The Relevance Of The Shipper`s Packing Instructions In Claims For Mould Damage To Cargoes Of Green Coffee Beans
The cargoes of coffee and cocoa beans are highly hygroscopic which means that they absorb humidity from the surrounding air and release water vapor in case of rising air temperatures.
When they are shipped from tropical countries with warm climate and humid air, it will release large amounts of water vapor after being stuffed into containers. When the containers with coffee or cocoa cargoes are transported to a region with a cold climate such as Northern Europe in the winter period, the water vapor released from the beans at the time of commencement of carriage will then condense in contact with the cold container ceiling and will drop from the container ceiling down the cargo.
Given the risk of condensation of water vapor released by the coffee and cocoa beans, the coffee and cocoa trade associations issued guidelines recommending the use of ventilated containers1.
The ventilated containers have openings through which the air flows, thereby removing to the outside the water vapor and preventing the formation of condensation water on the containers` ceiling.
Alternatively, the shippers can use non-ventilated standard dry containers lined with water-absorbent material.
The party responsible for the lining of containers will be either the shipper or the carrier in function of the container transport conditions required by the buyers.
If the buyers require FCL/FCL transport conditions, the shippers (sellers) shall be responsible for the proper lining of the containers and thereby liable if the goods will be damaged due to improper lining of the containers.
If the buyers require LCL/FCL transport conditions, the carrier shall be responsible for the proper lining of the containers and thereby liable if the goods will be damaged due to improper lining of the containers.
Because the use of standard dry containers is cheaper than the ventilated containers, many importers of coffee and cocoa beans request the carriage in standard dry containers. The buyers who choose to transport the green coffee beans in standard dry containers should give proper instructions to the sellers as to the absorbent material to be used for lining the containers. If the buyers fail to give proper instructions or any instructions at all, they cannot blame afterwards neither the sellers nor the carrier for the loss incurred due to the improper lining of the containers.
Case study: Volcafe Ltd. & Ors v. Compania Sud Americana De Vapores S.A.2
The case involved six claims for financial loss resulting from the mould damage to 9 consignments of washed Columbian green coffee beans transported from Buenaventura in Columbia to various destinations in Northern Germany. The green coffee beans were packaged in bags and transported in non-ventilated standard dry containers in LCL/FCL conditions pursuant to the provisions of Article 11(f) of the European Contract For Coffee.
The claims were made by the buyers, as consignees under the Bills of Lading, and the agents of cargo underwriters against the carrier as the party responsible for lining the containers under LCL/FCL transport conditions.
The claimants contended that:
- the mould damage occurred due to the carrier`s negligence in lining the containers;
- the carrier`s method of lining the containers with Kraft paper was inadequate to protect the cargo because the carrier did not use adequate or sufficient Kraft paper (two layers of Kraft paper) to line the containers;
- the carrier should have lined the containers with corrugated cardboard to protect the cargo from the water dropping from the containers` ceiling.
The carrier argued that it was up to the shippers what lining was used. If the shippers wanted special lining such as corrugated cardboard, they could ask for it and it would have been provided, but at a higher freight rate.
Given that the shippers must pass on to the carrier the packing instructions received from the buyers3 and there was no evidence that the buyers provided any packing instructions at all or that the shippers asked for corrugated cardboard, the buyers could not complain about the lining used by the carrier.
The carrier contended that in the absence of specific instructions from the shippers to use particular insulating materials for lining the containers, the carrier lined the containers with Kraft paper in accordance with the general practice in the container trade and if damage still occurred, that was not caused by the carrier`s breach, since it was not for the carrier to guarantee that minor condensation damage would not occur.
The carrier further contended that the damage to cargo was caused by an inherent vice. The report submitted by Dr. Martin Jonas, the expert called by the carrier, showed that minor condensation damage to green coffee beans packaged in bags when carried in non-ventilated containers from warm climates to cold climates is inevitable, whatever lining is used pursuant to the container industry practice. Dr. Martin Jonas stated in the report submitted to the Court that:
"The quantity of water that condensed on the inside steel surfaces of the container would have been exactly the same whatever the lining, and once the paper was saturated, all further water would have found its way into the cargo. Use of corrugated cardboard rather than paper may have delayed the onset of cargo wetting for some time, but once soaked through, corrugated cardboard would also have provided no further protection."
The claimants could have requested the carrier to transport the coffee beans in ventilated containers but they did not ask for it, preferring the cheaper option of transporting the coffee beans in standard dry containers.
The English Court of Appeal held that the guidelines issued by the coffee trade associations were sufficient evidence that there was a widespread commercial practice of carrying the coffee packaged in bags in unventilated containers lined with corrugated cardboard or Kraft paper. Although corrugated cardboard is preferable to Kraft paper, the use of Kraft paper for lining the containers is a common commercial practice covered by the industry recommendations. The widespread commercial practice of carrying the coffee packaged in bags in unventilated containers lined with Kraft paper rendered the carrier`s method of lining the containers with Kraft paper a sound system.
The English Court of Appeal held that the mould damage due to condensation is inevitable when carrying green coffee beans in unventilated containers whatever lining is used pursuant to the general practice of the container trade.
In the decision of the English Court of Appeal, Flaux J. said that the Article III Rule 2 of the Hague Rules does not require the carrier to employ a system which would prevent the damage to cargo.
Flaux J. referred to the English case Albacora SRL v. Westcott & Laurence Line Limited4. In that case, Lord Reid said that:
"the obligation [of the carrier] is to adopt a system which is sound in light of all the knowledge which the carrier has or ought to have about the nature of the goods. And if that is right then the [carrier] did adopt a sound system."
A similar opinion was given by Lord Pearce who said that:
"A sound system does not mean a system suited to all the weaknesses and idiosyncrasies of a particular cargo, but a sound system under all the circumstances in relation to the general practice of carriage of goods by sea."
To avoid disputes related to the lining of containers, in case of cargoes transported in LCL/FCL conditions where the carrier is responsible for the proper lining of containers, the shippers should provide any relevant packing instructions and the guidelines for the preparation of containers issued by the coffee and cocoa trade associations. Furthermore, the Guidelines issued by The Federation of Cocoa Commerce Ltd. require the shippers to put the carriers on notice about their responsibilities under the guidelines. The Section 2 of the Guidelines for Shipment of Cocoa in Containers issued by The Federation of Cocoa Commerce Ltd. (FCC) provides that the shippers must ensure that the shipping lines` responsibilities set out in Section 3.1 are incorporated into the freight booking note and thereby into the contract of carriage. The Section 3.1 of the FCC Guidelines contains the following provisions:
"3.1. Shipping Lines` Responsibilities
The Shipping Line will supply sufficient good quality 2 ply corrugated cardboard and/or Kraft Paper and 2 kilo desiccant bags to prepare a sufficient number of containers to fulfil the load contract quantity in accordance with Section 3.3 [Container Preparation Guidelines].
[...]
When the Shipping Line undertakes the preparation of the container on behalf of the Shipper then it shall be liable to the Shipper for any failure to prepare the containers in accordance with the Container Preparation Guidelines. When such failure results in damage to the cargo on arrival at the Place of Final Delivery the Shipping Line will accordingly reimburse the Shipper for losses and expenses incurred in relation thereto as evidenced by an Independent Surveyor`s Report."
The carriers must keep the documentary evidence necessary to prove the compliance with the shippers` packing instructions. In Volcafe Ltd. & Ors v. Compania Sud Americana De Vapores S.A.5, the UK Supreme Court overturned the English Court of Appeal decision on the grounds that the carrier did not provide adequate evidence as to how many layers of Kraft paper were used and as to the thickness of the paper.
by Vlad Cioarec, International Trade Consultant
This article has been published in Commoditylaw`s Coffee & Cocoa Trade Review Edition No. 1.
Endnotes:
1. See Sub-Section 6.1 of the Code of Practice "Enhancement of coffee quality through prevention of mould formation" published on the European Coffee Federation web site www.ecf-coffee.org. See also the Standard Guidelines for Shipment of Cocoa Beans in Containers published by The Cocoa Merchants Association of America.
2. [2016] EWCA Civ. 103
3. See Article 11 (h) of the European Contract For Coffee
4. [1966] 2 Lloyd`s Rep. 53
5. [2018] UKSC 61