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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, 28 January 16
WHAT ARE THE PROSPECTS FOR COAL IN LIGHT OF THE PARIS CLIMATE AGREEMENT? - GERMAN COAL IMPORTERS ASSOCIATION
This depends – says the VDKi – to a very great extent on who you want to believe more, the United Nations or the International Energy A ...
Thursday, 28 January 16
RICHARDS BAY COAL SWAPS FOR Q1,Q2 AND Q3 DELIVERIES FIRM THIS PAST WEEK
COALspot.com: Q1’ 2016 API4 FOB Richards Bay Coal swap rose month over month and week over week.
The Q1’ 2016 FOB Richards Bay Coa ...
Wednesday, 27 January 16
API 5 FOB NEWCASTLE COAL SWAPS CLOSE MIXED
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery rose another $1.17 per ton (3.13%) this past week compared to the sam ...
Wednesday, 27 January 16
CHINA'S STALLING ECONOMY HAS HAD A GREAT EFFECT ON VARIOUS COMMODITIES; DECREASED DEMAND DRIVING COMMODITY PRICES LOWER AND LOWER - LINOS ALEXANDROS KOGEVINAS
Having gone through the first few weeks of 2016, it’s starting to look like another challenging year is ahead of us. Hopes for a recovery in ...
Wednesday, 27 January 16
WORLD HARD COAL PRODUCTION AND CONSUMPTION DECLINE IN 2015 FOR THE FIRST TIME IN OVER A DECADE - VDKI
COALspot.com: Seaborne hard coal trade and the changes in this area were decisively affected by China and India - VDKi.
China bears the g ...
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- Coastal Gujarat Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- Intertek Mineral Services - Indonesia
- Metalloyd Limited - United Kingdom
- CNBM International Corporation - China
- Kideco Jaya Agung - Indonesia
- Mjunction Services Limited - India
- Lanco Infratech Ltd - India
- Orica Australia Pty. Ltd.
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Savvy Resources Ltd - HongKong
- GAC Shipping (India) Pvt Ltd
- Thai Mozambique Logistica
- Edison Trading Spa - Italy
- Sakthi Sugars Limited - India
- Aditya Birla Group - India
- Wilmar Investment Holdings
- Meralco Power Generation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Makarim & Taira - Indonesia
- Ceylon Electricity Board - Sri Lanka
- ICICI Bank Limited - India
- Bulk Trading Sa - Switzerland
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Kaltim Prima Coal - Indonesia
- Energy Development Corp, Philippines
- Cement Manufacturers Association - India
- Indika Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Thiess Contractors Indonesia
- Trasteel International SA, Italy
- TeaM Sual Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Ministry of Finance - Indonesia
- Ind-Barath Power Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- Timah Investasi Mineral - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Sree Jayajothi Cements Limited - India
- Simpson Spence & Young - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Samtan Co., Ltd - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Star Paper Mills Limited - India
- Electricity Authority, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- The University of Queensland
- Oldendorff Carriers - Singapore
- Barasentosa Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Grasim Industreis Ltd - India
- Tata Chemicals Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- ASAPP Information Group - India
- Rashtriya Ispat Nigam Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Maharashtra Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Siam City Cement PLC, Thailand
- Directorate Of Revenue Intelligence - India
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- GMR Energy Limited - India
- International Coal Ventures Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Economic Council, Georgia
- Electricity Generating Authority of Thailand
- Eastern Coal Council - USA
- Sojitz Corporation - Japan
- Jindal Steel & Power Ltd - India
- Central Java Power - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sical Logistics Limited - India
- Gujarat Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- IHS Mccloskey Coal Group - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- Kartika Selabumi Mining - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- PNOC Exploration Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Eastern Energy - Thailand
- Xindia Steels Limited - India
- McConnell Dowell - Australia
- Riau Bara Harum - Indonesia
- Bhatia International Limited - India
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- South Luzon Thermal Energy Corporation
- Georgia Ports Authority, United States
- Mercator Lines Limited - India
- Indian Oil Corporation Limited
- Attock Cement Pakistan Limited
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- Miang Besar Coal Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- Toyota Tsusho Corporation, Japan
- Wood Mackenzie - Singapore
- Ambuja Cements Ltd - India
- The Treasury - Australian Government
- Jorong Barutama Greston.PT - Indonesia
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- OPG Power Generation Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Mining Services - Indonesia
- Altura Mining Limited, Indonesia
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Power Finance Corporation Ltd., India
- Malabar Cements Ltd - India
- Marubeni Corporation - India
- Maheswari Brothers Coal Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bangladesh Power Developement Board
- Standard Chartered Bank - UAE
- Planning Commission, India
- Singapore Mercantile Exchange
- Leighton Contractors Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- VISA Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Kumho Petrochemical, South Korea
- San Jose City I Power Corp, Philippines
- Semirara Mining Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Parliament of New Zealand
- Cigading International Bulk Terminal - Indonesia
- Minerals Council of Australia
- Heidelberg Cement - Germany
- Commonwealth Bank - Australia
- PetroVietnam Power Coal Import and Supply Company
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Romanian Commodities Exchange
- Formosa Plastics Group - Taiwan
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Carbofer General Trading SA - India
- LBH Netherlands Bv - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- Bharathi Cement Corporation - India
- Australian Commodity Traders Exchange
- MS Steel International - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Vedanta Resources Plc - India
- Therma Luzon, Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Antam Resourcindo - Indonesia
- Meenaskhi Energy Private Limited - India
- Coalindo Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Chamber of Mines of South Africa
- Coal and Oil Company - UAE
- Bayan Resources Tbk. - Indonesia
- CIMB Investment Bank - Malaysia
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- Sindya Power Generating Company Private Ltd
- Bhoruka Overseas - Indonesia
- European Bulk Services B.V. - Netherlands
- Australian Coal Association
- India Bulls Power Limited - India
- Deloitte Consulting - India
- Jaiprakash Power Ventures ltd
- Directorate General of MIneral and Coal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Indonesian Coal Mining Association
- Anglo American - United Kingdom
- Petron Corporation, Philippines
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- GVK Power & Infra Limited - India
- London Commodity Brokers - England
- PowerSource Philippines DevCo
- Mercuria Energy - Indonesia
- Borneo Indobara - Indonesia
- Central Electricity Authority - India
- Global Business Power Corporation, Philippines
- Renaissance Capital - South Africa
- Ministry of Transport, Egypt
- Madhucon Powers Ltd - India
- Bhushan Steel Limited - India
- SMG Consultants - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Posco Energy - South Korea
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