the carriage of steel april 2010

8/6/2019 The Carriage of Steel April 2010

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The Carriageof Steel

A selection o articles previouslypublished by Gard AS


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Introduction 4Steel pre-shipment surveys 5

Condensation damage - Australia 8

Australia - Condensation damage - A ollow-up 12

When can a master reuse to load damaged cargo? 13

Pre-loading surveys of steel cargoes - When are they recommended? 16

Steel Seawater wetting inland? 17

Caliornia Block Stowage - Too ree and easy? 18

Pre-loading surveys o steel products 21

Steel coils rom China contaminated by asbestos 22

P&I incidents involving steel cargoes 23

Contents

Disclaimer

The inormation contained in this publication is compiled rom material previously published by Gard AS and is provided or general

inormation purposes only. Whilst we have taken every care to ensure the accuracy and quality o the inormation provided at thetime o original publication, Gard AS can accept no responsibility in respect o any loss or damage o any kind whatsoever which mayarise rom reliance on inormation contained in this publication regardless o whether such inormation originates rom Gard AS, itsshareholders, correspondents or other contributors.


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Introduction

This booklet contains a collection oloss prevention material relating tosteel cargoes, which over the years hasbeen published by Gard.

Steel cargo claims account or a largeproportion o total cargo claims,both in terms o requency and cost.This booklet contains material withnumerous examples o incidentsresulting in large steel claims.

As with most claims, steel cargo claimscan be avoided. The ollowing tenpoints serve as a reminder o whatshould go a long way to ensuring aclaim ree voyage.

1. A pre-shipment survey will helpto ensure that the mates receiptsand bills o lading accurately relectthe cargo quantity and apparentorder and condition at the time oshipment.

2. Proper maintenance and inspectiono bilges, hatch covers and otherhold openings will reduce the riskso water ingress.

3. Hold preparation checks, e.g ahose test on hatch covers, testson bilge suctions and non-return valves, will help to ensurewatertight integrity.

4. Proper planning and supervisiono stowage and securingarrangements will reduce the riskso cargo shiting, crushing andchaing.

5. Pre-sailing checks, e.g securingo cargo and o weather deckopenings, will help to ensure thatnothing has been overlooked ororgotten.

6. Proper ventilation, ollowing thedewpoint point rule (only ventilatei the dewpoint o the air outsidethe hold is lower than the dewpointo the air inside the hold), willreduce the risk o condensationdamaging the cargo.

7. Visual checks o the holds and dailysoundings o the bilges will help toensure that problems arising duringthe voyage are detected and dealtwith early enough.

8. An outturn survey will help toevidence watertight integrity andthe condition o the cargo at thetime o discharge.

9. Keeping ull and proper recordso the vessels care or the cargowill to help deend claims should aclaim arise.

10. I an incident does occur the Cluband/or the local correspondentshould be contacted to assist.

Expanded commentary on the abovepoints can be ound in the materialenclosed in this booklet. So pleaseread on and challenge your operationto a year without steel claims.


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Steel pre-shipmentsurveys

Purpose

Cargo surveyThe purpose o a pre-shipment surveyo the cargo is to establish its apparentcondition immediately beore it isloaded onto the vessel. Because oincreasing claims or poor outturn osteel cargoes, it is now very commonor carriers to contract independentsurveyors to perorm pre-loadingsurveys o this type o cargo. There

would be insuicient time or the shipsoicers to perorm a detailed surveyo all o the cargo rom the time o thearrival o the vessel until the cargo isloaded. Hence the assistance o anindependent surveyor is essential i thecondition o the cargo at this t ime isto be ully and accurately determined.This is done to assist the Master toensure that the Mates receipts andbills o lading are appropriately clausedto accurately describe the apparentcondition o the cargo at the time heaccepts responsibility or the cargo.1

Vessel surveyOten a pre-shipment survey othe vessel is also requested. Thiswill involve an examination o thevessels holds to ensure that they arein a suitable condition to receive thecargo. The survey also involves theexamination o the hatches, ventilators,sounding pipes, accesses, etc. toensure that the watertight integrityo the vessel is adequate. A hatchsurvey includes the structure o thepanels, sealing bars, rubbers, drainchannels, guttering, cleats, wedges,

wheels, hinges and the operatingsystem, including any hydraulic leaks.

1 See article Pre-load Surveys o Steel Products in Gard News 144, o December 1996.2 The relevant section o the International Group Circular, dated February 1964, reads:In appropriate cases, () it is permissible or any o the ollowing clauses to be used when describing steel shipments which show signs o rust or asimilar condition on shipment:

Partly rust stainedRust and oil spottedRust stainedWet beore shipmentRust spots apparentWet steel tubesSome rust spots apparent

Wet barsSome rust spots apparent on top sheetsRust on metal envelopesTop sheets rustyCovered with snowSome top sheets rusty

PittedRusty edgesRustySome rusty edgesRust with pittingRusty ends

Goods in rusty conditionSome rusty endsEdges bent and rustyRust spottedPartly rusty

When packed sheet iron is shipped theollowing two clauses may be used:Covers rusty/wet Packing rusty/wet

It may include testing the integrity othe hatch covers by ultrasonic meansor with a jet hose o water. Any aultsdiscovered at the pre-loading survey othe vessel should be corrected beorethe vessel loads the cargo i necessary,but in any event beore the vessel putsto sea.

Loading surveyUsually the surveyor is requested to

remain in attendance throughoutthe loading so that he can monitorthe loading operation. He may berequested to advise the Master onstowage and dunnaging, and to check(and perhaps advise) on the standardso securing. Correct stowage ensuresthe load on the ships structure is withinits strength limits (e.g., deck load intonnes per square metre), avoids thecargo shiting, crushing and chaing,and ensures that the cargo can bereadily discharged. Dunnage is usedto distribute the load rom the cargo,prevent riction damage, prevent

distortion o the cargo in the stow andassist in cargo securing. The surveyorwill keep complete records, such asthe timing o the loading operations,including delays with reasons, theweather throughout, and details o thevessel, cargo description, numbers,types, weights, stowage, bills o lading,etc.

TerminologyThe terms used to describe thecondition o the cargo are the personalchoice o the surveyor. The actual

words he uses should be in the Englishlanguage, which may not be his native

Gard Guidance on Bills of Lading, reprinted 2002/Gard News 153 March/May 1999

tongue. Hence it can be seen thatthe true meaning o the terms usedcould be open to interpretation. In anattempt to avoid this conusion, theInternational Group o P&I Clubs hasissued a list o standard clauses to beused to describe the condition o steelcargoes.2 There are clauses to describesurace condition, including packagingi appropriate, which are mainly anattempt to dierentiate between

degrees o rust, and other clausesto describe mechanical damage.In all cases, it is essential that thesurveyor take a ull set o high-qualityphotographs in order to both provideevidence and clariy the terminology,should this become necessary.

The ormation o rustWhen it leaves the producer, rawsteel is covered by a thin coatingo mill scale. This is brittle, and iseasily displaced, whereupon rustingcommences. The rusting o steel isa continuous process. The longer it

continues, the more it will damagethe cargo. Any rust which appears tobe insigniicant during loading coulddevelop during the voyage, even i thecargo is properly looked ater by thevessel. Thus it is vital that any and allsigns o rust, no matter how minor, areidentiied by the surveyor.

Surace rust which orms in a reshwater environment, and is removedwithin a reasonable time, seldomcauses damage which reduces thecommercial value o the cargo.

However, rust which orms in a saltladen environment can result in rapid


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deterioration o the cargo, with pittingo the surace. This considerablyreduces the commercial value o theproduct, and may make it unsuitable orits intended purpose. It may have to besold o or a lower quality applicationor even scrap and the attendingsurveyor must test any rust or salt

content. This is usually done with silvernitrate, which turns milky when exposedto chlorides. However, this test is notinallible, and a positive result is onlyan indication that there may be saltcontamination.

WHAT DOES THE SURVEYOR LOOK

FOR?

Is the cargo wet?This may be caused by the cargo beingstowed in the open either duringstorage at the manuacturers yard orin the port beore loading. Even i itappears dry on the outside, rain mayhave penetrated, or example throughcovers or amongst rods o a bundle.Moisture may be apparent when thecargo is lited and tilted, and there maybe stains or marks on the outside toindicate that the cargo is damp or hasbeen wetted in the past. I there aresigns o moisture, it is important thatthese are tested or salinity. This couldbe caused by a salt laden environment

(such as an open stow close to thesea with a strong onshore breeze) inaddition to direct wetting by sea water.Wetness includes snow or ice.

Are there any signs o surace

rust?Types o rust include:

Spot Localised slight penetration othe mill scale.Stained A light tan coloured and inepowdery coating.Rusty A thicker coating o brownscale, when removed, the remainingsurace is uneven.Pitted Penetration o the surace withminor indentations which cannot beremoved by wire brushing.Scale Thick laking rust.Streaks Stains which indicate thatwater has previously run across thesurace.

These comments should indicate theextent o the rust, with expressions todescribe the percentage o the suracearea aected, or the location o therust i a distinct portion o the steelis aected (e.g., edges o langes). Ithe product is galvanised, commentsshould be made i the zinc coating isdull or aected by white oxidation.

Is there any contamination

present?Full details including extent shouldbe noted i there are any signs ogrease or oil, including stains, or thepresence (note colour and any othercharacteristics i the contaminantcannot be identiied).

Is the cargo mechanically

damaged?The type and extent o deormationsshould be described as accurately aspossible, with appropriate dimensions.Terms which are commonly usedinclude:Bent (locally or entire length/width)DentedEdges buckledScoredNickedCoating scratched, cracked, peelingWindings telescopedBindings brokenPackaging torn/dented punctured

Oten mechanical damage is causedby careless or inappropriate handling.I the handling damage is caused bythe stevedores during loading, thenthey should be held responsible. Theprocedure is normally clariied in anycharterparty. The bill o lading should


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not be claused as this is not strictly pre-shipment damage.

Comments should also be made whereindividual pieces within a package havebecome misaligned, or example, barsprotruding rom one end, coils ovalised.

WHO SHOULD BE NOTIFIEDThe attending surveyor should reportany damage noted to his principals.His instructions should state whoelse should be notiied, or example,the shipper o the cargo, so that heis given the opportunity to replacedamaged goods or cancel shipmento aected items. Sometimes, thesurveyor will negotiate an agreementwith the shipper on the wording o theclauses to be used. The instructionswill normally provide or the vesselto be kept ully advised so that theappropriate clauses to describe the

apparent condition o the cargo can beinserted into the Mates receipts andbills o lading.

CLAUSING MATES RECEIPTS AND

BILLS OF LADINGAt the time o loading a Mates receiptis issued and signed by the vessel.Later, the carrier will issue a bill olading to the shipper based on theMates receipt. Amongst other acts,these documents state the condition othe cargo at the time o loading. This isusually phrased as in apparent good

order and condition. I this does notdescribe the condition o the cargoas would be apparent rom a careulinspection, then the documents mustbe claused to relect the true conditionobserved.

I the cargo is ound to be wet, thenthe documents should be claused orexample wet beore shipment. I rustis ound, the type and extent o the rustshould be described using the phrasesdiscussed earlier. Similarly, i the cargohas mechanical damage, the type andextent should be included in the clause.

Appropriate clauses should indicatethe likely cause, or example markedby handling gear. It is importantthat these remarks are as accurate as

possible. The aected cargo shouldbe identiied. General terms such assome, a ew and a number oshould be avoided.

The bill o lading represents the goodsthemselves, and i the cargo is soldduring the voyage, the new owner willrely on the description o the cargoin the bill o lading. He wil l expect toreceive his cargo as described, and sowill have a case or damages againstthe carrier i the cargo is delivered in aworse condition. This is why care shouldbe taken to ensure that an accuratedescription o the condition o thecargo at the time o loading is includedin these documents.

THE OUTTURN SURVEY

Although we have discussed pre-loading surveys, it is important that anindependent surveyor attends at thedischarge port. He will examine the

hatch covers beore they are unsecuredi possible, and check or signs o wateringress when they are irst opened. Hismain duty is to examine the cargo upondischarge to check or damage. I he

inds any damage that was not recordedat the time o loading, then he shouldinvestigate the causes. He may also beinvolved in ensuring that the damagedcargo is properly sorted, segregatedand stored with suitable protection toprevent the cargo rom deterioratingurther, and that all necessary measuresare taken to mitigate any loss.

By Captain Peter Roberts, LondonOshore Consultants, London


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Condensation damage -Australia

The Federal Court o Australia hasrecently considered the responsibilityor condensation damage when cargointerests knowingly use vessels withoutdehumidiiers.

IntroductionA recent decision1 provides aninteresting and, or carriers, worryinginsight into how the Australian courtsview the extent to which a carrier must

exercise due diligence under a contractor the carriage o cargo. The decisionis understood to be under appeal butthe case raises an interesting debate.

The case beore the Federal Court oAustralia concerned two cargoes osheet steel coils shipped on sister ships(both o single hold construction, witha tween deck and olding hatch covers)but on separate voyages rom Japanto Australia. Both cargoes sueredcorrosion damage, or which cargointerests brought claims under bills olading identiying the owners o the two

vessels as carriers. For the purposeso this analysis the cargo interests andshipowners/carriers can be consideredthe same in each voyage.

One o the cargo interests was theimporter o the steel coils and hada contract o areightment whichrequired use o the carriers vesselsunless there was no vessel availableat the time. The shipping managerresponsible or choosing a carrier wasamiliar with the vessels and the holdarrangements.2 He was aware that thevessels were carrying steel cargoes romother shippers or other consignees.

The dispute was whether the damageoccurred because o insuiciency opacking3 o the steel coils or because othe ailure by the carrier to exercise duediligence to make the vessel seaworthyand/or to carry, keep and care or thecargo properly and careully.4

Both voyages gave rise to very similaractual issues. It was common groundthat the steel coils were damaged asa result o corrosion resulting romcontact with water beore or duringthe course o the voyages. Notably,there was rain during loading on bothvoyages. On the irst voyage some othe subject coils were loaded wet. Inboth voyages other cargoes or othershippers were also loaded wet. There

was no evidence o the subject coilsbeing loaded wet in the second voyage.There was dispute as to the mechanismby which water entered the packagingaround the coils. Both parties reliedheavily on experts.

The mechanism o the damageIt was common ground that at leastsome o the corrosion damage tothe coils in question was the resulto condensation during the voyage.There was expert evidence thatcondensation on the steel coils wouldalmost certainly have occurred since the

recorded dew point levels exceededthe coil temperatures or most o thevoyage. The case summary does notmention the type o condensation,but presumably it was cargo sweat.5However, the carrier contended thatthere were in act three sources owetting that caused damage. Firstly,external wetting which was able toiniltrate the wrapping surrounding thecoils. This was only relevant to the irstvoyage, or which the mates receipts/shipping orders were claused partlywet by rain in barge. However, therewas expert evidence that the nature anddistribution o the corrosion observedon the steel coils was highly consistentwith the corrosion having occurred asa result o condensation and not as aresult o external wetting. Secondlyand thirdly, the carrier contended thatcondensation either on the externalpackaging or within the packaging,which was allowed to come into contactwith the steel, was the source o wetting

1 Stemcor (Asia) Pty Ltd v C.V. Scheepvaartonderneming Ankergracht [2005] FCA 1808 (16thDecember 2005).2 The case summary is not clear on this point, but it is assumed he did know or ought to haveknown that the holds were not ftted with dehumidifers.3 A deence available to a carrier under Article IV, rule 2 o the Hague-Visby Rules, which applied inthe case by virtue o the Australian Carriage o Goods by Sea Act 1991.4 Article III, rules 1 and 2 o the Hague-Visby Rules.5 See article Dont work up a sweat in Gard News issue No. 173.

that caused damage. These argumentsessentially equated to an argument oinadequate packing.

Inadequate packingThe coils in the subject case weresaid to be packaged in a mannerconsistent with the standard practiceor the packaging o cold rolled steelcoils an inner sot paper wrapping, anouter metal wrapping, including end

caps and corner protectors, with steelstrapping. The essence o the carrierscase was that the coils should havebeen wrapped in a manner that wouldhave completely prevented the ingresso water either in the orm o liquid orvapour. The carrier reerred to evidenceo problems rom previous shipmentswhich resulted in the same shipperschanging the inner paper wrappingas a result o suggestions that thepreviously used paper was not eectivein preventing the penetration o water/water vapour. The carrier also reerredto the practice o another shipper o

steel coils, which was to include anadditional sealed plastic wrapper overthe top o the inner paper wrapper,and which was said to completely sealthe contents against any moistureingress. The carrier also sought to makeweight o the nature o the steel, whichwas unchromated. Chromate coatingprovides temporary protection againstcorrosion, but in this case the endreceiver required unchromated steel.Thereore, only a light oil coating wasapplied to the coils which provided verylimited protection against corrosion.

The court commented that insuiciencyo packaging is the inadequatepreparation o goods to withstand theoreseeable risks o carriage on thevoyage contemplated. Packing wouldbe deemed suicient i it is normal orcustomary in the trade. It was apparentthat the method o packaging in this casewas in accordance with usual practice, butwas not such as would prevent the entryo water vapour in the air. The real issuethereore was whether, having regard tothe nature o the steel, the packaging wasrequired to be such that water vapourcould not enter through it, or whetherthe packaging was suicient i it wasadequate to prevent the entry o loosewater rom external wetting, the burdenbeing on the carrier to ensure that water

Gard News 186,May/July 2007


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vapour in the air, which might iniltratethe outer and inner packaging, wouldnot condense on the steel coils duringthe carriage. In other words, as the courtput it, it was a question o whether theshipper was entitled to rely on the carrierto ensure that the conditions under whichcarriage was to occur would preclude

condensation o water vapour in the air,or whether the carrier was entitled toassume that the packaging was such asto preclude the ingress o water vapourthrough the packaging.

SeaworthinessThe court stated that a carrier mustdemonstrate that it has exercised allreasonable skill and care to ensurethat the vessel is seaworthy at thecommencement o the voyage. Thetest to be applied was an objectiveone. The carrier must act in accordancewith international standards and the

standards o a reasonable carrier inthe particular circumstances o theproblem at hand. In the courts view,the more serious the consequences ounseaworthiness, the greater the eortthat should be made to make the vesselseaworthy.

Cargo interests main case onseaworthiness was that the vesselsought to have been equippedwith a dehumidiication system toremove water rom the holds beorecondensation could occur. They arguedthat a vessel or use in the voyages in

question at the particular time o yearor the particular cargo that did nothave a dehumidiication system wasunseaworthy with regard to that voyagecarrying that cargo. The voyagesin question were to commence in

Yokohama in winter, when it is regularlycold and rain is expected. Rain didoccur during loading operations o bothvessels and it took about 20 minutes

to close down the hatches when raincommenced. It was reasonably likely,thereore, that some rain entered theholds during loading operations. Wateralso entered the holds on and withinother items o cargo that were loaded,including timber packaging anddunnage. There was expert evidence

that the amount o water in the holdsmeant that condensation duringthe voyages was virtually inevitable.Interestingly, a igure o 68 litres was puton the amount o water required in thehold or condensation to occur. In orderto travel to Australia, the vessels hadto cross the equator where they wouldencounter warm moist air. Accordingly,there was a high probability thatconditions or condensation would becreated in the hold during the courseo the voyages i ree water was noteliminated or i moist air was introducedinto the hold in the course o the

voyages.

Cargo interests also argued as analternative that heaters should beinstalled in the hold to preventcondensation, although there was noevidence that the use o heaters invessels generally was commonplace.Dehumidiication systems on the otherhand had been used on vessels carryingmoisture-sensitive cargoes or manyyears prior to the voyages in question.There was evidence that anothercarrier had been carrying similar coilswith dehumidiiers since 2003 with no

incidence o corrosion. Whether theinstallation o dehumidiication systems,on either a temporary or permanentbasis, was reasonably practicable in thecircumstances was, in the courts eyes,to be gauged in the light o severalactors, such as the reight earnedunder the year-long areightmentcontract and the value o the coils,although the latter would have been

unknown to the carrier. As the court putit, unless the cost was prohibitive or itwas otherwise an unreasonable costto incur, due diligence would requirethat it be incurred. It was determinedthat or each o the vessels the cost oinstalling a dehumidiication systemwould have been somewhere between

AUD 67,400 and AUD 115,406.

Proper and careul handling and

careCargo interests also contended that thecarrier breached the duty to properlyand careully load, handle, stow, carry,keep, care or and discharge the coils.The two broad arguments were thatthe carrier allowed ree water to enterthe holds during loading and that theyailed to seal the hatches properly.Although some rain water may haveentered the holds during loading, therewas no evidence that the system or

closing the hatches was other than aproper system, and there was no reasonto believe that the system was notimplemented in relation to the voyagesin question. As or the hatches, therewas no evidence o there being anyingress o water into the holds o eithervessel by way o the hatches at anystage during their respective voyages.As or loading wet cargo or dunnage,the court took the view that this wouldnot normally give rise to a breach oArticle III, rule 2 o the Hague- VisbyRules so long as the carrier had aproper system to remove the moistureadmitted into the holds.

Thus, the real question, as the court putit, was whether the carrier properly andcareully carried, kept and cared or thecoils. I there was water in the holds,then ventilators would need to beoperated in a way that would removethat moisture. I the ventilators wereoperated in a ashion that permitted


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Condensation damage to steel coils.

6 A hygroscopic material is one which attracts moisture rom the atmosphere.

the ingress o urther moisture, therewas a ailure to carry, keep and careor the coils properly and careully.Both vessels recorded periods whenthe holds were ventilated but cargointerests contended that the holdsshould not have been ventilated whenthey were, and that it was unnecessaryand contrary to proper practice to doso. The ventilation records or bothvessels conirmed that, on all occasionsbut one, the crew only ventilatedthe holds when the dew point o theoutside air was less than that o the airinside the hold, consistent with the dewpoint rule. The court noted, however,that this was a non-hygroscopic6 cargoand that it was standard practice in theshipment o steel rom cold to warmerclimates not to ventilate the hold.

The courts fndingsThe courts indings were as ollows:

The packaging o the coils wasnot insuicient, but adequate andconsistent with general practice in theindustry. While the nature o the steel (whichwas unknown to the carrier) madethe coils particularly susceptible tocorrosion, the sensitivity o steel tocorrosion generally was well known inthe industry. More likely than not the holds wereclosed in Yokohama with water trappedinside in the orm o wet dunnage andliquid water on some cargoes that werewet with rain.

It was probable that water in the ormo vapour was introduced to the holds

during periods o ventilation (when thevessels were likely to have been in thetropics) rather than being removed. On the balance o probabilities,condensation occurred ater theloading o the coils on each vessel andduring the course o the respectivevoyages o the vessels. The condensation resulted incorrosion. The corrosion could not have occurredi moisture had not been admitted intothe holds or i moisture, once admitted,had been removed by the operation oa dehumidiication system installed inthe vessels. Alternatively, condensationcould have been prevented by theoperation o a heating system installedon the vessels to ensure that the suracetemperature o the coils did not allbelow the dew point temperature o theair in the holds. Given the imprecision o the dew

point rule, the question o installation oa dehumidiication system was critical. The carrier could have actored thecost o installation and operation odehumidiiers into the reight charge orthe particular voyage or or the periodo the areightment contract. That is adecision that should have been madeprior to oering the vessels or loading.

The courts decision (under

appeal)The court went on to hold that incircumstances where the coils wereknown to be sensitive to moisture:

and there was no dehumidiication or

heating system, the admission o waterinto the hold during the course o thevoyages was a ailure to carry, keep andcare or the coils properly and careully; and it was known or ought to havebeen oreseen by the carrier that waterwould be admitted into the holdson other cargo and on dunnage and

possibly because o rain, the vesselswere not seaworthy or the purpose ocarrying the coils in question on thevoyages in question at the relevant timeo year; it was reasonable or the carrier totake steps to ensure that water couldnot be admitted into the holds or, ithat was not practicable, to install adehumidiication system to removeexcess water rom the holds and ensurethat the dew point temperature o airin the holds would not all below thesurace temperature o the coils. Theailure to do so was a ailure to use due

diligence to make the vessels seaworthyor, putting it another way, to make theholds it and sae or the carriage andpreservation o the coils.

DiscussionThere certainly appear to be plentyo issues in this case and it will beinteresting to see the outcome o theappeal. The reader may eel that thecarrier was unortunate to have beenound wanting in his duty to properlyand careully carry, keep and care orthe coils. On all occasions but one, thecrew ventilated the holds consistentlywith the dew point rule. I doneproperly, such ventilation should serveto replace hold air with ambient air thatcontains less moisture. Thus the courts


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7 Non-hygroscopic cargo being carried rom a cold climate to a hot climate see ootnote 5.8 E.g., Article III, rule 8 o the Hague/Hague-Visby Rules.9 See ootnote 5.

inding that it was probable water inthe orm o vapour was introduced tothe holds during periods o ventilationrather than being removed, suggestssome misunderstanding on their part.Perhaps the court was inluenced bythe act that this was a carriage orwhich the holds would not normally

be ventilated7 and by expert evidencethat the dew point rule is only anapproximation. The latter may well betrue, but that is the recognised systemon board ships and the court seemedto be happy with the system o closingthe hatches during rain despite it beinglikely that rain would enter the hold inthe time taken to do so.

The most interesting aspects o thiscase, however, concern the courtsviews on the installation and use odehumidiiers. The signiicant issuewhich appears to have been the

carriers undoing was the wettingpresent in the holds at loading, andthe inability o the vessel to removethat moisture during the voyage. Ocourse by the time o loading it wastoo late to it dehumidiiers. Whatother options did the carrier have atthat time? The court itsel recognisedthat it was not possible or the carrierto dry the cargo beore it was loaded,especially since at that time the cargowould not be in the possession othe carrier. Since the vessels wereo single hold construction, albeitwith a tween deck, it may have been

diicult to aord wet cargo its ownseparate stowage accompanied by awritten remark on the bills whereby theshippers accepted all responsibility orthe consequences o their cargo beingwetted. That would perhaps leave thecarrier with the option to reject wettedcargo. Not straightorward; and withoutknowing the terms o the contract oareightment it is diicult to comment.

The importer who was the other partyto that contract appears to have knownthat the vessels were not itted withdehumidiiers and would have knownabout the risks o exposure to moisture-sensitive cargo on the subject voyages.This case suggests that, even with thatknowledge, owners should bear the risk

when cargo interests knowingly decideto use vessels without dehumidiiersand, urthermore, even i owners go onto ventilate in accordance with the dewpoint rule, they should still bear the risk.One wonders whether the court wouldhave come to the same decision hadthere been no evidence o wetting inthe holds at the time o loading, butthen the corrosion may never haveoccurred.

Lessons learnedI anything, this case suggests thatboth carriers and cargo interests

ought to give more considerationto the oreseeable risks to the cargoat the time they contract. Nobodylikes to negotiate remarks on bills olading at the last minute and a remarkseeking to relieve the carrier rom anyresponsibility or the vessel not beingitted with a dehumidiier could wellall oul o the relevant carriage rules.8For the voyages in this case there doesseem to have been a risk o moisturebeing admitted to the holds at loading.However, due to changes in theweather/climate, that same risk may notarise on all loadings under a contract

o areightment. Cargo interests will inmany cases wish to see their cargoesbeing shipped regardless o wetting.They may thereore be willing to use aship or all loadings under a contract oareightment without a dehumidiierand despite the risk that condensationmay result rom the vessels inability toremove moisture admitted to the holds.As or the owners, they will be keen

to ensure that they are not exposedto claims or condensation damagewhere they have no control over thesubstantial risks o such damagearising. The diiculty oten aced byowners, as demonstrated in the subjectcourt case, is determining the causeo the condensation. Moreover, it

may not always be possible to avoidcondensation despite proper practiceon the ship. For example, i due tobad weather or high dew points inthe ambient air, the ship is unableto ventilate, ships sweat may beunavoidable on voyages rom warm tocold climates. Cargo sweat at dischargecan also be diicult to avoid and occurswhen cold cargo comes into contactwith warm moist air when the holds areopened at discharge.

I an owner is aced with a contracto areightment similar to that in this

case, and wishes to limit his exposureor condensation damage claimswhere no dehumidiiers are itted onhis ships, he could seek to make itclear in the contract that owners willonly be responsible or such claimswhen caused solely by improper/insuicient ventilation. I bills o ladingwill be issued pursuant to the contracto areightment, there is a risk thatowners will be unable to avoid liabilityor condensation damage claims byinnocent third parties entitled to claimunder those bills.9 Owners would thenneed to consider making provision

or a non-responsibility clause undera voyage charterparty, which might, iincorporated in the bill, aord ownersa deence, but more importantlycould establish a recourse against thecharterer in the event a deence couldnot be sustained.


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Australia - Condensationdamage - A follow-up

An article in Gard News issue No. 1861featured a case before the Australian courtsinvolving corrosion damage to steel coils,caused by condensation, and for whichthe carrier was found liable. The case wasappealed to the full court of the AustralianFederal Court and judgment has now beenhanded down.2 The outcome for carriers ismixed.

Readers will recall from the article in issue

No. 186 that the carrier was found liable atfirst instance3 on two counts. Firstly, therewas a finding of unseaworthiness by reasonof failure to use due diligence to makethe holds fit and safe for the carriage andpreservation of the steel coils. The reasoningof the judge was that:(i) it was known orought to have been foreseen by the carrierthat water would be admitted into the holdson the cargo and on the dunnage, possiblybecause of rain, given the nature of thevoyage and time of year. (ii) it was deemedreasonable for the carrier to take steps toensure that water could not be admitted intothe holds, or if that was impracticable, to

install a dehumidification system to removeexcess water from the holds and coils.

Secondly, there was a failure to carry, keepand care for the coils properly and carefully,because, in the absence of a dehumificationor heating system, the carrier failed toprevent the admission of water into the holdduring the voyage.

UnseaworthinessTo the appeal court, the question waswhether the vessel was fit to carry the cargoto its destination. The alleged unfitnesswas the absence of dehumidifiers, leadingto an inability to avoid condensationand, therefore, corrosion of the coils. Ifcondensation was a risk of the voyage, thenthe carrier was obliged to provide a ship,crew and equipment to deal with that risk.To answer this, the appeal court raised twofurther questions. The first was whether suchconditions might have arisen at some stagein the voyage, which was accepted. Thesecond was whether the vessel and crewwere capable of dealing with the problem.In answer to this, the appeal court doubtedthe correctness of the first instance judgesreasoning in (i) above and commented that

the chance that moisture might enter thehold during loading could hardly, by itself,make the vessel unseaworthy, especiallysince much depended on the amount ofwater, the available means for dealing with it

and the likely conditions to be encounteredon the voyage. The appeal court went onto find that there was no evidence of anypractice to install and use dehumidifiers,so the duty to exercise due diligence couldonly have required such a step if the vesseland crew were not otherwise capable ofdealing with the problem. On that point,the appeal court found that there was amechanism for removing water from theholds, namely wiping and mopping and

although the effectiveness thereof mayhave been questionable, that had to beconsidered in light of the lack of evidenceas to any practice concerning the use ofdehumidifiers. In summary, therefore, theclaimants adduced insufficient evidence toprove unseaworthiness, so the question ofdue diligence did not arise.

Proper and careful handling and careThe appeal court deemed that condensation,the causal event, was most relevant toconsideration of this duty of the carrier, notthe mere presence of water in the holds.Also key was the first instance finding that

there should be no ventilation during thecarriage of steel cargoes from cool to warmerclimates, with which the appeal court agreed.They also agreed with the first instance

judges interpretation of the expert evidencethat ventilation should not have occurredas it was capable of causing condensation.Although there remained the questionas to whether the corrosion was causedby condensation resulting from improperventilation, the appeal court decided that thecarrier had not challenged the first instance

judges finding that it probably did. Theappeal court went on to review the carriersdefences, notably inadequate packing,and agreed with the first instance judge,commenting that the carrier had failed toshow that there was any wrapping in use thatwas impervious to water. The appeal courttherefore upheld the first instance decisionthat the carrier had failed to properly andcarefully carry, keep and care for the cargo.

CommentThe positive aspect of the appeal decisionis that the court appears to have playeddown many of the arguments on the use ofdehumidifiers. Somewhat surprisingly, thosearguments in relation to seaworthiness lost

out to a much less sophisticated system:wiping and mopping. Ultimately, the carrierappears to have fallen foul of not complyingwith a basic principle of ventilation, which isnot to ventilate non-hygroscopic cargoes on

1 Condensation damage Australia.

2 C.V. Scheepvaartonderneming Ankergracht

v Stemcor (Asia) Pty Ltd [2007] FCAFC 77 (31st

May 2007).

3 Stemcor (Asia) Pty Ltd v C.V.

Scheepvaartonderneming Ankergracht [2005]

FCA 1808 (16th December 2005).

4 This rule is also given to the practice o only

ventilating i the temperature o the outsideair is at least three degrees cooler than the

average cargo temperature at the time o

loading, which can o course be difcult to

determine.

voyages from cooler to warmer climates.That basic principle is, however, just abasic principle and arguably over-simplifiesmatters. As mentioned in the previousGard News article, cargo sweat can bedifficult to avoid when cold cargo comesinto contact with warm moist air when theholds are opened at discharge. Such flashcondensation has been known to occurand it could have occurred on voyagessuch as those in this case, had there been

no ventilation. It is interesting that theappeal court even commented that therewas evidence of benefits in ventilating thesteel cargo despite its non-hygroscopicnature, including warming the cargo.

It is also worth noting that at first instanceand on appeal the Australian courtshave considered the dew point rule anapproximation and a system that in somecircumstances might be consideredimproper. There was reference in bothcourt judgments to the three degreerule, which permits ventilation only if theexternal air dew point temperature is three

degrees lower than that in the hold.4 If anyguidance can be given, it is to be awareof the risks of condensation and to seekinstructions from shippers as to ventilationrequirements. With cargoes like steel,which are very susceptible to damage fromcondensation, particular care is neededand the carrier needs to be confident thatwhatever ventilation system is adoptedwill improve the conditions within the holdwithout risk of condensation. If in doubt,seek expert guidance.

Gard News 187, November 2007/ January 2008


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When can a masterrefuse to load damaged

cargo?

is issued against the provision to theshipowners by the charterers o a lettero indemnity (LOI). The irst solution isthe one preerred and recommendedby Gard. The second is likely to leavean owner without P&I cover (see Rule34 1 ix o Gards 2005 Statutes andRules) and with little or no deence toa claim by an innocent third party ordamage which should have been notedon the bill.

In Gards experience, it is relatively rareor a master to reuse to load damagedcargo. This usually happens when thereis a clause in the charterparty whichrequires the master to sign clean billso lading, but which allows him to rejectcargo which is in such a conditionthat a clean bill could not be issued.Nevertheless, this does happen romtime to time and a recent decision othe English High Court1 provides useulguidance on the points which masters,owners and charterers should have inmind when aced with such a situation.Interestingly, this was an appeal by

owners Sea Success Maritime (SSM)rom an award in avour o charterersArican Maritime Carriers (AMC) by atribunal o London arbitrators. UnderEnglish law, it is very diicult to obtain

Following a recent decision o theEnglish High Court, very clear termsmust be set out in the charterparty ithe parties wish to give the master theright to reject damaged cargo beore itis loaded.

IntroductionThe question o whether a cargo,oten a cargo o steel products, is inapparent good order and conditionand the resulting disagreement as to

whether the bill o lading should beclaused (and i so, in what terms) arisesregularly. Disagreement may arisebecause there is a genuine actualdispute as to the true condition o thegoods. Alternatively (or sometimesadditionally), or letter o credit reasons,a shipper will want a clean bill o lading,whereas a master has the right and theduty to protect both the shipowner andthe uture bill o lading holder(s) andto place remarks on the bill which inhis reasonably-held opinion accuratelyrelect the condition o the goods.

Any disagreement is usually resolved bydiscussion between the parties. Eithera wording or insertion into the bill bythe master is agreed, or a clean bill

1 Sea Success Maritime Inc. v. Arican MaritimeCarriers Ltd. [2005] EWHC 1542 (Comm); 15thJuly 2005

Gard News 180, November 2005/January 2006

leave to appeal against an arbitrationaward. The act that leave to appeal wasgranted suggests that the judge whoheard the application thought therewere important issues which should beheard by the High Court.

The actsSSM were the owners and AMC thecharterers o the SEA SUCCESS. Thevessel was chartered on the well-knownNew York Produce Exchange orm.

There were several other charterpartiesdown the line to various sub-charterers, essentially on identicalterms. The same arbitrators wereappointed under each charterpartyand the disputes were dealt withconcurrently.

In September 2004, the vessel wasordered to load a cargo o steelpipes at Constanza, Romania. Havinginspected them beore loading,the master ound the pipes to bedamaged. He reused to load them.The dispute was resolved by the issue

to owners o an LOI. The vessel then


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sailed to Novorossiysk. There, shewas instructed to load a cargo o hotrolled steel coils. The same situationarose. The master considered thecoils to be damaged (which in Gardsexperience is not uncommon with suchcargo) and reused to load them. Thistime, rather than an LOI being issued,the parties entered into a withoutprejudice agreement which resolved

the immediate problem. The cargo wasthen loaded.

The basis on which the master

reused to load the cargoIn support o his decision to reuse toload the cargo in question, the master(and SSM) reerred to clause 52 o thecharterparty with AMC. This clauseread:The vessel to use Charterers Billso Lading or Bills o Lading approvedby Charterers and/or sub-Chartererswhich to include Clause ParamountGeneral, USA or Canadian, as

applicable, during the period othis Charter. Master to authorise,time by time, in writing Charterersor their appointed Agents to signBills o Lading on behal o Masterin accordance with Mates Receipts.Master has the right and must reject anycargo that are [sic] subject to clausingo the BS/L.

SSM relied on the last sentence o thisclause which, they argued, meant thatthe master could and should reuseto load cargo which was in such acondition that, i it was loaded, the billso lading would have to be claused.Eectively they were arguing that onlycargo which was in apparent goodorder and condition could be loaded.

There seems to have been no disputebetween SSM and AMC as to theactual condition o the cargo at bothConstanza and Novorossiysk. Soar as the Novorossiysk cargo wasconcerned, AMC agreed and conirmedthat the bills o lading would containthe description o the cargo and itscondition as set out in the pre-loading

survey report prepared on ownersbehal. On this basis, AMC said thatthe master would not need to clausethe bills o lading (because they alreadycontained the surveyors remarks) andthus that he had no good reason toreuse to load the cargo.

The arbitrationThe dispute went to arbitration. It washeard by three well-known Londonarbitrators. Essentially, they had todecide two questions:1. In what circumstances, on thetrue construction o clause 52 o the

charterparty, is the master entitled andobliged to reject the cargo presentedor shipment/tendered or loading?2. Did those circumstances exist atNovorossiysk?

In answer to the irst question, thetribunal decided that the master could/should reject the cargo ... i the cargo,once loaded (emphasis added) wouldbe properly described in the bill olading in a way which would qualiy thestatement o apparent good order andcondition ... proposed to be stated inthe bill o lading by the shipper.

In answer to the second question, thetribunals answer was no, on thebasis that there was no dispute as to

After initial inspection of the cargo, shippers may change their intended desription of the cargo in the bill of lading.

the condition o the cargo, nor thedescription o it that would be insertedin the bills o lading. The tribunal wasno doubt inluenced by the act thatSSM and AMC were essentially inagreement as to the proper conditiono the cargo. SSM sought leave toappeal against these indings andobtained it. The appeal was heard bythe High Court in early July 2005.

The High Courts fndingsThe judge upheld the tribunals decisionand thus ound in avour o AMC.Broadly, he approved o the tribunalsreasoning. He made the particular pointthat clause 52 (and presumably similarclauses) was not intended to be used ithere was no dispute between SSM andAMC as to the condition o the cargo.The judge accepted that the clausewould operate i the master (correctly)intended to clause the bill in relationto the condition o the cargo, but theshipper did not agree.

The judge also dealt with whathe called the timing point. Thisconcerned SSMs argument that it wasimpractical or a master to try to rejectcargo once it had been loaded, anargument with which many readers willhave sympathy. Nevertheless, the judgerejected this argument. He concludedthat, ater the initial inspection o thecargo (whether by the master or by thepre-loading surveyor), the charterers/shippers have the opportunity tochange their intended description othe cargo in the bill o lading. Thus,

he elt, it would be premature or themaster to reject the cargo at that time.I charterers/shippers agreed to thebill being worded in terms acceptable


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to the master, there is no dispute andclause 52 does not operate (see above).In the judges view, it was only i thecharterers/shippers declined to changetheir description o the cargo in thebill o lading (i.e., reused to allow thebill to be claused as required by themaster) that clause 52 operated and the

master was then allowed and requiredto reject the cargo.

Because it did not arise here, the judgesaid nothing as to the masters positioni the charterers/shippers do not replyto his request that they agree to thebill(s) o lading being worded in termsacceptable to him. Under English law,silence is not agreement. Thus it wouldseem that, i aced with a clause in thecharterparty worded similarly to clause52, the master would probably haveto continue loading, but would havethe right and obligation to clause the

bill(s) himsel, just as he would have ithe charterers/shippers had reused hisrequest.

CommentIt must be said that clause 52 is notclearly worded. Although the intentionappears to be that the master hasthe right and must reject damagedcargo prior to loading, the last sentencehas been interpreted by a tribunal oLondon arbitrators and a High Court

judge as meaning something dierent,especially as to when the master canexercise his right and obligation to

reject. I owners, or indeed charterers,wish to give the master the right toreject damaged cargo beore it isloaded, this will have to be set out invery clear terms in the charterparty.

We have mentioned above the positionwhere a clause in the charterpartyrequires the master or his agent to signonly clean bills o lading, but also giveshim the right to reject cargo or whichclean bills can not be issued. Based onthis case, it seems that such a right toreject may arise only once the cargo has

been loaded. It is thereore suggestedthat owners who are asked to acceptsuch a clause stipulate in clear termsthat the master is entitled to reuse toload (not merely reject) cargo orwhich in his opinion a clean bill couldnot be issued.

It is also worth stressing that both thetribunal and the judge appear to havebeen strongly inluenced by the actthat SSM and AMC were in agreementas to the condition o the cargo,especially the Novorossiysk cargo. Itis apparent that AMC were willing to

allow SSMs surveyors remarks to beinserted into the Novorossiysk bills.Had this been done, it would havebeen diicult or SSM to have arguedthat the bills did not accurately statethe condition o the cargo at the time itwas received by the vessel. I there hadbeen no agreement between SSM andAMC and had AMC insisted on cleanbills being issued, it seems the positionwould have been very dierent. The

judge ound that clause 52 wouldhave operated in such circumstances,although he does not seem to haveconsidered how, in practice, the vessel

would have discharged the steel coilsalready loaded.

Lastly, the judge re-stated what almostall practitioners would recognise as

The timing point is an important factor.

being the correct state o aairs in suchmatters. To paraphrase the judge, hesaid that i the master (or oten a surveyoracting or owners) inspects the cargo andreasonably considers it to be in such acondition that the bill o lading should beclaused, the parties have a choice. Eitherthe charterers/shippers agree to the bill

o lading being so claused, in which casethe master can sign it, or give authority orit to be signed on his behal, because heis satisied that it accurately relects thecondition o the cargo, or the charterers/shippers reuse to themselves clause thebill, in which event the master must do sohimsel.

In so saying, the judge repeated the well-known position under English law that amaster has to take what he called a ...reasonable, non-expert view o the cargo... as he sees it.

A master will oten seek a second opinionrom a surveyor and in the case o cargoeso steel products, it is common or pre-loading surveys to be carried out, ashappened here.

What is uncommon is that the masterand SSM reused to allow the cargo to beloaded, even though AMC conirmed thatthe surveyors remarks would be insertedinto the bills o lading.

Both the arbitrators and the judge oundthat clause 52 o the charterparty did notallow SSM to reuse to load the cargo. Itremains to be seen whether, having loston two occasions, SSM wish to appealto the Court o Appeal. We shall keepreaders inormed.


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Pre-loading surveys ofsteel cargoes - When are

they recommended?Articles in Gard News issues No. 144and 153 discussed steel pre-loadingsurveys and the Clubs policy andrecommendations in this regard. Recentexperience has demonstrated thatthere may still be some uncertainty withrespect to this issue.

In particular, it has been observed thatsome members do not ully appreciatethat there are some steel products

which normally do not justiy thecosts o having a pre-loading surveyarranged.

As a general guideline, the Club willcover the costs involved in ownersentries pre-loading survey on inishedsteel products. Accordingly, it isnormally recommended that pre-loading surveys be carried out on theollowing products: Hot rolled steel in coils or bundles Cold rolled steel in coils, packs orbundles Galvanized steel

Stainless steel Tin plates Wire rods

Steel pipes Structural steel (rebars, channels,angles, beams, bars, strips, sections,orgings)

However, certain low-value and semi-inished products, such as those listedbelow, normally do not require a pre-loading survey: Steel billets Steel blooms

Steel slabs Steel scrap Steel swar Pig iron.

Nevertheless, i despite the Clubsrecommendation a member wishesto have a pre-loading survey o any othe above low-value and semi-inishedsteel products carried out, the Clubmay assist with the arrangements, butthe costs o the survey will be or themembers own account.

It should be noted that the mere

ailure to carry out a pre-loading surveyon inished steel products does notprejudice the P&I cover. But, as always,

Gard News 171, August/October 2003

the P&I cover may be prejudiced i themaster or the member knows that thebill o lading, waybill or other documentevidencing the contract o carriagecontains an incorrect description o thecargo or its quantity or its condition.

Finally, there are occasions when itmakes sense or an owner to agree witha time charterer to share the costs oa pre-loading survey on a 50/50 basis.

Generally, the Club does not havea problem with this, and it may be agood solution rom a cost perspectivei there is a sound on-going commercialrelationship between owners andcharterers. However, it is appropriateto warn owners against agreeing toshare the costs o a pre-loading surveywith voyage charterers or the obviousreason that voyage charterers will quiterequently have a very close commercialrelationship with the shippers, with theresult that disputes over remarks inmates receipts and clausing o bills olading can easily occur.


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Steel Seawater wettinginland?

THE SCENARIORoads and other suraces are commonlysprayed with salt in winter to preventand remove rost and ice. When thatsalt becomes mixed with water onthe roads, rom rain or melted ice,the salt gets taken up in the spraygenerated rom vehicles on the roads.Steel transported by road on lorries, isoten not covered at all or insuicientlycovered, e.g. by tarpaulins. This can

lead to the steel being exposed tothe salt laden spray. The result is saltcontamination.

THE PROBLEMIt is well known that steel productsare sensitive to salt contamination,principally because o the risk o thesteel rusting. The mere presence ochlorides on coils oten, thereore, leadsto rejection o the cargo by receivers,and losses resulting rom agreeddepreciations, salvage sales or evendisposals. The losses on particularlysensitive types o steel, or example

cold rolled coils, can be signiicant tens to hundreds o thousandso US dollars. Invariably when areceiver discovers that chlorides have

contaminated the coils, he is inclinedto think that the cause is seawater, andthe damage having occurred during thesea transit. Whilst tests conirming thepresence o chlorides are not inallible,they may, together with other evidence,or example the presence o heavyweather during the sea transit, suice toestablish a prima acie case that the seacarrier is the responsible party.

This general problem highlights theneed to protect shipowners positionagainst claims or pre-shipmentdamage.

THE SOLUTIONIt ollows that it is very important orthe sea carrier to have good evidenceo the condition o the steel at thetime o loading and discharge romthe vessel to properly assess whethercases against them have any merit. Thatis why sea carriers are recommendedto instruct properly qualiied andindependent surveyors to perorm pre-

shipment and outturn surveys o steel(or urther inormation/comment seethe article Steel pre-shipment surveysin Gard News 153, March/May 1999,

Gard Loss Prevention Circular 12-02

pages 35-39). As part o such surveys,the Master is advised to ensure that thesurveyor tests steels, particularly thosesuspected to have been in contact withmoisture, or the presence o chlorides.This test is usually done with a silvernitrate, which turns milky when exposedto chlorides. As a ollow-up to thiscircular, please reer to the upcomingGard News 169 in February 2003 orurther inormation on silver nitrate

testing.

Further inormation can also be oundin the Gard Guidance on Bills o Ladingon our website at www.gard.no.

We are grateul to our correspondentsin Barcelona, Bull Sworn MarineSurveyors S.L or drawing our attentionto this issue and or providing theimages o steel on lorries beingaected by sprays on Spanish roads,accompanying this article. With thewinter in the northern hemispherearound the corner the problem o salt

contamination rom road spray will notbe isolated.


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California Block Stowage- Too free and easy?

INTRODUCTIONThe Caliornia Block Stow (CBS) methodo stowing steel slabs has been inexistence or a number o years. As thename suggests, the method originatedin Caliornia, reportedly with CaliorniaSteel Industries. The idea behind thismethod appears to have been toincrease eiciency in cargo handling,although it is unlikely to have beencoincidental that one result o the use

o this method is to reduce the timeand cost involved in cargo handling bythe stevedores.

This method involves binding togethersteel slabs into a ree-standing stow.The slabs are loaded ore and at,dunnaged and shored up and thenlashed with Signode strapping.This system uses steel strapping andmetal clips, rather than wire ropesand turnbuckles, to secure the goods.The straps secure only the top ewtiers in the outer stacks vertically. Theslabs inside the stack are essentially

ree-standing, held in place only bytheir own weight, by the weight o theslabs outside and above them and thestrapping.

Although ease and speed o loadingand discharging is importantcommercially, it is more important,both or the saety o the vessel andher crew and cargo, that the best andsaest method o stowing and securingthe cargo is used. This is particularly thecase where the cargo is large, heavy,steel slabs. Gard Services view is thatthe CBS method is not necessarily thebest and saest method in all situations

and that the traditional method is to bepreerred.

ARBITRATIONA case which ended up in arbitrationin New York and which resulted in thelosing party paying close to a sevenigure sum in respect o damages,makes it clear that using the shortcut othe CBS method does not produce thedesired result in the long run. The caseinvolved several parties and a numbero issues, but the basic acts are set outbelow.

The vessel in question, a sel-trimmingive-hold bulker, was built in the early1980s. In early 1995, she loaded acargo o nearly 15,500 MT o steel

Gard News 160, December 2000/February 2001

slabs at a port in southern Italy. Thecargo was destined or the US EastCoast. Prior to loading, the Master wasinormed that the CBS method wouldbe used. He had never carried steelslabs beore and initially suggested themore time-consuming but tried andtrusted method o stowing the slabsathwartships, extending the stow to thesides o the hopper tanks. However,the shippers persuaded him that the

CBS was appropriate and that theyhad considerable experience o thismethod. He thereore accepted theirstowage plan. He also signed a lettergiven to him by the shippers in theollowing terms:This is to certiy that the cargo ladenonboard my vessel has been loaded,stowed, secured and lashed under mysupervision and up to my completesatisaction. The vessel is in all respectsseaworthy and is ready to carry on hervoyage.

Unortunately, a ew days ater sailingand whilst still in the MediterraneanSea, the vessel suddenly listed inmoderate, but not exceptional,weather conditions. An inspection


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o the holds showed that the cargoin all ive holds had shited to port.The shipowners declared generalaverage and the Master decided toput into a port o reuge in one o theMediterranean islands. There, thecargo was re-stowed in accordancewith the recommendations o the

surveyors who attended on behal othe various parties. Interestingly, thesurveyors recommended that steelbrackets be welded in each hold toprevent the stow shiting, but otherthan this change, the stowage methodwas essentially the same as had beenused at the port o loading, i.e., theCBS method. The remainder o thevoyage was uneventul and the vesseland cargo arrived saely at the port odischarge.

THE CLAIMSThere were a number o disputes

between the various parties. Therewere claims both up and down the lineo charterparties or hire and bunkerspaid or withheld. The shipownersalso claimed the re-stowage andassociated costs, to the extent that theyhad not been reimbursed in generalaverage. The (voyage) charterers at thebottom o the chain o charterpartiesalso claimed their general averagecontribution. All these disputes wereconsolidated into an arbitration, whichtook place in New York beore a panelo three arbitrators.

Essentially, the matter ell to be dealtwith on the basis o clauses 8 and 15o the standard New York ProduceExchange (NYPE) orm o charterparty.Both these clauses were materiallyunamended. In particular, clause8 did not contain the words andresponsibility ater the words under

the supervision o the Master.

THE ARGUMENTSOwners argued that the weatherencountered by the vessel was notunusual or the time o year and thatthe cause o the cargo shit was ailureby the shippers to properly ollow theirown loading plan. Owners urther saidthat clause 8 rendered the voyagecharterers responsible or incorrect and/or inadequate stowage and securing othe cargo.

Voyage charterers disagreed. They

maintained that the (CBS) method ostowing the goods was appropriateand that the stowage and securing bythe shippers was correct and adequate.They reerred to the Masters lettero satisaction in support o theirposition. In their view, an exceptionallyheavy roll must have caused the cargoin all ive holds to shit, which urtherindicated negligent navigation on thepart o the Master.

THE ARBITRATORS DECISIONOne arbitrator dissented rom thedecision o the other two. There wasmuch argument about the weatherconditions encountered by the vesseland the extent o roll o the vesselwhich would or should cause the cargoto shit. Expert evidence was submitted

by both sides. On the basis o theevidence which they saw and heard,particularly rom the various surveyorswho attended the vessel at the port oreuge and assisted in the re-stowageoperation and the surveyor who carriedout a pre-loading survey o the cargo,the majority decided that the shippershad not ollowed their own loading andstowage plan. The majority ound thatthere were deiciencies in the lashingsused and insuicient lateral support orthe slabs. It also ound that the slabs ineach stack were not o uniorm size.This naturally meant that each stack was

itsel not o uniorm size.

The panel then considered who wascontractually responsible or thepoor stowage. Owners argued thatthe wording o clause 8 placed suchresponsibility on the voyage charterers.Somewhat surprisingly, perhaps, thevoyage charterers accepted that thiswas correct. Nevertheless, the voyagecharterers argued that:


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the true cause o the casualty wasunseaworthiness on the part o thevessel, not poor stowage;

this unseaworthiness was causedby negligence or ault on the parto the shipowners (or their servantsor employees);

there was a non-delegable duty on

owners to ensure that the vesselwas seaworthy; the Master had a duty to supervise

the loading and stowage o thegoods and amiliarise himsel withthe nature o the goods, over andabove his responsibility to ensurethe stability and seaworthiness ohis ship.

Essentially, the case came down to thequestion o causation. Was the causepoor stowage or unseaworthiness?The majority decided that the causewas poor stowage and went on to say

that the Master (who, it will be recalled,had never carried this cargo beore)can not be expected to be an expertin the carriage o every type o cargo.He was entitled to rely on what he wastold by the shippers, who representedthemselves as being well versed in theCBS method. The letter o satisactionsimply conirmed what the Master hadbeen told by the shippers and wasdescribed as being no more than aletter which stevedores in many portsrequire a Master to sign on completiono loading.

The dissenting arbitrator disagreed withthe conclusions o the majority. It is notknown whether he was appointed bythe voyage charterers, but, eectively,he supported their position. Inparticular, he elt that the Master shouldhave done more to supervise theloading and stowage o the goods and

to satisy himsel that it was correct andsae, rather than (in the arbitrators view)simply sitting back and allowing theshippers to take over this responsibility.The arbitrator also elt that more weightshould have been given to the letter osatisaction signed by the Master. Heaccepted that the Master had a duty toensure the stability and seaworthinesso the vessel beore and at the timeo sailing, but, on the basis o theevidence submitted, was not satisiedthat the Master had done so. Hethereore concluded that the main aultlay with the Master and his employers,

the shipowners.

Despite this dissent, the majorityallowed the shipowners to recovervirtually all their claim rom the voyagecharterers, who had agreed to stepinto the shoes o owners contractingparty. Inclusive o interest, the amountrecovered came to slightly morethan USD 800,000. In addition, themajority awarded attorneys eesand disbursements. Although notspeciically mentioned in any o thecharter contracts, an award o such ees

had been requested by each party. Thisitem came to USD 170,000.Thus the total amount payable by thevoyage charterers was almost USD 1million.

CONCLUSIONIn reaching their decision, the panel

made it clear that they were notpassing judgment on the CBS methoditsel. They also accepted evidencethat numerous cargoes o steel slabsstowed using this method were carriedat sea without any problem. However,several o the surveyors with whomGard Services has regular contract haveexpressed the view that this method isinherently less sae than the traditionalmethod o stowing and securingsuch large and heavy pieces o steel.For this reason, Gard Services doesnot recommend the use o the CBSmethod.


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Pre-loading surveys ofsteel products

STEEL CARGOES AND BILLS OF

LADINGOne o the unctions o a bill o ladingis that o a receipt or the goodsloaded. As such, it will usually statethe apparent condition o the cargo atthat time. All those to whom the bill olading is transerred normally rely onthat statement to orm a view on thecondition o the cargo at the time oloading. This is especially important or

buyers and receivers o cargo. Wherethe bill o lading shows that somethingwas wrong with the cargo at the timeo loading the buyer may be able toreject the cargo under the contract osale, or at least claim damages romthe seller. On the other hand, i the billo lading states that the cargo was inapparent good order and condition atthe time o loading and at discharge itis not in the same order and condition,then the receivers will not have a claimunder the contract o sale, but insteadwill have a claim under the contracto carriage, that is, a claim against the

carrier. In virtually all jurisdictions, thecarrier is unlikely to have any deencewhatsoever to such a claim i in act thedamage existed prior to loading andsuch damage was known by the masterto exist, but the bill o lading wasissued clean. Since it knowingly mis-states the true condition o the cargo,the bill will, in such circumstances,normally be regarded as a raudulentdocument. Consequently, owners willalmost certainly lose their P&I cover,as well as ind themselves liable in ullto cargo interests: a double blow! Aletter o indemnity rom the shippers isunlikely to be regarded as legally validand owners only hope o salvagingsomething will be i the shippers arewilling to honour any such indemnity. Itshould always be kept in mind that theowners and through them, the master,have a duty towards the innocentthird party cargo buyer to protect hisposition by properly clausing the bill.

It may be that issuing a bill o ladingshowing that something was wrongwith the cargo at the time o loadingcreates commercial problems or

the shippers, since the bill may berejected by banks under documentarycredit transactions. This, however, is aproblem or the shippers (who have,ater all, supplied damaged cargo or

shipment) and should not aect ownersapproach. Nevertheless unnecessaryor meaningless clauses should beavoided, as should remarks which donot relate strictly to the condition ocargo at the time o loading. Clausesinserted in Mates receipts and bills olading should always be careully andselectively considered.

PRE-LOADING SURVEYS OF STEEL

CARGOESSteel products are particularly proneto damage which may result in a claimagainst the carrier. Hence special careshould be taken when issuing billso lading or this type o cargo. Forvarious reasons the ships oicers maybe unable to properly ascertain thecondition o the cargo and clause thebills o lading accordingly. This may bebecause the loading operations startso soon ater the vessel has arrived atthe relevant port that there is no timeor the oicers to examine the cargoprior to loading, or perhaps becausethe oicers are not amiliar with thesystem used or marking and identiyingthe cargo at the particular port, etc. Forthese reasons it is common practiceor shipowners to appoint a surveyorwith relevant experience to inspect thecargo prior to loading on board. Thesurveyor should careully ascertain thecondition o the cargo at that time andassist the master in preparing suitableclauses to be inserted in the bill olading.

Pre-loading surveys are outside

the scope o the regular P&I cover.However, or some time it has beenGards policy to encourage Members tocarry out pre-loading surveys every timesteel products are loaded on boardtheir vessels. As a consequence, theAssociation regularly assists Members inarranging such surveys and may coverthe costs involved under the individualMembers P&I cover.

COVER NOT SUBJECT TO

DEDUCTIBLEBecause pre-loading surveys osteel cargoes are an important loss

prevention tool, every incentive shouldbe given or Members to undertakesuch surveys. In order to achieve thatobjective, the costs o pre-loading

Gard News 144, April 1996

surveys may be covered by Gard, inwhich case they will be treated asspecial costs. This means that thecosts will be absorbed by the Club,regardless o any deductible applicableto normal costs, thereby beingincorporated into the Members lossrecord.

CHARTERERSThe main purpose behind pre-loading

surveys o steel cargoes is to ensurethat Mates receipts and bills o ladingare claused in a manner which relectsthe actual condition o the cargo at thetime o loading. The survey is thereorean important instrument which assiststhe ships oicers in properly clausingMates receipts and bills o lading.

On the other hand, in cases involvingcharterers entries the main purpose oa pre-loading survey report is to securea recourse against the shipowners orpossibly to assist in the negotiationo claims. Thereore there is a

undamental dierence in the unctiono pre-loading surveys under ownersentries and charterers entries and asa consequence the relevant costs arenot covered under charterers entries,unless special terms o entry have beenagreed with the Club.

Nevertheless, charterers arerecommended to do their utmost toensure that owners carry out pre-loading surveys o steel cargoes.This could be achieved througha charterparty clause placing anobligation on owners to carry out a pre-loading survey. We recently spotted theollowing clause in a charterparty:

I steel is to be loaded a pre-loadingsurvey to be perormed by Owners P&IClub appointed surveyor. Cost o sameto be or Owners account.

Something as simple as that would besuicient.

REMARKS TO BE INSERTED IN

THE MATES RECEIPT AND BILL OF

LADING

One must dierentiate between caseswhere the bill o lading is issued bythe shipowners (the Member) andcases where the bill is issued by the


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P&I incidents involvingsteel cargoes

In the preceding article we havediscussed the reasons or and theAssociations policy on pre-loadingsurveys o steel cargoes. There is no

doubt that pre-loading surveys arevitally important in establishing thecondition o the cargo at the time itis received into the carriers custodythus enabling him (provided theBills o Lading have been properlyclaused) to deeat or reduce numerousclaims or alleged damage madeby cargo interests. Nevertheless,steel cargoes continue to generate asigniicant number o claims and theopportunity is taken here to re-statesome undamental principles o claimshandling.

Sea water is the greatest enemy o steelproducts. Hatch covers and ittingsshould thereore be properly and timelymaintained. Ram-Nek tape and/or

expanding oam should not be used asa substitute or such maintenance, butonly as an additional saety precaution.

Example: a bulk carrier entered withthe Association loaded 266 coils/6,020MT o hot rolled steel sheet in coils inthe US Gul. Some minor exceptionswere recorded in the pre-loading reportand the bills o lading were clausedaccordingly. During her voyage toJapan, the vessel encountered heavyweather, with winds up to Force 11 andthe ambient temperature droppedsharply. At the time o discharge, all 266coils were ound to be rusty, with some71 per cent being badly aected by seawater, which had entered through thedeective hatch covers o one hold and

through a hole caused by corrosion othe bottom plate o a crane post.

A claim in excess o USD 600,000 was

Gard News 144, April 1996

submitted and it was only by the useo the US package limitation that it waspossible to settle with cargo interests ata much reduced igure.

Fresh water wetting is oten less o aproblem. Many coils are let ashorein open storage, exposed to theelements, either beore loading or aterdischarge.

Nevertheless, high-value cargo suchas galvanised coils cannot be wettedby resh water with impunity: on thecontrary, all possible care shouldbe taken to ensure that the cargodoes not become wetted during thevoyage. This requires stowage withcompatible cargoes and protection

rom condensation. Ventilation mayinevitably have to be restricted duringperiods o heavy weather and i thecargo is not properly protected,


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damage will be noted at the time odischarge. Plastic sheeting is oten aneective means o protection againstsweat.

Example: a cargo o steel coils wasstowed by the charterers in the samehold as a consignment o wet lumber.

Ventilation was restricted duringthe voyage rom the Great Lakes toJapan and moisture migrating romthe lumber caused severe rusting to

the cargo. A seven igure claim wassubmitted. Our shipowner Memberhad to ace the claim and reached anamicable settlement.

Physical loss or damage can also becostly. Proper stowage and securingis essential, especially when heavyweather is expected. Large, heavy,packages, oten weighing severaltonnes, can cause substantial damageto themselves, other cargo andsometimes the vessel hersel i theybecome ree to move around during avoyage. Extra delay and costs may also

be incurred i the cargo is damagedto such an extent that it cannot bedischarged in the normal manner.

Strange though it may seem, it isalso oten alleged by cargo intereststhat the vessel has somehow lostone or more coils/sheets/beams/angles. As mentioned, such cargo islarge and heavy and the chances oit disappearing during a voyage areremote, to say the least. It is hardlypilerable! Nevertheless, such claimsdo arise and it will considerablyassist in the deence o such claimsi tallies can be produced to support

the (logical) argument that, i a vesselloaded a certain number o coils at oneport, sailed to another port withoutdischarging cargo elsewhere and wasempty o cargo on completion odischarge, she must have dischargedall the coils loaded. In the absenceo tallies, it is sometimes possible togo one step back and require cargointerests to discharge the initial onus onthem to prove the quantity loaded.

Example: a vessel entered with theAssociation loaded a quantity o steelbillets in bundles in Eastern Russia

or carriage to Taiwan. The case wascomplicated by the act that twodierent sets o original bills o ladingwere issued, but since the quantity

o cargo shown in both sets was thesame 1,380 bundles weighing 12,038MT this issue is not relevant here.Cargo interests alleged that only 1,348bundles, weighing 10,757 MT weredischarged and thus, that there wasa shortage o 32 bundles or 1,281 MTand argued that the bills o lading wereprima acie evidence o quantity andweight. Shipowners argued that theywere not. Each side produced evidenceto support its argument.

The bills o lading were claused Allparticulars (weight, measure, marks,numbers, quantity, contents, valueand etc. [sic]) thereo as stated by theMerchant but unknown to the Carrier.The case went beore the English HighCourt o Justice, where the Judgeound that the claimants had beenunable to prove, on the evidencesubmitted, that any particular weight ocargo was loaded. Nor had they provedthat a lesser weight was dischargedthan was shipped. Accordingly, it washeld that cargo interests had ailed to

prove their claim and the shipownerssucceeded.


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It has to be said that neither sidesevidence was ound to be particularlyimpressive, but the Court appears tohave concluded that the unsatisactorynature o the evidence as to the quantityallegedly loaded, together with thelack o correlation between the weighto the quantity allegedly shortlanded

and the number o bundles allegedlyshortlanded (32 bundles would, onaverage, have weighed 279 MT), meantthat cargo interests case did not getover the irst hurdle.

Accurate and reliable tallies might,however, have lead to a dierent result.

In view o the huge trade in steelproducts, claims involving such cargoesare unlikely to die out, but there area number o simple preventativemeasures which can be taken andwhich, i perormed properly, should

go a long way towards avoiding suchclaims, or enabling a strong deence tobe mounted. Oten the damage to thecargo is o a pre-shipment nature butthis can only be proved i pre-shipmentsurveys are carried out.

Example: In May/June this year oneo Gards entered vessels loaded a ullcargo o various steel products: bars,coils (hot and cold rolled), pipes, wirerods etc.

Pre-loading surveys were arranged atall the loading ports: Ventspils, Stettin,

Brake and Antwerp. The indings o thesurveyors, which included rust-stainedcargo, indent and chaing marks,damage to ends o pipes, protectingcaps and strapping bands missing etc.,were entered into the Mates receiptsand the bills o lading were clausedaccordingly.

Upon discharge at US Gul ports, thereceivers complained about rust andmechanical damage to the cargo, and

joint surveys were arranged togetherwith surveyors rom receivers. Thesurveyors ound that the cargo had

been properly handled and stowed.Further, there were no signs o seawaterentrance into the holds, and silvernitrate tests gave negative reactions,thus indicating that the rust damagewas o resh water origin.

When comparing the indings o thesurveyors with the remarks enteredinto the bills o lading, the surveyorsconcluded that there was no liabilityon the carrier, and thus no claim isexpected.

There is no doubt that without the pre-

loading survey and, more important,the clausing o the bills o lading, thecarrier would have been in a ar morediicult position. Through the years the

Association has seen many cases whereeverything points in the direction opre-shipment damage. However, withno survey rom the loading ports, andclean bills o lading, the carriers havebeen unable to provide any evidence intheir avour.

It also appears that many o the ilesopened by the Association with a pre-loading survey o steel cargo, are simplyclosed one year later as there hasbeen no reaction whatsoever rom thedischarging ports. The act that the billso lading have been properly clausedseems to discourage the receivers rompresenting unjust claims.

I a pre-loading survey is not carriedout, or i the bills o lading are notclaused once damage is ascertainedduring such a survey the result can bevery costly.

Example: During discharge o steelcoils rom one Gard entered vessel thecargo receivers claimed damage tothe coils and alleged that the packing/wrapping o the coils outturned in avery rusty condition. The cargo interestsdemanded security rom the shipownercorresponding to the ull value o thecargo i an arrest o the vessel wereto be be avoided. The cargo surveyorappointed by the Club conirmedthat the steel coils were apparentlydischarged in a rusty condition. Ittranspired that not only the packing,

but also the steel coils themselves wereheavily exposed.

Investigations on board the vesselconirmed that there were no signso water entrance through the hatchcovers during the voyage and theholds appeared to be dry. At the timeo loading the cargo the weather hadbeen clear and dry. During the voyagethe weather had been good with acalm sea and no water on deck. All inall it seemed that the vessel owner wasnot to blame or the rusty steel coils.A silver nitrate test carried out on the

rusty coils also conirmed no traces osea water.

The steel coils had been on board thevessel or our days only and the heavyrust attacks on the steel coils indicatedthat the rust must have been o pre-shipment origin.

Ater more closely checking o theshipment it turned out that the steelcoils had originally been shippedon river barges rom the inlandmanuacturers to the sea port. Theshipment on the inland barge started

two months prior to the loading onboard the sea-going vessel. At all timesduring the transport prior to loadingon board the sea-going vessel the

steel coils had been stored in the openexposed to the weather.

The consignment o steel coils inquestion was loaded on board the Gardvessel without any pre-loading cargocondition survey and against clean billso lading!

The cargo interests subsequentlyclaimed their loss under the same cleanbills o lading, and the Members inalexposure in this unortunate matteramounted to more than USD 100,000which would have been avoided i thecorrect measures had been taken at theloadport prior to loading the cargo.


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Gard AS

Kittelsbuktveien 31NO-4836 ArendalP.O. Box 789 StoaNO-4809 ArendalNorway

Tel: +47 37 01 91 00Fax: +47 37 02 48 10

Gard AS

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NO-5058 BergenNorway

Tel: +47 37 01 91 00Fax: +47 55 17 40 01

Gard AS

Stperigt 2,Aker BryggeNO-0250 OsloNorway

Tel: +47 37 01 91 00Fax: +47 24 13 22 33 (Energy)Fax: +47 24 13 22 77 (Marine)

Gard (UK) Limited

85 Gracechurch StreetLondon EC3V 0AAUnited Kingdom

Tel: +44 (0)20 7444 7200Fax: +44 (0)20 7623 8657

Gard (Japan) K.K.

Kawade Building, 5F1-5-8 Nishi-ShinbashiMinato-kuTokyo 105-0003Japan

Tel: +81 (0)3 3503 9291Fax: +81 (0)3 3503 9655

Gard (Sweden) AB

Vstra Hamngatan 5SE-41117 Gothenburg

Sweden

Tel: +46 (0)31 743 7130Fax: +46 (0)31 743 7150

Gard (HK) Ltd

Room 3505, 35FThe Centrium,60 Wyndham StreetCentralHong Kong

Tel: +852 2901 8688Fax: +852 2869 1645

Oy Gard (Baltic) Ab

Bulevardi 46FIN-00120 HelsinkiFinland

Tel: +358 9 6188 380Fax: +358 9 6121 000

Gard (North America) Inc.

30 Broa

the carriage of steel april 2010

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