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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, 31 March 16
CAPE: ANOTHER UNEVENTFUL WEEK WITH FIXTURES CONCLUDED AT LAST DONE LEVELS - FEARNLEYS
Cape
Another uneventful week with fixtures concluded at last done levels, CS levels remain around the USD 3 mark, whilst C3 is still just short o ...
Wednesday, 30 March 16
MINISTRY OF ENERGY AND MINERAL RESOURCES OF INDONESIA TO REVISE METHODOLOGY TO DETERMINE THE SELLING PRICE OF COAL TO MINE-MOUTH POWER PLANTS
COALspot.com: Ministry of Energy and Mineral Resources (ESDM) of Indonesia to review to revise methodology to determine the selling price of co ...
Wednesday, 30 March 16
VALEMAXES: THE BIGGEST NIGHTMARE OF TODAY'S DRY BULK MARKET - INTERMODAL
At a time that Europe is still dealing with the aftermath of the terrorist attacks in Brussels our society is daily bombarded with news of terroris ...
Tuesday, 29 March 16
BULK CARRIER VENTILATION - CAPTAIN PAUL R. WALTON
KNOWLEDGE TO ELEVATE
Moisture damage is a source of many cargo claims. Claimants allege that it is brought about by the ship’s failure t ...
Monday, 28 March 16
INDONESIAN WEEKLY CS50 COAL INDEX CLOSED SLIGHTLY FIRM; CS 57 INDEX CLOSED WEAK
COALspot.com: Average 5000 GAR coal index of Indonesian origin rose 0.03 percent week over week to averaging $38.91 per ton on this past Thursday, ...
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- Sojitz Corporation - Japan
- Intertek Mineral Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Formosa Plastics Group - Taiwan
- Therma Luzon, Inc, Philippines
- MS Steel International - UAE
- Salva Resources Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Energy Development Corp, Philippines
- Banpu Public Company Limited - Thailand
- Sindya Power Generating Company Private Ltd
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- Ministry of Mines - Canada
- Metalloyd Limited - United Kingdom
- Thai Mozambique Logistica
- Australian Coal Association
- Africa Commodities Group - South Africa
- Parliament of New Zealand
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Anglo American - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Planning Commission, India
- Kepco SPC Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- White Energy Company Limited
- Wood Mackenzie - Singapore
- Karaikal Port Pvt Ltd - India
- Australian Commodity Traders Exchange
- Lanco Infratech Ltd - India
- CIMB Investment Bank - Malaysia
- VISA Power Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Goldman Sachs - Singapore
- Simpson Spence & Young - Indonesia
- Vizag Seaport Private Limited - India
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- The Treasury - Australian Government
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Energy Link Ltd, New Zealand
- Indian Energy Exchange, India
- Orica Australia Pty. Ltd.
- Rashtriya Ispat Nigam Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Latin American Coal - Colombia
- Meralco Power Generation, Philippines
- Indika Energy - Indonesia
- Standard Chartered Bank - UAE
- Indogreen Group - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- SMC Global Power, Philippines
- Miang Besar Coal Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Georgia Ports Authority, United States
- Indonesian Coal Mining Association
- Xindia Steels Limited - India
- Deloitte Consulting - India
- Marubeni Corporation - India
- Star Paper Mills Limited - India
- Ministry of Finance - Indonesia
- Posco Energy - South Korea
- Agrawal Coal Company - India
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- Samtan Co., Ltd - South Korea
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Renaissance Capital - South Africa
- Power Finance Corporation Ltd., India
- Pendopo Energi Batubara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- Siam City Cement - Thailand
- Semirara Mining Corp, Philippines
- Aditya Birla Group - India
- Electricity Authority, New Zealand
- PowerSource Philippines DevCo
- Economic Council, Georgia
- Ambuja Cements Ltd - India
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- Bukit Makmur.PT - Indonesia
- Jindal Steel & Power Ltd - India
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- Directorate Of Revenue Intelligence - India
- PetroVietnam Power Coal Import and Supply Company
- Commonwealth Bank - Australia
- Cigading International Bulk Terminal - Indonesia
- Eastern Energy - Thailand
- GVK Power & Infra Limited - India
- Central Java Power - Indonesia
- Iligan Light & Power Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Central Electricity Authority - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Price Waterhouse Coopers - Russia
- Bahari Cakrawala Sebuku - Indonesia
- Merrill Lynch Commodities Europe
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- Rio Tinto Coal - Australia
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Kobexindo Tractors - Indoneisa
- Heidelberg Cement - Germany
- Billiton Holdings Pty Ltd - Australia
- Edison Trading Spa - Italy
- Gujarat Mineral Development Corp Ltd - India
- Ind-Barath Power Infra Limited - India
- Bukit Baiduri Energy - Indonesia
- Bangladesh Power Developement Board
- Coalindo Energy - Indonesia
- PTC India Limited - India
- CNBM International Corporation - China
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- Bulk Trading Sa - Switzerland
- IHS Mccloskey Coal Group - USA
- Kapuas Tunggal Persada - Indonesia
- Sical Logistics Limited - India
- Indian Oil Corporation Limited
- Orica Mining Services - Indonesia
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
- The University of Queensland
- European Bulk Services B.V. - Netherlands
- London Commodity Brokers - England
- Kohat Cement Company Ltd. - Pakistan
- Binh Thuan Hamico - Vietnam
- Kaltim Prima Coal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Coastal Gujarat Power Limited - India
- Toyota Tsusho Corporation, Japan
- Mjunction Services Limited - India
- Gujarat Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- Karbindo Abesyapradhi - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Bhatia International Limited - India
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- Bhushan Steel Limited - India
- Globalindo Alam Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Petron Corporation, Philippines
- McConnell Dowell - Australia
- Mintek Dendrill Indonesia
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Essar Steel Hazira Ltd - India
- Cement Manufacturers Association - India
- South Luzon Thermal Energy Corporation
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Singapore Mercantile Exchange
- AsiaOL BioFuels Corp., Philippines
- Holcim Trading Pte Ltd - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Indo Tambangraya Megah - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- SMG Consultants - Indonesia
- Eastern Coal Council - USA
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- TeaM Sual Corporation - Philippines
- Riau Bara Harum - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Wilmar Investment Holdings
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- Chamber of Mines of South Africa
- ICICI Bank Limited - India
- Antam Resourcindo - Indonesia
- Port Waratah Coal Services - Australia
- IEA Clean Coal Centre - UK
- Ceylon Electricity Board - Sri Lanka
- Medco Energi Mining Internasional
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kumho Petrochemical, South Korea
- India Bulls Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Minerals Council of Australia
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