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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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Thursday, 31 December 15
2016 FOB NEWCASTLE COAL SWAP RALLY TO CLOSE AT $37.98/TON
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery rose another $1.48 per ton (4.05%) this past week compared to the sam ...
Wednesday, 30 December 15
FINAL DEALS OF THE YEAR TAKING PLACE, AS SHIP OWNERS PREPARE FOR 2016 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The Holidays’ investment lull has taken a grip over the newbuilding and S&P market for second hand vessels, as shipbrokers are reporting ...
Tuesday, 29 December 15
CFR SOUTH CHINA COAL SWAPS ROSE MONTH OVER MONTH
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery rose US$ 0.68 (1.64%) per ton month over month.
A commodity swap is ...
Monday, 28 December 15
Q2' 15 U.S. STEAM COAL EXPORTS TOTALED 7.0 MMST; DOWN 16.9% FROM Q1 2015 - EIA
COALspot.com: U.S. coal production during second quarter 2015 totaled 211.1 million short tons.
According to EIA’s preliminary quarterly ...
Monday, 28 December 15
NOVEMBER NEWCASTLE COAL EXPORTS DECLINED 11.87%; THE AVERAGE PRICE OF COAL EXPORTS ROSE 1.37%
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port has shipped $1.120 billio ...
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- Ministry of Mines - Canada
- Intertek Mineral Services - Indonesia
- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- Pendopo Energi Batubara - Indonesia
- Parry Sugars Refinery, India
- SMC Global Power, Philippines
- Global Coal Blending Company Limited - Australia
- Kalimantan Lumbung Energi - Indonesia
- Latin American Coal - Colombia
- Borneo Indobara - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- Mercuria Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Indian Energy Exchange, India
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Directorate Of Revenue Intelligence - India
- Barasentosa Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Siam City Cement - Thailand
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Singapore Mercantile Exchange
- Jaiprakash Power Ventures ltd
- Rio Tinto Coal - Australia
- Orica Australia Pty. Ltd.
- Bank of Tokyo Mitsubishi UFJ Ltd
- Uttam Galva Steels Limited - India
- Riau Bara Harum - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Standard Chartered Bank - UAE
- Karaikal Port Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- OPG Power Generation Pvt Ltd - India
- GMR Energy Limited - India
- Edison Trading Spa - Italy
- New Zealand Coal & Carbon
- Deloitte Consulting - India
- Therma Luzon, Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Ambuja Cements Ltd - India
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- Renaissance Capital - South Africa
- Ind-Barath Power Infra Limited - India
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- VISA Power Limited - India
- India Bulls Power Limited - India
- Attock Cement Pakistan Limited
- Global Business Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Kumho Petrochemical, South Korea
- Energy Development Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- McConnell Dowell - Australia
- Petron Corporation, Philippines
- Thiess Contractors Indonesia
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- Australian Commodity Traders Exchange
- Power Finance Corporation Ltd., India
- PetroVietnam Power Coal Import and Supply Company
- AsiaOL BioFuels Corp., Philippines
- Banpu Public Company Limited - Thailand
- Kapuas Tunggal Persada - Indonesia
- Bhatia International Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Meralco Power Generation, Philippines
- Indian Oil Corporation Limited
- Wood Mackenzie - Singapore
- Heidelberg Cement - Germany
- Thai Mozambique Logistica
- IEA Clean Coal Centre - UK
- Lanco Infratech Ltd - India
- The University of Queensland
- Semirara Mining and Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Larsen & Toubro Limited - India
- SN Aboitiz Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
- Electricity Generating Authority of Thailand
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Samtan Co., Ltd - South Korea
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- Toyota Tsusho Corporation, Japan
- Ministry of Finance - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Vizag Seaport Private Limited - India
- Metalloyd Limited - United Kingdom
- Bangladesh Power Developement Board
- Directorate General of MIneral and Coal - Indonesia
- The State Trading Corporation of India Ltd
- Kaltim Prima Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- Planning Commission, India
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Malabar Cements Ltd - India
- Global Green Power PLC Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Globalindo Alam Lestari - Indonesia
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Bhushan Steel Limited - India
- Manunggal Multi Energi - Indonesia
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PowerSource Philippines DevCo
- Billiton Holdings Pty Ltd - Australia
- Goldman Sachs - Singapore
- Tamil Nadu electricity Board
- Asmin Koalindo Tuhup - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Madhucon Powers Ltd - India
- Independent Power Producers Association of India
- Economic Council, Georgia
- Central Electricity Authority - India
- Essar Steel Hazira Ltd - India
- Africa Commodities Group - South Africa
- Baramulti Group, Indonesia
- Salva Resources Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Coal and Oil Company - UAE
- Kobexindo Tractors - Indoneisa
- Coalindo Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Xindia Steels Limited - India
- Eastern Energy - Thailand
- MS Steel International - UAE
- Tata Chemicals Ltd - India
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- GVK Power & Infra Limited - India
- Wilmar Investment Holdings
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- The Treasury - Australian Government
- European Bulk Services B.V. - Netherlands
- South Luzon Thermal Energy Corporation
- Kideco Jaya Agung - Indonesia
- Indonesian Coal Mining Association
- Carbofer General Trading SA - India
- Romanian Commodities Exchange
- Mjunction Services Limited - India
- Makarim & Taira - Indonesia
- Kepco SPC Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Parliament of New Zealand
- Aditya Birla Group - India
- Savvy Resources Ltd - HongKong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- London Commodity Brokers - England
- Maharashtra Electricity Regulatory Commission - India
- Agrawal Coal Company - India
- Port Waratah Coal Services - Australia
- Trasteel International SA, Italy
- Simpson Spence & Young - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kartika Selabumi Mining - Indonesia
- Sarangani Energy Corporation, Philippines
- Antam Resourcindo - Indonesia
- Chettinad Cement Corporation Ltd - India
- Merrill Lynch Commodities Europe
- Marubeni Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- CNBM International Corporation - China
- Central Java Power - Indonesia
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- Electricity Authority, New Zealand
- Oldendorff Carriers - Singapore
- Australian Coal Association
- Petrochimia International Co. Ltd.- Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Vedanta Resources Plc - India
- Rashtriya Ispat Nigam Limited - India
- Star Paper Mills Limited - India
- IHS Mccloskey Coal Group - USA
- Timah Investasi Mineral - Indoneisa
- Dalmia Cement Bharat India
- ASAPP Information Group - India
- Gujarat Sidhee Cement - India
- Sojitz Corporation - Japan
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- PTC India Limited - India
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