Soya beans: risks and loss prevention recommendations

• International Trade

Soya beans: risks and loss prevention recommendations

Soya beans, due to their high value and the large quantities of export, this seemingly harmless cargo is responsible for multimillion-dollar claims. Though this commodity is predominantly subject to export to China, the biggest importer of soya beans, it has also become of a great interest in Ukraine.

In our practice there are some recent cases according to import of soya beans to Ukraine, which were not without problems. That is why we share practical recommendations on how to minimize risks even at the stage of concluding a contract.

Soya beans generally have a long shelf life provided they remain below 25°C and contain no more than 11.5% moisture. However, if the temperature and moisture are disturbed or the voyage is longer than expected, the cargo becomes unstable, which can cause self-heating of the cargo and result in a fire, putting the ship and its crew in danger. In addition to the risk of self-heating, soya beans are susceptible to mould and rotting.

Thus, the problem is indicated by the physical properties of the cargo, which is why it is so important to protect yourself from such incidents.

Under Article IV rule 2 (m) of the Hague-Visby Rules, the carrier is protected and not responsible for damage or loss when same has resulted from an inherent vice or defect of the goods. However, parties should not rely too heavily on this statutory protection as it will require strong evidence to prove that the damage resulted precisely for that reason and, furthermore, some jurisdictions do not accept the defense of inherent vice.

In this context, legal loss prevention can be very effective to avoid cargo claims. Such measures include carefully drafting contracts with a clear allocation of liability. We advise parties to check their contracts for clauses which concern the areas listed below.

State the allowed moisture content of cargo below 11,5 % in contract to prevent the cargo from becoming unstable. Also, it is of utmost importance to insert specifically worded clauses, clearly apportioning the parties’ risks and responsibilities for the cargo damage due to the lack of ventilation, in the charter party. The Deviation Clause shall be also incorporated into the charter to clarify the owner’s responsibility of cargo safety in case of deviation. The standard clauses in place which state that the vessel needs to be delivered with clean holds, can be further specified. For example, by adding rider clauses specifically stating the fumigation requirements.

We furthermore recommend using clear clauses outlining the allocation of responsibilities in respect of the risk of shortage and cargo damages.

Note, these recommendations are important for especially sensitive cargoes, which are also exposed to the risks connected with long-distance maritime transport.