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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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Friday, 18 December 15
CHINA GROWTH SHOCK TO HIT ENERGY, SHIPPING, STEEL MOST - FITCH
Energy, shipping and steel would be the hardest-hit sectors in Asia-Pacific (APAC) in the event of a sharp slowdown in Chinese growth, says Fitch R ...
Friday, 18 December 15
WEEKLY U.S. COAL PRODUCTION REMAINS FLAT ACROSS ALL BASINS
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 16.1 million shor ...
Thursday, 17 December 15
THE LOW DEMAND AND EXCESS COAL OUTPUT, KEEP THE FOB INDONESIA COAL SWAPS UNDER PRESSURE
COALspot.com: Indonesian coal swap for delivery Q1 2016 rose month on month and decline slightly week over week. For the week ended December 11, 20 ...
Thursday, 17 December 15
GLADSTONE PORT COAL RECORD LOOMING, EXPORTS UP 12% - GLADSTONE OBSERVER
COAL exports from Gladstone's port have taken a leap, with more than seven million tonnes leaving the wharves in November.
That increase i ...
Wednesday, 16 December 15
FOB RICHARDS BAY COAL SWAP SLUMP 5.5% FROM LAST MONTH
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q1’ 2016 decline month over month and week over week.
The Q1’ 2016 &nbs ...
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- Sakthi Sugars Limited - India
- Parry Sugars Refinery, India
- Eastern Coal Council - USA
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- Global Business Power Corporation, Philippines
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- Electricity Authority, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maharashtra Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- SMG Consultants - Indonesia
- Samtan Co., Ltd - South Korea
- Karbindo Abesyapradhi - Indoneisa
- CNBM International Corporation - China
- IEA Clean Coal Centre - UK
- Australian Commodity Traders Exchange
- McConnell Dowell - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Asmin Koalindo Tuhup - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Makmur.PT - Indonesia
- Goldman Sachs - Singapore
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- Bangladesh Power Developement Board
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- The State Trading Corporation of India Ltd
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- Parliament of New Zealand
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- Intertek Mineral Services - Indonesia
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- Sree Jayajothi Cements Limited - India
- Bukit Baiduri Energy - Indonesia
- Agrawal Coal Company - India
- Antam Resourcindo - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Sojitz Corporation - Japan
- Global Coal Blending Company Limited - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
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- Formosa Plastics Group - Taiwan
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- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Indonesian Coal Mining Association
- Planning Commission, India
- Latin American Coal - Colombia
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- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- Dalmia Cement Bharat India
- PowerSource Philippines DevCo
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- Kepco SPC Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Barasentosa Lestari - Indonesia
- Tamil Nadu electricity Board
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- PTC India Limited - India
- Anglo American - United Kingdom
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Eastern Energy - Thailand
- Krishnapatnam Port Company Ltd. - India
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- Coalindo Energy - Indonesia
- Georgia Ports Authority, United States
- MS Steel International - UAE
- Malabar Cements Ltd - India
- VISA Power Limited - India
- Aditya Birla Group - India
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- Binh Thuan Hamico - Vietnam
- Kartika Selabumi Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mercator Lines Limited - India
- Orica Mining Services - Indonesia
- Lanco Infratech Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Neyveli Lignite Corporation Ltd, - India
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- Chamber of Mines of South Africa
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- Chettinad Cement Corporation Ltd - India
- Baramulti Group, Indonesia
- Timah Investasi Mineral - Indoneisa
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Orica Australia Pty. Ltd.
- Africa Commodities Group - South Africa
- The Treasury - Australian Government
- SN Aboitiz Power Inc, Philippines
- Posco Energy - South Korea
- Wood Mackenzie - Singapore
- Siam City Cement - Thailand
- Semirara Mining Corp, Philippines
- Indogreen Group - Indonesia
- Indian Oil Corporation Limited
- Sindya Power Generating Company Private Ltd
- Independent Power Producers Association of India
- Kapuas Tunggal Persada - Indonesia
- New Zealand Coal & Carbon
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Marubeni Corporation - India
- Electricity Generating Authority of Thailand
- Borneo Indobara - Indonesia
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Indian Energy Exchange, India
- Ind-Barath Power Infra Limited - India
- Coastal Gujarat Power Limited - India
- Sarangani Energy Corporation, Philippines
- Mintek Dendrill Indonesia
- Ministry of Finance - Indonesia
- Interocean Group of Companies - India
- GMR Energy Limited - India
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- Australian Coal Association
- Holcim Trading Pte Ltd - Singapore
- Makarim & Taira - Indonesia
- Coal and Oil Company - UAE
- Bayan Resources Tbk. - Indonesia
- Rio Tinto Coal - Australia
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- Energy Link Ltd, New Zealand
- Uttam Galva Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Ambuja Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Power Finance Corporation Ltd., India
- Cement Manufacturers Association - India
- Oldendorff Carriers - Singapore
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- The University of Queensland
- Edison Trading Spa - Italy
- Vedanta Resources Plc - India
- Iligan Light & Power Inc, Philippines
- Central Java Power - Indonesia
- Jindal Steel & Power Ltd - India
- Grasim Industreis Ltd - India
- Gujarat Sidhee Cement - India
- Kideco Jaya Agung - Indonesia
- Kobexindo Tractors - Indoneisa
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Vizag Seaport Private Limited - India
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- LBH Netherlands Bv - Netherlands
- Ministry of Mines - Canada
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- ASAPP Information Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Commonwealth Bank - Australia
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Trasteel International SA, Italy
- Gujarat Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Sinarmas Energy and Mining - Indonesia
- India Bulls Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- Star Paper Mills Limited - India
- Economic Council, Georgia
- Attock Cement Pakistan Limited
- GVK Power & Infra Limited - India
- Maheswari Brothers Coal Limited - India
- Jaiprakash Power Ventures ltd
- Standard Chartered Bank - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Essar Steel Hazira Ltd - India
- TeaM Sual Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Bhoruka Overseas - Indonesia
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Thiess Contractors Indonesia
- Minerals Council of Australia
- Sical Logistics Limited - India
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