Dangerous cargo, for 2020 and beyond

Dangerous cargo, for 2020 and beyond

Introduction

For many carriers, cargo interests, insurers and lawyers alike, this topic is simply distillation of contract wording in order to determine who has agreed to bear what risk, and for most it reliably conjures up well known scenarios involving spontaneous combustion [1], exotic insects [2] and mummified rats [3].

However, with innovation now leading as well as responding to consumerism, modern international trade increasingly involves carriage of materials which differ greatly from fishmeal, coal and calcium hypochlorite - each with their familiar and often regulated characteristics - but likewise present hazards that must be conceptually understood, physically tackled and contractually addressed.

After a quick review of the main context and some core provisions, using one particular example this article offers a reminder of the need to identify and respond to the ever-developing risks in the carriage of seeming benign goods in the service of today’s lifestyles.

Background

In the last two decades the law and practice on carriage of dangerous goods has been a key topic. Containerisation has grown significantly, progressively more such cargo is shipped that way, and the resulting economies have lessened freight costs and so depressed gross revenues. Container insurance premiums are generally higher per unit than for LNG carriage, even though the latter presents far greater potential exposure in a major incident.

It is suspected that many fires and other marine incidents involving hazardous goods are unreported, with most coming to light via the media or court proceedings. Though there are thankfully far fewer air carriage casualties, their nature and severity usually means immediate press coverage.

Transporting dangerous goods involves major risks all round. Buyer and seller want to ensure that the transit meets all regulatory requirements, so the cargo is safely carried. The performing carrier and others in the chain, such as a charterer or agent, arguably bear more risk due to direct involvement in actually handling the goods, often over substantial distances and long periods of time.

The risks are not just monetary, such as might be quickly covered by insurance. Incidents often mean loss of life or substantial injuries. The press is usually involved, and environmental, wider commercial and also reputational issues can arise. There may be numerous cargo claims, salvage might be required, general average is usually declared and the vessel could become a total loss. Government bodies and regulators might investigate. All these matters can have a major effect, and the various case files will often remain open for years.

 

 

What are “dangerous goods”?

One familiar, and also regulatory, example is the various prohibitions by airlines, which bar passengers from carrying pressurised containers, flammable or explosive items, chemicals, projectiles, firearms, sharp objects and the like.  This is largely due to the threat of terrorism, and more recently has included restrictions on actual volumes of liquids.

A main issue used to be the varied worldwide definition of “dangerous goods”, or “hazardous materials” in the US. However, most places now regulate such carriage (whether by air, sea or road/rail) under a UN-based legal framework, and widespread uniformity means that reclassifying or repacking good is rare, even within diverse and multi-modal transport.

Most jurisdictions have now adopted regulations based on the guidance in the UN Recommendations on the Transport of Dangerous Goods and Model Regulations. The IMO and the International Civil Aviation Organisation (“ICAO”) have also played a major part by unifying standard and recommended practices for worldwide sea and air carriage, hence uniform classification, packing, marking, labelling and documentation.

The UN has the following nine broad categories, each supplemented by detailed guidance using specific examples:

1. Explosives;

2. Gases;

3. Flammable liquids;

4. Flammable solids;

5. Oxidising substances;

6. Toxic and infectious substances;

7. Radioactive material;

8. Corrosives;

9. Miscellaneous dangerous goods.

Note that the common law concept of dangerous goods includes apparently safe cargo which may sometimes present a hazard. For example, in the “AMPHION” [4] the shipper was liable for damage caused by bagged fishmeal. This had ignited during discharge, because the shipper had not applied antioxidant treatment which would have substantially reduced the risk of spontaneous fire.

Goods can be dangerous not only where they endanger the safety of the ship and the cargo but also where they cause delay - see for example Mitchell, Cotts v Steel Bros and Co Ltd [5], where a rice cargo was held to be dangerous as the charterer knew that government permission to unload was needed but did not tell the carrier, and the vessel was detained.

Liabilities

How does the law balance the interests of shipper and carrier?

 

Common law

A shipper/charterer must not ship undisclosed dangerous goods under a bill of lading - he must tell the carrier of the nature of the cargo. But this does not apply where the carrier knows or ought reasonably to have known of the danger. So in Brass v Maitland [6] the carrier was expected to know the characteristics of chloride of lime, as the cargo was described as bleaching powder. The carrier must prove any lack of notification.

Hague-Visby Rules

Under Article IV (6), where goods of an inflammable, explosive, or dangerous nature are shipped without the consent of the carrier or his agent, the carrier can land or destroy them or make them harmless at any time before discharge. If this happens the carrier does not have to compensate the shipper, who is therefore liable for all resulting losses.

If the carrier has consented to such a shipment, and the goods become a danger to other cargo or the vessel, the carrier can also deal with them as above, and will be liable only in general average. Note that “dangerous” is not here defined, and (though it seems a broad concept) case law has still to fully explore its scope. In the “GIANNIS NK” [2] it was held that a cargo of processed nuts infested with the voracious Khapra beetle was “dangerous” under Article IV (6). The shipper was therefore found liable after the carrier had destroyed the cargo and fumigated the vessel.

Article IV (2) says that the carrier is not responsible for loss or damage arising from:

a)    Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship;

b)    Fire, unless caused by the actual fault or privity of the carrier.

i)      Act or omission of the shipper or owner of the goods, his agent or representative.

m)   Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods.

n)    Insufficiency of packing.

o)   Insufficiency or inadequacy or marks.

p)    Latent defects not discoverable by due diligence.

q)    Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that [none of the above fault, etc] contributed to the loss or damage."

Note though that even if a vessel has been found unseaworthy, the carrier’s defence could still succeed. However, he must show that due diligence was exercised, as only then can he rely on the above exceptions. In Maxine Footwear Company Ltd. v Canadian Government Merchant Marine [7] the cargo was destroyed by a fire in port. It was stowed after the fire broke out but before it was discovered, and the court held that, in relation to fire, proof of exercise of due diligence under Article III (1) is an overriding obligation. If lack of due diligence causes the damage, the Article IV (2) exceptions cannot be relied on. 

Where for example the shipper reasonably believes that the goods are safe but they later become dangerous, the shipper will not be liable for any loss or damage of the carrier that arises without the act, fault or neglect of the shipper or his agent (Article IV (3)). This situation is rare, however, and (depending entirely on fact and proof) it is a difficult case for shippers to run.

Hamburg Rules

On shipment of dangerous goods the shipper must inform the carrier (or actual carrier) of their nature and the necessary precautions. He must also mark or label the goods in a suitable way (Article 13 (1)) and a bill of lading must include the relevant details.

The shipper is liable for any loss to the carrier where he has failed to furnish the required information and the carrier or actual carrier does not otherwise know of the goods’ nature (Article 13 (2)(a)), and the carrier can at any time unload or destroy the goods or render them harmless without liability to the shipper.

Where the carrier consents to the carriage and the goods become an actual danger to life or property, he may unload or destroy them or make them harmless. He does not have to pay compensation, except under general average or where he is in breach of other contractual provisions.

A new kind of problem - lithium batteries

Almost like the microchip itself, these are a key component of modern life, and are invisible, essential and largely unknown. However, like many other such items, they can give rise to the same sorts of incidents, and of course issues, as conventional and long-established dangerous goods. 

The ICAO published new regulations on carrying them, which came into force in January 2013, largely as a result of a casualty which highlighted the dangers and corrected a very major misunderstanding.

On 3 September 2010 a fire occurred on a UPS cargo flight from Dubai to Cologne, leading to a crash in which both crew members died. After an independent investigation the General Civil Aviation Authority’s conclusive report identified the cause as a container filled with thousands of lithium batteries. The report made over thirty safety recommendations, and a subsequent FAA Safety Alert highlighted that halon - until then thought to suppress lithium battery fires - had no effect on those involving one particular type of battery.

There are two types : lithium ion and lithium metal.

Lithium ion batteries are rechargeable and commonly found in laptops, computers, mobile phones and MP3 players. They produce a current carried by lithium ions, which contain a flammable electrolyte. Fires involving this type of battery usually involve multiple eruptions of flames and sparks, but can be suppressed by halon.

By contrast, lithium metal batteries are non-rechargeable and often found in flashlights, cameras and smoke detectors. Containing metallic lithium within their cell, they are extremely reactive and their fires are hard to extinguish.They burn above the melting point of aluminium and halon has no effect on them.

Lithium batteries generally present two dangers.

The first is as a fire initiator. They can cause a fire due to a defect or improper packaging, or any time after incurring damage.

They are also a fuel for fires, which can quickly spread to all battery cells. Under the previous regulations large quantities might be shipped, and an otherwise manageable fire could mean a total loss, as with the UPS flight. Fortunately, there have been no further reported such incidents since the new measures were introduced.

Conclusion

It is likely that most incidents arising out of carriage of hazardous goods occur because of mis-labelling, mis-packaging or mis-handling, but it is clear that both shipper and carrier have duties to ensure that such goods are safely transported, and that the updated regulations on the transport of lithium batteries are just one example of the dangers presented by carriage of an everyday item in common use worldwide.

Industry awareness and developing technology mean that the historical, traditional types of dangerous goods are usually carried properly, with their long notorious hazards suitably addressed. However, that same advancement has brought into existence other goods whose natures and dangers are still perhaps not fully understood.

Continuing innovation, then, highlights, rather than lessens, the importance of independent regulation and collaboration within international trade, so that the concept of hazardous cargo is always kept well in mind, and parties and practitioners remain abreast of the issues that arise when what can prove to be new and unfamiliar types of dangerous goods are carried.

If you would like to discuss anything raised in this article please contact Chris Potts on +(852) 9461 4377 or at chris.potts@crumpslaw.com or Peter Lau on +(852) 9683 7439 or at peter.lau@crumpslaw.com.


[1] “ATHANASIA COMNINOS" [1990] 1 Lloyd's 277

[2] Effort Shipping Co Ltd v Linden Management SA [1998] UKHL 1

[3] "DARYA RADHE" [2009] EWHC 845 (Comm)

[4] Q.B.D. (Com.Ct.) (Evans J.) 8 March 1991

[5] [1916] 2 KB 610

[6] (1856) 6 E & B 470

[7] [1959] AC 589