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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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Thursday, 31 December 15
2016 FOB NEWCASTLE COAL SWAP RALLY TO CLOSE AT $37.98/TON
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery rose another $1.48 per ton (4.05%) this past week compared to the sam ...
Wednesday, 30 December 15
FINAL DEALS OF THE YEAR TAKING PLACE, AS SHIP OWNERS PREPARE FOR 2016 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The Holidays’ investment lull has taken a grip over the newbuilding and S&P market for second hand vessels, as shipbrokers are reporting ...
Tuesday, 29 December 15
CFR SOUTH CHINA COAL SWAPS ROSE MONTH OVER MONTH
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery rose US$ 0.68 (1.64%) per ton month over month.
A commodity swap is ...
Monday, 28 December 15
Q2' 15 U.S. STEAM COAL EXPORTS TOTALED 7.0 MMST; DOWN 16.9% FROM Q1 2015 - EIA
COALspot.com: U.S. coal production during second quarter 2015 totaled 211.1 million short tons.
According to EIA’s preliminary quarterly ...
Monday, 28 December 15
NOVEMBER NEWCASTLE COAL EXPORTS DECLINED 11.87%; THE AVERAGE PRICE OF COAL EXPORTS ROSE 1.37%
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port has shipped $1.120 billio ...
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- TNB Fuel Sdn Bhd - Malaysia
- Wood Mackenzie - Singapore
- Bhatia International Limited - India
- Billiton Holdings Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- Mjunction Services Limited - India
- Parliament of New Zealand
- Thiess Contractors Indonesia
- Ministry of Transport, Egypt
- Asmin Koalindo Tuhup - Indonesia
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Standard Chartered Bank - UAE
- Altura Mining Limited, Indonesia
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- Therma Luzon, Inc, Philippines
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Borneo Indobara - Indonesia
- VISA Power Limited - India
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- Star Paper Mills Limited - India
- Wilmar Investment Holdings
- PTC India Limited - India
- Agrawal Coal Company - India
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Riau Bara Harum - Indonesia
- Bhoruka Overseas - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- IEA Clean Coal Centre - UK
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Romanian Commodities Exchange
- Essar Steel Hazira Ltd - India
- Central Electricity Authority - India
- Semirara Mining Corp, Philippines
- Bangladesh Power Developement Board
- Singapore Mercantile Exchange
- GVK Power & Infra Limited - India
- Planning Commission, India
- Power Finance Corporation Ltd., India
- Bahari Cakrawala Sebuku - Indonesia
- Kumho Petrochemical, South Korea
- Sical Logistics Limited - India
- Krishnapatnam Port Company Ltd. - India
- Coal and Oil Company - UAE
- Sinarmas Energy and Mining - Indonesia
- Electricity Generating Authority of Thailand
- Petron Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- The University of Queensland
- Bulk Trading Sa - Switzerland
- Mercuria Energy - Indonesia
- Gujarat Sidhee Cement - India
- ICICI Bank Limited - India
- Aditya Birla Group - India
- Ambuja Cements Ltd - India
- Marubeni Corporation - India
- Xindia Steels Limited - India
- White Energy Company Limited
- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- SN Aboitiz Power Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Energy - Thailand
- Rashtriya Ispat Nigam Limited - India
- Carbofer General Trading SA - India
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Makarim & Taira - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- SMC Global Power, Philippines
- Central Java Power - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- Globalindo Alam Lestari - Indonesia
- Latin American Coal - Colombia
- Eastern Coal Council - USA
- New Zealand Coal & Carbon
- IHS Mccloskey Coal Group - USA
- London Commodity Brokers - England
- OPG Power Generation Pvt Ltd - India
- Sojitz Corporation - Japan
- Timah Investasi Mineral - Indoneisa
- Binh Thuan Hamico - Vietnam
- Simpson Spence & Young - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Thai Mozambique Logistica
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Energy Link Ltd, New Zealand
- GAC Shipping (India) Pvt Ltd
- Independent Power Producers Association of India
- Dalmia Cement Bharat India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rio Tinto Coal - Australia
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Banpu Public Company Limited - Thailand
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- International Coal Ventures Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Minerals Council of Australia
- Medco Energi Mining Internasional
- Straits Asia Resources Limited - Singapore
- Siam City Cement PLC, Thailand
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Grasim Industreis Ltd - India
- Indian Oil Corporation Limited
- Bayan Resources Tbk. - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Gujarat Electricity Regulatory Commission - India
- Bukit Asam (Persero) Tbk - Indonesia
- Deloitte Consulting - India
- Savvy Resources Ltd - HongKong
- Oldendorff Carriers - Singapore
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Barasentosa Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Economic Council, Georgia
- CNBM International Corporation - China
- Edison Trading Spa - Italy
- Ind-Barath Power Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement - Thailand
- Cement Manufacturers Association - India
- PetroVietnam Power Coal Import and Supply Company
- Toyota Tsusho Corporation, Japan
- Alfred C Toepfer International GmbH - Germany
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Indian Energy Exchange, India
- Global Green Power PLC Corporation, Philippines
- Merrill Lynch Commodities Europe
- Australian Coal Association
- GN Power Mariveles Coal Plant, Philippines
- Mintek Dendrill Indonesia
- MS Steel International - UAE
- Jaiprakash Power Ventures ltd
- Tata Chemicals Ltd - India
- Vizag Seaport Private Limited - India
- Sarangani Energy Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Goldman Sachs - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Parry Sugars Refinery, India
- South Luzon Thermal Energy Corporation
- ASAPP Information Group - India
- McConnell Dowell - Australia
- Iligan Light & Power Inc, Philippines
- Orica Mining Services - Indonesia
- Formosa Plastics Group - Taiwan
- Attock Cement Pakistan Limited
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Directorate Of Revenue Intelligence - India
- Pipit Mutiara Jaya. PT, Indonesia
- Chamber of Mines of South Africa
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Baramulti Group, Indonesia
- San Jose City I Power Corp, Philippines
- Electricity Authority, New Zealand
- Port Waratah Coal Services - Australia
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Uttam Galva Steels Limited - India
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Lanco Infratech Ltd - India
- Coalindo Energy - Indonesia
- The State Trading Corporation of India Ltd
- Commonwealth Bank - Australia
- Aboitiz Power Corporation - Philippines
- Vedanta Resources Plc - India
- Malabar Cements Ltd - India
- Australian Commodity Traders Exchange
- Larsen & Toubro Limited - India
- Bharathi Cement Corporation - India
- India Bulls Power Limited - India
- Anglo American - United Kingdom
- Indika Energy - Indonesia
- Mercator Lines Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Global Coal Blending Company Limited - Australia
- Maheswari Brothers Coal Limited - India
- LBH Netherlands Bv - Netherlands
- The Treasury - Australian Government
- GMR Energy Limited - India
- Kobexindo Tractors - Indoneisa
- Videocon Industries ltd - India
- Trasteel International SA, Italy
- European Bulk Services B.V. - Netherlands
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