The importance of the RETLA Clause in Bills of Lading has been
highlighted in the recent Breffka & Hehnke GMBH & Co KG and
Others v Navire Shipping Co. Ltd and others (The SAGA EXPLORER)
 EWHC 3124 (Comm) decision in which the English Commercial
Court did not follow the Tokio Marine & Fire Insurance Company
Ltd v Retla Steamship Company  2 Lloyd's Rep 91 United
States Court of Appeal (Ninth Circuit) decision.
By way of introduction, there are two conflicting interests when
issuing bills of lading. On one hand, it is in shippers'
interests to have clean bills of lading issued and receive payment
for goods shipped pursuant to a sale contract. On the other hand,
it is in receivers/consignees' interests to have bills of
lading accurately describing the goods shipped and to make payment
for goods purchased under the sale contract. Carriers will often be
under pressure from shippers or charterers to issue clean bills of
lading contrary to the mate's receipt or pre-load survey.
However, the carriers' P&I cover will typically exclude
claims arising from a knowing misdescription of the goods.
In the steel trade, there is a real difficulty determining
whether bills of lading should be claused.
Most untreated steel shipped will have some degree of rust.
Surface rust, which forms in a fresh water environment, is easily
removed and seldom causes damage which reduces the commercial value
of the cargo. Rust that forms in a salt environment can result in
rapid deterioration of the cargo with pitting of the surface and
may even reduce the cargo to scrap.
What is known as the RETLA Clause was developed as a convenient
way of issuing a clean bill satisfying the interests of shippers
and protecting the carrier from claims for damage to cargo which
can be shown to be of a pre-shipment nature. The RETLA Clause is
named for the Tokio Marine & Fire Insurance Company Ltd v Retla
Steamship Company  2 Lloyd's Rep 91 United States Court
of Appeals (Ninth Circuit) decision. In this case the front of the
Bill of Lading had the following provision:
THE TERM "APPARENT GOOD ORDER AND CONDITION" WHEN USED
IN THIS BILL OF LADING WITH REFERENCE TO IRON, STEEL OR METAL
PRODUCTS DOES NOT MEAN THAT THE GOODS, WHEN RECEIVED, WERE FREE OF
VISIBLE RUST OR MOISTURE. IF THE SHIPPER SO REQUESTS, A SUBSTITUTE
BILL OF LADING WILL BE ISSUED OMITTING THE ABOVE DEFINITION AND
SETTING FORTH ANY NOTATIONS AS TO RUST OR MOISTURE WHICH MAY APPER
ON THE MATES' OR TALLY CLERKS' RECEIPTS.
The Court of Appeals (Ninth Circuit) found, inter alia,
that the RETLA Clause was not restricted to "light atmospheric
rust" but that the carrier had not stated the apparent good
order and condition with respect to rust or moisture whatever the
severity. This decision has not been followed in all United States
Courts and all jurisdictions and as a result there has been
confusion about its effect.
RECENT DEVELOPMENTS IN THE LAW
The RETLA Clause came up for review again in the recent Breffka
& Hehnke GMBH & Co KG and Others v Navire Shipping Co. Ltd
and others (The SAGA EXPLORER)  EWHC 3124 (Comm) decision.
The manager of the ship's agent gave evidence that, having seen
the surveyor's report, which included 16 pages of
"Damage/Exception Prior to Loading", the shippers
requested clean bills against letters of indemnity. The manager
asserted that, on the basis of the Retla clause included on the
front of the printed form of the bill of lading, he considered
there was no need to clause the bills. Accordingly, he signed and
released the bills.
Contrary to the United States Court of Appeals (Ninth Circuit)
the English Commercial Court found that the RETLA clause did not
contradict the representation as to the cargo's good order and
condition, but was a qualification that there was an appearance of
rust and moisture of a type which might be expected to appear on
any cargo of steel: superficial oxidation caused by atmospheric
conditions. The exclusion of "visible rust or moisture"
from the representation as to the good order and condition was
directed to superficial appearance of a cargo which was difficult,
if not impossible, to avoid. Itdid not
extend to all rust of whatever severity. Accordingly, the
judge concluded that the issuing of clean Bills of Lading amounted
to a false representation by Owners.
The only safe way to avoid claims arising from preshipment
damage is to ensure that the bill of lading is properly claused to
reflect the apparent order and condition of the cargo. The RETLA
clause can only apply to superficial appearance of cargo, which
highlights the importance of the master's duty to form an
honest and reasonable non-expert view of the cargo when deciding
whether to clause bills of lading.
Originally published in July 2013
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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