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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, 03 March 16
BDI FURTHER STRENGTHENING; THE INCREASE IN RATES WAS NOT SUBSTANTIAL
COALspot.com: The BDI closed off on a positive note for a second week in a row, further strengthening the belief that the market might be bottoming ...
Thursday, 03 March 16
RIO TINTO COMPLETES SALE OF INTEREST IN BENGALLA JOINT VENTURE FOR US$616.7 MILLION
COALspot.com: Rio Tinto has completed the sale of its 40 per cent interest in the Bengalla coal Joint Venture in Australia to New Hope Corporation ...
Wednesday, 02 March 16
RE-EVALUATION OF MINING LICENSES CLEAN AND CLEAR STATUS IN INDONESIA
COALspot.com: In connection with the transfer of mining authority from Regents/Mayors to Governors1 and from Regents/Mayors and Governors to t ...
Wednesday, 02 March 16
OIL MY GOD.....!!!!
OIL my GOD….!!!!
The oil price “crash” that started in 2014 was caused by a glut of practically unwanted oil. Producers had be ...
Tuesday, 01 March 16
CS 42 (4200 GAR) COAL INDEX CLOSED AT US$ 27.11 A TON ON 26 FEBRUARY
COALspot.com: Average 5000 GAR coal index of Indonesian origin decline 0.31 percent week over week to averaging $38.77 per ton on this past Friday, ...
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- Romanian Commodities Exchange
- Aditya Birla Group - India
- Parry Sugars Refinery, India
- PetroVietnam Power Coal Import and Supply Company
- Riau Bara Harum - Indonesia
- Antam Resourcindo - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Interocean Group of Companies - India
- Jaiprakash Power Ventures ltd
- Xindia Steels Limited - India
- Directorate Of Revenue Intelligence - India
- GN Power Mariveles Coal Plant, Philippines
- Chettinad Cement Corporation Ltd - India
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- International Coal Ventures Pvt Ltd - India
- Mercuria Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- The University of Queensland
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Malabar Cements Ltd - India
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- Billiton Holdings Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- White Energy Company Limited
- Chamber of Mines of South Africa
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Vizag Seaport Private Limited - India
- Kideco Jaya Agung - Indonesia
- IHS Mccloskey Coal Group - USA
- Timah Investasi Mineral - Indoneisa
- Kaltim Prima Coal - Indonesia
- Central Electricity Authority - India
- Port Waratah Coal Services - Australia
- Savvy Resources Ltd - HongKong
- MS Steel International - UAE
- Kartika Selabumi Mining - Indonesia
- Samtan Co., Ltd - South Korea
- Bulk Trading Sa - Switzerland
- Wilmar Investment Holdings
- Medco Energi Mining Internasional
- Baramulti Group, Indonesia
- VISA Power Limited - India
- London Commodity Brokers - England
- Bahari Cakrawala Sebuku - Indonesia
- Petron Corporation, Philippines
- Minerals Council of Australia
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- Carbofer General Trading SA - India
- Singapore Mercantile Exchange
- Bharathi Cement Corporation - India
- Aboitiz Power Corporation - Philippines
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Price Waterhouse Coopers - Russia
- Formosa Plastics Group - Taiwan
- IEA Clean Coal Centre - UK
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- Africa Commodities Group - South Africa
- Manunggal Multi Energi - Indonesia
- Sakthi Sugars Limited - India
- Parliament of New Zealand
- Kohat Cement Company Ltd. - Pakistan
- TeaM Sual Corporation - Philippines
- Edison Trading Spa - Italy
- Indonesian Coal Mining Association
- Coal and Oil Company - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Miang Besar Coal Terminal - Indonesia
- European Bulk Services B.V. - Netherlands
- Thiess Contractors Indonesia
- CIMB Investment Bank - Malaysia
- Thai Mozambique Logistica
- OPG Power Generation Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Independent Power Producers Association of India
- Siam City Cement - Thailand
- Jorong Barutama Greston.PT - Indonesia
- San Jose City I Power Corp, Philippines
- Australian Coal Association
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- Jindal Steel & Power Ltd - India
- Essar Steel Hazira Ltd - India
- Indogreen Group - Indonesia
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Australian Commodity Traders Exchange
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Tamil Nadu electricity Board
- Meenaskhi Energy Private Limited - India
- Mercator Lines Limited - India
- Leighton Contractors Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- GMR Energy Limited - India
- Indo Tambangraya Megah - Indonesia
- India Bulls Power Limited - India
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Central Java Power - Indonesia
- ICICI Bank Limited - India
- GVK Power & Infra Limited - India
- Sojitz Corporation - Japan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Marubeni Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Madhucon Powers Ltd - India
- Iligan Light & Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Kumho Petrochemical, South Korea
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Binh Thuan Hamico - Vietnam
- Commonwealth Bank - Australia
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Sinarmas Energy and Mining - Indonesia
- Ministry of Mines - Canada
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indika Energy - Indonesia
- The Treasury - Australian Government
- Merrill Lynch Commodities Europe
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Transport, Egypt
- ASAPP Information Group - India
- Eastern Coal Council - USA
- Latin American Coal - Colombia
- Semirara Mining Corp, Philippines
- Agrawal Coal Company - India
- McConnell Dowell - Australia
- New Zealand Coal & Carbon
- SN Aboitiz Power Inc, Philippines
- Siam City Cement PLC, Thailand
- Bayan Resources Tbk. - Indonesia
- Barasentosa Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- Indian Oil Corporation Limited
- Mjunction Services Limited - India
- Orica Australia Pty. Ltd.
- Economic Council, Georgia
- Metalloyd Limited - United Kingdom
- Global Coal Blending Company Limited - Australia
- Gujarat Sidhee Cement - India
- Dalmia Cement Bharat India
- Ind-Barath Power Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Kapuas Tunggal Persada - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kepco SPC Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Cigading International Bulk Terminal - Indonesia
- Meralco Power Generation, Philippines
- Sarangani Energy Corporation, Philippines
- Electricity Authority, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Energy - Thailand
- SMC Global Power, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- PTC India Limited - India
- Bhatia International Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Coastal Gujarat Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Orica Mining Services - Indonesia
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