The quantity of vegetable oil cargoes is measured and calculated at the time of shipment both on shore and the vessel and then comparisons are made to see if there is any difference.
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.
Because the Master`s clausing of Bills of Lading with the ship`s weight figure may create difficulties for the shipper in obtaining the payment for the cargo, the commodity traders drafted charter party clauses whereby the shipowners are required to issue the Bills of Lading with the weight figure determined by shore scales, as in the example provided below:

"Bills of Lading to be issued in accordance with the shore weight figures supplied by the Shipper or Charterer. If there will be any discrepancies between the shore weight figures and those resulting from the ullage measurement of Vessel`s tanks, the shore weight figures will prevail and the Bills of Lading shall be issued without comments relating to the Vessel`s calculation of the cargo weight received on board."

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 ullage reports at loading and discharge ports were certified by independent surveyors1.
The carriers of vegetable oil cargoes issue the Bills of Lading based on an amended VEGOILVOY Bill of Lading form and state the shore weight figure with the following disclaimer:

"A quantity in bulk said by shippers to be:
…..............................................................
The quantity, measurement, weight, gauge, quality, nature, value and actual condition of the cargo unknown to the carrier, the Vessel and the Master."

The carriers can also use a weight disclaimer based on the custom of trade for the calculation of the commodity price based on the shore weight figure.
For Argentine vegetable oil shipments, the evidence of this custom of trade is the Clause 12 of FOSFA Contract No.51 "Contract For Argentine Vegetable Oils In Bulk – FOB Terms” which has the following provisions:

"12. WEIGHTS: Shipped weight, as certified by the surveyor, ascertained by gauging either in officially calibrated land tank/s or tank barge/s from which the oil is delivered or by delivery via certified weigh scales, or from tank cars which, if not calibrated, shall be weighed before and after loading by single weighing only (front and back axle weighing not allowed). ...
Weight ascertained by vessel`s tank(s) ullage or draft survey shall be contractually irrelevant."

For the Brazilian vegetable oil shipments, the evidence of this custom of trade is the Clause 9 of ANEC Contract forms No. 81, 83, 110, 112 which has the following provisions:

"9. WEIGHT: To be final at time and place of shipment per certificate/s issued by Independent Surveyor, based on figures ascertained by measurement of shore tanks, where available, cost being for Seller`s account. Buyer has the option, at his expense, and for his own guidance, to request for joint weight control, advising the Seller in due time the name of the Independent Surveyor he is appointing. For all effects and purposes results of the Seller`s Independent Surveyor will be final. Any figure, other than the shore tanks, where available, will not be acceptable."

The shipping laws of some of the most important exporting and importing countries of vegetable oils and biodiesel products – i.e. United States2, Malaysia3, Singapore4, India5 and Pakistan6 - include provisions as to the intended legal effect of a weight disclaimer based on custom of trade when inserted into the Bills of Lading for bulk cargoes. 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."

To date the only Court interpretation of these law provisions was made in the US law case Spencer Kellogg v. S/S Mormacsea7.
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 with the following disclaimer:

"WEIGHT OF CARGO DETERMINED BY A THIRD PARTY AND ISSUANCE OF THIS BILL OF LADING SHALL NOT BE AN ADMISSION BY CARRIER THAT WEIGHT STATED IN THIS BILL OF LADING IS ACCURATE."

The ship`s Master who did not check the accuracy of shore weight figures 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.
In the Court proceedings, the carrier contended that the Bills of Lading were not prima facie evidence of delivery to the vessel of the amounts stated therein, because the shipments were weighed by independent surveyors hired by the shipper and not by the carrier and "the typical procedure in such cases is for the shipper to provide the quantities stated in the bill of lading". However, the carrier failed to provide evidence that there is a custom of trade for the issuance of Bills of Lading with the shore weight figure.
The District Court of New York and US Court of Appeals for the Second Circuit upheld the claim.
Referring to the Bills of Lading statement that weight of cargo was determined by a third party, the US District Court of New York made the following comments:

"Under COGSA, this should not be sufficient to put the consignee on notice that it cannot rely upon the weights stated in the bills. Given the importance of enabling consignees to rely upon    carrier representations in bills of lading, and the fact that consignees must know that carriers commonly seek to disclaim their statutory duty to stand behind such representations irrespective of any custom, carriers should be required to make it clear in any disclaimer that they are at least claiming to rely upon a custom of the trade. A disclaimer purportedly based on a custom should be given effect only where the carrier states its claim 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. Here, the bills do not suggest reliance upon any such custom, the third party is not identified, and the weight is first given as the actual weight of the goods received and then separately disclaimed. Under these circumstances, the consignee is entitled to the protection Congress intended consignees normally to have."

Based on this Court interpretation, the Bills of Lading issued with the weight figure resulted from the weighbridge weighing of tanker lorries should have a weight disclaimer with the following provisions:

"The weight figure stated in this Bill of Lading has been furnished by ….............. (FOSFA Approved Superintendent) in accordance with the custom of trade for ascertaining the weight of castor oil in bulk by weighbridge weighing of tanker lorries.
Carrier agrees to issue this Bill of Lading with the weight figure ascertained by weighbridge weighing of tanker lorries 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 castor oil in bulk is 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.
If the carrier can evidence with the ship`s ullage reports that there was no in-transit loss or that the in-transit loss was within the contractual allowance for the inherent loss in weight that occurs during the sea carriage of vegetable oil cargoes, then the responsibility for the quantity invoiced in excess of the delivered quantity should belong to the seller who must reimburse the buyer.
In case of vegetable oil cargoes carried on long voyages, the carriers can include in charterparties and Bills of Lading`s Conditions of Carriage a clause providing that the carrier shall only be liable for the in-transit loss to be determined as the difference between weight figures ascertained by joint ullage surveys of vessel`s tanks at loading and discharge ports, if such loss exceeds a contractual allowance of 0.5% for the inherent loss in weight.
An example of Bill of Lading`s in-transit clause is quoted below:

"The Carrier shall not be liable for any in-transit loss in weight of cargo below 0.5% of the Bill of Lading`s weight figure. “In-transit loss” shall be determined as the difference between the weight figure ascertained by ullage measurement of Vessel`s cargo tanks at loading port and the weight figure ascertained by ullage measurement of Vessel`s cargo tanks at the port of discharge."

In charter parties the in-transit loss clause has the following provisions:

"Owners shall not be liable for any in-transit loss in weight of cargo below 0.5% of the Bill of Lading`s weight figure. “In-transit loss” shall be determined as the difference between the weight figure ascertained by ullage measurement of Vessel`s cargo tanks at loading port and the weight figure ascertained by ullage measurement of Vessel`s cargo tanks at the port of discharge."

If the Bills of Lading contain such clauses or incorporate charter parties with such clauses, in case of shortage claims the shipowners would only be liable for cargo shortages in excess of contractual loss allowance. Another effect of incorporation into the Bills of Lading of in-transit loss clauses is that in case of shortage claims the Courts would normally give preference to the evidence provided by vessel`s ullage reports rather than the Bills of Lading and out-turn report.
The in-transit loss clauses were initially drafted for oil tanker charter parties following a series of US Court decisions in the early 1980s which declined to accept a trade allowance for in-transit loss in oil trade in the absence of a specific reference in the contract of carriage8.
The US law requirement for express reference in the contract of carriage of in-transit loss allowance means that an in-transit loss allowance can be opposable to a third party holder of Charter Party Bill of Lading, such as a CFR or CIF buyer, only if the in-transit loss allowance is specified in a charter party clause and the charter party containing the clause is properly incorporated in the Bill of Lading or if the Bill of Lading`s Conditions of Carriage include a clause that the carrier shall not be responsible for any in-transit loss that is below the specified tolerance.

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Biofuels Trade Review Edition No. 2.


Endnotes:

1. 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 is not deemed enough and the carriers have not been held responsible for the differences in weight that were attributable to measurement errors and inherent loss in weight. See Trading Corporation of Pakistan v. Inter-Continental Oceanic Enterprises Corporation and Others (The "Nitsa"), [2000] 1 Lloyd`s Rep. 563.
2. See Section 1310 of US Carriage of Goods by Sea Act, 1936
3. See Section 6 of Malaysian Carriage of Goods by Sea Act, 1950
4. See Section 5 of Singapore Carriage of Goods by Sea Act, 1998
5. See Section 6 of Indian Carriage of Goods by Sea Act, 1925
6. See Section 6 of Pakistan`s Carriage of Goods by Sea Act, 1925
7. 538 F. Supp. 230 (S.D.N.Y. 1982); 703 F.2d 44 (2nd Cir. 1983)
8. See Kerr-McGee Refining Corporation v. M/V La Libertad, 529 F. Supp. 78 (S.D.N.Y. 1981), Amerada Hess Corp. v. S.S. Phillips Oklahoma, 558 F. Supp. 1164 (S.D.N.Y. 1983) and Sun Oil Company of Pennsylvania v. M/T Carisle, 771 F.2d 805 (3rd Cir.1985).