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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, 10 December 15
FOB RICHARDS BAY COAL Q3' 16 DELIVERY SWAP WAS CLOSED 7.27% PER TON LOWER COMPARED TO AVERAGE Q1' 16 DELIVERY PRICE
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q1’ 2016 decline month over month and week over week.
The Q1’ 2016 &nbs ...
Wednesday, 09 December 15
U.S. COAL EXPORTS DECLINE IN 2015 DUE TO SLOWER GROWTH IN WORLD COAL DEMAND AND LOWER INTERNATIONAL COAL PRICES - EIA
COALspot.com: The slower growth in world coal demand and lower international coal prices have contributed to a decline in U.S. coal exports in 2015 ...
Wednesday, 09 December 15
DRY BULK EXPERIENCES THE PERFECT STORM - PANOS TSILINGIRIS
Dry bulk experiences the perfect storm as the slowing of demand predominantly because of China sat atop the exaggerated oversupply. The BDI broke t ...
Tuesday, 08 December 15
OPEC'S DECISION BODES WELL FOR THE TANKER MARKET: STRONG MIDDLE EAST CRUDE EXPORTS WILL CONTINUE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
OPEC’s latest decision to keep up oil production is seen by shipbrokers as a further boost for the tanker market. At the end of last year OPE ...
Tuesday, 08 December 15
Q1' 16 API 5 FOB NEWCASTLE COAL SWAP CLOSED AT $ 36.73 A TON; 1.73% HIGHER COMPARED TO Q3' 16 PRICE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $1.47 per ton (3.85%) month over month to US$ 36.73 per ton. The swap ...
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- Indika Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
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- Ambuja Cements Ltd - India
- Xindia Steels Limited - India
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- Bulk Trading Sa - Switzerland
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Planning Commission, India
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- Mercator Lines Limited - India
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- Edison Trading Spa - Italy
- Asmin Koalindo Tuhup - Indonesia
- IHS Mccloskey Coal Group - USA
- Bhoruka Overseas - Indonesia
- GVK Power & Infra Limited - India
- CNBM International Corporation - China
- Cement Manufacturers Association - India
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- Indian Oil Corporation Limited
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- Sojitz Corporation - Japan
- New Zealand Coal & Carbon
- ICICI Bank Limited - India
- Pendopo Energi Batubara - Indonesia
- Minerals Council of Australia
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- MS Steel International - UAE
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- Makarim & Taira - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
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- Bharathi Cement Corporation - India
- Aboitiz Power Corporation - Philippines
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- Standard Chartered Bank - UAE
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- Singapore Mercantile Exchange
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- Ministry of Transport, Egypt
- Wood Mackenzie - Singapore
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- Videocon Industries ltd - India
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- Georgia Ports Authority, United States
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- TNB Fuel Sdn Bhd - Malaysia
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- Straits Asia Resources Limited - Singapore
- European Bulk Services B.V. - Netherlands
- Mintek Dendrill Indonesia
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Grasim Industreis Ltd - India
- Vizag Seaport Private Limited - India
- Latin American Coal - Colombia
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- The Treasury - Australian Government
- Global Green Power PLC Corporation, Philippines
- Altura Mining Limited, Indonesia
- Meralco Power Generation, Philippines
- CIMB Investment Bank - Malaysia
- Kumho Petrochemical, South Korea
- Posco Energy - South Korea
- Formosa Plastics Group - Taiwan
- Alfred C Toepfer International GmbH - Germany
- Wilmar Investment Holdings
- Indian Energy Exchange, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- South Luzon Thermal Energy Corporation
- Banpu Public Company Limited - Thailand
- Riau Bara Harum - Indonesia
- Kepco SPC Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
- Chettinad Cement Corporation Ltd - India
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meenaskhi Energy Private Limited - India
- London Commodity Brokers - England
- Vijayanagar Sugar Pvt Ltd - India
- Chamber of Mines of South Africa
- Globalindo Alam Lestari - Indonesia
- Gujarat Sidhee Cement - India
- AsiaOL BioFuels Corp., Philippines
- Renaissance Capital - South Africa
- Antam Resourcindo - Indonesia
- Billiton Holdings Pty Ltd - Australia
- White Energy Company Limited
- Energy Development Corp, Philippines
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Manunggal Multi Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Karaikal Port Pvt Ltd - India
- Australian Commodity Traders Exchange
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- Barasentosa Lestari - Indonesia
- Bhushan Steel Limited - India
- Sarangani Energy Corporation, Philippines
- Anglo American - United Kingdom
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- Star Paper Mills Limited - India
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- Indonesian Coal Mining Association
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- Salva Resources Pvt Ltd - India
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- The State Trading Corporation of India Ltd
- Baramulti Group, Indonesia
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- Interocean Group of Companies - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
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- Neyveli Lignite Corporation Ltd, - India
- Eastern Energy - Thailand
- Ministry of Finance - Indonesia
- Timah Investasi Mineral - Indoneisa
- Ministry of Mines - Canada
- Bukit Makmur.PT - Indonesia
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- Tata Chemicals Ltd - India
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Africa Commodities Group - South Africa
- Carbofer General Trading SA - India
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- Eastern Coal Council - USA
- Australian Coal Association
- Bahari Cakrawala Sebuku - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Kartika Selabumi Mining - Indonesia
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- Economic Council, Georgia
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- SN Aboitiz Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Port Waratah Coal Services - Australia
- Goldman Sachs - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Indogreen Group - Indonesia
- Aditya Birla Group - India
- Therma Luzon, Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Medco Energi Mining Internasional
- Directorate General of MIneral and Coal - Indonesia
- Coastal Gujarat Power Limited - India
- IEA Clean Coal Centre - UK
- Maheswari Brothers Coal Limited - India
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Malabar Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- Petron Corporation, Philippines
- Parliament of New Zealand
- Semirara Mining and Power Corporation, Philippines
- PowerSource Philippines DevCo
- Global Coal Blending Company Limited - Australia
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