1. Importance of remarks in transport documentation
NNPC Correspondents regularly are requested to provide assistance in respect of disputes relating to cargo claims. Such disputes often start with the discovery of cargo damages at the port of discharge (such as wet damages, condensation damages, rusted cargo, etc.) which triggers an investigation as to where and when during the transportation of the goods the damage has been caused. Apart from investigating the circumstances during the transport itself, it will often be useful to first determine the condition and circumstances in which the cargo was originally loaded on board.
On the basis of the Hague Rules (for maritime transport) as well as on the basis of the CMNI Convention (for inland waterway transportation- as ratified in the Netherlands and contained in Title 10 of Book 8 of the Civil Code) the carrier must state the apparent order and condition of the shipped goods in the issued transport documentation. If the carrier fails to include any remarks, the apparent order and condition of the goods will be considered as “good”. This is also known as the issuance of a “clean” Bill of Lading, i.e. a Bill of Lading without remarks (depending on the preference of the shippers, the Bill of Lading may also explicitly be remarked as “clean on board”). Following the issuance of a (clean) Bill of Lading, the carrier must deliver the goods received in the same condition as described in the transport document. If the condition of the goods at the port of discharge does not correspond to the description on the transport document, this may give rise to a cargo claim filed against the party issuing the document, in many cases the master of the ship (and therefore by extension the shipowner).
2. A multitude of possible remarks during loading
The carrier must therefore be extra vigilant during the loading process as to the apparent order and condition of the goods to be loaded. If a cargo of grains in bulk already appears to be wet or discolored at the time of loading, the master or his crew will have to make a remark to this effect in the transport document. The same applies to steel coils or steel cables that are presented for loading in a wet or already rusty condition in which case remarks such as “wet before loading”, or “atmospherically rusted” are considered appropriate to be included on the transport document. Given the high value of this cargo on the one hand or the relatively high degree of sensitivity to wet damage of steel products on the other, it is often a specific condition under the carrier’s P&I policy conditions to have a 3rd party cargo surveyor present to verify the condition of the steel products before loading and to recommend appropriate remarks.
Another cause of cargo disputes are presence of of insects in grain cargoes carried in bulk. Usually these cargoes are fumigated before loading, but it in some cases living or dead insects may still be present during loading. Also here it will be important to include an appropriate remark the transport document. A more uncommon type of damages relate to cargoes which are loaded with too high temperatures, such as paper reels or paper packaged in bundles which are loaded ex factory directly on board of the ship, or certain types of cargoes in bulk loaded in hot temperatures such as cacao beans in bulk or in bags, where condensation during the voyage causes wet damage and moulding to occur.
In some instances it may be challenging to determine the exact external condition of the goods at loading, for example in cases where cargo is contaminated with particles that are not visible to the naked eye, or where the cargo consists of packaged items. In cases such as these where the ship is held liable by cargo receivers, it will have to be assessed whether a person with the same knowledge of the matter and in the same circumstances as the master at the time of shipment would reasonably be expected to include relevant remarks on the condition of the cargo in the Bill of Lading.
3. Protection of the position of the Carrier
Including appropriate remarks in the transport documents not only protects the position of the carrier against a claim from cargo interests, but this can also serve to protect the position of the shipowners under the charter party. A dispute in connection with the cargo condition at the port of discharge may have far-reaching consequences: this can cause delays in the discharging process (resulting in a loss of time for the ship itself) and may also trigger a claim by charterers for additional port costs and/or costs of cancellation of stevedore gangs. In such cases charterers may use the issuance of Bills of Lading without remarks as an extra argument to claim that the cargo has been loaded in good condition, that the cargo damage has occurred during the period of responsibility of the carrier, and that any delay in unloading (and related costs) therefore are for the account of – and recoverable from – the carrier.
For the same reason, including relevant remarks in the Bill of Lading may also serve to protect the position of the carrier in exercising recourse against shippers in as far as possible.
4. Loading during adverse weather conditions – rain and/or snowfall
A more specific point of contention may arise when the ship is loaded in adverse weather conditions that may affect the condition of the goods, for example snow or rain. Shipowners are on occasion requested to load during snow or rainy conditions in exchange of a letter of guarantee issued by shippers or charterers where the issuer vows to indemnify the master and shipowner against cargo claims and other consequences which may be incurred by reason of complying with the request. These are the so-called “rain letters” where the shipowner is requested to allow the continuation of the loading process during rain or snow. This also means that during the loading the hatches of the ship are kept open, which of course has a deteriorating effect for certain types of cargoes such as steel products or grains. A common characteristic of such rain letters is that it also requires the carrier not to put any remarks in the Bills of Lading issued as to the apparent (wet) condition of the cargo upon loading.
Before accepting such letters, the carrier should carefully consider the extent to which complying with this request will cause damages to the cargo. When continuing loading of unpacked steel products or bulk loads of grain during rain or snow, it appears to be unavoidable that ultimately cargo damages will be incurred and as a consequence a cargo claim will be filed.
The carrier will also need to realize that such letter of guarantee or rain letter will not protect against a claim filed by the receiver under the Bill of Lading. In case of cargo damages, the receiver will be able to claim that they are not a party to the rain letter and will therefore not be deemed to be bound by the contents thereof. The receiver will also be able to rely on the description of the cargo in the bill of lading and – absent of remarks on the Bill of Lading – will be successful in directing his cargo claim against the carrier, i.e. the issuer of the Bill of Lading
In addition, possible recourse instigated by the carrier (following a cargo claim filed against the latter) directed against the issuer of the guarantee letter will more often than not encounter insurmountable obstacles. In various jurisdictions, including the Netherlands, the validity of such letters of guarantee is not recognized. This is based on the reasoning that the letter of guarantee is in itself a fraudulent document that cannot be relied upon in court. As a result, the carrier will ultimately not be able to rely on the hold harmless obligations undertaken by the issuer of the guarantee.
Moreover, as per standard policy conditions of most P&I clubs, cover is excluded in respect of damages to cargo that were already known or visible at the time of loading and for which the Bill of Lading does not contain appropriate remarks.
Based on the above, it will therefore be of utmost importance for the carrier to be extra vigilant when loading or transshipping cargo and, where necessary, to include appropriate remarks in the transport documentation regarding the apparent order and condition of the cargo. In case of doubt, it may be useful to involve a cargo surveyor to attend on-site and document the cargo condition either solely or jointly together with cargo interests’ surveyor. The network of NNPC Correspondents BV consists of an extensive array of experts throughout the Netherlands which are available at competitive prices and able to arrive on site quickly.
We invite our readers to contact NNPC Correspondents BV wherever needed for prevention advice and/or assistance in respect of the above topic. Please contact us at correspondents@nnpc-correspondents.nl