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Soybean Cargo Damage Claim – Should Carrier be held liable?
Domestic soybeans, albeit their growing areas and production output keep increasing, cannot satisfy the market demand. Moreover, domestic soybeans are mainly for human consumption, whilst imported beans are mostly for oil extraction. Therefore, total amount of soybeans imported by China maintains at a high level in recent years. According to data released by the National Bureau of Statistics of the PRC (NBS), China imported 91.08 million tons of soybeans in 2022, whilst statistics by the General Administration of Customs of the PRC (GACC) shows that importation of soybeans by China in the first ten months of 2023 has amounted to over 80 million tons. It is anticipated that total quantity of soybeans imported by China for 2023 will exceed 100 million tons.
China imports soybeans predominantly from the United States and Brazil. According to GACC’s statistics, in 2022, 54.39 million tons of soybeans were imported from Brazil, accounting for 59.72% of the total soybean importation; 29.53 million tons from the United States, accounting for 32.42%; and 3.64 million tons from Argentina accounting for 4.00%. Due to trade friction between the US and China and raising output of Brazilian soybeans, importation percentage of Brazilian soybeans has further ascended this year.
The experts believe that despite being processed such as drying after harvested, soybeans are still living organisms and can respire. Soybeans are rich in protein and fat, and the surface of soybean kernels is covered by dormant fungal spores. Fungal spores will grow, reproduce, metabolise and generate heat in an environment with suitable moisture and temperature. Particularly, they are more active when there are more impurities and broken kernels in the soybean cargo stow. Meanwhile, soybeans are of strong hygroscopicity and poor thermal conductivity. If the heat generated by respiration and microbial activities cannot be dispersed in time, soybeans will get mildewed, caked, carbonized and eventually heat-damaged. Among the soybean quality parameters, the moisture content will substantially influence the biological stability of soybeans, whilst the percentages of impurities and broken kernels also bear a certain influence on likely heat damage to soybeans. Therefore, professional research on relations among moisture content, temperatures and safe stowage period of soybeans reveals that the lower temperatures and moisture contents of soybeans are, the longer soybeans can be safely stowed for transport. For example, the equilibrium relative humidity (ERH) of the gap air should be maintained below 70%; at temperature of 21 Centigrade, soybeans with moisture content at 13% could be safely stowed and transported for 70 days; if the moisture content increases to 14%, the safe period may be reduced to 45 days. Some experts even believe that the above standards are applicable to grain storage in silos on land where external environment is relatively stable. For ocean carriage under variable conditions, the moisture content of soybeans should be controlled at 11.5% for purpose of safe transport.
Standards given by the Ministry of Agriculture, Livestock and Food Supply of Brazil (hereinafter referred to as “the MAPA Standard”) stipulates the moisture content limit of soybeans to be 14%, whilst National Standards of the PRC states it to be 13%, but maximum moisture content normally specified in sales contracts for soybeans imported to China is within 14%. The sea voyage from Brazil to China is about 40 days. Taking into account the time required for cargo operation and storage prior to loading and after discharge, the soybeans should be stowed in transit for 2 months in total. Brazilian soybeans are harvested during February to April, and the peak export season is from May to August. It is winter in Southern Hemisphere but summer in Northern Hemisphere. The large temperature difference between the loading port and the destination port is not conducive to safe stowage of soybeans. Compared to Brazilian soybeans, US soybeans are harvested in September to October. The sea voyage from the US to China is slightly shorter and there is no substantial temperature difference from Southern to Northern Hemispheres, Besides, the quality control and drying measures of US soybeans are much stricter, so cargo damage disputes over US soybeans are much less than those concerning Brazilian soybeans.
For ocean carriage, soybeans are usually loaded in bulk carriers, generally 50,000-70,000 tons by each vessel. To reduce the heat generated by respiration of soybeans and reproduction of fungi and for moisture evaporation, and to mitigate or prevent cargo damage caused by ship sweat, the carrier should, during sea transit, carry out appropriate ventilation according to actual condition, to introduce dry air and remove the warm moist air in cargo holds. When considering whether to ventilate or not, the carrier should be aware that ventilation is not allowed during fumigation, at night time or under adverse weather and sea conditions. The carrier should monitor air conditions inside and outside ship holds and the dew points, and determine whether ventilation is required in accordance with the “Dew Point Rules” or the simplified “Three Degree Rules”.
Consequently, while China keeps importing large quantities of soybeans, disputes over soybean cargo damage at sea continuously occur. The China Maritime Law Association (CMLA) therefore hosted a seminar on “Disputes Resolution concerning Sea Carriage of Soybeans” in November 2023 and invited cargo insurers, P&I clubs, judges of maritime courts, lawyers, surveyors and experts to participate in discussion. The seminar also widely attracted attention from the public. In the following paragraphs, we will discuss whether the carrier shall be held liable for the soybean cargo damage at sea, which was a hot topic during the seminar.
Authors: CHEN Xiangyong, Wang Jing & Co. Law Firm Reference
- Should carrier clause the B/L?
- What resulted in the damage – inherent vice of cargo or carrier’s failure in caring for cargo?
- Absence of Unified Standard for Loss Assessment
- Prospect on dispute resolution for soybean damage
Authors: CHEN Xiangyong, Wang Jing & Co. Law Firm Reference
- Statistical Communiqué by National Bureau of Statistics of China on National Economic and Social Development of the PRC for Year 2022
- Quantities and Values of China’s Major Imported Commodities in October 2023 (in CNY) by General Administration of Customs of the PRC;
- Speeches and transcripts by guest speakers at the Seminar on Disputes Resolution concerning Soybeans Carriage hosted by China Maritime Law Association