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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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Tuesday, 08 December 15
HOW TO MITIGATE LEGAL RISKS WHEN PURCHASING BUNKERS - LESSONS LEARNED FROM THE OW BUNKER COLLAPSE - THE SWEDISH CLUB
KNOWLEDGE TO ELEVATE
About a year has passed since OW Bunker & Trading A/S filed for bankruptcy. The collapse shows that there are signifi ...
Monday, 07 December 15
5000 GAR CS (I) COAL INDEX REMAIN THE SAME OVER LAST WEEK
COALspot.com: The 5000 GAR CS (i) coal index remain the same over last week.
According to the CS (i) coal (system generated) index, the CS 50 ...
Monday, 07 December 15
COAL DEMAND IN 2016 FAILS TO SUPPORT PRICES; CFR SOUTH CHINA COAL SWAPS SEEN AT $US 42 A TON
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 1.70 (3.88%) per ton month over month.
A commodity swap ...
Sunday, 06 December 15
THE BDI DECLINED BY 3.09 PERCENT TO 563 POINTS ON 4 DECEMBER
COALspot.com: The BDI declined by 3.09 percent to 563 points on 4 December 2015.
The Cape index was also declined by 10.01 percent to 890 poin ...
Sunday, 06 December 15
DRY BULK MARKET ON REVERSE MODE, SET TO BREAK NEW ALL-TIME LOWS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been the negative “star” of the shipping industry for quite some time. In fact if it wasn’t for the boomi ...
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- Edison Trading Spa - Italy
- Rio Tinto Coal - Australia
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Romanian Commodities Exchange
- Sarangani Energy Corporation, Philippines
- Goldman Sachs - Singapore
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Energy Development Corp, Philippines
- Mercator Lines Limited - India
- Chettinad Cement Corporation Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Salva Resources Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Metalloyd Limited - United Kingdom
- The University of Queensland
- McConnell Dowell - Australia
- Pendopo Energi Batubara - Indonesia
- Bayan Resources Tbk. - Indonesia
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Siam City Cement - Thailand
- Sojitz Corporation - Japan
- Coal and Oil Company - UAE
- Tamil Nadu electricity Board
- Mintek Dendrill Indonesia
- Sakthi Sugars Limited - India
- MS Steel International - UAE
- The Treasury - Australian Government
- GN Power Mariveles Coal Plant, Philippines
- Energy Link Ltd, New Zealand
- Sree Jayajothi Cements Limited - India
- Petron Corporation, Philippines
- Bharathi Cement Corporation - India
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bhatia International Limited - India
- GMR Energy Limited - India
- Australian Coal Association
- Ind-Barath Power Infra Limited - India
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- Videocon Industries ltd - India
- Intertek Mineral Services - Indonesia
- Indian Energy Exchange, India
- Samtan Co., Ltd - South Korea
- The State Trading Corporation of India Ltd
- Wood Mackenzie - Singapore
- Heidelberg Cement - Germany
- Toyota Tsusho Corporation, Japan
- Planning Commission, India
- Thiess Contractors Indonesia
- Eastern Coal Council - USA
- OPG Power Generation Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- CNBM International Corporation - China
- Electricity Authority, New Zealand
- Xindia Steels Limited - India
- South Luzon Thermal Energy Corporation
- Malabar Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Global Business Power Corporation, Philippines
- Carbofer General Trading SA - India
- Grasim Industreis Ltd - India
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- Globalindo Alam Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Latin American Coal - Colombia
- Therma Luzon, Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- Larsen & Toubro Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Central Java Power - Indonesia
- Tata Chemicals Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Trasteel International SA, Italy
- TNB Fuel Sdn Bhd - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- Bulk Trading Sa - Switzerland
- Africa Commodities Group - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Makarim & Taira - Indonesia
- Ministry of Finance - Indonesia
- Posco Energy - South Korea
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- Power Finance Corporation Ltd., India
- Gujarat Sidhee Cement - India
- India Bulls Power Limited - India
- Barasentosa Lestari - Indonesia
- Banpu Public Company Limited - Thailand
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Georgia Ports Authority, United States
- Eastern Energy - Thailand
- Semirara Mining Corp, Philippines
- Parry Sugars Refinery, India
- Orica Australia Pty. Ltd.
- Mjunction Services Limited - India
- Aditya Birla Group - India
- VISA Power Limited - India
- Sical Logistics Limited - India
- Electricity Generating Authority of Thailand
- Sinarmas Energy and Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Holcim Trading Pte Ltd - Singapore
- Riau Bara Harum - Indonesia
- Price Waterhouse Coopers - Russia
- IEA Clean Coal Centre - UK
- Indika Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Merrill Lynch Commodities Europe
- Timah Investasi Mineral - Indoneisa
- Karbindo Abesyapradhi - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Interocean Group of Companies - India
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Bukit Baiduri Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Borneo Indobara - Indonesia
- Savvy Resources Ltd - HongKong
- Indo Tambangraya Megah - Indonesia
- Jaiprakash Power Ventures ltd
- Agrawal Coal Company - India
- Singapore Mercantile Exchange
- Billiton Holdings Pty Ltd - Australia
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Deloitte Consulting - India
- Cigading International Bulk Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Simpson Spence & Young - Indonesia
- ICICI Bank Limited - India
- Indogreen Group - Indonesia
- Renaissance Capital - South Africa
- Chamber of Mines of South Africa
- Directorate General of MIneral and Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Mercuria Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Uttam Galva Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Parliament of New Zealand
- Gujarat Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Anglo American - United Kingdom
- Sindya Power Generating Company Private Ltd
- Siam City Cement PLC, Thailand
- Attock Cement Pakistan Limited
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- Karaikal Port Pvt Ltd - India
- White Energy Company Limited
- Baramulti Group, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- SMG Consultants - Indonesia
- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- Jindal Steel & Power Ltd - India
- Independent Power Producers Association of India
- Minerals Council of Australia
- Bangladesh Power Developement Board
- Meralco Power Generation, Philippines
- Marubeni Corporation - India
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Kobexindo Tractors - Indoneisa
- PTC India Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- New Zealand Coal & Carbon
- Kideco Jaya Agung - Indonesia
- ASAPP Information Group - India
- Ministry of Transport, Egypt
- Oldendorff Carriers - Singapore
- London Commodity Brokers - England
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhushan Steel Limited - India
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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