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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, 10 February 16
OWNERS APPEAR WILLING TO DISPOSE OF TONNAGE THE SOONEST IT HITS THE 10 YEAR MARK - TIMOS PAPADIMITRIOU
COALspot.com: The last two months of 2015 made a case for traditional shipowners to invest in the dry bulk sector, doing so though based purely on ...
Monday, 08 February 16
DRY-BULK SHIPPING DIVING DEEP
COALspot.com: The freight markets continued to fall this past week.
The Baltic Dry Index (BDI) of dry-bulk shipping freights, a measure of glo ...
Monday, 08 February 16
DRY BULK: SHIPBROKER SEES BDI MARKET REACHING LOW POINT OF 236 POINTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The endless pit that is the dry bulk market over the past two months, has been the issue of debate among ship owners, shipbroker and analysts alike ...
Friday, 05 February 16
COAL INDIA EYES COAL MINES IN SOUTH AFRICA - PTI
“Coal India Ltd has plans of acquiring coal mines in South Africa,” an official said. It is looking at acquiring mines in partnership w ...
Friday, 05 February 16
U.S. WEEKLY COAL OUTPUT ROSE 4.2% TO 13.6 MMST
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 13.6 million shor ...
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- Kepco SPC Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Indonesian Coal Mining Association
- Bahari Cakrawala Sebuku - Indonesia
- Jindal Steel & Power Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Barasentosa Lestari - Indonesia
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Singapore Mercantile Exchange
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercator Lines Limited - India
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Samtan Co., Ltd - South Korea
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Borneo Indobara - Indonesia
- Parry Sugars Refinery, India
- Latin American Coal - Colombia
- The Treasury - Australian Government
- New Zealand Coal & Carbon
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- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Georgia Ports Authority, United States
- GN Power Mariveles Coal Plant, Philippines
- ICICI Bank Limited - India
- Videocon Industries ltd - India
- GAC Shipping (India) Pvt Ltd
- Economic Council, Georgia
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- Port Waratah Coal Services - Australia
- OPG Power Generation Pvt Ltd - India
- Commonwealth Bank - Australia
- Siam City Cement PLC, Thailand
- South Luzon Thermal Energy Corporation
- Mintek Dendrill Indonesia
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Thiess Contractors Indonesia
- Straits Asia Resources Limited - Singapore
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Riau Bara Harum - Indonesia
- LBH Netherlands Bv - Netherlands
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Bukit Baiduri Energy - Indonesia
- Bhushan Steel Limited - India
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
- Interocean Group of Companies - India
- Oldendorff Carriers - Singapore
- MS Steel International - UAE
- Directorate General of MIneral and Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Pendopo Energi Batubara - Indonesia
- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Essar Steel Hazira Ltd - India
- Malabar Cements Ltd - India
- Deloitte Consulting - India
- Meralco Power Generation, Philippines
- Edison Trading Spa - Italy
- Attock Cement Pakistan Limited
- Petron Corporation, Philippines
- Central Java Power - Indonesia
- Kumho Petrochemical, South Korea
- Tata Chemicals Ltd - India
- Aboitiz Power Corporation - Philippines
- Australian Coal Association
- Bangladesh Power Developement Board
- Global Green Power PLC Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Central Electricity Authority - India
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Australian Commodity Traders Exchange
- Wood Mackenzie - Singapore
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Anglo American - United Kingdom
- Lanco Infratech Ltd - India
- Chettinad Cement Corporation Ltd - India
- Makarim & Taira - Indonesia
- SN Aboitiz Power Inc, Philippines
- Baramulti Group, Indonesia
- Bulk Trading Sa - Switzerland
- PTC India Limited - India
- Sindya Power Generating Company Private Ltd
- Asmin Koalindo Tuhup - Indonesia
- Romanian Commodities Exchange
- PowerSource Philippines DevCo
- Jorong Barutama Greston.PT - Indonesia
- Karaikal Port Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Eastern Coal Council - USA
- Bukit Makmur.PT - Indonesia
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- Chamber of Mines of South Africa
- Coastal Gujarat Power Limited - India
- Coalindo Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Trasteel International SA, Italy
- Sical Logistics Limited - India
- White Energy Company Limited
- Alfred C Toepfer International GmbH - Germany
- Marubeni Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pipit Mutiara Jaya. PT, Indonesia
- Indika Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Bhoruka Overseas - Indonesia
- Global Coal Blending Company Limited - Australia
- GMR Energy Limited - India
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vedanta Resources Plc - India
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Gujarat Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Kapuas Tunggal Persada - Indonesia
- Posco Energy - South Korea
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Bharathi Cement Corporation - India
- GVK Power & Infra Limited - India
- The University of Queensland
- Merrill Lynch Commodities Europe
- Dalmia Cement Bharat India
- Ceylon Electricity Board - Sri Lanka
- Indogreen Group - Indonesia
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Minerals Council of Australia
- SMG Consultants - Indonesia
- Sree Jayajothi Cements Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Indo Tambangraya Megah - Indonesia
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- Eastern Energy - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- TeaM Sual Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Sarangani Energy Corporation, Philippines
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- Heidelberg Cement - Germany
- Sojitz Corporation - Japan
- Banpu Public Company Limited - Thailand
- Agrawal Coal Company - India
- Intertek Mineral Services - Indonesia
- Price Waterhouse Coopers - Russia
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- Electricity Generating Authority of Thailand
- Metalloyd Limited - United Kingdom
- Antam Resourcindo - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Standard Chartered Bank - UAE
- Power Finance Corporation Ltd., India
- Tamil Nadu electricity Board
- Formosa Plastics Group - Taiwan
- Independent Power Producers Association of India
- Africa Commodities Group - South Africa
- Bhatia International Limited - India
- Aditya Birla Group - India
- CIMB Investment Bank - Malaysia
- Kaltim Prima Coal - Indonesia
- Vizag Seaport Private Limited - India
- Grasim Industreis Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Energy Development Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Xindia Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Star Paper Mills Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Renaissance Capital - South Africa
- Ministry of Mines - Canada
- Orica Mining Services - Indonesia
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