This article discusses on the relevance of Shipped on Board Date and the date to be reflected in the Bills of Lading.
- During a training session we recently conducted, we were enquired on what would be the correct “shipped on board” date to be reflected in Bills of Lading (“Bs/L”). By way of background, Container Operators (“CO”) and their agents are frequently requested by their clients to issue Bs/L with shipped on board dates which confirm to the dates mentioned in their sale contract. The dates requested may not confirm to the actual shipped on board dates i.e. the request may either be for a “ante-dated/backdated” or a “post-dated” Bs/L. While this topic has been discussed and written on many times, we felt that it might be worthwhile to write on this topic for the reference of a CO.
- The first question must be is why is the shipped on board date of the Bs/L so important? Many a times, the container is handed over to the operator prior to the shipment and this may be either at the port or at Inland Container Depots (known as Dry Ports). In the case of all major terminals, they impose a “cut off” for delivering containers to the terminal prior to the vessel arrival so as to better manage the loading process (generally the cut off is 2-3 shifts / 24 hours with containers accepted upto say 7 days prior to vessel arrival). This being the case, the containers meant for shipment are invariably stacked at the terminal awaiting shipment at least 16 hours/ 1 day to 7 days prior to the vessel arrival. If the vessel gets delayed for any reason, then the shipment would also get delayed. With respect to the period of responsibility, if the scope of the service provided by the CO is restricted to Ocean Carriage, then the CO could be considered to be acting as agents for the cargo interests during the storage at the terminal prior to the shipment (depending on the terms of the Bill of Lading contract) such that if there is any loss or damage to the cargo at the terminal, they (cargo interests) may need to be pursue the person at fault.
- The general practice of COs involved in Ocean Carriage is to issue Bs/L with the date of sailing as the date of issue of Bs/L. If there is no express “Shipped on board” notation in the Bs/L, then the date of vessel sailing is considered as the Shipped on Board date. If an express notation is required, then the notation showing the Shipped on Board date is added to the Bs/L and endorsed by the CO or their agents. If the cargo interests require a Bill of Lading prior to shipment, provided the containers are under the custody of the CO, they (CO) may issue a “Received for Shipment” Bs/L which signifies that the container is yet to be shipped (in this case, it is advisable for a notation to be made on the Bill of Lading stating that it is a “Received for Shipment” Bill of Lading). Once container/s are shipped, cargo interests may request for the Bs/L to be endorsed with the Shipped on Board dates (See Article III Rule 7 of the Hague/Visby Rules which provides for either the Received for Shipment Bs/L to be endorsed or exchanged for a Shipped on board Bill of Lading if requested by the cargo interests). Shipped on board Bs/L are greater securities in that the cargo interests are aware of the party who is responsible for the goods i.e. the Carrier who has issued the Bs/L.
- The Incoterms or International Commercial Terms are a series of pre-defined commercial terms which have been published by the International Chamber of Commerce (ICC) and are widely used in international commercial transactions. The Incoterms are a series of three letter trade terms related to common contractual sale practices and assist to define the transfer or risks, costs and cargo between the parties to the sale contract. The latest Incoterms is of 2010 (Incoterms ® 2010), however, the earlier editions, the last being of 2000, are commonly used. The Incoterms ® 2010 recommends use of CPT/CIP or FCA for Container Shipments. Many of the Cargo interests continue to use CFR/CIF and FOB as provided in the earlier editions of the Incoterms and for which the transfer of risks operate differently (The risks under Incoterms 2000 transfer to the buyer from the shipper when the goods have been shipped or loaded on board the vessel). With respect to Incoterms ® 2010 , the recommendation for container shipments to use the below terms:
- CPT (Carriage Paid To) instead of CFR (Cost and Freight)
- CIP (Carriage Insurance Paid To) instead of CIF (Cost Insurance Freight)
- FCA (Free Carriage) instead of FOB (Free on Board).
The difference in the new terms is that the risk transfers to the buyers once the cargo has been handed over to the CO and which may be when the goods have been delivered to the terminal which may be under the contractual/actual custody of the CO. With respect to the difference in liabilities (when the CO acts as an agent), it is our understanding that it would make no difference to the position of the Cargo Interests (Shipper or the Consignee as the case may be) provided the cargo has been appropriately insured.
- The sale contracts may provide for pricing mechanisms for the cargo depending on the date of shipment or may require the shipment of cargo to be effected by a certain date. If the value of cargo drops due to the delay in the arrival of the vessel, or the contract is not fulfilled due to the delay (shipment to be effected by a certain date), the Shipper may be at a disadvantage. The Shipper may therefore request the CO to provide an “ante-dated / back dated” Bs/L citing the requirements under their sale contract. Any such requests of this nature should not be entertained by the CO considering that by doing so; the CO would become party to fraud and if pursued by the cargo interests, may become liable for the full value of the cargo. Instead, the CO must direct the Shipper to renegotiate his contract with their counter party. In normal circumstances, this should not be an issue. However, if the prices have dropped or this is a one off sale, the counter party may not agree to any changes and which may be detrimental to the Shipper. As the CO is a neutral third party involved only in the carriage of goods, the contract between the Shipper and the Buyer is best left to them and the CO should not get involved in this aspect. We also believe that these issues may be resolved by the cargo intereests contracting on the basis of Incoterms ® 2010 in that the risk would transfer prior to shipment as and when the containers have been handed over to the nominated CO (in which case, the sale contract should require submission of a received for shipment bill of lading).
- Given that shipments will continue to be done under the old Incoterm Rules, we now consider the date of shipment which should be mentioned in the Bill of Lading.
- If the Ship loads the containers and departs on the same day, then the date to be mentioned should be the date of departure.
- If the Ship’s loading process continues for some days, some of the containers may have been loaded a few days prior to sailing. In this case, the issue would be as to what would be the date of shipment? Considering that the risks would transferred after loading, an argument may certainly be made that the actual date of loading should be the date of shipment. However, we would suggest the COs to consider the following to aid them in deciding the date of shipment:
- The custom of the trade: We understand that the custom of some ports allow the Bs/L to be “backdated” in certain circumstances. By way of an example, we mention the “8 O’Clock” Rule in Nigeria meant for Oil shipments completed before 08:00 hrs on the first day of any month, would be treated as if the shipment had been completed on the last of the preceding month – see “Eurus” ( 2LLR,408).
- Whether the containers have been loaded in sound condition and the owners have acknowledged receipt of the same.
- If the CO is an underlying Carrier, the date of shipment mentioned in the Bs/L issued by the overlying Carrier. This is an important point to consider given that most of the liability policies issued for CO would make it incumbent on the CO to contract with their client on similar terms as the overlying carrier. If there is a difference in dates between the Bs/L issued by the overlying Carrier and the CO, this may be considered as a breach such that Insurers may be entitled to reserve cover.
- In conclusion, while the use of Incoterms ® 2010 may go a long way to resolve the “Shipped on board” date issues, given that the trade is comfortable with the earlier version of the Incoterms, issues on the Shipped on board dates will continue to crop up. If CO’s are requested to mark the Bs/L dates different from the date of sailing, they must consider the following:
- Whether there is any applicable custom in the port which entitles them to mark the date differently than the date of vessel sailing.
- Consider the date of shipment on the Bs/L issued by the Overlying Carrier.
- Recognise that failure to show correct dates in the Bs/L may not only expose them to cargo claims but also loss in reputation due to improper practices being followed.