesting points raised in this FORUM which should be read with attention by regional when, UNCITRAL is advancing with the Draft Instrument for a New Maritime Convention, which would also apply to Multimodal Transport if a part of the transport is carried out by sea. (note made in 2011 The Rotterdam Rules are now open for ratification.).
In the first part of the ALADI-forum the question of  limitation of liability of the carriers attracted most interest and was amply discussed, without bringing the different opinions an inch closer to each other. On the one hand there are those that consider any limitation as a “virtual act of impunity of the carriers” and “something grossly unfair to the owners of the cargo”. Especially 2 Uruguayan lawyers, who are fiercely opposed to limitations of liability, wrote a lot about this, putting much emphasis on “rich and poor countries” and “countries of transport users against countries of transport providers”. I gave my opinion that this is a gross exaggeration and that very few people actually compare the average values of the cargoes that are transported by different modes with the values of the limitations of the Conventions, where only air transport is in detriment to the transport users. When asked in the FORUM if anybody knew these figures, it resulted that none of the participants had any idea of them. Therefore I made an entry in the FORUM with copies of 2 tables indicating the values of the limitations of the different conventions and the average value of the cargoes that are transported by different modes in the European Union, according to a study made in 2001. (See below).  Moreover any shipper who does not accept that the carrier limits his liability, can declare the value of his cargo and avoid the limitation, but will have to pay a higher freight rate. Based on what I read in different publications about liability regimes of the carriers, I believe that a reasonable limitation of liability of the carrier brings the overall cost of transportation down. No doubt in IMMTA the opinions of the different interested members will be as much apart from each other as the picture given in the ALADI FORUM and I look forward to receive your (surely different) opinions at azuidwijk@yahoo.com.ar .The conclusions of this ALADI FORUM, showed without any doubt that talking about “limitation of liability” in South America, is just like talking about a religion. Some just believe in it and other just flatly reject it, but there is no reasoning behind it. Therefore I agree with a participant who followed the discussions closely and finally concluded that it is utopian to believe that this question can be solved in a FORUM or a simple discussion. This can only de done thorough studies, like those made in the USA, the European Union and OECD around 2000. Only factual studies can show who is right and who is wrong. However, without belonging to a transport operator, I shall once again repeat my view of the question and why I believe that the limitation of liability brings the overall costs of transportation down. In the first place I wish to refer to one of the first laws that accepted this, the Carmack Amendment of the USA, which was enacted at a time of strong regulations and published rates of carriers. This Law allowed the carrier to limit his liability, in exchange for a lower freight-rate than the published one.(“Released rates”)  and this is by itself a clear proof that the limitation undoubtedly brought the cost of transportation down. Although much has changed since then, several studies in the USA and Europe about “liability regimes of carriers”, seem to confirm the general opinion that the basic facts are still the same. Especially the study "The Economic Impact of Carrier Liability on Intermodal Freight Transport, European Commission, 01/22/2001, makes me believe that this understanding is correct.

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On the other hand this study concluded that more money could be saved if uniform rules could be established for all modes of transport, something that in practice is proving to be very difficult to achieve. It also mentions that the developing countries lack clear rules, which create legal uncertainties, resulting in conflicts and lawsuits and that this is the underlying reason that Multimodal Transport does not advance in those countries and regions. On the other hand, big shippers in the industrialized countries declared to have great benefits using Multimodal Transport and that this is the reason that amongst these countries this has advanced so far. 

On the opposite side of the discussion were 2 Uruguayan lawyers, who loath the idea of any limitation of liability and wrote the following, in my opinion, confused text:

Quote : Juridical problems:

Many transport users complain that, both under multimodal and unimodal rules, they do not receive full compensation from the carrier for the total value of the cargo and other financial losses, when cargo is damaged or delivery is delayed. Some have manifested that the majority of the Conventions and National Transport Laws imply a virtual impunity of the carriers in general and of Multimodal Transport Operators.( virtual impunity ????) In this situation, many transport users prefer– although not being the responsible party in the accident )- to claim compensation for the full value of the cargo from their own insurer – for which they pay an insurance premium that covers the full value of the cargo and after that the insurer repeats against the insurers of the carriers.  
For the insurer this last option works in a few countries where no limitations of liability exist, which assures the recovery of the full amount of compensation paid to the transport user, but this is not always so where limitations exist, because the cargo may be of a higher value. In this respect the transport users consider that, when these rules were established by the governments, they were influenced by the lobbies of transporters, freight-forwarders and insurers, against the interests of the transport users, who in many countries of the region are not organized in chambers or associations that make it possible to coordinate and impose their views before the national governments. Unquote
Finally I made the following observations,  Quote: It is an exaggeration to say that most conventions mean a virtual impunity of the carriers and many studies have concluded that a reasonable limitation of liability brings the overall cost of transportation down. Applying reasonable limits of liability, well above the average values of the cargoes that are transported, avoids that carriers and their liability insurers have to calculate their risks based on the value of an exceptional cargo which has a much higher value than the average.  In all existing Conventions, a transport user can declare the value of his cargo, after which the carrier cannot limit his liability. Most probably he will have to pay a higher freight rate (ad valorem).Without rules limiting the liability, it will be more difficult for insurers to calculate their risks. Most countries of S.A. do not permit a limitation of liability in their national transport laws and limitations only are accepted when International Conventions for Maritime and Air Transport apply, but not for inland transport. This is probably the reason that in this region carriers are afraid to enter in “unknown territories” and prefer to work with “port to port” bills of lading, instead of Multimodal Transport Document, as was concluded in this Forum. Also I pointed out that the many transport users, who often “complain” that the “per kilo” limitations of the most used Maritime Conventions, The Hague and the Hague-Visby Rules, and even of the little used Hamburg Rules, are “too low”, should not forget that all these Conventions have a limitation “per package” and that the highest of the two resulting values will apply. Reportedly about 80% of all Multimodal Transport in the world has a part of transportation by sea and practically all those cargoes are transported in containers.. Under all those Conventions, for the application of the limitation of liability, the amount of declared packages in the container is used. Most probably the average quantity of pieces transported worldwide in a container is well over 100 and taking the “per package” limitation of liability, this would result under the Hague Rules to be 100 times 100 Pound Sterling Gold is 10.000 PSG, which at the quotation of gold in the last months is equal to about US$ 1.950.000. per container. Under Hague-Visby 100 x SDR 666.666 = 100 x US$ 1033,-- = US$ 103.300,-- per container. Under Hamburg Rules 100 x SDR 835 = US$ 129.000,-- per container. In fact the amount of packages per container is irrelevant and the question is: what percentage of the cargo transported in containers in the world has a higher value than US$ 1.033,-- per package, which is the lowest of the 3 rules ? Those that ship more valuable cargoes and do not wish to have a limitation of liability, should in my understanding, declare the value and eventually pay “ad-valorum” freight in order not to burden the whole system with higher costs resulting from higher risk calculations by carriers and their insurers. Unquote. Here I wish to add a few questions to the the eventual readers of this Newsletter: Can anybody show me that my understanding is wrong ? Who can give us an idea in how many percents of cargo-claims, the carrier uses his right of limitation ? Is it true that this is usually the case when special cargoes, such as perfumes or jewels are involved ?  Well, I look forward to receive your opinions

Comparison between limits of liability of the carriers and average values of the cargoes.

*Whatever is higher     * * N/a = not applicable

           
A comparison of these values in US $ in December 2006 shows:
1 SDR= US$1,55 .

Limit per package
USA  COGSA 1936:                                   US$    500.-
Hague Rules 100 pounds gold                 US$19.500,--
Hague-Visby: 666,666 SDR´s is               US $  1.033,--
Hamburg-rules: 835 SDR´s                      US $  1.294,25

Limits per kilo
Hague Rules not applicable
Hague Visby SDR 2,-- = US$ 3,10
Hamburg       SDR 2,50 =US$ 3,90

When a Convention has a limit per package or per kilo, the highest of the resulting values is applied.

C.M.R. SDR 8,33 = us$ 12,91

Average values of cargo transported by different modes:
Road  Euro 1,62 per kilo      = US$ 2,43
Rail     Euro 0,90                  = US$ 1,35
Water transport  Euro 0,80   = US$ 1,20