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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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Friday, 19 February 16
INDONESIAN HBA HITS A NEW LOWS BELOW $51 A TON AS OVERSUPPLY, LOW DEMAND WOES PERSIST
COALspot.com: Low coal demand and excess supplies sent Indonesian benchmark coal price further deep in February 2016. HBA has slumped second time t ...
Friday, 19 February 16
U.S. WEEKLY COAL PRODUCTION ROSE 2.6% FROM LAST WEEK - EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 13.2 million shor ...
Thursday, 18 February 16
INDIA NEEDS INTERNATIONAL SUPPORT ON HIGH EFFICIENCY COAL - WORLD COAL ASSOCIATION
Speaking at a conference in New Delhi today, World Coal Association Chief Executive Benjamin Sporton said the critical role of coal in driving econ ...
Thursday, 18 February 16
CHINA COAL SECTOR - 2015 RESULTS BLEAK, 2016 UNLIKELY TO BE ANY BETTER - FITCH
COALspot.com: China Coal Sector’s Financial Woes to Worsen in 2016.
Fitch Ratings says that the 2015 full-year result previews issued by ...
Thursday, 18 February 16
PANAMAX RATES OUT OF ECSA WERE STILL GAINING A PREMIUM OVER THE REST OF THE MARKET - INTERMODAL
The BDI moved further down last week, fact that hardly took anyone by surprise as the lunar year holidays in Asia on top of the already depre ...
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- Vedanta Resources Plc - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Borneo Indobara - Indonesia
- Kumho Petrochemical, South Korea
- Kepco SPC Power Corporation, Philippines
- Deloitte Consulting - India
- Vizag Seaport Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Pendopo Energi Batubara - Indonesia
- Price Waterhouse Coopers - Russia
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Mercator Lines Limited - India
- Karaikal Port Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Parry Sugars Refinery, India
- Jindal Steel & Power Ltd - India
- Coastal Gujarat Power Limited - India
- Merrill Lynch Commodities Europe
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- Attock Cement Pakistan Limited
- The State Trading Corporation of India Ltd
- Metalloyd Limited - United Kingdom
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Intertek Mineral Services - Indonesia
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- SN Aboitiz Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Sakthi Sugars Limited - India
- PNOC Exploration Corporation - Philippines
- Rio Tinto Coal - Australia
- Global Business Power Corporation, Philippines
- Carbofer General Trading SA - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bahari Cakrawala Sebuku - Indonesia
- Kartika Selabumi Mining - Indonesia
- MS Steel International - UAE
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- Grasim Industreis Ltd - India
- Billiton Holdings Pty Ltd - Australia
- White Energy Company Limited
- Trasteel International SA, Italy
- Bhatia International Limited - India
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- Parliament of New Zealand
- Indian Oil Corporation Limited
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Directorate General of MIneral and Coal - Indonesia
- Thai Mozambique Logistica
- CNBM International Corporation - China
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sical Logistics Limited - India
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Oldendorff Carriers - Singapore
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Banpu Public Company Limited - Thailand
- India Bulls Power Limited - India
- IEA Clean Coal Centre - UK
- Coalindo Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement PLC, Thailand
- Timah Investasi Mineral - Indoneisa
- Georgia Ports Authority, United States
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Bukit Baiduri Energy - Indonesia
- Malabar Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- Bangladesh Power Developement Board
- Edison Trading Spa - Italy
- Interocean Group of Companies - India
- Kobexindo Tractors - Indoneisa
- Sojitz Corporation - Japan
- SMG Consultants - Indonesia
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- Indonesian Coal Mining Association
- AsiaOL BioFuels Corp., Philippines
- Romanian Commodities Exchange
- PTC India Limited - India
- Madhucon Powers Ltd - India
- Minerals Council of Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining and Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Manunggal Multi Energi - Indonesia
- Cement Manufacturers Association - India
- Straits Asia Resources Limited - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Singapore Mercantile Exchange
- Xindia Steels Limited - India
- ICICI Bank Limited - India
- Australian Coal Association
- Ind-Barath Power Infra Limited - India
- Thiess Contractors Indonesia
- Eastern Coal Council - USA
- Global Coal Blending Company Limited - Australia
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Medco Energi Mining Internasional
- Ceylon Electricity Board - Sri Lanka
- Sinarmas Energy and Mining - Indonesia
- Makarim & Taira - Indonesia
- GVK Power & Infra Limited - India
- Jaiprakash Power Ventures ltd
- Bhushan Steel Limited - India
- Uttam Galva Steels Limited - India
- Chamber of Mines of South Africa
- Economic Council, Georgia
- Planning Commission, India
- European Bulk Services B.V. - Netherlands
- Sree Jayajothi Cements Limited - India
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- Orica Australia Pty. Ltd.
- Sindya Power Generating Company Private Ltd
- San Jose City I Power Corp, Philippines
- Tata Chemicals Ltd - India
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Mercuria Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Central Electricity Authority - India
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- TeaM Sual Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- New Zealand Coal & Carbon
- Globalindo Alam Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Heidelberg Cement - Germany
- Latin American Coal - Colombia
- Tamil Nadu electricity Board
- Maharashtra Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Electricity Authority, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- Mintek Dendrill Indonesia
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Gujarat Mineral Development Corp Ltd - India
- PowerSource Philippines DevCo
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- Eastern Energy - Thailand
- Samtan Co., Ltd - South Korea
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Aditya Birla Group - India
- Anglo American - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Bukit Makmur.PT - Indonesia
- Aboitiz Power Corporation - Philippines
- Bharathi Cement Corporation - India
- Indogreen Group - Indonesia
- Toyota Tsusho Corporation, Japan
- Cigading International Bulk Terminal - Indonesia
- Indian Energy Exchange, India
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Karbindo Abesyapradhi - Indoneisa
- Posco Energy - South Korea
- Baramulti Group, Indonesia
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Ambuja Cements Ltd - India
- Port Waratah Coal Services - Australia
- The University of Queensland
- Standard Chartered Bank - UAE
- Africa Commodities Group - South Africa
- Energy Development Corp, Philippines
- Salva Resources Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Marubeni Corporation - India
- Kaltim Prima Coal - Indonesia
- McConnell Dowell - Australia
- South Luzon Thermal Energy Corporation
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Wood Mackenzie - Singapore
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