UK: Cargo Liquefaction Remains A Risk

Last Updated: 14 March 2014
Article by Martyn Haines

The continued demand to source the most competitive price for iron and nickel ore has highlighted the need for ship owners to exercise contractual prudence and for ship's crew and master to be vigilant during loading.

On 25 July 2012, BIMCO published its "Solid Bulk Cargoes that Can Liquefy Clause for Charter Parties". The clause was designed to help ensure the safe transportation of solid bulk cargoes, which is a particular issue in the case of cargoes prone to liquefaction or combustion. However, a recent ship loss and severe delays in port whilst resolving contractual responsibilities means the risk of carrying such cargoes remains as real as the need to be reminded what should be done.

Parties' obligations

Obligation to nominate and load a safe cargo

The primary obligation of charterers is to nominate and present for loading a cargo that is safe for transportation. This may be expressly stated in the charterparty, although it is not always. If not expressly stated, there is a fallback position under English law which provides that dangerous cargoes may not be transported unless owners have sufficient notice of the character of the cargo to enable them to take the necessary precautions to carry it safely.

What is a "safe" or "dangerous" cargo?

This may be provided for in the charterparty and may also be agreed by incorporation of the Hague or Hague-Visby Rules, which specifically prohibit the shipment of certain types of dangerous goods. Further, English law broadly defines dangerous goods to include goods which "as a result of their inflammable, explosive, corrosive, noxious or other properties are likely to cause personal injury or physical damage to the ship or other cargo".

Subject to agreement between the parties, it is very likely that charterers by tendering a cargo that, by virtue of its water content or combustibility will jeopardise the safety of the crew, vessel or cargo, will be in breach of the above warranty of safety.

Information in relation to the cargo

Whether the cargo is "dangerous" or not, charterers have an obligation under chapter VI the International Convention for the Safety of Life at Sea, 1974 (SOLAS) and Section 4 of the International Maritime Solid Bulk Cargoes (IMSBC) Code to provide the owners, master or owners' agent with certain information about the cargo. This includes (but is not limited to) information (where applicable) about the:

  • Bulk cargo shipping name
  • Cargo Group (e.g. Group A – Cargoes which may liquefy)
  • IMO class of cargo
  • UN number
  • Total quantity of the cargo.
  • Stowage factor
  • Self-heating properties of the cargo
  • Need for trimming and the trimming procedures
  • Likelihood of shifting and the angle of repose
  • A certificate on the Transportable Moisture Limit (TML) of the cargo

There are for certain cargoes additional notice requirements under the International Maritime Dangerous Goods Code (IMDG). It is imperative that charterers supply the information required by these conventions so that owners can be aware of the risks (if any) associated with carrying that specific cargo and either prepare the vessel and brief the master and crew accordingly, or decline to carry the cargo. The IMSBC is mandatory and applies to all solid bulk cargoes whether or not they are specifically named in its schedules (which describe specific cargoes).

If charterers do not provide the said information to the owners, unless it can be shown that the owners already had it, it will be difficult for the charterers to defend a claim by the owners in the event that the cargo causes loss or damage to the crew, owners or other cargo. It is therefore in the interests of both charterers and owners to comply with the IMSBC and/or IMDG.

Claims

Unfortunately, unsafe cargoes are sometimes loaded and claims can result between the parties. If discovered to be dangerous, owners could have a claim for delay in the event that the vessel cannot sail or discharge the cargo at the load port. This could be a claim for hire (and bunkers) under a time charter, or demurrage/damages for detention under a voyage charter. It could also be a claim for market losses in the event the vessel is discharged after its redelivery date.

Both parties will be aware that, once on board, it can take weeks or even months to discharge a cargo, e.g. customs formalities may be difficult to obtain; the vessel may have to go to the back of the berthing queue; some load ports do not have the equipment to discharge or to receive the cargo, or storage facilities. Consequently, these claims can be significant, and costs such as stevedoring, berth charges or storage will still need to be paid in the interim, often by the owners, in circumstances where charterers may refuse to pay hire, or money for demurrage or detention will not have been received (assuming the voyage is not cancelled or a replacement cargo available).

Further, if the vessel subsequently capsizes or is lost, owners may potentially face claims in respect of any loss of life and compensation payable to the families of the deceased, hull and machinery, salvage, and possibly significant liability if there is any pollution damage caused by escaped bunkers.

Waiver

There are of course arguments that charterers can employ to seek to avoid liability. One possible argument is that the master, by loading the cargo, waived owners' rights to bring a claim in respect of the transportation of that particular cargo and/or accepted the risks associated with it.

Whether these arguments will succeed depends on the facts and what was discussed and agreed. Subject to that position, English law provides that, unless the master consents to the shipment of dangerous cargo with knowledge of its nature and character, he does not waive owners' rights under the charterparty.

Whether the owners, master or owners' agent had sufficient knowledge of the nature or character is a matter of fact and depends on what information was provided by charterers, and what was discussed and agreed between the parties.

The difference between the "nature" and the "character" of goods is arguable, although it is likely that the former refers to knowledge in relation to the cargo generally (e.g. some cargoes such as grain or iron ore fines are liable to shift, or some seedcakes liable to heat) and the latter, to the specific information on the particular cargo being carried (such as the TML or Cargo Group, and other information charterers must provide under the IMSBC or IMDG).

If charterers have not provided the required information, owners, the master or owners' agent are unlikely to be found to possess the relevant knowledge and to have waived their rights or accepted the risks by loading the cargo. It is therefore in the interests of both parties for detailed information in relation to the cargo to be provided to the owners.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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