A208: (Importantly, as further background, the seller stowed the container at their premises, i.e., the buyer’s carrier collected “ex works.”)

First, consider the nature of the damage – is incorrect or inadequate stowage the only cause? Then, refer to the contract terms; are there any specific stowage instructions that have not been met?

The seller has no knowledge of the stresses and strains the cargo may be exposed to in transit, and it cannot necessarily be assumed that, given they are delivering at their works, they have any experience in international carriage conditions at all. For example, how much has the journey (that the buyer had exclusive control over) contributed to the damage?

The devil is in the detail. Along with the nature of the goods, the type of damage and the route taken you might need to consider prior dealings and the concept of customary practices.

There are variable factors to contemplate and there isn’t an obvious one-size-fits-all answer. Stowage alone cannot protect cargo against every transit risk.

Incoterms Rules only address certain aspects of a much larger and more inclusive sale agreement, and commercial terms in general often contribute little to the detail of supply chain management.

The obligation and risk of ‘stowage’ in a seafreight container is a case in point.

Incoterms Rules offer no guidance on the subject, except historically and in the negative sense of clarifying its exclusion from the scope of the Rules.

The introduction to Incoterms Rules 2010 clearly stated –
The Incoterms® 2010 rules do not deal with the parties’ obligations for stowage within a container and therefore, where relevant, the parties should deal with this in the sale contract.

Unfortunately, no detailed advice is given in the later and current version of the Rules, Incoterms 2020, but by omission of any reference we can assume it remains an excluded consideration.

Determining liability for damage to goods during transit due to poor stowage will therefore depend on other factors.

Perhaps the most significant of these, apart from the buyer’s instructions, and as mentioned, is any customary practice between the parties or the broader idea of customary trade practices in the relevant industry or region.

Of course, however ignorant, the seller cannot be reckless and as the seller physically stowed the goods in the container a compelling argument can always be made that the seller bears liability, particularly if stowage is inappropriate for the nature of the goods, should the nature of the goods contribute to (or cause) the damage.

However, if the damage occurred due to other factors during transit (e.g., rough seas, bad roads, poor container handling, inadequate storage etc,.) and no specific stowage instructions in the agreement address these risks, the risk of loss or damage after handover to the carrier generally falls on the FCA buyer (allowing that prevailing laws or conventions potentially give rise to exceptions).

Of course, if the buyer (or seller) procured marine insurance, the insurer (should they cover the loss) would investigate further, potentially claiming against the liable party.

It is one of the many benefits of marine insurance that the insurer has the reach and the expertise to go deeper into the matter, whereas the claimant commonly lacks the experience, time, and/or energy to do so themselves.

To the question –

Whenever stowage is the seller’s physical obligation, but is not explicitly addressed in the sales agreement, the seller may still be held liable for damage caused by improper stowage, provided they had sufficient knowledge (from past dealings, say) and had failed to meet an acceptable or anticipated standard.

Be cautious though: once you start to rely on terms like “improper”, “sufficient”, “acceptable” or “appropriate”, matters start to become subjective.

If the damage occurred due to transit risks (e.g., container mishandling) and the contractual risk had already transferred to the buyer under the applicable commercial term (or a governing law), the buyer would in all probability bear the loss.

The buyer cannot control the supply chain and yet deny liability for the inadequate protection of the cargo during that period. In the absence of clear instruction, the seller cannot necessary be held to account for transit risks they have no control over.

Having established the protective packing and packaging specifications for the cargo during the negotiation, and to avoid ambiguity, in seafreight containerised traffic the underlying sale agreement should further specify responsibilities and requirements for stowage, particularly when Incoterms Rules are used, although this is good practice under all contract systems.

Attention to detail will always benefit both parties and it is impossible to be too precise.

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