Background
(1)
International Max Planck Research School, Max Planck Institute for Comparative and International Private Law, Hamburg, Germany
The liability for deck cargo has long deviated from general cargo liability, essentially on the grounds that carriage on deck exposes the goods to additional risks. This is still so today, although the traditional risks involved in deck carriage have decreased considerably due to technical developments.1 This chapter aims to give account of the special characteristics of deck carriage. It is initiated with an attempt to provide a definition for deck cargo, followed by a review of the legal effects of deck stowage on marine insurance policies and letters of credit. Moreover, taking into consideration how deck cargo is exposed to additional risks, there is reason to answer the question of why cargo is stowed on the deck in the first place. The final section focuses on containerisation, a phenomenon that has changed the scenery of world trade and shifted the traditional risk exposure faced by deck cargo.
2.1 Definition of Deck Cargo
What deck cargo is may seem obvious and in most situations it is. Cargo placed on the open deck or above will generally be deck cargo. But what about cargo placed in a permanent steel enclosure above the main deck? Does containerised deck cargo enjoy such a protection that it should be put on par with cargo stowed in the hold? And will the liability regime for deck cargo apply although the cargo is damaged before de facto being placed on deck? These and other issues relating to the definition of “deck cargo” shall be dealt with here.
Neither any of the international conventions nor the national laws dealt with in this study contain a definition of deck cargo. The scarce (and it must be added, dated) case law2 as well as the academic literature3 and the travaux préparatoires to the Hamburg Rules4 and Rotterdam Rules,5 however, are consistent: risk exposure should be the decisive factor when deciding whether cargo shall be considered deck cargo for the purpose of liability. The special liability for cargo stowed on deck is based on the recognition that goods stowed on deck are unavoidably 6 exposed to additional risks in comparison with cargo stowed in the hold. Those risks, which are often referred to as “the special risks involved in deck carriage”, involve among other things boarding seas, rain, moisture and the risk of becoming swept overboard or jettisoned.7 Although deck cargo may be more exposed than hold cargo to other risks as well – such as fire or theft – these risks are not specific to deck cargo and thus, as a rule, are not comprised by the term.8
It follows from the above that it is not possible to provide a general technical delimitation for deck or hold cargo.9 Neither, of course, will the name given in writing in the transport document affect the classification.10 Whether the cargo is in a certain situation exposed to any of the special risks involved in deck stowage must be decided on a case-to-case basis.11
In modern trade, there is reason to assume that goods in a permanent steel enclosure will be considered hold cargo.12 But what about the non-permanent steel enclosure that the container embodies? Although the container can be considered a movable extension of the vessel’s hold,13 also containerised cargo on deck is, de facto, exposed to greater risks than it would be in the hold, albeit to less severe risks than non-containerised cargo. Therefore, also cargo in containers stowed on deck must be deemed deck cargo for purposes of liability.14
Whereas the division into deck and hold cargo presupposes that there is a deck or similar construction, new technology has blurred the traditional limitation. Some modern container vessels15 are of open-top construction, so that there is no deck in the word’s traditional sense. Presumably, on such vessels the tank top will be the “deck” and subsequently all goods deck cargo, because even though the risk will be higher at the top of a stack, also the containers at the bottom are exposed to not insignificant additional risks, e.g. damage resulting from salt water or condensation, in comparison with cargo stowed under the main deck of a vessel with a deck.16
Another question arising in relation to deck cargo is when cargo becomes deck cargo. Is it sufficient that it is intended to be stowed on deck or does it also, de facto, have to be placed there before the liability rules for deck cargo apply? Similar concerns arise where the cargo is initially stowed on deck but later restowed under deck or vice versa. Since the cargo is not exposed to the special risks involved in the carriage on deck as long as it is not placed there, the main opinion in the academic literature seems to be that the cargo should only be considered deck cargo as from the placement on deck and only during the time that it is de facto stowed on deck.17 Exception ought to be made, however, for cargo temporarily placed on deck in order to enable loading operations of other goods.18
2.2 The Impact of Deck Stowage on Other Fields of Law
The rules on the carrier’s liability for deck cargo in the Hague and the Hague-Visby Rules cannot be seen in isolation. The way in which the goods are carried affects not least issues of insurance. The fact that goods are carried on deck normally requires the cargo interest to take out an additional insurance. The main rules governing letters of credit similarly prohibit banks from accepting transport documents containing a statement on deck cargo so that specific instructions have to be tendered where deck cargo is intended.
2.2.1 Insurance
The rules on liability can be viewed as a mechanism for ascertaining which risks will be borne by the P&I insurer (the carrier’s insurer) and which risks will fall on the cargo insurer (the shipper’s insurer). Essentially, the cargo insurance covers damage which cannot be recovered from the carrier. It may be damage not attributable to the carrier’s fault or damage for which the carrier is entitled to limit or exclude liability.19
Under the Hague and the Hague-Visby Rules, the carrier is likely to be held negligent and thus, liable for damage to cargo placed on deck without authorisation.20 Although the carrier’s liability for cargo damage is generally covered by his P&I insurance, it does not extend to damage to deck cargo. The carrier may, however, take out a special so-called SOL-cover for deck cargo, this being a special (non-club) cover, arranged by the P&I club on the open market.21
Where the carrier stows cargo on deck with authorisation, the risk of damage caused by the special risks involved in deck carriage usually falls on the shipper.22 As with P&I cover, neither does the cargo insurance policy cover damage to deck cargo, unless specially designated. The shipper, thus, must designate the deck cargo or it will be off risk.23
It should be noticed in this regard that it cannot be excluded that the carrier will be able to limit or even exclude his liability even if he has stowed cargo on deck without authorisation. At the same time, the fact that the shipper is unaware of the deck stowage does not change his ability to recover under the policy (contrary, for example, to a case of geographical deviation).24 Thus, depending greatly on the law governing the contract, the shipper should consider taking out deck cargo insurance in any case.25
2.2.2 Letters of Credit (UCP 600)
Cargo stowed on deck is, as seen above, exposed to additional risks in comparison with cargo stowed in the hold. At the same time, the cargo interest may not be able to recover full compensation from the carrier under the Hague or the Hague-Visby Rules in the case of damage or loss.26 The importer or buyer (under the transport agreement this person is referred to as consignee or third party holder) thus has an interest, before commencing payment (but also for reasons of insurance as seen above), in knowing whether the seller has procured a contract of carriage in accordance with the underlying contract of purchase.
As the buyer for this purpose is dependent on the information in the bill of lading, the carrier faces a corresponding obligation under the international treaty law on carriages of goods by sea, to insert into the bill of lading information as to deck stowage where the cargo is not placed in the hold. A carrier failing to fulfil his duty to describe the goods will be liable vis-à-vis the buyer for damage or loss arising out of this failure. The buyer is in other words entitled to presume that the bill of lading is “clean” (in accordance with the buyer’s justified expectations) in the absence of information showing otherwise in the bill of lading.27
Where the bill of lading contains a notation on deck carriage, although the buyer has not agreed to carriage on deck, the bill of lading is “unclean”. In such a situation, the buyer (or his bank) is entitled under UCP (Uniform Customs and Practice for Documentary Credits)28 to refuse the documents and the goods.29 Art. 26 of the UCP 600 accordingly prohibits the bank from accepting a transport document, which states that the goods are or will be carried on deck. However, a document containing an option or liberty to stow on deck is acceptable.30 As the UCP Rules apply by way of contractual incorporation they may be modified by the parties through an express statement in the letter of credit.31 Where it is known that the type of goods may give rise to deck stowage, a modification or exclusion of Art. 26 should therefore be undertaken.32
2.3 Why Stow on Deck?
If deck carriage exposes the goods to additional risks, one may ask why cargo is stowed on deck in the first place. There are numerous reasons. Certain goods such as timber and coal have long been loaded on deck due to their weatherproof characteristics.33 As a matter of fact, it has been said that deck cargo was initially excluded from the scope of the Hague-Visby Rules with the Baltic timber trade in mind. This way, the parties would be free to agree on deck carriage locally, whereas deck stowage carried out without authorisation in an agreement would be a serious contractual breach.34
Cargo may further be stowed on deck because the goods simply do not fit in the hold or would occupy too much space in relation to their volume. Dangerous goods, moreover, may have to be carried on deck pursuant to the law for safety reasons.35 Another motive could be financial reasons, as the freight rate for deck cargo can generally be expected to be lower.36 To a certain extent, however, the additional insurance premiums for such cargo mentioned above, ought to counterbalance this advantage.
Finally, containerisation has immensely increased the amount of goods carried on deck. The design of modern container vessels requires that a large amount of cargo is stowed on or above the deck and the protection afforded by the container has resulted in the widest variety of goods being amenable to deck carriage. Heavier containers are stowed in the bottom for the purpose of vessel stability, and containers being discharged at a certain port of destination are stowed in the same stacks.37 Besides that however, the stowage on or under deck is quite arbitrary as the containers are stowed as they arrive at the terminal. When the bottom is full, the remaining containers are stowed on deck.38
2.4 Containerisation
Containerization is a method of distributing merchandise in a unitized form thereby permitting an intermodal transport system to be developed providing a possible combination of rail, road, canal and maritime transport.39
The container is today the standard way to transport general cargo.40 It was introduced in the US in the mid-1950s and soon became a common method of stowage.41 The main reason for the success of containerisation is the great reductions in cost it achieved42 by among other things utilising economies of scale and reducing the risks for cargo damage, the number of port calls and the amount of cargo handling.43 It has, as such, been largely responsible for the globalisation of trade.44
Modern container vessels are designed to carry a large amount of containers on or above deck. For this purpose they have a lofty hull, often several times higher than the hull of a conventional cargo vessel,45 and are equipped with cell guides designed to fit the standard 20 ft and 40 ft containers.46