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Bill of lading related problems & handling guideline for ship master
A bill of lading is a receipt for goods either received (before shipment) or shipped on board cargo ship. It provides good evidence of the existence and terms of a contract between the shipper and carrier . (A contract of carriage may exist without issue of a bill of lading, however.) Problems may arise handling a bill of lading. Summarized below some basic procedures need to be followed by ship master .
If damaged or otherwise defective cargo is presented for loading
Where shippers offer damaged or defective goods for shipment, i.e. cargo which is not in the “apparent good order
and condition” as stated in the printed terms on most bills of lading, the master’s duty is either:
i) to reject the goods (with the advice/assistance of an independent cargo surveyor where necessary); or
ii) to accept the goods for carriage on condition that he will issue a claused bill of lading stating the nature of the
deficiency.
The master is entitled, as the carrier’s agent, to enter remarks on the bill of lading as to the apparent order and
condition of the goods.
Since some remarks may not be effective in protecting the carrier against claims by third parties, the master should
contact the owner’s P&I club correspondent before making any remarks of which he is uncertain; certain remarks
may have adverse consequences for the shipper when he presents a “shipped” bill of lading to his bank in
compliance with the terms of a Letter of Credit.
Where the damaged or defective cargo is steel in any form, the P&I club correspondent should always be consulted
before any remarks are made on the bill of lading.
Where rusty steel is shipped, as is often the case, claims will inevitably arise. The master is fully justified in
clausing a bill of lading relating to a steel cargo on which rust is apparent. However, to simply write “rusty” on the
bills of lading is not recommended by the P&I clubs, since it may not be effective in protecting the carrier’s position
and it may have adverse consequences for the shipper when he presents the bills of lading to his bank and demands
payment for the goods.
The P&I clubs advise that remarks on the degree of rusting, e.g. “extremely rusty” or “superficially rusty” should
never be made.
In every case where steel is being loaded and rust is apparent, the master should contact the P&I club
correspondent before making any remarks on the bill of lading. Certain clauses will be recommended by the club,
while the use of others will not be approved of.
If master is asked to sign “clean” bills of lading when these are not justified
A clean bill of lading is a bill of lading bearing no superimposed clauses stating a defective condition or shortage of
the goods. It states that the goods have been received “in apparent good order and condition...”, without further
remarks as to their condition.
A dirty bill of lading, also known as a “claused” or “foul” bill, is one claused with remarks such as “torn bags”,
“rusty drums”, etc.
A Letter of Indemnity (or “back letter”) may be offered by the shipper, promising to indemnify the master or
carrier against any loss or liability as a consequence of signing a clean bill of lading. However, acceptance of a
Letter of Indemnity of this type in return for clean bills makes the master a party to an act of deception or fraud on
banks, consignee/buyer, and insurers, since it is an attempt to obtain payment for goods knowing them to be
unsound. There may be personal criminal liability for fraud on the part of the carrier and the master, and a heavy
financial liability on the shipowner. This type of Letter of Indemnity has no legal standing in English law and cannot
be sued on if the shipper goes back on his promise of indemnity.
A master should consult his owners and their P&I club’s correspondent if he is in any doubt, but should never
accept a Letter of Indemnity of this sort without the written orders of his owners.
If ship and shore loading figures differ
Where the ship’s cargo quantity measurements show less cargo loaded than the quantity stated by the shipper, the
master should generally enter the ship’s figures on the face of the bill of lading.
Some shipowners require their masters to endorse a bill of lading which does not provide space for the ship’s figures
in the following terms: “Vessel’s measurements are stated below and this Bill of Lading only acknowledges the
shipment of the weight or quantity given in the vessel’s measurements on completion of loading”.
Where the shipper refuses to accept such an endorsement the master should write a Letter of Protest to the shipper,
pointing out the discrepancy in the figures and stating that the bill of lading will be signed under protest. A copy of
the Letter of Protest should be stapled to each negotiable copy of the bill of lading (i.e. each bill of lading in the set
of “originals”).
If the ship’s measurements show more cargo loaded than advised by the shipper, the shipper’s figures should be
entered on the bill of lading. No Letter of Protest will be necessary.
If a charterer’s bill of lading has to be used
Where a charter party requires the master to sign bills of lading as presented by the charterer, the master should first
verify that the bills of lading incorporate the terms of the Hague or Hague-Visby Rules. (This will generally be
stated in the Clause Paramount or Paramount Clause.)
P&I clubs usually restrict cover to contracts incorporating terms at least as favourable as those given by the Hague
Rules or Hague-Visby Rules. Where there is no reference in the charterer’s bill of lading to the incorporation of
these Rules, the P&I club correspondent should be contacted.
Where the master is required to sign “clean” bills of lading as presented by the charterer, “clean” has been
held by a court to mean only that the bill of lading should not be claused to the effect that demurrage was due at the loading port, without affecting the master’s right to clause the bill of lading as to the apparent order and condition of
the goods where necessary.
Where a contractual lien for demurrage is given by the charter party terms, and demurrage is due at the loading
port but not paid, the master should clause the bill of lading to that effect so that the lien can be exercised if
necessary at the discharge port.
If the number of original bills of lading shown on the face of the bill is not the
same as the number of negotiable bills of lading
The number of original bills of lading in the set should, before signing, be entered in a space provided on the face
of each bill. (In addition to these “originals”, there may be several other “non-negotiable copy” bills, each of which
should be clearly marked as such.)
Where the master is asked to sign bills of lading and the number of “original” bills presented for signature is not the
same as the number indicated on the face of the bill, the master should:
• attempt to ascertain the reason for the discrepancy;
• call the P&I club correspondent;
• refuse to sign the bills until the correct number is inserted.
If two or more sets of bills of lading are requested by the shipper
Two or more sets of original bills of lading may have to be issued in the following circumstances:
• where cargo is shipped by more than one shipper (e.g. at multiple loading ports);
• where cargo is consigned to more than one consignee; or
• where more than one type, grade or specification of cargo is shipped by one shipper.
In the tanker trades it may happen that two or more consignments of cargo, shipped by different shippers, are
intentionally loaded into one tank, so that it becomes impossible to determine the respective shippers’ quantities on
completion of loading. In such cases the master should endorse and sign separate bills of lading to the effect that
the shipments are part cargoes, or are part of a bulk cargo.
Where multiple consignments are loaded, but only one total figure is given, the master should consult the shipper
as to the apportionment of quantities on the bills of lading for each consignment. Where no instructions are
obtainable, the total quantity loaded should generally be divided between the bills of lading in proportion to the
original split of the nominated consignments. For example, where the consignments were nominated as 40,000 tons
consigned to Party A and 60,000 tons to Party B, but only 99,400 tons are loaded, the apportionment on the bills of
lading should be 39,760 tons and 59,640 tons respectively.
If a bill of lading presented for signing is written in an incomprehensible foreign
language or alphabet
Bills of lading are, in some countries (e.g. Libya), presented for signing in a foreign language or alphabet which may
not be known to the master. In such case the master should arrange for the bill of lading to be translated by an
independent third party (i.e. someone other than an agent of either the carrier or charterer). If in doubt, the P&I club
correspondent or British consul should be asked whom to employ.
If a translator cannot be found, the master should make out his own bill of lading in English (using another bill of
lading form as a model), and issue this to the shipper for completion of the shipment details before signing. Only
appropriate clauses should be incorporated.
If the master is asked to sign blank or partially completed bills of lading
Except where the Early Departure Procedure is being properly used in the tanker trades , blank or
partially-completed bills of lading should never be signed and issued by the master, for obvious reasons.
In all cases where the master is asked to sign blank or partially-completed bills of lading, the P&I club
correspondent should be advised.
If Early Departure Procedure is used
Some oil terminals and tanker companies use an “Early Departure Procedure” (“EDP”) to allow tankers to sail
on completion of cargo operations without having to wait for cargo figures to be prepared and documents produced.
The practice is more commonly used when the ship’s time is at a premium, but at other times is discouraged.
In the EDP system:
1. Bills of lading are prepared before completion of loading, but without any loaded cargo quantity as advised
by the shipper.
2. The agent presents the bills of lading for the master’s signature before completion of loading.
3. The master returns the originals of the bills of lading to the agent but retains the non-negotiable “captain’s
copies” together with “copy” bills for consignees, and other completed cargo documents.
4. The master writes any necessary Letter of Protest regarding the order or condition of the cargo, and allows any
investigation to be completed before departure.
5. After departure of the ship, the agent communicates the shipper’s final loading figures to the master as soon
as they are available.
6. If the master agrees the communicated figures, he enters them on his “captain’s copies” of the bill of lading
and on the consignee’s copies, while the agent completes the original bills of lading and signs them on behalf
of the master.
7. If the master does not agree with the shipper’s figures he informs the agent, who writes a Letter of Protest
to the shipper on the master’s behalf and completes and signs the bills of lading under protest.
8. The agent releases all original documents to the shipper, who sends them to the consignee.
At some ports the practice may be to present bills of lading to the master for signature either blank or only partiallycompleted,
but the master should never sign such documents, and should instead call the P&I club correspondent.
Agents should be authorised to sign bills of lading on behalf of the master only after the master has been made
aware of, and has agreed to, any details (including loading figures) to be entered.
If bills of lading have to be re-issued or amended
The master may be asked to re-issue or amend a previously issued bill of lading. He should never agree to this
without the consent of the P&I club correspondent.
The P&I club correspondent will normally ensure that before a second set is issued, all bills of lading in the first set
are returned and cancelled or destroyed. (The number of original bills returned should, of course, tally with the
number of originals issued, as stated on the face of each bill.)
Each bill of lading in the new set should be claused as follows:
This is a replacement Bill of Lading issued at…………….… on the …… day of ………………… (month/year)
on cancellation of an original Bill issued at ……………… on the …… day of ………………….(month/year) to
show (reason for re-issuing bills of lading).
If the master is asked to pre-date or post-date bills of lading
Under the terms of a Letter of Credit, payment to the seller of the goods will normally depend on the goods being
shipped on a particular date, or between particular dates, and banks will generally refuse to pay the seller if the
actual date of loading does not correspond with the date stipulated in the Letter of Credit. Cases therefore arise
where the incorrect loading date is inserted in bills of lading in an attempt to evade a delay in obtaining payment.
A“shipped” bill of lading should always be dated for the actual date of loading, or the date of completion of
loading. Although the master may be requested to sign pre-dated or post-dated bills of lading, he should never do
so.
If delivery of cargo is requested without presentation of the relevant bill of lading
In the tanker trades, cargoes are commonly bought and sold many times during a voyage, causing delays in the
arrival of the bills of lading, and the problem commonly arises that the cargo arrives at the discharge port before a
copy of an original bill of lading can be produced.
In other cases, the bill of lading may be missing for a variety of reasons. The receiver may claim that the bills have
been lost, stolen or delayed. In such cases, there is there is the possibility of misdelivery and a serious risk of fraud.
If the master negligently delivers cargo to the wrong party without first requiring production of an original bill of
lading, the carrier will be held wholly liable for the consequences and will receive no backing from his P&I club or
sympathy from the courts. Wrongful delivery may even result in the arrest and sale of the ship to recover the
cargo’s value for the rightful owner.
Ifit is likely that the bill of lading has merely been delayed, the goods may be delivered - with the shipowner’s and
the P&I club’s agreement - after the receiver signs an acceptable Letter of Indemnity. An “acceptable” Letter of
Indemnity is one that:
• promises to indemnify the shipowner against all consequences and liabilities of delivery to the wrong person;
• is phrased in terms acceptable to the owner’s P&I club; and
• is countersigned by a first class bank or cargo insurance underwriter, i.e. one able to meet any claim.Some P&I clubs print the text of their standard Letter of Indemnity in their club handbook or rulebook, which
should be carried on board. This does not imply, however, that the club will always give cover for claims arising
under such Letters of Indemnity.
If an acceptable Letter of Indemnity cannot be offered, the cargo should not be delivered.
If cargo delivery is requested against presentation of an original bill of lading
carried on board
In some cases an original bill of lading may be sent to the consignee on board the carrying vessel.
The master should issue a receipt to the shipper or his representative (e.g. the freight forwarder).
The master should not accept for carriage original bills of lading made out “to order”, or where there is no named
destination or where the destination is qualified, e.g. “Lands End for orders/intention Le Havre”.
The master should not accept original bills of lading for carriage if the shipper refuses to sign the receipt, or if no
party is named as receiver in the bill of lading.
The master should not discharge against an original bill of lading carried on board if the discharge port is different
from the destination shown in the bill of lading. In this case he should consult the owner and the P&I club
correspondent.
On arrival at the discharge port the master should hand the bill of lading to the party named in the receipt, if his
identity can be confirmed.
If two parties present “original” bills of lading
The master should immediately contact the P&I Club correspondent.
The bills of lading may be left with a court of law to settle the dispute. In the meantime, the goods should be landed
to a warehouse/tank, etc., where they should be held until the dispute has been settled and freight and charges have
been paid.
If goods are unclaimed at the discharge port
The master is not obliged to deliver goods to a receiver until one original bill of lading is presented, but neither is he
obliged to retain unclaimed goods on board.
At common law, if goods are not claimed within a reasonable time, the master may land and warehouse them. The
master has a duty to do this, in fact, rather than detain his ship in port beyond her laytime and make the charterer
liable for demurrage. The warehouseman becomes a common agent of both carrier and consignee and should be
instructed to release the goods only on payment of all outstanding charges (e.g. freight and demurrage).
Warehousing expenses will be for account of the receiver of the goods.
If the goods remain unclaimed, they may usually be sold by the carrier after a reasonable time (depending on local
law) and after advertising for the consignee in the national press.
Carriers often insert a clause known as a London Clause in their bills of lading giving them the right to land goods
on arrival; this clause overrides the common law position.
Related other info pages
- What is a bill of lading ?
A bill of lading is a receipt for goods either received (before shipment) or shipped on board.
It provides good evidence of the existence and terms of a contract between the shipper and carrier ...
More .....
- Function of a bill of lading in cargo ships agreement
a bill of lading is only prima facie evidence as to the quantity, weight and condition of goods
shipped, i.e. if a bill is signed for a greater quantity of cargo than is actually shipped, it may be possible, provided
the bill is not endorsed to a third party,...
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- Bill of lading related problems
Problems may arise handling a bill of lading....
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- How the bolero system works ?
Bolero is designed for all parties in the trade process:
importers, exporters, freight forwarders, port authorities, inspection agencies, carriers, ship’s agents, customs
agencies and financial institutions....
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- Delivery conditions in a time charter agreement
Unless the contract contained in the bill of lading, charter party or sea waybill expressly provides otherwise, goods
stated in the contract of carriage as being carried on deck and which are, in fact, stowed on deck will not be
protected by the Hague-Visby Rules. ...
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- Hague-Visby Rules defining cargo ships obligations and liability
Hague-Visby Rules (HVRs) are properly called the Hague Rules as Amended by the Brussels Protocol 1968 and apply to every bill of lading or any similar document of title relating to the carriage of goods between ports...
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- Hamburg Rules
Hamburg Rules are properly called the United Nations Convention on the Carriage of Goods by Sea 1978, were drafted under the auspices of the UN agency UNCITRAL and introduced in 1992 in response to shippers’ complaints that the Hague and Hague-Visby Rules were unfavourably weighted in favour of the carrier....
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- Outline of a mate's receipt
A mate’s receipt is a receipt, issued and signed by the carrying ship’s chief mate (or the ship’s agent on his behalf), for goods
received on board....
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- Sea waybills and related procedure
A sea waybill is a receipt for goods shipped on board.
It bears good evidence of the existence and terms of a contract between the shipper and carrier, but is not a contract
itself....
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- What is standard shipping note
Standard Shipping Note (SSN) is a shipping document widely used in the UK liner trades to accompany a consignment of goods from their place of origin (e.g. a factory) to the place of loading (e.g. an inland container depot) or the port of shipment....
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