Three interests – A marine story

Once upon a time……….. there was a Shipper ( of containerized cargo), a Shipping Line which carried the cargo and an Insurer who insured the cargo. There was a presumption and even now, it is presumed by many that the responsibilities/ liabilities of all three interests run concurrently or is identical. Nothing can be further from the truth.

The shipper is responsible for making available or delivering the cargo safely to the buyer at a particular place as per the purchase agreement, within the boundaries of the Incoterms. The insurer on his part, insures the transit from end to end within the meaning of the Incoterms but at times extending the coverage beyond it, when the underlying contract between the shipper and buyer mandates so. Do the Incoterms or the coverage under the cargo insurance define the responsibility of the shipping line? No.

The responsibility of the shipping line in case of containerized cargo is as per the terms set out in the Bill of Lading which could be 1) CY:CY 2) CY:CFS 3) CFS:CFS 4) CFS:CY. 

• CY:CY means ‘Container yard to container yard’. ‘This normally applies in case of Full Container Loads (FCL). The container yard is a place within the port, terminal or dry port where the FCL containers awaiting export are stacked. It is the responsibility of the shipper( buyer in case of ex-works shipments) to deliver the fully loaded and sealed container at the container yard. Once handed over at the container yard, the responsibility of the shipping line starts, continues during the ocean voyage ( irrespective of terms of sale) and terminates on handing over to the consignee in the container yard at the discharge port. The responsibility for unsealing and de-stuffing the container at his place rests with the consignee. It may also be noted that the transit from the container yard to the consignee’s premises might have been covered by the insurer, but the shipping line will not be responsible for any loss/damage during this leg. Further, as the packing and stuffing inside the container is done by the shipper, insurers can ( if they are able to establish it) invoke the ‘insufficiency of packing/unsuitability of stowage exclusion under ICC.
• CY:CFS means ‘Container yard to container freight station’. This notation would apply, again in case of FCL but the difference here would be that there could be multiple consignees. Responsibility of the shipper is to deliver the fully loaded and sealed container at the container yard to the shipping line. Responsibility of the shipping line starts from here, continues during the ocean voyage and terminates after de-stuffing at the container freight station. It will be the responsibility of the individual consignees to transport the cargo from the CFS to their own place in non-containerized form.
• CFS:CFS applies majorly in case of Less than Container Loads( LCL) & means ‘Container freight station to container freight station’. Here, the different shippers have the responsibility of transporting and delivering the cargo at the CFS. The stuffing of cargo belonging to different shippers inside one container rests with the shipping line. The stuffing not being done by the assured, insurers cannot invoke the exclusion for unsuitability of stowage in these cases. The shipping line’s responsibility continues during the ocean voyage and terminates on de-stuffing the cargo belonging to various shippers and meant for various consignees, at the CFS in the destination country. There could be multiple insurers in these cases.
• CFS:CY refers to ‘Container freight station to container yard. This involves cases of multiple shippers delivering the cargo to the CFS for stuffing into a container but the difference is that the consignee is usually one. The shipping line takes the responsibility for stuffing, the entire ocean voyage and would be discharged from liability once the container (without de-stuffing) is handed over to the consignee at the container yard in the destination country. There could be multiple insurers in this case or the consignee may have purchased insurance, depending on terms of sale.

Moral of the story: Responsibilities of shippers, shipping lines & insurers start and end at different points of the transit.