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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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Sunday, 13 December 15
THE LOW VESSEL DEMANDS PUSHED DOWN BALTIC DRY INDEX FURTHER DOWN
COALspot.com: The low vessel demand across nearly all vessel sizes pushed the Baltic Exchange’s main sea freight index further down in this F ...
Sunday, 13 December 15
DRY BULK RATES KEEP ON FALLING AS LOW VESSEL DEMAND IS STILL THE NORM - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market nowadays is in an endless downward spiral, which as it turns out is unable to recover, at least as long as the current balance ...
Friday, 11 December 15
US COAL PRODUCTION UP 7.7% IN WEEK ENDED DECEMBER 5, 2015
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 16.1 million shor ...
Thursday, 10 December 15
LIENING CARGO - WHICH LIEN CLAUSE APPLIES TO THE BILL OF LADING? : WIKBORG REIN | HELLENIC SHIPPING NEWS
KNOWLEDGE TO ELEVATE
In a dry bulk market where a charterer is not paying freight or hire, its counterparty is often left to consider whether ...
Thursday, 10 December 15
CANADIAN MINER TECK ANNOUNCES LNG HAUL TRUCK PILOT PROJECT
Teck Resources Limited is piloting the use of liquefied natural gas (LNG) as a fuel source in six haul trucks at its Fording River steelmakin ...
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- Videocon Industries ltd - India
- Energy Development Corp, Philippines
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Ministry of Transport, Egypt
- Maharashtra Electricity Regulatory Commission - India
- Indo Tambangraya Megah - Indonesia
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
- Parry Sugars Refinery, India
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- ASAPP Information Group - India
- Orica Australia Pty. Ltd.
- International Coal Ventures Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
- Merrill Lynch Commodities Europe
- Electricity Authority, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Chettinad Cement Corporation Ltd - India
- Posco Energy - South Korea
- Economic Council, Georgia
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Chamber of Mines of South Africa
- India Bulls Power Limited - India
- Jindal Steel & Power Ltd - India
- Africa Commodities Group - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Thai Mozambique Logistica
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Antam Resourcindo - Indonesia
- Mintek Dendrill Indonesia
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Mercator Lines Limited - India
- Orica Mining Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tamil Nadu electricity Board
- Dalmia Cement Bharat India
- Electricity Generating Authority of Thailand
- Parliament of New Zealand
- PetroVietnam Power Coal Import and Supply Company
- SMG Consultants - Indonesia
- Rio Tinto Coal - Australia
- Indian Energy Exchange, India
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IEA Clean Coal Centre - UK
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thiess Contractors Indonesia
- Planning Commission, India
- Central Electricity Authority - India
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Bukit Baiduri Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Cigading International Bulk Terminal - Indonesia
- Uttam Galva Steels Limited - India
- Formosa Plastics Group - Taiwan
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- Eastern Coal Council - USA
- SN Aboitiz Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- Timah Investasi Mineral - Indoneisa
- Indogreen Group - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Bharathi Cement Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Cement Manufacturers Association - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Commonwealth Bank - Australia
- Vedanta Resources Plc - India
- Bangladesh Power Developement Board
- Vijayanagar Sugar Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Ministry of Mines - Canada
- Wilmar Investment Holdings
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- Kaltim Prima Coal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Medco Energi Mining Internasional
- Directorate Of Revenue Intelligence - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sical Logistics Limited - India
- Globalindo Alam Lestari - Indonesia
- San Jose City I Power Corp, Philippines
- Australian Commodity Traders Exchange
- Madhucon Powers Ltd - India
- Global Coal Blending Company Limited - Australia
- Manunggal Multi Energi - Indonesia
- Salva Resources Pvt Ltd - India
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Samtan Co., Ltd - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- GN Power Mariveles Coal Plant, Philippines
- Simpson Spence & Young - Indonesia
- The Treasury - Australian Government
- Romanian Commodities Exchange
- Ministry of Finance - Indonesia
- CNBM International Corporation - China
- Ambuja Cements Ltd - India
- Petron Corporation, Philippines
- Xindia Steels Limited - India
- Therma Luzon, Inc, Philippines
- Marubeni Corporation - India
- Bukit Makmur.PT - Indonesia
- Wood Mackenzie - Singapore
- Siam City Cement - Thailand
- Metalloyd Limited - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- Borneo Indobara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bayan Resources Tbk. - Indonesia
- Jaiprakash Power Ventures ltd
- Global Business Power Corporation, Philippines
- London Commodity Brokers - England
- Standard Chartered Bank - UAE
- Kapuas Tunggal Persada - Indonesia
- Renaissance Capital - South Africa
- Bhoruka Overseas - Indonesia
- The University of Queensland
- Directorate General of MIneral and Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Tata Chemicals Ltd - India
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Sojitz Corporation - Japan
- LBH Netherlands Bv - Netherlands
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Indian Oil Corporation Limited
- Kideco Jaya Agung - Indonesia
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMC Global Power, Philippines
- Essar Steel Hazira Ltd - India
- Toyota Tsusho Corporation, Japan
- Indonesian Coal Mining Association
- Meenaskhi Energy Private Limited - India
- Mercuria Energy - Indonesia
- Bhatia International Limited - India
- Independent Power Producers Association of India
- GVK Power & Infra Limited - India
- Singapore Mercantile Exchange
- Goldman Sachs - Singapore
- Karaikal Port Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Sree Jayajothi Cements Limited - India
- Australian Coal Association
- Altura Mining Limited, Indonesia
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Deloitte Consulting - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Riau Bara Harum - Indonesia
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- TeaM Sual Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Heidelberg Cement - Germany
- Kartika Selabumi Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Sakthi Sugars Limited - India
- VISA Power Limited - India
- Bhushan Steel Limited - India
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
- MS Steel International - UAE
- Ind-Barath Power Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Savvy Resources Ltd - HongKong
- White Energy Company Limited
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- Minerals Council of Australia
- Carbofer General Trading SA - India
- Trasteel International SA, Italy
- TNB Fuel Sdn Bhd - Malaysia
- McConnell Dowell - Australia
- Iligan Light & Power Inc, Philippines
- PTC India Limited - India
- South Luzon Thermal Energy Corporation
- Mjunction Services Limited - India
- PowerSource Philippines DevCo
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Agrawal Coal Company - India
- Malabar Cements Ltd - India
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