Dealing with cargo claims in Vietnam

Vietnam has experienced noteworthy economic growth since the major economic reforms of 1986. The country is projected to be one of the fastest growing economies in the next few decades. Its principal exports are crude oil, textiles and garments, fisheries products and electronics, while the country’s principal imports are machinery, refined petroleum, steel, material for the textile industry and agricultural products.

Vietnam imports most of its domestic consumption of wheat, cotton, wood, cattle and dairy products. Investment in transport infrastructure is set to increase from $7bn to $120bn by 2020, with plans to upgrade existing airports, build new international standard airports and develop metro operations in Hanoi and Ho Chi Minh City.

Despite Vietnam’s growth, some ports suffer from poor infrastructure, which, among other issues, can render a ship’s stay in Vietnam difficult. Problems usually arise due to the lack or limited amount of storage for cargo. This leads to cargo being immediately trucked or barged to its final destination and may result in further damage or shortages being claimed for, if draft surveys are conducted and reliance is placed on grab scales or shore weigh-bridge.

While all ports in Vietnam are hot spots for cargo claims and threats of ship arrests, there are ports where problems arise more frequently than others. The two most prominent ports that stand out are Phu My (Cai Mep) in the South and Cai Lan in the North. The frequency of claims in Cai Lan is generally greater, since this port is often the second or final discharge port in a voyage. It is common practice for shortages found at preceding ports to be reported to the cargo underwriters and receivers at the port of Cai Lan.

Paper shortages are customary, with receivers’ surveyors manipulating draft readings to claim for larger shortages than in reality. When trying to resolve such discrepancies, the receivers’ surveyors usually leave the vessel and do not return. Another tactic often seen in Vietnam is that receivers’ surveyors insist that the master signs their draft survey records without remark, threatening to delay discharge if the master refuses to do so.

Like in many other difficult jurisdictions, appointing a surveyor to protect a ship’s interests may not guarantee the avoidance of a paper claim. However, these preventative measures do go some way in minimising the carrier’s exposure. Appointing surveyors on a precautionary basis arms us with counter arguments that assist the vessels interests. Without any independent reports, carriers would be left with no real room to negotiate a claim.

Negotiations will vary on a case-to-case basis and the “on the spot” handling of a cargo claim, whether paper or real, will largely depend on the receiver, with some parties’ underwriters opting for immediate arrest and others opting for more amicable requests for security after the vessel has already sailed. Local courts readily comply with arrest orders when these are requested and are quite flexible in demanding and agreeing on the appropriate documents proving a claim, ie scanned copies of bills of lading, not always including reverse endorsed backsides where appropriate, are generally accepted.

Courts have the authority to act and issue such an arrest as an action in rem, irrespective of the governing jurisdiction. While approved local insurers accept LOU’s, acceptance of such security is at the discretion of the claimant. If this is refused and one applies to the courts to have them accept security, this can only be accepted by the courts if the claimants advise they themselves are in agreement, otherwise such security is routinely rejected.

If a bank guarantee is agreed, there are additional problems that ensue over wording. Banks demand closed wording, ie a time limit of one year – renewable whereas claimants and the courts will insist on no such time limit or on open-ended guarantees. While any arrest can be appealed, this usually has to be done within 48 hours of it having been received by the master. It is therefore difficult to have such an appeal heard within this time frame but it can be done, if correspondents and lawyers are alerted early enough. This does not mean the claim goes away but it gives a more level playing field during negotiations.

As a consequence, in practice most claims are dealt with straightaway. Claimants who arrest a vessel - usually on a Friday afternoon to exercise maximum pressure for a fast settlement - often issue release papers at the same time, with a view to submit these papers to port authorities even during the weekend. This means that an arrest on a Friday afternoon will not necessarily translate into the ship remaining in the port until Monday morning, awaiting Courts’ opening. The only way that claimants will agree to release a ship is if they receive a “promise to pay” from the local correspondents on behalf of the owner and the association.

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