What Things Can Go Wrong For Soya Bean Cargoes During The Carriage By Sea

The soya bean cargoes may deteriorate during the carriage by sea due to mould damage and self-heating.

Mould Damage

The mould damage to soya bean cargoes may occur either due to the condition of soya bean cargoes at the time of shipment (high moisture content) and/or due the conditions of carriage, i.e. outside air temperatures, and the fact that the soya beans are hygroscopic which is an inherent vice.
ANEC Contract forms No. 41 and 42 used for the FOB sales of Brazilian soya beans provide that the soya bean cargoes may have a moisture content of maximum 14% and an amount of mouldy beans of maximum 6%. The problem with the pockets of mouldy beans is that the mould damage may extend in the course of the carriage to the sound beans¹. The ventilation of cargo holds will only prevent the mould damage to the top layer of the cargo in case of moisture condensation. It cannot prevent mould damage to the lower layers of the cargo if the cargo is shipped with high moisture content or parts of the cargo are mouldy².
In the claims for mould damage to soya bean cargoes originating from Brazil, the condition of soya bean cargoes at the time of shipment was often considered to be the most probable cause of their subsequent deterioration³.
Whether the cargo is within the quality specifications of the sale contract it should be irrelevant to the Master⁴. The Master`s responsibility is to determine by visual assessment whether the soya beans loaded on board are in good condition or not. In this regard, a shipment of cream soya beans means that the cargo is in apparent good condition, while a shipment containing portions of white or dark blue soya beans means that they are mouldy and should be rejected to avoid claims from receivers<sup>5</sup>.
The mould damage may also occur in case of moisture condensation.
The soya bean cargoes have a natural moisture content and are hygroscopic which means that they will release water vapour in case of rising air temperatures and absorb the humidity from the surrounding air (i.e. the air in the head space above the cargo in the holds).
When the soya bean cargoes are loaded at ports with a warm climate (and humid air), it will release water vapour in the holds after the hatch covers are closed. If the soya bean cargoes are transported from a warm climate through or to a cooler climate, the water vapour released from the cargoes at the time of the commencement of voyage will condense in contact with the underside of the hatch covers and the condensed water will drip down and wet the cargoes.
The greater the cargo`s moisture content and the difference between the temperature of the air in the head space of the holds and the temperature of the air outside the holds, the greater the condensation of moisture and resulting mould damage will be, unless the cargo holds are properly ventilated to prevent or at least to minimise this. The hatch covers of bulk carriers have ventilation openings which, if opened, will permit the cool air from outside to enter inside the cargo holds and remove the warm moist air from within the hold headspace to the outside, thereby preventing the formation of condensation water onto the underside of the hatch covers.
There are two recognised methods for determining when the ventilation of the cargo holds is necessary: the "dew point rule" and the "three degree rule".
Under the "dew point rule" the cargo holds should be ventilated when the dew point temperature of the outside air is lower than the dew point temperature of the air inside the holds.
Under the "three degree rule" the cargo holds should be ventilated when the temperature of the air outside the holds is 3 degrees Celsius or more below the temperature of the air in the head space of the holds (the cargo temperature recorded at the time of loading).
In the event of claims for mould damage to soya bean cargoes evidence showing that the ship`s crew ventilated properly the cargo is essential to carriers in defending the claims.
The Article III Rule 2 of the Hague – Visby Rules imposes on the carriers a general duty to take reasonable care of the cargo during the sea carriage.
In the English law case Volcafe Ltd. & Ors v. Compania Sud Americana De Vapores S.A.<sup>6</sup>, the UK Supreme Court held that in case of claims for mould damage to hygroscopic cargoes the carrier has the legal burden of proving that he took due care to protect the goods from damage, including due care to protect the cargo from damage arising from inherent characteristics such as its hygroscopic character and must provide adequate evidence in this regard. If the carrier is unable to provide adequate evidence, he cannot rely on the inherent vice defence and will be held liable for cargo damage.
It the ship`s crew uses the "three degree rule" for determining when to ventilate the cargo holds, they should record in the Ventilation Log the cargo temperature at the time of loading, the outside air temperatures during the voyage, the outside air temperatures during the voyage, the wind and sea conditions, the periods when the cargo holds were ventilated and the reasons for this (temperature differences higher then 3 degrees Celsius), the periods when the cargo holds could not be ventilated and the reasons for this (e.g. bad weather).
The failure to keep and provide on request such records will leave no chance to carriers in case of claims for mould damage, notwithstanding the soya beans` inherent propensity to deteriorate.

Heat Damage

The soya beans are prone to deteriorate and self-heat if their moisture content and temperature rise above the limits within which they are biologically stable.
The cargo temperature and moisture content at the time of shipment can provide an indication as to the likelihood of deterioration of a soya bean cargo during the sea carriage due to self-heating.
ANEC Contract forms No. 41 and 42 used for the FOB sales of Brazilian soya beans provide that the soya bean cargoes may have a maximum 4% content of heat damaged and burned beans but maximum 1% content of burned beans. The problem with the pockets of heat damaged and burned beans is that the heat damage may extend in the course of carriage to the sound beans.
Whether the cargo is within the quality specifications of the sale contract it should be irrelevant to the Master⁷. The Master`s responsibility is to monitor the cargo temperature during loading and determine by visual assessment whether the soya beans loaded on board are in good condition or not. In this regard, a shipment of cream soya beans means that the cargo is in apparent good condition, while a shipment containing portions of brown and/or black beans means that the soya bean cargo is in a process of self-heating. If a shipment of soya beans contains portions of brown and/or black beans, the Master can either request the replacement of such portions or ask the shippers to state the estimated amount of brown and black beans in the description of cargo in the Bills of Lading.
The failure to properly describe the cargoes that contain heat damaged and burned beans in the Mate`s Receipt and Bills of Lading would expose the shipowners to claims from the receivers.
Cases of heat damage to soya beans cargoes were reported in China following prolonged delays at Chinese ports in the berthing of carrying vessels and delivery of the goods caused by the congestion in ports, lack of storage space ashore for the cargo or by the change of regulations in respect of imports of soya beans.
One such case occurred in 2004. On 10 May 2004, AQSIQ (General Administration of Quality Supervision, Inspection and Quarantine of the People`s Republic of China), a Chinese government agency in charge of imports of agricultural commodities, imposed quarantine restrictions on the imports of Brazilian soya beans supplied by four trading companies following discovery of fungicide-tainted seeds in a Brazilian soya bean cargo in April 2004. As a result, the vessels carrying Brazilian soya bean cargoes for the four trading companies could not enter the Chinese ports for nearly two months and when they finally did the Chinese buyers who had to settle the demurrage claims sought to recover some money from the shipowners through claims for cargo damage.
Claims for heat damage to Brazilian soya bean cargoes were also reported in 2017 following prolonged delays at Chinese ports caused by the local buyers who sought to take advantage of the reduction of VAT charged on imports of agricultural commodities⁸.
The safe storage period of soya bean cargoes on board the carrying vessels depends mostly on their moisture content and temperature at the time of shipment.
For cargoes with 12% moisture content, the safe storage period at a temperature of 26.7ºC is estimated at 70 days⁹.
For cargoes with 13% moisture content, the safe storage period at a temperature of 26.7ºC is estimated at 40 days¹⁰.
For cargoes with 14% moisture content, the safe storage period at a temperature of 26.7ºC is estimated at 20 days¹¹.
The higher the moisture content and cargo temperature and the longer the voyage, the more prone soya bean cargoes will be to damage by self-heating¹². The ventilation of cargo holds cannot prevent the heat damage to the lower layers of the cargo if the cargo was self-heating at the time of shipment.

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Grain Trade Review Edition No. 4.


Endnotes:

1. See Gard INSIGHT 172/2003 - "Soybean claim in China"
2. See Gard INSIGHT 172/2003 - "Soybean claim in China"
3. See Gard`s Loss Prevention Circular No. 03-13 - "Prevention of soya bean cargo claims" and Gard INSIGHT 172/2003 - "Soybean claim in China".
4. See London Arbitration No. 12/07 (2007) 719 LMLN 3.
5. See Gard INSIGHT 172/2003 - "Soybean claim in China"
6. [2018] UKSC 61
7. See London Arbitration No. 12/07 (2007) 719 LMLN 3.
8. See Mark Russell, "Soya bean claims due to self-heating on the rise in China", Gard INSIGHT 2017
9. See Gard`s Loss Prevention Circular No. 03-13 - "Prevention of soya bean cargo claims"
10. See Gard`s Loss Prevention Circular No. 03-13 - "Prevention of soya bean cargo claims"
11. See Gard`s Loss Prevention Circular No. 03-13 - "Prevention of soya bean cargo claims"
12. See Mark Russell, "Soya bean claims due to self-heating on the rise in China", Gard INSIGHT 2017.