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24 March 2012

Submission on the Consumer Law Reform Bill: Carriage of Goods

(Submission deadline 29 March 2012)

To: Parliament's Commerce CommitteeSelect Committee OfficeParliament BuildingsWELLINGTON 6011

Submitter detailsThis submission is from the Board of the New Zealand chapter of the Conference of Asia PacificExpress Carriers ('CAPEC NZ'), PO Box 53046, Auckland Airport, Manukau 2150.

CAPEC NZ can be contacted via the New Zealand secretariat:Sherelle Marie KennellyT: + 64 9 255 0555F: + 64 9 255 0562M: + 64 21 243 4728sherelle.kennelly@tnt.co.nz

CAPEC NZ wishes that the following also appear in support of this submission:New Zealand Board members represented by and for:

• Alan Barnett, National Operations Manager − DHL Express NZ Ltd

• Lee Davies, Country Manager − FEDEX

• Mark Benton, National Operations Manager − TNT Express New Zealand

• Karina Horne, General Manager New Zealand − UPS

Background:

CAPEC NZ is a non−profit organisation established to represent the interests of the world'sleading integrated express delivery service companies: DHL, FedEx, TNT, and UPS.

CAPEC NZ's mission is to work closely with governments and regulatory authorities in Australiaand New Zealand to further the interests of the express industry and to facilitate tradeexpansion and economic growth in both countries.

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The CAPEC NZ Executive Committee consists of senior executives of each founding member'scompany. The executive committee's role is to lobby on behalf of CAPEC NZ and to work withgovernments and regulatory authorities in Australia and New Zealand to further the interests ofthe express industry.

Submission:

Please consider the following submission from CAPEC NZ in response to the Consumer LawReform Bill, proposed inclusion of section 8A to the Carriage of Goods Act and subsequentanalysis recommendations presented in the Consumer Law Reform Additional Paper−February 2011, Carriage of Goods, from the Ministry of Consumer Affairs.

CAPEC NZ opposes the intent of the proposed Bill based on the following:

1.0 It is the opinion of industry and CAPEC NZ that there is a distinct lack of evidence insupport of an actual problem; that the objective of being aligned to the Australiancommercial model may well be based more on anecdote than on robust and factualanalysis. Is there indeed a significant problem and what is its scale1 27 Industry andCAPEC NZ believe the scale of the problem to be small.

2.0 Profitability in the movement of Express Freight is maintained by operating at lowmargins and at high volumes. The industry works in an environment which relies onestablished and recognisable costs. Proposed changes will have the negative effect ofcreating greater complexity around carrier and consumer contracts, the costs of whichwill inevitably be passed back to the consumer built into charged rates for service3.

3.0 Both consumers and carriers will be detrimentally impacted by proposed changes, whichare both significant and will have a real commercial impact. It is the opinion of industry

i "There is quantitative evidence from Victoria and various other countries that suggests somewhere between5and 15% of consumers might be detrimentally affected by unfair terms"; p.8. Regulatory Impact StatementConsumer Law Reform − December 2010. "

2 "While no surveys have been done, a scan of complaints to consumer watchdogs, including Consumer NZ and FairGo, indicates that there is dissatisfaction and actual loss by consumers who received damaged goods or whosegoods are |ost in transit"; p.34. Regulatory Impact Statement Consumer Law Reform − Further Decisions February2011.

3 "Consumers: Limited carriers' risk may result in higher freight charges as businesses seek to off−set insurancecosts.„Businesses:The limited carriers' risk contract requires insurance and therefore increases compliance costs";

pg 36−37 Regulatory Impact Statement Consumer Law Reform − Further Decisions February 2012

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and supported by CAPEC NZ that a consumer law reform omnibus Bill is not the suitableforum within which to undertake changes of the nature proposed.

4.0 What the proposed changes fail to address is the fact that the Carriage of Goods Actcurrently operates as a Code to industry. This has the desirable result of providingcertainty and business confidence for carriers and consumers.

5.0 CAPEC NZ upholds that significant concern is the incalculable and unpredictable natureof the proposed liability arrangement, specifically:

5.1 that consumers will have the ability to bring consequential loss claims againstcarriers in relation to the carriage of goods. Further, is consequential loss limitedand how is it expected to impact industry?;

5.2 the mandatory component whereby carriers must offer a contract for carriage atlimited carrier's risk or declared value risk depending on the 'value of the goods'and without regard to with whom they are dealing − business or consumercustomer. Should business and consumer customers not be treated the same,where consumers should have some responsibility to manage their own risks'?;

5.3 the new Section 8A of the Carriage of Goods Act will require a carrier to offer toenter into a contract for carriage at limited carrier's risk or declared value risk,whilst still having the current section 8 apply. The Bill renders unclear the liabilityimpact of the carrier. For example, what if the consignor declines the offer madeunder 8A and opts to contract at owner's risk or on declared terms? What if theconsignor opts to continue to contract at declared value risk for goods worth lessthan the proposed limited carrier's risk of $2000? CAPEC NZ submits thatthe option to contact out as per the current Carriage of Goods Act should remainin place.

5.4 the consumer will be able to recover against the carrier under both the Carriageof Goods Act and the Consumer Guarantees Act, which would in effect be'double−dipping';

5.5 it is extremely difficult for carriers to insure against unknown liability, the extent ofwhich could be beyond that which carriers can economically support, i.e.:unlimited. How is the carrier to determine the financial exposure?

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6.0 CAPEC NZ submits that changes to carrier liability will have the following results:

6.1 the amount of potential liability carriers would be required to insure against willbe unclear which will create significant uncertainty in respect of carrier's risk. Itwould non−viable for a carrier to operate with unknown or unlimited liability risk;

6.2 there is no logical reason why a carrier and business customer should not beable to negotiate their commercial terms and enter a contract at limited carrier'srisk for goods that are worth more than $2000. It follows that consumers shouldhave the ability to opt for some of the responsibility of managing their risks;

6.3 carriers should be able to enter a contract for carriage where that contract bestsuits the products and services on offer by the carrier, rather than the mandatoryrequirement of having to offer a certain type of contract based on the 'value ofgoods' being carried;

6.4 there is insufficient clarity as to whether the carrier must make a new offer everytime goods are carried or whether a standing offer will comply. The requirementto offer different types of contracts potentially multiple times with customers willnot only place an administrative impediment on the carrier but again theadditional cost of which will end up being borne by the customer;

6.5 it is unclear how 'value of goods' is to be defined, i.e.: wholesale, retail price ordeclared value? There is a commercial difference as to how these arecontractually applied in practice;

6.6 the proposed changes in liability will ultimately translate through to increasedpricing (required to self−insure against risks) and reduced services to thecustomer (as carriers will be forced to make decisions based on the withdrawal of(now) commercially non−viable services or refusal to carry certain types ofgoods). The current contacting out of carrier liability under the Carriage of GoodsAct reduces transport costs to consumers and provides consumer choice;

7.0 CAPEC NZ submits the following concerns regard the removal of a carrier's right towaive claims by recipients:

7.1 the contracting party is typically the consignor of goods, who is the party in themost appropriate position to know the 'real' value and nature of goods beingpassed to the carrier. It therefore follows that the consignor is in the best positionto choose a carrier service which is based on their interpretation of being most

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suited to the risk of the goods being carried, can manage appropriate packagingand make other insurance arrangements, as appropriate;

the Contract for carriage is between the consignor and the carrier and thereforestrongly disagree that the consignee should be able to take action with thecarrier. The consignee contract is with the consignor and not directly with thecarrier;

the ability of the consignee to claim against the carrier is quite likely to result infraud, i.e.: claim for goods which were never passed to the carrier. In suchacircumstance the onus for proof of carriage would become that of the consigneeand the consignee would be required to glean appropriate information from theconsignor;

the proposed change does not clarify the position of international incoming items,where the final leg is New Zealand, often inbound delivery and where damagehas occurred offshore. In this situation the final leg carrier should not be heldliable for damage or loss which occurred offshore;

there is no protection in the Bill against a carrier having claims raised againstthem by both the consignor and consignee, again highlighting the potential to'double−dip';

claims lodged by the consignee rather than the consignor are likely to made atfull retail price rather than the actual cost price of goods.

Specific comments:

The current regime is not broken and has been working well for the last 20−plus years. Also, themain Government goal is harmonisation between Australia & New Zealand but there is noevidential indication as to how this is working in Australia.

It is in the best interests of CAPEC NZ members to solve contract issues with its customer baseto ensure ongoing loyalty and protect its international brands.

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Recommendations:

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CAPEC NZ recognizes the inflationary component of the carrier's statutory liability for contractsat limited carrier's risk; that an increase from $1500 to $20004 under section 15(1) of theCarriage of Goods Act would be appropriate provided that the proposed changes in the newsection 8A do not proceed. The carrier's ability to determine which contract to carriage to enterinto with its business and consumer customers under section 8 of the Carriage of Goods Act,remains in place.

CAPEC NZ New Zealand requests that a study is undertaken to understand the how the AUmodel is working. Success in Australia would support the harmonisation key objective ofGovernment and only then should proposed changes and nature thereof be considered.

Alan Barnett, National Operations Manager DHL Express NZ Ltd

Lee Davies, Country Manager FEDEX

Mark Benton, National Operations Manager TNT Express New Zealand

Karina Horne, General Manager New Zealand UPS

4 The carriers' liability was last increased in 1989 (Part 1, Subpart 2, Clauses 32−55, amending the CGA),New Zealand Parliament − Consumer Law Reform Bill 2011: Bills Digest No 1857

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