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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, 16 December 15
MARKET INSIGHT - KATERINA RESTIS
On Friday 4th of December the meeting of OPEC was held in Vienna, Austria. Since its last meeting, oil and product stock levels have continued to r ...
Tuesday, 15 December 15
THE GOVERNMENT DECLARED THERMAL COAL BENCHMARK PRICE CRASHING ONCE AGAIN
COALspot.com: Low coal demand and excess supplies sent Indonesian benchmark coal price down to below 2009 level. HBA has slumped by 1.69% mo ...
Tuesday, 15 December 15
API 5 FOB NEWCASTLE COAL SWAP FIRM W-W; WEAK M-M
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $.13 per ton (0.35%) month over month to US$ 37.07 per ton. The swap w ...
Monday, 14 December 15
5000 GAR CS (I) COAL INDEX DECLINE US$ 0.04 PER TON W-O-W
COALspot.com: The 5000 GAR CS (i) coal index decline US$ 0.04 per ton (-0.10 %) week over week.
According to the CS (i) coal (system generated ...
Monday, 14 December 15
CFR SOUTH CHINA COAL SWAP IS STILL SLIDING
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 0.93(2.18%) per ton month over month.
A commodity swap ...
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- Intertek Mineral Services - Indonesia
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- Eastern Coal Council - USA
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- Australian Coal Association
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- Indogreen Group - Indonesia
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- McConnell Dowell - Australia
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- Petrochimia International Co. Ltd.- Taiwan
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- Economic Council, Georgia
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- New Zealand Coal & Carbon
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- Metalloyd Limited - United Kingdom
- Africa Commodities Group - South Africa
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Maheswari Brothers Coal Limited - India
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- Savvy Resources Ltd - HongKong
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Makarim & Taira - Indonesia
- Price Waterhouse Coopers - Russia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Ceylon Electricity Board - Sri Lanka
- Bayan Resources Tbk. - Indonesia
- Petron Corporation, Philippines
- ICICI Bank Limited - India
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Indonesian Coal Mining Association
- VISA Power Limited - India
- Parry Sugars Refinery, India
- Sakthi Sugars Limited - India
- Sojitz Corporation - Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Planning Commission, India
- Alfred C Toepfer International GmbH - Germany
- Thiess Contractors Indonesia
- Krishnapatnam Port Company Ltd. - India
- Romanian Commodities Exchange
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Singapore Mercantile Exchange
- Bhushan Steel Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Madhucon Powers Ltd - India
- Mercuria Energy - Indonesia
- The University of Queensland
- Vizag Seaport Private Limited - India
- Interocean Group of Companies - India
- Videocon Industries ltd - India
- Minerals Council of Australia
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- IHS Mccloskey Coal Group - USA
- PowerSource Philippines DevCo
- Bukit Makmur.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meralco Power Generation, Philippines
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- White Energy Company Limited
- International Coal Ventures Pvt Ltd - India
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Electricity Regulatory Commission - India
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- Manunggal Multi Energi - Indonesia
- Kepco SPC Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- PTC India Limited - India
- Wilmar Investment Holdings
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- PNOC Exploration Corporation - Philippines
- Port Waratah Coal Services - Australia
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Deloitte Consulting - India
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- Altura Mining Limited, Indonesia
- Bhoruka Overseas - Indonesia
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- Malabar Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Electricity Authority, New Zealand
- Vedanta Resources Plc - India
- Georgia Ports Authority, United States
- Miang Besar Coal Terminal - Indonesia
- Bangladesh Power Developement Board
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- Oldendorff Carriers - Singapore
- Orica Mining Services - Indonesia
- Chamber of Mines of South Africa
- Aboitiz Power Corporation - Philippines
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- Marubeni Corporation - India
- Coastal Gujarat Power Limited - India
- Ministry of Mines - Canada
- Xindia Steels Limited - India
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- Cement Manufacturers Association - India
- Energy Link Ltd, New Zealand
- CIMB Investment Bank - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- The Treasury - Australian Government
- Sinarmas Energy and Mining - Indonesia
- Ministry of Transport, Egypt
- Indo Tambangraya Megah - Indonesia
- Billiton Holdings Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- TNB Fuel Sdn Bhd - Malaysia
- European Bulk Services B.V. - Netherlands
- GVK Power & Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Antam Resourcindo - Indonesia
- Straits Asia Resources Limited - Singapore
- Cigading International Bulk Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meenaskhi Energy Private Limited - India
- Trasteel International SA, Italy
- Directorate Of Revenue Intelligence - India
- LBH Netherlands Bv - Netherlands
- Kartika Selabumi Mining - Indonesia
- Riau Bara Harum - Indonesia
- Ind-Barath Power Infra Limited - India
- Ambuja Cements Ltd - India
- OPG Power Generation Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Central Java Power - Indonesia
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- London Commodity Brokers - England
- Goldman Sachs - Singapore
- Sree Jayajothi Cements Limited - India
- Iligan Light & Power Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- India Bulls Power Limited - India
- Ministry of Finance - Indonesia
- Semirara Mining Corp, Philippines
- Thai Mozambique Logistica
- Attock Cement Pakistan Limited
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
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