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