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Web Alert: Discharge of Edible Oil in Chittagong, Bangladesh

08 October 2013

The total volume of edible oil imported into Bangladesh was estimated to be 1.84 billion metric tons during 2012. Shortage claims based upon the shore outturn figures for this cargo have increased over recent years and have become more and more common, particularly at the Port of Chittagong. The alleged shortages give rise to cargo claims and customs penalties. Under the Customs Act 1969 the nominated agents are directly responsible for meeting those claims in the first instance. In light of this, agents have consistently, and perhaps understandably, demanded security for these claims. Security would more often than not take the form of a Club LOU. This form of security was also acceptable to cargo owners.
The Club has now been advised by local correspondents in Chittagong that some agents have now started to demand a cash settlement for cargo claims in place of a Club LOU. The reason being given by these agents is that in previous shortage claims, after a Club LOU had been given, defendants to cargo claims sought to challenge the legitimacy and quantum of the claims rather than simply paying them in full. The agents concerned have been advised by the Club’s correspondent that the defence of cargo claims is always based on lawful grounds and that it is simply unreasonable to make demands for cash payments.
In a recent claim dealt with by the Club a vessel was unlawfully detained for over a week by the agent until cash security was given. The agents refused a Club LOU for the above reasons.
In light of the above Members are advised to take particularly care when discharging edible oil cargo in Chittagong and take steps, so far as possible, to carry out due diligence in respect of the agent appointed, and potentially to ascertain in advance, where a claim looks likely, whether an agent will still accept a Club LOU.