Hidden challenge for bulk carriers

The Swedish Club highlights an often-overlooked challenge faced by shipowners when it comes to cargo damage – shortage claims. The Club’s new publication, Bulker Focus: Carriage of Grains and Soya Beans, examines the complexities of transporting these commodities, highlighting the prevalence of cargo shortage claims.

These claims account for 63% of all claims recorded. Such a significant figure should prompt shipowners to pay keen attention to this issue, said the Club.

Johan Kahlmeter, director of claims at The Swedish Club, explained: “In Argentina and many North African countries, it is not unusual for there to be discrepancies between the shipper’s figures based on shore scales and draft surveys. Each country has its own rationale for this, but the bottom line is that the operator can find themselves seriously out of pocket through no fault of their own.”

The publication outlines advice to help operators safeguard against these claims. Recommendations include the use of surveyors, meticulous record-keeping practices, and involving P&I clubs when third parties request signatures on statements.

Authored by Joakim Enström, senior loss prevention officer at The Swedish Club, the guide provides an examination of all cargo claims concerning grains and soya beans between 2018 and 2022 that have incurred costs of at least $5,000. The Club reviewed approximately 200 bulk carrier claims and performed in-depth analyses on the gathered statistics. The publication also gives guidance on effective fumigation and ventilation techniques, as well as an evaluation of customs fines.

Myriad challenges

The loading, transportation, and unloading of bulk grain and oilseed cargoes introduce an array of challenges, according to the guide. The crew faces various considerations before and during the carriage of these cargoes. Gaining insight into common issues encountered during the transportation of grains and oilseeds, and adopting strategies to mitigate them, can significantly minimise cargo damage and associated claims, the Club advised.

The publication also outlines key statistical findings.

Notably, there has been a consistent increase in the frequency of claims since 2019.

During this five-year span, 68% of the shortage claims were prevalent during discharge, and most frequently occurred in North Africa and China. Discrepancies between vessel figures and shore figures underpinned approximately 70% of shortage claims. While China witnessed few claims until 2021, a steady surge has been observed since then, although North Africa consistently hosted the highest number of claims over the entire period.

The emergence of claims in China can be linked to the pandemic, noted the guide. “The severe lockdowns that were seen in many cases delayed the vessel. They also made it difficult for surveyors to attend the vessel for inspection. Crew and stevedores were also more hesitant to interact with each other because of the risk of becoming infected. This led to the crew not being able to verify the cargo operation and taking draft figures,” said the guide. This mirrors the trends observed in soya bean claims.

Claims costs

Shortage claims contributed to a significant 44% of the total claims cost, with an average claim cost of $35,000. While the average claim may appear modest, the sheer frequency of shortage claims is a concern. The guide also underscores the non-contribution towards General Average contributions, constituting 20% of the total cost, albeit occurring less frequently but carrying a higher average claim cost of $800,000.

Wet damage accounts for 13% of the total cost, with an average claim cost of $37,000. Frequently attributed to calculation errors – which are essentially shortage claims – this category encompasses 35% of total claims. As many as 80% of wet damage incidents occur during discharge at the port.

Meanwhile, improper cargo handling on the shore side contributes to 12% of claims, occurring almost equally at the loading and discharge ports. Claims during the voyage and loading ports represent 16% and 10%, respectively, of the total claims in this category.

In cases of cargo damage discovery during discharge, meticulous recording of the damaged cargo’s location within the hold is vital, advises the guide. Close monitoring of discharge procedures, along with segregation activities, is also recommended and the appointment of a local surveyor to document cargo condition and oversee damage inspection, accompanied by the sampling of grain during discharge, is advised.

The publication also addresses country-specific challenges.

Draft survey figures are not recognised in Algeria, and Tunisia imposes customs fines for errors in manifests or cargo spillage.

Moving to soya bean claims, a frequency of claims of 0.011 over the five-year period (equivalent to 1.1% of all bulk carriers), again demonstrate the impact of the pandemic. Extended anchor stays resulting from lockdowns have heightened the risk of heat damage to soya bean cargoes.

The overarching aim of the guide is to highlight the risks leading to claims for The Swedish Club’s members. By proactively addressing these issues and implementing preventive measures, the Club believes ship owners can significantly reduce both the quantity and cost of claims.
Source: The Swedish Club