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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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Sunday, 24 January 16
PANAMAX MARKET WEAKENS ACROSS THE BOARD
COALspot.com: The Baltic Dry Index, which gauges the cost of shipping dry bulk including iron ore, cement, grain, coal and fertiliser, fell ninetee ...
Friday, 22 January 16
WEEKLY US COAL PRODUCTION ESTIMATES ALMOST FLAT
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 13.3 million shor ...
Friday, 22 January 16
COAL PRICES TO REMAIN UNDER PRESSURE THIS YEAR
COALspot.com: Indonesian coal swap delivery Q1 2016 declined month on month and week over week. The falling trend of prices for coal was continuing ...
Friday, 22 January 16
Q3' 16 FOB RICHARDS BAY COAL SWAP CLOSED AT $ 40.80; DECLINE $ 2.80 M-O-M
COALspot.com: Q1’ 2016 API4 FOB Richards Bay Coal swap up month over month and decline week over week.
The Q1’ 2016 FOB Richards B ...
Wednesday, 20 January 16
Q3'16 FOB NEWCASTLE COAL SWAP CLOSED $ 2.40 LESSER THAN Q1'16 CLOSING PRICE OF $ 38.10
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery rose another $0.77 per ton (2.06%) this past week compared to the sam ...
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- PNOC Exploration Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Aditya Birla Group - India
- Chettinad Cement Corporation Ltd - India
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- VISA Power Limited - India
- London Commodity Brokers - England
- Semirara Mining and Power Corporation, Philippines
- Planning Commission, India
- Minerals Council of Australia
- Indo Tambangraya Megah - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bharathi Cement Corporation - India
- PowerSource Philippines DevCo
- Trasteel International SA, Italy
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Leighton Contractors Pty Ltd - Australia
- Heidelberg Cement - Germany
- Alfred C Toepfer International GmbH - Germany
- Indika Energy - Indonesia
- Bulk Trading Sa - Switzerland
- AsiaOL BioFuels Corp., Philippines
- Ministry of Transport, Egypt
- Posco Energy - South Korea
- Karbindo Abesyapradhi - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Gujarat Mineral Development Corp Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Madhucon Powers Ltd - India
- Intertek Mineral Services - Indonesia
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Coalindo Energy - Indonesia
- Latin American Coal - Colombia
- Global Business Power Corporation, Philippines
- Renaissance Capital - South Africa
- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- Electricity Authority, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Bhushan Steel Limited - India
- Port Waratah Coal Services - Australia
- Meralco Power Generation, Philippines
- Siam City Cement - Thailand
- Agrawal Coal Company - India
- Wood Mackenzie - Singapore
- CNBM International Corporation - China
- Australian Commodity Traders Exchange
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- Goldman Sachs - Singapore
- The University of Queensland
- Deloitte Consulting - India
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- India Bulls Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Mintek Dendrill Indonesia
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- Sarangani Energy Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Savvy Resources Ltd - HongKong
- Samtan Co., Ltd - South Korea
- GMR Energy Limited - India
- Bukit Makmur.PT - Indonesia
- White Energy Company Limited
- Indonesian Coal Mining Association
- Aboitiz Power Corporation - Philippines
- Malabar Cements Ltd - India
- Interocean Group of Companies - India
- Marubeni Corporation - India
- Mercator Lines Limited - India
- PTC India Limited - India
- International Coal Ventures Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Africa Commodities Group - South Africa
- IEA Clean Coal Centre - UK
- Ceylon Electricity Board - Sri Lanka
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rio Tinto Coal - Australia
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Commonwealth Bank - Australia
- Medco Energi Mining Internasional
- New Zealand Coal & Carbon
- Timah Investasi Mineral - Indoneisa
- Antam Resourcindo - Indonesia
- Maheswari Brothers Coal Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Xindia Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- Kaltim Prima Coal - Indonesia
- Bhoruka Overseas - Indonesia
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Orica Australia Pty. Ltd.
- Iligan Light & Power Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Riau Bara Harum - Indonesia
- Indogreen Group - Indonesia
- Semirara Mining Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Therma Luzon, Inc, Philippines
- Parry Sugars Refinery, India
- Sojitz Corporation - Japan
- Central Java Power - Indonesia
- Barasentosa Lestari - Indonesia
- The Treasury - Australian Government
- TNB Fuel Sdn Bhd - Malaysia
- Merrill Lynch Commodities Europe
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- Manunggal Multi Energi - Indonesia
- Singapore Mercantile Exchange
- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- Power Finance Corporation Ltd., India
- Kepco SPC Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Binh Thuan Hamico - Vietnam
- Lanco Infratech Ltd - India
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Bahari Cakrawala Sebuku - Indonesia
- San Jose City I Power Corp, Philippines
- Oldendorff Carriers - Singapore
- The State Trading Corporation of India Ltd
- Ambuja Cements Ltd - India
- Energy Development Corp, Philippines
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Energy Link Ltd, New Zealand
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- Meenaskhi Energy Private Limited - India
- Economic Council, Georgia
- Makarim & Taira - Indonesia
- Romanian Commodities Exchange
- Coal and Oil Company - UAE
- Toyota Tsusho Corporation, Japan
- GAC Shipping (India) Pvt Ltd
- Jaiprakash Power Ventures ltd
- Bangladesh Power Developement Board
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- Kumho Petrochemical, South Korea
- Ind-Barath Power Infra Limited - India
- South Luzon Thermal Energy Corporation
- Mjunction Services Limited - India
- Sical Logistics Limited - India
- Pendopo Energi Batubara - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Tamil Nadu electricity Board
- Maharashtra Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- Kapuas Tunggal Persada - Indonesia
- Baramulti Group, Indonesia
- Kideco Jaya Agung - Indonesia
- Eastern Energy - Thailand
- Vedanta Resources Plc - India
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- Sinarmas Energy and Mining - Indonesia
- Standard Chartered Bank - UAE
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Orica Mining Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Australian Coal Association
- Banpu Public Company Limited - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- Georgia Ports Authority, United States
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