The Role of the Bill of Lading (BL) in Bulk Cargo Shortage Disputes

A view of the manifold system on a bulk carrier ship, showing multiple pipes and valves used for loading and unloading liquid cargo.
The manifold system on a bulk carrier ship is critical for managing the flow of liquid cargo. Proper maintenance and operation are essential to prevent contamination and ensure accurate measurements during transportation.

The Bill of Lading (BL) is a fundamental document in the shipping industry, especially when dealing with bulk cargo shortage disputes.
Bulk cargo transport typically involves commodities like grain, coal, and oil, where the value is closely tied to the cargo’s weight. The nature of these commodities demands precise handling and accurate documentation to ensure that any discrepancies in quantity or quality are promptly addressed, whether the cargo is liquid or dry.

Understanding Bulk Cargo Shortages

Maritime transport of bulk cargo involves several stages, each fraught with potential risks. From the initial loading onto specialized vehicles and structures designed for bulk handling at the port of origin, through the journey across seas, to the final unloading at the destination terminal, there are multiple points where loss or damage can occur.

Cargo shortage disputes arise when there is a discrepancy between the quantity of goods transported and the quantity received. But how does such a discrepancy occur?

Cargo shortages typically arise from several factors including:

  • Measurement errors: incorrect measurements during loading and unloading can result in perceived shortages.
  • Pilferage and theft: During transit, some cargo might be lost due to theft.
  • Spillage and damage: Physical loss during handling can reduce the total cargo weight.
  • Natural causes: Factors like evaporation (for liquid cargoes) or settling (for grains) can lead to a reduction in measurable quantity. 

In cases of bulk cargo shortages, it is essential to understand the risks and types of bulk cargo to effectively address and resolve disputes.

A large blue tanker ship named "Fure West" docked at a port with large storage tanks in the background.
During the loading or discharging process, accurate documentation is crucial to prevent cargo shortages and ensure precise handling of bulk liquid cargo.

Legal Implications Under the Hague-Visby Rules

The Hague-Visby Rules, which govern the carriage of goods by sea, provide a legal framework that impacts the role of the BL in cargo shortage disputes. Under these rules, the carrier is obligated to exercise due diligence to:

  • Make the ship seaworthy.
  • Properly man, equip, and supply the ship.
  • Ensure that the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried are fit and safe for their reception, carriage, and preservation.

If a cargo shortage dispute arises, the BL plays a crucial role in establishing whether these obligations have been met. It serves as a primary piece of evidence in legal proceedings, helping to determine liability and the extent of damages, between the shipper, carrier, and consignee.

Resolving Bulk Cargo Shortage Claims

Marine insurance relies on the BL to serve multiple purposes, including acting as a receipt of goods, a document of title, and evidence of the contract of carriage.

In the event of a shortage claim, documentation of the cargo’s weight is essential, as even minor discrepancies can have significant financial implications. The BL provides an official record of the cargo’s details, including its weight, quantity, and condition at the time of loading and discharge.

An insured cargo requires precise documentation to ensure that any claims related to shortages are adequately supported.

Let’s examine its role in more detail:

BL As a Receipt of Goods

The BL acts as a receipt issued by the carrier to the shipper, confirming that the cargo has been loaded onto the vessel as described.

According to the Hague-Visby Rules, carriers are obliged to issue a BL that accurately reflects the quantity or weight of the goods as provided by the shipper.
These international regulations establish the carrier’s duties and liabilities, including the requirement to issue a clean BL, which attests to the apparent good order and condition of the cargo.

In case of loss or damage, the BL is used to support insurance claims, demonstrating the exact quantity of goods loaded and received to calculate the losses.

BL as a Document of Title

The BL serves as a document of title, allowing the consignee to take possession of the cargo upon presentation of the original BL. This document is crucial in the transfer of ownership and ensuring that the consignee has the legal right to claim the cargo.

BL as Evidence of the Contract of Carriage

The BL establishes the carrier’s responsibility for the cargo during transit. If there is a discrepancy in the quantity of goods upon arrival, the BL is a key reference for determining where the loss or damage may have occurred. It also helps verify compliance with the terms and conditions of the transport contract, ensuring both parties have fulfilled their obligations.

The BL serves as evidence of the contract of carriage between the shipper and the carrier, outlining the terms and conditions under which the cargo is transported.

Best Practices for Carriers

How can carriers issue a BL that protects their interests in the event of a shortage claim by cargo receivers?

Below are the steps carriers should take:

  • Verification of Shipper’s Weight: Firstly, verify the accuracy of the weight provided by the shipper by means of a draft survey. If the difference between the shore and ship’s figures is within the customary tolerance (typically within 0.5%), you may sign the BL as presented. To safeguard your interests, annotate the BL with terms such as “Said to weigh” or “Weight, measure, quantity unknown.”
  • Significant Weight Discrepancies: If there are discrepancies that raise “reasonable suspicion” (in accordance with the Hague-Visby Rules) that the shipper’s figure exceeds the amount actually on board, take the following actions:
    • Mate’s receipt adjustments: The master should enter the ship’s figure in the Mate’s Receipt before signing it. Provide a copy to the shipper, ensuring they acknowledge the shortage in writing.
    • BL notation: Clearly state on the BL that there is likely to be a shortage of cargo, citing the draft survey figures.
    • Refusal to sign: If “clausing” the BL is not permitted, the master should refuse to sign the BL as presented and issue a note of protest.
    • Negotiation with shipper: Engage in dialogue with the shipper to have them accept the ship’s figure. If necessary, conduct another draft survey or involve an independent surveyor to assess the loaded quantity.
    • Letter of Indemnity (LOI): If the shipper refuses to recognize the ship’s figures and insists on signing the BL as presented, they may offer a Letter of Indemnity (LOI). However, be cautious, as such an LOI may be unenforceable if a court finds it implies fraud against the receiver.
    • Standard clausing: Ensure the BL reads “Weight, measure, quantity unknown” when signed.
  • Actions at the Receiving End: If the surveyor’s discharge port figure is less than the BL figure, the master should not confirm it. If requested, sign a copy of the surveyor’s report stating “As receipt only and without prejudice.”

Ultimately, the outcome of a bulk cargo shortage dispute hinges on the amount and clausing shown in the BL. Therefore, carriers should cross-check the shipper’s figure and only sign once confident of its accuracy.

Facing a bulk cargo shortage claim requires technical and legal expertise to build a strong case. Contact us today for professional legal advice.

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