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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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Wednesday, 24 February 16
HOW IS THE FUEL MIX FOR U.S. ELECTRICITY GENERATION CHANGING? - EIA
In recent years, there have been changes in the mix of fuels used to generate electricity in the United States. Natural gas and renewable energy so ...
Wednesday, 24 February 16
PRIVATE EQUITY FUNDS LOOKING TO EXIT SHIPPING, MOST NOTABLY DRY BULK, AS OVERORDERING HAS RESULTED IN EXCESS TONNAGE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The injection of more than $13 billion in shipping from various private equity funds over the past few years has resulted in what many feared would ...
Wednesday, 24 February 16
THIRTEEN - NOT ALWAYS AN UNLUCKY NUMBER? - CLARKSONS
Back in early 1999 the price of a 5 year old Panamax bulkcarrier dipped to $13.5m, and ever since analysts have hailed purchase decisions made at t ...
Monday, 22 February 16
4200 GAR COAL INDEX SETTLES AT $27.02, DOWN 0.07% FROM LAST WEEK
COALspot.com: Average 5000 GAR coal index of Indonesian origin decline 0.17 percent week over week to averaging $38.89 per ton on this past Friday, ...
Monday, 22 February 16
FREIGHT MARKETS PICKED UP SLIGHTLY THIS PAST WEEK
COALspot.com: The freight markets picked up slightly this past week.
The Baltic Dry Index (BDI) of dry-bulk shipping freights, a measure of gl ...
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- Renaissance Capital - South Africa
- Minerals Council of Australia
- Kaltim Prima Coal - Indonesia
- Coalindo Energy - Indonesia
- Indonesian Coal Mining Association
- Therma Luzon, Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Marubeni Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Port Waratah Coal Services - Australia
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Makarim & Taira - Indonesia
- GMR Energy Limited - India
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- Indian Oil Corporation Limited
- London Commodity Brokers - England
- Billiton Holdings Pty Ltd - Australia
- PTC India Limited - India
- Tata Chemicals Ltd - India
- Chettinad Cement Corporation Ltd - India
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- Sree Jayajothi Cements Limited - India
- PetroVietnam Power Coal Import and Supply Company
- White Energy Company Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Antam Resourcindo - Indonesia
- Globalindo Alam Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- The University of Queensland
- Romanian Commodities Exchange
- Mintek Dendrill Indonesia
- VISA Power Limited - India
- Indian Energy Exchange, India
- Straits Asia Resources Limited - Singapore
- Krishnapatnam Port Company Ltd. - India
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- India Bulls Power Limited - India
- Latin American Coal - Colombia
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Kohat Cement Company Ltd. - Pakistan
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- Australian Coal Association
- TNB Fuel Sdn Bhd - Malaysia
- Karaikal Port Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- CIMB Investment Bank - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Electricity Generating Authority of Thailand
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- Bangladesh Power Developement Board
- OPG Power Generation Pvt Ltd - India
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Attock Cement Pakistan Limited
- Ceylon Electricity Board - Sri Lanka
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Central Electricity Authority - India
- Bukit Asam (Persero) Tbk - Indonesia
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- Central Java Power - Indonesia
- Binh Thuan Hamico - Vietnam
- Borneo Indobara - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement - Thailand
- Independent Power Producers Association of India
- GVK Power & Infra Limited - India
- PNOC Exploration Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bhatia International Limited - India
- Anglo American - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- IEA Clean Coal Centre - UK
- Ministry of Mines - Canada
- Larsen & Toubro Limited - India
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Bulk Trading Sa - Switzerland
- Karbindo Abesyapradhi - Indoneisa
- Jaiprakash Power Ventures ltd
- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Africa Commodities Group - South Africa
- Thai Mozambique Logistica
- Toyota Tsusho Corporation, Japan
- Indika Energy - Indonesia
- Baramulti Group, Indonesia
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- SMC Global Power, Philippines
- Sindya Power Generating Company Private Ltd
- Semirara Mining Corp, Philippines
- Bhushan Steel Limited - India
- Planning Commission, India
- Ambuja Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- TeaM Sual Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Metalloyd Limited - United Kingdom
- Riau Bara Harum - Indonesia
- Kepco SPC Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Medco Energi Mining Internasional
- Uttam Galva Steels Limited - India
- Timah Investasi Mineral - Indoneisa
- Dalmia Cement Bharat India
- Wood Mackenzie - Singapore
- Kartika Selabumi Mining - Indonesia
- Kideco Jaya Agung - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Kobexindo Tractors - Indoneisa
- Standard Chartered Bank - UAE
- Mercator Lines Limited - India
- Aboitiz Power Corporation - Philippines
- Carbofer General Trading SA - India
- Indogreen Group - Indonesia
- Indo Tambangraya Megah - Indonesia
- Xindia Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Global Business Power Corporation, Philippines
- Interocean Group of Companies - India
- Meralco Power Generation, Philippines
- Sarangani Energy Corporation, Philippines
- Sical Logistics Limited - India
- Gujarat Sidhee Cement - India
- Orica Mining Services - Indonesia
- Goldman Sachs - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Holcim Trading Pte Ltd - Singapore
- Banpu Public Company Limited - Thailand
- New Zealand Coal & Carbon
- Intertek Mineral Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Deloitte Consulting - India
- Economic Council, Georgia
- GAC Shipping (India) Pvt Ltd
- Energy Development Corp, Philippines
- Power Finance Corporation Ltd., India
- Global Coal Blending Company Limited - Australia
- Merrill Lynch Commodities Europe
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- Edison Trading Spa - Italy
- Altura Mining Limited, Indonesia
- Rio Tinto Coal - Australia
- Petron Corporation, Philippines
- ICICI Bank Limited - India
- Sinarmas Energy and Mining - Indonesia
- Samtan Co., Ltd - South Korea
- Ministry of Finance - Indonesia
- The Treasury - Australian Government
- Videocon Industries ltd - India
- Eastern Coal Council - USA
- CNBM International Corporation - China
- Barasentosa Lestari - Indonesia
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Thiess Contractors Indonesia
- Bukit Baiduri Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- SMG Consultants - Indonesia
- Siam City Cement PLC, Thailand
- Commonwealth Bank - Australia
- Chamber of Mines of South Africa
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
- Pendopo Energi Batubara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- ASAPP Information Group - India
- SN Aboitiz Power Inc, Philippines
- Madhucon Powers Ltd - India
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