REFRIGERATED CONTAINER CARGO CLAIMS
Published: 12 April 2022
Claims involving cargoes that are allegedly distressed upon receipt at a receiver’s premises, having been carried in a refrigerated container onboard a Member’s vessel, are commonplace. In the past two years, the Club has opened just over 250 claims files for allegedly damaged refrigerated containerised cargo carried on Members’ vessels, amounting to claims of just over six million US dollars (USD). The number of such claims has been rising recently, although from consulting with industry experts, the cause is unclear, and it is most likely due to a combination of factors.
Cargoes carried in refrigerated containers are many and varied, including meat, vegetables, fruit, live plants, flowers and medicines, all requiring their own bespoke temperature and atmosphere management.
Where there is the loss of the entire contents of a 40’ high cube container (by far the most common type of refrigerated container), the claim cost incurred can be substantial. The following are some examples of the quantum associated with recent cases:
- Cargo damage due to delay for mechanical repairs: USD 550,000
- Unintentional thawing of 12 containers of tuna: USD 500,000
- Temperature abuse of 27 containers of fruit: USD 335,000
- Temperature abuse of 3 containers of frozen shrimps: USD 228,000
- Temperature abuse of a consignment of cherries: USD 92,000
- Reefer malfunction affecting shrimps and prawns: USD 58,000
Dependent on the nature of the product, the refrigerated container will be assigned an appropriate “set-point” carriage temperature, either frozen or chilled as stipulated by the shipper. This temperature is to be maintained from loading (stuffing) the container at the shipper’s facility, throughout the voyage until ultimate delivery to the receiver when the container is unloaded (de-vanned). The other two settings that can be crucial to the successful outturn of certain products carried in refrigerated containers are the humidity and the air exchange rate.
The majority of claims arising, where a consignment is found in an apparent distressed condition upon receipt, are due to temperature abuse. This can occur due to a number of reasons:
- Cargo stuffed into the refrigerated container whilst at a temperature significantly different from the carriage set-point temperature. Refrigerated containers are not designed to cool cargo to the set-point, with the result that it takes many days for the core of the cargo to be cooled to the required carriage temperature. The temperature of cargo to be stuffed into a refrigerated container should be at or very close to the set-point temperature.
- Incorrect set-point temperature.
- Refrigerated container malfunction.
- Refrigerated container failure.
- Lack of electrical power, either post stuffing and prior to loading, whilst onboard due to the refrigerated container not being plugged in upon receipt on board, the socket being inadvertently switched off or the plug removed in error during the voyage, whilst in transit ports or while in transit to the receiver at/from the final discharge port.
- Excessive voyage length, due to port congestion, deviation due to Covid restrictions or other reasons, or vessel breakdown, reducing the usable life of the product upon delivery to receivers, or causing its deterioration prior to delivery.
Where a product has been found to have deteriorated on de-vanning, the carrier is usually alleged to be the party responsible for the poor condition of the cargo. Carriers are therefore urged to consider the recommendations in the following paragraphs, and ensure that these are implemented, where practicable, to help minimise the risk of claims. As with all claims, evidence is key to refuting a claim where this is possible, and by showing that whilst in the custody of the carrier the cargo was properly cared for, the reason for any deterioration must lay elsewhere.
PRIOR TO LOADING
Prior to delivery to the shipper for stuffing, all refrigerated containers should be subject to a Pre-Trip Inspection (PTI) on behalf of the carrier, conducted by a suitably qualified person. The PTI will include a visual inspection of the container’s structure and refrigeration machinery and a function test of the plant. In the event of a failed test, the necessary repairs should be carried out prior to re-testing. Where stuffing is delayed or the shipment cancelled, it is recommended that the carrier’s procedures stipulate the maximum validity of a PTI prior to stuffing, after which a new PTI will be necessary.
The required set-point temperature and any humidity range and/or air exchange requirements are usually stipulated on the Bill of Lading/Sea Waybill, with often only a required set-point temperature detailed. All required carriage conditions should be set prior to container stuffing and the container cooled to the set-point before being filled.
Some older refrigerated containers may be encountered where the temperature data is recorded on a circular paper card, often referred to as a Partlow Chart. The chart usually records 31 days’ information, although weekly charts may be encountered. A new chart, completed with container number and other data as required, should be fitted and rotated so that the recording stylus is set at the correct date and time, prior to starting the container to cool it ready for stuffing. It should also be ensured that the clockwork mechanism for rotating the chart, where not electrically driven, is fully wound.
CARE ON BOARD THE VESSEL
Refrigerated containers should be stowed allowing safe access for periodic checking and for repairs. It is recommended that they be stowed no higher than the second tier from the deck or lashing bridge, and when on the second tier, a properly secured and rigged working platform should be fitted along with a safe means of access. Access for checking and conducting repairs on refrigerated containers on the second tier should be subject to a risk assessment. We are aware of refrigerated containers being stowed three or four tiers from the deck or lashing bridge, where checking during the voyage and the provision of repairs would be unsafe, if not impossible in the case of major repairs being necessary, such as changing a compressor. This is poor practice and should be resisted. Standard operating procedures for container planners should address this point.
Upon loading, the vessel should ensure that all refrigerated containers designated as containing cargo that is temperature controlled, should be plugged in, the plug locking collar engaged on the socket, power switched on, and the socket box access securely closed to prevent spray and water ingress. If the refrigerated container is of the water-cooled type, it should be ensured that the water supply and return hoses are in a good condition and these are properly connected and secured by the locking collar, if provided. When the water supply valves are opened, it should be ensured that adequate and correct waterflow is established for the container unit. Spare extension cables should be available onboard, so that in the event of the failure of an individual socket, the power cable can be plugged in to another socket box if necessary. The container should then be confirmed as running and heading to set-point temperature. It should also be confirmed that the set-point temperature on the unit matches that given in the carriage instructions whilst also checking the temperature type is correct (⁰C or ⁰F), as well as verifying whether the required and actual set point temperature are plus (+) or minus (-). At a suitable juncture thereafter, it should be confirmed that the required set-point temperature has been achieved. If the container fails to start, it should be ensured that all breakers and power switches on the unit are on, and the container is set to the correct voltage. If a container fails to function properly, and / or does not approach and meet set-point temperature, assistance from ashore should be sought. If the problem cannot be rectified on board, the container should be rejected and discharged.
The refrigerated container function and temperature should be checked every six hours and records of time and date, and delivery and return air temperatures kept.
Where a container malfunctions or fails on passage, best endeavours should be made to rectify the problem. However, where this is not possible, prompt advice should be provided to the charterers so that measures can be taken to repair the container at the next port, or remove the container at the earliest opportunity for repair ashore or for transfer of the contents to another container. It should be ensured that the vessel has adequate manufacturers’ spare parts, specialist tools and repair manuals for the various makes and models of refrigerated container routinely carried, so that basic repairs can be carried out on board, so far as is safe and practicable. A supply of suitable refrigerant gas, sufficient for the number of refrigerated containers usually carried, should also be available.
A carrying vessel is often limited in what it can achieve with a refrigerated container that is malfunctioning or failing, and the rectification of the underlying fault for such a malfunction or failure is often beyond the capabilities of the vessel. Therefore prompt action is always recommended in order to protect the position of the carrier.
The vessel should be familiar with any terms and conditions in the charter party concerning the carriage of refrigerated containers. These may detail inspection intervals, repairs that can be carried out, or details of the parties to be notified if a refrigerated container malfunctions or fails whilst on board.
Where refrigerated containers contain split port cargo, records of the times/dates when the container was powered down for discharge, and powered up upon reloading, should be kept by the crew. The concern being that in less developed ports, the container may remain off power for an unsuitable length of time while ashore.
INTERNET OF THINGS (IOT) TECHNOLOGY
Internet of Things (IoT) refers to a network of interconnected devices and objects connected to the Internet. IoT technology has today become an integral part of our lives, and in recent years IoT technology has also been introduced to the world of refrigerated containers. Some refrigerated container operators today offer IoT as part of their service, which allows the shipper to remotely pinpoint the container’s real-time location as well as monitor and maybe even adjust some of the container’s settings e.g. its temperature.
While this is all very convenient for the shipper, it does provide some concerns to the carrier, who is ultimately responsible for monitoring the container’s performance during its voyage, particularly as the container settings can now be altered remotely and without their knowledge. Therefore, from a liability perspective, the carrier needs to ensure that for containers installed with IoT technology, the contract of carriage clearly states that:
- The setting instructions, which may be stipulated on the bill of lading or on the reefer manifests/instructions provided to the ship for each container, remains the legally binding instructions in terms of the container’s settings, and which the ship shall monitor during the voyage.
- Changes to these instructions should be communicated in writing, so that there is a clear paper trail of the instructions provided by the shipper to the ship.
- The carrier cannot be held liable for any remote changes to the settings which has not been notified to the ship as agreed by the contract.
- The carrier shall not be held liable for any malfunctioning of the IoT module.
The carrier should continue to monitor the containers installed with IoT technology in the same manner as with conventional refrigerated containers to ensure that:
- At loading the refrigerated container is in a good working condition and that the settings are as prescribed by the bill of lading or reefer manifest/instructions.
- During the voyage the container continues to work satisfactorily and maintains its set values.
Any indication of error, sign of faults or changes to the container’s settings should immediately be reported to the shipper for its clarification and further instructions. The ship should be able to document that they have monitored the refrigerated container during the voyage as required and, if there is any sign or suspicion of the container malfunctioning, preserve evidence in order to reject a potential claim.
Often shippers will place a small data logger (usually the size of an electronic car key) in one or more marked carton(s) to record detailed temperature information and also humidity where required. Other parameters that can be recorded are exposure to light and carbon dioxide level. Some models can provide real time and historic data, as well as location, via mobile phone networks when in range. Standalone data loggers are usually only used in relation to chilled products, although on occasion they will be placed in frozen consignments. Where possible carriers are advised to consider their terms and conditions of carriage, making shipper’s data logger information inadmissible as evidence of product abuse whilst in the care of the carrier, as the data recorded will vary depending on where the data logger was situated within the stow: it may be near the return air, for example, which will be warmer than the supply air, the latter being the only temperature that can be guaranteed by the carrier.
In the event of a potential claim being notified to the carrier, the refrigerated container’s integral data logger information should be secured and provided to the Club. The information available from the container’s data logger will usually include power on and off dates and times, PTI information, alarms activated, temperature, humidity, air exchange rate, carbon dioxide etc., although this will be dependent on the hardware and software installed on the container.
Deterioration of the product may also be exacerbated due to pre-shipment issues, although this is difficult to prove. This includes the inherent vice of the cargo, where, in particular, chilled cargoes are nearing their use by date upon being stuffed into their refrigerated container. Where temperature and/or humidity abuse has occurred, it is not unusual to find that some of the cargo is in good condition, whilst a proportion has deteriorated significantly. The variation in condition being possibly due to a combination of factors:
- The position of the product in the stow, with those cartons at the periphery subject to enhanced degradation due to lack of cooling, often exacerbated by exposure of the container’s surfaces to sources of heat, whilst the core of the stow takes considerably longer to warm-up;
- Variations in the age of the product sourced from different growers;
- How the product has been stored between harvesting and shipment.
Where the cargo has been without cooling for a prolonged period, degradation of the entire consignment is expected and, on some occasions, for example meat that has defrosted and deteriorated, the cargo may be condemned and impounded by Port Health Authorities and only released for destruction. If some degradation of a cargo is found, various options exist to minimise the magnitude of the claim, including offering a discount to buyers for the entire consignment, sorting to remove substandard product and salvage sale.
Members requiring any further guidance are advised to contact the loss prevention department.