Allocation of Liability for Delivery of Damaged Cargo under Bills of Lading Drafted by the Shipper

The carriage of goods by sea is a complex process that involves many persons from maritime agents, stevedores, and freight forwarders to insurance companies to banks. However, the main legal relations are those between shipper, carrier, and consignee. Each of these persons has its own interests. The shipper’s interest is to receive payment for the goods delivered; the carrier’s interest is to receive freight for the delivery of cargo; the interest of the consignee is to receive the goods of the proper quality.

If the cargo arrives at the port of discharge with any damage, then the carrier is usually liable for such damage since he is subject to liability for the safety of the cargo during its transportation from the port of loading to the port of discharge¹.

This rule responds to the fact that the carrier, when accepting the cargo, issues the bill of lading for the shipper², which is the document confirming the carriage of goods contract and containing its main terms. In addition, the bill of lading certifies the shipper’s right to the cargo and the fact of the cargo transfer to the carrier.

It is the carrier’s obligation to draft and issue the bill of lading in connection with the receipt of the cargo aboard the vessel. However, it is not always that needs of commerce, the customs established in a particular port, or relations between the parties of the carriage strictly correspond to the maxims of law which seem to be immutable.

In practice, shippers often do not wait for the bill of lading from the carrier and do not require the carrier to issue it, and provide the draft of the document themselves, pursuing various goals (as a rule, it is related to the necessity to reduce the time which is spent on the formal procedures at the port of loading). The carrier only has to affix the signature thereby “transforming” the draft directly to the bill of lading with evidential value. Under such circumstances, the statements set forth in the draft of the bill of lading by the shipper become the facts confirmed by the carrier. It also includes the information on the cargo and its condition at the moment of loading, which is essential for the allocation of liability under the carriage of goods agreement.

In this case, it is possible that according to documents the cargo is sent in good condition without any reservations on its appearance from shipper’s view, but the cargo arrives at the port of discharge with obvious visible damage. In such circumstances, it is not disputed that the consignee is entitled to compensation of losses caused by the delivery of the damaged cargo. However, should the carrier be entitled to argue that the cargo condition was unknown to him at the date of the bill of lading since he relied on the shipper’s statements stipulated in the shipper’s draft of the bill of lading? In other words, is it possible to affirm that the draft of the bill of lading prepared by the shipper includes assurances in regard to the cargo condition?

It is important to note that the bill of lading is drafted on the basis of the information provided by the shipper. In this regard, the shipper guarantees to the carrier the reliability of this information³. At the same time, if the carrier does not make any reservations in the bill of lading in regard to the goods’ appearance, it is assumed that the cargo was accepted to the carriage in the good external condition. Therefore, any defects in the cargo detected during its unloading and delivery to the consignee were made during the transportation.

However, it would be unfair to impose liability on the carrier even if the carrier did not have any opportunity to verify the external condition of the cargo and agreed with its description provided by the shipper in the draft of the bill of lading.

Meanwhile, since the carrier is obliged to issue bills of lading, it is the carrier who has to verify, as far as possible, the accuracy of the description provided even if the draft of the bill of lading was submitted with the description of the cargo appearance as a good one. If the carrier cannot inspect the cargo, he has to indicate that the cargo description was provided by the shipper without inspection by the carrier since the external condition of the cargo can only be established by its physical inspection. The said is reflected in judicial practice. The courts note that when accepting the cargo carrier shall verify the accuracy of the records made regarding the number of packages, as well as their markings and numbers, the external condition of the cargo and its packaging⁴.

However, the physical inspection is not always an option available to the master of the vessel and depends on the circumstances in the port of loading and the actions of the shipper. For example, the cargo can be presented in a package without the possibility of its opening for the identification. In this case, the master is deemed to have a duty to take reasonable steps for inspection of the cargo, but he does not have to violate the standard procedures of loading or damage the package. For instance, the courts point out that the carrier does not have a real opportunity to verify the actual quality of the cargo if it was presented in the container with the shipper’s locking and sealing device⁵.

Since the bill of lading shall be issued by the carrier, the description of the cargo should be stipulated on the basis of the inspection by the master and not by another person, e.g. the shipper. It follows that even if the shipper was not aware of the cargo condition when drafting the bill of lading or he expected its good external condition, the master is still obliged to verify that.

Furthermore, the description of the cargo contained in the bill of lading is inseparably linked with the fact of its issue (when the cargo is loaded aboard the vessel). Consequently, any statement of the shipper in the draft of the bill of lading on the cargo condition should not be relevant for the carrier since the bill of lading is intended to reflect actual circumstances that took place at the time the loading has been completed and not at an earlier time.

Therefore, the cargo description contained in the draft of the bill of lading submitted to the carrier by the shipper cannot be regarded other than as an assumption of the latter, and the draft itself should be regarded as an auxiliary document intended to assist the master in issuing the bill of lading. However, the master should not take this draft without objections and should, if it is possible, make its own assessment of the facts set out therein. Otherwise, it would lead to the situation when the shipper may have provided the damaged cargo and misinform the carrier in regard to its condition. Under such circumstances, the shipper might have been aware of the existing damage but would have had an opportunity to avoid liability.

Taking into account the above mentioned, the carrier should not rely unconditionally on the statements regarding the condition of the cargo stipulated in the draft of bill of lading. It is advisable for the carrier to carry out its own inspection of the cargo, to make the conclusion in regard to its condition, and only then to decide whether or not to sign such a document. If the carrier disagrees with the cargo description, he should draft a new bill of lading or add appropriate reservation to the draft provided, stating that the description of the cargo was provided by the shipper without verification since the carrier had no opportunity to confirm or deny this information due to the fact that the opening of the packages was impossible or there were any other objective obstacles to its inspection. In turn, consignees are advised to inform the carrier immediately of any defects of the cargo detected while unloading or at the time when the physical inspection has become possible for the consignee. ■

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