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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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Monday, 28 March 16
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Thursday, 24 March 16
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- Vijayanagar Sugar Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Singapore Mercantile Exchange
- Chettinad Cement Corporation Ltd - India
- Thiess Contractors Indonesia
- Tata Chemicals Ltd - India
- Central Electricity Authority - India
- Bhatia International Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Sarangani Energy Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
- Salva Resources Pvt Ltd - India
- Indika Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Banpu Public Company Limited - Thailand
- London Commodity Brokers - England
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Latin American Coal - Colombia
- Essar Steel Hazira Ltd - India
- Cement Manufacturers Association - India
- Madhucon Powers Ltd - India
- Merrill Lynch Commodities Europe
- Iligan Light & Power Inc, Philippines
- Power Finance Corporation Ltd., India
- Meenaskhi Energy Private Limited - India
- Sindya Power Generating Company Private Ltd
- Semirara Mining and Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Electricity Generating Authority of Thailand
- Ind-Barath Power Infra Limited - India
- Global Coal Blending Company Limited - Australia
- Rio Tinto Coal - Australia
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Ceylon Electricity Board - Sri Lanka
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- South Luzon Thermal Energy Corporation
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Vedanta Resources Plc - India
- Dalmia Cement Bharat India
- Bukit Makmur.PT - Indonesia
- Standard Chartered Bank - UAE
- Ministry of Transport, Egypt
- Metalloyd Limited - United Kingdom
- Kaltim Prima Coal - Indonesia
- Renaissance Capital - South Africa
- MS Steel International - UAE
- GAC Shipping (India) Pvt Ltd
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- Posco Energy - South Korea
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Indo Tambangraya Megah - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- Malabar Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Samtan Co., Ltd - South Korea
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Siam City Cement PLC, Thailand
- Australian Coal Association
- Bayan Resources Tbk. - Indonesia
- Minerals Council of Australia
- Formosa Plastics Group - Taiwan
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Sree Jayajothi Cements Limited - India
- Vizag Seaport Private Limited - India
- Goldman Sachs - Singapore
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- Ambuja Cements Ltd - India
- Indian Energy Exchange, India
- Interocean Group of Companies - India
- Jorong Barutama Greston.PT - Indonesia
- Altura Mining Limited, Indonesia
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Coalindo Energy - Indonesia
- Sojitz Corporation - Japan
- European Bulk Services B.V. - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- Orica Mining Services - Indonesia
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- Directorate Of Revenue Intelligence - India
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Bharathi Cement Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- The Treasury - Australian Government
- IHS Mccloskey Coal Group - USA
- Trasteel International SA, Italy
- San Jose City I Power Corp, Philippines
- Larsen & Toubro Limited - India
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Jindal Steel & Power Ltd - India
- Thai Mozambique Logistica
- AsiaOL BioFuels Corp., Philippines
- Meralco Power Generation, Philippines
- Indogreen Group - Indonesia
- The University of Queensland
- Kapuas Tunggal Persada - Indonesia
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- CNBM International Corporation - China
- LBH Netherlands Bv - Netherlands
- Coastal Gujarat Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Port Waratah Coal Services - Australia
- Ministry of Finance - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Energy Development Corp, Philippines
- Videocon Industries ltd - India
- Star Paper Mills Limited - India
- Coal and Oil Company - UAE
- Australian Commodity Traders Exchange
- Holcim Trading Pte Ltd - Singapore
- Straits Asia Resources Limited - Singapore
- VISA Power Limited - India
- Kumho Petrochemical, South Korea
- Eastern Coal Council - USA
- Barasentosa Lestari - Indonesia
- ICICI Bank Limited - India
- Kideco Jaya Agung - Indonesia
- Timah Investasi Mineral - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- PetroVietnam Power Coal Import and Supply Company
- Parliament of New Zealand
- Agrawal Coal Company - India
- Tamil Nadu electricity Board
- Georgia Ports Authority, United States
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- SMC Global Power, Philippines
- The State Trading Corporation of India Ltd
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- McConnell Dowell - Australia
- Simpson Spence & Young - Indonesia
- Lanco Infratech Ltd - India
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- White Energy Company Limited
- Electricity Authority, New Zealand
- Mjunction Services Limited - India
- Wilmar Investment Holdings
- New Zealand Coal & Carbon
- Bangladesh Power Developement Board
- Alfred C Toepfer International GmbH - Germany
- Kohat Cement Company Ltd. - Pakistan
- SN Aboitiz Power Inc, Philippines
- Chamber of Mines of South Africa
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Eastern Energy - Thailand
- India Bulls Power Limited - India
- Maheswari Brothers Coal Limited - India
- Mercator Lines Limited - India
- Pendopo Energi Batubara - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Petron Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- ASAPP Information Group - India
- Orica Australia Pty. Ltd.
- Binh Thuan Hamico - Vietnam
- Medco Energi Mining Internasional
- Riau Bara Harum - Indonesia
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