Logistics: Bite-Size Insights - February 2023

In this latest edition of Logistics: Bite-Size Insights, we explore an upcoming review of the liability to pay excise duty under the CMR, provide an update from Mexico, consider new requirements for consignors of dangerous goods and provide a reminder of the application of the no set-off rule in freight contracts.

Welcome to the latest edition of Logistics: Bite-Size Insights, where we explore an upcoming review of the liability to pay excise duty under the CMR, provide an update from Mexico, consider new requirements for consignors of dangerous goods and provide a reminder of the application of the no set-off rule in freight contracts.

One to watch – Supreme Court to consider 45 year old judgment on payment of excise duty under the CMR

On 28 February 2023, in the case of JTI POLSKA Sp. Z o.o. and others v Jakubowski and others, the Supreme Court will be reviewing the House of Lords’ judgment in Buchanan v Babco [1978] regarding the liability to pay excise duty under the CMR.

This longstanding judgment has been of considerable significance to those involved in the international road carriage of tobacco products, spirits and any other cargos which attract high rates of excise duty.

In Buchanan v Babco, the House of Lords adopted a wide interpretation of Article 23 of the CMR and held that the carrier had to pay the cargo owner the full value of the excise duty in addition to the limit of liability under the CMR.

The Supreme Court’s decision on both the question of damages recoverable, and of whether it is appropriate to disturb such a longstanding decision will be keenly anticipated.

Contacts: Chris Chatfield, Sara Askew

Mexico trucking update

The Mexico trucking industry continues to see strong growth as the effects of the COVID-19 pandemic wane and trade with the US returns to record high levels. Mexico consistently ranks as one the United States’ top three trading partners (together with Canada and China), and the country is beginning to see benefits from the United States-Mexico-Canada Agreement (USMCA) which came into effect on 1 July 2020 (replacing NAFTA). The trucking industry underpins two-way trade, which topped US$779 billion in 2022, making up 81% of movements of domestic cargo and 84% of movements of cargo between Mexico and the US.

However, security issues continue to plague Mexico and cargo truck hijacking is a serious problem. Truck hijacking was on the rise in 2022, with government figures showing that there were 3717 hijackings in the first six months of 2022, up 4.9% compared to the same period in 2021. The use of violence increased too, with robberies or hijackings with violence coming to 87.2%.

The majority of incidents are happening in the centre of the country, far from the border with the US. 85% of hijackings in the first six months of 2022 occurred in the State of Mexico, Puebla or Michoacan. The State of Mexico, which surrounds the country’s megacity capital, Mexico City, was responsible for 48% of hijackings alone. This has not gone unnoticed by the government, which is facing pressure from industry groups to deploy Mexico’s National Guard to protect vital freight corridors. A recent cyber attack affecting Mexico’s transportation ministry that resulted in it not issuing new permits, licence plates or driver’s licences for commercial truck operators during the latter months of 2022 did not help matters, leading to further pressure on the trucking industry in the country.

As government security strategy struggles to cope with this threat, those involved in the freight and logistics market in Mexico would be well advised to review their risk management and security measures and procedures as well as liaise with their insurers on scope of cover, in particular preventative measures that are conditions to cover.

Contacts: George Phillips, Antonio Mendez, Michael Hennessy

Consignors beware – transportation of dangerous goods by road

Parties who are currently only acting as consignors of dangerous goods – because they send dangerous goods to others or because they are consignors under the terms of a contract - must, from 1 January 2023, have appointed a Dangerous Goods Safety Adviser (DGSA).

It is not uncommon for vehicles carrying goods to be involved in incidents in which their cargos spill onto the road. However, should a vehicle transporting dangerous goods be involved, the effects could be catastrophic for individuals, property and/or for the environment.

This was one of the driving forces behind the existing Agreement Concerning the International Carriage of Dangerous Goods by Road (ADR) Regulations requiring a DGSA for businesses selling and transporting dangerous goods by road. From 1 January 2023, however, the Regulations will also require consignors to appoint a DGSA.

Contact: George Emery

The no-set off rule – where are we?

In 2022, the English Court re-affirmed the narrow application of the set-off rule and the narrow definition of the term ‘freight’.

In a claim for recovery of sums due under invoices relating to the carriage of goods by road, the court held that the governing contract was more akin to a hire contract than one for freight. The no set-off rule was therefore not applicable to the defendant’s counterclaim.

Under English law, where a party makes a claim for a debt, which is responded to with a counterclaim, both claims would usually be dealt at the same time - especially in circumstances when the claims arise out of the same contract. In these circumstances, the defendant would seek to reduce the claimant’s claim by off-setting it with the counterclaim.

However, there is an exception to the rule of set-off which arises out of freight contracts. In the case of Aries Tanker Corp v Total Transport Ltd [1977], the court held that a party will not be permitted to withhold a freight payment even if it has a separate claim arising out of the same carriage.

In order to take advantage of the no set-off rule, it is recommended that a contract for carriage clearly states the term ‘freight’ in order to avoid the potential for a dispute on the proper construction of the contract.

Contacts: Shaan Burton, Eleonore De Montule