August 2006 | Commentary | Risks and Rewards

Build Your Case With Bills of Lading

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Q: I work for a company that imports and exports cargo from countries all over the world. One of our import containers was recently stolen from a delivering carrier's lot in Jacksonville, Fla., and was never recovered. Who is responsible for the loss—the Non-Vessel-Operating Common Carrier (NVOCC) that arranged the shipment, the ocean carrier, or the ocean carrier's delivering agent?

A: Unfortunately, because ocean transportation is a complex process involving numerous service providers, determining who is responsible for a loss such as this one can be baffling.

In this case, the loss involves an ocean shipment covered by both an ocean carrier bill of lading and an NVOCC bill of lading. (An NVOCC is recognized as a steamship line, although it does not directly operate ships.)

Ocean carriers issue bills of lading to shippers as evidence that the shipper has entrusted them to transport its cargo. If an NVOCC arranges the shipment, carriers typically list the NVOCC as the shipper on the bill of lading. The NVOCC, in turn, issues its own bill of lading to the customer—the party with the true interest in the cargo.

Bills of lading are key documents that define the rights and responsibilities of all parties involved in a shipment. They contain liability limits and time bar provisions, and establish the period during which carriers and NVOCCs are responsible for the cargo. Under the terms of their bills of lading, ocean carriers agree to be responsible for a shipment for all, or any part, of the transit period.

A carrier's bill of lading, for example, might only cover the ocean portion of the transit, from the origin port to the destination port. Conversely, it might cover the complete transit from the point of origin to the point of destination, or it can cover any combination of origin and destination points. The same is also true for an NVOCC's bill of lading.

Determining responsibility for a shipment takes on an added dimension when underlying service providers are called upon to actually move the goods in question. Each time a shipment changes hands—from a carrier to a trucker or warehouse operator, for instance—an additional document is issued for that segment of the transit.

These transactions might occur in tandem with the terms of the bill of lading, or they might occur outside the time period the bill of lading covers. In addition, these transactions usually take place without the shipper's or receiver's knowledge.

For these reasons, when a shipment is lost or stolen during transit, the transportation documents determine who is responsible for the loss. When a shipper asserts a claim, each party looks to another along the transportation chain to respond.

Where should shippers turn first to cover their losses?

In this case, we don't know whether both the ocean carrier's and the NVOCC's bills of lading were still in effect. While it is prudent to formally notify any party believed to be responsible for the loss, the first step is to return to the party who took original responsibility for arranging the transit and begin the claim there.

This scenario, however, presupposes that the shipment was not insured for loss in transit. If a shipment is insured, determining who is responsible for the loss is much easier—shippers can simply turn to the cargo insurer for payment, and thereafter, the insurer would continue the process of determining ultimate responsibility.

Looking for expert advice about business insurance and liability? Send your questions to Dan Negron, dan.negron@thomasmiller.com

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