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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, 10 January 16
LNG BUNKERING IN ASIA: FUELING A PROMISING FUTURE? - REED SMITH
The requirement of a mandatory reduction of sulphur content in bunker fuel proposed by the International Maritime Organisation (IMO) poses a challe ...
Saturday, 09 January 16
BALTIC DRY INDEX SINKS 10% WEEK OVER WEEK TO AN ALL-TIME LOW OF 429 POINTS
COALspot.com: The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry bulk commodities, decline around 10% we ...
Friday, 08 January 16
FOB INDONESIA COAL SWAP FOR DELIVERY H1'16 REMAIN FLAT AS DEMAND DROPS OFF
COALspot.com: Indonesian coal swap delivery Q1 2016 declined month on month, flat week over week. The price for coal has been in a Dull Market sinc ...
Friday, 08 January 16
FOB RICHARDS BAY COAL SWAP FOR Q2'16 DELIVERY CLOSED UP $0.13 AT $45.50 PER TON
COALspot.com: Q1’ 2016 API4 FOB Richards Bay Coal swap decline month over month and slightly up week over week.
The Q1’ 2016 FOB R ...
Friday, 08 January 16
WEEKLY US COAL PRODUCTION DECLINES 1.6% TO 11.7 MMST, SAYS EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 11.7million short ...
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- Bukit Asam (Persero) Tbk - Indonesia
- Videocon Industries ltd - India
- Coalindo Energy - Indonesia
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- Therma Luzon, Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Sindya Power Generating Company Private Ltd
- OPG Power Generation Pvt Ltd - India
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Kohat Cement Company Ltd. - Pakistan
- Deloitte Consulting - India
- Alfred C Toepfer International GmbH - Germany
- Minerals Council of Australia
- Banpu Public Company Limited - Thailand
- Bulk Trading Sa - Switzerland
- Manunggal Multi Energi - Indonesia
- Goldman Sachs - Singapore
- Karbindo Abesyapradhi - Indoneisa
- IEA Clean Coal Centre - UK
- Leighton Contractors Pty Ltd - Australia
- Petron Corporation, Philippines
- Marubeni Corporation - India
- SMG Consultants - Indonesia
- Sakthi Sugars Limited - India
- Sical Logistics Limited - India
- Singapore Mercantile Exchange
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Krishnapatnam Port Company Ltd. - India
- Vedanta Resources Plc - India
- PTC India Limited - India
- New Zealand Coal & Carbon
- PNOC Exploration Corporation - Philippines
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- Parry Sugars Refinery, India
- Indonesian Coal Mining Association
- Economic Council, Georgia
- Neyveli Lignite Corporation Ltd, - India
- Sree Jayajothi Cements Limited - India
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- White Energy Company Limited
- Mercator Lines Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Kideco Jaya Agung - Indonesia
- Africa Commodities Group - South Africa
- Parliament of New Zealand
- Metalloyd Limited - United Kingdom
- Sarangani Energy Corporation, Philippines
- Central Java Power - Indonesia
- Bangladesh Power Developement Board
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Kaltim Prima Coal - Indonesia
- Malabar Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Kapuas Tunggal Persada - Indonesia
- The Treasury - Australian Government
- Rashtriya Ispat Nigam Limited - India
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Central Electricity Authority - India
- McConnell Dowell - Australia
- The State Trading Corporation of India Ltd
- Xindia Steels Limited - India
- Electricity Generating Authority of Thailand
- Agrawal Coal Company - India
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- MS Steel International - UAE
- India Bulls Power Limited - India
- Energy Link Ltd, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Rio Tinto Coal - Australia
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- GMR Energy Limited - India
- Barasentosa Lestari - Indonesia
- Global Business Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Posco Energy - South Korea
- Wood Mackenzie - Singapore
- Mercuria Energy - Indonesia
- Sojitz Corporation - Japan
- Thai Mozambique Logistica
- Australian Coal Association
- Cement Manufacturers Association - India
- LBH Netherlands Bv - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- GVK Power & Infra Limited - India
- Renaissance Capital - South Africa
- Lanco Infratech Ltd - India
- TeaM Sual Corporation - Philippines
- The University of Queensland
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- Meralco Power Generation, Philippines
- Edison Trading Spa - Italy
- Mjunction Services Limited - India
- Jaiprakash Power Ventures ltd
- Merrill Lynch Commodities Europe
- Aboitiz Power Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Riau Bara Harum - Indonesia
- GAC Shipping (India) Pvt Ltd
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Interocean Group of Companies - India
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Planning Commission, India
- Aditya Birla Group - India
- Commonwealth Bank - Australia
- Anglo American - United Kingdom
- Coal and Oil Company - UAE
- Oldendorff Carriers - Singapore
- Maheswari Brothers Coal Limited - India
- European Bulk Services B.V. - Netherlands
- Ceylon Electricity Board - Sri Lanka
- Ministry of Transport, Egypt
- Siam City Cement - Thailand
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Grasim Industreis Ltd - India
- VISA Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Georgia Ports Authority, United States
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Simpson Spence & Young - Indonesia
- Kumho Petrochemical, South Korea
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Bayan Resources Tbk. - Indonesia
- Binh Thuan Hamico - Vietnam
- Global Green Power PLC Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PowerSource Philippines DevCo
- Electricity Authority, New Zealand
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Makarim & Taira - Indonesia
- Pendopo Energi Batubara - Indonesia
- Chamber of Mines of South Africa
- Standard Chartered Bank - UAE
- South Luzon Thermal Energy Corporation
- Petrochimia International Co. Ltd.- Taiwan
- ICICI Bank Limited - India
- Straits Asia Resources Limited - Singapore
- Indian Energy Exchange, India
- CIMB Investment Bank - Malaysia
- Cigading International Bulk Terminal - Indonesia
- Tamil Nadu electricity Board
- Heidelberg Cement - Germany
- ASAPP Information Group - India
- Star Paper Mills Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- Coastal Gujarat Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Antam Resourcindo - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Bhatia International Limited - India
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- CNBM International Corporation - China
- Samtan Co., Ltd - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Kalimantan Lumbung Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Mineral Development Corp Ltd - India
- Wilmar Investment Holdings
- Ambuja Cements Ltd - India
- Directorate Of Revenue Intelligence - India
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