Charterparty And Bill Of Lading Clauses Used To Protect The Carriers Of Vegetable Oil Cargoes In Case Of Claims For Quantity Shortages
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).