Section 3 Liabilities for bill of lading particulars
According to the Hague and Hague-Visby Rules, the carrier shall on the demand of the shipper issue a bill of lading showing amongst other things either the number of packages or the quantity or weight of the goods together with its apparent order and condition. The bill of lading is considered to be evidence of the receipt of the goods accurately described on its face. The carrier may be liable if the nature, quantity or condition of the cargo does not match the description in the bill of lading. The Hague and Hague-Visby Rules, however, also contain some important exclusions from this liability. For further details see comments under 184.108.40.206-14.
The world trade of goods is based on the principle that the bill of lading particulars are an accurate description of the goods and the bill of lading is negotiable on the basis that the endorsee / lawful holder is entitled to delivery of those goods, as described, at the relevant discharge port. This principle is strictly enforced against carriers. Therefore, Members should take great care at the time of loading to ensure that the bill of lading issued truly reflects the apparent quantity and condition of the goods.
This section of Rule 4 defines the extent of cover against liability for bill of lading particulars. The Member is covered for liability he may incur for an incorrect or incomplete description of the cargo or other incorrect statements in a bill of lading, waybill or other document containing or evidencing the contract of carriage with two important exceptions. Firstly, according to (a) there is no cover for an antedated or post-dated bill of lading. Secondly, under (b) cover is excluded when a bill of lading is issued which deliberately contains an incorrect description of the goods. This is particularly evident when a letter of indemnity has been issued in lieu of a clean bill of lading.
4.3.2 Antedated or postdated bills of lading
220.127.116.11 A bill of lading should be dated when loading is completed
The issuance of a bill of lading is confirmation that the goods are of the nature, quantity and condition as specified in the bill of lading and that these have been received by the carrier and loaded onto the ship (an “On Board” bill of lading). The date of the bill of lading should be the date when loading was completed.
An antedated bill of lading records the loading as has having been completed prior to the date the cargo was in fact loaded. A post-dated bill of lading bears a date subsequent to the actual loading.
A “Received for Shipment” bill of lading can be equally wrong if it is dated before or after the day the cargo was actually received by the carrier. The same principles apply to waybills.
18.104.22.168 Effects of antedating and postdating
Carriers do not always appreciate the significance of the bill of lading date and the liability risks which a wrongly dated bill of lading may present. Market prices for many commodities vary from day to day. New market prices are quoted weekly or monthly. A buyer may find that he paid March prices for a cargo when the loading was not completed until early April and where the market price quoted for April was lower than that for a March shipment. He will no doubt claim the difference in price from the carrier alleging that he was deliberately deceived by the issuance of a bill of lading which misrepresented the date of shipment. He can easily establish the correct loading date from the ship’s deck log and from other official documents at the port of loading. Being in breach of the freight contract, the carrier may have to pay, not only the difference in price, but also other categories of loss and fines. Additionally, the usual limitations and exclusions of liability may not apply.
The situation can be even worse. There may be official export or import permits valid only for loading before a certain date. Currency restrictions or the terms of the letter of credit may make the sale of the goods conditional upon loading before a certain date. If the carrier agrees to provide a shipper with a bill of lading dated to comply with the terms or conditions and it is subsequently revealed that loading was still not completed at that time, the receiver may be refused the import permit or the money to purchase the cargo. The liability consequences for the carrier who issued the inaccurate bill of lading can be severe.
A carrier can also be held liable for an inaccurate shipment date on a bill of lading issued by ship agents in the normal course of their duties on behalf of the carrier even when this occurred without the carrier’s knowledge and consent.
22.214.171.124 No cover for antedating and postdating
The essence of item (a) of this section is that there is no cover under P&I Insurance for the consequences of an antedated or post-dated freight contract. The exclusion applies regardless of whether or not the Member knew that the bill of lading was antedated or post-dated.
4.3.3 Incorrect bill of lading particulars
126.96.36.199 General comments on incorrect bill of lading particulars
The second exclusion from cover under Rule 4 Section 3 is contained in item (b). It is in respect of liability for the description of the cargo in a bill of lading, its quantity and condition, which the Member or the Master of the entered ship knew to be incorrect.
188.8.131.52 The carrier’s obligations with regard to bill of lading particulars
As mentioned earlier, the carrier shall upon demand of the shipper issue a bill of lading showing among other things either the number of packages or the quantity or weight of the goods together with their apparent order and condition. A reference to the cargo’s country of origin is regarded as part of the description of the cargo. The bill of lading is considered as evidence that the description it contains is correct. Under the Hague-Visby Rules, a clean bill of lading is in fact conclusive evidence, which means that the carrier is estopped from bringing any evidence that the goods were damaged when received.
The bill of lading particulars should be confined to the main object(s) shipped and should not contain more information than the carrier has reasonable means to check. For instance, to state in a bill of lading for unboxed cars that they are equipped with battery, spare tyre, wind-shield, wipers and repair tool kit may imply that the presence of those items listed were duly checked and confirmed on each car by the carrier at the time of loading. It would impose a documentary liability on the carrier where such equipment was found to be missing at destination.
To establish the apparent order and condition of the goods requires an organisational routine at the time of loading capable of performing a reasonable inspection of the goods to verify the particulars to be inserted in the bill of lading. Packages should be tallied. The quantity of bulk cargo should be established by the reading of ullages or drafts. See comments under 184.108.40.206.1-3. The external condition of the goods should be noted so far as is reasonable and samples taken, where necessary. It has been said elsewhere in these comments that the ship’s officers should be qualified, knowledgeable and experienced and have reasonable access to basic information. If in doubt as to the condition of the cargo, they should call in qualified, independent surveyors and avail themselves of the experience, assistance and service of the Club’s local correspondent.
220.127.116.11 Clausing of bills of lading
Any observations made which confirm or indicate that the cargo is incomplete or does not match the nature, quality or description, should be noted in the bill of lading. For practical examples in relation to certain types of goods, see comments under 18.104.22.168.5, 22.214.171.124.2.3, 126.96.36.199.1.3, 188.8.131.52.5, 184.108.40.206.2 and 220.127.116.11.4. Such qualifications are usually made first in a Mate’s Receipt or similar document. It is important that such qualifications as are made are copied into the bill of lading.
It is not always possible to achieve this where a vessel is on charter and the bills of lading are drawn up and issued by the Charterer. However, Members should avoid clauses which compel the Master to issue “clean” bills of lading (i.e. issued without any remarks as to the quality or condition of the cargo inserted in the bill of lading) in exchange for an undertaking from the Charterer to indemnify the Member against cargo claims. Such clauses are regarded as contractual terms not approved by the Club according to Rule 10 Section 2. On the contrary, a charterparty should contain stipulations to the effect that Charterers are only authorised to issue bills of lading strictly in conformity with Mate’s Receipts or Tally Clerk’s Receipts and that Charterers shall hold the Owner harmless if there is any breach of those terms.
Any notation to be inserted in a bill of lading must clearly and unequivocally define the nature and extent of the unsatisfactory condition of the cargo. If 23 paper reels are found oil stained at the time of loading, the remark should say so and not merely state “some reels damaged”. The Club’s local correspondent is available to assist a Member and his Master to adequately clause a bill of lading.
18.104.22.168 Letters of indemnity
The reason why shippers want a clean bill of lading or at least try to dilute the force of the notation is that most trading of cargo is financed by a letter of credit. It is usually a requirement of the letter of credit that the bill of lading should be clean. The carrier can be caught in the middle and put under heavy pressure to either turn a blind eye to the cargo damage or to accept a letter of indemnity from the shippers and/or charterers, in exchange for issuing a clean bill of lading. Shippers may even threaten the carrier to stop the loading and have the entire cargo discharged in order to have it further examined. As this would mean delay, extra expense and probably a claim for non-performance of the freight contract, it is recommended that Members contact the Club for advice and legal assistance as soon as any such situation arises.
A Member who gives in to pressure exerted by shippers and agrees to issue a bill of lading with a description of the cargo, its quantity or condition which either he or the Master knew was incorrect, has no cover under these Rules for any ensuing liability. A claim is likely to be filed against him by the receiver on the strength of the clean bill of lading. There would be no point in revealing the existence of the letter of indemnity as this would make the carrier complicit in the fraud and unconditionally liable. At the same time, the carrier would be unable to discharge his burden of proof under the Hague or Hague-Visby Rules on the basis that the damage claimed did not occur during the period of transport. It remains for the carrier to settle as best he can with the owner or underwriter of the cargo, and then try to recover his uninsured loss under the terms of the letter of indemnity provided. In a number of countries, the carrier will have no legal means of enforcing the letter of indemnity since such a claim would necessarily be based on a fraudulent document.
If no other solution is available, the carrier may have to consider the possibility of accepting a guarantee in his favour. As the extent of liability is considerable and as those risks are excluded from cover, it is important to the carrier that the indemnity/guarantee is drafted and in such a way that he is protected to the fullest extent possible. See the further comments on guarantees under 22.214.171.124.
126.96.36.199 Claimant’s burden of proof
For a claimant to prove that the carrier failed to deliver at the port of discharge, goods of the nature, quantity and condition as specified in the bill of lading, he must meet the burden of proof as described under 4.1.4.
Evidence of shortage should be scrutinised carefully even if issued by official authorities such as customs shortage certificates. The certificates do not carry more weight as evidence than the reality they reflect. If the tally or measurement system is poor, which it often is, or the certificate reflects observations made long after discharging, the certificate should be contested and the claim rejected as lacking sufficient evidence. It underlines the importance of information and observations from the ship and the local ship agent on local conditions in general and at the time of the ship’s call in particular.