Container Depot as a Performing Party under the Rotterdam Rules with a Misleading Case Study

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Note: Queries 2 to 4 were added on 13 September 2010.

1st Query from XX:
Dear Mr. Lee,
With respect and pleasure always to read your articles in DCI. I noticed in the latest issue (Spring [2010]) that you mentioned "the container yard and the container freight station were not parties to a contract of carriage by sea..." I am wondering whether the statement is wrong spelled. CY and CFS are both places to handle FCL or LCL. How come they become parties? Anyway, I can guess what you mean here.
Please clarify if my guess is right. Thanks for that.
Best regards
XX

1st Response from T.O. Lee:

Dear XX,

A contact of carriage made under the Hague/Visby Rules or the Hamburg Rules, such as a port-to-port bill of lading, is made between the shipper and the actual carrier that provides the means of carriage, the cargo ship for sea carriage. Depending on the terms of carriage printed at the back of the bill of lading, it should also cover the consignee and endorsee (named as "merchants") as parties to the contract of carriage.

The container depot, according to its function, is divided into two parts, (a) the container yard (CY for handling FCL stowage) and (b) the container freight station (CFS for handling LCL stowage). They are only contractors to the carrier, under a separate contract with the carrier, not involving the shipper or the consignee. Hence the container depot is not a party in the bill of lading according to the Hague/Visby Rules or Hamburg Rules. As a result, the consignee cannot claim directly to the container depot in case the carrier goes bankrupt as there is no contractual relationship between the consignee and the container depot.

Therefore, under the Hague/Visby Rules or Hamburg Rules, the shipper or consignee has to claim firstly on the carrier, failing which to the cargo insurance company, but not directly to the container depot. The carrier or the cargo insurance company (after subrogation to claim in the name of the consignee) may counter-claim on the container depot after meeting claims from the consignee.

Now under the Rotterdam Rules, the container depot is also a "performing party" to the contract of carriage such as a port-to-port bill of lading. That means the consignee can claim directly to the container depot for any damage made by the container depot. The purpose is to add contractual responsibilities to this service provider. This is to ensure that in case the carrier declares bankruptcy, the consignee can also claim on the container depot under the bill of lading that is subject to the Rotterdam Rules.

This is what I really mean.

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Best regards,

T. O.

2nd Query from XX:
Dear T.O,
How are you doing?
Recently I am facing with many puzzled problems. It's about my article towards TA688. I know you are very knowledgeable in transport and insurance industry. So I am writing to you, hopefully you could help me.
Ron sent my article to both Mr. D. S. and Mr. S. T. They give different opinions which made me really puzzled. It's like "the more you know, the more you don't know". Okay, let me get to the point.

Whether an insurance policy can be made out to order or to bearer without indicating the identity of the original insured is correct or complying with practice?
Whether insurance documents are transferable documents instead of "negotiable documents"? Some acts use "negotiable" like the Rotterdam Rules, some use "transferable". Is there any difference between "negotiable" and "transferable" to describe insurance documents or bills of lading?
One expert thinks if an insurance policy is made out "to order", it needs not endorsement, whereas, if it is made out "to order of XXX", it needs endorsement. Is that correct? I would think both need endorsement.
One expert also thinks if an insurance document is issued “pay to bearer” or “pay to order” then it is payable to the bearer. I don't think the same. To me, "pay to order" still requires endorsement as shown above. But "pay to bearer" doesn't require endorsement. How do you think of it?
ISBP681 179 states: "A document issued to bearer is acceptable where the credit requires an insurance document endorsed in blank and vice versa." I couldn't agree to it. To me, "blank endorsement" is different from "to bearer". The former still constitutes an endorsement but the latter will be transferred only by delivery without any endorsement. Am I correct? I explain this in my article to read the following:
Take the Geneva Convention as an example. The original meaning of article 12 means that if a transferer writes down its name and the wording “(Pay) to bearer”, this has the same effect as an endorsement in blank, which still constitutes an endorsement. But if a bill is payable to bearer, it does not need any endorsement; it will be only transferred by delivery. This is totally different from an endorsement “to bearer”. In fact, blank endorsement emphasizes that the holder (not the transferer) of an instrument need not make an endorsement if it wants to re-transfer. But the transferer needs to write its name on the back of the instrument in order to fulfill a blank endorsement and deliver it to the holder.
I need your help to clarify the above questions. And many thanks for that.
Kind regards
XX

3rd Query from XX:
Dear T.O.
May I have your response tomorrow cause it's urgently needed? Many thanks for that.
I have another question which also needed your explanation. An LC prohibits transshipment, but the beneficiary instructed the shipping company to effect transshipment, which incurred losses of goods. Will the insurance company pay the assured if it is under FPA?
Look forward to your prompt reply.
Best regards
XX

T.O. Lee's Response to Queries 2 and 3:

Dear XX,
I need to do some research to answer your previous questions and this would take a lot of time. I will do it when I am free.
I believe your question on transshipment is a fabricated one. As I am very busy serving clients, I cannot afford the time to answer fabricated questions that may not fit in the trade practices.
If I answered the queries it would mislead the enquirers to think that their fabricated scenarios are possible, whereas they are mission impossible.
For example, a shipper has not the knowledge, experience, connections and up-to-date information to arrange transshipment. Transshipment can only be arranged by the carrier, who has good connections with other carriers and who know the availability of the vessels at the port of transshipment.
T. O.

4th Query from XX:
Dear T.O.
Thanks for your reply though I haven't got the final answer. :-)
I understand how busy you are and how serious you are towards my questions. Okay, I will be waiting till you have enough time.
As to the last question on transshipment, I got it from a domestic forum. But I do think there is possibility that the carrier (as you mentioned) may transship the goods though the LC prohibits. Under such circumstance, will the insurer compensate the assured if the losses occurred in the course of transit? If the answer is "yes", I would think it's unfair to the insurer. If the answer is "no", then the carrier cannot manage well the journey cause there are some times he has to do so because of special factors (war, accidents, etc.). That's why I am asking you. The post is not well organized. You are really knowledgeable to see the rips. :-)
Keep waiting.
Best regards
XX

T.O. Lee's Response to Queries 2 and 4:

Dear XX,
Your query on cargo insurance coverage for damages due to transshipment is a very complex issue to me because "the more I know, the more I don't know".
The following material facts will determine whether the insurer is responsible for the claims on damages or loss due to transshipment. These facts also determine whether the insurer can counter-claim on the carrier.

Are the damages or loss PROXIMATELY (in simple terms the main or closest reason) related to the transshipment?
If the answer to 1 is No, then are the damages or loss PROXIMATELY (in simple terms the main or closest reason) caused by the transshipment?
If the answer to 2 is Yes, then are the damages or loss due to Act of God?
If the answers to 2 is No, then are the damages or loss due to

cargo ship in transit voyage being not cargo-worthy?
cargo ship in transit being not sea-worthy?

timing is also an important factor.
subject to Hague/Visby or Rotterdam Rules

negligence of the carrier in transshipment?

We have to stop right here or such questions will be endless.
So we have a decision tree in front of us. The trunk branches out to many main branches, branching out further to many sub-branches, sub-sub-branching further and further....
Hence it is not possible to give a definite answer until all the branching out questions are answered.
That is why we should not waste time answering mock-up case studies created by laymen because such fabricated case study does not make sense. It will lead to nowhere. If I try to give a definite answer, based on some assumptions, it will further mislead the enquirer. This is more dangerous.
T. O.

This document is the 1st episode of "Misleading Case Study".

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