A LOSS PREVENTION ARTICLE

RICE CARGO CLAIMS

Rice is a staple food for a majority of the world’s population. Each year, close to 450
million tonnes of milled rice is produced, with over 50% of the production taking
place in Asia, mainly due to favorable climate conditions and low costs of production.
In this article, we will highlight the challenges of rice cargo as well as how to deal
with the many forms of claims cases that may arise.

Rice is a staple food for a majority of the world’s popula- its susceptibility to damage.
tion. Each year, close to 450 million tonnes of milled rice
is produced, with over 50% of the production taking place Rice is a sensitive product and there are many considera-
in Asia, mainly due to favorable climate conditions and low tions and precautions that must be taken when dealing
costs of production. China and India are the two biggest with this cargo to ensure loss prevention and minimize
producers, responsible for over half of the global output. liability.
They are closely followed by Thailand, Vietnam, Indonesia,
Pakistan and Myanmar. International trade in rice is about
30 million tonnes, largely taking place between Asia and CARGO HANDLING
Africa. Africa accounts for over 30% of the world’s rice
imports.
PACKAGING
Rice is categorized as short grain, medium or long grain,
depending on the shape and size of the grain. It is then Rice is normally transported as break-bulk cargo in bags;
further subdivided according to its preparation. Cargo rice usually 20 – 25 kg woven propylene bags, allowing for easy
my consist of about 80% of white or polished rice and 20% handling and stowage. Bagged cargo is susceptible to a
of unprepared paddy or brown rice. Being transported in number of problems, including wet damage, tearing and
this mixing ration allows the rice to remain drier, reducing theft. The following considerations must be kept in mind

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when dealing with bagged cargo: ture, depending on where it is grown and the atmospheric
humidity at the time. It must be dried to about 12 – 14%
within 48 hours of harvest before it can be loaded. There-
´´ Rice should only be filled into clean and dry bags fore, when rice cargo is taken from new crop, it is likely to
´´ All bags should be the same size to prevent shortage have a higher degree of moisture, increasing the likeli-
claims later hood of moulding, lumping and spoilage. The optimal
´´ The bags must be kept in a dry condition at all times. moisture content of the rice depends on the desired stor-
Additional waterproof material should be used to age duration. The longer the storage duration, the lower
protect the bags if stored in an open area prior to the optimal moisture content should be. Port congestion
loading and inefficiencies at the load and discharge ports often
´´ As the bags used are typically white coloured, damage result in the cargoes remaining onboard for prolonged pe-
to the cargo is easily detectable as dark stains appear riods. That means good voyage planning prior to shipment
on the bags in the event of damage. Therefore, simple forms part of effective loss prevention.
visual quality inspections of the cargo to eliminate
loading of all damaged, cut/ torn and heavily stained
bags is a simple loss prevention technique that should MIXING DIFFERENT MOISTURE CONTENT
be applied RICE
´´ Spare empty bags should be kept on board to fill with
sweepings in case the bags tear or get damaged Often lower moisture content rice is mixed with higher
during discharge moisture content rice to give an overall optimal moisture
´´ Surveyors should be appointed to supervise the loading content. This can, however, prove to be damaging during
and discharging operations and prevent stevedore theft transport as the damp rice affects not only the undam-
of the cargo facilitating by cutting the bags aged rice in close proximity, but also other rice in the hold
´´ Ensure individuals bags are counted during the tallying by increasing the overall moisture content.
process, and not just the slings
THE IMPORTANCE OF HOLD VENTILATION
MOISTURE This kind of damage is also very often caused by poor
One of the main causes of claims that arise when dealing stowage and lack of protection of the bags from the ships’
with rice cargoes is its moisture content. bulkheads. It is, therefore, important to ensure all holds
are adequately ventilated. This is especially important
When harvested, rice typically contains 20% - 28% mois- during a voyage to West Africa, where the air temperature

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and seawater temperature reduces, and day and night air STOWAGE AND DUNNAGE
temperatures differ substantially. When the vessel passes
from the warm Indian Ocean into the cooler Atlantic In respect to stowage, the cargo shall be stowed in a way
Ocean, seawater temperature drops, leading to condensa- that ventilation channels are not blocked. Proper dun-
tion of the rice cargo. Separation channels between rice nage shall be arranged and checked (plastic or bamboo)
bags. so as to ensure the cargo is sufficiently protected from the
ship’s bulkhead. Appropriate dunnage may prevent the
bags from coming into contact with the hold surfaces, in
RAIN AND ITS CONSEQUENCES
the event that condensation takes place. Many claims in
West Africa arise due to wet damage of the cargo, and en-
Several cases have been reported in Douala, Cameroon in
suring proper dunnage helps to reduce such claims. The
which considerable damage was caused by water infiltra-
small expense incurred in providing adequate dunnage
tion into the ship’s holds during rain. Tropical rainfalls
serves to reduce cargo claims in the future.
are often very sudden. Loading and discharge should not
be undertaken during periods of bad weather. Monitor-
It is understood from Masters that at loading ports, the
ing weather forecasts, the crew should be available and
shippers/charterers instruct the crew not to open the
equipped to close hatch covers at the first sign of rain.
cargo holds for some days after fumigation. In such cases,
the Master/Owners shall require written instruction and
TEMPERATURE lodge a Letter of Protest in respect to the moisture which
the cargo may suffer as a result of condensation produced
Rice cargo is also susceptible to becoming mouldy if its in the closed holds. Salinity tests shall be performed if
temperature is greater than 25°C. Higher temperatures moisture is observed.
result in the rice sticking together and aid in metabolic
processes that affect the cargo’s quality. The optimal tem-
perature at which rice should be transported is between
5 - 25°C.

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LOADING PORT PROBLEMS following loss prevention tips to keep in mind when
loading rice cargoes in India during the rainy season:
a) Port Authorities only issue precautionary weather
warnings (based on the met department’s fore
INDIA casts) in the case of prevailing depression
and cyclonic weather.
There have been several incidents reported in which a se- b) Normal weather forecast reports issued by the
rious problem of short landed bags of rice have occurred Met Dept. are easily available on the internet and
(between 3,000 and 5,000 bags on each voyage) when can be viewed for reference and
cargo is loaded in Kakinada, India. compliance.
c) However, from experience, it is observed that the
In a large number of these cases, pre-loading surveys accuracy of such reports especially regarding rain
had not been carried out at the load port. Members are, is only correct 40 – 50% of time and may often be
therefore, reminded to appoint competent surveyors to the opposite of what is predicted.
conduct pre-loading surveys. For a number of loss pre- d) Crew on board the vessels need to be extra cau
vention tips suggested by our correspondents, please visit tious and close the hatch covers and hatch access
our website - http://www.skuld.com/topics/cargo/solid- covers when the sky is overcast and rain is sus
bulk/agricultural-cargoes/west-africa-heavy-shortage-of- pected, despite an insistence of the stevedores to
bagged-rice/ continue loading. Weather forecast should not be
solely relied on.
The Indian monsoons also pose a significant problem. A e) Masters are also advised to post an Officer on
lot of vessels load bagged rice during the months of June the bridge to watch the Radar regarding
to September, when rainfall in many parts of India can be approaching rain, so they are able to act in time
quite heavy. There have been many instances of damage and close the hatches, preventing damage to the
to bagged rice as a result of sudden rain and the vessels cargo.
not being able to close their hatch covers in time. f) Hatch cover top has to be cleaned and mopped to
remove rain water prior opening hatch covers to
Our correspondents in India have provided us with the resume loading after it has stopped raining.

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g) Ensure that the hatch coaming non return drain high atmospheric humidity compounds the likelihood of
valves are not blocked. condensation in the holds and warehouses.

In general, torn and stained bags must be promptly re- In order to prevent such claims arising from rice cargoes
moved from cargo holds and must be replaced by sound originating in Vietnam, the following precautions should
rice bags. Competent surveyors appointed at the time of be taken:
loading must assist the ship’s staff in ensuring that this is
carried out effectively. a) Loading should only commence once the Master
has obtained a written specification of the
rice including its moisture content
VIETNAM b) Independent surveyors should be hired to conduct
moisture content tests and oversee the loading
There have been arisen numerous cargo claims involv- operation to ensure only sound cargo is loaded
ing rice cargoes loaded in Ho Chi Minh City. Vietnam is a c) Ensure adequate ventilation of the holds to
relatively new player in the large scale export of rice and prevent the cargo from molding
production methods have not yet advanced significantly in d) It may be prudent to only consider mechanically
the country. ventilated vessels for this trade
e) Appropriate dunnage and proper stowage can
Rice produced in this region has been observed to have a improve the condition by preventing cargo
high moisture content of up to 30%. Due to the lack of so- from coming in contact with the sides of the ship
phisticated equipment in the region, most of the rice is left f) An independent surveyor should be instructed at
to dry under the sun. In addition, due to the sudden rise in the discharge port to monitor the condition of the
the export of rice from Vietnam, the rice is almost imme- cargo and arrange an independent tally
diately shipped after production, reducing its chances of
further drying in storage. The prescribed moisture content Another problem associated with loading in Vietnam is
for most grades of rice in the region is 14%, and often rice poor check tallies and unqualified surveyors in this region.
is mixed and re-bagged to achieve to achieve this. It is therefore, of utmost importance to contact your club
when loading in Vietnam so they can instruct qualified and
As a result of the high moisture content, the likelihood of competent surveyors for you.
condensation forming in the holds increase significantly,
giving rise to conditions favorable for mold growth and Ensuring that tally clerks count individual bags and not
the deterioration of cargo. This can be mitigated by a just slings is important to prevent shortage claims at
good ventilation system, however, may not be adequate discharge.
to protect the rice from molding in the rainy season when

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 ors, albeit more expensive, have experience with specific
THAILAND cargo and their appointment serves to reduce shortage
claims.
Recently (May 2013), the BIMCO Marine Department was
informed that in an attempt to increase its export trade, Vessels which load cargo in Thailand via lighter vessels
Thailand intends to export older rice stockpiles harvested usually face shortage claims as normally lighter vessels
many years ago. do not deliver the sweeping cargo to the main vessel. This
becomes evident when empty bags given, to be refilled by
As a result, members are advised to seriously take into sweeping cargo, are found to be empty at the discharge
consideration the moisture content of the rice and closely port.
assess the cargo quality certificates. The general princi-
ples discussed in this article should be followed to reduce
claims when dealing with rice cargoes from Thailand. MYANMAR
There have also been a number of cargo shortage claims Myanmar is projected to become a major global rice
arising from Thailand due to the following reasons: exporter in years to come and will soon rival top exporters
like Thailand, Vietnam and India.
´´ Poor check tally and unqualified surveys conducted at the
load port Myanmar rice usually have a high degree of humidity.
´´ Vessels which load cargo from lighter vessels normally face Cargo from here should always be checked for this kind of
severe shortages as the lighter vessels do not deliver the damage before it leaves the warehouse. It may be prudent
sweeping cargo to the mother vessel to appoint surveyors to identify where and in what condi-
tions the rice is being stored and to determine the mois-
Instructing a competent and independent surveyor can ture content of the cargo prior to loading.
help to minimize such shortage claims. Qualified survey-

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DISCHARGE PORT PROBLEMS well as implementing appropriate loss prevention mecha-
nisms. In addition, the use of additional clauses, to appor-
tion who in the venture should bear such risks, can reduce
WEST AFRICA a parties’ liability. If members are trading to areas such
as West Africa and Yemen, please contact your syndicate
Rice is not easily cultivated in Africa. This necessitates a which can provide you with additional protective clauses
large amount to be imported. Africa accounts for over 30% for incorporation in your charterparty.
of the world’s rice imports.
Members will appreciate that beyond the increased risks
of cargo claims, some of the problems highlighted below BANGLADESH
can occur:
Cargo shortage claims are common in the ports of Chit-
´´ Pilferage of cargo tagong and Mongla, where short landed cargo is subject
´´ Shortage of cargo to a penalty. Under s 156(1), ss 24 (I) and (II) of the Cus-
´´ Stowaways toms Act 1969, the Customs Authority can impose a pen-
alty up to a maximum of 200% of the duty leviable on short
African ports are notorious for stowaway embarkation. landed cargo. Once such a penalty is officially imposed on
Careful stowaway checking shall be performed with more an agent, there are a number of procedural requirements
attention than in other ports. Stowaway incidents can po- and hearings which take place. Members are advised to
tentially be very expensive to the ship owner and burden- be careful of how local Agents choose to deal with such
some to the crew, so there is every reason to take meas- situations.
ures to minimize the risk of stowaways getting on board. Most agents will withhold sailing clearance of the ves-
sels until the shortage claims and custom penalties are
To learn more about the IMO Guidelines on Stowaways, settled or a bank guarantee is issued as per the agents
please visit demanded wording.
http://www.skuld.com/Documents/Topics/People/Stowa-
ways/IMO_Stowaway_Guidance.pdf?epslanguage=en Bangladesh prefers to import rice during the monsoon
season, as due to heavy rain the country’s rice produc-
For more information on how to deal with stowaways, tion level drops. Carrying and discharging rice during the
please visit our website monsoons can increase its chances of damage if not han-
dled properly. If the cargo is declared to be unfit for hu-
http://www.skuld.com/topics/people/stowaways/insight/ man consumption by the Port Health Authority, procedural
stowaways/ formalities must be carried out for destroying or dumpling
damaged cargo. This can delay the vessel by weeks and
http://www.skuld.com/topics/people/stowaways/china/ sometimes even months. The following formalities must
Stowaways/ be undertaken when dealing with damaged cargo in Bang-
ladesh port, significantly delaying the vessel:
Piracy
Piracy in West Africa has become of increasing concern to a) The damaged cargo must be surveyed to
the shipping industry and local coastal states and mem- ascertain the extent, nature and cause of
bers must always carefully consider the risks and precau- the damage
tions necessary when trading to high risk zones. b) This survey report must be submitted to the local
Quarantine Authority
For more information on piracy issues, please visit our c) The Health Authorities will then inspect the
website damaged cargo to make sure it fits the
http://www.skuld.com/topics/voyage--port-risks/piracy/ description in the survey report
overall/piracy---gulf-of-guinea/general-information/ d) It will then issue a certificate confirming the dam
http://www.skuld.com/topics/voyage--port-risks/piracy/ age and ordering the cargo to be destructed or
gulf-of-guinea/west-african-piracy-lessons-learned- dumped
from-an-actual-incident/ e) The agents must then file for an approval to de
stroy/ dump the cargo with the Customs Authority
Detention by authorities f) Thereafter, the agents must file an application
The approach of authorities (customs, PSC, Agriculture) with the harbour master and Deputy
can be very uncertain in many African ports. Masters Traffic Manager for permission to carry out the
should take care to ensure the vessel and cargo docu- destruction/ dumping
mentation is up-to-date. Special attention should be given g) The Harbour Master will then designate a location
to the bunker declaration onboard the vessel. where dumping can take place
h) After receiving permission from the Customs and
- Increased/ excess war premium Port Authority, the agents must book Customs
- Bottom fouling due to prolonged stay representatives, port police and receivers
The risks of trading to West Africa can be reduced by to witness the dumping after which a dumping
understanding the nature of the cargo being shipped as certificate is issued.

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LOSS PREVENTION

within the moisture content limits noted on the
cargo quality certificate or as per the receivers
requirement
- Independent tallying of cargo to avoid shortage
Below are a number of precautions a prudent carrier can claims
take at the loading and discharge ports to minimize their - Pre-loading inspection/ continuous tally on board
exposure: to ensure that only sound bags are loaded into the
vessel
- Visual quality inspection of the cargo to eliminate
PRE-LOADING SURVEY the loading of all damaged, cut/ torn and heavily
stained bags
Below are a few pre-loading checks a prudent carrier can - Packing and marking inspections
carry out to ensure the safe carriage of rice cargo: - All bags are the same size. See if it is possible to
get spare empty bags to put sweepings into, if
- The vessel’s holds are clean and free of salt or bags get torn or damaged during carriage
other residues or discharge
- The hatch covers are weather tight
- There are adequate ventilation systems on-board
which are not being obstructed LOADING SURVEYS
- Material used as dunnage should be clean and
dry At the port of loading, an independent surveyor should be
- Adequate ventilation channels should be instructed to assess the following features of the cargo
constructed loading operations:

- To remain on board the Vessel during the entire

In addition to making sure the vessel can safely carry the loading operation and be available to assist the
cargo, independent pre-loading surveys can be conducted Master and his Officers at any given point of time
to ensure the following: - Ensure that dunnage material and separation
- Moisture tests on the cargo to ensure they are paper (kraft paper) is being laid out properly prior

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 commencement of loading and throughout the This is also a common issue encountered with rice in Afri-
loading operation can Ports. And there may be little control on those getting
- Ensure that tally surveys are being carried out ef on and off the vessel : despite the best efforts of the crew
fectively and more or less matches with the daily and even of hired security.
draught survey figure as calculated by the
Chief Officer Sometimes, stevedores do not hesitate to tear some bags
- Tally figures / Daily working reports from various of rice and pour the rice in their backpacks. Crew control
parties must be compared shift-wise so and checking is important in order to avoid or at least
that discrepancies, if any, can be limit such behavior and its consequence : but crew safety
sorted out well in time remains paramount at all times. If possible, crew should
- Cut / torn and stained bags are removed from seek to :-
the hold in consultation with the ship’s staff and
replaced with sound bags - Collect Evidence (keep any cut/ torn bags as
- Means of providing a separation channel is evidence)
discussed with the Master of the Vessel - Take pictures
and the loading foreman, prior - Issue Protest Notes
commencement of loading, so as - You may need to put Charterers on notice
to ensure that there is adequate - Have checks and systems in place
ventilation between the various lots of rice bags - Consider employing private security guards
loaded in the hold - Instruct independent surveyors to oversee the
- On completion of loading, the complete top layer discharging process
of the bags should be covered with kraft - Contact your Skuld syndicate
paper so as to prevent any condensation
from the hatch cover undersides from landing on
the rice bags during the course of the voyage SHORTAGE CLAIMS
- Hatch covers and hatch access covers must
be sealed on completion of loading and Shortage claims may arise due to a mistake in tallying at
a ‘Sealing certificate’ and a ‘Fumigation loading, leading to an incorrect figure in the Bill of Lad-
certificate’ be obtained from the appropriate au ing, or due to a mistake in tally during the discharge of
thorities after completion the cargo. Note that the manipulation of draught surveys
of any in-transit fumigation (The by the receiver to file shortage claims is not unheard of
Recommendations on either.
the Safe Use of Pesticides
in Ships published by the IMO provides necessary At the discharge port, a common cause of cargo shortage
guidance on the use of pesticides and fumigants is negligent and rough handling of cargo by steverdores
on ships) during the discharge operation. This results in tearing of
bags, the contents of which are spilt and lost.

DISCHARGE SURVEYS How to prevent shortage claims?

At the port of discharge, an independent surveyor should - Perform tallies and cross-check them with other
also be instructed to assess the following features of the interested parties during both loading and dis
cargo: charge operations
- Appoint independent surveyors to supervise seal
- Appearance of cargo in hatches ing of cargo holds and perform draft
- Discharge operation surveys before and after loading and discharging
- Draft surveys - Shortage claims seldom arise when loading
- Stevedore handling of cargo – Stevedores are supervision and tally surveys are conducted by
usually unskilled and provided with only qualified surveyors
rudimentary equipment for slinging bagged - Although rice discharged in West Africa is usually
cargoes. Often the preservation of cargo bagged cargo, draught surveys prior to the start
is sacrificed in order to achieve quicker discharge and at the conclusion of discharge can provide
times. useful evidence to challenge allegations
- Pilferage, rough handling or mishandling of the of shortage
cargo by the stevedores should be documented by - Make sure the draught surveys are accurate by
photographic evidence o Properly reading and recording draught
- Discharge supervision to avoid theft of the cargo marks
- Tallying o Keeping the vessel stationary
o Accurately measuring the dock water
density
PILFERAGE AT DISCHARGE PORT - Issue hatch cover sealing certificates
- Issue a certificate showing ports called at after

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 the load port, and which hatches were opened, if
any
- Issue a moisture content certificate for dry bulk
cargo
- Measure/ record the moisture content of the
cargo at the load/ discharge port. This
can help in challenging an allegation of
cargo shortage on the grounds
of moisture loss during
the voyage. How
ever, although loss in the
weight of cargo can result from natural
shrinkage and moisture evaporation, it is
hard to prove this without concrete evidence.
- Instruct independent surveyors to take pictures
and collect evidence to defend shortage claims
- Obtain an empty hold certificate from the owners’
surveyor which should be countersigned by the
receivers after completion of discharge
- Make sure all bags are of the same size. 50 kg
bags are the most common bag sizes, but
rice can also be shipped in 1 kg retail boxes
- Issue a notice of protest to charterers and receiv
ers if tally clerks are counting slings and
not the individual number of bags
- Instructing available crew members to tally the
cargo can ensure accuracy

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CONTRACTUAL RESPONSIBILITES It is common to include additional stevedore rider clauses
holding charterers liable for stevedore damage, in par-
ticular in charterparties in which clause 8 is amended
to include “and responsibility”. Where there is the case,
TIME CHARTERERS responsibility for stevedore damage is considered to rest
with the owners, with the rider clause only transferring
Allocation of Responsibility under the Charterparty liability to charterers where their intervention is the direct
At common law, the Owners are obliged to load, stow, trim cause of the damage. (London Arbitration No. 2/89 (LMLN
and discharge the cargo. Owners can, however, endeavor 242))
to include clauses in the charterparty that serve to trans-
fer these obligations to charterers. Incorporation of clause Conflicting rider clauses can sometimes lead to uncer-
8 of the NYPE ’46 achieve this. tainty in respect of liability for stevedore damage, as
demonstrated in the London Arbitration Award [1992] 318
NYPE ’46 – clause 8 LMLN 1. However, as a general rule, liability for stevedore
“Charterers are to load, stow and trim the cargo at their damage usually rests with the party responsible for the
expense under the supervision of the Captain” loading and discharging operations and clear words are
necessary to transfer this responsibility to the other party.
NYPE ’93 – clause 8
“Charterers shall perform all cargo handling, including Recourse against Charterers
but not limited to loading, stowing, trimming, lashing, The ICA is an agreement between the P&I Clubs who are
securing, dunnaging, unlashing, discharging, and tally- members of the International Group. It aims to provide
ing, at their risk and expense, under the supervision of the a simple mechanism for apportioning liability for cargo
Master.” claims between Owners and Charterers.
Despite the wording of clause 8, the vessel’s master The ICA is incorporated in the standard NYPE ’93 charter-
owes no positive duty to the charterers to supervise these party
operations. The responsibility for any stevedore damage
will only be transferred back from the charterers to the NYPE ’93 – Clause 27
owners if the master actively interferes in the stevedoring “Cargo claims as between the Owners and the Charterers
operations or shows negligence by failing to intervene in shall be settled in accordance with the Inter-Club New
the stevedoring operations that endanger the vessel, its York Produce Exchange Agreement of February 1970, as
crew or cargo. amended May, 1984, or any subsequent modification or
replacement thereof.”
Clause 8 is sometimes amended to include “and responsi-
bility” after “supervision”. Where this is the case, respon- The ICA provides, inter alia, as follows:
sibility stays with the owners unless they are able to prove “(8) Cargo claims should be apportioned as follows:
that the charterers actively interfered in the cargo opera- (a) Claims in fact arising out of unseaworthiness
tions/stevedoring operations. and/or error or fault in navigation or management
of the vessel:
Stevedore damage
Where charterers are under an obligation to load and 100% Owners
discharge cargo, the losses caused by the negligence of save where the Owner proves that the unseaworthiness
stevedores, prima facie, remains with them. was caused by the loading, stowage, lashing, discharge or

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other handling of the cargo, in which case the claim shall from the holds and discharged by the Charterers, free of
be apportioned under sub-Clause (b). any risk, liability and expense whatsoever to the Owners.
The charterers shall provide and lay all dunnage material
(b) Claims in fact arising out of the loading, stowage, lash- as required for the proper stowage and protection of the
ing, discharge, storage or other handling of cargo: cargo on board, the owners allowing the use of all dun-
nage available on board. The charterers shall be respon-
100% Charterers sible for and pay the cost of removing their dunnage of
unless the words “and responsibility” are added in Clause the cargo under this charter party and time to count until
8 or there is a similar amendment making the Master dunnage has been removed.
responsible for cargo handling in which case:

50% Charterers ADDITIONAL CLAUSES

50% Owners
FIOS (Free In, Out, Stowed)
save where the Charterer proves that the failure properly
to load, stow, lash, discharge or handle the cargo was Under a charterparty fixed on a FIOS basis, all respon-
caused by the unseaworthiness of the vessel in which sibility of loading, stowing and discharging lies with the
case: charterer. The Owner is usually free of any risks and
expenses in respect of cargo damage, unless the alleged
100% Owners damage is caused by owners or owners’ agents.
(c) Subject to (a) and (b) above, claims for shortage or
overcarriage: However, as expressed in the House of Lords decision,
The Jordan II [2003] 2 Lloyd’s Rep. 319, the use of a FIOS
50% Charterers clause on its own does not always transfer responsibility
50% Owners to charterers in all contracts.

Unless there is clear and irrefutable evidence that the

claim arose out of pilferage or act or neglect by one or BAGGED CARGO CLAUSE
the other (including their servants or sub-contractors) in
which case that party shall then bear 100% of the claim. When dealing with bagged cargo, we recommend Owners
adopt the following clause to limit their liability.
(d) All other cargo claims whatsoever (including claims for
delay to cargo): “In case bagged cargo is carried, Owners are not respon-
sible for all bags torn/ shortlanded/ damaged/ leakage/
50% Charterers pilferage except for those wetted or those damaged due to
50% Owners the vessels’ unseaworthiness”.

Unless there is clear and irrefutable evidence that the

claim arose out of the act or neglect of the one or the
other (including their servants or sub-contractors) in
which case that party shall then bear 100% of the claim.”

VOYAGE CHARTERS
GENCON 1994

Similar considerations will have to be made in connection

with voyage charterparties. Again, if the voyage charter-
party has no express clause allocating responsibility for
cargo operations, this will be an owners’ responsibility.

The Gencon Charterparty, recommended by the The Baltic

and International Maritime Council (BIMCO), is a com-
monly used charter party for the transport of rice cargoes.
Under clause 5(a) this charterparty, the responsibility of
loading and discharging cargo is on the charterers.

Clause 5: Loading/ Discharging

a) Costs/ Risks
The cargo shall be brought into the holds, loaded, stowed
and/or trimmed, tallied, lashed and/or secured and taken

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HOT TIPS

FOR CHARTERERS
´´ Make sure your head-charter is on back-to-back terms with your sub-charter

FOR OWNERS
´´ Be ready to issue protest notes
´´ Incorporating the ICA clause in the charterparty can limit owners liability for cargo claims
´´ Make sure your charterers are financially secure and is insured by an IG Club

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CASE STUDY: A RECENT SKULD SHORTAGE CLAIM

FACTS:
´´ A cargo of bagged rice was being transported from Ko Sichang, Thailand to Abidjan, Ivory Coast
´´ A shortage of 8,922 bags was recorded on completion of discharge
´´ In addition to shortage, several bags along the hold sides were found to be mouldy on discharge, despite being
protected from any direct contact with the steel work. The mould was found to be due to condensation
´´ No pre-loading survey was conducted and thus it was difficult for Owners to prove precisely what was
loaded onto the vessel and the condition of the cargo loaded
´´ The lack of a pre-loading survey made it hard for Owners to defend the shortage claim and prove the damage to the
cargo was not as a result of their own negligence. A recourse claim against charterers also proved to be more
difficult
´´ According to the local customs rules in Abidjan all discrepancies noted between the cargo noted on
the B/L and the cargo discharged is subject to an automatic fine of USD 2 per missing bag for rice cargoes
´´ The local agent, under local law, is held to be the legal representative of the Owners, even if appointed by
charterers
´´ The local agent responsible for payment of the fine to the customs department demanded a guarantee
for payment in the form of a LOU before allowing the vessel to leave

CLAIM AMOUNT = USD 437,500
´´ Shortage = 8062 short landed bags
´´ Cargo loss = 64 mouldy bags and 1480 bags torn during handling

LESSONS LEARNT:
´´ Always conduct an independent pre-loading survey which includes an independent tally of cargo loaded
´´ Moisture tests on the cargo must be conducted to ensure they are within the moisture content limits noted
on the cargo quality certificate
´´ Pre-loading inspection/ continuous tally should be conducted on board to ensure that only sound bags are
loaded onto the vessel
´´ Visual quality inspection of the cargo can help to eliminate the loading of all damaged, cut/ torn
and heavily stained bags
´´ Contact the club immediately
´´ Place Charterers on notice of the claim as soon as possible

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CASE STUDY: LONDON ARBITRATION
(1992) 318 LMLN 1

FACTS:
´´ The vessel was time chartered on the NYPE 46 form
´´ During the course of discharge, one of the crane was damaged by the stevedores

CHARTERPARTY
´´ Clause 8: Charterers are to load, stow, trim and discharge the cargo at their expense under the supervision of the
captain
´´ Clause 35: GEAR BREAKDOWN. In the event of a breakdown of . . . crane or cranes for any period by reason of disa
blement or insufficient power, the hire to be reduced pro rata . . . If Charterers continue working by using shore gear,
such to be for Owners’ account but then the vessel not to be off hire pro rata . . . Time lost by stevedores as a result
of such breakdown . . . and all other expenses thereby incurred, to be for Owners’ account. . .
´´ Clause 47: STEVEDORES. The stevedores although appointed by Charterers are to be considered Owners’ servants
and shall load, stow, trim and discharge the vessel under the control of the Master. The Master is to direct and
control the loading, stowage and discharging of cargoes in co-operation with the local authorities. . . .
´´ Clause 48: STEVEDORE DAMAGE. Damages to the vessel caused by the stevedores during . . . discharging to be
repaired at Charterers’ expense before redelivery to Owners if affects vessel’s seaworthiness, but Charterers not
to be responsible if Master fails to notify . . . except hidden damages which to be notified as soon as discovered, in
which case a joint survey to be held. Otherwise Charterers not to be responsible. . . .

HELD
´´ The unamended Clause 8 transferred the responsibility of cargo operations onto the charterers. However, although
clause 47 obliged the charterers to arrange and pay for the stevedores, they were considered the owners servants
and placed on the master the responsibility to direct their obligations.
´´ It was therefore, found that clause 47, being a typewritten rider clause took precedence over any existing provisions
in the charterparty and in effect served to amend clause 8 to place responsibility of stevedores on the owners.
´´ Clause 48, however, being an additional rider clause expressly placed liability of stevedore damage on the
charterers and the tribunal thus concluded that the charterers were responsible for the damage caused to the
cranes by the negligent stevedores.

LESSONS LEARNT:
´´ Owners and Charterers should clearly specify liability for stevedore damage by use of rider clauses
´´ A clause obliging Charterers to appoint stevedores or making them responsible for the expense of employing steve
dores does not transfer the responsibility of their acts or negligence on to them

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CASE STUDY: THE JORDAN II
(2003) 2 LLOYD’S REP. 319

FACTS:
´´ A cargo of steel coils was to be carried from Bombay to Barcelona and Motril
´´ The claimants alleged that damage to the cargo was due to rough handling during loading and/or discharge and/or
inadequate stowage

CHARTERPARTY
The charter was effected on a Stemmor 1983 form
´´
Clause 3: Freight to be paid on a FIOST (Free In and Out, Stowed and Trimmed) basis
´´
Clause 7: charterers to have full use of all vessel’s gear to assist in loading and discharging cargo
´´
Clause 17: Shippers/charterers/ receivers to put the cargo on board, trim and discharge cargo free of expense to the
´´
vessel

BILLS OF LADING
´´ The bills of lading provided that freight was payable “as per the charter party” and it incorporated the Hague Visby
Rules (HVR)
´´ Article III r.2 HVR: the carrier is responsible for properly and carefully loading, stowing and discharging the goods
carried
´´ Article III r.8 HVR: Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from
liability for loss or damage to goods … shall be null and void and of no effect

ISSUE
´´ Were the owners liable for any damage to the cargo caused as a result of loading, discharging or stowage?

DECISION
´´ Clause 3 would not have stood alone to transfer responsibility to the charterer but with clause 17 it did
´´ Clause 17 clearly places the obligation to load and discharge the cargo on the charterers
´´ As all cargo work had to be performed by charterers, it follows that they would be liable if it was not properly or
carefully carried out
´´ Incorporation of the Hague Visby Rules, specifically Article III r.2 and r.8, did not render clause 3 and clause 17 of the
contract null and void. Parties are free to determine and allocate responsibility by their own contract

LESSONS LEARNT
´´ A charter party clause seeking to transfer the responsibility to load, discharge and stow cargo on the charterers/
shippers / receivers must be extremely clear and precise
´´ It must specifically mention the cargo handling activities it aims to transfer on the charterer/ shipper/ receiver

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CREDITS
BY: ZHAO RONG OOI
CLAIMS EXECUTIVE
HONG KONG SYNDICATE
Edited by Nikita Lulla, Hong Kong Syndicate

With acknowledgment and thanks to:

Andrew Moore & Associates Ltd

www.andrew-moore.com

Spica Services (S) Pte Ltd

spicavietnam@hcm.fpt.vn

Cameroon P&I Correspondents

www.cameroonpandi.com

Coast to Coast P&I Services Ltd. Bangladesh

Leandros Kotsakis
Senior Claims Executive; Piraeus Syndicate

Per Zerman
Vice President; Copenhagen Syndicate

In case Members have further queries they are asked to contact:

LOSS PREVENTION AND RECURRING CLAIMS GROUP /

LOSSPREVENTION@SKULD.COM
Christian Ott,
Vice President, Head of Claims, Singapore Syndicate
Loss Prevention and Recurring Claims Team Leader