HOW TO AVOID OR MINIMIZE EXPOSURE TO UNGROUNDED CLAIM

FOR DAMAGE OF FINISHED STEEL CARGOES SHIPPED FROM PORT OF MARIUPOL

After 2016 it is observed the trend of increasing shipments of finished steel products from Mariupol, being the major Ukrainian steel production area (65% of total Ukrainian steel production), where it is established a specific system for shipment of steel cargoes, limiting the ability of shipowners to assess the actual conditions of intended cargoes before loading and to clause shipping documents. To prevent this system affecting the rights of shipowners they should take precautionary measures for the timely detection of cargo damage prior to their loading on board the vessel.

While hauling locally from the steel mills to the storage place in Mariupol port the finished steel products are exposed to damage risks because of various reloading handling, improper securing on a railways wagons or road vehicles, use unsuitable cargo-handling gears. In the port, the cargoes are stored in open areas located in close proximity to the quay and coal terminal and as such is exposed to sea salt and chemicals because of airborne spray contamination.

Often the steel cargoes have pre-shipment defects and damages, but due to the loading mode, practiced in Mariupol port, when 6 - 20 cargo units combined into unitized loads for speeding up loading are loaded by the dockside cranes, the crew personnel are unable to detect such defects and damages in time.

The forwarding agent METINVEST, responsible for loading arrangements of steel cargoes and for processing of shipping documents in the port of Mariupol, is an associated company with local steel mills, which makes limited the possibility of a carrier to clause mate receipts and bills of lading.

Unless the Master of a carrying ship produces the pre-loading survey report, showing detected preshipment defects/damages, to the forwarding agent, he would be only allowed to clause mate receipts and bills of lading with following general remarks that do not reflect the actual conditions of shipped cargoes: ATMOSPHERIC RUST, STOWED AT OPEN AREA BEFORE SHIPMENT, SURFACE WET BEFORE SHIPMENT, CARGO PARTLY RUSTY BEFORE SHIPMENT.

The existing practice shows that Master's attempts to make other remarks reflecting the actual conditions of the cargo loaded meet the strong resistance of the forwarding agent METINVEST and the Mariupol port operator and as a rule, such attempts are unsuccessful. Unless the cargo is inspected on the storage place it is appeared to be difficult for the Master to prove the preshipment defects/damages because the ship's responsibility commence as soon as the loading operations commence. This is deemed to be the moment the goods are hooked on to the gear on the quay close to the ship. Loading operations commence after berthing, so there is no time available for the ship's staff to inspect the cargo prior to loading.

When the charterparty contains a clause which obliged the Master to issue only clean bills of lading, the Master may order the cargo unit which is not in apparent good condition, to be replaced. But the notice of replacement of such goods that do not comply with the terms of the "clean bill of lading", together with the substantiating preloading survey report must be provided to the forwarding agent METINVEST and Mariupol port operator again prior to the commence of loading. As soon as the cargo unit has been loaded into the hold, its replacement is no longer carried out unless the damage occurs during the loading of this unit into the hold.

Therefore, it is very important that, before the vessel arrives at the port for loading, the appointed surveyor would carry out a thorough pre-shipment inspection of the cargo in the port's storage and, upon the ship's arrival the Master to be provided with a detailed preloading report reflecting the revealed defects and damages with the appropriate descriptive clauses on Mate receipts and bills of ladings. With reference to such report the Master, before loading is commenced, notifies the forwarding agent of his intention to clause Mate receipts and bill of ladings unless the defects/damages are rectified/repaired. In such scenario, the shipper and the forwarding agent METINVEST will be compelled to take appropriate measures to eliminate the identified defects, or to replace the damaged cargo units, or otherwise to reconcile with the Master's clausing requirements.

Deviation from this sequence of actions leads to the prejudice ship's right to clause properly the shipping documents in the loading port and to significant claims from Receivers for cargo damage allegedly occured during sea transit.

As a clear illustration to what the violation of the rule of timely detection of cargo defects and proper clausing shipping documents is cited in the recent case when the shipowner refused to conduct a pre-shipment inspection of the cargo of steel coils by an independent survey company, relying on the experience of the Master, who could clause the shipping documents only with general remarks that the forwarding agent METINVEST accepted. But those remarks did not accurately describe the other particular defects: dented edges, broken packing bands, deep score marks at edges. At discharging port a heavy damage of cargo packing was found (see below photos). The cause of the damage had been initial defect and mechanical damage of cargo packing which was enhanced due to reducing of its tolerance to vibration and alternating force during vessel’s passing through stormy seas.

Conclusion: in order to avoid claims for damage of finished steel cargoes shipped from Mariupol port allegedly during sea transit we recommend the Shipowner to take the following precuation messures:

- timely performance of pre-loading inspection of cargo at the port storage areas by an independent surveying company prior the ship's arrival

- providing the Master of the vessel prior to the loading commencement with the written survey report containing the accurate description of defects/damages detected

- Master’s notification prior to loading commencement to the forwarding agent METINVEST/Shippers of defects/damages found by the surveyor and of Master’s demand for either rectifying/repairing cargo defects or replacing damaged units by the sound ones, otherwise of Master’s intention to clause MR/BL with the remarks recommended by appointed surveyor in respect of actual cargo conditions.

The Shipowners should not rely on the OOW and crew in establishing the true conditions of finished steel cargoes as presented by the Shipper because they have no time to examine the cargo before the loading due to existing practice at Mariupol port.