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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, 16 December 15
MARKET INSIGHT - KATERINA RESTIS
On Friday 4th of December the meeting of OPEC was held in Vienna, Austria. Since its last meeting, oil and product stock levels have continued to r ...
Tuesday, 15 December 15
THE GOVERNMENT DECLARED THERMAL COAL BENCHMARK PRICE CRASHING ONCE AGAIN
COALspot.com: Low coal demand and excess supplies sent Indonesian benchmark coal price down to below 2009 level. HBA has slumped by 1.69% mo ...
Tuesday, 15 December 15
API 5 FOB NEWCASTLE COAL SWAP FIRM W-W; WEAK M-M
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $.13 per ton (0.35%) month over month to US$ 37.07 per ton. The swap w ...
Monday, 14 December 15
5000 GAR CS (I) COAL INDEX DECLINE US$ 0.04 PER TON W-O-W
COALspot.com: The 5000 GAR CS (i) coal index decline US$ 0.04 per ton (-0.10 %) week over week.
According to the CS (i) coal (system generated ...
Monday, 14 December 15
CFR SOUTH CHINA COAL SWAP IS STILL SLIDING
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 0.93(2.18%) per ton month over month.
A commodity swap ...
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- Port Waratah Coal Services - Australia
- Meenaskhi Energy Private Limited - India
- Georgia Ports Authority, United States
- Standard Chartered Bank - UAE
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- Indika Energy - Indonesia
- Romanian Commodities Exchange
- White Energy Company Limited
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- Merrill Lynch Commodities Europe
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- Straits Asia Resources Limited - Singapore
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- Bukit Makmur.PT - Indonesia
- Bhatia International Limited - India
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- MS Steel International - UAE
- CNBM International Corporation - China
- Aditya Birla Group - India
- Commonwealth Bank - Australia
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- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Metalloyd Limited - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- Sinarmas Energy and Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Marubeni Corporation - India
- Economic Council, Georgia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Coal Blending Company Limited - Australia
- Agrawal Coal Company - India
- Gujarat Mineral Development Corp Ltd - India
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bangladesh Power Developement Board
- Mintek Dendrill Indonesia
- Videocon Industries ltd - India
- SMG Consultants - Indonesia
- Central Electricity Authority - India
- Formosa Plastics Group - Taiwan
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- Electricity Generating Authority of Thailand
- India Bulls Power Limited - India
- Goldman Sachs - Singapore
- London Commodity Brokers - England
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Xindia Steels Limited - India
- Altura Mining Limited, Indonesia
- Bukit Baiduri Energy - Indonesia
- Lanco Infratech Ltd - India
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- Ministry of Mines - Canada
- Power Finance Corporation Ltd., India
- PTC India Limited - India
- Chamber of Mines of South Africa
- VISA Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Vedanta Resources Plc - India
- Wood Mackenzie - Singapore
- Madhucon Powers Ltd - India
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- Global Business Power Corporation, Philippines
- Australian Coal Association
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- Ministry of Transport, Egypt
- TNB Fuel Sdn Bhd - Malaysia
- IHS Mccloskey Coal Group - USA
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- PowerSource Philippines DevCo
- San Jose City I Power Corp, Philippines
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- Ind-Barath Power Infra Limited - India
- Toyota Tsusho Corporation, Japan
- Leighton Contractors Pty Ltd - Australia
- Minerals Council of Australia
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- Intertek Mineral Services - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Planning Commission, India
- Thiess Contractors Indonesia
- Globalindo Alam Lestari - Indonesia
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
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- Simpson Spence & Young - Indonesia
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- Sindya Power Generating Company Private Ltd
- Iligan Light & Power Inc, Philippines
- Edison Trading Spa - Italy
- GN Power Mariveles Coal Plant, Philippines
- Cement Manufacturers Association - India
- Holcim Trading Pte Ltd - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- CIMB Investment Bank - Malaysia
- Petron Corporation, Philippines
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Sojitz Corporation - Japan
- The State Trading Corporation of India Ltd
- Samtan Co., Ltd - South Korea
- SMC Global Power, Philippines
- Mercuria Energy - Indonesia
- South Luzon Thermal Energy Corporation
- SN Aboitiz Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Deloitte Consulting - India
- The Treasury - Australian Government
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- Baramulti Group, Indonesia
- Timah Investasi Mineral - Indoneisa
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