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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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Tuesday, 26 January 16
Q3'16 CFR SOUTH CHINA COAL SWAP DROPPED BELOW $41 A TON
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery rose US$ 0.82 (1.94%) per ton month over month.
A commodity swap is ...
Tuesday, 26 January 16
OUTLOOK FOR GLOBAL OIL MARKETS - OPEC SECRETARY GENERAL
Opening address by HE Abdalla S. El-Badri, OPEC Secretary General, at the Chatham House Conference: Middle East and North Africa Energy 2016, Theme ...
Monday, 25 January 16
5700 GAR COAL INDEX CLOSED $ 50.08 PER TON, $0.20 LOWER FROM LAST WEEK
COALspot.com: Average 5000 GAR coal index of Indonesian origin decline 1.35 percent week over week to averaging $39.39 per ton on this past Friday, ...
Monday, 25 January 16
SHOULD A DEFAULTING PARTY BE ENTITLED TO AN INNOCENT PARTY'S SAVING, FOLLOWING THEIR BREACH OF CONTRACT? - THE NEW FLAMENCO REVISITED
KNOWLEDGE TO ELEVATE
This case was addressed by the club in our of January 2015, when the High Court decision became available. The background ...
Monday, 25 January 16
DRY BULK SHIPPING: A MISERABLE START TO A NEW YEAR, WHERE THE MARKET STRUGGLES TO GROW AT ALL - BIMCO
The global production of steel dropped in 2015 compared to 2014, to a larger extent outside China, as China exported its surplus of steel to destin ...
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- Siam City Cement - Thailand
- VISA Power Limited - India
- Energy Development Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- GAC Shipping (India) Pvt Ltd
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Transport, Egypt
- Aditya Birla Group - India
- Billiton Holdings Pty Ltd - Australia
- GMR Energy Limited - India
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- Pendopo Energi Batubara - Indonesia
- PowerSource Philippines DevCo
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- PTC India Limited - India
- Formosa Plastics Group - Taiwan
- Kapuas Tunggal Persada - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Ministry of Mines - Canada
- Thai Mozambique Logistica
- Globalindo Alam Lestari - Indonesia
- Coastal Gujarat Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Coalindo Energy - Indonesia
- Bhushan Steel Limited - India
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- Carbofer General Trading SA - India
- Bukit Baiduri Energy - Indonesia
- Eastern Energy - Thailand
- Power Finance Corporation Ltd., India
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Indogreen Group - Indonesia
- Kartika Selabumi Mining - Indonesia
- Videocon Industries ltd - India
- SMG Consultants - Indonesia
- Sarangani Energy Corporation, Philippines
- Metalloyd Limited - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Jindal Steel & Power Ltd - India
- Savvy Resources Ltd - HongKong
- ICICI Bank Limited - India
- Gujarat Sidhee Cement - India
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Global Coal Blending Company Limited - Australia
- Orica Australia Pty. Ltd.
- Central Java Power - Indonesia
- Attock Cement Pakistan Limited
- Agrawal Coal Company - India
- Vizag Seaport Private Limited - India
- GVK Power & Infra Limited - India
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- IEA Clean Coal Centre - UK
- LBH Netherlands Bv - Netherlands
- IHS Mccloskey Coal Group - USA
- Australian Commodity Traders Exchange
- Meenaskhi Energy Private Limited - India
- Marubeni Corporation - India
- International Coal Ventures Pvt Ltd - India
- Sakthi Sugars Limited - India
- Bukit Makmur.PT - Indonesia
- Indian Energy Exchange, India
- Merrill Lynch Commodities Europe
- Bukit Asam (Persero) Tbk - Indonesia
- Sojitz Corporation - Japan
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- Rashtriya Ispat Nigam Limited - India
- Miang Besar Coal Terminal - Indonesia
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- Bharathi Cement Corporation - India
- Kideco Jaya Agung - Indonesia
- Madhucon Powers Ltd - India
- Edison Trading Spa - Italy
- Kobexindo Tractors - Indoneisa
- Planning Commission, India
- Latin American Coal - Colombia
- Electricity Generating Authority of Thailand
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
- Bhatia International Limited - India
- Ambuja Cements Ltd - India
- South Luzon Thermal Energy Corporation
- ASAPP Information Group - India
- Indo Tambangraya Megah - Indonesia
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Maheswari Brothers Coal Limited - India
- Holcim Trading Pte Ltd - Singapore
- Indika Energy - Indonesia
- Minerals Council of Australia
- Trasteel International SA, Italy
- Altura Mining Limited, Indonesia
- Xindia Steels Limited - India
- Tata Chemicals Ltd - India
- The University of Queensland
- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- London Commodity Brokers - England
- Meralco Power Generation, Philippines
- Sree Jayajothi Cements Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- Economic Council, Georgia
- Siam City Cement PLC, Thailand
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- CIMB Investment Bank - Malaysia
- PNOC Exploration Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Coal and Oil Company - UAE
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Antam Resourcindo - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Goldman Sachs - Singapore
- New Zealand Coal & Carbon
- Kaltim Prima Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Chettinad Cement Corporation Ltd - India
- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Oldendorff Carriers - Singapore
- San Jose City I Power Corp, Philippines
- Semirara Mining Corp, Philippines
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Renaissance Capital - South Africa
- Banpu Public Company Limited - Thailand
- Ind-Barath Power Infra Limited - India
- Electricity Authority, New Zealand
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
- Kalimantan Lumbung Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Global Green Power PLC Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Heidelberg Cement - Germany
- Bahari Cakrawala Sebuku - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Interocean Group of Companies - India
- Salva Resources Pvt Ltd - India
- Commonwealth Bank - Australia
- Independent Power Producers Association of India
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- Romanian Commodities Exchange
- Jorong Barutama Greston.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Singapore Mercantile Exchange
- Grasim Industreis Ltd - India
- Baramulti Group, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Ceylon Electricity Board - Sri Lanka
- Parry Sugars Refinery, India
- Sinarmas Energy and Mining - Indonesia
- Bangladesh Power Developement Board
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Directorate Of Revenue Intelligence - India
- Makarim & Taira - Indonesia
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wilmar Investment Holdings
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- MS Steel International - UAE
- Larsen & Toubro Limited - India
- McConnell Dowell - Australia
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Tamil Nadu electricity Board
- Petron Corporation, Philippines
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- Rio Tinto Coal - Australia
- Borneo Indobara - Indonesia
- Bulk Trading Sa - Switzerland
- Medco Energi Mining Internasional
- Directorate General of MIneral and Coal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Standard Chartered Bank - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The Treasury - Australian Government
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