Business

North P&I Club: Beware the in-transit cargo loss clause

David Patterson and Simon Clarke of North P&I Club explain why it is in the shipowner’s best interests to avoid in-transit cargo loss clauses.

Published

4 years ago

March 1, 2022

Admin

It is common for charterers to make claims or apply deductions based on ‘in-transit loss clauses’ in the crude oil trade. North P&I Club’s David Patterson, Loss Prevention Executive, and Simon Clarke, Senior Claims Executive, explain why it is in the shipowner’s best interests to avoid this type of clause.

In-transit cargo loss clauses generally define an in-transit loss as the difference between the vessel’s gross observed volume (GOV) on completion of loading and before unloading at the discharge port. While this may seem a simple comparison, it is a fundamentally flawed measurement, reflecting a ‘paper shortage’ rather than any physical loss.

One of the main problems with these clauses is that Owners may not have the defences that would otherwise be available for an alleged shortage if the claim had been assessed with reference to, for instance, the Hague/Hague-Visby Rules. In addition to putting owners in a difficult position when trying to defend claims made by charterers referencing these clauses, this may adversely impact upon the scope of club cover available in respect of the claim.

Paper shortages

During measurement, the GOV is established by subtracting any free water and sediment from the total volume of fluids in the tank, providing the quantity of oil at the given temperature upon loading.

On the voyage to the discharge port, two factors can result in changes to the gross observed volume: a decrease in cargo temperature and an increase in free water.

Cargo temperature decrease

Cargo is likely to cool during the voyage, increasing in density and therefore reducing in volume while its mass remains the same. Even when cargo heating is employed, it is unlikely that tank temperatures at the discharge port will be same as they were at the load port during the tank survey. When the two gross volumes are compared – as required by in-transit loss clauses – this reduction in cargo volume will indicate a paper shortage.

Free water increase

The crude oil production process consists of separating fluids from an oil well into crude oil, gas and water/sediment. While this can be a highly efficient process, crude oil cargoes usually contain a small amount of water and some solids –known as the cargo’s ‘base sediment and water content’ (BS&W).

To put this into context, if a vessel loads 1 million barrels of crude oil with a BS&W of 0.3%, 997,000 barrels of the cargo will be crude oil while 3,000 barrels will contain water and some sediment. Free water is the term used to describe any water that has separated from the crude oil at the bottom of the cargo tank.

This can result in a difference in the reported amount of free water detected upon completion of loading and arrival at the discharge port. Typically, the tank survey at the load port will commence as soon as is practicable after the completion of loading. There is therefore minimal time for any water in the cargo to separate out, and the survey may detect only trace amounts of free water. Consequently, the GOV will be calculated as the entire volume of the cargo tank contents, including any water and sediment.

During the voyage, water and sediment contained in the cargo will have time to separate out, meaning that free water can be detected more readily in the discharge survey. This is done by establishing the interface between the water and oil. While the amount of sediment is not accounted for directly, it is included in the free water figure as the sediment will settle below the water.

When the GOV is re-calculated, free water and sediment is subtracted from the total contents of the tank, with the difference between the volume of free water and sediment detected at the load and discharge ports indicating a paper shortage.

Performing correct calculations

To account for variations in cargo temperature at the load and discharge ports, the cargo must be compared at a standard temperature. This is achieved by applying a volume correction factor to calculate the quantity of cargo at 15^oC or 60^oF. The term ‘gross standard volume’ (GSV) is used when the GOV is calculated at a standard temperature.

To ensure that any free water and sediment is accurately accounted for during the tank surveys, the total calculated volume of the cargo should be established. This is achieved by adding free water and sediment calculations to the GSV.

Checking cargo documents

The cargo documentation should provide details of the total volume of water and sediment for the cargo. This can be established by subtracting the gross and net quantities listed on the bill of lading or by the BS&W as stated on the Certificate of Quality.

Loss prevention

For Owners, it is better to avoid any in-transit loss clauses that may override clauses incorporating the Hague/Hague-Visby Rules, such as a Clause Paramount.

The standard pre-printed charterparty clauses are preferable from an Owner’s perspective. For example, the widely used Asbatankvoy voyage charterparty has a Clause Paramount (clause 20(b)(i)) that incorporates the Hague/Hague-Visby Rules, as does BIMCO.

Find out more

Recommended clauses can be found on our website: North – Recommended Clauses (2021-2022)

North Members enjoy free access to our loss prevention guide: Shipboard Petroleum Surveys: A Guide to Good Practice

Published: 1 March, 2022

Bunker Fuel

Singapore: Bunker fuel sales down by 3.8% on year in July 2026

4.73 million mt of various marine fuel grades were delivered at the world’s largest bunkering port in July, up from 4.92 million mt recorded during the similar month in 2025.

Published

8 hours ago

August 17, 2026

Admin

Singapore: Bunker fuel sales down by 3.8% on year in July 2026

Sales of marine fuel at Singapore port fell by 3.8% on year in July 2026, according to data from the Maritime and Port Authority of Singapore (MPA).

In total, 4.73 million metric tonnes (mt) (exact 4,731,900 mt) of various marine fuel grades were delivered at the world’s largest bunkering port in July, up from 4.92 million mt (4,918,000 mt) recorded during the similar month in 2025.

Deliveries of marine fuel oil, low sulphur fuel oil, ultra low sulphur fuel oil, marine gas oil and marine diesel oil in July (against on year) recorded respectively 1.95 million mt (zero from 1.95 million mt), 2.33 million mt (-2.1% from 2.38 million mt), 1,600 mt (+100% from zero), 700 mt (-82% from 3,900 mt) and zero (from zero).

Singapore: Bunker fuel sales down by 3.8% on year in July 2026

Bio-blended variants of marine fuel oil, low sulphur fuel oil, ultra low sulphur fuel oil, marine gas oil and marine diesel oil in July, (against on year) recorded respectively 8,200 mt (-83.7% from 50,300 mt), 29,900 mt (-62.9% from 80,500 mt), zero (from zero), zero (from zero) and zero (from zero). B100 biofuel bunkers, introduced in February last year, recorded 1,400 mt (-46.2% from 2,600 mt).

LNG and methanol sales were 58,700 mt (+41.4% from 41,500 mt) and zero (from zero) respectively. There were no recorded sales of ammonia for the month and so far since 2025.

Photo credit: Maritime and Port Authority of Singapore
Published: 17 August, 2026

Alternative Fuels

Ammonia, methanol bunkering workshops to be held at 13th Singapore Safety@Sea Week

Three workshops on ammonia bunkering, methanol bunkering, and crew safety awareness are part of MPA’s Safety@Sea Week, which will be held from 17 to 21 August.

Published

8 hours ago

August 17, 2026

Admin

The Maritime and Port Authority of Singapore (MPA), together with industry partners, on Monday (17 August) launched several new initiatives to enhance maritime safety.

Announced at the opening of the 13th Singapore Safety@Sea Week, these initiatives will support shared learning, strengthen operational capabilities, and prepare the industry for the safe adoption of new technologies.

Organised by MPA from 17 to 21 August, this year’s Safety@Sea Week is themed “All Hands on Deck – Safety First!”. About 1,500 participants from across the maritime community are expected to take part in 18 events organised by MPA and its partners.

These include the Safety@Sea Symposium, featuring seven speakers across two panel sessions, and three workshops on ammonia bunkering, methanol bunkering, and crew safety awareness.

Speaking at the opening, Mr Murali Pillai, Senior Minister of State for Law and Transport, highlighted three priorities for strengthening maritime safety: harnessing technology responsibly, preparing early for emerging risks, and keeping people at the centre of safety. He also underscored the importance of strong partnerships across the maritime community in building a strong safety culture.

At the opening of Safety@Sea Week, the National Maritime Safety at Sea Council and the Singapore Shipping Association launched the Singapore Near Miss Reporting System to encourage the reporting and sharing of lessons from near miss incidents.

Modelled on the internationally recognised Confidential Human Factors Incident Reporting Programme (CHIRP), the system provides sea space users with a confidential online channel to report near misses. CHIRP will independently receive the submissions and provide anonymised information to the Council, which will distil key safety lessons for sharing with the wider maritime community.

Note: More information about the event can be found here.

Photo credit: Peter Nguyen on Unsplash
Published: 17 August, 2026

Bunker Fuel

Alkagesta highlights key insights on European choke point pressures in August

Update covers dual supply crisis currently shaping global bunker markets — a stalled Strait of Hormuz peace process and Rhine water levels at a 140-year record low — and the implications for Singapore.

Published

8 hours ago

August 17, 2026

Admin

Malta-based global commodity trading house Alkagesta recently shared latest market insight examining the dual supply crisis gripping global energy markets as diplomatic efforts to reopen the Strait of Hormuz stall and Rhine water levels fall to record lows, creating what the company describes as a “state of emergency” for European inland fuel distribution.

In an article published on Alkagesta Market Insights on 11 August, the company’s trading and market intelligence teams outlined how the convergence of two simultaneous logistical crises is tightening prompt fuel availability across Singapore, Northwest Europe, and the Mediterranean:

Strait of Hormuz transits fell to a near-one-month low of 13 ships on August 9 following an attack on an ADNOC-linked tanker, as both the US and Iran demand war reparations before any reopening agreement can be reached. Simultaneously, Rhine water levels at the Kaub chokepoint fell to 16 cm on August 10 — the lowest since records began in 1880 — with forecasts pointing to a further drop to just 4 cm by August 14, effectively halting barge traffic and trapping fuel oil stocks at the ARA hub.

The supply picture across both key hubs has deteriorated sharply. In Singapore, Middle Eastern fuel oil imports nearly tripled week-over-week to 328,878 mt by July 29 — the highest volume since March — providing some relief as onshore commercial heavy distillate stocks rose to a five-week high of 19.58 million barrels by August 5. However, July bunker fuel sales are estimated to have fallen 3.7% month-over-month to 4.44 million mt, with elevated premiums redirecting prompt demand toward alternative ports including Zhoushan and Port Klang.

In Europe, the VLSFO market remains acutely undersupplied as refiners continue to prioritize high-margin diesel over low-sulfur blending components, while the Rhine crisis has forced barges to operate at just 15–20% of normal capacity — with freight rates from Rotterdam to Karlsruhe rising more than 400% in two months.

Alkagesta’s strategic outlook points to a potential total breakdown in Rhine-linked inland distribution by mid-August, a VLSFO Hi-5 spread likely to remain above $200/mt through Q3, and a global crude market that analysts warn requires an additional 2.1 million b/d for 18 months to rebuild depleted inventories.

Note: The full article can be read here.

Photo credit: Alkagesta
Published: 17 August, 2026