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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, 23 December 15
SHIPPING MARKET INSIGHT - PANOS MAKRINOS
As we are heading towards the end of the year we could argue that most of those involved in the shipping industry share mixed feelings for 2015. Th ...
Wednesday, 23 December 15
FOB NEWCASTLE COAL SWAP CLOSES FIRM
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery up $0.45 per ton (1.22%) month over month to US$ 37.20 per ton. The swap wa ...
Tuesday, 22 December 15
3800 GAR INDEX CLOSED AT US$ 22.03 PER TON; DOWN 0.15% W-O-W
COALspot.com: The 5000 GAR CS (i) coal index decline US$ 0.03 per ton (-0.07 %) week over week.
According to the CS (i) coal (system generated ...
Monday, 21 December 15
Q3' 2016 CFR SOUTH CHINA COAL SWAP CLOSED SLIGHTLY LOWER COMPARE TO Q1'16 CLOSING PRICE
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery up US$ 0.20 (0.48%) per ton month over month.
A commodity swap is a ...
Sunday, 20 December 15
THE FREIGHT RATES FROM INDONESIA TO INDIA IS EXPECTED TO BE SOFT NEXT WEEK
COALspot.com: The BDI facing all time low's this week. The bulk dry index closed at 477 points on 18 December 2015.
The cape index was als ...
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- Bharathi Cement Corporation - India
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- Carbofer General Trading SA - India
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
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- SMC Global Power, Philippines
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- McConnell Dowell - Australia
- Global Business Power Corporation, Philippines
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- International Coal Ventures Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Holcim Trading Pte Ltd - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
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- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
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- Aditya Birla Group - India
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- Sarangani Energy Corporation, Philippines
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- Parliament of New Zealand
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- Essar Steel Hazira Ltd - India
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement - Thailand
- Merrill Lynch Commodities Europe
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- Electricity Authority, New Zealand
- Meralco Power Generation, Philippines
- Energy Development Corp, Philippines
- Indonesian Coal Mining Association
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- Binh Thuan Hamico - Vietnam
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- The University of Queensland
- India Bulls Power Limited - India
- Siam City Cement PLC, Thailand
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- The State Trading Corporation of India Ltd
- CIMB Investment Bank - Malaysia
- Makarim & Taira - Indonesia
- Bayan Resources Tbk. - Indonesia
- Coastal Gujarat Power Limited - India
- PTC India Limited - India
- Romanian Commodities Exchange
- Bhoruka Overseas - Indonesia
- Kepco SPC Power Corporation, Philippines
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Bulk Trading Sa - Switzerland
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- Eastern Energy - Thailand
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- PowerSource Philippines DevCo
- The Treasury - Australian Government
- Agrawal Coal Company - India
- Vizag Seaport Private Limited - India
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- GN Power Mariveles Coal Plant, Philippines
- Central Electricity Authority - India
- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Indika Energy - Indonesia
- Thiess Contractors Indonesia
- Ministry of Mines - Canada
- Directorate General of MIneral and Coal - Indonesia
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- MS Steel International - UAE
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- Baramulti Group, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Chettinad Cement Corporation Ltd - India
- Commonwealth Bank - Australia
- Power Finance Corporation Ltd., India
- Economic Council, Georgia
- Trasteel International SA, Italy
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Anglo American - United Kingdom
- Ministry of Transport, Egypt
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
- Cement Manufacturers Association - India
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- Barasentosa Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
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- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Neyveli Lignite Corporation Ltd, - India
- Renaissance Capital - South Africa
- Savvy Resources Ltd - HongKong
- Tata Chemicals Ltd - India
- Australian Commodity Traders Exchange
- Rio Tinto Coal - Australia
- Manunggal Multi Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- Maheswari Brothers Coal Limited - India
- Ind-Barath Power Infra Limited - India
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Singapore Mercantile Exchange
- SMG Consultants - Indonesia
- Energy Link Ltd, New Zealand
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- Minerals Council of Australia
- San Jose City I Power Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Oldendorff Carriers - Singapore
- Thai Mozambique Logistica
- SN Aboitiz Power Inc, Philippines
- Goldman Sachs - Singapore
- Bhatia International Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Marubeni Corporation - India
- Leighton Contractors Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Lanco Infratech Ltd - India
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- LBH Netherlands Bv - Netherlands
- Rashtriya Ispat Nigam Limited - India
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- Global Green Power PLC Corporation, Philippines
- Tamil Nadu electricity Board
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