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  • QA 208
    Question:
    If quality deteriorates during (delayed) transit, who is responsible?
    Background:
    Recent piracy events in the Gulf of Aden affecting cargo vessels makes one wonder about the following: if for whatever reason a vessel carrying coffee is substantially delayed en route in tropical waters, what will be the situation when on arrival the buyer claims the goods have deteriorated? Who will decide if this was due to transit delays or shipment of substandard quality? Can the buyer claim on the shipper?
    Asked by:
    Academia/Press
    Answer:

    Assessing deterioration of coffee quality calls for a subjective judgement. This is different from damage that is factual and can be seen/measured. Damage to goods is always covered by insurance and is a matter to be finalised between the owners of the goods and the concerned underwriters. Deterioration however is not damage…

    If during very prolonged transit excessive humidity, temperatures and condensation caused green coffee to fade and possibly even develop mould then, we would suggest, this might be fairly obvious and as such could possibly be considered to be 'fresh water damage'.  But just claiming that 'quality has deteriorated' because of the transit time is both hypothetical and subjective. And very difficult to prove considering that many coffee shipments travel for lengthy periods of sometimes 3 months. So, most are no longer 'fresh' when they arrive and most of the industry knows this. It is generally accepted that there is a window of some months (as many as six according to some) before quality deterioration becomes a real issue at destination. And, most importers/roasters know what to expect in this regard from different coffee producing regions.

    As regards liability on the part of the shipper we would point out that, usually, coffee to be carried by sea is shipped basis 'free on board'. Here risk is transferred from shipper to buyer when the goods cross the ship's rail. Therefore, whatever happens during the voyage does not concern the shipper and buyers cannot hold the shipper responsible for delays in transit. For the shipper to be held responsible for a quality claim referring to 'deterioration' we suggest the buyer would have to prove that the quality was already substandard when shipped, for example that the moisture content was excessive. But shippers would of course deny this and would counter that the alleged deterioration was due to the transit delay and so was beyond their control. *

    The duty of the shipping company, the carrier, is to transport a container between certain ports, not to be responsible for the condition of the contents. Bills of Lading represent ownership of the goods and, they are the transport agreement covering the cargo in question. The transport agreement does not refer to the condition of the goods nor does it promise any agreed arrival date: all it does is undertake to deliver the cargo at the agreed destination. **

    In shipping, the basic condition of the goods is a commercial and quality matter between shipper and receiver. The carrier is not involved. Only where it can be conclusively proven that damage occurred because the carrier did not act with 'due diligence' could one think of a successful claim on the carrier. All FCL/FCL (or CY/CY) Bills of Lading clearly state that the carrier is transporting a sealed and numbered container, said to contain certain goods. For LCL/FCL (or CFS/CY) shipments the bags will be checked and counted on receipt for stuffing but even so, for a claim to be successful one would have to prove that any damage to the condition of the goods occurred due to negligence by the carrier. None of this has anything to do with the length of transit! ***

    From an insurance perspective delayed receipt of cargo does not constitute damage whereas any claims for 'deterioration' would face the same problem of proof referred to earlier. We believe claims would be assessed in the usual manner but settlement would probably also depend on the relationship between the claimant and his underwriters.

    In closing we would caution against too much emphasis on the possible effects of isolated incidences of piracy and ship hijacking, also because the delays actually caused to affected vessels have been relatively short.

    * Here again we would point out that 'deterioration' is subjective and is difficult to measure, let alone pinpoint the cause. If the claim is that the cup quality has deteriorated (lost flavour, had aged/became oldish, whatever) then who is to say why this happened and at which point in time this moved from 'normal transit ageing' to 'abnormal ageing'? And if it was due to 'abnormal ageing' then was it because the coffee was, for example, already excessively humid when shipped, or was it due to the excessive transit time? We would suggest this to be impossible to determine with any certainty and, in any event, to be a matter between the insured and his or her underwriters.

    ** Delays and problems caused by unforeseeable events or acts also allow the carrier to invoke force majeure (claim an Act of God) under what is known as the 'The Hague Rules', first enacted in Brussels in 1924 by the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading. To note however that on 11 December 2008 the UN General Assembly adopted a new international convention governing the loss and damage of ocean cargo that has moved by sea. To be known as the Convention on Contracts for the International Carrying of Goods Wholly or Partly by Sea, this will replace the convention known as the 'The Hague Rules'. Formal signing is expected to take place in September 2009 whereas 20 countries need to ratify the new convention to bring it into effect.

    *** FCL/FCL (Full Container Load): Carrier undertakes to transport a closed, sealed container. Also called CY/CY (Container Yard to Container Yard). LCL/FCL (Less than Container Load to Full Container Load): Carrier undertakes to deliver the goods. Also called CFS/CY (Container Freight Station to Container Yard). See Chapter 5 of the Guide, section 05.01.08 for more on this.

    Posted 10 December 2008 - Updated 15 January 2009

    Related chapter(s):
    Related Q & A:
    Q&A 067, 063, 046, 034, 025.