An Indian company imported a Pressing machine from Italy. The terms of sale were CIF Chennai port. The container carrying the machine was unloaded from the vessel at Chennai port and as it was being carried in a trailer to the place of Customs examination and delivery, the trailer toppled causing damages to the container and the imported machine. Joint survey was carried out. The ship surveyor confirmed the damages but the shipping company took the position that since they had safely discharged the cargo at Chennai port, they were not liable for the damages to the machine in any way.
Claim was also lodged on the supplier’s insurer in Italy who promptly declined the claim citing that the Certificate of insurance was made out as ‘ From Genoa port to Chennai port’ and cover was subject to Institute Cargo clauses ‘A’. They quoted 8.1.1. of the ICC which talks about when cover would cease under the policy — i.e. ” on completion of unloading from the carrying vehicle or other conveyance in or at the final warehouse or place of storage at the destination named in the contract of insurance”. The insurer contended that the contract of insurance mentioned Chennai port as the destination and the unloading of the container from the vessel had been safely completed.
On a strong representation by the client with a threat of legal action, the shipping company came round for a settlement as did the overseas insurer to whom the rights against the shipping company had to be subrogated. So what prompted the turnaround? Well, it was the wordings used under ICC-A as also the Conventions/Rules governing the liability of the carrier stated on the reverse of the Bill of Lading/ Common Law. The initial denial of liability can be attributed to posturing, so as to be in a stronger position, should a negotiated settlement become necessary.
First, let us look at the wording of 8.1.1. of the Institute Cargo clauses. It speaks about ‘ unloading from the carrying vehicle or other conveyance’ and DOES NOT say ‘unloading from the vessel’. Further, where should the unloading happen? ‘ At the final warehouse or place of storage at the destination named in the contract of insurance’. This clearly implies that even if the cover is ‘port to port’ ( in this case till Chennai port), insurance cover under the policy DOES NOT cease, the moment the container is unloaded on the wharf or quay. Final warehouse or place of storage need not mean that there should be an actual warehouse or that it should be the final destination. Destination as stated under the Certificate of insurance was Chennai port. So, it is to be interpreted to mean that shipping company will be responsible and so will be the insurer, till the time the container is made available for delivery to the consignee at the named destination port. Needless to add, the shipping company could have recoveries later from the trailer operator/handling agents/port as the case may be.
If the Bill of Lading is subject to the Hamburg Rules, this aspect of shipping company’s liability is clearly spelt out under Article IV —
“(1) The responsibility of the carrier for the goods under this Convention covers the period during which the carrier is in charge of the goods at the port of loading, during the carriage and at the port of discharge.
(2) For the purpose of paragraph 1 of this article, the carrier is deemed to be in charge of the goods from the time he has taken over the goods.…… until the time he has delivered the goods.’
The Hamburg Rules bring out the distinction between unloading/discharge of the container and delivery of the same. It also pins the shipping company till the time of delivery throwing out the earlier maxim of their liability being on ‘tackle to tackle’ basis as per earlier conventions. The Hague/Visby conventions do not speak about ‘delivery’ and the wordings used are ‘ from the time when the goods are loaded on to the time the goods are discharged from the ship’.
Does this mean that if the Bill of Lading is made subject to Hague/Visby Rules, the liability of the shipping company would terminate on discharge of goods at the wharf or quay? No. Being earlier conventions, they do not take into account carriage of goods in containers, even though these conventions have been widely adopted and used by many countries even today. A rule of common law adopted by most countries is that under a ‘To Order’ or a Straight Bill of Lading’, carriers should not deliver the cargo unless the original Bills of Lading have been surrendered to them. Bills of Lading being documents of title, if a carrier makes a delivery without the originals, he would not be able to invoke any of the exclusion clauses in the Bill of Lading. Yes, there are instances where deliveries are made against Letters of Indemnity, but even if so and a mis-delivery happens, the P & I cover available to the shipping company could be lost. The main point here is that, shipping companies invariably will hold on to the containers till original BLs are submitted and delivery taken. They would not just unload the container on the wharf and be done with it. In many ports, there may not be facility for direct port delivery. The importer can have the Customs examination done and delivery taken only at the Container Freight Stations, which for all practical purposes are extended arms of the Customs Authority of that particular port. So, will the shipping company be responsible till the container reaches the CFS? Yes, and any loss/damage in the interim, the shipping company could have a recovery against the CFS operator/ nominated carrier.
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Excellent article Bala bringing out the oft repeated mistake of defining port to port shipment. Hope all read this and make best use of this well drafted clarification.
Very helpful Sir. This is an invaluable post. It contains insights, lucid explanations & references which are made all the more captivating by your trademark writing. Thank you again for educating us with your articles.