Documentary Evidence Used To Analyse The Shortage Claims For Vegetable Oil Cargoes
The quantity of vegetable oil cargoes transported by sea is measured and
calculated at each point of transfer of responsibility and then
comparisons are made to see if there is any difference.
The vegetable oil cargoes are delivered to vessels either directly from tanker lorries or from loading port storage tanks.
In
case of parcels of vegetable oils delivered to vessels from tanker
lorries, the export duty and FOB price are calculated based on the
weight figure resulted from the weighbridge weighing of tanker lorries.
Hence, the Bills of Lading, surveyor`s certificate of weight and all
other commercial documents required for payment must state the weight
figure resulted from the weighbridge weighing of tanker lorries. This is
a custom of trade stated in the Clause 12 of FOSFA Contract No. 51 and
Clause 9 of ANEC Contract forms No. 81, 83, 110, 112.
In case of
vegetable oil cargoes shipped on board the vessels from shore tanks, the
export duty and FOB price are calculated based on the weight figure
resulted from shore tanks gauging. In such case, the Bills of Lading,
surveyor`s certificate of weight and all other commercial documents
required for payment must state the weight figure resulted from the
shore tanks gauging. This is a custom of trade stated in the Clause 12
of FOSFA Contract No. 51, Clause 10 of PORAM Contract No.7 and Clause 9
of ANEC Contract forms No. 81, 83, 110, 112.
After loading of cargo
in the vessel`s tanks is completed, the cargo quantity is once again
measured and calculated based on vessel`s tank ullages. Accordingly, at
loading port the relevant documents for comparison are the weighbridge
report, shore tanks gauging report and vessel`s ullage report.
At the
port of discharge, the weight of cargo is calculated based on ullage
measurements made on board the vessel before discharge and after
discharge based on storage tanks measurement and/or weighbridge weighing
of the tanker lorries that carry the cargo from the port to the
consignee`s premises. At the port of discharge, the relevant documents
used for comparison are the ship`s ullage report made before discharge,
out-turn quantity report and in case of full cargoes, the dry tank
certificate showing that all the cargo carried on board has been
delivered and the cargo tanks are empty after discharge.
The
measurement procedures for vegetable oil cargoes in shore tanks and
ship`s tanks are similar to the procedures used in case of petroleum oil
cargoes. However, the fact that the vegetable oil cargoes are traded
based on weight means that the figures used for comparison are the
weight figures and the reference to quantity is a reference to weight.
Out-turn
quantity shortages occur sometimes due to measurement errors, inherent
loss of cargo in long voyages and the use of different VCF Tables for
the calculation of shipped weight figure and delivered weight figure.
The
shortage claims for vegetable oil cargoes are made by the cargo
insurers on behalf of the CFR and CIF buyers who pay for the cargoes
based on the shipped weight figure stated in the Bills of Lading and
want to recover the value of quantity shortage resulted from the
difference between the Bill of Lading weight figure and out-turn
report`s weight figure1.
In cases involving shortage
claims for vegetable oil cargoes, the Courts analyse all the relevant
documents evidencing how the weight of cargo was determined at the time
of shipment at loading port and at the time of delivery at the port of
discharge.
The carriers argue that pursuant to Art.1(e) of
Hague-Visby Rules, the carrier`s responsibility for the goods begins
from the time when the goods are loaded on board the ship and ends when
they are discharged from the ship and accordingly, any in-transit loss
should be determined by comparing the weight figures stated in the
vessel`s ullage reports made after loading and before discharge2.
In this regard, Sub-clause 7(a) of VEGOILVOY tanker voyage charter party form has the following provisions:
"The
cargo shall be pumped into the Vessel at the expense, risk and peril of
the Charterer, and shall be pumped out of the Vessel at the expense of
the Vessel, but at the risk and peril of the Vessel only so far as the
Vessel`s permanent hose connections, where delivery of the cargo shall
be taken by the Charterer or its consignee."
In the US law cases Northeast Petroleum Corp. v. S.S. Prairie Grove3, Kerr-McGee Refining Corporation v. M/V La Libertad4, New England Petroleum Co. v. OT SONJA5,
the US District Court of New York held that in case of a carriage
subject to such charter party provisions a cargo receiver may not base a
shortage claim upon computations made at a point subsequent to the
point of delivery defined in the charter party, i.e. vessel`s permanent
hose connections, and the question wehther there was any in-transit loss
has to be determined by comparing the quantity figures stated in
vessel`s ullage reports made after loading and before discharge.
If
the Bills of Lading contain or incorporate such charter party terms and
the vessel`s ullage readings were verified by independent surveyors, in
case of shortage claims the Courts would normally give preference to the
weight figures stated in the vessel`s ullage reports, notwithstanding
the prima facie evidence provided by the Bills of Lading.
The Indian
Courts adopted the rule that the quantity based on shore tank receipt or
weighbridge weighing of tanker lorries should only be used for the
assessment of import duty6 and the carrier`s liability for
cargo shortages should be determined by comparing the ship`s ullage
quantity at discharge port with the ship`s ullage quantity at loading
port7.
A similar rule was adopted in Pakistan by the Pakistan High Court in the law case Trading Corporation of Pakistan v. Inter-Continental Oceanic Enterprises Corporation and Others (The “Nitsa”)8.
In that case the consignee of a shipment of soya bean oil in bulk made a
shortage claim for the difference between the Bill of Lading`s weight
figure (25,801.749 Metric Tonnes) and out-turn weight figure (25,557.657
Metric Tonnes).
The carrier`s evidence consisted of the vessel`s
ullage reports and dry tank certificate. The weight figure stated in the
vessel`s ullage report made after loading was 25,862.600 Metric Tonnes,
while the weight figure stated in the vessel`s ullage report made
before discharge was 25,863.014 Metric Tonnes.
The carrier argued
that the results of joint ullage measurements of the vessel`s tanks made
by after loading and before discharge by surveyors representing the
shipper, consignee and the carrier were a proof that no loss occurred
during the carriage. The entire quantity found on board the vessel was
discharged into the shore tanks and a dry tank certificate was issued
indicating that nothing remained on board the vessel. The carrier
contended that the shortage could only have occurred after the cargo had
been discharged and according to Hague Rules, the carrier`s
responsibility for the cargo ends when the vegetable oil leaves the
ship`s manifold at the port of discharge. Based on the carrier`s
evidence, the Pakistan High Court held that there was no actual
shortage.
Although the Bill of Lading is a prima facie evidence of
the quantity of cargo stated to have been shipped on board the vessel,
the carrier can rebut this evidence with a vessel`s ullage report
certified by an independent surveyor at loading port, the Mate`s Receipt
and a letter of protest stating that the actual weight of cargo shipped
on board the vessel was not that provided by the shipper in the Bill of
Lading. In Trading Corporation of Pakistan v. Inter-Continental Oceanic Enterprises Corporation and Others (The “Nitsa”)9,
the Pakistan High Court held that the carrier can evidence with the
Mate`s Receipt and a letter of protest that the quantity was short
shipped at the port of loading. The relevant comments are quoted below:
"For
this purpose the master of the ship can rely on the mate`s receipt and
if he is bound to sign for the amounts in excess of the amount actually
loaded, for instance because of certain binding term of charter-party,
then he could lodge a note of protest at the port of loading before
sailing... Such note of protest may be accepted in evidence to show that
the quantities actually loaded on board were not the same as shown in
the bill of lading."
However, in cases where the vessel`s
ullage report at loading port was not certified by independent surveyors
or the carriers did not even produce a vessel`s ullage report, the
Courts determined the carrier`s liability based on the shore weight
figures evidenced by the Bills of Lading and out-turn report.
An example of such case is the US law case Spencer Kellogg v. S/S Mormacsea10.
In
that case the weight of two castor oil cargoes shipped on board the
vessel from tanker lorries was determined by a Brazilian Government
agency based on the results of weighbridge weighing of tanker lorries
before and after loading. The weight figures determined by weighbridge
weighing were stated in the Bills of Lading issued by the ship`s Master
who did not check their accuracy by ullage measurement of the vessel`s
tanks. Upon delivery at the port of discharge, the consignee made a
shortage claim for the differences between the Bill of Lading`s weight
figure resulted from the weighbridge weighing of tanker lorries and the
weight figures resulted from the shore tanks gauging at the port of
discharge.
The District Court of New York and US Court of Appeals for the Second Circuit upheld the claim.
by Vlad Cioarec, International Trade Consultant
This article has been published in Commoditylaw`s Biofuels Trade Review Edition No. 2.
Endnotes:
1.
In the US law case Spencer Kellogg v. S/S Mormacsea, 538 F. Supp. 230
(S.D.N.Y. 1982), the District Court of New York held that: "[T]he
quantity of cargo that a consignee was actually able to sell or use is
the fairest measure of damages, since any oil it is able to sell or use
redresses its actual damages accordingly. […] The proper and fair net
shortages for purposes of damages in this case, therefore, are the
differences between the amounts reflected on the bills of lading and the
amounts delivered to the storage tanks."
2. See Trading
Corporation of Pakistan v. Inter-Continental Oceanic Enterprises
Corporation and Others (The "Nitsa"), [2000] 1 Lloyd`s Rep. 563.
3. 1977 AMC 2139 (S.D.N.Y. 1977)
4. 529 F. Supp. 78 (S.D.N.Y. 1981)
5. 732 F. Supp. 1276 (S.D.N.Y. 1990)
6.
See Indian Supreme Court`s order dated 20 February 2002 in the case of
Commissioner of Customs (Import), Mumbai v. M/s. National Organic
Chemical Industries Ltd. (NOCIL) [2002 (142) ELT A280 (S.C.)]; See also
the Indian law case Godrej Industries Ltd. v. Collector of Customs
(Bombay High Court 2004).
7. See the Indian law case Shaw Wallace
& Co. Ltd. v. Assistant Collector of Customs & Others [1986 (25)
ELT 948 (Bombay)].
8. [2000] 1 Lloyd`s Rep. 563
9. [2000] 1 Lloyd`s Rep. 563
10. 538 F. Supp. 230 (S.D.N.Y. 1982); 703 F.2d 44 (2nd Cir. 1983).