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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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Tuesday, 01 March 16
CAN BULKCARRIER SUPPLY CUTS RESTORE SOME BALANCE? - CLARKSONS
The easing in bulkcarrier deliveries and the accelerated pace of demolition in recent years has seen bulkcarrier fleet growth slow from a rapid 17% ...
Monday, 29 February 16
BALTIC INDEX INCHES UP THIS PAST WEEK AS SMALLER VESSELS LEND SUPPORT
COALspot.com: The freight markets rose slightly this past week.
The Baltic Dry Index (BDI) of dry-bulk shipping freights, a measure of global ...
Monday, 29 February 16
LOSS OF EARNINGS IN THE WAKE OF A COLLISION - GARD
KNOWLEDGE TO ELEVATE
A shipowner’s loss of earnings can form a significant part of a collision claim. Awareness of the ways of calculati ...
Friday, 26 February 16
U.S WEEKLY COAL PRODUCTION UP SLIGHTLY
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 13.4 million shor ...
Thursday, 25 February 16
DRY BULKERS ARE SCRAPPED AT RECORD PACE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The newbuilding market is at a lull these days, as ship owners are focusing on two fronts, getting rid of excess dry bulk tonnage and snapping up b ...
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- Krishnapatnam Port Company Ltd. - India
- Goldman Sachs - Singapore
- Directorate Of Revenue Intelligence - India
- Bulk Trading Sa - Switzerland
- Meralco Power Generation, Philippines
- Siam City Cement - Thailand
- Australian Commodity Traders Exchange
- Sical Logistics Limited - India
- Neyveli Lignite Corporation Ltd, - India
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Economic Council, Georgia
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Aditya Birla Group - India
- Ministry of Mines - Canada
- Orica Australia Pty. Ltd.
- Rashtriya Ispat Nigam Limited - India
- Medco Energi Mining Internasional
- Kartika Selabumi Mining - Indonesia
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- Tamil Nadu electricity Board
- Power Finance Corporation Ltd., India
- Alfred C Toepfer International GmbH - Germany
- Bukit Asam (Persero) Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Essar Steel Hazira Ltd - India
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Posco Energy - South Korea
- Bhoruka Overseas - Indonesia
- Ambuja Cements Ltd - India
- CNBM International Corporation - China
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Tata Chemicals Ltd - India
- TeaM Sual Corporation - Philippines
- Indonesian Coal Mining Association
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- New Zealand Coal & Carbon
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- Karbindo Abesyapradhi - Indoneisa
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Vedanta Resources Plc - India
- Attock Cement Pakistan Limited
- Ministry of Finance - Indonesia
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Kepco SPC Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Larsen & Toubro Limited - India
- Holcim Trading Pte Ltd - Singapore
- Trasteel International SA, Italy
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- The University of Queensland
- Lanco Infratech Ltd - India
- Thiess Contractors Indonesia
- Chamber of Mines of South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- SN Aboitiz Power Inc, Philippines
- Makarim & Taira - Indonesia
- Bangladesh Power Developement Board
- Romanian Commodities Exchange
- SMC Global Power, Philippines
- Pendopo Energi Batubara - Indonesia
- Carbofer General Trading SA - India
- Energy Development Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- Bayan Resources Tbk. - Indonesia
- Renaissance Capital - South Africa
- Anglo American - United Kingdom
- Standard Chartered Bank - UAE
- Baramulti Group, Indonesia
- San Jose City I Power Corp, Philippines
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- Formosa Plastics Group - Taiwan
- Bhushan Steel Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Wilmar Investment Holdings
- Kaltim Prima Coal - Indonesia
- Vizag Seaport Private Limited - India
- Ind-Barath Power Infra Limited - India
- Sojitz Corporation - Japan
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
- Timah Investasi Mineral - Indoneisa
- Deloitte Consulting - India
- Globalindo Alam Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Malabar Cements Ltd - India
- Port Waratah Coal Services - Australia
- PetroVietnam Power Coal Import and Supply Company
- Sinarmas Energy and Mining - Indonesia
- Australian Coal Association
- CIMB Investment Bank - Malaysia
- Sindya Power Generating Company Private Ltd
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- London Commodity Brokers - England
- Savvy Resources Ltd - HongKong
- Bharathi Cement Corporation - India
- VISA Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Sidhee Cement - India
- Manunggal Multi Energi - Indonesia
- Jaiprakash Power Ventures ltd
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Africa Commodities Group - South Africa
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- GMR Energy Limited - India
- Intertek Mineral Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Uttam Galva Steels Limited - India
- Thai Mozambique Logistica
- Electricity Authority, New Zealand
- MS Steel International - UAE
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Independent Power Producers Association of India
- Kohat Cement Company Ltd. - Pakistan
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Meenaskhi Energy Private Limited - India
- European Bulk Services B.V. - Netherlands
- Central Java Power - Indonesia
- McConnell Dowell - Australia
- Indo Tambangraya Megah - Indonesia
- Kapuas Tunggal Persada - Indonesia
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- ICICI Bank Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Borneo Indobara - Indonesia
- Parry Sugars Refinery, India
- GVK Power & Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Metalloyd Limited - United Kingdom
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Transport, Egypt
- The State Trading Corporation of India Ltd
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- White Energy Company Limited
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Eastern Coal Council - USA
- Straits Asia Resources Limited - Singapore
- Coalindo Energy - Indonesia
- Xindia Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Minerals Council of Australia
- Salva Resources Pvt Ltd - India
- Planning Commission, India
- International Coal Ventures Pvt Ltd - India
- Central Electricity Authority - India
- Bukit Baiduri Energy - Indonesia
- Sakthi Sugars Limited - India
- Barasentosa Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Madhucon Powers Ltd - India
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Riau Bara Harum - Indonesia
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- Samtan Co., Ltd - South Korea
- PowerSource Philippines DevCo
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