Current situation arising from Covid-19, developments in Mobility and Transport

One of the main reasons why the Spanish Government advocates maintaining the State of Alarm is to be able to guarantee restrictions on citizens’ mobility, both in and beyond their territory.

At national level, the Ministerial Order TMA/400/2020, of 9 May, which establishes the conditions to be applied in the first phase of the de-escalation of mobility, was approved. In order to guarantee the mobility of the Canary and Balearic Islands by means of Air Transport, it has been decided, among others, to lift the ban on regular commercial operations between islands, to establish a minimum of daily frequencies, always guaranteeing the safety distance, as well as to keep the Directorate General of Civil Aviation (DGAC) informed.

With regard to Railway Transport, either in suburban trains or in any other state-owned service, it has been agreed to gradually increase it until the effective recovery of 100% of its services and lines.

If we refer to the Maritime Transport of the Balearic and Canary Islands, specifically in the Canary Islands:

1) The disembarkation of passengers from RoRo passenger ships that provide regular services between the Peninsula and the Islands is prohibited, with the exception of drivers on board of ro-ro cargoes.

2) The Autonomous Community of the Canary Islands is authorised to lay down conditions for the provision of regular inter-island services or shipping lines.

3) The following vessels and boats may navigate between ports or points on the coast of the same municipality and nearby inhabited islands

– Those of tourist transport of passengers.

– Those devoted to practical trainings and courses.

– Those used for recreational/sports purposes by their owners or in nautical rentals.

If we focus on the Balearic Islands, and conditioned to guarantee health protection measures:

1) Transport on lines between the Peninsula and the Balearic Islands is authorised.

2) The embarkation/disembarkation of passengers and vehicles is permitted on RoRo passenger ships and passenger ships providing regular services on the inter-island maritime lines of the Autonomous Community.

3) Recreational sailing is permitted between points on the coast of the same municipality and nearby uninhabited islands.

On both islands, the above restrictions shall not apply to state ships or cargo ships, or to ships sailing for humanitarian, medical or emergency purposes.

At international level, three Ministerial Orders have been agreed which directly regulate entry to and exit from the country by the different means of transport (Order INT/396/2020, of 8 May, Order INT/409/2020, of 14 May and Order TMA/410/2020, of 14 May), and a fourth additional one (Order SND/403/2020, of 11 May).

Order INT/396/2020, of May 8, extending internal border controls and maintaining limited access, among others, for Spanish citizens and residents in Spain, cross-border workers, persons traveling for exclusively work purposes. It is important to note that these restrictions will not affect the transport of goods. Under the heading “transport of goods” we must also consider the crew members of ships in order to ensure the provision of maritime transport services and fishing activities, and the aviaiton personnel necessary to carry out commercial air transport activities.

The restrictions set out in this order are complementary to those already established at land borders and at the external borders of ports and airports (originating in countries outside the Schengen area).

Order INT/409/2020, of 14 May, extending the criteria for the application of a temporary restriction on non-essential traveling from third countries to the European Union and associated Schengen countries for reasons of public order and health, as a result of the health crisis caused by COVID-19.

Entry shall be denied on grounds of public policy and public health in connection with the health crisis caused by COVID-19 to any third-country citizen, subject to the proposed exceptions which include habitual residents in the European Union, the Schengen associated States or Andorra, cross-border workers or personnel engaged in transport of goods in the course of their work (ship and flight crews). This shall not apply at the land border with Andorra or at the checkpoint of persons with the territory of Gibraltar.

The Order TMA/410/2020, of May 14, which limits entry to aircrafts and passenger ships restrictions on mobility of citizens through designated points of entry with the capacity to respond to public health emergencies of international importance, updated by Order TMA/415/2020 of May 17, which aims to designate the ports and airports that will be enabled as the only point of entry into Spain, for passenger flights from any airport located outside Spanish territory or for passenger ships or passenger vessels and ROROs that provide a regular line service originating in any port outside Spanish territory (provided that the passengers transported are not the drivers of the road vehicles). Specifically, the airports of “Sevilla”, “Menorca”, “Ibiza”, “Lanzarote-César Manrique”, “Fuerteventura”, “Tenerife Sur”, “Alicante-Elche” and “Valencia”, and the ports of Barcelona, Bilbao, Las Palmas de Gran Canaria, Málaga, Palma de Mallorca, Tenerife, Valencia and Vigo will be operational.

These limitations do not apply to State aircrafts or vessels, aircrafts making stopovers for non-commercial purposes, exclusive cargo flights or vessels, or positional, humanitarian, medical or emergency flights or vessels.

Bearing in mind, in any case, the Order SND/403/2020, of May 11, by which all persons coming from abroad will be quarantined for 14 days after their arrival; order that came into force on May 15.

Maritime transport

With regard to the maritime transport sector, there have been abundant Ministerial Orders and recommendations of the Ministry of Transport, Mobility and the Urban Agenda since the State of Alert was decreed on 14 March. Therefore, we have decided to emphasise two Ministerial Orders, Order TMA/419/2020, of 18 May, and Order TMA/374/2020, of 28 April, for their relevance.

If we delve into its content, the Order TMA/419/2020, of 18 May, which updates the measures in general  management of maritime navigation adopted during the state of alarm  to deal with the health crisis caused by the COVID-19 to the de-escalation process. It presents restrictions on the entry of ships into Spanish ports (i) for cruise ships from any port; (ii) for foreign ships or recreational vessels that do not have their port of stay in Spain (with exceptions).

On the other hand, it regulates the management of ballast water and ship sediments, the procedures to be followed for the transfer of ships, whether for repair or maintenance purposes or for sale and purchase, and the transfer of ships between ports. In addition, in its Single Repeal Provision it repeals certain Orders and modifies Order TMA/258/2020, of 19 March, by rewriting the article on titles whose validity is extended and on inspection activities.

On the other hand, Order TMA/374/2020, of 28 April, which establishes the documentation with which the crew members of the vessels may prove their condition in order to facilitate their movement to ensure the provision of maritime transport services, due to the health crisis situation caused by the COVID-19. The order stipulates the necessary documentation to allow changes of crew in Spain and the return to their countries of residence or boarding another vessel calling at a Spanish port. Specifically:

– Certificate of Competence or Seafarers’ Identity Card or Discharge Book

– Employment agreement or letter of appointment. This documentation shall include at least the name of the vessel and its flag, the port where the vessel is located and the estimated date of embarkation/disembarkation.

Likewise, the Ministry of Transport, Mobility and Urban Agenda has published preventive recommendations to be implemented in maritime passenger stations and on board of the ships for the restart of passenger traffic in order to prevent and minimize the risks of possible COVID-19 infections when passenger traffic is re-established.

Maritime Administration Inspection activities / Administrative Certificates

Due to the exceptional situation generated by COVID-19, the Administration has taken action by extending the validity of certain administrative titles and suspending significant part of its inspection activities.

The titles whose validity is extended if they expire during the State of Alarm are: (i) professional cards and certificates issued to seafarers, as provided for in international conventions and national regulations; (ii) certificates and documents issued to ships governed by international instruments of the IMO, ILO and the European Union; (iii) certificates and documents issued to ships and vessels operating services, as provided for in national regulations; (iv) certificates of maritime training issued to seafarers in accordance with the STCW Convention and health regulations; (v) certificates of medical fitness issued to seafarers in accordance with the STCW Convention and national regulations; (vi) certificates of medical fitness issued to seafarers in accordance with the STCW Convention and national regulations; (vii) fitness certificates expired during the State of Alert.

In addition, the conduct of scheduled inspections and surveys by the Maritime Administration, as provided for in the Regulations on Inspection and Certification of Civilian Ships, has been suspended, unless they result from emergency situations, and the conduct of periodic inspections of foreign ships, with the exception of those to (i) ships subject to a report or notification by another Member State; (ii) ships which cannot be identified in the inspection database; (iii) ships which have been involved in a collision, grounding or stranding on their way to port; (iv) ships which have been accused of violating allegedly the provisions in force concerning the discharge of hazardous substances or effluents; (v) ships which have manoeuvred in an erratic or unsafe manner.

News about the State of Alarm in Spain (April 6th, 2020)

On April 4th, the President of the Spanish Government announced his intention to request the Congress of Deputies to agree to the extension of the State of Alarm for at least 15 days more. Therefore the State of Alarm, enacted on March 14th, will be maintained until midnight of April 25th.

His petition seems to have the support of the leaders of the rest of the political forces in the State; nevertheless, the extension will not be made official until it is approved by the Congress of Deputies at the forthcoming plenary session scheduled for April 9th.

However, and as the President Pedro Sánchez has already announced, the extension of the State of Alarm does not necessarily imply the extension of the suspension of non-essential activities, a suspension tackled in our publication of April 2 (RDL 10/2020 of March 29th – Suspension of Non-essential Activities) that, since these restrictive economic measures were made public, has received a lot of criticism and pressure to analyse its possible moderation or suppression. Both on part of the industries that asked to maintain their essential activities in order to prevent the total economy freeze, and the political forces in the country. Therefore, and depending on the decisions made by the Government, these non-essential activities might be reactivated from April 9th. 

As we have seen, during the three weeks of the State of Alarm that we have already undergone in Spain, this situation is having an enormous impact on all social and economic sectors in Spain and, in particular, the sectors of industry, commerce and trade, and a part of the transportation sector have been severely hit by this situation.

 

FISHERIES SECTOR 

The Ministry of Agriculture, Fisheries and Food published Order APA/315/2020 of April 1st in the BOE (Official State Gazette). This Order establishes new criteria for the management of fishing quotas assigned to the Kingdom of Spain in order to optimize their use and modifies certain Ministerial Orders that regulate these concepts since 2014.  

This Order is mainly applicable to the stocks subject to the total allowable catches and quotas in the peninsula waters of the Atlantic Ocean. 

These are the main measures that have been taken: 

  • Flexibilization of the transmissions of fishing possibilities (quotas) for the vessels with individual distribution, thus allowing a better adaptation to the fisheries within the previously established distribution, that is to say, that the vessels themselves through the transmissions regulate the distribution of quotas. Those operating in the Bay of Biscay and the Northwest, Gulf of Cadiz and those trawling in Portuguese waters. 
  • Establishment of a mechanism for the annual optimisation of the boilermakers’ quotas. As of October 1st, vessels that have already exhausted their quotas will be able to continue fishing and using the quotas that will be left over for other vessels, thus guaranteeing the full use of the quotas allocated.
  • Establishment of procedures for the management of quotas allocated to Spain but which, until now, have mostly not been established. 
  • Establishment of criteria for the annual allocation of quotas not yet allocated in Spain, (blue whiting or horse mackerel in EU waters and swordfish in the North Atlantic). 
  • Establishment of uniform procedures for the cessation of activity and the closure of fisheries in cases where quotas have been exhausted. 
  • Establishment of management measures for recreational fisheries for sea bream in the Cantabrian Sea. 

The Order APA/315/2020, of April 1st, reinforces Spain’s commitment to sustainable and responsible fisheries management and shows progress in the regulation regarding the fishing quotas assigned to Spain.  

 

LAND TRANSPORT

Many measures are being taken with regard to land transport as it is an essential resource to secure the local supply chain, above all on local and national level. 

Administrations are beginning to ensure the protection of truck carriers by distributing personal protective equipment by enabling filling stations and providing places for weekly rest of at least 24 hours. 

Likewise, the National Road Transport Committee communicated to the Ministry of Transport its commitment to maintain transport and guarantee the supply of medicines in hospitals during the Easter weeks. 

For its part, rail transport is also adapting to this situation and some initiatives are already beginning to be made public, such as adapting trains of the Operator Renfe for the transport of patients affected by COVID-19 between different autonomous communities. 

 

AIR TRANSPORT

The Spanish airports are adapting to the COVID-19, among other forms, by enabling their esplanades to offer parking to the planes that, due to the evident reduction of flights, are not operating and therefore have to remain on the ground. 

Since the health emergency does not only affect Spain but it is a global phenomenon, many flights and many regular lines operated by air operators will be suspended for an undefined period of time.

 

MARITIME TRANSPORTATION

With regard to maritime transport, it is important to highlight the change of direction that the maritime industry is taking in order to face the pandemic. 

Many shipping companies are temporarily suspending some of their usual shipping lines, as well as adapting their rotations to the progressive increase in Asian imports to the demanding European continent. This increase is materialized in the fact that rates from the Mediterranean to the Far East have increased by 42.4% and in the oil price crash. 

Although there are shipping companies that have decided to suspend temporary their services with stopovers in Spanish ports, there are still sufficient services to guarantee the supply chain. 

For its part, the Spanish ports have been taking measures to mitigate the effects that might arise from abandonment of goods and containers in the ports (in many cases forced). Let us take as an example the Port of Barcelona that has implemented the so called “flat rate” regarding the cost resulting from storage of the containers in the ports with the aim to mitigate the economic impact that COVID-19 is producing in the importing companies. 

This measure adopted by the Port of Barcelona shall be applicable to the import containers located in the container terminals of the enclave between March 31st and April 13th (for the time being). According the experts’ estimation, the cost of storage of the containers will be reduced by 65 % as a result of these measures.

As we can observe, all sectors are renewing and readapting themselves in this uncertain and unknown situation we are just undergoing in order to guarantee the supply chain of products and materials, securing so that basic needs of the citizens are met and that the industries, to the maximum possible extent, continue operating.

RDL 10/2020, of March 29th, Suspension of Non-essential Activities

The recent Royal Decree Law nº 10/2020, of March 29th  orders the suspension of companies and non-essential works as a consequence of the declaration of the state of alarm issued on March 14th, an order that certainly affects both the economy and society in a global way.  

This suspension will last 11 days, from March 30th to April 9th, both inclusive, establishing that March 30th is considered a day of adaptation to enable the closure of all non-essential activities that shall be suspended in the following days. During this period the remuneration of the employees will be secured by means of the “recoverable paid leave”, as approved by the Government on March 29th. 

The problem is that the classification of activities which are considered essential and those which are not has caused controversy the first day of the shutdown. Consequently, the Government issued the Order SND/307/2020, of March 30th, which establishes the imperative criteria for application of the Royal Decree-Law 10/2020, of March 29th, and the model of statement of responsibility which allows the necessary journeys between the worker’s residence and the workplace, which supplements the RDL but without clarifying all the questions and doubts arising from the very same RDL. 

Let us recall that the Royal Decree law 463/2020, of March 14th, by means of which the state of alarm was declared in order to manage the health crisis situation caused by COVID-19, states that the supply of the population must be guaranteed at all times, by facilitating and ensuring the transport of goods throughout the national territory. On this basis, it should be noted that land transport companies and those companies related to maritime and air traffic pursuing or enabling this aim (without being this a limiting list), as well as the facilities providing these services shall guarantee their activity throughout the whole period of the state of alarm. In fact, Mrs. María José Rallo, the Secretary General for Transport, declared that transport is obviously included within the essential activities, and State Ports has initiated an information campaign to emphasize the functioning of the state port system to guarantee the distribution of essential items and goods during the COVID-19 crisis. 

Abiding to the sixth point of the annex of the RDL nº 10/2020, states: “The recoverable paid leave regulated by this royal decree-law is not applicable to the following employees: 6. Those who carry out transport services, both for people and goods, which continue to be carried out since the declaration of the state of alarm, as well as those who must ensure the maintenance of the means used for this purpose, under the protection of the regulations approved by the competent authority and the competent authorities delegated since the declaration of the state of alarm”. 

Similarly, article 4 of the RDL 10/2020 specifies what shall be understood as the minimum indispensable activity: “The companies that must apply the recoverable paid leave regulated in this article may, if necessary, establish the minimum number of staff or work shifts that are strictly indispensable in order to maintain the essential activity. This activity and this minimum number of staff or shifts shall be based on the activity carried out during an ordinary weekend or on public holidays”.

Therefore, in accordance with the sixth point of the annex of the RDL nº 10/2020 (which regulates the non-application of the paid leaves regulated in the present Royal Decree-Law) the port services are considered essential services (art. 18 of the Royal Decree, of March 14th), being some of them even mandatory for the vessels when in ports. Moreover, we must understand that all the State Ports of General Interest are strategic infrastructures by their very definition, some of them also being critical infrastructures. All of them are guarantors of operation of services that are defined as essential and must therefore continue to operate, guaranteeing supply by facilitating the flow of goods in them. 

The same interpretation shall be applicable to the companies that provide their services there: 

 – The commercial procurement service.

– The commercial supply service.

– The ship agency service.

– The commercial inter-port transport service.

– Port handling operations (dockers, etc.).

– The port passenger service.

– Mooring and unmooring service.

– The port towing service.

– The port consignment service.

– General services provided directly by the Port Authority or indirectly by third parties.

– The rest of the commercial activities related to the port activities, such as freight forwarders, customs agents, damage commissioners, container depots, etc.

With regard to road transport of goods, it is also asserted as essential and its workers can continue with their activity under the new exceptions to the compliance with driving and rest times implemented between March 29th and April 12th, both inclusive (Resolution of March 26th, 2020, of the Directorate General for Land Transport), and with the acceleration of driving facilitated by the so called cross-border “green lanes”. 

We should point out that transport activities remain fully operative as long as these are related to other essential economic activities (distribution of food and healthcare products, among others). What is more, the RLD n. 10/2020 is only applicable to the salaried employees, which means that the self-employed remain active except for those performing services for companies that were, on March 14th, classifies as no-essential and remain closed: restaurants and hospitality companies, sports companies, among others. 

Extension of the State of Alarm in Spain

The Congress of Deputies, at the plenary session on March 25, approved the extension of the State of Alarm for another 15 days, among other things. 

This means that all the measures, orders and decisions that have been implemented up to now and have been extended during the period of the State of Alarm shall be extended, a priori, for another 15 calendar days. In other words, the State of Alarm declared by the Royal Decree 463/2020 of 14th of March will last at least until midnight on April 11.

In fact, article 116 of the Spanish Constitution regulates the State of Alarm and establishes that it may be adopted by the Government for a maximum period of 15 calendar days. Yet it is precisely the article 116 of the Spanish Constitution that, in spite of limiting the action of the Government to declare the State of Alarm for a total period of 15 calendar days, in its second paragraph adds the possibility that the Congress of Deputies may extend such period, with unspecified time limitation. 

That is, as long as the Congress of Deputies approves the extension of the period of the State of Alarm the Constitution does not limit the duration of the period. Therefore, this could be prolonged if necessary.

Last measures adopted by the Spanish Government are:

LAND BORDER.- 

As we have already mentioned, the logical and direct consequence of the extension of the State of Alarm is that many of the Orders and Decisions that had been taken during the first two weeks of the State of Alarm shall also be extended during this second fortnight.

An example of this is the Order INT/283/2020, of 25 March, extending internal land border controls from 00:00 on 27 March 2020 to 24:00 on 11 April 2020. In other words, only the following persons will be allowed to enter the national territory by land: 

(a) Spanish citizens. 

(b) Residents of Spain. 

(c) Residents of other Member States or Schengen Associated States on their way to their place of residence.

(d) Cross-border workers. 

(e) Health or elderly care professionals on their way to work. 

(f) Those that provide documentary evidence of force majeure or necessity.

Exempt from these restrictions are foreign personnel accredited as members of diplomatic missions, consular offices and international organisations located in Spain, provided that they are travelling in connection with the performance of their official duties. Similarly, and in order to ensure the continuity of economic activity and to preserve the supply chain, these measures are not applicable to the transport of goods.

Another example is Order TMA/286/2020, of 25 March, which extends the ban on entry of passenger ships from the Italian Republic and cruise ships of any origin, on Spanish ports to limit the spread of COVID-19, from 00:00 hours on 27 March 2020 to 23:59 hours on 9 April 2020.

WORK.- 

At the same plenary meeting the Council of Deputies ratified the Royal Decree-Law, by means of which the objective dismissal for absenteeism was repealed (article 52.d of the Workers’ Statutes), which allowed dismissal for justified medical absences.

The main objective of the Minister of Health with the repeal of this article is to preserve the health of the workers, avoiding that they attend work while sick as they fear to be dismissed. Moreover, the Minister stresses that taking care of oneself, in addition to personal well-being, also guarantees the health of others. 

LAND TRANSPORT.- 

On the other hand, and in relation to the transport sector, on March 26th the Government enacted the Ministerial Order INT/284/2020 modifying the regulation that had been adopted during the State of Alarm for the management of traffic and circulation of motor vehicles. 

Article 1.1 states that the Minister of the Interior may agree to close to traffic roads or sections of roads for reasons of public health, safety or traffic flow, or to restrict access to certain vehicles on these roads for the same reasons. Furthermore, the paragraph 2 provides that, in the case of road closures or restrictions on the movement of certain vehicles, those intended for certain activities considered essential to ensure the supply of products and the provision of essential services to the population shall be exempted.

In particular, the vehicles considered essential to ensure the supply of essential goods and services are the following: 

a) Those of transport and health care, both public and private; those of the Security Forces and Corps, those of civil protection and rescue and those of fire extinction. 

b) Those transporting maintenance personnel or repair technicians for health facilities or equipment 

c) Those for the distribution of medicines and medical equipment. 

d) Those for the distribution of food. 

e) Those of the Armed Forces. 

f) Those for road assistance. 

g) Those of the road maintenance and conservation services. 

h) Those for the collection of solid urban waste. 

i) Those intended for the transport of melting materials. 

j) Those intended for the transport of fuels. 

k) Those intended for the production, marketing, processing and distribution of agricultural, livestock and fisheries products and their inputs; for the production, distribution, rental and repair of equipment and machinery for agriculture, fisheries, livestock farming and their associated industry, and for the transport and treatment of agricultural, livestock and fisheries waste and by-products and those of the food industry. 

l) Those intended for the carriage of perishable goods, understood as those set out in Annex 3 to the International Agreement on the Carriage of Perishable Foodstuffs (ATP) as well as fresh fruit and vegetables, in vehicles which meet the definitions and standards expressed in Annex 1 to the ATP. In any case, perishable goods must account for at least half the payload capacity of the vehicle or occupy half the payload volume of the vehicle. 

m) Those intended for the manufacture and distribution of cleaning and hygiene products. 

n) Those of the Sociedad Estatal Correos y Telégrafos, S.A. 

ñ) Funeral services. 

o) Those used by private security companies for the provision of security transport services, response to alarms, patrols or discontinuous surveillance, and those that are necessary for the performance of security services to guarantee essential services and supply the population.

p) Other vehicles that, if not included among the above, the agents in charge of traffic control and discipline consider, in each specific case, that they contribute to guaranteeing the supply of goods or the provision of essential services to the population.

Therefore, the circulation of these vehicles will be guaranteed during the entire State of Alarm, without limitation to restrictions, both existing and future.

INCOTERMS® 2020

What are Incoterms®?

The increase in the volume and complexity of the sales of national and international merchandise has generated a growth in the misunderstandings and litigation that can always arise between the parts of a contract; with greater reason when the two main parts of a contract, seller and buyer, are located in different countries. 

Already in 1936, and in order to facilitate international trade, Incoterms® were born from the hand of the International Chamber of Commerce (ICC). Rules that, applied to a contract of sale, help to define the obligations and responsibilities that each of the parties assumes in the business they jointly undertake. So, the Incoterms® are not a supranational legal rule, but Lex Mercatoria.

When choosing a rule adjusted to our business needs, there are many more aspects that we should take into account. 

Among others:

  • The means of transport to be used to send the goods from the seller’s premises to those of the buyer.
  • The nature of the merchandise that is the object of the sale, as it is not the same, if we have to urgently deliver perishable merchandise, send bulk merchandise on ships or carry out a palletized truck transport, among other cases.
  • The means of payment agreed between the parties. In this case, the situation will be conditioned on having to make the payment by means of documentary credit with banking entities.
  • The buyer’s own wishes. In fact, there is more and more competition between companies so, in many cases, the seller is forced to make the difference from their competitors.
  • The situation of the countries of origin and destination of the merchandise, since it may happen that we are facing countries with protectionist tariff policies or unstable legal situations or policies.

 

Incoterms® 2020

This year the last version of these rules has been finalized, which is born under the name “Incoterms® 2020” and will enter into force on January 1, 2020.

The rules are classified in the different groups that we detail below:

GROUP

INCOTERM®

DESCRIPTION

Group EEXWEx Works.
Group FFCAFree Carrier
FASFree Alongshide Ship
FOBFree on Board
Group CCFRCost and Freight
CIFCost, Insurance and Freight
CPTCarriage Paid to
CIPCarriage and Insurance paid to 
Group DDPUDelivery at Place Unloaded
DAPDelivery at place
DDPDelivery Duty Paid 

 

Among the novelties presented by this new version, the first and probably most striking is the redenomination of the rule DAT (Delivered At Terminal) that now happens to be called DPU (Delivered at Place Unloaded). This change of acronyms is a simple redenomination, since the obligations and functions of both terms remain exactly the same.

The term DPU is classified within the group of multipurpose terms, meaning that it is an Incoterm® suitable for any type of contracted transport (Road, road, air or sea transport), and is the only Incoterm® that provides that the delivery will only be carry out once the merchandise has been unloaded from the means of transport in which it has been transported. The new nomenclature that has been given to this term only evidences the fact that the merchandise will be delivered unloaded, unlike the rest of the Incoterms® in which the merchandise will be made available to the buyer at the port of destination , in the place designated by the parties.

Secondly, we must mention that in this new version of the Incoterms® when applying the Rule FCA (Free Carrier), it gives us the option, only in case that the main international transport contracted is maritime transport, that the buyer request the carrier or maritime carrier to issue a Bill of Lading on behalf of the seller, wherein the clause “on board” is included, which will record that the merchandise has been loaded on board the ship. 

The introduction of this clause in the Bill of Lading or Bill of Lading will facilitate the payment made by means of documentary credit, as mentioned above.

Thirdly, in this new version it is explained precisely which party will be responsible for carrying out customs procedures, assuming the costs and risks of that phase. The responsibility will be assumed by those who are obliged to transport the goods to the designated place of delivery. Also, for the first time, the dispatch of goods in transit is included.

Finally, we want to talk about what we consider to be the most important difference that this new version of the Incoterms® 2020 rules has brought. This are the different coverages for the merchandise insurance, during their international transport under the terms CIP (Carriage and Insurance Paid to) and CIF (Cost, Insurance and Freight).

While in the CIF term the seller will contract in favor of the buyer a transport insurance with a minimum coverage of clause C of the English Institute Cargo Clauses, which does not vary from the previous Incoterms® version 2010, in the CIP term, the seller will contract for the buyer the transport insurance with a maximum coverage according to clause A of the English Institute Cargo Clauses. 

Difference between CIP and CIF that is justified because CIF is commonly used for the maritime transport of bulk goods (raw materials, scrap, minerals, etc.) whose price per kilo is very low. Therefore, if insurance with maximum coverage is demanded, the policy would become more expensive, which would damage the negotiation margin of the sellers with their potential buyers.

In any case, we must not forget that the rules are part of the ancestral business of buying and selling merchandise, and will be subject to the modifications that the parties consider appropriate and determined in their contracts, within the freedom that national and international trade and rules grant them.  

Cyber disruption in marine

Yesterday, one of our partners, Verónica Meana, took part in a practical conference organized by AON under the title “CYBER DISRUPTION IN MARINE” which was held in AON’s head office in Torre de Iberdrola in Bilbao. The conference was devoted to learning about and to sharing the risks and consequences that cyberattacks constitute in transportation and industry. 

Verónica had the opportunity to share the discussion panel with Max Bobys, Chris Bhatt and Nannette Wong, and in her presentation tackled administrative and civil responsibilities within transportation and logistics in the context of cyber threat, referring in particular to the maritime transportation sector and its agents. 

AIYON Abogados would like to thank AON for the opportunity we were given to participate in this event, which was greatly insightful in terms of better understanding of the new and future risks that the transportation sector is facing, the ways to deal with them and the insurance options available in the market of hull and machinery, civil liability and P&I insurance. 

The direct action of the carrier endorsed by The Supreme Court

In its Judgement nº 248/2019 dated 6th May ,  the Spanish Supreme Court has confirmed the right of the effective carrier to take direct action against the sender in case the freight for the transport has not been paid. The Supreme Court had previously ruled in favour of this direct action in its Judgement Nº 664/2017 of 24th November, after several conflicting second instance decisions (for example, of the Court of Appeals of Madrid, Zaragoza, Bilbao or Barcelona among others).

This way, the Supreme Court endorses for the second time one of the latest amendments related to the Spanish Land Transport Regime Act (LOTT) included in the Act 9/2013 of 4th July,   which in its Additional Provision Six establishes the following: “Direct legal action against the main sender in the event of intermediation. In the event of intermediation in a land transportation contract, the effective carrier can take a direct action for the unpaid part, against the principal sender and everyone who, when applicable, preceded them in the subcontracting chain, in case of non-payment of the freight for the transport by the contracting party, except in the case stipulated in article 227.8 of the restated text of the Public Sector Contracts Act, approved by Royal Legislative Decree  3/2011, of 14th November.” 

The Additional Provision Six does not limit this direct action to the sender who has not paid the contracted services. This direct action exists regardless of the relations established between the original parties to the contract and the effective carrier is entitled to claim the price of the transport not only against the main sender but also against the rest of the intervening parties (intermediaries) in the transport chain.      

The Supreme Court concludes in both judgments that: “The essential novelty that the amendment of the Act introduces is that the direct action can be exercised by the effective carrier regardless of whether the defendant (the sender or an intermediate subcontractor) has paid or not the price of the transport to his or her contracting party. In other words, The Additional Provision Six “LOTT” does not limit the exercise of the direct action to the case that the sender does not pay his contracting party. This direct action of the effective carrier exists even if the sender has paid its contractual carrier.” These clarifications are important and need to be taken into consideration since,  initially, the direct action in land transportation was assimilated to the direct action in a work contract set forth in article 1597 of the Civil Code (which was based in the concept of unjust enrichment) whereas the guarantee established in the Additional Provision Six of the “LOTT” has a broader scope and, undoubtedly, the right of effective carriers is protected in a more substantial way by interpreting that the purpose of the Act to protect the weakest part of the transport chain, i.e., the effective carrier.  

Therefore, although there can be no doubt that the position of the effective carrier remains protected by the Act and the Supreme Court interpretation of the same, the sender is placed in a complicated situation as, even if he complies with this obligation to pay the freight, he may still be involved in a third-party claim (actual carrier)  for the amounts already paid. If the sender were compelled to make double payment, he would have a recourse action against his contractual carrier and could demand the return of the amount payed to the effective carrier.  To protect the sender from such situation and to minimize this risk would to prohibit the contractual carrier to subcontract. In fact, the aforementioned 2017 Supreme Court Judgement advises the sender to have a control, insofar as it is possible, over this phenomenon, the risks of which were  already analyzed in our article dated July 10th, 2019, “A competitive but also a secure road transportation”.

Regarding the potential application of this provision to international land transport subject to the CMR Convention, there are contradictory positions. On one hand, some experts argue that the direct action should remain excluded from international transport under the above-mentioned convention because the convention does not include such possibility. On the other hand, other experts consider that the direct action should apply because the “LOTT” complies with the CMR Convention and because its text does not establish the geographical scope of application of the referred action. 

 

A competitive but also a secure road transportation

We received a new case in our law firm. Our good clients request that we protect their interests in a case of cargo that was stolen during a road transportation between Spain and Italy, a contract that was agreed under the terms of the CMR Convention (Convention relative au contrat de transport international de Marchandise par Route, Geneva 1956).

Once we were acquainted with the details, we learned that several individuals had impersonated the identity of a Spanish freight forwarding company, as well as that of its manager, with the aim to conclude several business agreements by sending emails directly to potential Spanish shippers and offering them budget-friendly transportation from Italy. To our surprise, this plan involved phone conversations in which the fraudsters used the identity of real people, the issuance of false documents using names of real existing companies, the goods collection by the fraudsters themselves in broad daylight at the concerted warehouses, and many other circumstances fitting into an elaborated thriller.

This is not an isolated case. In fact, theft of goods transported by road by means of diverse subterfuges is a serious and a live issue given its high economic impact in Spain and in the rest of the European Union. This reality was noted by various national and international organizations and associations, and has been echoed by the international association TAPA – Transported Asset Protection Association – which has denounced that the resulting number of thefts of goods in 2018 is the highest ever recorded since its foundation 20 years ago and it continues increasing in 2019. Moreover, they point out that the crimes they record in their system represent only a part of the market reality.

All this requires reflecting on the risky situations and the lack of guarantees arising during road transportation, and particularly in international transportation, due to the current dynamics pursued in contracting and subcontracting, among other circumstances. It is a common practice to subcontract the same road transportation in an unlimited way which brings forth a creation of “a chain of subcontractors” which in many cases affects the quality of the service and in the worst cases goods are damaged or stolen.

It is quite frequently a case that an export/import company decides to contract a road transport and for that contracts a reputable carrier. From this very first contact between the two entities to the ultimate and effective realization of the transportation by a professional carrier a chain of subcontractors of the same transportation might be created, a fact that might be unknown to the shipper. At least, of course, until damages occur, and liability is claimed. And it is that the contracting carrier or the first carrier, due to internal organization or due to the lack of its own fleet, can subcontract the transportation agreed with the loader to another carrier that, at the same time, can choose to subcontract it to a third party and so on until a supply chain is crated, a chain which ends in the moment that the very last and effective carrier concludes the agreed transportation. This effective carrier might be located in the country where the business was originally agreed as well as in any other country. When a transportation contract is developed between the shipper/contracting party and the first carrier, it is common to agree a set of conditions and requirements but, when the realization of the transportation moves away from the sphere of the two parties that initially agreed it and it is forwarded to the subcontracted third parties, the conditions that were agreed originally in many occasions are not respected and consequently quality and guarantees are lost (lack of regulatory certifications and permits, non-compliance with the established hours of rest, lack of a valid transport insurance, lack of an insurance for the cargo, insufficient insurance coverages, etc. ).

In order to control this situation, and in particular the problematics presented here, that is, the continued growth of thefts during transportation, it should be seriously considered to implement greater control of road transportation from the moment of its contracting to its conclusion. This control could comprise of limiting the number of accepted subcontracts or by directly prohibiting them to the first carrier, requiring compliance with the initially agreed guarantees from the subsequent subcontracted carriers, establishing verifications of safety in case of subcontracting unknown carriers or requesting the safety standards in the modes of transport, among other options. We should remember that once damage has occurred the circumstances of each transportation and its agents will be scrutinized by the affected parties and their insurers. The result of this analysis might place the carriers and their insurance companies in a delicate situation if, in case of an intent or a serious negligence, limitations of the carrier’s liability exposed in the CMR Convention or in the Spanish Law 15/2009 Contract of Transportation of Goods cannot be applied.

Nowadays, the struggle between cost and quality is part of the reality of national and international road transportation. From our law firm, we urge that shippers and carriers focus on searching for the right balance when establishing a competitive and, at the same time, secure business framework.

WISTA Spain Annual Meeting – 2019 – “Bilbao in Evolution”

On 26th and 27th of April, WISTA Spain annual meeting was held in the Maritime Museum (Museo Marítimo) in Bilbao and was cosponsored by our firm. The event was organized by the WISTA associates in Bilbao, Marta Prado, the chair of the panel discussion on 26th; Itsaso Ibáñez, Carolina Ibáñez and the partner of our Bilbao office, Zuberoa Elorriaga.

As planned, the event under the title Bilbao in Evolution: New Trends in Shipping and Tradingtook place on Friday. The meeting was divided into three thematic groups, two in the morning with various presentations under the heading “Fishing Industry, Insurance and its Evolution” and “Logistics, Transportation and Supply Chain”; and one in the afternoon consisting of a very interactive panel discussion called “Development and Port Challenges in the XXIst Century”, all this with the participation and the great performance of Dr. Olga Fotinopoulos – Full Professor of Laboru Law and Social Welfare Law at the University of the Basque Country, Mr. Borja Alonso Olano – Director of the Legal and Sustainability Department of Albacora S.A., Mrs. Beate Soia – Account Executive of March JLT, Marine Insurance & Claims, Mrs. Iratxe García Gil – Director of Organization and Corporate Development in IVL/LEE (Basque Institute of Mobility and Sustainability), Mrs. Sonia García Díaz – Managing Director in Dagase, President of Asetravi ( Business Association of Transport of Biscay), Mrs. Nerea García Núñez – Regional Supply Chain Manager in Guardian Glass Automotive – Europe, Mrs. Inmaculada Ugarteche Maturana – Director of UniportBilbao – Port Community, Mrs. Elvira Gallego Uribe – General Manager in CPS Iberian Bilbao Terminal, Mrs. Ana Santiago G-Bretón – CEO in SISTEPLANT and Mrs. Sira Aranguren Lozano – Managing Director in SERGUSA and President of the Official Association of the Customs Agents in Bilbao.

Out of the present authorities it is necessary to stress the support received from Mrs. Arantxa Tapia, Minister for Economic Development and Competitiveness of the Basque Government, who also participated in the event, as well as the attendance of the Director of the Merchant Navy, Mr. Benito Núñez, the Harbour Master of Bilbao Mr. Carlos García, the Harbour Master of Pasaia Mr. Josu Gotzon Bilbao and Mr. Carlos Alzaga of the Bilbao Port Authority, among others.

From AIYON Abogados we would like to congratulate all the organizers and speakers on the excellent work done!