Bill of Lading Practical recommendations for avoidance of delays related to cargo quantity disputes in port of loading

‘…A range of quantitave and qualitative monitoring and recorded techniques is recommended which should ensure that potential loss or contamination problems are identified at an early stage and can be remedied cost effectively.’
Shipboard Petroleum Surveys.

Discrepancies and Delays

Another important practical and commercial problem comes up when the master notes inconsistency in bill of lading as to the date or the cargo description (quality/quantity) and the shippers are reluctant to correct their representation. As a result the parties may argue in future over liability for ship’s delay in the port.

For example in tanker trade, quantity of crude oil or petroleum product(s) loaded, assessed by measurements done ashore at the terminal and afterwards shippers enter these figures in the bill of lading. On the other hand ship’s figures ascertained on board by way of measurement of ship’s tanks and concomitant calculations done by especially appointed surveyor together with responsible for cargo operations ship’s officer. These figures, obtained ashore and on board of tanker, as a rule, differ from each other. There are many factors contributing to these discrepancies such as superseded tables used by the terminal in the calculation of Bill of Lading quantities, inaccurate vessel experience factor, Cargo Custody transfer practices and the competency of Cargo Inspectors (read more OIL CARGO LOSSES AND PROBLEMS WITH MEASUREMENT).

When ship’s measurements show less cargo than stated in bill of lading the charterers are facing potential liabilities for cargo shortage at the discharge port. Therefore they usually specifically provide in their voyage instructions for actions required from the owners and the master of the vessel in such circumstances.

These instructions, normally subject to tolerable margin, because small discrepancy is practically inevitable, but sometimes not, disallow the master to sign bill of lading until he first communicate with the charterers. Similar but much more comprehensive wording one can find in EMV 2005 form voyage charter, cl.17 - Cargo Measurements, (below).

17.CARGO MEASUREMENT. (lines 291-315):

(a) Prior to loading, Master shall measure the on board quantities of oil cargo, water and sediment residues which are segregated in all holding tanks and slop tanks and those which remain in cargo tanks and, if requested, shall advise supplier(s) and Charterer of such quantities. After loading, Master shall determine the cargo quantities loaded, expressing these cargo quantities in barrels at standard temperature (60°F), using for such calculations the latest Manual of Petroleum Measurement Standards issued by the American Petroleum Institute (API MPMS) or similar standards issued by the American Society for Testing and Materials. A written tank-by-tank ullage report containing all measurements of oil cargo, water and sediment residues on board prior to loading and quantities of cargo loaded shall be prepared and promptly submitted by Master to Charterer.

(b) If Master’s calculations of cargo loaded (oil, water and sediment residues on board excluded), after applying the Vessel’s Experience Factor (VEF), show any deficiency from the Bill of Lading figures, Master shall, if investigation and recalculation verify such deficiency, issue a Letter of Protest to supplier(s) (which should, if practical, be acknowledged) and shall advise Charterer of such deficiency immediately by electronic mail, telex or radio and thereafter shall send a copy of the Letter of Protest to Charterer. Vessel shall have on board sufficient historical information for the calculation of a VEF using the latest edition of the API MPMS. Master shall calculate and apply the VEF as so determined during all loadings.

(c) Prior to discharging, Master shall measure the quantity of each grade of cargo on board, expressing these quantities in barrels at standard temperature (60°F), using the same calculation procedures specified in Paragraph (a) of this Clause. Before and after discharging, Master shall cooperate with shore staff to ascertain discharged quantities. Vessel shall be obliged to discharge all liquid oil cargo and, if ordered by Charterer, any residues of oil cargo, water and sediment. Vessel’s just-mentioned obligation shall not in any way be qualified or limited by any purported custom of the trade which is based on a stated in-transit loss or which otherwise would excuse Vessel from discharging all liquid cargo and residues.

(d) An inspector may be employed by Charterer at its expense to verify quantities and qualities of cargo and residues on board Vessel at both loading and discharging port(s) and/or place(s). If Vessel is equipped with an Inert Gas System, depressurization of tanks to permit ullage measurements shall be allowed in accordance with the provisions of the most recent Inert Gas Systems for Oil Tankers publication issued by the International Maritime Organization (IMO). Any time used solely for such inspections and/or measurements shall count as laytime or, if Vessel is on demurrage, as time on demurrage.

Usually communication between all the parties concerned, i.e. the shippers, the charterers, the brokers and the owners takes time, sometimes many hours, especially if loading has been completed on weekend or after office hours. The owners can avoid liability for delays related to such communication and disputes over the ship/bill of lading discrepancies if they show that the master acted reasonably and he did not cause or contribute to the delay by any unreasonable act or omission on his part. On the other hand courts and arbitrators have always been quick to support the owners who take a stand to insert an accurate figure in the face of a shipper who is demanding a questionable figure (Liquid Cargo Shortage Claims. Discrepancy between Ship and Shore Figures at Load Port. North of England P&I, 2008).

On the other hand when master fails properly supervise records of mate’s receipts and issuance of bill of lading the owners may face various cargo-related claims. In London Arbitration 15/13 case charterers claimed deadfreight which, as they contended, resulted in under-recording of the cargo by the master. After loading finished, the quantity loaded as recorded by the shore scales was 50,299.983mt. This was reflected in the mate’s receipts, signed by the Master, in which the quantities were described as "said to be" and qualified by the words "quality, quantity, weight, measure, condition, contents and value unknown". Four draft surveys each showed a load of more than the amount recorded by the shore scales. Neither mate’s receipt nor bills of lading reflected any discrepancy, though master issued Letter of Protest after signing bills of lading. Charterers’ claim succeeded on the basis of Tribunal’s findings that the Master did not do all he reasonably could to protect the Respondents’ interests. He should have made direct contact to advise them promptly of the discrepancy. He also should not have signed the mate’s receipts before obtaining their instructions. The Master was in breach of his duties under clause 7 (making the whole reach and burden of the vessel available to the charterer) and clause 8 (failing to render all customary assistance by not effectively following instructions that should have been obtained from the Respondents) (source Lexology).

It seems that, whenever possible and if agreed between parties, in cases when for some reasons dispute over ship’s/bill of lading figures is likely to involve a considerable delay of the vessel upon completion of loading, the best solution would be to leave the port without signing of bill of lading but give an authorisation to the agent to sign bill of lading on behalf of the master when figures will be eventually agreed. This approach can also be recommended when custom fines which may flow from Bill of Lading and loaded quantity difference are foreseen. For example in Turkish ports there is reportedly a risk of customs and other administrative fines that can follow should a vessel be found to have delivered more or less cargo than was stated on the bill of lading. However, this option may not always be ready acceptable to all parties, since it will delay passing of letter of credit documentation through the banking system with all the consequences to follow.

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