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