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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, 23 December 15
SHIPPING MARKET INSIGHT - PANOS MAKRINOS
As we are heading towards the end of the year we could argue that most of those involved in the shipping industry share mixed feelings for 2015. Th ...
Wednesday, 23 December 15
FOB NEWCASTLE COAL SWAP CLOSES FIRM
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery up $0.45 per ton (1.22%) month over month to US$ 37.20 per ton. The swap wa ...
Tuesday, 22 December 15
3800 GAR INDEX CLOSED AT US$ 22.03 PER TON; DOWN 0.15% W-O-W
COALspot.com: The 5000 GAR CS (i) coal index decline US$ 0.03 per ton (-0.07 %) week over week.
According to the CS (i) coal (system generated ...
Monday, 21 December 15
Q3' 2016 CFR SOUTH CHINA COAL SWAP CLOSED SLIGHTLY LOWER COMPARE TO Q1'16 CLOSING PRICE
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery up US$ 0.20 (0.48%) per ton month over month.
A commodity swap is a ...
Sunday, 20 December 15
THE FREIGHT RATES FROM INDONESIA TO INDIA IS EXPECTED TO BE SOFT NEXT WEEK
COALspot.com: The BDI facing all time low's this week. The bulk dry index closed at 477 points on 18 December 2015.
The cape index was als ...
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- GAC Shipping (India) Pvt Ltd
- Maharashtra Electricity Regulatory Commission - India
- The University of Queensland
- IEA Clean Coal Centre - UK
- Antam Resourcindo - Indonesia
- Riau Bara Harum - Indonesia
- Thai Mozambique Logistica
- Independent Power Producers Association of India
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- Mercuria Energy - Indonesia
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- Malabar Cements Ltd - India
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- CIMB Investment Bank - Malaysia
- Ind-Barath Power Infra Limited - India
- Merrill Lynch Commodities Europe
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Agrawal Coal Company - India
- Global Green Power PLC Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Singapore Mercantile Exchange
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- Iligan Light & Power Inc, Philippines
- Attock Cement Pakistan Limited
- Central Electricity Authority - India
- Mjunction Services Limited - India
- Australian Coal Association
- Petron Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Grasim Industreis Ltd - India
- Larsen & Toubro Limited - India
- Renaissance Capital - South Africa
- Romanian Commodities Exchange
- Central Java Power - Indonesia
- VISA Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- ASAPP Information Group - India
- Eastern Coal Council - USA
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- Indonesian Coal Mining Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Africa Commodities Group - South Africa
- Siam City Cement PLC, Thailand
- Kalimantan Lumbung Energi - Indonesia
- Goldman Sachs - Singapore
- Sinarmas Energy and Mining - Indonesia
- Orica Australia Pty. Ltd.
- Directorate General of MIneral and Coal - Indonesia
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Therma Luzon, Inc, Philippines
- Borneo Indobara - Indonesia
- Sojitz Corporation - Japan
- Uttam Galva Steels Limited - India
- Bhatia International Limited - India
- Lanco Infratech Ltd - India
- Cement Manufacturers Association - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Metalloyd Limited - United Kingdom
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- Kumho Petrochemical, South Korea
- Krishnapatnam Port Company Ltd. - India
- Oldendorff Carriers - Singapore
- Electricity Authority, New Zealand
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Sidhee Cement - India
- Madhucon Powers Ltd - India
- MS Steel International - UAE
- McConnell Dowell - Australia
- Ministry of Transport, Egypt
- San Jose City I Power Corp, Philippines
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- Coalindo Energy - Indonesia
- Indian Oil Corporation Limited
- Indika Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Globalindo Alam Lestari - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Marubeni Corporation - India
- Chettinad Cement Corporation Ltd - India
- Bayan Resources Tbk. - Indonesia
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Indian Energy Exchange, India
- White Energy Company Limited
- Savvy Resources Ltd - HongKong
- Bukit Baiduri Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Posco Energy - South Korea
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- GMR Energy Limited - India
- Binh Thuan Hamico - Vietnam
- Bahari Cakrawala Sebuku - Indonesia
- Parliament of New Zealand
- Straits Asia Resources Limited - Singapore
- Toyota Tsusho Corporation, Japan
- Vedanta Resources Plc - India
- Global Business Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- New Zealand Coal & Carbon
- Siam City Cement - Thailand
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Altura Mining Limited, Indonesia
- Indo Tambangraya Megah - Indonesia
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Tamil Nadu electricity Board
- Electricity Generating Authority of Thailand
- Rashtriya Ispat Nigam Limited - India
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Bhushan Steel Limited - India
- Power Finance Corporation Ltd., India
- Neyveli Lignite Corporation Ltd, - India
- SMC Global Power, Philippines
- Minerals Council of Australia
- Price Waterhouse Coopers - Russia
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- The State Trading Corporation of India Ltd
- Maheswari Brothers Coal Limited - India
- Salva Resources Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- Kepco SPC Power Corporation, Philippines
- Bangladesh Power Developement Board
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Wood Mackenzie - Singapore
- The Treasury - Australian Government
- PTC India Limited - India
- IHS Mccloskey Coal Group - USA
- Indogreen Group - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- LBH Netherlands Bv - Netherlands
- CNBM International Corporation - China
- Coastal Gujarat Power Limited - India
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- SMG Consultants - Indonesia
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Banpu Public Company Limited - Thailand
- South Luzon Thermal Energy Corporation
- Bharathi Cement Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Edison Trading Spa - Italy
- Ministry of Finance - Indonesia
- Intertek Mineral Services - Indonesia
- Xindia Steels Limited - India
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- Billiton Holdings Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- Trasteel International SA, Italy
- Medco Energi Mining Internasional
- Vizag Seaport Private Limited - India
- Deloitte Consulting - India
- Global Coal Blending Company Limited - Australia
- GVK Power & Infra Limited - India
- PNOC Exploration Corporation - Philippines
- Tata Chemicals Ltd - India
- India Bulls Power Limited - India
- Ministry of Mines - Canada
- Heidelberg Cement - Germany
- Energy Development Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Commonwealth Bank - Australia
- Orica Mining Services - Indonesia
- Meralco Power Generation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Videocon Industries ltd - India
- Mintek Dendrill Indonesia
- Samtan Co., Ltd - South Korea
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
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