No.799-01/02/16
To the Members
Dear Sirs,
Cargo Shortage Vol.3 - China
As Vol.3 of our P&I News regarding the area where shortage claims are frequently alleged, we
are circulating to you the local information about Things to know when dealing with cargo
shortage claim in China which we have obtained from Chinese correspondent, Huatai Insurance
Agency & Consultant Service Ltd. Please find a circular as attached.
Yours faithfully,
The Japan Ship Owners' Mutual Protection & Indemnity Association
Loss Prevention and Ship Inspection Department
Tel:
+81 3 3662 7229
Fax:
+81 3 3662 7107
E-mail:
lossprevention-dpt@piclub.or.jp
Website:
https://www.piclub.or.jp
Things to know when dealing with cargo shortage claims in China
Role and Function of CIQ
Under Chinese law, there are certain kinds of import or export cargo that are subject to statutory
inspection by China Entry-Exit Inspection and Quarantine Bureau (“CIQ”). In practice, sometimes
CIQ will entrust its subsidiary company ---- China Certification & Inspection (Group) Co Ltd
(“CCIC”) to conduct statutory survey on their behalf.
For cargo that is not subject to statutory inspection in accordance with relevant regulations, the
cargo receivers can apply to CIQ or CCIC for commercial inspection of the cargo to ascertain its
quantity or quality.
Normally CIQ report carries more weight in eyes of local judge compared with other survey firms.
But this doesn’t mean owners cannot contest CIQ figure; if effective evidences can be provided,
CIQ figure may be refused by court.
Issues Surrounding Draft Survey
In China, draft survey is a most common method adopted by CIQ or CCIC to ascertain the
quantity of dry bulk cargo discharged, though at some ports for some types of cargo the
authorities may use shore scale to weigh the quantity of the cargo.
Sometimes disputes may arise during the process of drafty surveys as a result of the following
factors:
1.00 Draft reading
As far as we we know, most of the ships for carrying the grain cargo, especially for the soybean,
are the Panamax bulk carrier, the dead weight of which is around 60,000 ~ 70,000MT. The TPC
(tonange per centimeter) of this kind of ship is about 60 tons ~ 65 tons, the correct reading to the
ship’s six drafts, especially to the two middle drafts, is essential to the draft survey.
There are several circumstances which might affect the draft reading, including but not limit to:
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1.01 The sea condition
Normally, the draft reading should be conducted under a calm sea condition and it’s better to
stop if the wave is more than 0.5 meters high. Some of non-ideal sea condition is caused by
geographical condition itself which could not be easily improved, but some caused by the
surrounding condition, such the passing ships or sudden strong wind, could be avoided after
some time.
In some cases, we could find some master’s remark on the final draft report of the loading port
which shows the wave was about 1 meter or even more at the moment of draft survey. In this
situation, there is a big risk of loading with less cargo under the B/L. The master/chief officer
should report the situation to the charterer/owner, stop the draft survey if it would not cause
serious demurrage, require the stevedore party to load more cargo in the hold, issue the letter of
protest, etc. If the ship is obliged to sail without chance to re-conduct the draft survey or the
stevedores refuse to load more cargo onboard, the master should report the situation to his
owner/P&I club immediately, and a standby competent surveyor should be arranged at the
discharging port.
At some ports at Fujian Province, such as Songxia Port at Fuqing, the local sea condition is not so
ideal for draft survey, especially in the winter, the vessel might be pitching for more than 1 meter
at the berth. In this situation, it’s advisable to conduct the draft survey in the morning time when
the wind is weak or during the time of slack tide when the sea scale is relative calm. Also, the
ship party (chief office)/surveyor should be more careful when reading draft survey figures.
Photo No.1 – Sea swell
At some ports, the berth is very near the channel where plenty of vessels are passing by; in this
situation, it’s necessary to complete the draft reading quickly during the interval time.
1.02 Vague draft mark
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If a ship is anchoring for a long time or an aged ship is lack of maintenance, the hull might be
covered by the fouling and the draft mark is too vague to read.
In one case, a ship was ever hijacked by the Somalia pirate for 7 months. When this ship finally
arrived at her destination port, her hull plate, including the draft mark, was fully spread by
fouling, such as oyster and seaweed. In order to get a correct draft reading, the ship party
entrusted the local cleaning company to use the shovel and high-pressure water jet to clear up
the fouling.
Photo No.2 – Fouling on the hull
1.03 Obstacle to draft mark
There were several cases caused by the possible incorrect draft readings because the ship’s
middle draft mark was covered by the shore fender. In fact, there are several ways to solve this
matter, including:
A. Use the pilot ladder to approach the draft mark as close as possible to check the reading.
However, it’s not safe for the surveyor/crew while the sea condition is not so good or the
space between the ship and terminal is too narrow.
B. Use the ruler to measure the distance from the level where draft mark still could be read to
the sea surface, and then deduct the same from the visible reading.
C. Apply to shift the ship forward or afterward for several meters in the berth by mooring after
being approved by the port authorities.
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Photo No.3 – Draft mark covered by fender
1.04 Aground
The ship might be aground at the berth if ship is berthing alongside on an improper time. In the
case that local port has big tidal range but the CIQ surveyor fails to attend onboard in time to
conduct the draft survey, the ship’s UKC (Under water clearance) might not meet the
requirement so the ship bottom would touch the sea bed from time to time which would affect
the draft reading.
This situation should be strictly avoided because if the cargo operation is not commenced in time
due to the dispute during draft survey, the ship’s grounding condition might be more and more
serious which finally threats the ship safety. Under this circumstance, the ship party may have a
sounding to the sea water around the ship to ascertain the actual depth of the sea water. If it’s at
time of flood tide, the concerned parties also could wait for some time when the ship is
re-floated.
In order to prevent the ship from becoming aground at berth, the master should check the depth
of berth and local tidal condition with the local agent before proceeding to the berth, and draft
survey should be arranged in time after the vessel berthed alongside.
1.05 Personal factors
Due to that 3 of 6 draft marks are on the sea side which only could be read while the inspector is
standing on a small boat (the middle sea side also could be read via a pilot ladder). In some ports,
CIQ surveyor only checks 4 draft marks (3s of shore side and 1 of mid-ship at the sea side) when
there is lack of small boat or they want to decrease survey time. Regarding the rest 2 marks of
the sea side (fore and after), they use the ship list to calculate it. This might cause some
additional errors if the 6 draft marks are not fully read or properly read, the ship party should
request the CIQ surveyor re-conduct the draft survey if they have some suspicion on the result.
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2.00 Density of sea water
This factor includes both the sea water of the berth and the sea water in the ship’s ballast tanks.
The standard density of the sea water is 1.025mt/m3, which varies from port to port according to
the different geographical position, temperature, nearby rivers, tide condition and weather
condition at the material time.
2.01 Sea water of berth
The displacement of Panamax bulk carrier could be up to 81,000 m3or ever more, in this situation,
the permillage (0.001) change to the sea water would give rise to about 81 tons of difference.
Normally, the ship party and the CIQ surveyor should have their own densitometer to measure
the density of the sea water, and the densitometer should have the valid calibration certificate.
However, the ship’s densitometer sometimes is unavailable, aged or broken; in this situation, the
ship party could not have their own data to argue with the data of the CIQ’s densitometer. Also,
during reading the densitometer, there might be some disputes which finally cause a big
discrepancy. The ship party should invite the CIQ surveyor to check the reading again and again
until they reach agreement. If the dispute still existed, the ship party should report the situation
to concerned parties immediately.
Photo No.4 – Reading the density of sea water
In some ports, the CIQ surveyor prefers to use their experienced data of the density of the sea
water instead of checking the actual density at the site. In this situation, the ship party should
have a measurement to the density of sea water in advance or request the CIQ surveyor to check
the sea water together in order to ascertain the actual density.
At some ports where there are rivers nearby, the density of upper sea water is different with that
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of bottom. In this case, it’s better to use the middle sea water (50% of ship draft) for checking.
Anyway, the ship party should not play any tricks while the crew takes the sea water sample
which is used for density checking because that the CIQ surveyor is so familiar with the density of
the sea water of the local port. In one case, one chief officer asked the Bosun to put some salt
into the sea water sample in order to increase the density; however, the abnormal density
immediately gave rise to the CIQ surveyor’s suspicion and he finally found some salt residue in
the sampler. At last, this incident was reported by the media and the ship was recorded in the
bad ship list by the local authorities.
2.02 Ballast water
Normally, the quantity of ballast water onboard when the ship arrives at her first discharging port
is not so much (About 100 ~500 MT) and it would not affect the initial draft survey. After the part
or all the cargo is discharged, the ship shall be re-ballasted for about 10,000 MT to 30,000 MT of
sea water in order to maintain the ship’s stability. Therefore, the calculation, including the density
of ballast water and its sounding would be very important in the final draft survey at discharging
port or the initial draft survey of second/final discharging port.
In one case, the ship party dispatched an A/B to cooperate with the CIQ surveyor to take
sounding to the ballast tanks; but this A/B didn’t make any records on the result of sounding, the
CIQ surveyor finally made a mistake in his record and caused about 120 tons of shortage. In order
to prevent from this kind of mistake, ship party should make the record of the sounding together
with the CIQ surveyor, compare the latest result with ship’s previous result, to ensure that there
is not big discrepancy between the ship’s result and that of the CIQ surveyor’s.
3.00 Ship’s table/documentation
Normally, the calculations and corrections of the draft survey are based on Hydrostatic Table and
Sounding Book provided by ship party. In some aged ships, the original edition of the Hydrostatic
Table or sounding book approved by the Class is unavailable, or some pages of the table or book
are missing, or the present table could not reflect the actual condition due to that the hull
condition is deformed, which might possibly cause some errors.
In one case, we found the one numerical value should be negative while the draft calculation
system of the ship’s computer sets it as positive which led to a shortage about 60 MT. In order to
prevent from this kind of mistake, the ship should be equipped with the approved intact
table/documentation, and the ship computer should be updated in time.
The ship’s Hydrostatic Table and Sounding Book is on basis that the ship is in an even keel and NIL
trim condition. If the ship trim or list is too large, it would affect the accuracy of the calculation.
Therefore, in order to minimize the possible error, the ship party may adjust the ballast water and
try to make the ship in an even keel and Nil trim condition if possible, especially while the present
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calculation show sthere might be some cargo shortage.
4.00 Ship’s constant
Incorrect ship’s constant might cause or enlarge a possible cargo shortage during the initial draft
survey. Basing on our experience, it’s better to submit a lower constant (less than 220 tons) to
the CIQ surveyor if there might be a cargo shortage so that the shortage could be controlled
temporarily at this stage and the ship party/P&I surveyor then could seek some opportunities to
minimize the shortage during the final draft survey.
This ship’s constant will disappear during the final draft survey according to the draft calculation
rules. Normally, the constant of the Panamax bulk carrier varies from 200 mt to 350 mt according
to the year of building, ship maintenance and the actual voyage condition. If the ship party could
not provide the ship’s constant of this voyage, it could be referred to the average value of the
ship’s constant of last 5~ 8 voyages or more.
Trade Allowance Argument
There is no specific provision on the trade allowance of 0.5% under Chinese law and different
courts have different judgment on this issue. The limited provision on the trade allowance could
be see the Article 51 of Maritime Code of PRC “The carrier shall not be liable for the loss or
damage to the goods occurred during the period of carrier’s responsibility arising or resulting
from the nature or inherent vice of the goods” “The carrier who is entitled to exoneration from
the liability for compensation as provided in the preceding paragraph shall bear the burden of
proof.”
In practice, during negotiation,
1) if the weight of cargo is measured by draft survey, the 0.5% trade allowance is relatively easy
to be achieved.
2) if the weight of liquid cargo is measured by ullage survey, the situation is more complicated.
(there were previous court judgments accepting allowance of 0.2%, 0.3% and even 0.5% for
ullage surveys).
Most of Chinese cargo interests accept 0.3% of the whole consignment as trade allowance. Such
trade allowance is also applied to in the cargo Insurance policies.
Judgments relating to the trade allowance are quite different. We see some Chinese Courts
referred to the Rules for the Weight Survey for the Import and Export Commodities issued by CIQ
as basis to support the trade allowance argument, wherein it is provided that:
“during draft survey, many factors will affect the accuracy of the calculation…the accuracy of draft
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survey shall be 5‰;
for the Static measurement of liquid products, the measurement accuracy of the containing
vehicle should be less than 2‰”.
To protect carrier’s interest, it is recommended for the carrier to add a “Exemption of Trade
Allowance” clause into the B/L or make a remark of this effect on the B/L, which states “Parties
acknowledge and accept a risk of shortage not exceeding 0.5% of bulk cargo during carriage, for
which the carrier shall be exempted from liability.” Handwritten remarks may cause the B/L to be
unclean. Owners may consider have such wording printed on the B/L, or have the trading parties
agree that such remark shall not cause the B/L to be unclean.
Bulk Liquid Cargo
Claim for shortage of bulk liquid cargo is relatively easy to deal with under Chinese law.
In 2006, the Supreme Court replied to Tianjin Higher Court:
1) The period of responsibility of the carrier with regard to carriage of bulk liquid goods shall
cover the period during which the carrier is in charge of the goods, starting from the end of
flange plate where the oil pipeline of the ship connects with the shore tank oil pipeline at the
port of loading to the end of flange plate where the oil pipeline of the ship connects with the
shore-tank oil pipeline at the port of discharge.
2) In the circumstances in which the consignee fails to provide effective evidence to prove that
the shortage occurred during the period of responsibility of the carrier, the Dry Certificate and
Ullage Report provided by the carrier shall have the effect to prove the quantity of bulk liquid
goods delivered. The Weight Certificate of Shore Tank provided by the consignee, unless having
been agreed by the carrier, shall not have the effect to the quantity of bulk liquid goods
delivered.
In China, the Supreme Court’s reply shall be deemed as the final interpretation of the law and
therefore becomes the trial basis of local Courts. However, Receivers/their cargo Underwriters
still have some chances to pursue a claim against carriers:
1）For example, the Receivers’ surveyor refuses to sign on the dry tank certificate or use some
tactics when signing on the certificate. (e.g.: putting following remark: The Master refused the
surveyor to visually check the tanks after discharging.) This gives a chance to the cargo interests
by arguing that the cargo is not completely discharged.
2）When the cargo Underwriters pursue a recovery claim against the Carriers after compensation
to the Insured in accordance with the terms and conditions of the Policy, the Carriers may have
more difficulties in defending the claim for shortage. (In many cases, the Judges put pressures
onto the Carriers to reach mediations with the cargo Underwriters.)
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Iron ore (wet tonnage) shortage
The background is clear: the cargo shipped in wet metric tons (WMT). During the voyage, a large
quantity of moisture in the cargo will usually drain to the bilges and is pumped overboard.
Chinese receivers then make a claim against the owners on basis of the CIQ draft survey findings.
More and more Chinese courts have realized that such kind of shortage claim is simply a paper
loss. The alleged shortage is attributable to the excessive moisture pumped overboard. The bilge
logs show that the drained/discharged bilge water is basically equal to the WMT difference
between load port and disport.
We have noted the positive Judgment achieved from Shanghai maritime court in a recent case
and noted that the P&I Club has listed the following documentary evidences, which are essential
to defend the claim:
Cargo Ship Safety Construction Certificate;
Cargo Ship Safety Equipment Certificate;
Document of Compliance;
Safety Management Certificate;
Testing certificate of hatch covers;
Port log at the loading port;
Weather reports during loading operation;
Statement of Facts at load port;
Signed bilge log;
Deck log;
Result of any can test performed by the crew after loading;
Shipper’s IMSBC Code documentation
We fully concur with the Club about the importance of the above documents bearing in mind
that Members have to convince the Judge on the following points:
1) no sea water or rain entered into the cargo holds during the voyage;
2) the bilge records only recorded the excessive moisture from cargo holds. The moisture
pumped out is not from the vessel’s internal drainage system or any other sources.
Though judgments do not set precedents in China, we are optimistic that Members are now in a
stronger position to refute the shortage claims provided that Members are able to present
sufficient evidence before the Court.
In addition, we suggest that the following tactics are used if a shortage claim against Members is
foreseeable:
1) In most cases, Shippers/Charterers require the Master to pump out the moisture in the cargo
holds and report the outcomes on a daily basis. The Master’s e-mail exchanges with the
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Shippers/Charterers in respect of the quantity of bilge water pumped out are important evidence
in some judgments;
2) To provide the cargo interests’ surveyor with the bilge logs before he carries out draft survey.
(By doing so, the Court is easy to accept the authenticity of the bilge log.)
3) When a shortage claim is foreseeable, establish communications with the cargo Underwriters
as soon as possible. Cargo Underwriters may have no professional knowledge and simply
compensate the insured on basis of the CIQ report. When the cargo Underwriters compensate
the Insured and pursue a recovery claim against Owners, the ownersr will have difficulties in
totally refusing the claim.
Meantime, regarding the aforementioned positive judgment in favor of owners, some Chinese
lawyers commended that if the claimant had claimed on basis of wet tons instead of dry tons, the
result might be different because the proof of burden in respect of the moisture content would
be shifted from claimants to owners.
Soyabean Shortage
In a recent case, Tianjin Maritime Court quoted Article 46 of the Maritime Code and upheld that:
“The plaintiff produced CIQ report in respect of the measurement of the shore weight of the
cargo as the evidence of the shortage. However, such measurement has exceeded the period
during which the carrier is in charge of the goods and has exceeded the responsible period of the
carrier. Therefore, the present evidence produced by the plaintiff cannot substantiate that the
shortage occurred during the responsible period of the carrier.”
The claimant appealed the first instance judgment to the high court and the high court sustained
the first instance court’s judgment.
This is a favorable judgment to owners in that the claimant failed to substantiate their claim
against with the shore scale certificate issued by CIQ. Instead, they need to produce the draft
survey report to prove the cargo shortage.
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