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  • Carrier’s liability – burden of proof

     
     

    FCL - full container load simply means the seller/shipper was responsible for stuffing the container and the cost thereof. But the contents of a sealed container cannot be verified from the outside.

    The FCL bill of lading simply states 'received on board one container STC [said to contain] X number of bags [or for bulk: kg] of coffee, shipper stow and count'. In other words, in an FCL bill of lading the shipping line acknowledges receipt of the container, undertakes to transport it from A to B without losing or damaging it, but does not commit itself as regards the contents. (See also 10, Risk.)

    There is no connection between FCL or LCL and Incoterms. The terms FCL and LCL are common in most coffee producing countries but do not always have exactly the same meaning. Combining FCL with the term CY (container yard: container is received), and LCL with CFS (container freight station: goods are received), removes any room for confusion.

    LCL - less than container load means that the carrier is responsible for the suitability and condition of the container, and the stuffing thereof. The carrier pays for this and then charges an LCL service charge. The bill of lading will state 'received in apparent good order and condition X number of bags said to weigh X kg'. Now the carrier accepts responsibility for the number of bags but still not for the contents of the bags, nor for the weight.

    In the interests of service to clients, although not in all coffee producing countries, shipping lines will agree to carry coffee as LCL provided the containers are filled or stuffed on the carrier's premises, ideally at a container freight station (CFS). It has become accepted practice in some countries for containers to be stuffed at the seller's premises at their expense, under the supervision of the carrier or the carrier's appointed agent.

    A higher rate of freight will still apply than for an FCL shipment but this arrangement is nevertheless of great value to smaller shippers or to those who are still relatively unknown. Importers and their bankers increasingly check on the credibility of exporters, including the documentation they supply, and do not accept FCL bills of lading from just anyone. For some exporters and origins, the stuffing and weighing of containers 'under independent supervision' is now the order of the day, not only for LCL shipments but also for FCL in order to satisfy the legitimate security concerns of all involved in the coffee trade.

    Such services are often provided by collateral managers who verify correct procedure in an exporter's operations on behalf of the bank that finances the business, sometimes right through to delivery at the receiving end. (See also chapter 10, Risk.)

    Claims on shipping lines have dropped as a result of this, suggesting that past discrepancies in containerized cargo were at least partly the result of inadequate supervision during stuffing. The main cause of claims on containerized coffee in bags has however always been condensation damage, which is much less likely to occur when coffee is shipped in bulk.

    The term LCL is something of a misnomer in that containers are nearly always full and freight is charged per container, not by weight. The reason the term is often used is that it permits marine insurers and/or receivers to lodge insurance claims directly on shipping lines.

    But just as roasters argue that roasting and distribution is their core business, not the transporting, storing and financing of green coffee stocks, so shipping companies consider their business is to carry sealed containers safely and efficiently from A to B, and not to be concerned with the contents. The wish of shipping lines is to eliminate the LCL bill of lading entirely, in time. This in turn will see increased use of independent weighers and supervisors although the reliability of such services will still vary from port to port, and from country to country. If after such inspections weight or quality claims still arise there will be serious differences of opinion between shipper and receiver. This is mainly because it is not always understood that providing a certificate of weight or quality does not absolve the shipper from contractual obligations.

     

    Carrier’s liability – burden of proof

    Of course each case of damage to goods needs to be examined on its own circumstances and merits but it is good to understand the background. International conventions governing maritime contract of carriage issues include the The Hague-Visby Rules, the Hamburg Rules and now the Rotterdam Rules adopted by the UN General Assembly in 2009. The first two define a Contract of Carriage as referring only to the carriage of goods by sea whereas the newly adopted Rotterdam Rules (by early 2011 however not yet formally ratified by enough countries to come into force) define a Contract for Carriage as one that may combine carriage by sea and other modes of transport. These Conventions define a carrier's obligations, for example such as having to exercise due diligence to make the vessel seaworthy and to care for the cargo. In general the Rotterdam Rules strengthen the rights of shippers and owners of cargo but of course this type of convention covers many aspects and some of the texts may even be open to different interpretations. However, in terms of who has to prove what then, broadly speaking, it still remains up to the claimant to prove that any loss or damage is due to the carrier's failure to adequately perform its duties.*

    This means a shipping company will accept responsibility only if it can be conclusively proven that damage to the goods occurred during transit, i.e. en route whilst the goods were under its control. However, unless the cause of such damage is obvious it may be very difficult to prove the point and exporters can fully expect that receivers of damaged goods will hold them responsible. But at the same time receivers are duty bound to preserve and exercise all rights against third parties and so must also always lodge claims with the shipping company, with their underwriters and any other involved party. (Go to 05.05 for more on marine insurance and claims).

    Nevertheless, the burden of proof rests with the exporter, unless there is concrete evidence that the loss or damage was due to an external event, an event that took place after the container was handed over for shipment.

    Of course, if an FCL shipment is lost or destroyed in its entirety then in most instances everyone will have little option but to accept the exporter’s declaration as to the original contents and their condition.

    But, generally speaking, if upon discharge containerised goods are found to be damaged without any obvious link to an external event then the burden of proof can become very heavy…

    On a separate but related issue: If really serious damage occurs en route, due to unforeseen events beyond anyone’s control – Force Majeure or Acts of God, then under the contract of carriage (bill of lading) a shipping company may decide to declare what is known as General Average. Such a declaration will result in proportional claims being lodged against all the owners/receivers of all the goods that were on board at the time the event took place – this kind of situation can become extremely complicated and may at times result in lengthy litigation.

    * Shippers and receivers alike should of course be familiar with the numerous clauses and conditions contained in the fine print on Bills of Lading but this is not always the case…

     

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