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Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
by A.T.M Nesarul Hoque
The practice of stowing cargo on deck has existed since the inception of carriage of goods by sea, even when no formal bills of lading were issued. During that time, there was a clear relationship between a clean bill of lading and cargo stowage under deck, which was also reflected in the present uniform rule, the "Hague Rule".
Shipping lines also incorporated various types of disclaimer clauses as a part of the contract of carriage so they could be exonerated from possible marine perils. Hence, there was a link between the practice of deck cargo through incorporation of a disclaimer clause and the lack of a permissible provision of deck cargo in the law, either national law or uniform law. But the attitude of courts with regard to the above circumstances was mixed.
Later, the invention of containerization dissolved every possible doubt; now containers on deck are recognized as a custom of the trade.
This article will analyze the position of deck cargo under various methods of cargo carriage - from break bulk to unitization to containerization as viewed by different courts and compare these with the present UCP 600 provision.
Deck cargo prior to the Hague Rule
In ancient times, when no formal bill of lading was issued for transportation of goods by sea, the general rule was that cargo must be stowed under deck. A statute of Marseilles, dated 1253, decreed it to be unlawful to carry merchandise on the deck of a ship even by agreement and provided that if so carried, the person responsible for the stowage should be held accountable for any loss occasioned thereby.
The same position prevailed even after the bill of lading came into common use in the sixteenth century. In the 1838 case of Varnard V. Hudson, Mr Justice Story wrote: "Where the goods are shipped under common bill of lading, it is presumed that they are shipped to be put under deck, as the ordinary mode of stowing cargo."
The relationship between the clean on board bill of lading and under deck shipment also prevailed at the beginning of nineteen century. The case of Armour v. Walford and the Peter Helms, deciding the question in Great Britain, noted that: "A bill of lading containing a general clause permitting deck carriage but no statement of deck carriage [on the face of bill of lading] is not a clean bill of lading."
After the Hague Rule
Before the advent of containerization, there was no real problem with respect to the application of the "on deck deviation" rule. This was because the stowage of cargo on deck will substantially augment the risk of losses. Hence, almost all cargo was normally stowed below the weather deck. Moreover, the design of ships during that time was also shaped to carry the cargo mostly under the deck except for a few dangerous/hazardous cargoes, which usually stow on deck following the custom of the trade.
Consequently, the Hague Rule strictly prohibited deck cargo by excluding the same from the definition of the goods. Sub-article 1 (c) of the Rules reads: "Goods include goods, wares, merchandise, and articles of every kind whatsoever except live animals and cargo which by contract of carriage is stated as being carried on deck and is so carried." [emphasis added]
Therefore, when the carrier contracted to carry goods without stipulating the place of stowage, it was understood in the contract that the goods are to be carried under deck. This was one of the basic principles that must be understood in any consideration of deck cargo in light of the Hague Rule.
Hague Rule and disclaimer clauses
Other practices existed during this time. One involved inserting an exclusion/ disclaimer clause as terms and conditions of the contract of carriage. At the beginning, such a clause was incorporated in a very limited way, but later its use increased. In this regard, there's a famous quotation from the annual report of the West of England P & J club in 1889 as follows: "The committee congratulates the members on the absence in recent years of cargo claims which has been brought amount by the new general adoption of the negligence clause; the premium reduction for use of this clause is therefore discontinued."
But much confusion has arisen over printed clauses in the bill of lading which permit carriage of cargo on deck. Both the English and American courts have taken up the question.
Before the English courts
In a case Svenska Traktor Aktiebolaget v. Maritime Agencies (Southampton), Ltd before Justice Pilcher, a tractor was stowed on deck under the following general liberty clause: "Steamer has liberty to carry goods on deck and shipowners will not be responsible for any loss, damage, or claim arising thereform." The tractor washed overboard. The plaintiffs' claim in the action was for the sum of £316 4s. 2d, agreed to have been the value of the tractor. Justice Pilcher held: "A mere general liberty to carry goods on deck did not amount to a statement that the goods were in fact being carried on deck, and that the goods were accordingly carried subject to the obligation imposed by Art. III (2) properly and carefully to 'load, handle, stow, carry, keep, care for and discharge the goods carried.' [emphasis added]
The plaintiffs succeeded and were entitled to recover judgment for the sum claimed with interest at 4 per cent, with costs. Hence, under English Law a clause giving the carrier "liberty to carry goods on deck" without responsibility for loss relieved the carrier from the "fundamental breach concept" and preserved the Hague-Visby Limitation of Liability.
Before the American courts
In the American courts, a general deck carriage clause without a statement on the face of the bill of lading meant that cargo carried on deck was an option not exercised and the deck carriage was a fundamental breach of both the contract and the rules. Cargo stowage on deck was considered to be unlawful deck carriage under the doctrine of deviation (sometimes called quasi-deviation to distinguish it from geographic deviation).
Consequently, general liberty clauses, such as one stating: "Cargo may be carried on or under deck without notice to merchant" or "Cargo to be carried on deck at shipper risk", etc., will be qualified as a "breach of fundamental concept" if the cargo will be stowed on deck at latter stage without having an express agreement or a statement to that effect on the face of bill of lading." [emphasis added].
The Hague Rule after containerization
The invention of the revolutionized box, which we call containers, created dramatic changes in existing systems for the movement of cargo in international commerce by land, ocean and air carrier. Container shipments have not only reduced the cost of transportation, they have also saved time in loading and unloading of cargo from one vessel/ truck/trailer to another and have reduced the risk of damage, loss and pilferage during the movement of goods from one place/port to another. However, this new system of transportation has also caused a myriad of problems.
Major shipping laws, including the Hague Rules, were adopted long before container shipping entered the scene. These laws were unable to envisage the new containerization system. As a result, the question was posed before the courts as to whether or not deck cargo under containership was permitted under the Hague Rules.
At the earlier stage of containerization, a case before the US courts in 1969, Encyclopedia Britannica v. Hong Kong Producer & Universal Marine Corporation concerned a claim for damage by breakage and seawater to approximately 1300 cartons of encyclopaedias shipped by the appellant, Britannica, from New York to its affiliate in Yokohama, Japan. Unknown to Britannica and United, only two of the containers were stowed below deck while six were stowed on the weather deck under a broad liberty clause. The Hong Kong Producer ran into what was described as "boisterous" weather, and two containers (which were on deck) were found to have been damaged. The court held that "On deck carriage of a container without a corresponding notation on the bill of lading was a deviation which deprived the carrier of the US$500.00 per package limitation of liability."
Although the American court didn't extend the deck carriage on the above case, there was a strong argument from the carrier to consider an on deck container as an established custom of trade. But the court repudiated this claim, stating that "There was no evidence at that time to show such a custom existed. The carrier is, therefore, not justified in claiming that the on deck stowage was permissible for that reason." In order to justify an on deck container as a custom of trade, the court required that the text be that nearly all ships stow this cargo on deck as a matter of practice.
Five years after the Encyclopedia Britannica case, the circuit had another opportunity to determine whether the carriage of containers on deck, pursuant to a clean bill of lading, constituted an unreasonable deviation. In Du Pont de Nemours Int'l S.A vs. S.S.Mormacvega, the defendant carrier had stowed the plaintiff shipper's two containers on deck, although there was no agreement concerning the usual under deck stowage. During the Atlantic crossing, the containers were washed overboard. The plaintiff claimed the defendant had deviated from the contract of carriage by having stowed the container on deck.
Turning to the inquiry made in the court below, the appeals court sanctioned findings that:
• Containers on the deck of the Mormacvega were not necessarily subject to greater risks than those stowed under deck;
• Deck stowage was required by the realities and exigencies of the carrier's cargo terminal and ship loading procedures;
• The vessel was specially constructed to permit safe carriage of cargo on deck; and
• The stowage, lashing and checking of the cargo was approved shortly before departure by a surveyor from the National Cargo Bureau.
Specifically, the court noted that while the Mormacvega was built in 1964 for the carriage of general cargo, it was reconstructed, refitted and converted two years later into a combination "break-bulk" and containerized cargo vessel. The substantial structural changes made in the Mormacvega were to permit on-deck stowage of ocean shipping containers." Hence, the court held that deck carriage on a specially designed container ship would not be considered as a deviation.
To achieve economies of scale, the container ship was designed in such a way to enable it to carry goods on deck. A successful containership operation presupposes that approximately 30 per cent of the containers will be carried in this way.
Moreover, in the present shipping industry at least 85% of total cargo is shipped/consigned under container ship arrangements. Usually, containers on deck took place in tiers. The first generation of container ships provided for carriage of containers on deck in tiers only two high. The next generation allowed for up to four tiers high.
With the gigantic container ships used by the major liners today, such as COSCO, P&O/Nedlloyd and Maersk, there are six or more layers of containers all stacked up over and above the deck. It is estimated that there are now over 4,600 container ships in service, and today's container ships now routinely carry containers on deck up to eight tiers high. Korean shipyards have presented designs for container ships with 16.000 TEUs carrying capacity, and the Society of Naval Architects & Marine Engineers (SNAME) reports that designers are working on plans for container ships of up to 22,000 TEU capacity. These ships would have a carrying capacity 50% greater than the large container ships in service today.
A secured and robust container offers extra outer protection than goods packed in paper car tons stowed inside. Carriers also provide special purpose containers such as the "reefers" that supply refrigeration to perishables and sealed containers that are impermeable to light and water. If goods are stowed in these containers, there is no harm in carrying them on deck. This means that on deck shipment is no longer a concern for an average shipper.
In short, in the present containerization era, carriage of container on deck under a general liberty clause is a custom of trade and is therefore a permissible alternation of the Hague Rule.
Deck cargo under the UCP
The use of "on deck shipment" was introduced even before the birth of the first UCP. In fact, on deck shipment first appeared in the Joint Regulations Governing the Handling of Documentary Credits, opened with the principal Copenhagen banks in 1928, which state: "If no instructions to the contrary be given in the credit, we will accept the following: (c) Bills of Lading showing that the goods, or part of same, have been loaded on deck; in such cases, however, we will require delivery of a policy covering deck cargo ...".
The practice of allowing on deck shipment backed by insurance coverage was adopted in the first version of UCP, UCP 82, and continued to exist until the 1951 version in article 21: "Banks have the right to refuse Bills of Lading mentioning the stowage of goods on deck but may accept such Bill of Lading when the documents presented include an insurance policy or certificate mentioning that the goods are stowed on deck."
It was at the 1961 Congress of the ICC held in Stockholm that British delegates informed members that British banks were considering the possibility of accepting the UCP followed by presentation of a report suggesting certain changes that would enable these banks to accept the rules. One was the suggestion that" British banks would not necessarily assume that a defect in the bill of lading would be cured by a policy of insurance providing cover for goods expressly stated to be stowed on deck." The reason was that deck shipment was more liable to result in damage to goods, unless the goods are such that no increased risk of damage was likely, something that a bank cannot know for certain. As a result, "it has always been the practice of British banks to refuse bills of lading showing that the goods have been shipped on deck unless such shipment is authorized by the credit."
In line with the British objection, the ICC Banking commission adopted the following language in sub-article 20 (a) of UCP 222 : "Bank will refuse a transport document stating that the goods are or will be loaded on deck unless specifically authorized in the credit."
Although the use of containers for shipment began in the 1950s, it was not until the International Standards Organization (ISO) created global standards that the use of containers became commonplace. Standards for containers were issued by ISO between 1968 and 1970, ensuring interchangeability between different modes of transportation worldwide.
Because of this, the 1962 revision was silent on container bills of lading. Consequently, during the regime of UCP 222, there was a question as to how this would be received, even by the courts. One court asked: "If containership operators chooses to issue a container bill of lading bearing a provision reserving to the operator the right to stow containers on deck, is it the equivalent to a 'showing of goods on deck' in violation of article 20 of the 1962 revision?"
Sub-article 23 (b) in the 1974 revision clarified the status of container bills of lading having reservation clauses: "Banks will not refuse a transport document which contains a provision that the goods may be carried on deck, provided that it doesn't specifically state that they are or will be loaded on deck." It's likely that the reason behind this provision was that the placement of containers, whether above or below deck, is unascertainable at the time of issuance of the bill of lading. The location of a particular container on a containership is "determined by its weight and size in relation to the size and weight of the other containers to be carried on the same voyage. Consequently, until all of the containers intended to be carried abroad the container ship are received, measured and weighed, the on board location of particular container is unknown." When the containership operator receives a container, the operator cannot inscribe on the bills of lading whether the container will be stowed on or below deck..
During 2000-2001, ICC reiterated its position in favour of the use of the word "may" in one of its official opinions, since this reservation clause does not specify the certainty of a shipment on deck being carried out. Therefore, a transport document containing a clause stating the goods may be carried on deck is not a reason to reject. The practice involving a reservation clause regarding deck cargo in the shipping industry is still going on, and the UCP also recognized the same as a uniform custom.
From the above analysis, we can infer that it has now become trite law that a container on deck is a permissible deviation under the Hague Rule and is well-established before the American and English courts.
After the development of container shipments, ICC has taken several initiatives to accommodate this remarkable change as a uniform custom. Specifically, it has made provision for a transport document bearing a clause such as "shippers load and count", "said by shipper to contain" "Quality, Quantity, Measurements unknown" or similar and has allowed transhipment even in credits prohibiting transhipment provided the goods are shipped in containers, trailers or LASH barges. Now it's time for ICC to take the initiative and consider "container on deck" as an international standard banking practice under a documentary credit.
A.T.M Nesarul Hoque is Assistant Vice President of Mutual Trust Bank Ltd. Special Thanks to Kim Sindberg for his valuable comments. Mr Hoque's e-mail address is: firstname.lastname@example.org
A.T.M Nesarul Hoque is Assistant Vice President of Mutual Trust Bank Ltd. Special Thanks to Kim Sindberg for his valuable comments. Mr Hoque's e-mail address is: email@example.com