In my law school days at the University of Delhi, there was a buzz around a “newly introduced” optional paper in the 5th semester. But the subject did not have too many takers. There was little understanding of the subject amongst students and only a hurriedly compiled photocopy of study material was available. This “new subject” was titled “international trade laws”. I opted for it out of curiosity, but frankly, a few initial lectures were not encouraging. They presented a very dry picture of an area of trade and law, which in a few years’ time totally dazzled me.
The instance highlights the relatively late awakening of the Indian legal fraternity to the emergence of freight forwarding, and international transportation of goods as a significant business with huge potential.
A major positive shift in legal awakening to this industry in India came in 1993 with passage of the Multimodal Transportation of Goods Act (“MMTG Act”). The concept of door-to-door delivery, which is basically what multi model transportation is all about, was already settling down in international trade but was not so much in vogue in India. In this context, the Government of India enacted the MMTG Act based on the UNCTAD/ICC rules which had gained widespread acceptance globally. Before this Act, the laws on freight forwarding and logistics were scattered over a multitude of statutes, such as the ‘Carriers Act 1865’, ‘Carriage by Air Act 1972’, ‘Carriage of Goods by Sea Act 1925’, ‘Merchant Shipping Act 1958’, ‘Marine Insurance Act 1963’, ‘Major Port Trusts Act, 1963’ etc.
The MMTG Act for the first time seriously attempted to identify, define and consolidate all major standard terms of freight forwarding, logistics and cross border sea and air transportation to and from India. Also, a new registration system for Multimodal Transport Operators (“MTO’s”) was enforced o carry on Multimodal Transportation business. The Act overall provided the much needed clarity to professionals and industry insiders alike.
Today, the freight forwarding and logistics industry, employ around 8-10 million people in 150 countries. This industry also has some of the cleanest and most transparent practices of conducting business. In India, this industry is growing even faster compared to rest of the world. India spends over 14% of its GDP on logistics and transportation compared to less than 8% by other developing countries. All in all, the logistics market in India is expected to be worth US$ 300 billion by 2020.With 12 international airports existing and government providing a major policy thrust to air connectivity, a coastline of over 7,000 km, 13 major and 10 intermediate sea ports existing, new deep sea ports planned on both eastern and western coasts, and dedicated rail and road freight corridors coming up, the core segments of this industry in India will only get better in the years to come. Further, ‘e-commerce retail logistics’ alone, as one of many new emerging trade areas, is expected to exceed US$ 36 billion in trade by 2020. Also, after ‘efreight’ becomes fully operational in India, which will establish a paper free and transparent air cargo supply chain, the clean business tag to this industry will get a further boost.
To a legal professional, this industry presents some of the most cutting edge challenges and opportunities. The most critical aspect of legal rules of this industry has been to determine the respective liabilities and obligations of contracting parties in a case of damage or loss to cargo. As the basic model of this industry involves multiple parties connected through contracts, valuable and heavy cargo being moved by various modes viz. sea, land and air, across the globe, the modalities of determining cargo liability often give rise to contradictory claims, disputes and litigations.
Almost the entire regulatory set-up of this industry is aligned to major international conventions, such as Warsaw Convention (signed in 1929, amended in 1955 and 1971) and Montreal Conventions of 1999, both relating to international carriage by air, Hague–Visby Rules on international carriage of goods by sea (an updated version of the original Hague Rules drafted in Brussels in 1924.). India ratified the majority of these conventions and aligned its domestic sea and air transport laws with them. The “International Federation of Freight Forwarders Associations” (“FIATA”), founded in Vienna in 1926, a nongovernmental representative body ofover40,000 forwarding and logistics firms, adopted the international convention rules to frame its own “model rules” which today provides a solid basis to determine contractual liability in forwarding and transportation contracts.
With the passage of the ‘Carriage by Road Act 2007’repealing the ‘Carriers Act of 1865’, more clarity came into the legal aspects of inland logistics operations including road transport damages and liabilities. More amendments to principle laws on this industry are in the pipeline which will further streamline legal aspects on determining liability and damages. The much awaited ‘Constitution (122nd amendment) Bill 2014’popularly called the ‘Goods and Services Tax Bill or ‘GST Bill’, isalso expected to address a critical aspect of this business, namely, value added tax regime.
Legal professionals in this industry need to keep themselves updated with the most current and relevant rules in this fascinating area and strive to provide the much-needed support as a business solution provider to the industry in order to address the critical issues of liability claims and contractual disputes
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