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Shippers and forwarders have welcomed UN adoption of a “landmark” convention allowing the sale of goods in transit, providing a key tool for helping avoid unexpected outbreaks of chaos in global supply chains.
The UN General Assembly rubber-stamped the Convention on Negotiable Cargo Documents (NCD) yesterday, opening it for signature – signatories will be bound by it once they have been joined by 10 or more member states.
Responding to the news, director of the Global Shippers Forum James Hookham told The Loadstar: “This is a very practical move for global shippers using road or rail services to reach markets. It provides a single global legal framework for selling or transferring ownership of goods during their transport in all modes, including by sea.
“It will also help smaller shippers get access to trade credit from banks because the bank can use NCDs as collateral to cover trade credit loans.”
Development of the NCD has followed a prolonged period of instability in global trade, not least during the pandemic, which witnessed a trend of volumes being bought up, because at the time of buying they were needed, only for complications in transport to delay delivery.
This meant goods were either no longer required or not being accepted late by retailer clients, leaving shippers at the mercy of contractual agreements providing for the opportunity to sell goods in transit – the NCD negates the need to rely on such clauses.
“This new convention not only extends the negotiable bills of lading concept that allows goods to be sold while at sea to all modes, but joins it up for those making multimodal shipments,” Mr Hookham added.
“This issue became pertinent during Covid and, because of the way the world has gone since, the ability to sell goods while in transit offers a way to get around sudden, abrupt changes. For instance, if destination countries are unexpectedly hit with a 25% tariff or port closures.”
Fiata director general Stéphane Graber said: “The NCD convention is a major milestone for global logistics and digital trade. Fiata, through its advisory body legal matters, is proud to have contributed its long standing expertise.
“We look forward to supporting our members and partners as states move towards signature, ratification and implementation, so that this convention can become a key enabler to facilitate complex multimodal transport corridors and digital trade worldwide.”
Mr Hookham was also heavily involved in development of the NCD and noted that the changes would prove particularly beneficial for landlocked countries where long overland journeys increased the prospect of unexpected changes in transit.
And he pointed to a “big opportunity” in Eurasian rail and road corridors, as it opened the door to new selling opportunities, with goods departing origin valued at one price, but arriving worth substantially more.
“That new selling opportunity is there for a buyer who has seen its value increase by such an extent in transit that it is perhaps better to sell the product on than to receive it,” Mr Hookham continued.
“Equally, it provides some defensive cover – maybe when you bought the shipment you wanted it, but since it departed you’ve realised you no longer want it; this gives you that chance to sell it rather than having to take delivery.”
Mr Graber noted that, “crucially”, the convention “aligns legal frameworks with operational realities” and provides “legal clarity” for electronic negotiable cargo records, such as the association’s own multimodal transport bill of lading.
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