How to figure out ocean cargo liability rules

This is a pretty good article explaining the basics of ocean cargo liability for those who are not clear on the subject as well as advice on how to describe your cargo on the bill of lading:

The fire earlier this year aboard the Hyundai Fortune in the Gulf of Aden, which resulted in the loss of numerous containers of merchandise, should prompt importers and exporters to consider how much they could recover from an ocean carrier if their shipments were caught in a similar catastrophe.

The answer to this question is not as simple as one would imagine. Today ships typically carry thousands of containers moving to and from many nations, and these countries may be party to different international treaties containing different liability clauses.

The generally applicable treaty governing international trade is known as the Hague Rules; the most commonly adopted version is the Hague-Visby Rules of 1968. The United States has not ratified that treaty; instead, it follows the Carriage of Goods by Sea Act (COGSA), which it enacted in 1936 as the U.S. version of the Hague Rules.

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All ocean bills of lading contain limitations on the issuing carrier’s liability. COGSA, the U.S. version of the Hague Rules, limits liability to $500 per package, or if not shipped in packages, to $500 per “customary freight unit” (one tank, one truck, one ton, and so forth).

The most frequently litigated question is, what constitutes a “package”? Whenever they have an opportunity to do so, carriers will contend that the entire 20- or 40-foot container is the package. Cargo owners, however, typically say that the smallest unit that is described on the bill of lading is the package.

Courts interpret the bills of lading strictly, therefore it is incumbent on shippers to clearly describe the smallestunit of packaging on the bill of ladingif they wish to recover the full value of their goods in the event of loss or damage. Thus, the proper description for recovery of full value would be “One 40-foot container containing 2,000 cartons of shoes on 20 pallets.”

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The lesson for ocean shippers (and their customs brokers and freight forwarders) is that they should study every bill of lading as soon as they have been received from ocean carriers, and they should protest any errors immediately.

Read the whole thing, very informative.

Travel the world: cheap

They don’t have a lot of amenities and you don’t get the chance to spend much time in port, but traveling on a cargo ship is a unique way to see the world:

In fact, the accommodations are much more comfortable than your average day on the indie-travel road. I took a freighter from the Suez to Bombay six years ago, and had a great time. It took about 15 days. I had a nice cabin, the food was fantastic, and the crew was very entertaining (I was the only non-crew passenger on board). I got to travel through the Suez Canal, the Red Sea, and the Arabian Sea — and we stopped at one Saudi and two Yemeni ports (though I couldn’t wander past the port without a visa). There was even a pool and a gym on board — neither was of good quality, but I used them anyway.
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Though some may imagine that freighter accommodations involve iron bunks and gruel dinners, the cabins are actually comparable to those of cruise ships. Most have a private bathroom, a view of the sea, bunk beds, couches, tables, a desk, and (because you get the same treatment as the ship’s officers) a steward to clean up after you. My freighter cabin was far nicer than most of the budget hotel rooms I have stayed in while vagabonding on land! I was also the only non-crew passenger on the ship, though there can be as many as 12 passenger slots on a typical freighter. The mess hall food is usually abundant and excellent, and passengers dine with the ship’s officers (who are always game for good conversation). If you befriend the cook, you should be able to drop down to the kitchen for a snack at any time of the day. Alcohol, soft drinks, cigarettes and toiletries are available for sale when the ship is at sea. All ships will have a common room where you can read books and watch videos with the crew. My freighter had a small gym (I was the only one who used it), as well as a frumpy swimming pool that the boatswain filled with seawater for me each day.

Peak Season Surcharge (PSS) – Asia to US

One of the biggest issues affecting PSS is the economic growth in Asia Pacific and the amount of exports to the U.S. The growth in exports is outgrowing the amount of freighter cpacity in the region which creates huge backlogs in cargo. Cargo space becomes a premium on aircraft leaving the region which translates into additional charges to secure space.

In looking at the market conditions especially from SHA, HKG, and TPE, you can typically expect an increase of 25% to 30% during peak. With space at a premium, you may want to check with your forwarder on their contigency plans and their ability to secure cargo space on your specific import lanes.

Incoterms: CIF – Cost, Insurance and Freight

CIF

CIF – Cost, Insurance and Freight – is a very commonly used incoterm. This is another incoterm that officially is not supposed to be used for air shipments, but I have seen its usage in both air and ocean shipments. Officially CIF is only to be used for ocean or inland waterway transport. CIF is basically the same as CFR except that it includes insurance as well as cost and freight.

In CIF, the seller/exporter arranges for the goods to be delivered to the named port of destination. However, unlike CFR, the seller’s risks do not end until the moment the goods have passed the ship’s rail at the named port of destination. The seller is responsible for all costs until the goods have been unloaded at the named port of destination. In this case, the named port of destination is domestic to the buyer, meaning that the named port must be a port in the buyer’s country. For example, if I was exporting cherries to Thailand and the port of destination was Laem Chabang, I would sell it based on “CIF Cost, Insurance and Freight Laem Chabang, Thailand”.

Under CIF terms, the seller’s risks end the moment the goods pass the ship’s rail at the named port of destination, but the seller is responsible for all costs up to the named port of destination :
Seller’s Responsibilities:
1) Produces the goods and commercial documents as required by the sales contract.
2) Arranges for export clearance and all export formalities.
3) Arranges and pays for all costs for the transportation of the goods up to the named port of destination.
4) Assumes all risk to the goods (loss or damage) only up to the point they have been carried to the port of destination and ends the moment the goods pass the ship’s rail at port of destination.
5) Seller must advise the buyer of the location and time that goods have been delivered onto the named vessel.
6) Seller has to provide the buyer with transport documents that will allow the buyer to take possession of the goods at the named port of destination.
Buyer’s Responsibilities:
1) Buyer must pay for the goods as per the sale contract
2) Buyer must obtain all commercial documentation, licenses, and authorizations required for import and arrange for import clearance and formalities at own risk and cost.
3) Buyer takes delivery of the goods after they have been delivered by the seller to the named port of destination.
4) Buyer must assume all risks for the goods from the time the goods pass the ship’s rail at port of destination to delivery into the buyer’s warehouse or other specified location. SPECIAL NOTE: While the seller is obligated to insure the goods and is legally responsible for the goods up to the port of destination, the buyer may have a vested interest in the goods during the voyage. It may be a wise decision for the buyer to purchase additional insurance coverage in the case of a loss.
5) Buyer pays for all costs of transportation, import customs formalities and duty fees, and all other formalities and charges related to the transportation of the shipment from the time the goods have been delivered to the named port of destination.
6) Buyer would accept the seller’s transport documents provided they conform with the sales contract and will allow the buyer to take possession of the goods after arrival at the named port of destination.

This interpretation is provided as a guide only.

Incoterms are published by the International Chamber of Commerce and are available on their website and official publication “Incoterms 2000″. For a complete and official overview please refer to the ICC’s publication.

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