Proper Completion of Bills of Lading involving Transhipment


By Vlad Cioarec

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_id59   

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