Claims Guides

Bills of Lading 3 - Issues with Quantity

and Quality of the Cargo at the Loadport
On the demand of the shipper, the carrier has a duty to record the condition
and quantity of the cargo upon loading. Problems sometimes arise when the
cargo is in a damaged condition or does not tally with the quantity declared
by the shipper.

The condition of the cargo condition at the time of loading. The to issue a clean bill of lading. In
issue as to when the loading operations consideration of doing so the shipper/
a) Owners’ obligations: to record
are finished is a more difficult matter charterers may propose to issue an
the apparent order and condition
in particular for bulk cargo. If this LOI (Letter of Indemnity) in favour
of the goods
situation arises Members should of the owners/charterers.
Article III Rule 3 of the Hague Visby contact the Club Managers for advice.
Issuing a clean bill of lading when the
Rules states that the carrier or the
If the cargo is not in “apparent good cargo is damaged, constitutes fraud
master are under an obligation to
order and condition” the bill of lading under English law. An LOI for which
record the condition of the cargo as
should be claused. The master is not the purpose is to defraud a third party
received: “After receiving the goods
expected to be an expert: he is only is unenforceable under English law.
into his charge the carrier or the
expected to ascertain damages or Furthermore, not only will the LOI be
master or agent of the carrier shall, on
defects apparent to a reasonable, non- unenforceable but the carrier may
demand of the shipper, issue to the
expert person. This duty is reflected prejudice his Club cover - see again
shipper a bill of lading showing among
within the ambit of the Club’s cover in the exclusions from cover under Rule
other things:… c) the apparent order
respect of cargo claims and failure to 2 Section 16(c)(e).
and condition of the goods….”
comply with this duty may result and
c) If the cargo is damaged prior
As a result the carrier should clause cover restrictions – see Rule 2 Section
to loading but the charterparty
the mate’s receipts and bills of s16(c) (e).
stipulates that “the carrier shall only
ladings (B/Ls) if the cargo is
Reference to a survey report will not issue clean bills” or “sign the bill of
damaged before loading.
constitute adequate clausing (unless it lading as presented”: what should
The carrier’s duty is to record is attached to all bills of lading and the the carrier/owner do?
the apparent visible of the cargo pages are numbered as forming part of
If the charterparty requires the master
“condition” not “its quality”. The the bill of lading together with, ideally,
to issue clean mate’s receipts or bills
description must be accurate, the bill of lading number stamped on
of lading, the master should reject (if
proportionate and record the condition the report).
possible) any cargo which description
of the cargo at the moment of receipt
b) Can the carrier issue a clean bill would require the bill of lading to be
by the carrier.
of lading against a letter of claused. If only defective cargo is
A question arises as to whether the bill indemnity (LOI)? available, then shippers/charterers
of lading should be claused when the cannot rely on the charterparty to
The shippers will generally require
cargo is damaged after receipt by the force the issue of clean bills.
a clean bill of lading in order for the
carrier but before the bill of lading is
bank to make a payment through the The master is entitled to refuse to
issued. If the bill of lading is a “shipped
documentary credit system. If a cargo sign the bill of lading, even if the
on board” bill, then the bill of lading
is damaged, the shipper/charterers charterparty requires the master
must show the apparent order and
will often put pressure on the carrier to sign it “as presented”.
Claims Guides

The quantity of cargo 2. Ship/shore differences 3. What constitutes a “significant”

loaded on-board difference?
The shipper’s figures invariably come
1. Carrier’s obligation to insert the from shore side measurements, being It is worth reiterating that the master
shipper’s figures from shore tanks in the tanker trades need not (and indeed under the Club
and from weighbridges, belt scales Rules should not) sign a bill of lading,
Under Article III Rule 3 of the Hague or other means for dry bulk cargoes. that he has “reasonable grounds
Visby Rules, the carrier or the master It is impossible of course for a ship for suspecting” does not accurately
are under the obligation to insert the to precisely determine how much reflect the amount of cargo loaded
figures in the bill of lading as provided cargo has been loaded in the holds or on board. But what constitutes
by the shipper: “After receiving the tanks. All that can be done is to make “reasonable grounds”, bearing in mind
goods into his charge the carrier or the an independent check using the best that ship and shore figures are unlikely
master or agent of the carrier shall, means available. In the tanker trades to match? When does the difference
on demand of the shipper, issue to that means taking ullages whilst in between the two sets of figures
the shipper a bill of lading showing the dry bulk trades the method is become significant?
among other things:… b) the number invariably draft surveys.
of packages or pieces, or quantity, or Unfortunately there are no hard and
weight… as furnished in writing by the Such surveys may not be entirely fast rules. Each case depends on
shipper ….” accurate, because, inter alia, they the circumstances of that particular
entail trying to accurately read draft shipment and the master’s intuitive
The Hague Rules also provide for a marks which may be challenging if feel for whether the differences are
similar provision. What is clear from the any swell is running, the ship may not minor and within usual measurement
Rules is that the figures inserted in the be on an even keel, she may hog or tolerances, or whether there is cause
bill of lading are the shipper’s figures. sag, there might be different water for greater concern that the ship’s
The obligation of the carrier is density, there is potential for squat figures are significantly at odds with
however not absolute. Article III Rule effect, etc. It is a near certainty that those provided by the shore. For
3 continues on to state that the master the ship’s figures obtained from a example, a shortage of a few tonnes
“shall not be bound to state in the draft survey will not precisely match might be of concern for small parcel
bill of lading any marks, numbers, the shore figures. but obviously becomes progressively
quantity or weight which he has less so as the parcel size increases.
They nevertheless serve a useful
reasonable grounds for suspecting purpose in giving some verification of One parameter that is often quoted
not accurately to represent the goods the amount of cargo loaded and thus is a measurement tolerance for bulk
actually received, or which he has had the likely accuracy or otherwise of the cargoes of ± 0.5%. Although not
no reasonable means of checking”. shipper’s figures. framed in any law this is a broad
As a result the carrier should: international standard and we think
If there is a significant difference
provides a good general guide as
Only enter the shipper’s figures if he between the shippers’, and the
to when a ship/shore difference is
reasonably believes that these are owners’, figures or there are no
becoming significant such that further
accurate reasonable grounds for checking, then
steps may be required before bills of
the master is under no obligation to
Mark the bill of lading as “weight, lading are signed.
issue the bill of lading demanded by
measure, quantity unknown” if he
the shipper.
cannot verify the accuracy of the
statement.
 Claims Guides

4. If it is apparent that the figures are Option 2: Can the master/owner insert “The shipper shall be deemed to have
incorrect, what should the carriers/ the ship’s figures and shipper’s guaranteed to the carrier the accuracy
owners do? figures into the bills of lading? at the time of the shipment of the
marks, number, quantity and weight,
Option 1: Refuse to sign the bill This may amount to clausing the bill
as furnished by him and the shipper
of lading? of lading and may be rejected by the
shall indemnify the carrier against all
shippers as the bill may be rejected by
Under Article III Rule 3 of the Hague loss, damages and expenses arising,
the bank under the letter of credit, or
Visby Rules: “….no carrier, master or or resulting from, inaccuracies in
the buyer under the sales contract.
agent of the carrier shall be bound such particulars”.
to state or show in the bill of lading Option 3: The master marks the bill
HOWEVER: the indemnity is
any marks, numbers, quantity or of lading as “weight, measure,
unenforceable if the purpose is to
weight which he has reasonable quantity, quality, condition,
commit fraud. If the master/owner
grounds for suspecting not accurately contents and value unknown”.
knowingly inserts manifestly wrong
to represent the goods actually
The carrier is entitled to put such figures, he commits a fraud and any
received, or which he has had no
remark on the bill of lading if he has LOI is unenforceable.
reasonable means of checking”.
no reasonable means of checking the
Once again Members are advised of
The problem: this will cause delay relevant condition or cargo quantity
the cover exclusions in Rule 2 Section
as the owners may have to go to the (Article III Rule 3 of the Hague Visby
16(c)(e) as mentioned above, and
local court for adjudication and/or Rules). This disclaimer is recognised
are encouraged to discuss potential
support of their position. An added under English law (however not in many
options and the repercussions of
difficulty with going to court is the foreign jurisdictions) and means that
adopting them with the Club Managers
legal uncertainty with regards to the the bill of lading has no evidential value
should such difficulties arise.
local court’s outcomes. Usually this and no warranty is made by the carrier.
just buys the master time to verify
Option 4: Can the master/owner
the shipper’s figures. Furthermore,
obtain an indemnity from shippers?
the receiver may bring a claim for
delayed arrival of the cargo. It’s a Owners could ask for a LOI from
difficult balance for owners and shippers/charterers, in addition there
the commercial pressures will be is already an indemnity in the Hague/
burdensome. Members are advised Visby Rules, because the owners’
to discuss options with the Club obligation to insert the shipper’s
Managers, which will also have figures under Art III Rule 3, Article
the benefit of clarifying issues or III Rule 5 of the Hague Visby Rules
questions of Club coverage. (Article 17 Hamburg rules) states:
Claims Guides

5. Checklist About the Author

In light of the above we recommend iii. Enter into a dialogue with the
the following: shippers/charterers with a view
A. Check – usually via draft survey – to persuading them to accept
the amount of cargo said to have the ship’s figures, so far as is
been loaded on board. possible and practicable. This
may involve inviting the shipper
B. Make a comparison between ship/
to appoint a surveyor to attend
shore figures to see whether:
a further ship draft survey or
i. The ship’s figures are even appoint an independent Julien Rabeaux
Claims Team Manager
approaching or exceed ± 0.5% surveyor to assess the loaded
of the shore figure, or quantity. T +65 6416 4894
E [email protected]
ii. The difference is otherwise iv. Notify the Club, for assistance
significant in the context of the with (iii) above and general Julien is a Claims Team Leader in West
shipment, or advice on how to best protect of England’s Singapore Office. He
iii. There is any other concern your position. studied law in France and England and
subsequently qualified as a solicitor in
about cargo figures being v. If shippers/charterers continue a London shipping law firm. Julien was
presented. to refuse to recognise the ship’s based in West of England’s Hong Kong
C. If none of the circumstances set figures and demand signing of Office for 5 years, before moving to
the Bills of Lading as presented, Singapore when the Club launched its
out in B are encountered then office there. Prior to joining the Club,
the Bill of Lading may be signed consider obtaining a LOI (but see
Julien worked for another IG Club in
as presented (though with the Part 4, option 4 above). London for 7 years.
usual “Weight, quality, quantity, vi. Ensure, if possible, that when
etc., unknown” clausing present eventually signed the bills of Get in touch
West of England Insurance Services
where possible as an additional lading contain the “Weight,
(Luxembourg) S.A.
safeguard). Club cover will respond quality, quantity, etc., unknown”
to any shortage claim that might clausing. Singapore Office
nevertheless arise. 77 Robinson Road
E. Remember that if in situation
Level 15-01, Robinson 77
D. If any of the circumstances set out (D) you are obliged to bow to Singapore 068896
in B are encountered and/or you commercial pressures and sign
T +(65) 6403 3885
are being subjected to commercial the bills of lading as presented,
pressure to sign the bills of lading then Club cover for any ensuing
London Office
as presented regardless of the cargo shortage claim will fall away One Creechurch Place
ship’s figures then the master because you will have issued a Creechurch Lane
should: bill of lading “signed for a greater London EC3A 5AF

i. Refuse to sign the mate’s quantity of cargo than is known by T +44 20 7716 6000
receipts and/or bills of lading the Member, or Master or Chief E [email protected]
Officer of the insured vessel to W www.westpandi.com
as presented.
have been shipped”. If the ship is
ii. Issue a note of protest. arrested the Club is unlikely to be
© West of England Insurance Services.
in a position to provide bail or at All rights reserved. The opinions expressed
least to do so only having received in this publication are those of the authors.
valuable counter-security first. This note is intended for general guidance
only and should not be relied upon as legal
advice. Should you require specific advice
on a situation please contact us.
February 2018
MCG-BL3-GBR-19-V1

The West of England Ship Owners Mutual Insurance Association (Luxembourg)

UK office One Creechurch Place, Creechurch Lane, London EC3A 5AF
Tel +44 20 7716 6000 Email [email protected] www.westpandi.com Follow us on