The Bill of Lading is one of the most important documents that a Master would sign after a parcel of cargo shipped on board, and therefore strict controls required on how it should be issued. Although the B/L is usually drafted by the Shipper and presented to the Master for signature, it is an Owners document. One of its three functions is to act as a receipt for the cargo, so the Master must make sure that the quantity and description of the goods are accurate as he would be expected to deliver the same to the Receiver.
If the B/L contains inaccurate or misleading statements about the quality or
quantity of the cargo it covers, then Owners will be liable for the consequences, at
least in the first instance. The Master's main concern must be to see that this
cannot happen. Therefore the Master must clause directly on the
bills the right condition of the quality and quantity of cargo if these two items have not been properly described in the paper presented. If
he wants assistance with the wording to be used in the clausing, he should call the
ship owners office who may engage the local P & I representative for advice.
Bill of Lading functions
The Bill of Lading (B/L) is a unique type of document which has three distinct
but overlapping functions. These are usually expressed as :-
- A receipt for goods loaded on board the vessel;
- A document of title through which property in the goods may be passed from
one party to another; and
- A contract (or evidence of a contract) governing the receipt, carriage and
delivery of these goods.
From this, three important consequences arise for the Owners and the
Masters as their employee :-
When he signs the B/L, the Master does so, not on behalf of the Charterers or Shippers, but behalf of Owners. The B/L is an Owner's document, and it
is the Master's responsibility to ensure that it is properly
prepared and signed. It applies whether the ship is contracted on a Voyage or a
Time Charter.
-
If an incorrect B/L is issued, for whatever reason, the situation is not
necessarily wholly beyond repair. However, the speed of action is essential since once a
third party takes up the B/L relying on what it says, it is too late to make any
correction. The Master must, therefore, notify the Owners and Charterers
immediately of any apparent irregularity in any B/L which he has issued (or which
he knows or believes has been issued by the ship's agents).
-
As the B/L is an Owners' document, third parties such as Charterers and
Shippers have limited powers to interfere with the Master signing it. However, it is
not unusual in a charter party to allocate Charterers or their agents the
authority to sign B/L's for and on behalf of the Master. In such cases, the Master
must issue the Agent with authority to sign B/L's on his behalf in writing. Such
authority includes any additional remarks the Master expressly requires
in the B/L's.
- Under normal circumstances, the B/L is the first evidence of the receipt
of the cargo which it describes. However, it is not the only evidence, and it
remains open to the Owners to avoid a claim by showing that what the B/L states
are incorrect.
For example, apart from paying great attention to the contents of the B/L itself, the
Master must also take all practical steps, which may subsequently assist Owners in
resisting any short delivery claims. He has to prove that no cargo is physically lost
(e.g., by draught survey) and by written protest as to any doubt or discrepancy in determining weights or volumes. Charterers' surveyors or inspectors must
justify any statement which they may make as to the condition of the cargo or
'pumpability' of oil residues, and also by keeping properly consistent records of
bilge pumping with wet cargoes such as ore concentrates).
- In some circumstances, shippers/agents may offer to give the Master a letter
of indemnity in return for the Master signing clean Bills of Lading. The Master
must not accept such a letter without first checking/obtaining authorization from
the shipowner. A Letter of Indemnity is strictly not enforceable in law. Only the
shipowner and their P & I club can decide if such a letter is acceptable on commercial grounds.
Signing of Bills of Lading and Early Departure Procedure (EDP)
On no account is a Master to sail from a load port without either issuing a B/L under his signature or else delegating the signing to the Agent, unless some suitable alternative has been agreed in advance by Owners.
In some trades (particularly tankers loading Arabian Gulf ports), the Bill of Lading is always signed by the Agent on behalf of the Master at a later stage after sailing out. This practice is called Early Departure Procedure (EDP). The Master will authorize the Agent in writing that he may sign the B/L on his behalf under certain strict conditions. However, EDP should NOT be followed unless the Master has permission form his commercial operator and or Charterer.
If the Master at any time discovers that he has issued an incorrect B/L, he must notify his commercial operator and/or management office immediately, giving full details of its particulars, including names of shippers, consignees and notify parties.
When confronted with a B/L, the Master must examine it in six main areas;-
Quantity of Cargo
-
Description and Condition of Cargo
- Date
- Description of Voyage
- Terms and Conditions
- Payments of Freight
Original Bill of Lading Carried On Board
In certain trades, it is not uncommon for the Master to carry one Original Bill of Lading on board, and the other two go ashore. Supposedly, this enables the Master to deliver the cargo having sighted an original bill of lading. However, the drawback is that any one of the originals is adequate to negotiate the cargo's sale. The two originals not carried on board may have been used for trading the cargo. If so, the original onboard will no longer reflect the true ownership of the cargo. If the Master is aware that he is carrying one original from a set of originals, he must also be aware that this original does not necessarily show the ownership of the cargo. The Owner's legal defenses against a wrongful delivery claim will be less than viable if delivery is made against an original carried on board.
However, if a bill must be carried on board, then the Owner may seek to protect himself by inserting a clause in the Bill of Lading along the following lines:
"One original bill of lading retained on board against which, bill delivery of cargo may properly be made on instructions from shippers/charterers."
In such a situation, the Master is to advise the commercial operator and or management office.
Delivery of the Cargo/Transhipment
The Master must not commence discharging any cargo without first receiving an original B/L. If no original B/L is presented to him, he must immediately contact the commercial operator and or management office, who may authorize the start of discharge against receipt of an appropriate Letter of Indemnity and or Bank guarantee. (Indeed this is a common practice on tanker vessels).
Note: that in certain dry cargo liner trades, presentation of original B/L's is not common practice.
There are three main areas where the Master may, in practice, become involved in problems of rightful delivery of the cargo. These are: -
- change of destination;
- delivery without presentation of original B/L; and
- transhipment/lightening
Once the ship and Bills of Lading have received the cargo issued, the Master has become responsible for it.
His responsibilities are then as follows:
- to perform the contract voyage without unreasonable delay and/or deviation;
- to discharge all the cargo (so far as is reasonably and physically possible); and
- to deliver it to those whom he believes are entitled to its possession.
Change of Destination
If the Master receives an instruction to proceed to some port or place other than that which appears on the B/L, he must draw this fact to the attention of the commercial operator as soon as possible (regardless of where the instruction comes from). The commercial operator will then seek the necessary letter of indemnity (LOI) from the Charterers. Only on receipt of confirmation of the LOI, will the commercial operator authorize the Master to discharge cargo to the new destination.
Delivery without presentation of original B/L
If the original B/L is not presented to the Master at the discharge port, then the Master must not commence discharge unless the commercial operator has given prior authorization. The Master will contact the agents in advance of the vessel's arrival at the discharge port to ascertain if the B/L's have arrived. If not, he must advise his commercial operator, who may then seek the appropriate LOI from the Charterers. A Letter of Indemnity received on the ship is not sufficient, and instructions MUST emanate from the operator.
A composite LOI wording can be used:
- if the cargo is to be discharged at a port other than stated on the B/L.
-
when the original B/L cannot be produced
Note: The International Group of P&I Clubs drafts these wordings, but it is still a commercial decision for the Owner on whether he wishes to accept it.
It
Transhipment/Lightening
Here again, on receiving the instruction to tranship or lighten all or part of his cargo, the Master must always consider whether or not this instruction is consistent with the B/L. If it is not, he must immediately notify the commercial operator.
On parting with all or part of the vessel's cargo other than at its final destination, the Master must ensure that a clean (i.e., unqualified) and unambiguous receipt for it signed by some person in authority is received, such as the Master or Chief Officer of the other vessel.
At this point, the Master must bear in mind that there is a reversal of roles, as he now stands in the shoes of a shipper, and he must take care to see that the receipt does not understate the quantity transferred. It is particularly important with part discharge or lightening in two or more ports. In the first port, if the vessel has transferred more cargo than stated in such a receipt, it is likely to deliver short at the next port. Although no cargo has been physically lost in total, the Receiver at the next port may raise a shortage claim.
If there is some dispute concerning the quantity transferred at such lightening or transshipment, and the Master feels that the receipt reads low, he must note this in protest at all subsequent ports of discharge.
Unique Bill of Lading US Trading
The US customs require that all cargoes imported into the USA have a unique Bill of Lading number. This number must be shown on the Bill of Lading and the vessel's manifests, cargo declaration, and other documents.
No cargo will be allowed to be discharged in the USA without such a number. This number must not be repeated for three years.
The number to be used is composed of two parts. A SCAC code which is assigned to the carrier and consists of four letters and a further sequence of numbers up to a maximum of 12.
The SCAC code must be registered with the US authorities by the "carrier" and is usually assigned by the Owner when on Voyage Charter and the Time Charterer when on Time Charter.
Where more than one Bill of Lading is issued, the number should be increased by 1, 2, 3, etc., for each separate bill. Where doubt exists, the commercial operator is to be advised.
Our additional pages contain somewhat larger lists of resources where you can find useful informations
- Dry Cargo Charterparties
There are numerous various forms, but to give a taste of dry cargo time charters, two types that are commonly used are: -
New York Produce Exchange (NYPE 93)
Baltic and International Marine Council (BALTIME 1939 (amended 2001)....
- Tanker Time Charters
Specific information such as, parties to the contract, where and when the vessel will be delivered, rates of hire, general permitted cargoes, general trading range etc. ....
- Documentation & notices
When a vessel is on Time Charter, bunkers and the majority of port services and costs, etc., are to the account of Time Charterers. However, should Time Charterers default on payment, then these charges may fall on Owners and there will then be a serious risk of the vessel being arrested for debts incurred by the Time Charterer. ....
- Function of bill of lading
The Bill of Lading is one of the most important documents that the Master will sign and therefore strict controls on how it is issued are required. Although the B/L is usually drafted by the Shipper and presented to the Master for signature, it is an Owners document. One of its three functions is to act as a receipt for the cargo, so therefore the Master must make sure that the quantity and description of the goods is accurate as he will be expected to deliver the same to the Receiver.....
- Seaworthiness for cargo ship, international navigational condition & procedure for Insurance claim
Insurance premiums amount to a very large proportion of the ship’s running costs. Whilst the owner insures his ship against certain risks and may present a claim which will recuperate at least part of his losses, the effect of submitting many claims will have the effect of increasing the insurance premiums for the next year. It is therefore in everyone’s interest to ensure that risks are not taken, that the ship operates safely and that accidents and incidents are avoided....
- Masters obligation to follow charterers routeing advise - The Hill Harmony case
The Hill Harmony case involved a vessel on time charter trading trans-Pacific. The Charterers had engaged a weather routing service and the Master was advised to take the shortest northern great circle route, however he deemed it safer to take a more southerly rumb line route. The Charterers were eventually able to prove that the great circle route had been suitable for safe navigation and that the extra steaming time was for the Owners account....
Other info pages !
Ships Charterparties Related terms & guideline
Stevedores injury How to prevent injury onboard
Environmental issues How to prevent marine pollution
Cargo & Ballast Handling Safety Guideline
Reefer cargo handling Troubleshoot and countermeasures
DG cargo handling Procedures & Guidelines
Safety in engine room Standard procedures
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