We continue to see claims where bills of lading have been issued “clean on board”, often as a matter of routine and sometimes without specific charterers’ instructions. In many cases, the legal implications of this wording are not fully considered.
At first glance, there appears to be little difference between a bill of lading without remarks and a bill marked “clean on board.” However, from a liability perspective, the distinction can be significant. A bill of lading without remarks contains no clauses or notations indicating that the cargo or its packaging is defective. Most standard forms also include a general statement that the goods were shipped in “apparent good order and condition.”
The word “apparent” is crucial. It limits the master’s representation to the visible and externally observable condition of the cargo at the time of shipment. The carrier does not warrant the internal condition of the goods, latent defects, or matters that could not reasonably be detected during loading. In the event of a cargo claim, the carrier may still rely on the qualification of “apparent” to argue that inherent or hidden defects or damages are not a matter for which they can be held liable. The addition of the words “clean on board” constitute a more positive representation that the cargo was shipped in a sound and undamaged condition. A claimant can use it to argue that the cargo was clean upon loading and place the burden of proving otherwise on the carrier.
In our experience, the use of “clean on board” bills has become more frequent in particular where the vessel is operating under a time charter where the master signs bills of lading as presented by charterers or their agents. It is important to note that unless the Bills of Lading are issued on behalf of the Charterers as “Charterers Bills” the owners will remain responsible for any representation about the condition of the cargo.
The requirement to issue clean on board bills is often related to documentary credit transactions because any remark may be considered as a breach of the underlying sales contract which may prevent or delay payment of the purchase price.
Members should ensure that any bill of lading which is issued reflecting the cargo as “clean” is only issued if the cargo is indeed found to be in clean conditions and otherwise appropriate remarks should be added to reflect the condition of the cargo. In this regard there are two further considerations:
- What are the terms of the charterparty and has the owner made any agreement to issue clean bills of lading?
- In the event that the Owner has agreed to accept a letter of indemnity to issue clean bills for non-clean cargo it is important to note that insurance cover may be prejudiced and any LOI may not be enforceable and often depends on the creditworthiness of the party issuing it.
A bill of lading should reflect the apparent good order and condition of the cargo. Adding “clean on board” makes a positive affirmation of the condition of the cargo which should only be included if this is in fact the observed condition of the cargo.
For any questions or assistance regarding this subject, we invite members to contact the NNPC claims team at claims@nnpc-marine.com.
