Inherent Vice

Inherent vice is a defence to a cargo claim under the Hague/Hague Visby Rules (Article 4 para. 2 (m)) and could mean that the carrier can defend a claim by cargo receivers.

Inherent Vice has been defined as “the risk of deterioration of the goods shipped as a result of their natural behaviour, in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty” [Soya GmbH Hainz Kommanditgesellschaft v White HL 1982].

Over the last few years the Club has dealt with a number of cases, in particular concerning soya beans and fertilisers, where despite arguments that the damage complained of is as a result of inherent vice, defending the claims has not proved to be straightforward. In many instances, difficulties arise because the local jurisdiction does not recognise the concept of inherent vice and/or because there is an incomplete evidence trail. Early and comprehensive evidence collection will always assist in minimising exposure or assist in the pursuit of an indemnity.

The following is an example of one of the most common current claims trends.

“Soya Beans Transported From Latin America to China – A tale of 40 Days And 40 Nights”

Voyages from Latin America to China usually last around 40 days. Soy beans should be carried in accordance with the Grain Code. The moisture content of soya beans is critical; moisture content and average temperature at loading determine the “shelf/transport-life” of the beans and the lower the moisture content the longer the shelf/transport-life. Soya beans are stable below 11.5% moisture content and 25 degrees C. It is essential to obtain the SOLAS-required shipper’s cargo declaration as early as possible and before loading commences to check the information provided there about the moisture content of the cargo. The declaration should provide the actual moisture content rather show a maximum limit. Elevated cargo temperature, mouldy and caked cargo are signs of a cargo deteriorating due to a high moisture content.

Some of the issues that make transportation of soya beans from Latin America to China problematic are:

• Latin American countries experience warm to hot and often humid weather for most of the year, resulting in elevated temperatures and exposure to moisture during the post-harvest stage before loading.
• pressures of increased export demand sometimes lead to shipments of poor or deteriorating cargoes.
• infrastructure problems in the country of produce increases the risk of the cargo being exposed to heat and moisture before shipment.
• some cargo sales contracts (eg, cargoes from Brazil) allow a moisture content of 13% or 14%, resulting in shorter shelf/transport life.
• strict inspections by the authorities at the country of discharge often condemn the full cargo quantity when only a part of the cargo may have any signs of damage.
• Discharge delays at Chinese ports can lead to situations where there is nothing which can be done by the ship to prevent cargo deterioration
• Chinese courts do not currently recognise the concept of inherent vice for soya beans

Evidence Collection

Closely inspecting the condition of the cargo during loading is strongly recommended.  Cargo that appears wet, discoloured, caked, smelly or mouldy should not be accepted for loading and a surveyor should be called to inspect the cargo. Proactive evidence collection in the form of the

following should help to minimise the exposure to these cargo claims or allow an indemnity claim to be pursued:

• cargo quality certificate,
• photographs of the cargo during loading
• cargo samples at loading,
• harvest and storage history of the cargo obtained by the local surveyor through local sources (where this information is publicly available)
• hatch cover test reports,
• ventilation records.

Similarly, requesting the disclosure of the sale contract specifications for the cargo from charterers is recommended, along with the incorporation in the charterparty of the ICA 1996 (as amended 2011) or similar clauses that allow for a potential part or full recovery from charterers in the event the vessel is held liable for an inherent vice claim.

If there are signs of damaged cargo at the discharge port then representative sampling and testing and proper segregation of the damaged cargo should be arranged as soon as possible.

You can find out more by reading our loss prevention briefing on the subject.