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Cargo Condensation – Issues


admin - April 3, 2021 - 0 comments

This is the fourth guest article written by L M Mohamed Ismail1 – it seems to us that he has has caught the writing bug. We thank Ismail for this wonderful article and look forward to seeing more such contributions from him and others.

  1. Condensation can be described as a natural phenomenon which occurs when water vapour becomes liquid. On the scientific front, condensation is vital in the distillation process. One major beneficiary of this technology is desalination where sea water is converted into potable water. At certain times condensation can have negative effects. One such effect is when it occurs during the course of transporting hygroscopic cargo across different temperature zones. Products such as rice, coffee beans, pulses, peanuts are some of the agricultural products that are hygroscopic.
  2. Shippers of hygroscopic cargo have always been saddled with losses arising from condensation. This is because the various institute clauses have always deemed condensation as an uninsured peril. In particular, Clause 4.4 of the Institute Cargo Clause 1.1.09 states that loss damage or expense caused by inherent vice or nature of the subject-matter insured is an excluded peril. This exclusion permits insurers to deny any claims relating heating or sweating of the insured cargo. Over a period of time, due to pressure from large insurance brokers, Insurers began offering coverage for condensation damages albeit with an additional premium coupled with high deductibles. At times additional premiums of up to 0.25% of the insured value, coupled with an excess of USD10,000/- are imposed.
  3. With respect to Carriers, while they have a duty to care for the cargo under both bailment and common law, they would rely on the natural and inherent nature of the goods to deny any liability. Additionally, contracts of carriage would usually provide for the incorporation of the Hague Rules or Hague Visby Rules. Subject to Carriers fulfilling their obligations as provided in Art III Rule 1 and 2, Carriers are entitled to exclusions as available under Art IV Rule 2 i.e.…. damage arising from inherent defect, quality or vice of the goods.
  4. All these changed by a 2018 decision of the  English Court of Appeal decision in Volcafe Ltd and others (Appellants) v Compania Sud Americana De Vapores SA (CSAV) (Respondent).
    1. In this case five Law Lords opined that carriers do have the duty to deliver the goods carried by them safely and are liable for any damages caused by condensation. The million-dollar question now is, does this mean that carriers are now liable for damages to goods carried caused by condensation whilst under their care and custody?
    2. Before one can jump to any conclusion, one should look at the basis of the Volcafe judgment. Briefly, Volcafe contracted with the carriers, CSAV to ship nine consignments of bagged Colombian green coffee from Buenaventura, Colombia to Bremen, Germany. The contract of affreightment required the carriers to prepare the containers for carriage as well as stuffing the bags of coffee in them. In this particular event the carriers opted to use of unventilated containers which was a cheaper option. Coffee beans is a hygroscopic cargo which means by nature it absorbs, stores and emits moisture.
    3. In order to prevent condensation damage during the voyage which is bound to happen when the ship passes through a number of climatic conditions, involving the rising and lowering of atmospheric temperatures, carriers dress the containers in cardboard or corrugated paper. These are usually called Kraft paper. The practice of using Kraft papers to mitigate condensation damages is common in the carriage of hygroscopic cargo.
    4. When the coffee beans finally arrived at Bremen, 18 of 20 containers of coffee beans were found damaged. Volcafe sought legal redress from the carrier, CSAV, for the damages that they suffered. This case was heard in the London Mercantile Court before David Donaldson QC, who was sitting as deputy High Court judge. In this case CSAV was held to be liable for the damage as they were unable to demonstrate that they had cared for and carried the goods “properly” for the purposes of Article III Rule 1 of the Hague Rules.
    5. The carriers being unhappy with the ruling brought this matter all the way to the Court of Appeal where they again lost their case and were held liable for the damages. Before shippers can point their fingers at the carriers for losses arising from inherent vice, one has to look at the basis of the Volcafe case. In this case, Volcafe contracted with CSAV to prepare the containers and load the cargo in containers for shipment. This meant CSAV was responsible for stuffing and ,ensuring that the containers were properly prepared for carriage of the cargo of green coffee beans for the relevant voyage.
  5. The point in question is, will this always be the case? The answer is a big NO. In most cases it is the shippers who make their request for the empty containers from the carriers and it is the shippers who choose between ventilated and unventilated ones and also load the cargo inside the container i.e. the shipper prepares the container for the loading of the cargo. In the case of hygroscopic cargo, the dressing of the containers with sufficient layers of kraft papers forms part of the preparation process.
  6. If the cargo arrives damaged at the destination, can the carriers be held liable for the damage to the cargo? We submit that carriers can deny the claim on the basis that preparation of the containers for shipment was performed by shipper themself, and therefore the onus is now on the cargo owners to ensure that the goods are stowed properly and adequately, to withstand the perils of the voyage.
  7. Let’s again explore the Volcafe case to see if CSAV could have done something better to avoid liability. It is to be appreciated that the stevedores employed by CSAV for the stuffing assignment were not material scientists. They may not have expert knowledge on the cargo as well as the inherent properties of the products that they are handling. Along with this they also require information and understanding of the various risk factors that affect the cargo during the course of transit including a number of transhipments. The usage of ventilated containers would have helped. Though Kraft paper was used to absorb the sweat from the coffee beans this may not be sufficient. Further, insufficient quantities of desiccants and silica gel could have been used to absorb the moisture present in the container. Long transit delays would render the desiccants ineffective.
  8. A common question asked by many insurance practitioners is, can cargo which are non-hygroscopic also suffer from condensation damages. The answer to this question is a surprising Yes! Before wooden pallets were prohibited in many countries, these were used to facilitate efficient stowage along with stuffing and unstuffing of the containers. Wood is hygroscopic and can sweat. Depending on the dampness of the pallets, condensation from these pallets can damage the cargo that is being placed on them. The second cause of condensation damage could come from the containers itself. This occurs when containers that are being washed, are not aired and dried properly. Water and moisture can collect on the roof and flooring of the containers and could be discharged when they ply between various atmospheric conditions.
  9. Each year millions of dollars worth of goods are lost or destroyed due to condensation losses. Plenty of research has been done in this field through efficient means of using ventilated containers, usage of Kraft papers along with desiccants. Another method that can be used is to permit the cargo to breathe. This means cargo is only loaded up to ninety percent of its capacity, allowing the gap to facilitate air circulation, along with the use of Kraft paper and desiccants. Moving forward the question we have to ask ourselves are the loss mitigation efforts sufficient? Can anything be done to prevent condensation losses in the first place? For this, we may need to look to the latest developments and in particular the spin offs from space technology or the military. It may be interesting to note that the ubiquitous infrared thermometers that are being used to measure temperature during this COVID 19 pandemic came from NASA. The commonly used duct tape, super glue, GPS, internet and virtual reality games are all from the military.
  10. Militaries from a number of countries require live ammunition at times to be stored in extreme temperatures. Temperatures in such situations can rise up to forty degree Celsius or more in the day, and fall to zero in the night. Such erratic temperatures,  exposes the ordnance to great risks. One way of mitigating this risk is to use air-conditioned tents. Maintaining air-conditioned facilities in the middle of a desert can be a huge logistical challenge as separate power units are required. Faced with such challenges the military designed a unique material or film which works along the lines of the Kraft paper that is used to dress containers. By utilising heat deflecting technology the temperature in the ammunition tents is kept at a constant and temperature spikes are minimised. This however was insufficient to prevent natural cargo sweat.
  11. Further research pointed to the need for a product which not only prevented temperature spikes2, it also has to allow hygroscopic cargo to breathe. In order to do this, nano technology was required. Extremely tiny perforations were made on the upper layer of the thermal shield which allowed water vapour to rise and penetrate the shield and move all the way to the roof the container. When the vapour turns into water, they were unable to penetrate the thermal shield as the nano pores were too small to allow the water to re-enter the container and fall on the cargo. Laboratory tests conforming to ASTM F1249 standards proved this. Such approved thermal shields can serve three purposes. The first being the elimination of damage to hygroscopic cargo through condensation. The second is to prevent damage to the cargo due to holed containers as tests has proven that water molecules being larger than the pores in the thermal shield prevents water from passing through and is retained on the upper layer of the shield. The third advantage is that that the quality of the hygroscopic cargo is preserved as the produce can be shipped in a much natural form, as the product is able to breathe.
  12. So where does this lead us to? Technology has always been in the forefront in the logistics arena and this may now be the way for shippers to prevent losses due to cargo sweat and condensation. While the risks of hygroscopic cargoes always remain, they can be managed by the use of technology such as the military grade thermal films to not only prevent condensation damages but also maintain the quality of their produce. Armed with this protection, they would be in a better position to negotiate an economical additional premium to seek cover for the condensation risks. Insurance underwriters may also be able or willing to provide condensation covers if the risks are better managed by the use of technology.This we believe will lead to more effective management of hygroscopic cargoes.

1. L M Mohamed Ismail,a marine insurance broker employed with Acclaim Insurance Brokers Pte Ltd and is involved in various classes of marine insurance. He can be reached at ismail@acclaim.com.sg.
2. One of the companies which deals with such a product, Aluma Liner, is a Singaporeran company, L J Max Pte Ltd. Further details of the company can be viewed at www.ljmax.com.sg

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