Charterparty And Bill Of Lading Clauses Used To Protect The Carriers Of Bulk Grain Cargoes In Case Of Shore – Ship Differences As To Cargo Weight At Loading Port
The quantity of bulk grain cargoes transported by sea is determined at each point of transfer of responsibility:
- at the time of shipment on board the carrying vessel at loading port, the quantity of cargo is ascertained by shore scales and vessel`s draft readings made by the marine surveyors appointed by the shippers and shipowners;
- at the port of discharge, the quantity of cargo is determined based on the vessel`s draft readings and then by shore scales.
The export duty, FOB price and settlement of payment in the FOB sale contracts are all based on the shipped weight figure ascertained at the time of shipment by shore scales. The purpose of the vessel`s draft surveys at loading port is to check the accuracy of weight figure determined by shore scales.
Minor differences up to 1% occur sometimes between the weight figure ascertained by shore scales and the weight figure calculated based on the vessel`s draft survey, because while the automatic bulk grain weighers must have an accuracy of +/- 0.1%, for the vessel`s draft surveys the accuracy is in the range of +/- 0.5 – 1%.
In case of minor differences up to 1% between the weight figure ascertained by shore scales and the weight figure calculated based on the vessel`s draft survey, the Masters are instructed to issue a Letter of Protest. But if the difference between the shore and ship weight figures exceeds the customary allowance of 1%, the carriers will require the shippers to state in the Bills of Lading the weight figure calculated based on the vessel`s draft survey results. An example of charter party clause stipulating the conditions for the issuance of Bills of Lading in such cases is provided below:
"The weight of cargo shall be determined at loading port by shore scales and this weight figure shall then be inserted in the Bills of Lading, unless the Master informs the Charterers that the weight figure determined by shore scales exceeds the weight figure determined by Vessel`s draft survey by more than 1%. In such case, the Charterers shall appoint a marine surveyor to make Vessel`s draft survey at loading port jointly with a surveyor appointed by Owners. If the weight figure calculated based on the results of joint draft survey is less than the weight figure determined by shore scales by more than 1%, then the weight figure to be recorded in the Bills of Lading shall be the one determined by joint draft survey."
In turn, the grain traders drafted charter party clauses requiring the shipowners to issue the Bills of Lading with the weight figure determined by shore scales notwithstanding the shore-ship difference and providing an indemnity to shipowners for the possible quantity shortage at discharge port up to the extent of the shore-ship difference at loading port. An example of such charter party clause is provided below:
"The weight of cargo shall be determined at loading port by shore scales and this weight figure shall then be inserted in the Bills of Lading.
To check the accuracy of weight figure determined by shore scales, the Owners shall nominate a marine surveyor to make the Vessel`s draft survey at loading port jointly with a surveyor appointed by Charterers. If the weight figure determined by shore scales exceeds the weight figure determined by Vessel`s draft survey by more than 1%, the Bills of Lading shall be issued without comments to the difference between the weight figure recorded in Bills of Lading and the weight figure calculated based on draft survey results, but the Charterers shall keep the Owners free of responsibility for the possible shortage at discharge up to the extent of the difference between the weight figure determined by shore scales and the weight figure determined by Vessel`s draft survey at loading port."
The ship agents commonly state the shore weight figure in the Bills of Lading under the qualifying statement "said to weigh", notwithstanding that in many jurisdictions the Courts do not accept such disclaimer1 2. A weight disclaimer in a Bill of Lading may protect the carriers in cases where the shore weight figures are not considered a reliable evidence and the vessel`s draft readings at loading and discharge ports were verified by independent surveyors. In such cases, the Courts held that in the absence of independent evidence of the shore weight figure, the prima facie evidence of the weight of cargo provided by the Bills of Lading on a "said to weigh" basis is not deemed enough3 and the carriers have not been held responsible for the differences in weight that were attributable to measurement errors and inherent loss in weight4.
Given the custom in international grain trade for the issuance of Bills of Lading with the weight figure determined by terminal silo5 scales, the United Kingdom had proposed the inclusion in the Hague Rules of a provision whereby in case of shortage claims for bulk cargoes, the shipper was bound to prove the weight actually delivered to the carrier. Failing to obtain consent on this matter, United Kingdom included in COGSA 1924 provisions regarding the issuance and evidentiary value of Bills of Lading for bulk cargoes6, that were thereafter adopted in all British Empire, including Australia7, Singapore, Malaysia, India and Malta. Similar provisions were adopted in US Carriage of Goods by Sea Act 1936, in Philippines Carriage of Goods by Sea Act, 1936 and Canada`s Carriage of Goods by Water Act, 19368. They are still in force in United States9, in Philippines10, Singapore11, Malaysia12, India13, Pakistan14, Malta15, in some of the states which are part of Commonwealth, i.e. Jamaica16, Antigua and Barbuda17, Tuvalu18, Solomon Islands19, Niue20, and in the British Overseas Territories, e.g. Bermuda21, Montserrat22. These provisions stipulate that:
"Where under the customs of any trade the weight of any bulk cargo inserted in the bill of lading is a weight ascertained or accepted by a third party other than the carrier or the shipper, and the fact that the weight is so ascertained or accepted is stated in the bill of lading, then, notwithstanding anything in the Rules, the bill of lading shall not be deemed to be prima facie evidence against the carrier of the receipt of goods of the weight so inserted in the bill of lading, and the accuracy thereof at the time of shipment shall not be deemed to have been guaranteed by the shipper."
In the US law case Spencer Kellogg v. S/S Mormacsea23, the US District Court of New York held that these law provisions would be taken into consideration only if there is evidence of the trade custom and the weight disclaimer inserted in the Bills of Lading by the carriers complies with the law provisions, i.e. the carrier states in Bill of Lading that "there is a custom of relying upon the weight stated by a specified third party, and that the purported weight is that declared by the third party, not by the carrier".
Furthermore, the US District Court of New York held that the weight figure should not be indicated separately as the actual weight of goods and then separately disclaimed.
Accordingly, it is recommended to write the weight disclaimer in the Bills of Lading taking into consideration the relevant law provisions in the shipper`s country and the rules adopted by the Courts in this matter. For instance, in the United States, the accuracy of weight figure stated in the Bills of Lading issued for grain and oilseeds cargoes is certified by a government agency, the Federal Grain Inspection Service. The weighing of US grain shipments is made in the terminal elevator scales under the supervision of federal inspectors so that any weight disclaimer in the Bills of Lading should state that, and not just state "said to weigh". Therefore, when a weight disclaimer is deemed necessary in the Bills of Lading, the shipowners can give instructions to the ship agents to issue the Bills of Lading with the following statement:
"The weight figure stated in this Bill of Lading has been furnished by the Federal Grain Inspection Service in accordance with the custom of trade for ascertaining the weight of bulk grain cargoes with the terminal elevator scales.
Carrier agrees to issue this Bill of Lading with the weight figure ascertained by terminal elevator scales relying on the custom of trade and makes no representation with regard to the accuracy of weight figure stated herein. According to the weighing performed ashore under custom of trade, the shipment of wheat in bulk is said to weigh: …..................."
Based on the New York District Court`s interpretation of US COGSA 1936 in Spencer Kellogg v. S/S Mormacsea24, the Bills of Lading with such statement would not be deemed prima facie evidence of weight in case of shortage claims against the carriers, provided such Bills of Lading incorporate the provisions of US COGSA 1936, as does NORTH AMERICAN GRAIN BILL OF LADING form.
Currently, there is no Bill of Lading form in use with a weight disclaimer referring to the custom of trade for ascertaining the weight of bulk grain cargoes. For a brief statement, the carriers can use as example the weight disclaimer of the "AUSTWHEAT BILL" form published in 1990 by the former Australian Wheat Board to be used for Australian wheat shipments. The weight disclaimer had the following wording:
"Shippers` description of goods
…......................................... in bulk
the weight ascertained or accepted by the Silo Authority25 under the custom of the trade, weight shipped unknown, and to be delivered in the like apparent good order and condition at the aforesaid port(s) of discharge.
Silo Authority`s Weights -
Weight shipped unknown, but said to weigh: …....................."
If the Bill of Lading is not prima facie evidence of the weight stated therein, the CFR and CIF buyers claiming the value of quantity shortage from the carriers will have the burden to prove that the weight stated in the Bill of Lading was actually shipped on board the vessel. In such case the responsibility for the quantity shortages is primarily upon the shippers and surveyors.
For the US grain shipments the shortage claims are settled to buyers by a state agency, GIPSA (Grain Inspection, Packers and Stockyards Administration) because this agency provides the Federal Grain Inspection Service certification of quality and weight for the US export shipments of grains.
A similar approach it is recommended in Canada where the accuracy of weight figure stated in the Bills of Lading is certified by a government agency, the Canadian Grain Commission. The weighing of Canadian grain shipments is made in the terminal elevator scales under the supervision of the Canadian Grain Commission`s inspectors so that any weight disclaimer in the Bills of Lading should state that.
The settlement of shortage claims with these agencies is based on their certificates of weight.
by Vlad Cioarec, International Trade Consultant
This article has been published in Commoditylaw`s Grain Trade Review Edition No. 1.
Endnotes:
1. In the judgment of a claim for the shortage of a wheat cargo shipped from Tianjin to Rotterdam the Hamburg Court of Appeal held that the carrier cannot rely on the meaning of the clause "said to weigh" for an exclusion of liability and the carrier should in fact state that it had no reasonable means of checking the cargo`s weight so as to exclude its liability.
2. The 1975 UNCITRAL Report on Bills of Lading contains the following commentary: "Some jurisdictions have held that, in order to avoid responsibility for statements as to weight shown on the bill of lading, a carrier`s reservation to such statements noted on the bill of lading must be sufficiently specific to advise the consignee or other third party of the relevant facts giving rise to the reservation. These jurisdictions have not accepted vague or general reservations and some have insisted that, to be given effect, a reservation must disclose the grounds for the carrier`s suspicion that the shipper`s information is inaccurate or why the carrier lacks reasonable means for verifying the information." See paragraph 36 of "Fourth Report of the Secretary-General on responsibility of ocean carriers for cargo: bills of lading" (A/CN.9/96/Add.1; UNCITRAL Yearbook, vol.VI: 1975) at the 8th Session of United Nations Commission on International Trade Law (UNCITRAL). The Report can be viewed on UNCITRAL web site www.uncitral.org
3. See Noble Resources Ltd. v. Cavalier Shipping Corporation (The “Atlas”), [1996] 1 Lloyd`s Rep. 642
4. See Asian Terminals, Inc. v. Simon Enterprises, Inc., The Supreme Court of the Republic of the Philippines, First Division, G.R. No. 177116, 27 February 2013; Malayan Insurance Co., Inc. v. Jardine Davies Transport Services, Inc., The Supreme Court of the Republic of the Philippines, G.R. No. 181300, 18 September 2009.
5. In US and Canada, the silos are referred to as "grain elevators".
6. Those provisions of UK`s Carriage of Goods by Sea Act, 1924 (Section 5) were repealed by Carriage of Goods by Sea Act 1971.
7. Those provisions of Australia`s Sea-Carriage of Goods Act, 1924 (Section 8) were repealed by Australian Carriage of Goods by Sea Act 1991.
8. The provisions of Section 6 of Canada`s Carriage of Goods by Water Act, 1936 were repealed by Part 5 of Marine Liability Act.
9. See Section 1310 of US Carriage of Goods by Sea Act, 1936
10. See Section 11 of Philippines Carriage of Goods by Sea Act, 1936
11. See Section 5 of Singapore Carriage of Goods by Sea Act, 1998
12. See Section 6 of Malaysian Carriage of Goods by Sea Act, 1950
13. See Section 6 of Indian Carriage of Goods by Sea Act, 1925
14. See Section 6 of Pakistan`s Carriage of Goods by Sea Act, 1925
15. See Section 6 of Malta`s Carriage of Goods by Sea Act, 1954
16. See Section 15 of Jamaica`s Carriage of Goods Act
17. See Section 5 of Carriage of Goods by Sea Act of Antigua and Barbuda, 1926
18. See Section 5 of Tuvalu`s Carriage of Goods by Sea Ordinance, 1926
19. See Section 6 of Solomon Islands Carriage of Goods by Sea Act, 1926
20. See Section 10 of Niue Sea Carriage of Goods Act, 1940
21. See Section 4 of Bermuda Carriage of Goods by Sea Act, 1926
22. See Section 6 of Montserrat Carriage of Goods by Act, 2002
23. 538 F. Supp. 230 (S.D.N.Y. 1982)
24. 538 F. Supp. 230 (S.D.N.Y. 1982)
25. The reference to "Silo Authority" in "AUSTWHEAT BILL" form and later in "AUSGRAIN BILL" form was a reminiscent of the time when the port grain terminals in Australia were owned and operated by the former Bulk Handling Authorities. The Bulk Handling Authorities were state monopolies authorised to receive, store and handle wheat on behalf of Australian Wheat Board. There was a Bulk Handling Authority in each Australian state. However, since 1990 when the "AUSTWHEAT BILL" form was adopted, things have changed. The former Bulk Handling Authorities became private companies and export grains in their own name. The weight of Australian grain shipments is now determined by the Australian port operators under the supervision of the independent superintendent companies. So that the reference to "Silo Authority" in the "AUSTWHEAT BILL" form should be deleted and the Bills of Lading should state that the weight of cargo has been ascertained by the independent superintendent company pursuant to the custom of trade for ascertaining the weight of bulk grain cargoes with the silo scales.