Rejection of cargo by receivers – cargo contamination

Shirley Wu, Syndicate Manager, Eastern Syndicate, Steamship Mutual, has written a long noted on cargo receivers either delaying delivery or rejecting a cargo, for various reasons. These could include damage to the cargo, delay in arrival of the original bill of lading, disputes under the sale contract, or difficulties in the market.

This left carriers in a very difficult position, trying to mitigate loss and finding a way to dispose of the cargo, often without any cooperation from the receivers.

The urgency of the next voyage, extra cost and expenses in keeping the cargo, additional risks to the safety of the cargo and other reasons may put great pressure on the carriers.

Do the carriers have to keep the cargo until the receivers finally take delivery or formally abandon the cargo, or are they free to take steps to dispose of the cargo and/or leave the discharge port?

Wu analyzed a recent cargo contamination case, illustrating the difficulties faced by the carrier in a situation where receivers rejected a (partially) contaminated cargo and refused to cooperate with the carrier in finding ways to dispose of and/or salvage the cargo, leaving the carrier on its own to try to mitigate loss.

Steamship highlights the importance of exploring all possible legal and commercial options to resolve a situation which could potentially expose the carrier to substantial loss/damage and consequential loss claims.

The case study showed that, while the general legal position was that receivers were obliged to take delivery of cargo even if it had been damaged, there were limited situations where receivers would be justified in rejecting the cargo.

Carriers might in some circumstances have no option but to take active steps to try to reduce the loss and find alternative ways of resolving the deadlock, in the absence of normal cooperation from the receivers. This was especially the case when the carrier was clearly at fault for the cargo damage and also did not have a viable claim for damages against receivers for non-acceptance of cargo or delay in taking delivery.

“In such cases, an owner should act quickly to obtain legal advices in all relevant jurisdictions and try to explore all possible alternatives, both legal and commercial, to resolve the dispute.”