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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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Wednesday, 13 January 16
U.S. COAL PRODUCTION DECLINED BY 109 MMST IN 2015; COAL EXPORTS DECREASED 21% Y-O-Y
COALspot.com: U.S. coal production declined by 109 million short tons (MMst) (11%) in 2015, the largest decline ever recorded, says EIA.
The 2 ...
Wednesday, 13 January 16
SHIPPING MARKET INSIGHT - GEORGE ILIOPOULOS
Going through the second week of 2016 we could easily argue that at this point there are no visible signs of an imminent recovery in the Dry Bulk m ...
Wednesday, 13 January 16
IRON ORE IMPASSE - A FAILED CLAIM FOR CONVERSION - CLYDE & CO
KNOWLEDGE TO ELEVATE
In the recent case of the “Bao Yue”, the English High Court found that the bill of lading holder was liable t ...
Tuesday, 12 January 16
5700 GAR COAL FOR DELIVERY WITHIN Q1 FELL 0.91% WEEK OVER WEEK
COALspot.com: Average 5000 GAR coal index of Indonesian origin moved South direction week over week to averaging $39.96 per ton on last Friday, acc ...
Monday, 11 January 16
PORT OF NEWCASTLE SHIPPED 20% MORE COAL IN DECEMBER 2015; AVERAGE SELLING PRICE DECLINE 3.43%
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port has shipped $1.129 billio ...
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- Standard Chartered Bank - UAE
- The State Trading Corporation of India Ltd
- Globalindo Alam Lestari - Indonesia
- Ministry of Finance - Indonesia
- Xindia Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Marubeni Corporation - India
- Indonesian Coal Mining Association
- Agrawal Coal Company - India
- SMC Global Power, Philippines
- Uttam Galva Steels Limited - India
- TeaM Sual Corporation - Philippines
- Coal and Oil Company - UAE
- PetroVietnam Power Coal Import and Supply Company
- Bharathi Cement Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- IHS Mccloskey Coal Group - USA
- Jorong Barutama Greston.PT - Indonesia
- Oldendorff Carriers - Singapore
- SMG Consultants - Indonesia
- Meralco Power Generation, Philippines
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Bayan Resources Tbk. - Indonesia
- Therma Luzon, Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Samtan Co., Ltd - South Korea
- Indika Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karaikal Port Pvt Ltd - India
- Rio Tinto Coal - Australia
- Karbindo Abesyapradhi - Indoneisa
- Renaissance Capital - South Africa
- Semirara Mining and Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- India Bulls Power Limited - India
- Cement Manufacturers Association - India
- CNBM International Corporation - China
- Makarim & Taira - Indonesia
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Sidhee Cement - India
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Heidelberg Cement - Germany
- Ambuja Cements Ltd - India
- Salva Resources Pvt Ltd - India
- The Treasury - Australian Government
- Star Paper Mills Limited - India
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- Africa Commodities Group - South Africa
- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- CIMB Investment Bank - Malaysia
- Eastern Energy - Thailand
- IEA Clean Coal Centre - UK
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Vedanta Resources Plc - India
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- Global Green Power PLC Corporation, Philippines
- GMR Energy Limited - India
- Binh Thuan Hamico - Vietnam
- Essar Steel Hazira Ltd - India
- Indo Tambangraya Megah - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- Bhushan Steel Limited - India
- Simpson Spence & Young - Indonesia
- Straits Asia Resources Limited - Singapore
- Jindal Steel & Power Ltd - India
- Chettinad Cement Corporation Ltd - India
- Thai Mozambique Logistica
- The University of Queensland
- Siam City Cement PLC, Thailand
- Electricity Authority, New Zealand
- Bukit Baiduri Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Kartika Selabumi Mining - Indonesia
- Larsen & Toubro Limited - India
- AsiaOL BioFuels Corp., Philippines
- Maheswari Brothers Coal Limited - India
- Tamil Nadu electricity Board
- Aditya Birla Group - India
- Ind-Barath Power Infra Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- South Luzon Thermal Energy Corporation
- Petrochimia International Co. Ltd.- Taiwan
- Intertek Mineral Services - Indonesia
- Cigading International Bulk Terminal - Indonesia
- PTC India Limited - India
- Pendopo Energi Batubara - Indonesia
- Georgia Ports Authority, United States
- Posco Energy - South Korea
- Bhoruka Overseas - Indonesia
- Sakthi Sugars Limited - India
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Mercuria Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- ASAPP Information Group - India
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- Antam Resourcindo - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Planning Commission, India
- Mercator Lines Limited - India
- Latin American Coal - Colombia
- Borneo Indobara - Indonesia
- Global Coal Blending Company Limited - Australia
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Carbofer General Trading SA - India
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- Bukit Makmur.PT - Indonesia
- Central Electricity Authority - India
- Indian Oil Corporation Limited
- Baramulti Group, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- Global Business Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- Singapore Mercantile Exchange
- Bangladesh Power Developement Board
- Kideco Jaya Agung - Indonesia
- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
- MS Steel International - UAE
- Kobexindo Tractors - Indoneisa
- Central Java Power - Indonesia
- Savvy Resources Ltd - HongKong
- Malabar Cements Ltd - India
- Bhatia International Limited - India
- Grasim Industreis Ltd - India
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Krishnapatnam Port Company Ltd. - India
- Trasteel International SA, Italy
- Lanco Infratech Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Medco Energi Mining Internasional
- VISA Power Limited - India
- Siam City Cement - Thailand
- London Commodity Brokers - England
- Offshore Bulk Terminal Pte Ltd, Singapore
- Goldman Sachs - Singapore
- Edison Trading Spa - Italy
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Electricity Generating Authority of Thailand
- Port Waratah Coal Services - Australia
- Formosa Plastics Group - Taiwan
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Australian Coal Association
- Meenaskhi Energy Private Limited - India
- Metalloyd Limited - United Kingdom
- Jaiprakash Power Ventures ltd
- Minerals Council of Australia
- Australian Commodity Traders Exchange
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- Anglo American - United Kingdom
- Wood Mackenzie - Singapore
- Ceylon Electricity Board - Sri Lanka
- Sarangani Energy Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Interocean Group of Companies - India
- Mintek Dendrill Indonesia
- Thiess Contractors Indonesia
- Eastern Coal Council - USA
- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- Aboitiz Power Corporation - Philippines
- GVK Power & Infra Limited - India
- Parry Sugars Refinery, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- McConnell Dowell - Australia
- Sical Logistics Limited - India
- Deloitte Consulting - India
- Orica Mining Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- TNB Fuel Sdn Bhd - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Merrill Lynch Commodities Europe
- Chamber of Mines of South Africa
- Bulk Trading Sa - Switzerland
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
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