Advisories & Insights

Some Mar. Abbrv. Defined

September, 2014
By Marilyn Raia

Today's modern communication methods, including those allowing a limited number of characters in a message, have prompted the frequent use of abbreviations, for example, BTW and OMG. Internationally recognized abbreviations have been in use by people communicating in the maritime and marine insurance industries long before the first smartphone or computer was sold. This column defines just a few of the more commonly used abbreviations in the cargo and marine insurance contexts.

Cargo

CFS/CFS – Container Freight Station/Container Freight Station – This notation on a bill of lading means the goods to be transported under it are given to a carrier at its container freight station, and the carrier or someone acting on its behalf loads the goods into a shipping container. The goods are then transported to another container freight station where they are unloaded from the shipping container by the carrier or someone acting on its behalf, and delivered there to the intended receiver. A bill of lading with the notation "CFS/CFS" is prima facie evidence of the good order, condition, and quantity of the goods upon tender to the carrier for transportation because the carrier has the opportunity to see the goods.

CIF – Cost, Insurance, and Freight – The title to and risk of loss of goods sold on CIF destination port terms transfer from the seller to the buyer when the goods pass over the ship's rail at the load port. The seller's invoice to the buyer includes the cost of the goods, the freight to the destination port, and the cargo insurance premium. If a shipment sold on CIF destination port terms is lost or damaged in transit, the buyer may be at a disadvantage because it must seek recovery from the seller's insurer, which is often in another country.

COGSA – United States Carriage of Goods by Sea Act, currently found in a note at the end of at 46 U.S.C. §30701. COGSA is a federal statutory scheme of carrier liability and defenses enacted in 1936 that mandatorily governs bills of lading or similar documents of title that evidence a contract for the carriage of goods to or from the United States in foreign trade. Any term in a bill of lading that attempts to lessen the liability imposed on a carrier under COGSA is void as a matter of US law.

CWT – A Hundredweight – It is used as a measurement of weight in certain commodity contracts. In the United States, a hundredweight is 100 lbs. or a "short hundredweight". In the UK, a hundredweight is 112 lbs. or a "long hundredweight".

CY/CY – Container Yard/Container Yard – This notation on a bill of lading means the goods transported under it are tendered to the carrier in a sealed container at its container yard (terminal) and delivered in the sealed container to the intended receiver at another of the carrier's container yards. A bill of lading marked "CY/CY" is not generally considered prima facie evidence of the good order, condition, and quantity of the goods at the time they are tendered to the carrier for transportation because the carrier has not had the opportunity to see them.

EIR – Equipment Interchange Receipt – It is a receipt issued by a terminal when a container and a chassis enter or leave. The EIR provides details about the container and chassis such as their numbers, weight, and condition. The EIR also provides the date and time the container and chassis entered or left the terminal. If a shipment is delivered at destination in a damaged condition, the EIR is one of the documents used to determine where the damage occurred and who is responsible for it.

FOB – Free on Board – The title to and risk of loss of goods sold on FOB load port terms transfer from the seller to the buyer when the goods pass over the ship's rail at the load port. When goods are sold on an FOB load port basis, the buyer arranges for and pays the costs associated with insuring the goods and transporting them to the intended destination. If the goods are lost or damaged in transit, the buyer will seek recovery from its own insurer.

NVOCC – Non Vessel Operating Common Carrier – An NVOCC is a company that contracts with its customers to transport goods but does not itself physically transport them. Instead, an NVOCC books space on vessels and consolidates shipments from its various customers to take advantage of the lower freight rates it can obtain from vessel operating carriers. NVOCCs issue bills of lading and have carrier liability to their customers if the shipments are lost or damaged. In turn, NVOCCs can pursue recovery from the vessel operating carriers responsible for the loss or damage.

SL&C - Shipper's Load and Count – This notation on a bill of lading means the goods transported under the bill of lading were loaded into the shipping container by the shipper or someone acting on the shipper's behalf, and not by the carrier. It has the same legal effect as a bill of lading marked "CY/CY", that is, it is not prima facie evidence of the good order, condition, and quantity of the goods when tendered for transportation because the carrier has not had the opportunity to see them.

Marine Insurance

A/R – All Risk – This type of insurance covers all risks of physical loss or damage to the insured property from an external cause unless otherwise specifically excluded. Examples of causes of loss or damage that are not covered under all risk insurance include ordinary wear and tear and inherent vice.

F.C.&S. and S.R.&C.C. Warranties – Free of Capture & Seizure and Strikes Riots and Civil Commotions Warranties – Most cargo insurance policies contain F.C.&S. and S.R.&C.C. Warranties. Although referred to as warranties, they are really coverage exclusions. They exclude coverage for loss or damage due to capture and seizure, the consequences of war and warlike operations, and nuclear attack as well as loss or damage caused by acts of strikers, locked out workers, or persons taking part in riots, labor disturbances, and civil commotions. It is possible to purchase coverage for the risks excluded under the F.C.&S. and S.R.&C.C. warranties either with a war risk insurance policy or a policy endorsement, both of which will involve an additional premium.

LOU – Letter of Undertaking – A letter of undertaking is similar to a letter of guarantee. Under admiralty law, a vessel itself may be sued and held liable for damages. For a lawsuit to proceed against a vessel, the vessel must be arrested by the United States Marshal. When the underlying claim is covered by insurance, the arrested vessel's marine insurer customarily comes to an agreement with the arresting party for the posting of a letter of undertaking to stand in place of the vessel in the lawsuit. Although not statutorily provided for, if the parties agree, the court will order the vessel released from arrest upon the posting of a letter of undertaking. The letter of undertaking is usually in the amount of the claim plus interest and costs. A marine insurer will not issue a letter of undertaking for an amount greater than the insured value of the arrested vessel. The letter of undertaking guarantees payment of a judgment against the vessel after appeal, up to the amount specified.

PA/FPA – Particular Average/ Free of Particular Average – A partial loss of insured property is called particular average. When goods are insured on FPA terms, the cargo insurer does not pay for partial losses of the insured property unless the losses were caused by the carrying vessel having stranded, sunk, burned, or collided with another vessel. Goods frequently insured on FPA terms include used machinery, plate glass, lumber carried on deck, and scrap metal.

P&I – Protection & Indemnity – It is a type of liability insurance that covers a vessel owner's liability "as owner of" the vessel(s) named in the policy. For coverage to exist under a P & I policy, there must be a causal connection between the injury or damage and the operations of the vessel(s) named in the policy. P & I insurance may be provided by a marine insurance company or by a P & I Club, which is a mutual association of vessel owners who make contributions to a fund and insure themselves through the fund.

S/L – Sue and Labor – most marine insurance policies contain a "sue and labor" clause. Under that clause, in the event of a loss, the insured is obligated to take steps to avoid future damage and/or minimize damage that has already occurred. The clause further provides that the insurer is obligated to reimburse the reasonable expenses incurred by the insured if the avoided or minimized loss is covered under the policy.

TL – Total Loss – There are two basic types of total loss: an actual total loss and a constructive total loss (CTL). When cargo or a vessel is completely lost or totally destroyed and is no longer in existence as it was, it is an actual total loss. When the cost to repair a damaged vessel or cargo exceeds the amount for which it is insured, the damaged cargo or vessel is said to be a constructive total loss.

Abbreviations and acronyms are now a firmly entrenched part of everyday modern communication methods such as e-mailing, texting, and tweeting. The maritime and marine insurance industries worldwide have long used a wide variety of abbreviations and acronyms, which should be understood and used for more efficient communication.

Marilyn Raia is of counsel in the San Francisco office of Bullivant Houser Bailey. She has been certified as a specialist in Admiralty – Maritime law by the Board of Legal Specialization of the State Bar of California. She can be reached at marilyn.raia@bullivant.com.

Outside Link: www.pacmar.com/story/2014/09/01/maritime-law/some-mar-abbrv-defined/277.html

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