A LOSS PREVENTION ARTICLE

Transcription

1 A LOSS PREVENTION ARTICLE TRANSPORTATION OF WHEAT One of the most produced cerials in the world is also one of the most difficult and dangerous to transport. In this comprehensive loss prevention article, we will cover important topics such as vessel requirements and cargo handling as well as look at some recent incidents in wheat transporation. In 2011, the total production of wheat was over 700 million tones, making it one of the most produced cereals in the world, and is now said to be grown on more land area than any other food. Compared to iron ore and coal, grain is an agricultural commodity, seasonal in its trade and irregular in both volume and route. It s difficult to optimize and depends heavily on general purpose tonnage from the charter market.

2 TYPES OF WHEAT Over thousands of years of cultivation, numerous forms of wheat have evolved. The table below lists the classification system used in the United States. Other countries may use other classification systems. TYPE DETAILS USED FOR Durum Very hard, translucent, light coloured Flour for pasta and bulghur Hard Red Spring Hard, brownish, high protein wheat Bread & hard baked goods Hard Red Winter Hard, brownish, mellow high-protein Bread & hard baked goods Soft Red Winter Soft, low protein Cakes, pie crust, muffin, biscuits Hard White Hard, light-coloured, opaque, medium protein Bread & brewing Soft White Soft, light-coloured, very low protein Pie crust & pastry THE TYPICAL WHEAT SUPPLY CHAIN Source: Maritime Economic, 3rd Edition, Chapter 11, Figure 11.2

3 THE TOP EXPORTERS AND PRODUCERS OF WHEAT ARE: TOP 5 PRODUCERS TOP 5 EXPORTERS TOP 5 IMPORTERS China USA Egypt India France Japan USA Canada Brazil France Australia Indonesia Russia Argentina Mexico As you can see from the list, wheat is often shipped over long distances. The supply chain is similar to the figure above. It starts out on a farm, where wheat is harvested and stored locally, or transported by a truck to a storage elevator. From the storage elevator the wheat is gravity fed onto a railcar and shipped to port where it is offloaded and then reloaded to another storage elevator, usually by conveyor belts. Here, the grain is accumulated until there is sufficient load for a merchant ship. At the other end of the voyage the process is reversed and the grain is offloaded from the ship into a storage elevator (silo etc.), and then shipped to a flour mill or feed compounder for further storage. From the storage it moves to a grinding facility via a conveyor or an air slide, and finally the finished products are packed for the consumer market or shipped in bulk to other end users. CHARTERPARTIES In the grain trade the following types of voyage charter forms are generally used, although with some modifications to suit local circumstances. The charter party forms can be very specialised to apply to certain loading areas. NAME CODENAME COMMONLY USED IN North American Grain C/P NORGRAIN USA & Canada Baltimore Form C BFC USA & Canada Continent Grain C/P SYNACOMEX European Continent Australian Wheat C/P AUSTWHEAT Australia Grain Trade Australia V/C AUSGRAIN Australia Chamber of Shipping River Plate C/P CENTROCON South America Norgrain South C/P NORGRAIN S South America Standard Grain Voyage C/P GRAINCON General VESSEL REQUIREMENTS SOLAS regulation VI Part C (Regulation 9) (Requirements for cargo ships carrying grain) provides that a cargo ship carrying grain must hold a Document of Authorization as required by the International Grain Code. A ship without a Document of Authorization must not load grain until the master satisfies the Flag State Administration, or the SOLAS Contracting Government of the port of loading, that the ship will comply with the requirements of the International Grain Code in its proposed loaded condition. Without the certificate, the vessel will be refused entry into port to load cargo. BEFORE LOADING: Before loading, the holds must be examined for potential defects such as rust scale, insect infestation, oil sludge, and water. The ship must be substantially clean, dry, and ready to receive grain before the loading can begin. Almost all the above charter parties have provisions for vessel inspection before/during loading. For example: GRAINCON paragraph 3. Vessel Inspection: The vessel shall pass the inspections of the relevant Port, State or National Authority and/or Grain Inspection Bureau at the first or sole port or place of loading, certifying the Vessel s readiness in all compartments to be loaded with the

4 cargo covered by this Charter Party. If the vessel completes loading at a port in a different country than the first loading port, she shall pass the inspections of such subsequent national and/or regulatory bodies as may be required. The cost of such inspections shall be borne by the Owners and should the Vessel fail to pass inspections, the time from such failure until the Vessel has been passed shall not count as laytime or time on demurrage. Unless the conditions of Clause 18(b) apply the Master s notice of readiness as the first or sole loading port, shall be accompanied by the certificates issued in accordance with this Clause. NORGRAIN paragraph 3. Vessel Inspection: Vessel is to load under inspection of National Cargo Bureau, Inc in USA ports or the Port Warden in Canadian ports. Vessel is also to load under inspection of a Grain Inspector licensed/authorized by the United States Department of Agriculture pursuant to the U.S. Grain Standards Act and/or of a Grain Inspector employed by the Canada Department of Agriculture as required by the appropriate authorities. If vessel loads at other than U.S. or Canadian ports, she is to load under inspection of such national and/or regulatory bodies as may be required. Vessel is to comply with the rules of such authorities, and shall load cargo not exceeding what she can reasonably stow and carry over and above her Cabin, Tackle, Apparel, Provisions, Fuel, Furniture and Water. Cost of such inspection shall be borne by the Owners. AUSTWHEAT paragraph 10. Survey at loading port: Before loading is commenced the Vessel shall pass the customary survey of an Australian Commonwealth Government Marine Surveyor, and a recognized Marine Surveyor approved by the Shippers. Additionally, the Vessel shall pass any survey/inspection required under State and/or Federal Legislation. Charter parties may also state that representatives from the charterers, shippers, receivers and owners or their respective agents shall have the right to be on board whilst loading and/or discharging for the purpose of inspecting the cargo, checking the weight(s) and supervising their interests. Surveyors should monitor the loading closely, and take samples at certain intervals. HOLDS: After the carriage of contaminating (coal, ores, cement, sulphur, etc.), odor-tainting or pest-infested cargoes, holds must be cleaned, disinfected, deodorized and ventilated. An inspection certificate confirming fitness for loading should be provided. The holds must be Grain Clean. Details of at least the three previous cargoes will be required. Before loading, holds/containers should also be examined by an independent inspector for infestation by pests of any kind and an appropriate certificate obtained. It is also very important to separate different types of grains if they are carried in the same vessel. To avoid shifting of cargo, the grain surfaces must be reasonably trimmed. All non-working hatches of the cargo spaces into which the cargo is loaded or to be loaded should be closed. Most charter parties also list out rules for Cargo Spaces: GRAINCON paragraph 12. Cargo Spaces: Cargo shall be loaded in unobstructed main holds only, unless the Owners require, solely for trim and stability purposes, cargo to be loaded into wing spaces, always provided the cargo can bleed into centre holds. Wing spaces are to be spout trimmed; any further trimming in wing spaces and any additional expenses in loading or discharging to be for the Owners account and additional time so used is not to count as laytime or time on demurrage. Most charter parties also lay down rules and cost allocation for separation and securing the cargo. Additionally, charter parties commonly list out provisions for fumigation of holds. For example: SYNACOMEX 2000 paragraph 11: Charterers have the liberty to fumigate the cargo on board at loading and discharging port(s) or places en route at their risk and expense. Charterers are responsible for ensuring that Officers and Crew as well as other persons on board the Vessel during and after the fumigation are not exposed to any health hazards whatsoever. Charterers undertake to pay Owners all necessary expenses incurred because of the fumigation and time list thereby shall count as laytime or time on demurrage. When fumigation has been effected at loading port and has been certified by proper survey or by a competent authority, Bills of Lading shall not be claused by Master for reason of insects having been detected in the cargo prior to such fumigation. NORGRAIN paragraph 16: If after loading has commenced, and at any time thereafter until the completion of discharge, the cargo is required to be fumigated in vessel s holds, the Owners are to permit same to take place at Charterer s risk and expense, including necessary expenses for accommodating and victualing vessel s personnel ashore. The Charterers warrant that the fumigants used will not expose the vessel s personnel to any health hazards whatsoever, and will comply with IMO regulations. Time lost for the vessel is to count at the demurrage rate.

5 SAMPLING By using a diverter-type (D/T) mechanical sampler, a certain amount of the grain lot is drawn out for sampling. Installed at the end of the conveyor belt, it draws samples by periodically moving a device through the entire grain stream. After a primary sampler, the grain flows into a secondary sampler to reduce the size of the sample and from here it moves to a collection box or bucket inside a laboratory under the control of official personnel. On completion of loading, the hatch covers should be sealed. It is important to keep holds weather tight. If wetting is caused by salt water, drying out and reconditioning the cargo may not be financially viable and a total loss could result. INSPECTION PROCEDURES: The inspector periodically examines the samples collected to check for objectionable odors and insects. The inspector sieves the entire sample to perform a visual examination. After passing preliminary tests, the sample is divided into two portions of approx grams each, one work sample and one file sample. The work sample is used to determine the moisture and all grading factors. The file sample is maintained in a moisture proof container at the laboratory, locked in for 90 days after the inspection is completed. The sample is available for review in the event of any questions regarding its quality. The sample may then be further broken down to determine the quality of the wheat. It is also important to check the cargo s moisture content. CARGO HANDLING WEATHER: In damp weather like rain or snow, the cargo must be protected from moisture, since wetting and extremely high humidity may lead to mold growth, spoilage and self-heating due to increased respiratory activity. The cargo should not be wetted at any stage. Do not simply give-in to stevedores assurances that the loading will be ok in such conditions. BILLS OF LADING: If the master is being pressured into signing a clean B/L you should contact the local P&I correspondent and issue letters of protest. Remember unclean bills have consequences. Members should be aware that P&I cover can be prejudiced if clean bills of lading are issued where the Master knows cargo is wet or damaged. Please refer to Skuld Rule A protest should be issued if the draft surveys are different from the shipper s figures. Members may wish to place charterers on notice of their potential liability for shortage claims. Inserting figures known or suspected to be inaccurate may prejudice P&I cover. Please refer to Skuld Rule RISK FACTORS: When shipping wheat, there are a lot of factors that need to be taken into consideration. The use of surveyors and inspections are essential.

6 Angles of Repose Wheat is predominantly transported as bulk cargo, but on some occasions transported in bags or even Containers. Wheat/Grain is said to be one of the most difficult and dangerous cargoes to carry in bulk. Most cargoes have an angle of repose (slip angle) of 20 from the horizontal, meaning that if the ship rolls more than 20 the cargo will shift. Eventually the ship may capsize. Because grain cargoes are liable to shift, heavy emphasis is placed on the stability of carrying ships and the proper trim of the cargo in the holds. Temperature / Moisture / Water Content: Safe wheat carriage requires certain temperature, humidity/moisture and ventilation conditions. There is no lower temperature limit and the favorable travel temperature is around 20 C. Molds reach optimum activity level in the range between 20 to 30 C. At temperatures over 25 C the metabolic processes increase, leading to increased CO2 production and self-heating of the wheat. Wheat can be classified by moisture content: WATER CONTENT Up to 15% 15-16% 16-17% 17-18% DESIGNATION Dry Medium Dry Moist Wet Moisture causes mold, mustiness and fermentation, agglomeration, self-heating and a risk of germination (premature sprouting). If this happens, the product may no longer be suitable for milling into flour, but instead only for producing spirits. Problems with moisture can be prevented by suitable pre-drying of the wheat. Wheat with a moisture content of over 16-17% can rapidly produce an excessively damp atmosphere within the hold. Individual clusters of damp wheat may cause considerable damage to the cargo. Wheat in such clusters has a tendency to self-heat. Damp wheat then appears in boundary layers, allowing the process to continue further in the holds during carriage at sea. At moisture levels of over 17%, swelling occurs in addition to fermentation, mould, rot and self-heating. Seawater damage may result in structural damage to the ship due to the swelling in the hold. Where such damage is suspected, a sea water test should be carried out using the silver nitrate method. For North Atlantic voyages, a moisture content of 13% is the optimum value and the grain is dry for shipment. During the lower temperatures in the winter, 15% is possible. At low moisture content, the intensity of respiration is low at all temperatures. Even at 25 C, the respiration intensity is low at moisture levels up to 13%. If the moisture content is above 15% and elevated temperatures also occur, respiration becomes more intense. Prior to loading, the moisture content should be checked by an independent inspector and a certificate provided. The certificates should state not only that appropriate measures have been carried out but also how and with what they were carried out and at what level of success. Lumber used for grain bulkheads must be air dry, and moisture content must not be over 15%. Ventilation: Ventilation of grain depends on the mositure content. Cargo with moisture content under 14% may not need extensive ventilation. Up to a moisture content of 15%, surface ventilation is recommended. Wheat releases water vapour constantly, which needs to be dissipated by ventilation. Special care should be taken on voyages from hot to cold regions. In the case of damage only to a proportion of the cargo, an indicative rule might be that the damaged proportion has been stored in a dead air zone with inadequate ventilation. Ventilation is essential until the cargo has been unloaded from the ship, and should not be turned off while the ship is waiting to berth. For the purpose of defending against cargo claims, having accurate ventilation records on the vessel will be essential. It is important to record both periods of ventilation and periods when ventilation is not possible or suitable (and why, eg:

7 bad weather). Self-heating: Especially in freshly harvested grains with average moisture contents of 14%, there is a risk of self-heating, given the differing stages of ripeness of the individual grains; some of them have higher moisture contents. They are the starting points for moist spots which expand continuously and finally encompass the entire cargo of grains with a major rise in temperature. Gases: Metabolic processes continue after harvesting the wheat. The wheat absorbs oxygen (O2) and excretes carbon dioxide (CO2). Respiration may cause life-threatening CO2 concentrations or O2 shortages in the holds. Ventilation and gas measurements must be carried out before anyone enters the hold. It is important to find out what type of grain is about to be carried and if it gives off any dangerous gases. Strict rules for entering enclosed spaces on vessels must be followed. Odour: Gasses and aroma substances are readily absorbed by the grains. For this reason, holds must be completely odour-free and deodorization must not be carried out until immediately before loading. Insect infestation: Wheat may be infested by cereal pests during storage and transport. Inadequately cleaned warehouses and holds are usually the root cause of insect infestation. Infestation may result in self-heating which ultimately gives rise to depreciation or even total loss. Cargoes will need to be fumigated, and in case significant delays occur at any stage in the voyage thought would have to be given to checking and possibly re-fumigating the cargo as insect populations and other pests can multiply rapidly in a cargo hold of wheat. After discharge: It is common to analyse the cargoes for bacteria, etc. In case of concern, discharge sampling and surveying should be carried out on behalf of the vessel, for both quality and quantity issues. RECENT INCIDENTS Over the years the Association has seen many claims arising out of the transportation of wheat/grain cargoes: RAIN DURING LOADING OPERATION: The Captain told local stevedores to stop loading and close the hatches as he feared it was going to rain. Stevedores ignored his request and continued loading. Due to heavy passing rain showers, cargo in two of the holds were wetted. Surveyor attended the vessel, and in addition to some wetted cargo, he found a significant amount of threads/ garbage mixed with the loaded cargo. CARGO DAMAGED BY SEA WATER: During discharge at the Aden Gulf Terminal, a shipment from Argentina was found to be partially damaged because of sea water leaking into the holds. Owners were held responsible for the damage. Another vessel loaded in India and discharged in Jebel Ali, UAE. The captain signed a clean bill of lading for 2500MT of wheat in hold 2. At discharge, they found 65MT of the cargo discoloured, mouldy and smelly due to seawater leaking in to the cargo hold.

8 The vessel was arrested and not released until the Club issued a LOU, and later the case was settled commercially between the parties. CARGO DAMAGED BY HEAT: During discharge in Chittagong, 150MT was found damaged due to overheating. The cargo was discoloured, burned, and emitted a burning smell. A fuel oil tank used for heating HFO was situated right below the affected cargo holds. CARGO SHORTAGE: Cargo receiver claimed a shortage of 200MT of wheat when the vessel discharged in Tunis. He also threatened to arrest the vessel and required a bank guarantee, which was put up by the Club. After completion of discharge the total shortage was found to be only ¼ of the originally claimed shortage, 50MT. Bank guarantee charges are very high. In some cases, consideration should be given to whether the claim can be settled quickly. CARGO INFESTED BY INSECTS: The vessel sailed from Paranagua, Brazil to the Philippines with a cargo of 44500MT feed wheat. During discharge in Subic Bay, when opening the hatch covers, the cargo surveyor found live crawling insects in the cargo. It was found that during fumigation at the load port, the fumigants was not evenly scattered/ thoroughly mixed with the cargo. As fumigation is usually a charterer s responsibility, care should be taken to pursue charterers for an indemnity. In this respect, members need to review before entering into their charters that charterers are financially secure. CONTAMINATION CLAIMS: In recent years, there have been some cargo claims made on grain cargoes in Iran. During discharge, the receivers claimed that cargo in one hold was contaminated with the e-coli bacteria. After three positive tests by a local authority laboratory, the owner had the cargo tested in the UK, and the test was negative. Ensuring pre-shipment tests and certificates is vital when trading to countries that have rigorous local regulations on food quality.

9 HOT TIPS BEFORE FIXING Is your charterer financially sound? Does your charterer have P&I cover with an IG club? Is your charter party such that it protects your interests? Who has liability in the charter party for loading, fumigation, ensuring proper certificates and discharge? VESSEL Vessel and holds must meet requirement in the Grain Code The hatch covers are to be in weather-tight condition Necessary hatch cover sealing materials are to be carried on board / used to prevent water ingress to the cargo holds during voyage BEFORE LOADING Inspection of holds to ensure they are dry, clean and free of insects Inspection of wheat s moisture content Obtain cargo quality certificate Obtaining necessary cargo information / instruction of carriage by sea from the shipper DURING LOADING Monitor weather Sample cargo and check its condition regularly Call a P&I surveyor for assistance, if necessary AFTER LOADING Conduct draft surveys before and after cargo loading Seal the hatches properly Get a fumigation certificate / instruction from the authority Clause B/L in conformity with M/R to protect carriers in case of discrepancies in quantity, damage / shortage / con tamination etc. DURING VOYAGE Follow the fumigation instruction strictly Check the cargo hold bilge, cargo temperature and humidity regularly Maintain accurate records Ventilate the cargo holds as necessary Prevent over-heating to the fuel oil tanks next to the cargo spaces Follow the Enclosed Space Entry Procedure strictly DISCHARGE Always be careful when entering holds due to increased CO2 and decreased O2 levels Discourage discharge operations in bad weather. If the cargo receivers insist, demand an LOI from them Monitor the cargo hold bilge level during the ballasting operation concurrent with the discharge operation

10 CASE STUDY: THE GIANNIS NK [1998] 1 LLOYD S REP. 337 FACTS: A cargo of wheat and ground-nut pellets were being transported from Senegal to the Dominican Republic Under a B/L incorporating the Hague Rules On arriving at the port of discharge, an infestation was discovered Following unsuccessful fumigation, all the cargo had to be dumped into the sea The vessel then had to undergo fumigation that caused a 2 ½ month delay The carriers claimed damages against the shippers for the loss caused by the delay and the fumigation expenses LEGAL PRINCIPLES: Article IV, r.6 of the Hague Rules states that the shipper must bear all damages and expenses that arise directly out of the shipment of dangerous goods to which the carrier has not knowingly consented House of Lords decision The House of Lords found in favour of the carrier The term dangerous was not held to be confined to goods of an inflammable or explosive nature It was also not restricted to goods that cause direct or indirect physical damage to the vessel or to other goods Therefore, the cargo in this case was considered to be dangerous because they were infested and could give rise to the loss of other cargo loaded in the same vessel

11 CREDITS BY: RACHEL WONG CLAIMS EXECUTIVE HONG KONG SYNDICATE Edited by Nikita Lulla, Hong Kong Syndicate With acknowledgment and thanks to: Andrew Moore & Associates Ltd AVA Marine Group Inc. Agencia Maritima Walsh (E.Burton) SRL Messrs. Alberto Martin Azcueta & Assoc. Brazil P&I In case Members have further queries they are asked to contact: LOSS PREVENTION AND RECURRING CLAIMS GROUP / LOSSPREVENTION@SKULD.COM Christian Ott Vice President, Head of Claims, Singapore Syndicate Loss Prevention and Recurring Claims Team Leader