| Why transhipment
occurs in container shipping
 Due
to their high operating costs, the large container ships serve only few
large ports often referred to as “hub ports”. That’s why the sea carriage of
containers to and from such “hub ports” to regional ports is usually
sub-contracted by shipping lines to local operators of feeder vessels,
typically small and medium-sized vessels. The feeder vessels collect the
containers with cargo from the regional ports and transport them to the hub
port where the containers are discharged ashore only to be reloaded later on
board the large container ship, so-called “mother vessel”. At the other end
of its voyage, the mother
vessel discharges the containers ashore wherefrom
they are reloaded later on board of a second feeder vessel for on-carriage
to their final destination. Thus, in function of the route, 2 or 3 vessels
may be used to perform the sea carriage of containers.
How to evidence transhipment in Port-to-Port
Bills of Lading
Few, if any, shipping lines afford to operate feeder
vessels only as shipowners or demise charterers so that many carriers have
no other choice but to sub-contract the pre-carriage and onward carriage to
local operators of feeder vessels. That’s why the carriers named in
Port-to-Port Bills of Lading are often contracting carriers rather than
performing carriers. FIATA Bill of Lading is just one example of
Port-to-Port Bill of Lading issued by a contracting carrier. In issuing
FIATA Bill of Lading for port-to-port shipments, the named contracting
carrier assumes responsibility for the entire period of sea carriage,
including any pre-carriage and/or onward carriage performed by
sub-contractors, so that if the cargo is lost or damaged during any stages
of sea transport, the contracting carrier is liable to Bill of Lading
holder. The liability of contracting carrier shall be determined on the
basis of the law applicable to the sea leg where the loss or damage occurred,
i.e. Hague/ or Hague-Visby Rules, as the case may be.
BIMCO proposed shipping lines to use COMBICONBILL
terms whereby the liability of contracting carrier in case of loss or damage
to the goods shall be subject to Hague-Visby Rules regardless of whether the
loss or damage occurred during pre-carriage, main carriage or onward
carriage but provided that the stage of transport where the loss or damage
occurred is known and that Bill of Lading clearly identify the vessels
engaged to perform the carriage and the parts of carriage to be performed by
such vessels. BIMCO argues on its web site that in this way the shipping
lines would still benefit from the standard P&I insurance cover for their
vessels.
Both forwarders and shipping lines acting as
contracting carriers should identify in their Bills of Lading the vessels
engaged to perform the carriage and the parts of carriage to be performed by
such vessels otherwise in case of cargo claims they may be held liable for
misrepresentation. For an example of what can go wrong see the facts of the
case of Sabo SA v. United Arab Shipping Co [2005] EWHC 307
at
www.bailii.org/ew/cases/EWHC/Admlty/2001/500.html
Transhipment liability
In that case, the shipping line issued a Bill of
Lading naming only the port of loading, port of discharge and mother vessel
without any reference to the pre-carriage by feeder vessel and port of
transshipment, in order to comply with L/C terms that forbade transhipment.
On arrival at the port of transhipment the feeder vessel grounded and the
cargo was damaged by sea water. After discovering this, the L/C paying bank
and the buyer were no longer interested in paying for the shipping documents.
However, the Court pointed out in its decision that had they paid, the
carrier might have been liable for misrepresentation in the Bill of Lading
for the intended voyage, as the omission of the pre-carriage by feeder
vessel and the transhipment could have been intended to deceive the bank
paying under L/C and ultimately the buyer, as innocent third party holder of
Bill of Lading, who could not have known that the named carrier did not
operate a direct line between the port of loading and port of discharge
stipulated in L/C.
Thus, the consequence of carrier's failure to
identify in Bill of Lading all the vessels engaged to perform the sea
carriage and parts of carriage performed by such vessels might be that in
case of cargo claims by third party holder of Bill of Lading the carrier may
not be able to rely neither on the Bill of Lading defences provided by Hague
Visby Rules nor on the standard P&I insurance cover. If the cargo is lost or
damaged while on board the feeder vessel, claims under Bill of Lading naming
solely the mother vessel will not be covered by the mother vessel’s P&I
Club.
Similarly, if the cargo is lost while on board the
mother vessel, claims under Bill of Lading naming solely the feeder vessel
as carrying vessel will not be covered by P&I Clubs under standard cover,
unless the feeder vessel is owned or demise chartered by the carrier that
owns the mother vessel.
That's why a Bill of Lading issued by a contracting
carrier should identify all the vessels engaged to perform the sea carriage
and the parts of carriage performed by such vessels. The way this should be
done to comply with both P&I Club rules and art.20 of UCP 600 is by a
notation on the face of Bill of Lading to show:
- the name and voyage number of vessel on board of
which the cargo has been loaded at the port of loading stipulated in L/C;
- the part of carriage performed by this vessel,
i.e. from the port of loading to the port of transhipment;
- the name and voyage number of the vessel that is
to transport the cargo from the port of transhipment to the port of
discharge.
Here is an example of such notation:
“SHIPPED ON BOARD ON (name and voyage number of
feeder vessel performing the pre-carriage) AT (port of loading as stipulated
in L/C) ON: (shipment date) FOR CARRIAGE TO (port of transhipment) FOR
INTENDED TRANSHIPMENT TO (name and voyage number of mother vessel) FOR
ON-CARRIAGE TO FINAL DESTINATION: (port of discharge as stipulated in L/C).”
Alternatively, some carriers made the
transhipment notation separate from the “on board” notation as in the
following examples:
“SHIPPED ON BOARD: AUGUST 17, 2007 BY … (name and
voyage number of feeder vessel)
CONNECTING VESSEL: … (name and voyage number of
connecting vessel) AT ... (port of transhipment)”
“SHIPPED ON BOARD: AUGUST 17, 2007
CARGO LOADED AT (port of loading) ON (name and
voyage number of feeder vessel performing the pre-carriage) TO BE
TRANSHIPPED AT (port of transhipment) ... TO (name and voyage number of
mother vessel) OR SUBSTITUTION WITH FINAL DESTINATION: (port of discharge).”
In case of sea carriage involving two ports of
transhipment, the notation indicating transhipment should identify both the
ports of transhipment and the vessels performing the carriage.
One way this can be done is as follows:
“SHIPPED ON BOARD ON (name and voyage number of
feeder vessel performing the pre-carriage) AT (port of loading as stipulated
in L/C) ON: (shipment date) FOR CARRIAGE TO (first port of transhipment) FOR
INTENDED TRANSHIPMENT TO (name and voyage number of mother vessel) FOR
CARRIAGE AND SUBSEQUENT TRANSHIPMENT AT (second port of transhipment) AND
ONCARRIAGE BY (name and voyage number of feeder vessel performing the
on-carriage) TO FINAL DESTINATION: (port of discharge as stipulated in
L/C).”
The carriers who made the transhipment notation
separate from the “on board” notation use the following wording:
“FIRST CONNECTING: ... (name and voyage number of
first connecting vessel) AT ... (first port of transhipment)
SECOND CONNECTING: ... (name and voyage number of
second connecting vessel) AT ... (second port of transhipment)”
or
“INTENDED TO CONNECT:
1. .. (name and voyage number of first connecting
vessel) AT ... (first port of transhipment)
2. ... (name and voyage number of second
connecting vessel) AT ... (second port of transhipment)”
The qualifications “intended” or “substitution” are
used in Port-to-Port Bills of Lading with reference to mother vessel because
the containers brought by feeder vessel may not arrive in time at the hub
port used for transhipment and thus fail to connect with the mother vessel
named in Bill of Lading. Art.20 (a) (ii) of UCP 600 setting the requirements
for Port-to-Port Bills of Lading allows bankers to accept Bills of Lading
with such qualifications in respect of mother vessel provided that the Bill
of Lading has
an “on board” notation on its face to indicate:
-the name of the actual vessel (i.e. feeder vessel)
on board of which the cargo was loaded; -the date of loading on board such
vessel.
There is also the practice to show the port of
transhipment as port of loading, respectively as port of discharge,
depending on whether the carrier sub-contracts the pre-carriage or
on-carriage. Art.20 (a)(iii) of UCP 600 stipulates that a Port-to-Port Bill
of Lading showing the port of transhipment as “port of loading” is
acceptable provided that there is an “on board” notation on the face of Bill
of Lading indicating:
-the actual port of loading as required by L/C;
-the name of the vessel (i.e. feeder vessel) on
board of which the cargo was loaded at the actual port of loading;
-the shipment date. See my previous commentary on
art.19 of UCP 600 for more on this matter.
However, a Bill of Lading showing the port of
transhipment as “port of discharge” is not acceptable under UCP 600 because
the bankers fear that this might mean that carrier’s responsibility for
cargo is limited only to the period up to transhipment so that if the cargo
is lost or damaged during the carriage from the port of transhipment to the
actual port of discharge the third party Bill of Lading holder may not be
able to recover the loss from the carrier named in Bill of Lading or that
the carrier cannot be held liable in case of wrongful delivery of cargo.
Accordingly, ICC Banking Commission proposed carriers to indicate separately
on the face of Bill of Lading the port(s) were transhipment would occur and
show the port of discharge just as “port of discharge”.
For more on this matter see the commentaries of
Peter Jones and Chris Gillespie at
www.forwarderlaw.com/library/view.php?article_id=59
|
