Soya beans are susceptible to mould growth and resultant self-heating under

certain conditions. Safe storage time decreases as moisture content and

temperature of the beans increase. Thus, soya beans transported over greater
distances and involving more time in the stow, have increased potential for
damage at discharge due to microbiological instability.
In 2019, Brazil exported over 74 million metric tons of soya beans in bulk - three
quarters of the shipments to China.  And exports are increasing.  According to
the Proinde Practical Guidance, most of the Brazilian soya bean shipments in the
last years, particularly those departing from the Southern ports, have been sent
to Chinese ports via the Cape of Good Hope.  Such shipments can take between
35-45 days.  In contrast, shipments to the EU countries, take an average of 14-
20 days.   
 

 Brazilian soya bean export main routes (no scale) Courtesy Proinde Practical Guidance

Soya Beans loaded in Brazil at ambient temperatures of 24-32C and at moisture

content of 13-14% may arrive in sound condition to European ports but due to
longer transit times, may arrive damaged in Chinese ports.
Ventilation can, to a limited degree, reduce ship sweat and lead to better
outcome for the first few centimeters in the stow by decreasing the amount of
moisture that drips down onto the top of the stow. Ventilation cannot lessen the
caking and discoloration of beans deeper into the stow caused by microbiological
instability. Our video interview with Dr. Tim Moss provides an overview of best
practices for ventilation of soya bean cargoes.   
There have been a number of unfavourable Court decisions in China holding
owners responsible for the cargo damage despite expert scientific evidence that
the only possible cause of the damage is the inherent vice of the cargo, i.e. due
to cargo instability/self-heating/propensities, and that there were no measures or
steps that the Master and crew could have taken on board that would have
avoided such damage from occurring.
Whilst the investigation carried out and the evidence collected when issues arise
is most of the times sufficient for recognised international experts to conclude on
causation, the recent Court decisions in China indicate that the Chinese Courts
may not feel bound by their findings. The Chinese Courts tend to place more
weight on the findings of the local surveyors and the perceived completeness of
evidence provided by the vessel on the care exercised to the cargo during
loading, throughout the sea passage and up until it is discharged. Any incomplete
or missing information or records could lead to detrimental results for the vessel’s
interests even if such information or records are irrelevant to the cause of some
or all of the damage according to expert opinion.
The duty to care for the cargo is an obligation in law under the Hague Visby
Rules  - a duty the Master and his crew must actively exercise. It is also the
Master’s responsibility at the time the vessel is loaded to issue a bill of lading and
to determine by a reasonable examination of the cargo’s external condition
whether the cargo is loaded in “apparent good order and condition”. A
reasonable examination in the context of soya bean cargo means a visual
examination during a normal loading sequence. There is no obligation nor is it
recommended to sample for moisture content absent unusual appearance in
which case, Gard’s assistance should be requested.
The English Supreme Court recently confirmed in Volcafe (Volcafe Ltd and
another v Compania Sud Americana de Vapores SA ([2018] UKSC 61)) that
where the cargo was loaded “in apparent good order and condition” and found
damaged on outturn, it is the owners who bear the burden of proving that the
duty to care for the cargo has been fulfilled. Specifically, the Supreme Court
found that “…in order to be able to rely on the exception for inherent vice, the
carrier must show either that he took reasonable care of the cargo but the
damage occurred nonetheless; or else that whatever reasonable steps might
have been taken to protect the cargo from damage would have failed in the face
of its inherent propensities”
Whilst China has not ratified the Hague-Visby Rules, the Chinese Maritime Code
incorporates similar principles including the duty of care to the cargo and the
inherent vice defence. However, in practice, the Chinese Courts will readily draw
adverse inferences against the owners if the evidence kept by the ship on cargo
care is, in their view, incomplete. For example a lack of sufficient number of
pictures to show that the cargo was indeed in apparent good order and condition
throughout loading operations or should there be any acts or omissions of the
Master or crew, for example ventilation not sufficiently recorded or properly
performed, they are prepared to deprive the owners of the inherent vice defence
even contrary to expert advice that the damage was inevitable in that there was
no causal link between the act/omission and the damage found.  Thus in our
experience the Chinese Courts adopt a more stringent approach to the burden of
proof than Volcafe.
In our Insight on the Volcafe decision, we highlighted the importance of
implementing solid and diligent record keeping routines. The Chinese Courts’
approach on soya bean cases reinforces the same conclusion - evidence is of
paramount importance. In an effort to put Members in the best evidential position
possible to defend claims in China for damage to soya beans, we have prepared
the following checklists including sample ventilation spreadsheets. The checklists
identify the sort of evidence that should ideally be gathered to best demonstrate
that there was no lack of cargo care on the part of the Master and crew.
Members are encouraged to share the checklists with their operations
departments and the Masters and crews on board.
Before Loading
 Maintain records and keep evidence that the cargo holds have been
cleaned and are ready for loading in all respects in line with industry
standards for soya beans. Maintain any orders received from
shippers/charterers regarding hold preparation. Also maintain records and
keep evidence that weathertightness tests of hatch covers (ultrasonic or
hose test) have been carried out. In case of orders from shipper/charterer
and/or fumigators to use hatch cover sealant it is recommended that
written confirmation of such orders is obtained. Records include last
cargo(es), hold cleaning and maintenance, pictures, certificates, logs,
hatch cover maintenance and service reports.         
 Obtain and review the cargo declaration in order to be informed about the
general transport characteristics of the cargo that are relevant to the
cargo’s “apparent good order and condition”. There are no specific care
parameters for soya beans other than the “International Code for the Safe
Carriage of Grain” (the grain rules) and Masters should refer to this Code
when loading soya beans.  The quality certificate, which indicates the
actual analysis results of the cargo, should be requested where issues
arise, i.e. the cargo is not found to be “in apparent good order and
condition.”
 Seek clear written instructions on ventilation of cargo from shippers
/fumigators/charterers and seek timely clarifications if the instructions are
contradictory, for example, the fumigation period exceeds the duration of
the voyage. To avoid later dispute it is advisable to forward any
instructions from the fumigators to the charterers and ask them to confirm
that owners should comply.   
 Review the preloading stowage plan and loading sequence. The method
of loading is determined by the grain rules and normal fuel oil
management for heating during the voyage should be applied.          
 
During Loading      
 Keep hatch covers closed during periods of rain. Monitor weather
forecasts and stand ready to close hatch covers in the event of expected
or imminent rain. Log/keep record of the weather conditions during loading
and include references to hatches being closed in anticipation of/during
periods of rain in the Statement of Facts to ensure no cargo is exposed to
rain. Record not only the rain periods but also record in the deck or port
log when the hatch covers were closed/opened by stating the
times.           
 Conduct visual inspection throughout the loading operation to make sure
that the cargo is in apparent good order and condition - colour and odour
checks, infestation, contamination. Sound soya beans are light yellow in
colour.  Darkened beans are an indication of damage due to self-heating. 
When in doubt about the “apparent good order and condition” of the cargo,
notify Gard in order to arrange inspection by local surveyors and involve
experts if required.
 If the cargo is loaded via a conveyor belt check the cargo condition when
practically possible; during all stoppages of each hold and when dust
settles, take date stamped pictures of the cargo and make the relevant
entries in the logbook making reference to the pictures taken. The pictures
should be filed electronically. This is invaluable evidence should a claim
arise at the discharge port. Take date stamped photographs throughout
loading and of how the cargo is loaded; by
trucks/barges/grab/pipe/conveyor etc.         
 Keep record of the sequence of loading which is relevant to identifying the
cause of damage by comparing to the damage pattern during the
discharge. If barges deliver cargo, record barge numbers.   
 Take cargo temperatures using a calibrated digital temperature probe.
These should be taken during loading breaks or upon completion of
loading in 2-3 different spots in each hold. The probe should be inserted at
least 30-50 cm deep and stay for 5-10 minutes.  The temperatures should
then be averaged for the entire cargo. This average temperature will form
the basis for ventilation in accordance with the 3-degree rule. Elevated
cargo temperatures or temperature variations of 5-10 degrees C between
different spots or holds indicate self-heating and Gard should be notified
and a protest issued to all parties.         
 Cargo samples are not to be taken as part of the vessel’s standard loading
process for soya beans in that it is not within a carrier’s obligation to
investigate the cargo quality at the time of loading. However, when cargo
damage is detected, as part of the investigation that is carried out,
representative samples should be taken, according to FOSFA rules and/or
as determined by surveyors. Gard will assist in appointing the surveyors
and experts to manage sampling when investigation is necessary.            
 Moisture content is not to be measured as part of the vessel’s standard
loading process for soya beans in that it is a quality parameter over which
a carrier has no control/obligation. The time to investigate moisture
content is when there is an apparent issue/abnormality with the cargo
during loading. Gard will assist in appointing surveyors and experts to
manage the investigation of moisture content when investigation is
necessary.        
 If cargo is not in apparent good order and condition stop loading and seek
Gard’s assistance. Depending on the facts and the circumstances of the
case Gard may consider taking steps that include but are not limited to the
following:
 o inform correspondents, arrange surveyors’ attendance to
investigate on causation and assist the Master/send protests to the
parties concerned;
o  invite shippers and charterers/their club to jointly
inspect/sample/test;
o involve experts when needed for guidance and/or physical
attendance;
o consider clausing the bills of lading and/or getting shippers to
discharge the cargo that is not in apparent good order and
condition;
o involve lawyers for sending legal notices or for taking legal steps.
Sea passage
 Keep the cargo dry and properly ventilated (3 Degree Rule or Dew Point
Rule). Vents should be closed when weather or sea conditions could
result in wetting of the cargo. Subject to these Rules, if the weather
forecast permits, vents should be left open at night. Fog and high relative
humidity are irrelevant for the purposes of ventilation when either the 3
Degree Rule or Dew Point Rule is followed. More information is available
in our video:  Best Practices for Ventilation of Soya Bean and Grain cargo
 Gard recommends the 3 Degree Rule. After it is safe to open the vents
following the instructions of the fumigator, the cargo holds should be
ventilated whenever the temperature outside of the holds is at least 3
degrees below thatof the average temperature of the cargo at loading   
 Keep proper ventilation records. The attached sample spread sheets show
the relevant information that should be entered when following the Dew
Point Rule or the 3 Degree Rule. It is important to note the reasons why
ventilation has been or not been done, for example due to fumigation
orders or weather conditions.     
 After the fumigation period has elapsed check the drain valves of the
hatch covers to ensure they are unblocked and without condensation. If
there is condensation, record it in the logbook and support with
photographs. Condensation may be an indication of cargo self-heating.
 Where hatch covers are unsealed and where fumigation period has come
to end, inspect the cargo twice a week, weather permitting, through
access ways on deck from the top of the access ways (no crew should
enter inside a hold on standard personnel safety grounds), Record any
abnormalities (like sweat) in the log book. 
 In case of long delays notify Gard and open hatch covers if/when possible
to inspect the cargo. If the hatches are sealed, seek charterers’ approval
to unseal them for inspection, preferably jointly with them. Check cargo
temperatures and take pictures for passing on to charterers/their club, if
charterers deny attendance.
 Monitor cargo temperature down sounding pipes during the voyage which
could alert to any on going cargo self-heating.      
  Keep fuel at minimum pumpable temperature within HFOTs adjacent to
holds containing cargo to reduce the likelihood of heat transfer and
subsequent heat damage to adjacent cargo.        
 Record the condition of the cargo at the top of the stows in all holds by
comprehensive photographic record when hatch covers are opened for
the first time on completion of the voyage for the first cargo inspection by
the official local Authorities. 
We thank CWA (Dr. Stephanie Heard and James Blythe) Brookes Bell, (Dr. Kai
Aamlid. Dr. Martin Jonas, Dr. Daniel Sheard, Dr. Nicholas Crouch, Dr. Tim
Moss), Penningtons Manches Cooper (Darryl Kennard) and Waterson Hicks
(John Hicks) for their contribution to this insight. We also thank Brookes Bell for
preparing the ventilation spreadsheets.

Soybeans in their original form are not listed under the IMSBC Code. Shipment in bulk is subject
to the IMO International Convention for the Safe Carriage of Grain in Bulk (the "Grain Code").
Compared to other grain cargoes, soybeans are a perishable commodity and not meant to be
stored for an extended duration.

The main cause for damage to a soybean cargo is its inherent sensitivity to high moisture
contents, and high temperature at load port makes the cargo even more likely to suffer damage.
Warm soybeans can release moisture, leading to a warm and humid atmosphere within the
cargo bulk which consequently can allow mould to grow resulting in self-heating and cargo
damage during a lengthy sea voyage.

Table 1 Converted to Celsius degree from North Dakota State University's "Approximate
Allowable Storage Time for Soybeans
(https://www.ag.ndsu.edu/alerts/soybean-storage/media/ndsu-approximate-allowable-
storage-time-for-soybea.png/view)

China, the leading soybean importer, naturally produces the largest number and most costly
soybean claims against shipowners. It is also well known that, notwithstanding Chinese law
providing an exemption of carrier's liability for loss or damage caused by "natural characteristics
or inherent defect of the goods" (Article 51 (9) of the 1992 Maritime Code), it is extremely
difficult for shipowners to invoke that exemption in litigation.

So, what can owners do?

Based on recent case law, shipping lawyers Wang Jing & Co. have shared some useful tips which
have been complimented by comments from Skuld's Loss Prevention department:

1. Keep detailed ventilation logs

The ventilation logs shall be properly prepared and recorded. In a recent PRC Supreme Court
Judgment, the judges agreed that dew points/temperatures/humidity inside and outside the
cargo holds shall be recorded daily from the loading date to discharge date. In addition, if
ventilation has been carried out, the date, time and methods shall be recorded in detail. If
ventilation was not carried out, the reasons (such as fumigation restriction, bad weather, rough
sea etc.) shall be recorded.

 Skuld's Recommendation: The effect of ventilation on bulk cargo is limited to surface

ventilation, with air flowing over the surface of the cargo from ventilators. Through
ventilation is not required and is not possible to achieve on ships. Even when
mechanically ventilated, air will only pass around the periphery of the stowage.
Ventilation can therefore not prevent or reduce cargo damage caused by self-heating
below the surface within the bulk of the cargo. It is certainly true that ventilation can, in
some circumstances, assist to lessen the formation of condensation (ships' sweat).
However, in more extreme conditions of much cooler steelwork than cargo (for
example, traversing extreme latitudes, or a cargo undergoing self-heating) condensation
will form much more quickly and the limited surface ventilation of bulk carriers cannot
begin to prevent this from occurring.
 
If the soybean cargo has been fumigated upon shipment, the cargo holds must not be
ventilated until the minimum fumigation period has expired, and care must be taken to
ensure that subsequent ventilation does not endanger the crew. As fumigation
requirements may prevent the Master from ventilating the cargo during the voyage, full
and clear instructions need to be received from the charterers and shippers, bearing in
mind the loading/discharging port authorities may have specific requirements. For
instance, if the soybeans were loaded in a US port and fumigated there, the crew must
be aware that as per the regulations of the United States Department of Agriculture
(USDA), the cargo is not to be ventilated before discharge. This means that the cargo is
not to be ventilated at all, unless the ship owners have written instructions from their
charterers to ventilate the cargo despite the fumigation, otherwise owners open
themselves up for a damage claim from Charterers for fumigation failure and insect
presence.  Typically, from South American ports, fumigation of around 10 days is
stipulated.
 
However, as the Chinese lawyers suggest, it is indeed legally important that shipowners
conduct ventilation when necessary and when safe to do so - and keep records,
otherwise they can be found liable under Chinese law.
 
During loading operations, the crew should record the average temperature per each
individual cargo hold in Excel ventilations logs. From the day of the departure from load
port and throughout the whole voyage, the crew should measure and record the dry
bulb temperature of outside air on a daily basis. The cargo should only be ventilated
when the outside temperature is 3°C or more below the average temperature per cargo
hold. It is important to ventilate each cargo hold as per the cargo temperature within
that specific cargo hold. Note the "3-Degree Rule" is based on the assumption that the
 cargo remains at the same temperature as it was during loading operations.
 
It is therefore not a general advice to ventilate the soybean cargo in bulk carriage in all
circumstances. The cargo should not be ventilated if the dry bulb temperature of the
outside air is less than 3°C cooler than the average cargo temperature at the time of
loading, or warmer. The Crew should check this at night if they can as then the
temperature difference will be the greatest. If they cannot ventilate for any reason,
including night-time (for example, bad weather forecast, etc.) then they should note this
clearly in the ventilation record.
 
The "Dew point rule" does not work for the modern bulk cargo vessels in which it is not
possible to safely or effectively measure an accurate dew point. Instead, the crew
should rely on the temperature readings of air and the load port temperature. If the
temperature of the cargo as recorded through sounding pipes is significantly higher than
both the ambient sea/air temperatures and the loadport cargo temperature, this may
be a sign that there is ongoing self-heating within the cargo.

2. Make sure the ventilation records are consistent

On recording the ventilation methods and duration, the Master and duty officers should be
reminded that such contents, if recorded in the logbook, must be consistent with what is
inserted in the ventilation logs. In our experience, even where detailed and strong ventilation
logs were submitted then, if there was any inconsistency between the logbook and the
ventilation logs, for example regarding measures or period of ventilation, the Court would
disregard the evidence because of the inconsistency and find against shipowners for having
failed to exercise due diligence to care for the cargo.

3. Document hard copies of the ventilation logs or email them daily

In many cases, ventilation logs are recorded on an editable Microsoft Excel template, which is
then saved as a digital document. It is updated by the Chief Officer or other duty officer daily. In
some of our cases, the cargo receivers would challenge the electronic ventilation log on the
grounds that an Excel template can be easily altered and therefore the electronic data are
alleged to be unreliable. To avoid the data being challenged in such a way we recommend that,
in addition to properly filing it in onboard, a copy of the daily ventilation logs can be converted
to PDF-format and emailed from the vessel to owners and charterers at the end of each day
during the voyage. Such will allow a Chinese Notary Public to later notarise the emails in China
to enhance the credibility in the evidence.

4.  Get a surveyor there

If possible, Owners (or their appointed surveyors) should monitor loading operations and take
photographs of the cargo in each hold regularly. Cargo temperatures are needed anyway for the
ventilation regime, and these can be very helpful to assess the cargo condition on loading and its
longevity for the voyage.
When hatches are open before arriving the discharge port, they may also take photographs of
the apparent condition of the cargo. These photographs can form a traceable record of the
condition of the cargo during carriage. It is particularly useful evidence when there is a delay in
discharge as the pictures can reflect the gradual change in the cargo condition.

 Skuld Recommendation: If the surveyor at the loading port raises any doubt regarding
the cargo's condition, owners should involve the charterers and make sure they give
clear instruction (and if appropriate, an indemnity) so as to preserve owners' rights
under the charterparty. Skuld should also be informed immediately so that proper steps
can be considered.
 
At discharging port, if damage is suspected, for example if the vessel has been at sea for
an extended period or stuck in port congestion, Skuld recommends owners to have an
independent cargo surveyor attending on their behalf when the hatch covers are
opened and throughout the duration of the cargo discharge operations. This is to
witness any cargo damage caused by the extended storage time.

5. Beware of delay in discharging port

If a delay in the berthing schedule is expected, owners should inform Skuld as soon as possible.
Independent specialists should be sent on board to take representative cargo samples from all
cargo holds prior to, throughout, and after the discharge operations in accordance with
appropriate sampling standards and where practically possible. It is often better for all
interested parties to jointly instruct a specialised cargo control company who have the
manpower and training in sampling techniques, preparation and security. These cargo samples
can be examined at a later stage. In case the appointed cargo surveyor witnesses damaged
cargo, owners should immediately contact charterers to have them instruct stevedores to
segregate the cargo during discharge operations.

In case the vessel has to wait for discharge at the anchorage, owners' lawyers may be instructed
to send a demand letter to the concerned parties, requesting them to take delivery of the cargo
without delay and hold receivers liable for cargo damage caused by delay in discharge. This is a
lesson learned from another case we handled: the vessel waited for more than three months at
the anchorage, yet owners never requested the cargo receiver to take delivery of cargo. As a
result, in subsequent proceedings, the cargo receiver tried to blame owners for failing to inform
them to take delivery of cargo in time. In addition to the demand letter requesting delivery,
owners should ask for an alternative port of discharge to have the cargo to come off their vessel
as soon as possible.

 Skuld Recommendation: Also, when delay is expected, owners should send a notice to

charterers holding them liable for any damage caused to the soybeans because of the
extended storage time of the cargo on board. In addition, owners should exercise
pressure on charterers to nominate an alternative port of discharge where the cargo can
come off sooner as any day the vessel is held up in congested port increases the risk of
the cargo being damaged.
 
If delays are encountered, following the proper ventilation regimes exactly the same
 way as during the voyage is strongly advised. All too often, crews will assume that end
of voyage means end of ventilation.
 
We would also recommend that inspections are conducted of each hold on a weekly
basis, taking photographs and cargo temperatures, which should be sent to charterers
to keep them informed of the cargo deterioration status, if any.

6. Keep track of the statutory inspection and sampling

Genetically modified soybeans are regulated goods and subject to compulsory inspection by
Chinese Customs. Customs (or previously known as CIQ) officers will board the vessel to inspect
the cargo and take samples when the vessel arrives. In this regard, the Master or a surveyor
should be instructed to take photographs of the whole inspection and sampling process and put
same into record.

Skuld is grateful to Mr Wang Yongli, partner of Wang Jing & Co., Qingdao Office and scientists
from Brookes Bell Liverpool and Hong Kong offices for their contributions to this article.

Disclaimer

The above article has been produced by or in co-operation with correspondents or other
external sources and is reproduced here with their kind permission for general information
purposes only. Reference is made to the Legal disclaimer governing use of this website.
 Approximate Allowable Storage Time for Soybeans (°C)

Moisture Content (%) -1°C 4°C 10°C 15°C 21°C 26°C

Approximate Allowable Storage Time (Days)

11 * * * * 200 140

12 * * * 240 125 70

13 * * 230 120 70 40

14 * 280 130 75 45 20

15 * 200 90 50 30 15

16 * 140 70 35 20 10

17 * 90 50 25 14 7

19 190 60 30 15 8 3

Section one

Moist soybeans, regulations at the load port and obligations at the discharge port

The common connection

The Association has faced a number of substantial claims arising from cargo loaded at Santos,
Brazil and Montevideo and Nueva Palmira in Uruguay.

The common connection for these claims is self-heating due to high moisture content, which can
result in discolouration, mouldy and burnt cargo. The main reason for the high moisture content
is that South American countries, such as Uruguay, Argentina and Brazil, allow for soybeans with
a maximum moisture content of 14% to be loaded on vessels. In most of the soybeans cases
registered with the Association recently, cargo was loaded in Santos with moisture content as
high as 13-14%.

The high moisture content found in the beans recently is partly attributed to the weather
phenomenon known as "El Niño", bringing with it torrential rains in the southern part of Brazil,
whereas the centre-west area of the country has sustained drought. Although the local statistics
for 2016 are not yet available, claims arising from cargo originating from Santos have been
increasing.

A perishable commodity

Soybeans are, of course, a perishable commodity and one cannot expect to store them
indefinitely. The concept of "safe storage" is probably incorrect since there is no particular set of
conditions under which bulk soybeans cannot be damaged. However, the two crucial aspects are
heat and moisture. The period of safe storage (before noticeable deterioration occurs) depends
largely on the initial moisture content, the temperature of the beans at loading and the
subsequent storage conditions, higher temperatures and moisture content increase the rate of
deterioration.

The effect of moisture

The effect of moisture content on the shipment of soybeans has been summed up in a House of
Lords Judgment (Soya G.M.B.H. Mainz Kommanditgesellschaft v. White; 1983) which held that:

1. It is a natural characteristic of soybeans when shipped in bulk that if the moisture

content of the bulk exceeds 14 per cent, micro-biological action, the nature and causes
of which are unknown, will inevitably cause the soybeans to deteriorate during the
course of a normal voyage from Indonesia to Northern Europe to an extent which will
considerably reduce their value on arrival.

2. With a moisture content of between 12 and 14 per cent (below 12 per cent no micro-
biological action occurs), there is a risk that deterioration from micro-biological action
can occur during the course of such a voyage. Whether it does or not depends upon
factors that remain unknown. The range of moisture content between 12 and 14 per
cent is referred to as the "grey area".

The voyage from Brazil / Uruguay to China

If cargo is shipped at 13% or 14% at the load port, it still has approximately eight to ten weeks
sailing time assuming no delays at the load port and no delays at the discharge port. The
weather temperatures on route may vary as the vessel transits from one tropical region to the
other. Therefore, there is a significant risk that by the time the vessel arrives in China the cargo
may overheat and moisture damage giving rise to discoloration, mould or burnt cargo may
occur.

What has been happening in China in 2016?

The common problems with the cargo at discharging ports in China are serious discolouration,
high moisture content and a large amount of black/burnt beans evenly spread throughout the
whole consignment.
Extensive visible mould growth and caking noted at the hot spot in the aft starboard corner
According to the usual practice in China, cargo receivers will seek to reject the damaged cargo
but still insist that the damaged cargo is discharged into the receivers' silos/premises for their
use/handling. Often little if any segregation of damaged cargo is undertaken before the cargo is
put in the silos. This can increase damage claims as cargo interests may argue that once in the
silo the damaged cargo can contaminate the good cargo. At the same time receivers will lodge a
claim for loss of the whole consignment either against the cargo insurers and/or owners under
the bill of lading.

How claims are processed in China

Upon arrival of the vessel at the discharge port Chinese claimants will often apply to the China
Inspection & Quarantine (CIQ) for sampling and testing. The test results are usually given to the
applicant which are the 'claimants' and not given to the owner if owners do not apply for a joint
applicant. It should be noted that CIQ results carry substantial evidential weight in Chinese
courts.

Bill of lading holders in China mainly rely on two grounds for their claims in contract against the
carriers for damage/shortage:

1. The carrier has not cared for the cargo during the voyage hence the loss or damage to
the cargo. Here the CIQ report will be very important.

2. The carrier omitted to clause the bill of lading, which was issued clean while failing to
deliver the goods as per the clean description in the bill of lading.

The significance of the bill of lading

Once Chinese courts determine that the carriers or their agents have issued a clean bill of lading,
but failed to deliver the goods clean to the consignees holding the bill of lading in good faith,
they usually decide that the carrier should be liable for compensation.

Does the carrier under a bill of lading have any defences under Chinese law?

The Hague / Hague Visby Rules are not enacted in Chinese law. However, under the Chinese
Maritime Code enacted 1993 the owner / carrier will have similar obligations but not identical to
those found under the Hague and Hague Visby Rules. Likewise, the carrier can enjoy similar
defences such as "inherent vice" to that found under the Hague Rules and Hague Visby Rules
pursuant to Article 51 of the Chinese Maritime Code which states that:

The carrier shall not be liable for the loss of or damage to the goods occurred during the period
of carrier's responsibility arising or resulting from any of the following causes:... (9) Nature or
inherent vice of the goods;

If the carrier raises a defence such as "inherent vice", the carrier will bear the burden of proof
under the Chinese Maritime Code. This means the carrier will need good expert evidence to
show that cargo damage occurred due to the "inherent vice" of the cargo and will also need to
provide all the vessel's ventilation records to demonstrate that the vessel was not at fault in
causing the damage.
The dichotomy between Chinese law and English law and laws operating under Brazil, Uruguay
and Argentina

Under Chinese law, the owners are obliged to clause the bill of lading in accordance with the
condition of the cargo as loaded on board and as known by the master. Traditionally, this would
mean the apparent condition of the cargo. That means what the master can see, smell and
observe. However, it has recently been suggested by some Chinese lawyers that if the master
also knows something about the cargo and if it affects the cargo condition, he may be entitled to
insert that in the bill of lading. In this case, that could mean that the master, if he knows the
cargo is loaded at an average of 13% or 14%, may be entitled to note that on the bill of lading.
The advantage of this is, at least in so far as the BL holder is concerned, that he is then placed on
notice of the high moisture content of the cargo and this may aid an inherent vice defence in
local courts. We believe he could state something along the lines of:

"Cargo loaded at 14% max moisture as per Shippers Certificate attached: cargo in apparent good
order and condition" (assuming at the time of loading cargo was in his visual opinion in good
order and condition).

The advantage of inserting this clause on the bill of lading would be to assist owners in Chinese
courts with a defence of "inherent vice".

Legal perspective under English law

As stated above, under English law it is well known that soybeans with a moisture content of
between 12% and 14% may self-heat. Whereas, if the moisture content is in excess of 14% self-
heating is highly likely (depending on the voyage times, etc.).

Laws applicable at the load ports

Pursuant to a standard specification in South American sales contracts and under the Brazilian,
Venezuelan and Argentinean law, the moisture content need only be 14% or less.

Problems often arise in South America as it is both common and legal for the moisture content
to be 14%. As seen above this exposes owners to a risk that cargo will self-heat during the long
voyage, especially given the fact that the transit takes between eight to ten weeks and delays
can occur at subsequent load and discharge ports.

The masters dilemma: Clausing of bill of lading and mate's receipts

One of the major problems encountered by owners is that even though it is well recognised that
there is a risk cargo may self-heat if moisture content is above 12% but below 14%, owners are
probably not entitled under English law to clause the bill of lading and mate's receipts to reflect
the moisture content of the cargo, unless it is apparent from a visual inspection that the cargo is
not in apparent good order and condition. In this respect:

(a) It was held in the leading case of The David Agmashenebeli [2003] 1 Lloyd's Rep. 92 that the
master's duty in respect of the clausing of bills requires that he "should make up his mind
whether in all the circumstances the cargo, in so far as he can see it in the course and
circumstances of loading, appears to satisfy the description of its apparent order and condition
in the bills of lading tendered for signature."

(b) The test is therefore concerned with the visual appearance of the cargo, and not its other
characteristics such as its quality or, in our case, its moisture content, assuming characteristics
are not apparent on a reasonable visual inspection.

(c) Although it is possible that, in future cases, it may be held that a master is entitled to clause a
bill of lading where he is aware of a problem with the cargo, even where that problem is not
visually apparent, that would require an extension of the law which based on present case law is
unlikely.

(d) If the cargo smells (which can happen with moist cargo) the master is entitled to take note of
that and clause the bill of lading.

The Chinese position

Members will recall earlier in this article that under Chinese law to be protected, owners may be
entitled to clause the bill of lading to reflect what is known about the cargo. This is a broader
obligation than noting the apparent condition of the cargo and would in this case include
moisture content above 12%.

Article 75 of The Chinese Maritime Code states that "If the bill of lading contains particulars
concerning the description, mark, number of packages or pieces, weight or quantity of the
goods with respect to which the carrier or the other person issuing the bill of lading on his
behalf has the knowledge or reasonable grounds to suspect that such particulars do not
accurately represent the goods actually received, or, where a shipped bill of lading is issued,
loaded, or if he has had no reasonable means of checking, the carrier or such other person may
make a note in the bill of lading specifying those inaccuracies, the grounds for suspicion or the
lack of reasonable means of checking".

Article 76 states that "If the carrier or the other person issuing the bill of lading on his behalf
made no note in the bill of lading regarding the apparent order and condition of the goods, the
goods shall be deemed to be in apparent order and condition".

The position in Brazil, Argentina and Uruguay

Shippers are allowed by law to ship cargo with up to 14% moisture content. It is not clear
though whether the shipper would be entitled to reject a bill of lading issued by owners which
stated:

Moisture content of 14% as per shipper's declaration – cargo in apparent good order and
condition.

Given the bill of lading states cargo in apparent good order and condition we cannot see how
shippers could object to that description.

What can owners do to protect themselves?

If such circumstances arise, there are certain options that members can take.
1. Owners can insist on clausing the bill of lading and mate's receipts

The advantage of this option is that it should minimise the risk of any cargo claim in the
discharge port, as the receivers will have been made aware (at the time the bill is consigned or
endorsed to them) of the excessive moisture content prior to shipment.

However, there is no authority yet which would support the clausing of the bill of lading and
mate's receipt in these circumstances. As of this moment the law is untested on this point. The
authorities appear to provide for clean bills to be issued where the cargo is visually and
externally in a good condition. If owners insist on clausing the bill of lading and mate's receipt,
they may be in breach of charter (which could lead to substantial damages, if, for example, this
prevents compliance with the terms of the Letter of Credit).

To avoid this dilemma, we strongly recommend that owners should insist on a protective clause
in the charterparty allowing owners to insert the moisture content if above 12% on the bill of
lading.

2. Owners can issue a clean mate's receipt and bill of lading

The advantage of this option is that it will avoid any further dispute or delay at the load port and
under the time charter party.

The disadvantage (which is a very substantial disadvantage) is that if some of the cargo self-
heats, owners may face a very large cargo claim at the discharge port. Although, as a matter of
English law, there should be a good defence (on the basis of "inherent defect, quality or vice of
the goods"), such a defence may not succeed in discharge ports such as China. As advised
earlier, if the high moisture content was known at the time of shipment there may under
Chinese law be an obligation to state that on the bill of lading.

Further, even if the claim is defeated in China on the basis of inherent vice owners could still
incur significant expenses and inconveniences (if, for example, the ship is arrested). Delay while
the vessel is arrested can cause hire disputes with charterers arguing the vessel is off hire and
owners insisting the vessel is on hire.

To resolve these issues, we recommend owners carrying this cargo insert a protective clause in
the charter covering who is responsible for delay, costs associated with arrest and providing
security and legal and associated costs if cargo in excess of 12% is shipped on board the vessel.

Section two

Background information and practical loss prevention tips

Background information on the load ports

How is the soybean cargo transported and stored at the load ports in Brazil prior to shipment?

Soybean cargoes are usually transported to the loading port by truck and railcar. For some of
the riverine ports in the north, cargo is usually received by river barges. When at the port, the
cargo is loaded by means of conveyor belts from the warehouse to the vessel and there are
times where the belts are wet due to previous heavy rain. This contributes negatively to the
moisture content of the cargo.
Loading and trimming continued by two gangs until completion

Soybean cargoes are usually stored at the load port silos for periods not longer than one or two
months. The biggest exporting firms in Brazil are ADM, BUNGE, CARAMURU, CARGILL, NOBLE
and DREYFUSS.

Montevideo / Nueva Palmira, Uruguay

Similar to Brazilian soybeans, during loading operations, the Association has been advised that
the moisture content of the soybeans in Uruguay are also high, ranging in between 12% to 14%.

How is the transportation and storage in Uruguay prior to loading?

In Uruguay, normally the soybeans are transported from the farms to the storage facilities by
trucks. As of March 2016, there are 334 storage facilities in Uruguay, 42% of which are located
near the main grain exporting ports of Montevideo and Nueva Palmira. From there, internal
transportation and storage practices for each port varies according to the terminal to be used.

Soybeans loaded in Uruguay may have been originally grown in neighbouring countries such as
Argentina, Paraguay and occasionally Bolivia. The Uruguayan-grown beans may be delivered to
Nueva Palmira terminals by truck or rail, but the cargo originating elsewhere is more likely to be
delivered by river barge and transhipped via a loading berth or dolphin to the sea-going vessel.

In Montevideo:

 No silos inside the port

 Soybean cargo is transported from the stowage facilities to the port by trucks
  Montevideo is a multipurpose port - there are no fixed means to load grains

 The grains are discharged at the pier into repositories and loaded on board using
portable belt conveyor systems

In Nueva Palmira:

 There are two grain terminals: "Navíos" and "TGU"

 Both terminals have silos and fixed conveyors to load/unload vessels

 Soybean cargo is transported from farms to the terminal storage facilities by trucks or by
barges from other smaller ports in Uruguay

 Some floating transfer stations are available where the vessel berths and the grains are
transferred from barges to vessel by means of grab

Segregated cargo in the receiver's warehouse

The main exporting firms in Uruguay are Crop Uruguay, Barraca Jorge Walter Erro, LDC Uruguay,
GARMET, Cereoil.

Loss prevention tips

At the load port

The Association suggests given the high value of this cargo and the recent problems with
moisture of the beans on shipment that a local surveyor is appointed to monitor loading. The
local surveyor should be briefed and asked to do the following:
 1. Ascertain what were the weather conditions that applied to this crop?

2. Was there much rain?

3. Inspect the cargo throughout loading, recording visual appearance, odour and – in
particular – cargo temperature throughout.

4. Is the cargo in apparent good order and condition, or are there specific concerns about
the condition of the cargo?

5. If so, the surveyor will need to assist the master in preparing letters or protests and/or
clausing the mate's receipts and bills of lading.

6. Was the cargo delivered by barge? If so, what was the route? Was the barge covered?

7. Speak to the shippers and their superintendents to collect information about the pre-
loading history of the cargo. If the cargo is loaded from silos – what are the harvest
dates? How long has the cargo been in the silos prior to loading? Were intake samples
tested for moisture from the lorry deliveries to the silo? Are temperature logs available
during silo storage?

8. If the cargo is loaded from barges, inspect the barge cargo prior to transhipment for
signs of heating, mouldiness, off-odours etc., and carry out a temperature survey in each
barge prior to transhipment. Where and when was each barge loaded? Are barge
quality/moisture certificates available? When was the cargo harvested?

9. Observe and describe the sampling operations carried out by shippers' superintendents.
How and where are they taking samples? At what sampling frequency? What final
samples are being prepared? Obtain a copy of the sampling protocol, if possible.

10. Record weather information during loading, including rain and temperatures. In case of
rain, is the cargo adequately protected prior to loading?

During the voyage

1. Monitor cargo temperature

The crew should record the cargo temperature at the time of loading. This should preferably be
done with a digital thermometer and thermocouple probe. If the ship does not have these but is
carrying the cargo, we recommend that these are purchased and put on board the vessel and
that the crew are trained on how to monitor them. Such information will help cargo experts
should problems arise in determining how much the temperature has increased and it will be
providing information to assist cargo stability. Further this information can be used by owners
when defending cargo claims at the discharge port.

2. Ventilation

During the voyage the master should ideally apply ventilation (after the period of fumigation has
been completed). It should be noted that natural ventilation as found on bulk carriers affects
only the top 10 to 20 cm of the surface and whilst at sea basically equates to moving humid
moisture laden air, with 80% to 90% relative humidity, across the surface of the stow. However,
it is frequently alleged in Chinese courts that the crew applied improper ventilation and that this
caused the cargo damage. Therefore, it is extremely important for the crew to maintain an
accurate ventilation log with temperatures and dew points.

Ventilation, either mechanical or natural, is designed to regulate the conditions in the head
spaces of the cargo holds and as such has an effect only on the surface layers of a stow. It is not
capable of removing heat or moisture from deep within the stow.

Discharge as quickly as possible

The only thing that can be done to control the self-heating is to discharge the cargo as quickly as
possible and to place it in a silo where it can be properly cared for, or better, processed
promptly into oil and meal.

Points to note at the discharge port

1. In the event the cargo is loaded with a high moisture content above 12%, we suggest
that a surveyor is appointed at the discharge port to attend the vessel throughout
discharging operations.

2. The surveyors should take samples and gather evidence for preparation of any
anticipated claims.

3. Segregate cargo and make sure the cargo of different specs is not mixed.
 4. Monitor quantity of the different spec cargo discharged.

5. Keep all vessel records and preserve documents, such as ventilation and log books.

Reference is made to several previous articles on this cargo issued in our Beacon magazines and
on our web site.