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If requested by Shipper’s, should Carrier’s show additional details in their Bills of Lading?

Jagan - January 31, 2015 - 0 comments

We have been asked regularly by our clients as to whether they should accede to the requests made by Shippers to incorporate details of the sale contract in their bills of lading. In this regard, our consistent advise has been that Carriers must resist incorporating such details in their bills of lading as they may have a bearing on their responsibility. We are writing this article to touch on the issues which may arise.

  1. Traditionally, bills of lading were issued by vessel owners / operators but with the advent of various types of carriage and intermediaries, bills of lading are also issued by contractual carriers. Bills of lading basically do three function and are as follows:
    1. As receipt of goods shipped
    2. As evidence of contract of carriage
    3. As a document of title
  2. Article III rule 3 of the Hague / Hague-Visby Rules states “After receiving the goods into his charge, the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things
    1. the leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage;
    2. either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper;
    3. the apparent order and condition of the goods:Provided that no carrier, master or agent of the carrier shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received or which he has had no reasonable means of checking”.On this basis, where the contract of carriage incorporates the Hague / Hague Visby Rules either compulsorily by the application of law or by incorporation, shipper’s are entitled to demand the issue of a bill of lading containing information of the goods loaded on board the vessel / container. However, this information is restricted to the goods per se.
  3. In the case of shipments in containers, carriers are generally not involved in the loading of the cargo inside the containers. This being the case, they are not aware of the contents and therefore issue bills of lading incorporating the details of the cargo as provided by the Shippers but generally with a clause in their bills of lading such as “Said to Container” or “Shippers Load Stow and Count”. What these clauses try to do is to advise parties to the bills of lading contract that the carriers do not have actual knowledge of the goods inside the container. Additionally, the bills of lading contract may have an indemnity clause which would make the shipper liable to indemnify the carrier for any mis-declaration of the cargo. Furthermore, if the contract of carriage incorporates the Hague/ Hague-Visby Rules, then Art III rule 5 entitles the Carrier to seek an indemnity from the shippers for any mis-declaration of the cargo. (“The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight, as furnished by him, and the shipper shall indemnify the carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper.”)
  4. The issue arises when the shipper wishes to add details of their sale contract and which are not the goods per se. The reasons given by the Shippers are that the Shippers letter of credit requires the bills of lading to show specific details of the sale contract failing which they are unable to fulfill their transaction. While the sale contract between the seller and buyer of international goods may make for various provisions, the carrier is only involved in the transportation of goods and is neither party to and nor are they aware of the terms. This being the case, agreeing to incorporate such terms may actually be detrimental to the interests of the carrier. We touch on some of the requests recieved by our clients together with the issues which may arise
    1. “cargo sold on CIF/FOB/DAS/FCA terms”: While it may be that addition of such additional words may not have a bearing on the liability to the carrier, we often see that when a dispute arises, carriers are often included in the legal proceedings, particularly if the cargo interests follow the “shotgun approach” i.e. by initiating proceedings against all parties involved in the transaction. Even if the carrier has a valid defence, costs would be incurred to defend any claims. This being the case, we would wish to avoid any opportunity / potential for attack and are hence not comfortable to endorse incorporation of any details in the bills of lading having no relevance to the contract of carriage.
    2. “value of cargo USD 85,000”: If the bills of lading mention the value of the cargo, they then become an “ad valorem” bill. We had written an article earlier on this issue and therefore will not discuss on the same.
    3. “actual shipper XYZ”: Although this is not in relation to the sale contract, we have seen requests made by intermediaries who contract as principals with the carriers i.e. they are listed as the shipper in the carrier’s bills of lading and in turn issue their own (bills of lading as contractual carrier). The problem with the addition of these additional details in the body of the bills of lading is that the intermediary may later defend any and all claims raised against them by stating that their role was purely as an agent (which was not the intention while contracting with the carrier). This being the case, it would be best to avoid any ambiguity so that if any disputes arises, carriers are able to pursue their counterparties successfully.
  5. Carriers are insured for their risks as a “Carrier” with Transport Liability Insurers. It is invariably a requirement under most Transport liability policies that carriers not only have proper standard operating procedures but also that they have measures in place to ensure that they are followed both at their offices and their agents. Failure to have such procedures may entitle the carriers Liability Insurers to deny cover.
  6. To conclude, we would suggest that carriers be aware of
    1. details which should be mentioned in the bills of lading
    2. Ensure to have proper standard operating procedures and follow the same for the issue of bills of lading
    3. advise their clients that they can only list details of the cargo and are unable to add details of the sale contract as this may not only be detrimental to them (carrier) but may also prejudice their insurance cover.

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