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Friday, 18 December 15
WHEN IS A MASTER ENTITLED TO REFUSE DAMAGED CARGO? A REMINDER - THE STANDARD CLUB
 KNOWLEDGE TO ELEVATE
A master’s authority to clause bills of lading issued by or on his behalf can sometimes become the cause of disagreement between shippers, charterers and carriers.
Under Article III Rule 3 of the Hague/Hague Visby Rules after receiving the cargo, and on the demand of the shipper, the master is obliged to issue a bill of lading evidencing the quantity and apparent order and condition of goods to be carried.
The buyer of cargo, the consignee in an international trade, will want the subject bill of lading to be accurate and contain unambiguous remarks as to the quantity, quality and condition of the said cargo – so he knows exactly what he is purchasing. Conversely, the shipper/seller will primarily want a clean bill of lading to be issued, in order to trigger payment under the subject letter of credit.
On the other hand the master/carrier, to protect himself, may very well want to insert a clause in the subject bill of lading that better describes the condition of the cargo; otherwise he may be concerned that he will be subject to a claim by the lawful holder of the bill for ‘damaged’ goods at destination.
The master’s rights / obligations
Whilst under many time charterers there is usually a contractual provision which states the master is obliged to sign bills ‘as presented’, where the master is presented with a bill of lading, for signing, which the master has reasonable grounds for suspecting contains factual inaccuracies as to the subject cargo, such as an incorrect description as to the cargo’s condition, the master is generally under no obligation to sign it.
However, and practically speaking, he will often be under extreme commercial pressure to issue clean bills in exchange for a letter of indemnity (LOI) from his charterer. The problem the master/carrier has in these circumstances is that such a LOI may well be unenforceable, as a court could consider the indemnity to be perpetrating a fraud against the lawful bill of lading holder – certainly if the bill of lading inaccurately records the apparent order and condition of the cargo.
It should also be mentioned that there will be club cover implications where a master or member issues a bill of lading with knowledge that it contains an incorrect statement as to the quantity, quality or condition of cargo loaded on board the ship.
In these circumstances, provided the master has reasonable grounds for suspecting the quantity, quality or condition of the cargo loaded on board the ship and described in the bill is inaccurate, he may refuse to sign the bill of lading ‘as presented’. However, if the master unreasonably refuses to sign or authorise the issue of such a bill of lading he runs the risk of being in breach of Article III of the Hague/Hague-Visby Rules and possibly also liable to his charterer (under the subject charter) for any delay and consequent costs/losses down the chain.
What constitutes a reasonable refusal will, as with all things, turn on the particular facts of the case. However, the English courts handed down some useful guidance in The Boukadoura.
Here there was a difference between the shore and ship figures of about 1%. The master was prepared to put both the ship and the shore figures on the bill of lading, but the shippers refused and insisted on the shore figures being so inserted. In an attempt to resolve the dispute a second draft survey was carried out by an independent surveyor. This confirmed the ship’s figures, but the shippers nonetheless refused to accept a bill of lading showing the ship’s figures. Ultimately, and after considerable delay, a bill of lading based on the ship’s figures was issued and the cargo was carried to its destination and discharged, without any shortage claim. The charterer however subsequently claimed for the time lost due to the delay at the load port. Although the charterparty provided for bills of lading to be issued by the master ‘as presented’ the court agreed that the master was only obliged to issue a bill lading for the quantity of cargo he reasonably believed to have been so loaded.
Concluding remarks
There are no clear-cut guidelines to determine when, or if, a master can reasonably refuse to issue a bill of lading if he considers the quantity (or quality, condition) of cargo as shown on the bill to be inaccurate. Each case will turn on its own facts and also largely depend on expert evidence. Further, and somewhat irrespective of the law of the subject charterparty, the location and law of the load port will play an important role in any ‘budding’ dispute. Therefore, as soon as a master is aware of a problem in this respect, it is vital that he contacts the club and/or club’s local correspondent for advice and guidance (ideally with personal attendance of an expert surveyor on board) before any dispute escalates.
On a slightly different point, the charterparty may provide for the issuance of a clean bill of lading and/or give the master the right to reject any cargo that is subject to ‘clausing’ . This was the case in The Sea Success.
The ship here was under an amended NYPE timecharter according to which the master had the right to reject ‘any cargo that is subject to clausing of the bills of lading’.
The shippers tendered damaged steel cargo and the master rejected the same on the basis that it was subject to clausing of the bills. The charterers argued that the bills, as presented to the master, contained a complete and accurate description of the (damaged) cargo according to the findings of a preloading steel survey report and this didn’t amount to ‘clausing’. Indeed, in this case there was no dispute between the owners, charterers and shippers as to the apparent order and condition of the subject cargo, or the appropriate description of the cargo to be included in the bill of lading by the shipper.
The English High Court in this case held that the word ‘clausing’ meant a notation on the bill of lading by the master or his agents, which qualified already existing statements on the bill of lading as to the quality, quantity and apparent condition of the goods. Therefore, only if the master had to make an additional notation on the bill, to reconcile the description of the goods with the statements already on the bill as to its apparent good order and condition, then the same cargo was subject to ‘clausing’ and the master would be entitled and obliged to reject the same – as per the terms of this subject charter.
This article intends to provide general guidance on the issues arising. It is not intended to provide legal advice in relation to any specific query. The law is also not static. If in doubt, The Standard Club is always on hand to assist.
Source: The Standard Club
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Thursday, 07 April 16
PANAMAX RATES ARE FIRMING IN BOTH HEMISHEPHERES - FEARNLEYS
Capesize
With a great volume our of west Australia, rates were finally moving to upper 3's. and stabilizing towards the middle of the week in ...
Thursday, 07 April 16
BIMCO AND GIIGNL PUBLISH A GROUNDBREAKING VOYAGE CHARTER PARTY FOR LNG TRADE
BIMCO and the International Group of Liquefied Natural Gas Importers (GIIGNL) have today jointly issued the first definitive voyage charter party & ...
Wednesday, 06 April 16
HOW LONG SHIPPING CRISIS WILL BE; WHEN SHOULD OWNERS EXPECT THE BULK CARRIERS TO BECOME PROFITABLE? - INTERMODAL
It is the consensus that dry bulk shipping has been in a crisis for quite some time now. Bulk carrier values are at historical low levels, therefor ...
Tuesday, 05 April 16
DRY BULK REVISITS 1980S LOWS AND FACES UNCERTAIN LONGER TERM OUTLOOK - MSI | HELLENIC SHIPPING NEWS
With the market near bottom, attention is turning to the length of the downturn, the effect on asset values and the impact of broader demand side c ...
Monday, 04 April 16
THE LOADING, AND SUBSEQUENT DISCHARGE, OF UNSAFE NICKEL ORE - ALL TIME TO 'COUNT' - THE STANDARD CLUB
KNOWLEDGE TO ELEVATE
In a recent, published, London arbitration award the English tribunal has held that all time lost as a result of loading, ...
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- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- Siam City Cement - Thailand
- Lanco Infratech Ltd - India
- Sarangani Energy Corporation, Philippines
- Anglo American - United Kingdom
- Star Paper Mills Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Dalmia Cement Bharat India
- Kohat Cement Company Ltd. - Pakistan
- Sree Jayajothi Cements Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Ministry of Mines - Canada
- Gujarat Mineral Development Corp Ltd - India
- Standard Chartered Bank - UAE
- Global Coal Blending Company Limited - Australia
- Kaltim Prima Coal - Indonesia
- Antam Resourcindo - Indonesia
- Aboitiz Power Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Port Waratah Coal Services - Australia
- Indika Energy - Indonesia
- Ministry of Finance - Indonesia
- Economic Council, Georgia
- Samtan Co., Ltd - South Korea
- Sojitz Corporation - Japan
- Grasim Industreis Ltd - India
- Electricity Generating Authority of Thailand
- Marubeni Corporation - India
- Tata Chemicals Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Formosa Plastics Group - Taiwan
- Barasentosa Lestari - Indonesia
- Coal and Oil Company - UAE
- Ambuja Cements Ltd - India
- Heidelberg Cement - Germany
- GVK Power & Infra Limited - India
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Meralco Power Generation, Philippines
- Central Java Power - Indonesia
- Intertek Mineral Services - Indonesia
- CNBM International Corporation - China
- Kalimantan Lumbung Energi - Indonesia
- Tamil Nadu electricity Board
- Renaissance Capital - South Africa
- Vedanta Resources Plc - India
- Latin American Coal - Colombia
- Essar Steel Hazira Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Coalindo Energy - Indonesia
- Electricity Authority, New Zealand
- PowerSource Philippines DevCo
- ICICI Bank Limited - India
- Toyota Tsusho Corporation, Japan
- Leighton Contractors Pty Ltd - Australia
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- The State Trading Corporation of India Ltd
- India Bulls Power Limited - India
- Global Business Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Energy Link Ltd, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bharathi Cement Corporation - India
- Oldendorff Carriers - Singapore
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Chamber of Mines of South Africa
- Larsen & Toubro Limited - India
- Ind-Barath Power Infra Limited - India
- South Luzon Thermal Energy Corporation
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wilmar Investment Holdings
- Borneo Indobara - Indonesia
- Miang Besar Coal Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement PLC, Thailand
- Kobexindo Tractors - Indoneisa
- Posco Energy - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- San Jose City I Power Corp, Philippines
- Videocon Industries ltd - India
- Jaiprakash Power Ventures ltd
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- Bulk Trading Sa - Switzerland
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- Minerals Council of Australia
- Bukit Baiduri Energy - Indonesia
- Eastern Coal Council - USA
- Makarim & Taira - Indonesia
- Savvy Resources Ltd - HongKong
- PTC India Limited - India
- Energy Development Corp, Philippines
- VISA Power Limited - India
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Bhatia International Limited - India
- SMG Consultants - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Coal Association
- Gujarat Electricity Regulatory Commission - India
- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- GMR Energy Limited - India
- Metalloyd Limited - United Kingdom
- Chettinad Cement Corporation Ltd - India
- Bayan Resources Tbk. - Indonesia
- Therma Luzon, Inc, Philippines
- Central Electricity Authority - India
- Maharashtra Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- Rio Tinto Coal - Australia
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Edison Trading Spa - Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhoruka Overseas - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Riau Bara Harum - Indonesia
- Manunggal Multi Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- International Coal Ventures Pvt Ltd - India
- MS Steel International - UAE
- The Treasury - Australian Government
- White Energy Company Limited
- Attock Cement Pakistan Limited
- Bukit Makmur.PT - Indonesia
- Agrawal Coal Company - India
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- Mintek Dendrill Indonesia
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- New Zealand Coal & Carbon
- Power Finance Corporation Ltd., India
- Bhushan Steel Limited - India
- Wood Mackenzie - Singapore
- Indogreen Group - Indonesia
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- Mercuria Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Commonwealth Bank - Australia
- Aditya Birla Group - India
- Medco Energi Mining Internasional
- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- Africa Commodities Group - South Africa
- Bangladesh Power Developement Board
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Xindia Steels Limited - India
- European Bulk Services B.V. - Netherlands
- Ministry of Transport, Egypt
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Mjunction Services Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Parry Sugars Refinery, India
- Carbofer General Trading SA - India
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- Semirara Mining Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- GN Power Mariveles Coal Plant, Philippines
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- Sical Logistics Limited - India
- Planning Commission, India
- Thai Mozambique Logistica
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