Pre-Carriage, Carriage and On-Carriage explained

release of cargo without bill of lading

All of you in the industry have heard of the terms Pre-Carriage, Carriage and On-Carriage..

The difference between these terms needs to be understood very clearly by everyone involved in the shipment of a container in order to ensure that the relevant roles, responsibilities, costs and risks of the various parties are clearly defined and understood..

A simple definition of the terms Pre-Carriage, Carriage and On-Carriage would be :

  • Pre-Carriage – The movement that happens BEFORE the container is loaded on the ocean going vessel
  • Carriage – The movement that happens while the container is ON BOARD the ship
  • On-Carriage – The movement that happens AFTER the container is discharged from the ocean going vessel

To explain further :


Pre-Carriage – is the term given to the movement that takes place prior to the container being loaded at a port of loading on to an ocean going vessel.. Such activity can take place at the same location as the port of loading, or at a location close to the port of loading..

Example : Empty container is released in Johannesburg and moved to Pretoria for packing and then moved by road or rail to Durban port..

This activity is known as PRE-CARRIAGE..

If the activity is performed by the shipping line on behalf of the client, that movement is called Carrier Haulage..

In this case, the bill of lading will show Place of Receipt as Pretoria indicating that the carrier took over the cargo at the place of receipt (to be remembered when using FCA Incoterms Rules)..

In a Carrier’s haulage, this activity can be performed by the carrier using rail, road, or inland waterways transport..

If the activity is performed by the client or their transporter, that is called Merchant Haulage.. This activity can be performed using rail, or road transport..

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Carriage – is the term given to the movement of the cargo by sea from the port of load to the port of discharge.. Example : When the container is moved from Durban to say Hamburg by sea.. This activity is known as CARRIAGE..

This activity can be performed only by the shipping line/vessel operator who is undertaking to carry the cargo from point A to point B and the bill of lading issued by the ship owner/shipping line is the evidence of the contract of such carriage..

Image for Pre/On Carriage

On-Carriage – is the term given to any movement that takes place after the container is discharged at a port of discharge from the ocean going vessel..

Such activity can take place at the same location as the port of discharge, or at a location close to the port of discharge..

Example : Full container is discharged at Durban and then moved by rail to Johannesburg City Deep terminal and then further moved by road to Sasolburg for unpacking..

This activity is known as ON-CARRIAGE..

If the activity is performed by the shipping line on behalf of the client, that movement is called Carrier Haulage..

In this case, the bill of lading will show Place of Delivery as Sasolburg..

In a Carrier’s haulage, this activity can be performed by the carrier using rail, road, or inland waterways transport..

If the activity is performed by the client or their transporter, that is called Merchant Haulage.. This activity can be performed using rail, or road transport..

 

Conclusion

Just yesterday I received a query from a reader seeking assistance about some “destination charges” which their freight forwarder was charging them without any explanation..

The client was of the understanding that these destination charges were covered as part of the on-carriage charges which was already paid by them..

Customers must be VERY CAREFUL and understand the differences with these two terms Pre-Carriage and On-Carriage, who pays for what in a shipment, what are the modes of haulage and understand the costs and activities covered under these two terms when it is done on Carrier Haulage..

*** End of Article ***

19 thoughts on “Pre-Carriage, Carriage and On-Carriage explained”

  1. Good day Sir,
    I would request to have your advise on a scenario, I framed below as an example.

    Being a trader, if I have situation where I got a International supplier (A) and my local buyer is (C)
    My client (C) has import customs duty exemption in the country of destination/POD. Hence my sales contract with my client (C) is on CIF, basis and I submitted my quote and received a PO from my client (C) accordingly. Payment terms with my client are: After 30 days, from the date of receiving the goods at client’s warehouse.

    On the other hand I placed a PO, to my supplier (A), as per the quotation I received from them and my agreement with supplier (A) is on CIF basis. Payment terms with supplier are LC.

    Now, as I mentioned above my client has import customs duty exemption, he wants to take care of the customs formalities and clear the goods from port of discharge.

    For me being a trader, neither my supplier (A) has to know my selling price to client (C) nor my client (C) has to know my buying price from supplier (A).

    Could you please advise how to manage the documentation in such transaction, where I have to provide the original shipping documents to my client to clear the goods from customs, through their authorized clearing agent?

    Apologies, my question is not related to the above article.

    Reply
  2. Can you say a previous vessel in a transhipment operation is the “Pre-carriage” or it applies only to inland transportation ?

    Reply
    • Hi Nikolas, usually pre-carriage is associated with inland.. But there are cases wherein there are feeder vsls used and in that case the bill of lading may show the first vsl name under the column Pre-Carriage by and the main vsl will be shown under the vessel name.. Trust this helps..

  3. Hariesh,

    Of course there can be, and usually is, more than one contract that applies to the international shipment of goods. Each contract sets forth the terms each party to the sale, purchase and movement of goods are willing to deal, and specifies their rights, duties and liabilities.

    But do not miscontstrue the term “risk” and where and to whom and when it transfers. Total and unconditional “risk” for the goods never transfers to a shipping line. That ultimate risk is borne by either the seller or the buyer. The transfer of that total risk depends upon the Incoterms® 2010 rule the seller and the buyer agree on in their sale contract. The Incoterms® 2010 rule is normally not reflected on a bill of lading, nor is it reflected in the contract of carriage with the shipping line.

    Note that the MSL Standard Terms and Conditions (STC)you referenced says that the contract of carriage is governed by the Hague Rules or the Hague-Visby Rules, which are incorported into the STC.

    The shipping line is only responsible for its own acts of negligence, not for the overall safe keeping of the goods.That is why a seller or a buyer, or both, depending upon the chosen Incoterms® 2010 rule, is well advised to insure the goods against loss or damage. There may be instances where the goods are damaged at any point in their journey, and yet the carrier is not responsible.

    Reply
  4. The designation of “Pre-Carriage, Carriage, and On-Carriage” are merely terms that designate the point at which the shipment is at any given time. Those terms have nothing to do with either point of designated delivery, or point of designated transfer of risk

    Reply
  5. i have the following situation :
    I buy from a supplier in germany ex works in containers. i am reselling the cargo to a buyer in dubai on cfr basis.the buyer in dubai has an insurance based “from port to port”.
    i understand the situation as follows :
    the transport of goods from the premisses of supplier in germany to the port (in this case antewerp) is not insured. I have asked an insurance company to get an insurance from ex works to the port. the answer was no, as they give insurance for the whole voyage. but final receiver is ensuring goods from port to port. what solution can be found?
    Helen

    Reply
  6. Hi!

    Thanks David, your response is very informative.

    In fact what I should have mentioned earlier regarding the difference in the cargo clauses available for multimodal transport and not only as normally sought after marine insurance.

    How do we ensure complete insurance for cargo under multimodal transport? The loading / unloading and road, rail and sea transports involved expose the cargo to different nature of risks at each stage.

    With regards,

    Mahesh

    Reply
    • You can’t jump into insurance until you know which Incoterm rule you will be using. Transfer of risk is a key element in who is responsible for loss, the seller or the buyer. Are you a manufacturer? Are you an importer? Are you a freight forwarder?

  7. Hi!

    I am tempted to expand the discussion a little further in light of the problem brought to this blog a couple of days back by an importer from Nepal whose cargo had been entrusted to a freight forwarder under ‘EXW’ term from the exporter.

    When such a cargo is handled by multimodal transport how do we distinguish between pre-carriage, carriage or on-carriage?

    Does insurance cover make any such difference regards the risks the cargo is exposed?

    With Regards

    Mahesh

    Reply
    • The designation of “Pre-Carriage, Carriage, and On-Carriage” are merely terms that designate the point at which the shipment is at any given time. Those terms have nothing to do with either point of designated delivery, or point of designated transfer of risk. These are both determined by the designation of an appropriate Incoterms® 2010 rule in the sales contract, and which determines between the seller and buyer when delivery and transfer of risk will occur.

      Regarding insurance coverage; transfer of liability and risk are defined in the chosen Incoterms® 2010 rule. The decision of a seller or a buyer to insure or not to insure the goods will be determined by what Incoterms® 2010 rule is chosen.

      I assume you are familiar with Incoterms® 2010. If not, and if you are in any way involved with the international shipping of goods, I suggest you Google the International Chamber of Commerce (ICC) or go to http://www.iccbooks.com/Product/CategoryInfo.aspx?cid=144 and purchase a copy of the Incoterms 2010® book. This should answer your questions in detail.

      Or refer to a synopsis of the Incoterms 2010® rules on the many web sites that offer free, but misleading and incomplete, charts as to how to generally interpret and apply the Incoterms 2010® rules. Relying on these, without reference to the actual underlying Incoterms 2010® rules can be very dangerous.

      Caveat . . . . the synopsis and the Internet charts are NOT the Incoterms 2010® rules. The actual rules are much more detailed. Without a complete copy of the actual rules, anyone venturing into a shipping agreement is flying blind.

      See also: http://export.gov/faq/eg_main_023922.asp
      See also: http://en.wikipedia.org/wiki/Incoterms

    • Hi David and John – these terms do have relevance in terms of transfer of risk or point of delivery in the view point of a shipping line and the contract of carriage.. That is why they are shown on the Combined Transport bills of lading issued where there are specific fields showing PLACE OF RECEIPT and PLACE OF DELIVERY..

      The move from Place of Receipt to Port of Loading is called Pre-Carriage and the move from Port of Discharge to Place of Delivery is called On-Carriage and by updating information in these two fields when issuing a Combined Transport Bill of Lading, the shipping line undertakes this movement which means they also undertake the associated risks either directly or via their 3rd party contractors and this will be determined by their bill of lading terms and conditions..

      As an example you can read Section 5 of MSC’s bill of lading terms and conditions

      A seafreight shipment could be governed by two contracts :

      1) The commercial contract between the Seller and the Buyer governed by the Incoterms®
      2) The contract of carriage between the seller or buyer and the shipping line governed by COGSA and the bill of lading is the evidence of such contract

      A shipping line is not interested in the commercial contract between the seller and the buyer.. They are guided by the contract of carriage that is entered into between themselves and the booking party, whether it is the seller or the buyer.. Who books this cargo/controls the shipment will depend on the Incoterms®..

  8. To enlarge the image, all you have to do is right click it and then click on “Save Image As” . . . .save it to a file and open it with your photo program. You can then make it as large as you want.

    Reply
  9. I really enjoy your site. I am glade I stumbled across it a few months ago. IS it possible to make it so you can click on the images ie. that nice diagram you have there so it will expand to a larger image??

    Reply
  10. Hi Hariesh
    As always a topical and entertaining blog
    If I may expand please …PC and OC may also be conducted by SEA where the
    Mother / Ocean Vessel may not call directly at origin and destination ports .
    East London ZA and Walvis Bay NA may be good examples having in the past being served regularly by local feeder operator Unicorn / OACL either via Durban or Cape Town (and vice versa).
    An ocean liner serving UK may only call directly at Tilbury and then offer a feeder service to / from Felixstowe …and vice versa

    Reply

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