The commercial-law pages on this site cover the substantive rules — Hague, Hague-Visby, Bunker Convention, LLMC. This page walks the actual mechanics: from the receiver's outturn notice, through joint surveys and package-limitation quantum, to LOU vs vessel arrest and recourse against charterers. It is written for the Master, Chief Officer, and shore superintendent who has to run the process at discharge and in the following weeks.
Stage 1 — At discharge (Master + C/O)
Statement of Facts + Mate's Receipt. Note every damaged package. Photograph before + after breakdown of stow. The Mate's Receipt is your primary evidence + should carry every clausing the ship's side observed.
Letter of Protest. Any objection (bad water, unmanned tally, weather, stevedore damage) must be sent in writing to the terminal + agent at the time of the incident — not weeks later. Retain acknowledgment.
P&I club notified. Master calls the P&I emergency line immediately for any incident of substance. P&I appoints the surveyor + coordinates evidence. Do not commit to figures before the surveyor arrives.
Joint survey. Insist on joint (ship + receiver) attendance. Photograph packaging + condition + serial numbers. Sign the survey report only after the Chief Officer has verified — one signature under time-pressure has bound many ships to false facts.
Stage 2 — Outturn notice + 3-day window
Under Hague-Visby Article III Rule 6, the receiver's notice of loss/damage must reach the carrier at the time of delivery for apparent damage, or within 3 clear days for non-apparent damage. Miss the window + Rule 6 creates a rebuttable presumption that goods were delivered as described in the B/L. Ships should log the outturn notice date + attach it to the SOF.
Stage 3 — Time bar
Hague / Hague-Visby: 1 year from delivery (or when delivery should have taken place). Strict. English + US courts rarely extend without a written waiver from the carrier.
Rotterdam Rules: 2 years. Not yet in force in most jurisdictions.
National amendments. China Maritime Code + Nordic Maritime Codes have close-to-standard 1 year windows; check per jurisdiction.
Time-bar extension letters. Owners routinely grant 3-6 month extensions in return for the receiver's undertaking not to arrest. Always get P&I input before signing.
Stage 4 — Quantum
The claim value has three moving parts: sound arrived value, actual arrived value, and the package limitation ceiling under the applicable regime.
Sound arrived value. What the cargo would have been worth at discharge in sound condition. Includes freight + insurance + duty already paid. Compute from the invoice + market at destination.
Actual arrived value. What the damaged cargo actually sold for (or a valid write-off if disposed). Joint valuation survey documents this.
Package limitation (Hague-Visby Art. IV Rule 5). 666.67 SDR per package OR 2 SDR per kilogram of gross weight — whichever is higher. For a container carrying 300 cartons, the enumerated-package clause (Rule 5(c)) matters: if the B/L lists 300 cartons, count 300; if the B/L lists 1 container, count 1. Hague Rules (unamended, 1924) use GBP 100 gold value per package; US COGSA converts to USD 500. Rotterdam Rules 875 SDR / 3 SDR/kg.
Loss of profit + consequential. Recoverable to the extent foreseeable at contract formation (Hadley v Baxendale). Package limitation caps the total.
Stage 5 — Security: LOU vs arrest
LOU (Letter of Undertaking). Written undertaking by a P&I club to pay any established claim up to a specified limit. IG P&I club LOUs are generally accepted by cargo interests in lieu of arrest because IG clubs hold ~90% of world merchant tonnage + are trusted counter-parties. See P&I insurance.
Bank guarantee. Alternative to LOU. First-class bank required — the cargo interest sets the standard. Slower to raise + more expensive than a club LOU.
Vessel arrest. Legitimate last-resort. Costs ~USD 50-200k/day at anchor + creates operational chaos. Well-timed LOU offer usually settles quicker. See Arrest of ships.
Non-IG club LOU / unrated undertaking. Cargo interests may require top-up security. Master + operator: get the club LOU in writing before commenting to receiver + agent.
Stage 6 — Recourse against charterer
Damage caused by the shipper's improper stowage under a FIOS (Free In / Out / Stowed) charter creates carrier-to-charterer recourse. Similarly, damage from an unsafe port (safe-port warranty breach) or from the charterer's bunker specification. The 1-year time bar between carrier and cargo-claimant is separate from the charter-party time bar between owner and charterer — do not let the second slip while settling the first. P&I club coordinates both.
Common master + Chief Officer failure modes
Signing survey reports under time pressure without independent verification.
Failing to send a Letter of Protest at the moment of incident — waiting until arrival at next port destroys evidentiary value.
Losing the Mate's Receipt originals — always retain scanned copies + email to operator on the day.
Volunteering damage figures to receiver before the P&I surveyor arrives. Costs settle upward from any first commitment.
Failing to record the outturn-notice date — losing the Rule 6 rebuttable presumption defence.
Frequently asked
What is the deadline for a receiver to notify a cargo claim?
Under Hague-Visby Article III Rule 6, apparent damage must be noted at the time of discharge; non-apparent damage must be notified within 3 clear days of discharge. Miss the 3-day window and there is a rebuttable presumption that the goods were delivered as described in the Bill of Lading. Suit itself must be brought within 1 year of delivery (or the date on which delivery should have taken place) — this 1-year time bar is strict + rarely extendable without a written waiver.
How is the package limitation calculated?
Hague-Visby Article IV Rule 5(a): 666.67 SDR per package OR 2 SDR per kilogram of gross weight, whichever is higher. Container clauses (Rule 5(c)) matter — if the B/L enumerates the packages inside the container, count each; if not, the container is one package. Hague Rules (1924, unamended) apply GBP 100 gold-value per package which US COGSA converts to USD 500. Rotterdam Rules 875 SDR / 3 SDR/kg (not yet in force in most jurisdictions).
Should the master accept an LOU (Letter of Undertaking) or hold out for vessel arrest?
P&I clubs issue LOUs to avoid arrest — an LOU from an IG P&I club is generally accepted by cargo interests in lieu of arrest security because IG clubs collectively hold ~90% of the world merchant fleet + are trusted counter-parties. Non-IG or unrated LOUs may require top-up security. Vessel arrest is a legitimate but disruptive last-resort tool — a well-timed LOU offer usually settles quicker than a contested arrest.
What is sound arrived value + why does it matter for quantum?
Quantum under English law is the difference between the sound arrived value (what the cargo would have been worth at discharge in sound condition) and the actual value at discharge. Sound arrived value includes freight + insurance + duty already paid — carriers argue for the invoice value (lower); receivers argue for the market price at destination (higher). Get a joint valuation survey at discharge and record both figures separately.
Can the carrier claim recourse against the charterer?
Depends on the charter-party clause paramount + the specific damage. If the damage is caused by the shipper's improper stowage under a FIOS (Free In / Out / Stowed) charter, the carrier has recourse against the charterer. If a hire dispute exists in parallel + arrest security is being negotiated, the two often get bundled. Always get P&I club input before waiving recourse — an ill-advised waiver in a settlement letter can bar a genuinely valid claim.