Académique Documents
Professionnel Documents
Culture Documents
published by Gard AS
of Steel
2
Contents
Introduction 4
Disclaimer
The information contained in this publication is compiled from material previously published by Gard AS and is provided for general
information purposes only. Whilst we have taken every care to ensure the accuracy and quality of the information provided at the
time of original publication, Gard AS can accept no responsibility in respect of any loss or damage of any kind whatsoever which may
arise from reliance on information contained in this publication regardless of whether such information originates from Gard AS, its
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Introduction
This booklet contains a collection of 3. Hold preparation checks, e.g a 8. An outturn survey will help to
loss prevention material relating to hose test on hatch covers, tests evidence watertight integrity and
steel cargoes, which over the years has on bilge suctions and non- the condition of the cargo at the
been published by Gard. return valves, will help to ensure time of discharge.
watertight integrity.
Steel cargo claims account for a large
9. Keeping full and proper records
proportion of total cargo claims,
4. Proper planning and supervision of the vessel’s care for the cargo
both in terms of frequency and cost.
of stowage and securing will to help defend claims should a
This booklet contains material with
arrangements will reduce the risks claim arise.
numerous examples of incidents
of cargo shifting, crushing and
resulting in large steel claims.
chafing.
10. If an incident does occur the Club
As with most claims, steel cargo claims and/or the local correspondent
can be avoided. The following ten 5. Pre-sailing checks, e.g securing should be contacted to assist.
points serve as a reminder of what of cargo and of weather deck
should go a long way to ensuring a openings, will help to ensure that Expanded commentary on the above
claim free voyage. nothing has been overlooked or points can be found in the material
forgotten. enclosed in this booklet. So please
1. A pre-shipment survey will help read on and challenge your operation
to ensure that the mate’s receipts to a year without steel claims.
6. Proper ventilation, following the
and bills of lading accurately reflect dewpoint point rule (only ventilate
the cargo quantity and apparent if the dewpoint of the air outside
order and condition at the time of the hold is lower than the dewpoint
shipment. of the air inside the hold), will
reduce the risk of condensation
2. Proper maintenance and inspection damaging the cargo.
of bilges, hatch covers and other
hold openings will reduce the risks 7. Visual checks of the holds and daily
of water ingress. soundings of the bilges will help to
ensure that problems arising during
the voyage are detected and dealt
with early enough.
surveys
Purpose It may include testing the integrity of tongue. Hence it can be seen that
Cargo survey the hatch covers by ultrasonic means the true meaning of the terms used
The purpose of a pre-shipment survey or with a jet hose of water. Any faults could be open to interpretation. In an
of the cargo is to establish its apparent discovered at the pre-loading survey of attempt to avoid this confusion, the
condition immediately before it is the vessel should be corrected before International Group of P&I Clubs has
loaded onto the vessel. Because of the vessel loads the cargo if necessary, issued a list of standard clauses to be
increasing claims for poor outturn of but in any event before the vessel puts used to describe the condition of steel
steel cargoes, it is now very common to sea. cargoes.2 There are clauses to describe
for carriers to contract independent surface condition, including packaging
surveyors to perform pre-loading Loading survey if appropriate, which are mainly an
surveys of this type of cargo. There Usually the surveyor is requested to attempt to differentiate between
would be insufficient time for the ship’s remain in attendance throughout degrees of rust, and other clauses
officers to perform a detailed survey the loading so that he can monitor to describe mechanical damage.
of all of the cargo from the time of the the loading operation. He may be In all cases, it is essential that the
arrival of the vessel until the cargo is requested to advise the Master on surveyor take a full set of high-quality
loaded. Hence the assistance of an stowage and dunnaging, and to check photographs in order to both provide
independent surveyor is essential if the (and perhaps advise) on the standards evidence and clarify the terminology,
condition of the cargo at this time is of securing. Correct stowage ensures should this become necessary.
to be fully and accurately determined. the load on the ship’s structure is within
This is done to assist the Master to its strength limits (e.g., deck load in The formation of rust
ensure that the Mate’s receipts and tonnes per square metre), avoids the When it leaves the producer, raw
bills of lading are appropriately claused cargo shifting, crushing and chafing, steel is covered by a thin coating
to accurately describe the apparent and ensures that the cargo can be of mill scale. This is brittle, and is
condition of the cargo at the time he readily discharged. Dunnage is used easily displaced, whereupon rusting
accepts responsibility for the cargo.1 to distribute the load from the cargo, commences. The rusting of steel is
prevent friction damage, prevent a continuous process. The longer it
distortion of the cargo in the stow and continues, the more it will damage
Vessel survey
assist in cargo securing. The surveyor the cargo. Any rust which appears to
Often a pre-shipment survey of
will keep complete records, such as be insignificant during loading could
the vessel is also requested. This
the timing of the loading operations, develop during the voyage, even if the
will involve an examination of the
including delays with reasons, the cargo is properly looked after by the
vessel’s holds to ensure that they are
weather throughout, and details of the vessel. Thus it is vital that any and all
in a suitable condition to receive the
vessel, cargo description, numbers, signs of rust, no matter how minor, are
cargo. The survey also involves the
types, weights, stowage, bills of lading, identified by the surveyor.
examination of the hatches, ventilators,
etc.
sounding pipes, accesses, etc. to
ensure that the watertight integrity Surface rust which forms in a fresh
of the vessel is adequate. A hatch Terminology water environment, and is removed
survey includes the structure of the The terms used to describe the within a reasonable time, seldom
panels, sealing bars, rubbers, drain condition of the cargo are the personal causes damage which reduces the
channels, guttering, cleats, wedges, choice of the surveyor. The actual commercial value of the cargo.
wheels, hinges and the operating words he uses should be in the English However, rust which forms in a salt
system, including any hydraulic leaks. language, which may not be his native laden environment can result in rapid
1 See article “Pre-load Surveys of Steel Products” in Gard News 144, of December 1996.
2 The relevant section of the International Group Circular, dated February 1964, reads:
“In appropriate cases, (…) it is permissible for any of the following clauses to be used when describing steel shipments which show signs of rust or a
similar condition on shipment:
Australia
The Federal Court of Australia has Both voyages gave rise to very similar that caused damage. These arguments
recently considered the responsibility factual issues. It was common ground essentially equated to an argument of
for condensation damage when cargo that the steel coils were damaged as inadequate packing.
interests knowingly use vessels without a result of corrosion resulting from
dehumidifiers. contact with water before or during Inadequate packing
the course of the voyages. Notably, The coils in the subject case were
Introduction there was rain during loading on both said to be packaged in a manner
A recent decision1 provides an voyages. On the first voyage some of consistent with the standard practice
interesting and, for carriers, worrying the subject coils were loaded wet. In for the packaging of cold rolled steel
insight into how the Australian courts both voyages other cargoes for other coils – an inner soft paper wrapping, an
view the extent to which a carrier must shippers were also loaded wet. There outer metal wrapping, including end
exercise due diligence under a contract was no evidence of the subject coils caps and corner protectors, with steel
for the carriage of cargo. The decision being loaded wet in the second voyage. strapping. The essence of the carrier’s
is understood to be under appeal but There was dispute as to the mechanism case was that the coils should have
the case raises an interesting debate. by which water entered the packaging been wrapped in a manner that would
around the coils. Both parties relied have completely prevented the ingress
The case before the Federal Court of heavily on experts. of water either in the form of liquid or
Australia concerned two cargoes of vapour. The carrier referred to evidence
sheet steel coils shipped on sister ships The mechanism of the damage of problems from previous shipments
(both of single hold construction, with It was common ground that at least which resulted in the same shippers
a tween deck and folding hatch covers) some of the corrosion damage to changing the inner paper wrapping
but on separate voyages from Japan the coils in question was the result as a result of suggestions that the
to Australia. Both cargoes suffered of condensation during the voyage. previously used paper was not effective
corrosion damage, for which cargo There was expert evidence that in preventing the penetration of water/
interests brought claims under bills of condensation on the steel coils would water vapour. The carrier also referred
lading identifying the owners of the two almost certainly have occurred since the to the practice of another shipper of
vessels as carriers. For the purposes recorded dew point levels exceeded steel coils, which was to include an
of this analysis the cargo interests and the coil temperatures for most of the additional sealed plastic wrapper over
shipowners/carriers can be considered voyage. The case summary does not the top of the inner paper wrapper,
the same in each voyage. mention the type of condensation, and which was said to completely seal
but presumably it was cargo sweat.5 the contents against any moisture
One of the cargo interests was the However, the carrier contended that ingress. The carrier also sought to make
importer of the steel coils and had there were in fact three sources of weight of the nature of the steel, which
a contract of affreightment which wetting that caused damage. Firstly, was unchromated. Chromate coating
required use of the carrier’s vessels external wetting which was able to provides temporary protection against
unless there was no vessel available infiltrate the wrapping surrounding the corrosion, but in this case the end
at the time. The shipping manager coils. This was only relevant to the first receiver required unchromated steel.
responsible for choosing a carrier was voyage, for which the mates’ receipts/ Therefore, only a light oil coating was
familiar with the vessels and the hold shipping orders were claused “partly applied to the coils which provided very
arrangements.2 He was aware that the wet by rain in barge”. However, there limited protection against corrosion.
vessels were carrying steel cargoes from was expert evidence that the nature and
other shippers for other consignees. distribution of the corrosion observed The court commented that insufficiency
on the steel coils was highly consistent of packaging is the inadequate
The dispute was whether the damage with the corrosion having occurred as preparation of goods to withstand the
occurred because of insufficiency of a result of condensation and not as a foreseeable risks of carriage on the
packing3 of the steel coils or because of result of external wetting. Secondly voyage contemplated. Packing would
the failure by the carrier to exercise due and thirdly, the carrier contended that be deemed sufficient if it is normal or
diligence to make the vessel seaworthy condensation either on the external customary in the trade. It was apparent
and/or to carry, keep and care for the packaging or within the packaging, that the method of packaging in this case
cargo properly and carefully.4 which was allowed to come into contact was in accordance with usual practice, but
with the steel, was the source of wetting was not such as would prevent the entry
of water vapour in the air. The real issue
1 Stemcor (Asia) Pty Ltd v C.V. Scheepvaartonderneming Ankergracht [2005] FCA 1808 (16th
therefore was whether, having regard to
December 2005). the nature of the steel, the packaging was
2 The case summary is not clear on this point, but it is assumed he did know or ought to have required to be such that water vapour
known that the holds were not fitted with dehumidifiers. could not enter through it, or whether
3 A defence available to a carrier under Article IV, rule 2 of the Hague-Visby Rules, which applied in the packaging was sufficient if it was
the case by virtue of the Australian Carriage of Goods by Sea Act 1991.
4 Article III, rules 1 and 2 of the Hague-Visby Rules.
adequate to prevent the entry of loose
5 See article “Don’t work up a sweat” in Gard News issue No. 173. water from external wetting, the burden
being on the carrier to ensure that water
the ingress of further moisture, there during periods of ventilation (when the heating system, the admission of water
was a failure to carry, keep and care vessels were likely to have been in the into the hold during the course of the
for the coils properly and carefully. tropics) rather than being removed. voyages was a failure to carry, keep and
Both vessels recorded periods when – On the balance of probabilities, care for the coils properly and carefully;
the holds were ventilated but cargo condensation occurred after the – and it was known or ought to have
interests contended that the holds loading of the coils on each vessel and been foreseen by the carrier that water
should not have been ventilated when during the course of the respective would be admitted into the holds
they were, and that it was unnecessary voyages of the vessels. on other cargo and on dunnage and
and contrary to proper practice to do – The condensation resulted in possibly because of rain, the vessels
so. The ventilation records for both corrosion. were not seaworthy for the purpose of
vessels confirmed that, on all occasions – The corrosion could not have occurred carrying the coils in question on the
but one, the crew only ventilated if moisture had not been admitted into voyages in question at the relevant time
the holds when the dew point of the the holds or if moisture, once admitted, of year;
outside air was less than that of the air had been removed by the operation of – it was reasonable for the carrier to
inside the hold, consistent with the dew a dehumidification system installed in take steps to ensure that water could
point rule. The court noted, however, the vessels. Alternatively, condensation not be admitted into the holds or, if
that this was a non-hygroscopic6 cargo could have been prevented by the that was not practicable, to install a
and that it was standard practice in the operation of a heating system installed dehumidification system to remove
shipment of steel from cold to warmer on the vessels to ensure that the surface excess water from the holds and ensure
climates not to ventilate the hold. temperature of the coils did not fall that the dew point temperature of air
below the dew point temperature of the in the holds would not fall below the
The court’s findings air in the holds. surface temperature of the coils. The
The court’s findings were as follows: – Given the imprecision of the dew failure to do so was a failure to use due
– The packaging of the coils was point rule, the question of installation of diligence to make the vessels seaworthy
not insufficient, but adequate and a dehumidification system was critical. or, putting it another way, to make the
consistent with general practice in the – The carrier could have factored the holds fit and safe for the carriage and
industry. cost of installation and operation of preservation of the coils.
– While the nature of the steel (which dehumidifiers into the freight charge for
was unknown to the carrier) made the particular voyage or for the period
Discussion
the coils particularly susceptible to of the affreightment contract. That is a
There certainly appear to be plenty
corrosion, the sensitivity of steel to decision that should have been made
of issues in this case and it will be
corrosion generally was well known in prior to offering the vessels for loading.
interesting to see the outcome of the
the industry. appeal. The reader may feel that the
– More likely than not the holds were The court’s decision (under carrier was unfortunate to have been
closed in Yokohama with water trapped appeal) found wanting in his duty to properly
inside in the form of wet dunnage and The court went on to hold that in and carefully carry, keep and care for
liquid water on some cargoes that were circumstances where the coils were the coils. On all occasions but one, the
wet with rain. known to be sensitive to moisture: crew ventilated the holds consistently
– It was probable that water in the form – and there was no dehumidification or with the dew point rule. If done
of vapour was introduced to the holds properly, such ventilation should serve
to replace hold air with ambient air that
contains less moisture. Thus the court’s
6 A hygroscopic material is one which attracts moisture from the atmosphere.
7 Non-hygroscopic cargo being carried from a cold climate to a hot climate – see footnote 5.
8 E.g., Article III, rule 8 of the Hague/Hague-Visby Rules.
9 See footnote 5.
damage - A follow-up
An article in Gard News issue No. 1861 and the likely conditions to be encountered voyages from cooler to warmer climates.
featured a case before the Australian courts on the voyage. The appeal court went on That basic principle is, however, just a
involving corrosion damage to steel coils, to find that there was no evidence of any basic principle and arguably over-simplifies
caused by condensation, and for which practice to install and use dehumidifiers, matters. As mentioned in the previous
the carrier was found liable. The case was so the duty to exercise due diligence could Gard News article, cargo sweat can be
appealed to the full court of the Australian only have required such a step if the vessel difficult to avoid when cold cargo comes
Federal Court and judgment has now been and crew were not otherwise capable of into contact with warm moist air when the
handed down.2 The outcome for carriers is dealing with the problem. On that point, holds are opened at discharge. Such “flash
mixed. the appeal court found that there was a condensation” has been known to occur
mechanism for removing water from the and it could have occurred on voyages
Readers will recall from the article in issue holds, namely wiping and mopping and such as those in this case, had there been
No. 186 that the carrier was found liable at although the effectiveness thereof may no ventilation. It is interesting that the
first instance3 on two counts. Firstly, there have been questionable, that had to be appeal court even commented that there
was a finding of unseaworthiness by reason considered in light of the lack of evidence was evidence of benefits in ventilating the
of failure to use due diligence to make as to any practice concerning the use of steel cargo despite its non-hygroscopic
the holds fit and safe for the carriage and dehumidifiers. In summary, therefore, the nature, including warming the cargo.
preservation of the steel coils. The reasoning claimants adduced insufficient evidence to
of the judge was that:(i) it was known or prove unseaworthiness, so the question of It is also worth noting that at first instance
ought to have been foreseen by the carrier due diligence did not arise. and on appeal the Australian courts
that water would be admitted into the holds have considered the dew point rule an
on the cargo and on the dunnage, possibly Proper and careful handling and care approximation and a system that in some
because of rain, given the nature of the The appeal court deemed that condensation, circumstances might be considered
voyage and time of year. (ii) it was deemed the causal event, was most relevant to improper. There was reference in both
reasonable for the carrier to take steps to consideration of this duty of the carrier, not court judgments to the “three degree
ensure that water could not be admitted into the mere presence of water in the holds. rule”, which permits ventilation only if the
the holds, or if that was impracticable, to Also key was the first instance finding that external air dew point temperature is three
install a dehumidification system to remove there should be no ventilation during the degrees lower than that in the hold.4 If any
excess water from the holds and coils. carriage of steel cargoes from cool to warmer guidance can be given, it is to be aware
climates, with which the appeal court agreed. of the risks of condensation and to seek
Secondly, there was a failure to carry, keep They also agreed with the first instance instructions from shippers as to ventilation
and care for the coils properly and carefully, judge’s interpretation of the expert evidence requirements. With cargoes like steel,
because, in the absence of a dehumification that ventilation should not have occurred which are very susceptible to damage from
or heating system, the carrier failed to as it was capable of causing condensation. condensation, particular care is needed
prevent the admission of water into the hold Although there remained the question and the carrier needs to be confident that
during the voyage. as to whether the corrosion was caused whatever ventilation system is adopted
by condensation resulting from improper will improve the conditions within the hold
Unseaworthiness ventilation, the appeal court decided that the without risk of condensation. If in doubt,
To the appeal court, the question was carrier had not challenged the first instance seek expert guidance.
whether the vessel was fit to carry the cargo judge’s finding that it probably did. The
to its destination. The alleged unfitness appeal court went on to review the carrier’s
was the absence of dehumidifiers, leading defences, notably inadequate packing,
to an inability to avoid condensation and agreed with the first instance judge,
and, therefore, corrosion of the coils. If commenting that the carrier had failed to
condensation was a risk of the voyage, then show that there was any wrapping in use that
the carrier was obliged to provide a ship, was impervious to water. The appeal court
crew and equipment to deal with that risk. therefore upheld the first instance decision
To answer this, the appeal court raised two that the carrier had failed to properly and
further questions. The first was whether such carefully carry, keep and care for the cargo.
conditions might have arisen at some stage 1 “Condensation damage – Australia”.
in the voyage, which was accepted. The Comment 2 C.V. Scheepvaartonderneming Ankergracht
second was whether the vessel and crew The positive aspect of the appeal decision v Stemcor (Asia) Pty Ltd [2007] FCAFC 77 (31st
were capable of dealing with the problem. is that the court appears to have played May 2007).
In answer to this, the appeal court doubted down many of the arguments on the use of 3 Stemcor (Asia) Pty Ltd v C.V.
the correctness of the first instance judge’s dehumidifiers. Somewhat surprisingly, those Scheepvaartonderneming Ankergracht [2005]
FCA 1808 (16th December 2005).
reasoning in (i) above and commented that arguments in relation to seaworthiness lost
4 This rule is also given to the practice of only
the chance that moisture might enter the out to a much less sophisticated system: ventilating if the temperature of the outside
hold during loading could hardly, by itself, wiping and mopping. Ultimately, the carrier air is at least three degrees cooler than the
make the vessel unseaworthy, especially appears to have fallen foul of not complying average cargo temperature at the time of
since much depended on the amount of with a basic principle of ventilation, which is loading, which can of course be difficult to
water, the available means for dealing with it not to ventilate non-hygroscopic cargoes on determine.
Following a recent decision of the is issued against the provision to the leave to appeal against an arbitration
English High Court, very clear terms shipowners by the charterers of a letter award. The fact that leave to appeal was
must be set out in the charterparty if of indemnity (LOI). The first solution is granted suggests that the judge who
the parties wish to give the master the the one preferred and recommended heard the application thought there
right to reject damaged cargo before it by Gard. The second is likely to leave were important issues which should be
is loaded. an owner without P&I cover (see Rule heard by the High Court.
34 1 ix of Gard’s 2005 Statutes and
Introduction Rules) and with little or no defence to The facts
The question of whether a cargo, a claim by an “innocent third party” for SSM were the owners and AMC the
often a cargo of steel products, is in damage which should have been noted charterers of the SEA SUCCESS. The
“apparent good order and condition” on the bill. vessel was chartered on the well-known
and the resulting disagreement as to New York Produce Exchange form.
whether the bill of lading should be In Gard’s experience, it is relatively rare There were several other charterparties
claused (and if so, in what terms) arises for a master to refuse to load damaged “down the line” to various sub-
regularly. Disagreement may arise cargo. This usually happens when there charterers, essentially on identical
because there is a genuine factual is a clause in the charterparty which terms. The same arbitrators were
dispute as to the true condition of the requires the master to sign clean bills appointed under each charterparty
goods. Alternatively (or sometimes of lading, but which allows him to reject and the disputes were dealt with
additionally), for letter of credit reasons, cargo which is in such a condition concurrently.
a shipper will want a clean bill of lading, that a clean bill could not be issued.
whereas a master has the right and the Nevertheless, this does happen from In September 2004, the vessel was
duty to protect both the shipowner and time to time and a recent decision of ordered to load a cargo of steel
the future bill of lading holder(s) and the English High Court1 provides useful pipes at Constanza, Romania. Having
to place remarks on the bill which in guidance on the points which masters, inspected them before loading,
his reasonably-held opinion accurately owners and charterers should have in the master found the pipes to be
reflect the condition of the goods. mind when faced with such a situation. damaged. He refused to load them.
Interestingly, this was an appeal by The dispute was resolved by the issue
Any disagreement is usually resolved by owners Sea Success Maritime (SSM) to owners of an LOI. The vessel then
discussion between the parties. Either from an award in favour of charterers
a wording for insertion into the bill by African Maritime Carriers (AMC) by a 1 Sea Success Maritime Inc. v. African Maritime
the master is agreed, or a clean bill tribunal of London arbitrators. Under Carriers Ltd. [2005] EWHC 1542 (Comm); 15th
English law, it is very difficult to obtain July 2005
After initial inspection of the cargo, shippers may change their intended desription of the cargo in the bill of lading.
sailed to Novorossiysk. There, she the condition of the cargo, nor the
was instructed to load a cargo of hot There seems to have been no dispute description of it that would be inserted
rolled steel coils. The same situation between SSM and AMC as to the in the bills of lading. The tribunal was
arose. The master considered the actual condition of the cargo at both no doubt influenced by the fact that
coils to be damaged (which in Gard’s Constanza and Novorossiysk. So SSM and AMC were essentially in
experience is not uncommon with such far as the Novorossiysk cargo was agreement as to the proper condition
cargo) and refused to load them. This concerned, AMC agreed and confirmed of the cargo. SSM sought leave to
time, rather than an LOI being issued, that the bills of lading would contain appeal against these findings and
the parties entered into a “without the description of the cargo and its obtained it. The appeal was heard by
prejudice” agreement which resolved condition as set out in the pre-loading the High Court in early July 2005.
the immediate problem. The cargo was survey report prepared on owners’
then loaded. behalf. On this basis, AMC said that The High Court’s findings
the master would not need to clause The judge upheld the tribunal’s decision
The basis on which the master the bills of lading (because they already and thus found in favour of AMC.
refused to load the cargo contained the surveyor’s remarks) and Broadly, he approved of the tribunal’s
In support of his decision to refuse to thus that he had no good reason to reasoning. He made the particular point
load the cargo in question, the master refuse to load the cargo. that clause 52 (and presumably similar
(and SSM) referred to clause 52 of the clauses) was not intended to be used if
charterparty with AMC. This clause The arbitration there was no dispute between SSM and
read: The dispute went to arbitration. It was AMC as to the condition of the cargo.
“The vessel to use Charterers’ Bills heard by three well-known London The judge accepted that the clause
of Lading or Bills of Lading approved arbitrators. Essentially, they had to would operate if the master (correctly)
by Charterers and/or sub-Charterers decide two questions: intended to clause the bill in relation
which to include … Clause Paramount 1. In what circumstances, on the to the condition of the cargo, but the
General, USA or Canadian, as true construction of clause 52 of the shipper did not agree.
applicable, … during the period of charterparty, is the master entitled and
this Charter. Master to authorise, obliged to reject the cargo presented The judge also dealt with what
time by time, in writing Charterers for shipment/tendered for loading? he called the “timing point”. This
or their appointed Agents to sign 2. Did those circumstances exist at concerned SSM’s argument that it was
Bills of Lading on behalf of Master Novorossiysk? impractical for a master to try to reject
in accordance with Mate’s Receipts. cargo once it had been loaded, an
Master has the right and must reject any In answer to the first question, the argument with which many readers will
cargo that are [sic] subject to clausing tribunal decided that the master could/ have sympathy. Nevertheless, the judge
of the BS/L.” should reject the cargo “... if the cargo, rejected this argument. He concluded
once loaded (emphasis added) would that, after the initial inspection of the
SSM relied on the last sentence of this be properly described in the bill of cargo (whether by the master or by the
clause which, they argued, meant that lading in a way which would qualify the pre-loading surveyor), the charterers/
the master could and should refuse statement of apparent good order and shippers have the opportunity to
to load cargo which was in such a condition ... proposed to be stated in change their intended description of
condition that, if it was loaded, the bills the bill of lading by the shipper”. the cargo in the bill of lading. Thus,
of lading would have to be claused. he felt, it would be premature for the
Effectively they were arguing that only In answer to the second question, the master to reject the cargo at that time.
cargo which was in “apparent good tribunal’s answer was “no”, on the If charterers/shippers agreed to the
order and condition” could be loaded. basis that there was no dispute as to bill being worded in terms acceptable
inland?
THE SCENARIO contaminated the coils, he is inclined pages 35-39). As part of such surveys,
Roads and other surfaces are commonly to think that the cause is seawater, and the Master is advised to ensure that the
sprayed with salt in winter to prevent the damage having occurred during the surveyor tests steels, particularly those
and remove frost and ice. When that sea transit. Whilst tests confirming the suspected to have been in contact with
salt becomes mixed with water on presence of chlorides are not infallible, moisture, for the presence of chlorides.
the roads, from rain or melted ice, they may, together with other evidence, This test is usually done with a silver
the salt gets taken up in the spray for example the presence of heavy nitrate, which turns milky when exposed
generated from vehicles on the roads. weather during the sea transit, suffice to to chlorides. As a follow-up to this
Steel transported by road on lorries, is establish a prima facie case that the sea circular, please refer to the upcoming
often not covered at all or insufficiently carrier is the responsible party. Gard News 169 in February 2003 for
covered, e.g. by tarpaulins. This can further information on silver nitrate
lead to the steel being exposed to This general problem highlights the testing.
the salt laden spray. The result is salt need to protect shipowners position
contamination. against claims for pre-shipment Further information can also be found
damage. in the Gard Guidance on Bills of Lading
THE PROBLEM on our website at www.gard.no.
It is well known that steel products THE SOLUTION
are sensitive to salt contamination, It follows that it is very important for We are grateful to our correspondents
principally because of the risk of the the sea carrier to have good evidence in Barcelona, Bull Sworn Marine
steel rusting. The mere presence of of the condition of the steel at the Surveyors S.L for drawing our attention
chlorides on coils often, therefore, leads time of loading and discharge from to this issue and for providing the
to rejection of the cargo by receivers, the vessel to properly assess whether images of steel on lorries being
and losses resulting from agreed cases against them have any merit. That affected by sprays on Spanish roads,
depreciations, salvage sales or even is why sea carriers are recommended accompanying this article. With the
disposals. The losses on particularly to instruct properly qualified and winter in the northern hemisphere
sensitive types of steel, for example independent surveyors to perform pre- around the corner the problem of salt
cold rolled coils, can be significant shipment and outturn surveys of steel contamination from road spray will not
– tens to hundreds of thousands (for further information/comment see be isolated.
of US dollars. Invariably when a the article “Steel pre-shipment surveys”
receiver discovers that chlorides have in Gard News 153, March/May 1999,
INTRODUCTION Although ease and speed of loading slabs at a port in southern Italy. The
The California Block Stow (CBS) method and discharging is important cargo was destined for the US East
of stowing steel slabs has been in commercially, it is more important, Coast. Prior to loading, the Master was
existence for a number of years. As the both for the safety of the vessel and informed that the CBS method would
name suggests, the method originated her crew and cargo, that the best and be used. He had never carried steel
in California, reportedly with California safest method of stowing and securing slabs before and initially suggested the
Steel Industries. The idea behind this the cargo is used. This is particularly the more time-consuming but tried and
method appears to have been to case where the cargo is large, heavy, trusted method of stowing the slabs
increase “efficiency” in cargo handling, steel slabs. Gard Services’ view is that athwartships, extending the stow to the
although it is unlikely to have been the CBS method is not necessarily the sides of the hopper tanks. However,
coincidental that one result of the use best and safest method in all situations the shippers persuaded him that the
of this method is to reduce the time and that the traditional method is to be CBS was appropriate and that they
and cost involved in cargo handling by preferred. had considerable experience of this
the stevedores. method. He therefore accepted their
ARBITRATION stowage plan. He also signed a letter
This method involves binding together A case which ended up in arbitration given to him by the shippers in the
steel slabs into a free-standing stow. in New York and which resulted in the following terms:
The slabs are loaded fore and aft, losing party paying close to a seven
dunnaged and shored up and then figure sum in respect of damages, ”This is to certify that the cargo laden
lashed with “Signode” strapping. makes it clear that using the shortcut of onboard my vessel has been loaded,
This system uses steel strapping and the CBS method does not produce the stowed, secured and lashed under my
metal clips, rather than wire ropes desired result in the long run. The case supervision and up to my complete
and turnbuckles, to secure the goods. involved several parties and a number satisfaction. The vessel is in all respects
The straps secure only the top few of issues, but the basic facts are set out seaworthy and is ready to carry on her
tiers in the outer stacks vertically. The below. voyage.”
slabs inside the stack are essentially
free-standing, held in place only by The vessel in question, a self-trimming Unfortunately, a few days after sailing
their own weight, by the weight of the five-hold bulker, was built in the early and whilst still in the Mediterranean
slabs outside and above them and the 1980s. In early 1995, she loaded a Sea, the vessel suddenly listed in
strapping. cargo of nearly 15,500 MT of steel moderate, but not exceptional,
weather conditions. An inspection
steel products
STEEL CARGOES AND BILLS OF shipment) and should not affect owners’ surveys may be covered by Gard, in
LADING approach. Nevertheless unnecessary which case they will be treated as
One of the functions of a bill of lading or meaningless clauses should be “special costs”. This means that the
is that of a receipt for the goods avoided, as should remarks which do costs will be absorbed by the Club,
loaded. As such, it will usually state not relate strictly to the condition of regardless of any deductible applicable
the apparent condition of the cargo at cargo at the time of loading. Clauses to “normal” costs, thereby being
that time. All those to whom the bill of inserted in Mate’s receipts and bills of incorporated into the Member’s loss
lading is transferred normally rely on lading should always be carefully and record.
that statement to form a view on the selectively considered.
condition of the cargo at the time of CHARTERERS
loading. This is especially important for PRE-LOADING SURVEYS OF STEEL The main purpose behind pre-loading
buyers and receivers of cargo. Where CARGOES surveys of steel cargoes is to ensure
the bill of lading shows that something Steel products are particularly prone that Mate’s receipts and bills of lading
was wrong with the cargo at the time to damage which may result in a claim are claused in a manner which reflects
of loading the buyer may be able to against the carrier. Hence special care the actual condition of the cargo at the
reject the cargo under the contract of should be taken when issuing bills time of loading. The survey is therefore
sale, or at least claim damages from of lading for this type of cargo. For an important instrument which assists
the seller. On the other hand, if the bill various reasons the ship’s officers may the ship’s officers in properly clausing
of lading states that the cargo was in be unable to properly ascertain the Mate’s receipts and bills of lading.
apparent good order and condition at condition of the cargo and clause the
the time of loading and at discharge it bills of lading accordingly. This may be On the other hand, in cases involving
is not in the same order and condition, because the loading operations start charterers’ entries the main purpose of
then the receivers will not have a claim so soon after the vessel has arrived at a pre-loading survey report is to secure
under the contract of sale, but instead the relevant port that there is no time a recourse against the shipowners or
will have a claim under the contract for the officers to examine the cargo possibly to assist in the negotiation
of carriage, that is, a claim against the prior to loading, or perhaps because of claims. Therefore there is a
carrier. In virtually all jurisdictions, the the officers are not familiar with the fundamental difference in the function
carrier is unlikely to have any defence system used for marking and identifying of pre-loading surveys under owners’
whatsoever to such a claim if in fact the the cargo at the particular port, etc. For entries and charterers’ entries and as
damage existed prior to loading and these reasons it is common practice a consequence the relevant costs are
such damage was known by the master for shipowners to appoint a surveyor not covered under charterers’ entries,
to exist, but the bill of lading was with relevant experience to inspect the unless special terms of entry have been
issued clean. Since it knowingly mis- cargo prior to loading on board. The agreed with the Club.
states the true condition of the cargo, surveyor should carefully ascertain the
the bill will, in such circumstances, condition of the cargo at that time and Nevertheless, charterers are
normally be regarded as a fraudulent assist the master in preparing suitable recommended to do their utmost to
document. Consequently, owners will clauses to be inserted in the bill of ensure that owners carry out pre-
almost certainly lose their P&I cover, lading. loading surveys of steel cargoes.
as well as find themselves liable in full This could be achieved through
to cargo interests: a double blow! A Pre-loading surveys are outside a charterparty clause placing an
letter of indemnity from the shippers is the scope of the regular P&I cover. obligation on owners to carry out a pre-
unlikely to be regarded as legally valid However, for some time it has been loading survey. We recently spotted the
and owners’ only hope of salvaging Gard’s policy to encourage Members to following clause in a charterparty:
something will be if the shippers are carry out pre-loading surveys every time
willing to honour any such indemnity. It steel products are loaded on board ”If steel is to be loaded a pre-loading
should always be kept in mind that the their vessels. As a consequence, the survey to be performed by Owners’ P&I
owners and through them, the master, Association regularly assists Members in Club appointed surveyor. Cost of same
have a duty towards the innocent arranging such surveys and may cover to be for Owners’ account”.
third party cargo buyer to protect his the costs involved under the individual
position by properly clausing the bill. Member’s P&I cover. Something as simple as that would be
sufficient.
It may be that issuing a bill of lading COVER NOT SUBJECT TO
showing that something was wrong REMARKS TO BE INSERTED IN
with the cargo at the time of loading
DEDUCTIBLE
Because pre-loading surveys of THE MATE’S RECEIPT AND BILL OF
creates commercial problems for
the shippers, since the bill may be
steel cargoes are an important loss LADING
prevention tool, every incentive should One must differentiate between cases
rejected by banks under documentary
be given for Members to undertake where the bill of lading is issued by
credit transactions. This, however, is a
such surveys. In order to achieve that the shipowners (the Member) and
problem for the shippers (who have,
objective, the costs of pre-loading cases where the bill is issued by the
after all, supplied damaged cargo for
contaminated by
asbestos
Gard has recently been advised fire resistant material, however, contains attempts were made to remove the
by our Antwerp correspondents of asbestos fibres, causing contamination asbestos by cleaning with a brush.
steel cargoes from China allegedly of the hot rolled coils. The surveyor More importantly, we understand that
contaminated by asbestos. We involved in this particular case is of the the shippers intend to load these same
understand that other P&I Clubs have opinion that the contamination may coils aboard a substitute or later vessel.
also been notified of similar cases. have been visible at the time of loading.
Recommendation
The problem appears to be mostly Discussions are ongoing whether this Gard recommends that Members and
associated with steel coils shipped from sort of contamination of hot coils may clients exercise extra caution when
Bayuquan in China. In the case in which have been visible at the time of loading fixing a vessel to load hot rolled steel
Gard is involved, we were informed and whether, accordingly, the relevant coils in China. To provide the Member
by our Antwerp correspondents that bills of lading should have been with the best possible protection, we
charterers had specifically asked for a properly claused. What is clear is that strongly recommend that a local expert
survey to be carried out upon arrival at substantial time and money has had to is appointed to inspect the cargo upon
Antwerp of unpacked hot rolled coils. be spent on cleaning each coil prior to loading of hot rolled coils in China
discharge. and that Members ascertain the pre-
The coils had been shipped on board shipment history of the coils.
three different vessels from Bayuquan We have been advised that in one
to Antwerp and are reportedly incident, an expert was appointed on
contaminated by asbestos. The behalf of the carrier during loading
appointed surveyor attributed the in China and his intervention resulted
contamination of the coils to being put in many coils being rejected due to
on fire resistant material during the contamination of asbestos. Information
production process while still hot.This received suggests that unsuccessful
steel cargoes
In the preceding article we have expanding foam should not be used as submitted and it was only by the use
discussed the reasons for and the a substitute for such maintenance, but of the US package limitation that it was
Association’s policy on pre-loading only as an additional safety precaution. possible to settle with cargo interests at
surveys of steel cargoes. There is no a much reduced figure.
doubt that pre-loading surveys are Example: a bulk carrier entered with
vitally important in establishing the the Association loaded 266 coils/6,020 Fresh water wetting is often less of a
condition of the cargo at the time it MT of hot rolled steel sheet in coils in problem. Many coils are left ashore
is received into the carrier’s custody the US Gulf. Some minor exceptions in open storage, exposed to the
thus enabling him (provided the were recorded in the pre-loading report elements, either before loading or after
Bills of Lading have been properly and the bills of lading were claused discharge.
claused) to defeat or reduce numerous accordingly. During her voyage to
claims for alleged damage made Japan, the vessel encountered heavy Nevertheless, high-value cargo such
by cargo interests. Nevertheless, weather, with winds up to Force 11 and as galvanised coils cannot be wetted
steel cargoes continue to generate a the ambient temperature dropped by fresh water with impunity: on the
significant number of claims and the sharply. At the time of discharge, all 266 contrary, all possible care should
opportunity is taken here to re-state coils were found to be rusty, with some be taken to ensure that the cargo
some fundamental principles of claims 71 per cent being badly affected by sea does not become wetted during the
handling. water, which had entered through the voyage. This requires stowage with
defective hatch covers of one hold and compatible cargoes and protection
Sea water is the greatest enemy of steel through a hole caused by corrosion of from condensation. Ventilation may
products. Hatch covers and fittings the bottom plate of a crane post. inevitably have to be restricted during
should therefore be properly and timely periods of heavy weather and if the
maintained. Ram-Nek tape and/or A claim in excess of USD 600,000 was cargo is not properly protected,
damage will be noted at the time of Strange though it may seem, it is of cargo shown in both sets was the
discharge. Plastic sheeting is often an also often alleged by cargo interests same – 1,380 bundles weighing 12,038
effective means of protection against that the vessel has somehow lost MT – this issue is not relevant here.
sweat. one or more coils/sheets/beams/ Cargo interests alleged that only 1,348
angles. As mentioned, such cargo is bundles, weighing 10,757 MT were
Example: a cargo of steel coils was large and heavy and the chances of discharged and thus, that there was
stowed by the charterers in the same it disappearing during a voyage are a shortage of 32 bundles or 1,281 MT
hold as a consignment of wet lumber. remote, to say the least. It is hardly and argued that the bills of lading were
Ventilation was restricted during pilferable! Nevertheless, such claims prima facie evidence of quantity and
the voyage from the Great Lakes to do arise and it will considerably weight. Shipowners argued that they
Japan and moisture migrating from assist in the defence of such claims were not. Each side produced evidence
the lumber caused severe rusting to if tallies can be produced to support to support its argument.
the cargo. A seven figure claim was the (logical) argument that, if a vessel
submitted. Our shipowner Member loaded a certain number of coils at one The bills of lading were claused “All
had to face the claim and reached an port, sailed to another port without particulars (weight, measure, marks,
amicable settlement. discharging cargo elsewhere and was numbers, quantity, contents, value
empty of cargo on completion of and etc. [sic]) thereof as stated by the
Physical loss or damage can also be discharge, she must have discharged Merchant but unknown to the Carrier.”
costly. Proper stowage and securing all the coils loaded. In the absence The case went before the English High
is essential, especially when heavy of tallies, it is sometimes possible to Court of Justice, where the Judge
weather is expected. Large, heavy, go one step back and require cargo found that the claimants had been
packages, often weighing several interests to discharge the initial onus on unable to prove, on the evidence
tonnes, can cause substantial damage them to prove the quantity loaded. submitted, that any particular weight of
to themselves, other cargo and cargo was loaded. Nor had they proved
sometimes the vessel herself if they Example: a vessel entered with the that a lesser weight was discharged
become free to move around during a Association loaded a quantity of steel than was shipped. Accordingly, it was
voyage. Extra delay and costs may also billets in bundles in Eastern Russia held that cargo interests had failed to
be incurred if the cargo is damaged for carriage to Taiwan. The case was prove their claim and the shipowners
to such an extent that it cannot be complicated by the fact that two succeeded.
discharged in the normal manner. different sets of original bills of lading
were issued, but since the quantity
rust clause
English court limits effect of carrier’s bill that is still the view in some quarters As is often the case in the steel
of lading reservation clause. today. However, The SAGA EXPLORER trade, vessel interests had arranged
decision looks set to change all that. a pre-loading survey, which variously
Introduction described the pre-loading condition of
Cases on the RETLA1 clause are rare Facts of the case the cargo to be, amongst other things,
and the last time one was featured in This was essentially a claim by cargo “partly rust stained”, “wetted before
Gard News was in 1995.2 In the recent interests for loss arising from their shipment by rain and partly rust stained
case of The SAGA EXPLORER3 the reliance on clean bills of lading, against and slightly scratched on surface”,
English High Court was asked to decide vessel interests delivering damaged “wetted before shipment by rain and
on the effect of such a clause. The (rusted) cargo. The cargo was steel partly rust stained in white oxidation on
court referred to a number of relevant pipes, consigned from South Korea to surface”. A list of damage/exceptions
legal texts and it is useful to quote North America, and the RETLA clause in was recorded in the survey report and
one of those here, as an explanation the bills of lading read: the Mate’s Receipts (also containing a
of the intention behind a RETLA similarly worded RETLA clause) stated
clause and its perceived effect prior “RETLA CLAUSE: If the Goods as “Condition of Cargo as per Survey
to this decision: “The practice is now described by the Merchant are iron, Report”. The bills of lading contained
developing of including in the bill of steel, metal or timber products, the no such reservations and were
lading a definition of ‘good order and phrase ‘apparent good order and essentially therefore issued clean.
condition’ which makes it clear that the condition’ set out in the preceding
representation does not imply that the paragraph does not mean the Goods A witness for the vessel interests’
cargo is free from the type of defect were received in the case of iron, steel agents explained that the shippers
which commonly affects the cargo in or metal products, free of visible rust requested the bills to be issued
question, e.g. rust (metal goods) or or moisture or in the case of timber unclaused against Letters of Indemnity
moisture (timber). There appears to be products free from warpage, breakage, (LOI). Having compared the wording of
no reason why these clauses should chipping, moisture, split or broken the RETLA clause with the survey report
not be valid; and they do not appear to ends, stains, decay or discoloration. Nor damage/exceptions, the agent took the
offend the Hague-Visby Rules”.4 does the Carrier warrant the accuracy view that there was no need to clause
of any piece count provided by the the bills and so agreed to the shipper’s
The RETLA clause is often included in Merchant or the adequacy of any request, obtaining an LOI to be on the
bills of lading used in the steel trade banding or securing. If the Merchant safe side. Interestingly, the court did
and others, such as the timber trade. so requests, a substitute Bill of Lading not accept the agent’s rationale and
The clause is often relied on by the will be issued omitting this definition thought it much more probable that he
contractual carrier to try to limit the and setting forth any notations which was persuaded by the shipper to issue
evidential value of a clean bill of lading. may appear on the mate’s or tally clerk’s clean bills in exchange for LOIs.
On the one hand, a good deal of receipt.”
untreated steel is invariably presented
for shipment with some degree of
rust and, on the other, shippers will
consistently demand clean bills of
lading for letter of credit purposes.
Indeed, the ICC Uniform Customs and
Practice for Documentary Credits (UCP
600), which govern the acceptability
of bills of lading for letters of credit
purposes, defines a “clean transport
document” as one which “bears no
clause or notation declaring a defective
condition of the goods or their
packaging, i.e., a clean bill of lading”.5
The RETLA clause was therefore
seen as a convenient way of issuing a
clean bill of lading to satisfy the often
uncompromising position of shippers,
whilst also protecting the contractual
carrier against claims for damage to
cargo which can be shown to be of a
pre-shipment nature. As the legal text
above suggests, that protection was
once considered valid and perhaps
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