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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, 04 February 16
CAPESIZE: WEST AUSTRALIAN TO CHINA HAS BEEN CONCLUDED AT US$ 2.85 PMT AND THE C3 MARKET REMAINS INACTIVE - FEARNLEYS
Capesize
As everyone is getting ready for the Chinese new year, already depressed rates are under further pressure.
According to Fearnleys, ...
Wednesday, 03 February 16
DRY BULK MARKET CONTINUES TO BE UNDER PRESSURE - INTERMODAL
The Dry Bulk market continues to be under pressure, with the BDI remaining in search of even the slightest support, which seems to be delaying more ...
Tuesday, 02 February 16
RECORD EXPORTS THROUGH SOUTH AFRICA'S RICHARDS BAY COAL TERMINAL MADE AT EXPENSE OF SMALLER RIVALS, IHS SAYS
Five percent increase in coal exports through South Africa’s dominant Richards Bay Coal Terminal in 2015 unlikely to accelerate country&rsquo ...
Tuesday, 02 February 16
SETTING ASIDE, STRIKING OUT AND APPEALS TO THE COURT OF APPEAL IN SHIP ARRESTS - RAJAH & TANN ASIA LLP
KNOWLEDGE TO ELEVATE
The Singapore Court of Appeal once again has had to grapple with ship arrest, setting aside and appeals to the Court unde ...
Monday, 01 February 16
DRY BULK SUFFERS FROM POSEIDON'S POTENT PRONGS - CLARKSONS
It has been a grim start to 2016 for the bulkcarrier market, with the Baltic Dry Index sliding to new record lows on almost every day of the year s ...
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- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- Semirara Mining Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Indika Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Formosa Plastics Group - Taiwan
- Indonesian Coal Mining Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Leighton Contractors Pty Ltd - Australia
- Eastern Coal Council - USA
- Straits Asia Resources Limited - Singapore
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- Sindya Power Generating Company Private Ltd
- Asmin Koalindo Tuhup - Indonesia
- Vedanta Resources Plc - India
- Krishnapatnam Port Company Ltd. - India
- Billiton Holdings Pty Ltd - Australia
- Goldman Sachs - Singapore
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Trasteel International SA, Italy
- Salva Resources Pvt Ltd - India
- Bhatia International Limited - India
- IHS Mccloskey Coal Group - USA
- Karaikal Port Pvt Ltd - India
- Makarim & Taira - Indonesia
- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Central Java Power - Indonesia
- Rio Tinto Coal - Australia
- Kobexindo Tractors - Indoneisa
- Madhucon Powers Ltd - India
- Metalloyd Limited - United Kingdom
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- SMC Global Power, Philippines
- Simpson Spence & Young - Indonesia
- Bharathi Cement Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Larsen & Toubro Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhoruka Overseas - Indonesia
- OPG Power Generation Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- New Zealand Coal & Carbon
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Tata Chemicals Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Tamil Nadu electricity Board
- Medco Energi Mining Internasional
- Altura Mining Limited, Indonesia
- Ministry of Transport, Egypt
- Sakthi Sugars Limited - India
- Toyota Tsusho Corporation, Japan
- Jaiprakash Power Ventures ltd
- Ambuja Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Central Electricity Authority - India
- Wood Mackenzie - Singapore
- Chamber of Mines of South Africa
- White Energy Company Limited
- Holcim Trading Pte Ltd - Singapore
- Power Finance Corporation Ltd., India
- South Luzon Thermal Energy Corporation
- PTC India Limited - India
- Lanco Infratech Ltd - India
- CIMB Investment Bank - Malaysia
- GMR Energy Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- Parliament of New Zealand
- Minerals Council of Australia
- Kartika Selabumi Mining - Indonesia
- Indogreen Group - Indonesia
- Coastal Gujarat Power Limited - India
- Directorate Of Revenue Intelligence - India
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- Borneo Indobara - Indonesia
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- Dalmia Cement Bharat India
- Romanian Commodities Exchange
- Antam Resourcindo - Indonesia
- Coal and Oil Company - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- International Coal Ventures Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Anglo American - United Kingdom
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
- Alfred C Toepfer International GmbH - Germany
- Kepco SPC Power Corporation, Philippines
- Edison Trading Spa - Italy
- Cigading International Bulk Terminal - Indonesia
- Africa Commodities Group - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Merrill Lynch Commodities Europe
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Agrawal Coal Company - India
- Global Business Power Corporation, Philippines
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Orica Mining Services - Indonesia
- Bhushan Steel Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Petron Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Oldendorff Carriers - Singapore
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Energy Link Ltd, New Zealand
- The Treasury - Australian Government
- Bahari Cakrawala Sebuku - Indonesia
- VISA Power Limited - India
- The University of Queensland
- Standard Chartered Bank - UAE
- Deloitte Consulting - India
- Sical Logistics Limited - India
- GAC Shipping (India) Pvt Ltd
- Gujarat Electricity Regulatory Commission - India
- Grasim Industreis Ltd - India
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Australian Coal Association
- Bangladesh Power Developement Board
- Bayan Resources Tbk. - Indonesia
- Aditya Birla Group - India
- Parry Sugars Refinery, India
- GN Power Mariveles Coal Plant, Philippines
- Mercuria Energy - Indonesia
- Latin American Coal - Colombia
- Xindia Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- India Bulls Power Limited - India
- MS Steel International - UAE
- Eastern Energy - Thailand
- Banpu Public Company Limited - Thailand
- Singapore Mercantile Exchange
- Therma Luzon, Inc, Philippines
- Bulk Trading Sa - Switzerland
- Economic Council, Georgia
- Port Waratah Coal Services - Australia
- Thiess Contractors Indonesia
- Independent Power Producers Association of India
- Vizag Seaport Private Limited - India
- CNBM International Corporation - China
- Barasentosa Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Rashtriya Ispat Nigam Limited - India
- Riau Bara Harum - Indonesia
- Jindal Steel & Power Ltd - India
- Mjunction Services Limited - India
- Gujarat Sidhee Cement - India
- Malabar Cements Ltd - India
- Sojitz Corporation - Japan
- Kumho Petrochemical, South Korea
- Australian Commodity Traders Exchange
- GVK Power & Infra Limited - India
- McConnell Dowell - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- SMG Consultants - Indonesia
- Aboitiz Power Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Wilmar Investment Holdings
- Commonwealth Bank - Australia
- Pendopo Energi Batubara - Indonesia
- The State Trading Corporation of India Ltd
- PetroVietnam Power Coal Import and Supply Company
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- ICICI Bank Limited - India
- LBH Netherlands Bv - Netherlands
- Energy Development Corp, Philippines
- San Jose City I Power Corp, Philippines
- Heidelberg Cement - Germany
- Indo Tambangraya Megah - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
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