Cargo Retention Clause

Cargo Retention Clause

In Tanker Charterparty Forms covering the crude oil and dirty product trades, where the nature of the cargo is a heavy or sticky liquid containing sediment such as sand, it is common to include a Cargo Retention Clause, which gives the right to the charterer to make a deduction from freight. A typical clause would read as follows:

In the event that any cargo remains on board upon completion of discharge, Charterer shall have the right to deduct from freight an amount equal to FOB port of loading value of such cargo plus freight due with respect thereto provided that the volume of cargo remaining on board is liquid, pumpable and reachable by vessel’s fixed pumps as determined by an independent surveyor. Any action or lack of action in accordance with this provision shall be without prejudice to any rights or obligations of the parties.

The clause above gives the charterer the right deduct from freight an amount equal to the FOB value of the cargo at the port of loading plus the freight due thereon, providing the cargo remaining is in a liquid state (not sediment), pumpable that is to say the pumps would be able to pump the liquid (it is not too high viscosity) and reachable that is to say that the liquid cargo can reach the vessels cargo, usually located at the starboard after corner of the tank, can reach the liquid.

This may at first glance seem reasonable but in practice there is sometimes a discussion as to how much cargo is liquid, pumpable and reachable.

On some occasions the only surveyor available in a timely fashion is employed by the receiving terminal or the charterer, leading to the allegation that the surveyor could not have been independent.