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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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Monday, 18 January 16
Q1'16 CFR SOUTH CHINA COAL SWAP CLOSED AT $ 42.50 PER TON; UP 1% MONTH OVER MONTH
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery rose US$ 0.43 (1.02%) per ton month over month.
A commodity swap is ...
Friday, 15 January 16
FOB INDONESIA COAL SWAPS FIRM SLIGHTLY LAST WEEK
COALspot.com: Indonesian coal swap delivery Q1 2016 declined month over month and week over week.
According to AsiaClear OTC coal swap's r ...
Friday, 15 January 16
SHIPPING: 2016 STARTED WITH MISERY ACROSS THE BOARD FOR SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As one would have expected, the dry bulk market starter the new year where it left off in 2015, plunging to never seen before depths, as the market ...
Friday, 15 January 16
U.S. WEEKLY COAL PRODUCTION ROSE ACROSS ALL BASINS: EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 13.4 million shor ...
Thursday, 14 January 16
FOB RICHARDS BAY COAL SWAP FOR Q3 DELIVERY CLOSED $5.90 LOWER THAN Q1 PRICE
COALspot.com: Q1’ 2016 API4 FOB Richards Bay Coal swap up month over month and week over week.
The Q1’ 2016 FOB Richards Bay Coal ...
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- Bayan Resources Tbk. - Indonesia
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- South Luzon Thermal Energy Corporation
- Aboitiz Power Corporation - Philippines
- IEA Clean Coal Centre - UK
- Antam Resourcindo - Indonesia
- Rio Tinto Coal - Australia
- Ministry of Transport, Egypt
- Vizag Seaport Private Limited - India
- London Commodity Brokers - England
- PetroVietnam Power Coal Import and Supply Company
- CNBM International Corporation - China
- Indo Tambangraya Megah - Indonesia
- Manunggal Multi Energi - Indonesia
- Central Electricity Authority - India
- Carbofer General Trading SA - India
- Australian Coal Association
- Goldman Sachs - Singapore
- Sree Jayajothi Cements Limited - India
- Wood Mackenzie - Singapore
- Siam City Cement - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GAC Shipping (India) Pvt Ltd
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- Siam City Cement PLC, Thailand
- PowerSource Philippines DevCo
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- Interocean Group of Companies - India
- Riau Bara Harum - Indonesia
- Energy Link Ltd, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Georgia Ports Authority, United States
- Indian Oil Corporation Limited
- Pendopo Energi Batubara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Indian Energy Exchange, India
- Kohat Cement Company Ltd. - Pakistan
- Global Business Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Finance - Indonesia
- Ambuja Cements Ltd - India
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- Sarangani Energy Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Romanian Commodities Exchange
- Billiton Holdings Pty Ltd - Australia
- Central Java Power - Indonesia
- Makarim & Taira - Indonesia
- ICICI Bank Limited - India
- Global Green Power PLC Corporation, Philippines
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Electricity Generating Authority of Thailand
- Karbindo Abesyapradhi - Indoneisa
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Simpson Spence & Young - Indonesia
- White Energy Company Limited
- Global Coal Blending Company Limited - Australia
- Samtan Co., Ltd - South Korea
- Aditya Birla Group - India
- SMG Consultants - Indonesia
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- Thiess Contractors Indonesia
- Coal and Oil Company - UAE
- Sakthi Sugars Limited - India
- PTC India Limited - India
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- Independent Power Producers Association of India
- International Coal Ventures Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sindya Power Generating Company Private Ltd
- Jorong Barutama Greston.PT - Indonesia
- Borneo Indobara - Indonesia
- Cement Manufacturers Association - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bharathi Cement Corporation - India
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- Meenaskhi Energy Private Limited - India
- The State Trading Corporation of India Ltd
- Jaiprakash Power Ventures ltd
- Wilmar Investment Holdings
- Heidelberg Cement - Germany
- Mjunction Services Limited - India
- Xindia Steels Limited - India
- Eastern Energy - Thailand
- European Bulk Services B.V. - Netherlands
- Petron Corporation, Philippines
- Marubeni Corporation - India
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Karaikal Port Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Bhushan Steel Limited - India
- Uttam Galva Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Semirara Mining Corp, Philippines
- Latin American Coal - Colombia
- Meralco Power Generation, Philippines
- Economic Council, Georgia
- India Bulls Power Limited - India
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Miang Besar Coal Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- TeaM Sual Corporation - Philippines
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Altura Mining Limited, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Africa Commodities Group - South Africa
- Therma Luzon, Inc, Philippines
- Indika Energy - Indonesia
- Mercuria Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- Sojitz Corporation - Japan
- Straits Asia Resources Limited - Singapore
- Energy Development Corp, Philippines
- Parry Sugars Refinery, India
- Semirara Mining and Power Corporation, Philippines
- Electricity Authority, New Zealand
- Banpu Public Company Limited - Thailand
- Gujarat Electricity Regulatory Commission - India
- Cigading International Bulk Terminal - Indonesia
- Orica Mining Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Commodity Traders Exchange
- Essar Steel Hazira Ltd - India
- Bukit Baiduri Energy - Indonesia
- Sical Logistics Limited - India
- ASAPP Information Group - India
- Baramulti Group, Indonesia
- Posco Energy - South Korea
- CIMB Investment Bank - Malaysia
- Vijayanagar Sugar Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Malabar Cements Ltd - India
- Dalmia Cement Bharat India
- Grasim Industreis Ltd - India
- Star Paper Mills Limited - India
- Ind-Barath Power Infra Limited - India
- Mercator Lines Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Madhucon Powers Ltd - India
- San Jose City I Power Corp, Philippines
- Medco Energi Mining Internasional
- Minerals Council of Australia
- Leighton Contractors Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Kaltim Prima Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Maharashtra Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Trasteel International SA, Italy
- Eastern Coal Council - USA
- OPG Power Generation Pvt Ltd - India
- The University of Queensland
- Coalindo Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Renaissance Capital - South Africa
- Attock Cement Pakistan Limited
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Coastal Gujarat Power Limited - India
- Videocon Industries ltd - India
- Savvy Resources Ltd - HongKong
- Thai Mozambique Logistica
- Price Waterhouse Coopers - Russia
- TNB Fuel Sdn Bhd - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- The Treasury - Australian Government
- Ceylon Electricity Board - Sri Lanka
- Kartika Selabumi Mining - Indonesia
- SMC Global Power, Philippines
- Bangladesh Power Developement Board
- Tamil Nadu electricity Board
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Agrawal Coal Company - India
- Parliament of New Zealand
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Kapuas Tunggal Persada - Indonesia
- Tata Chemicals Ltd - India
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