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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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- Kobexindo Tractors - Indoneisa
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- Intertek Mineral Services - Indonesia
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- Indika Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- IEA Clean Coal Centre - UK
- Singapore Mercantile Exchange
- Mintek Dendrill Indonesia
- Trasteel International SA, Italy
- Gujarat Mineral Development Corp Ltd - India
- The State Trading Corporation of India Ltd
- Coastal Gujarat Power Limited - India
- Grasim Industreis Ltd - India
- Parry Sugars Refinery, India
- Petrochimia International Co. Ltd.- Taiwan
- Ceylon Electricity Board - Sri Lanka
- Kalimantan Lumbung Energi - Indonesia
- PowerSource Philippines DevCo
- Gujarat Sidhee Cement - India
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Directorate General of MIneral and Coal - Indonesia
- Banpu Public Company Limited - Thailand
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- Straits Asia Resources Limited - Singapore
- Central Electricity Authority - India
- Metalloyd Limited - United Kingdom
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- Altura Mining Limited, Indonesia
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- Holcim Trading Pte Ltd - Singapore
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- Power Finance Corporation Ltd., India
- South Luzon Thermal Energy Corporation
- Jaiprakash Power Ventures ltd
- Alfred C Toepfer International GmbH - Germany
- Salva Resources Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Merrill Lynch Commodities Europe
- CIMB Investment Bank - Malaysia
- Chettinad Cement Corporation Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Borneo Indobara - Indonesia
- Mercator Lines Limited - India
- Indian Energy Exchange, India
- Xindia Steels Limited - India
- Formosa Plastics Group - Taiwan
- Bhoruka Overseas - Indonesia
- Australian Coal Association
- London Commodity Brokers - England
- New Zealand Coal & Carbon
- International Coal Ventures Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Samtan Co., Ltd - South Korea
- Electricity Generating Authority of Thailand
- Uttam Galva Steels Limited - India
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- Posco Energy - South Korea
- Riau Bara Harum - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- MS Steel International - UAE
- Indian Oil Corporation Limited
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- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- Kideco Jaya Agung - Indonesia
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- Simpson Spence & Young - Indonesia
- VISA Power Limited - India
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Oldendorff Carriers - Singapore
- Planning Commission, India
- Global Business Power Corporation, Philippines
- Videocon Industries ltd - India
- Aditya Birla Group - India
- Parliament of New Zealand
- Cigading International Bulk Terminal - Indonesia
- Wilmar Investment Holdings
- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- Thai Mozambique Logistica
- Goldman Sachs - Singapore
- Interocean Group of Companies - India
- GVK Power & Infra Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Bulk Trading Sa - Switzerland
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- Independent Power Producers Association of India
- Directorate Of Revenue Intelligence - India
- Sinarmas Energy and Mining - Indonesia
- Ministry of Transport, Egypt
- Kepco SPC Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- Bangladesh Power Developement Board
- Toyota Tsusho Corporation, Japan
- The University of Queensland
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- Wood Mackenzie - Singapore
- Sindya Power Generating Company Private Ltd
- Coalindo Energy - Indonesia
- Port Waratah Coal Services - Australia
- Central Java Power - Indonesia
- IHS Mccloskey Coal Group - USA
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- Sical Logistics Limited - India
- Maheswari Brothers Coal Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Energy Link Ltd, New Zealand
- LBH Netherlands Bv - Netherlands
- Coal and Oil Company - UAE
- Commonwealth Bank - Australia
- Madhucon Powers Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GMR Energy Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Sojitz Corporation - Japan
- Energy Development Corp, Philippines
- Bharathi Cement Corporation - India
- PNOC Exploration Corporation - Philippines
- McConnell Dowell - Australia
- Rio Tinto Coal - Australia
- ASAPP Information Group - India
- Deloitte Consulting - India
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- PTC India Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Globalindo Alam Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- The Treasury - Australian Government
- Vizag Seaport Private Limited - India
- Siam City Cement PLC, Thailand
- ICICI Bank Limited - India
- Aboitiz Power Corporation - Philippines
- Standard Chartered Bank - UAE
- Renaissance Capital - South Africa
- Chamber of Mines of South Africa
- Ambuja Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- Petron Corporation, Philippines
- Anglo American - United Kingdom
- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Gujarat Electricity Regulatory Commission - India
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- SMC Global Power, Philippines
- CNBM International Corporation - China
- Timah Investasi Mineral - Indoneisa
- Marubeni Corporation - India
- Thiess Contractors Indonesia
- Sree Jayajothi Cements Limited - India
- Baramulti Group, Indonesia
- Larsen & Toubro Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Lanco Infratech Ltd - India
- Africa Commodities Group - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Electricity Authority, New Zealand
- Georgia Ports Authority, United States
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- Makarim & Taira - Indonesia
- Bhatia International Limited - India
- Siam City Cement - Thailand
- Eastern Coal Council - USA
- TeaM Sual Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Global Coal Blending Company Limited - Australia
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Australian Commodity Traders Exchange
- Ministry of Mines - Canada
- Bank of Tokyo Mitsubishi UFJ Ltd
- Iligan Light & Power Inc, Philippines
- Semirara Mining Corp, Philippines
- Vedanta Resources Plc - India
- Kaltim Prima Coal - Indonesia
- Indonesian Coal Mining Association
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- Pipit Mutiara Jaya. PT, Indonesia
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- Dalmia Cement Bharat India
- Orica Mining Services - Indonesia
- Minerals Council of Australia
- Binh Thuan Hamico - Vietnam
- Bhushan Steel Limited - India
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