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Remnants of a Chinese task force cornered in the Gulf of Lae, as there is no place to go, they park inland.

For some reason it seems also more difficult to shoot at them.

Playing only with the borders and coastline layers, sometime there are errors, however if you turn on other layers, they are clearly inland.

Not sure it is a bug, or just CMO cannot be so exact with the limits.

Is this neutral unit a pier? If so that's why the ships can move on land. In CMO all piers have a 'unrestricted by terrain' zone around them that allows ships to move trough them even if its on land. You can see the outline of the zone if you click on the pier.

Thanks for the explanation, I did not know it.

It is indeed the port of Lae.

From the manual:

When placing piers or single-unit ports in the scenario editor, a blue area appears. Ships can move freely in this area even if it’s
otherwise overland. This is to let them reach the pier placed at a suitable location, and represents canals or channels made to allow
entry to the port. Rotating the pier also changes the location of the blue area.

By standard this zone is oriented north. To get more realistic results, you can change it by Set Orientation in the same way like airbases/runways.