Reefer Cargo Claims: what claims handlers need to know

Cargo Claims

Reefer Cargo Claims: what claims handlers need to know

Managing reefer cargo claims is a challenging task for many in the shipping sector.

Perishable cargo, transported using reefer containers, brings along a series of potential complications, many of which lead to claims. From frozen food cargo claims to the broader challenges of cold chain logistics claims, the transportation of these temperature-sensitive goods is fraught with complexities.

Throughout this article, we delve into the prevalent challenges surrounding reefer cargo claims, while also shedding light on the foundational aspects of such container claims.

Reefer cargo claims demand meticulous handling and keen attention to detail. Known by carriers and freight forwarders as ‘reefer’ containers, these refrigerated units present distinct requirements, introducing challenges to both the shipping and insurance sectors.

Introduced in the 1970s, refrigerated containers, often termed ‘reefers’, have evolved into reliable engineering marvels, efficiently transporting perishables across long distances without compromising quality. Today’s reefer advancements, particularly the incorporation of IoT, allow shippers to remotely track real-time and adjust container settings, like temperature. Although this adds significant convenience for shippers, it also raises concerns for carriers. They remain accountable for the container’s performance throughout the journey, especially since these settings can be changed remotely without their awareness.

Reefer Cargo Claims: why they matter

Diego Alonso, our expert in reefer cargo, observes: “Since the onset of COVID, we’ve seen a notable uptick in reefer container claims, many of which are increasingly complex cases. Handling these claims demands specialized attention and understanding. In our records at Marlin Blue, reefer-related issues now account for a significant 37% of all cargo claims.”

Drivers, logistics providers, transportation companies, motor carriers, and insurers should prioritize understanding refrigerated cargo claims, given the financial implications and the magnitude of potential loss.

This understanding is further complicated by the multifaceted responsibilities of carriers, which can span across sea transits to overland haulages and container terminal stays, all pivotal in the cold chain logistics claims.

Types of reefer containers cargo

Reefer containers can carry a diverse range of goods that need to be temperature controlled during shipping. The North of England P&I Association (NEPIA, 2019) categorizes reefer cargo into:

Living organic: Includes fresh fruits, vegetables, flowers requiring refrigeration, and possibly fresh fish or meat.
Non-living organic: Examples include frozen meat or fish cargoes.
Inert: Non-food items such as medicine and pharmaceuticals.

The most common cause of reefer container claims

One of the most recurrent causes is the variation of temperature during the voyage, which can compromise sensitive goods. Flooding of the hold, either by external seawater intrusion or leaking pipes within, can wreak havoc on cargo.

Similarly, poor monitoring or inadequate maintenance of reefer units, along with mechanical failures, jeopardizes temperature-sensitive shipments.

Heavy weather can strain the ship and cargo, while improper cargo handling, whether on the ship side or shore side, can result in significant damage.

There are instances of leaking containers, and unclaimed cargo often becomes a liability.

Fires, albeit less frequent, are catastrophic, and their effects are compounded when cargo is poorly stowed or insufficiently lashed and secured.

Shippers at times are culpable, failing to secure their cargo adequately. Theft, an ever-present menace, results in direct losses, while inherent vice — the natural tendency of goods to deteriorate — is an overlooked but pertinent issue.

There are also cases where damage is detected prior to loading, questioning the state of the container or its contents before the voyage.

At times, the root cause is elusive, falling into categories of multiple factors, unknown reasons, or other unexpected events.

In summary, these causes result in the following list of types of reefer cargo claims:

Temperature Deviation Claims
Delay in Transit Claims
Mechanical Failure Claims
Improper Setting Claims
Inadequate Ventilation Claims
Contamination Claims
Controlled Atmosphere Claims
Poor Packaging or Stowage Claims
Shortage or Theft Claims
Condensation or “Sweat” Damage Claims
Claims from Incorrect Use of Humidity Controls
Power Interruption Claims
Claims due to Incorrect Gas Levels
Reefer Malpractice Claims

Challenges in reefer container claims handling process

Claims handlers in the shipping industry often face various challenges, such as:

1. Ensuring optimal temperature management

The cargo must be stored, transported, and handled at the correct temperature to maintain its quality. This must be done at the right timing, in the right place.

Based on the specific characteristics of the product, the refrigerated container is designated with a suitable “set-point” temperature. This can be either frozen or chilled, as specified by the shipper. Understanding the Set-point Temperature:

It is the temperature the shipper requests from loading (stuffing) carrier to configure the refrigeration unit at the shipper’s facility.
It’s not the temperature the carrier undertakes to maintain in the cargo itself.
It’s not exactly the temperature of the air supplied from the refrigeration unit.
It is usually stipulated at the time of booking and copy-pasted in the B/L or Sea Waybill.

Many claims are triggered when a consignment is received in an evidently compromised condition, largely due to temperature discrepancies. Various factors can lead to temperature fluctuations in reefer containers, such as:

System Malfunctions: Both refrigeration and Controlled Atmosphere (CA) systems can malfunction due to component failures, such as issues with compressors, fans, or gas leakages.
Power Interruptions: Extended off-power periods can happen at various locations, from the shipper’s premises, load and discharge ports, during transit, to the consignee’s site.
Improper Stowage: Ensuring proper airflow is crucial. Obstructions or inappropriate cargo arrangements, including exceeding height limits, can impact temperature maintenance.
Hot/Warm Stuffing: Reefer containers primarily maintain temperatures. They aren’t typically meant to cool down warm cargo, with some exceptions like certain banana shipments.
Cargo Ripening: Some produce, known as climacteric cargoes, can ripen prematurely, producing heat and ethylene. If one portion ripens early, it can adversely affect the entire cargo.
Setting Errors: Mistakes in setting temperature parameters or ventilation can result in cargo damage. For instance, confusion between °C and °F or inappropriate humidity control can be detrimental.

2. Double-check that all documentation is complete, accurate, and up-to-date.

It serves as evidence of loss, helps to ensure compliance with regulations, supports efficient and effective resolution of claims, and provides legal protection in the event of a dispute or challenge.

Transport & Delivery Documentation:

Transport Document (Bill of Lading/ CMR/ Air Waybill/ Postal Receipt/Other International Carrier’s Receipt)
Independent Loading/Stuffing Report
Delivery Note
Booking
Tracking
Equipment Exchange Slips (EIR) indicating times and dates, air and temperature configurations, and the status of the refrigerated container when delivered to the loading port (EIR input) and collected from the unloading port (EIR output).
Tally Sheets, Ship Outturn Report, Container Damage Report, Container Stuffing/Destuffing Tally Records, etc, as applicable.
Copy of the instrucctions to carrier regarding carriage temperature

Refrigeration & Monitoring Records:

Microprocessor Downloads from the Refrigerated Container (“Data Logger”) detailing the full journey, capturing temperature data, alarms, event histories, and automated pre-trip checks.
Transit-encompassing Partlow Charts, records/logs of monitoring at both loading and unloading ports, Shipborne Reefer Container Tracking Data, documentation on controlled or modified atmosphere, or air circulation records.

Cargo Documentation:

Original Packing List/Weight List
Contract of Sale/Purchase
Photos (prior to transportation)
Report (prior to transportation)

Damage Determination & Reports:

Survey Report with pictures
Pictures of the cargo stow prior to destuffing
Protest Letter
Original Exception Report from carrier/bailee
Analysis report from a laboratory approved by the surveyor, in case of wetting or contamination claims.

Quantification of Damage:

Original Commercial Invoice
Freight Invoice
Salvage Receipt if the cargo was sold for salvage or auctioned away, adn details
Destruction Certificate if the cargo was not sold for salvage
Reconditioning or Repair Invoices, if applicable

Insurance Documentation:

Original Certificate of Insurance
First Written Notice of Claim on Carriers or any Third Party responsible for the loss/damage (e.g., Forwarder/Port/Terminal/Warehouse/Warehouse Keeper)

3. Maintenance

Ensure proper maintenance and condition of refrigerated containers to avoid goods-exterior contact and maintain air circulation.

Here, three important issues:

Adequate adjustment of the parameters: Set point, Ventilation, Atmosphere.
A Reefer container uses circulating cool air to envelop the cargo, and the T-shaped rails in the floor facilitate this circulation.
The carrier should perform a Pre-Trip Inspection (PTI) on all refrigerated containers prior to loading

4. Mechanical failures

Reefer cargo is transported in refrigerated containers, wich can be prone to mechanical failures.

5. Human error

Stay vigilant about human error such as incorrect loading, miscommunication, or incorrect temperature settings.

For example, the carrier sets the temperature before releasing the container, but the exporter should verify it’s set correctly before packing the cargo.

6. Loss mitigation

Evaluate the possibility of loss mitigation immediately after the occurrence of a loss.

By promptly evaluating the possibility of loss mitigation, claims handlers can ensure that they are taking all necessary steps to mitigate any further losses and protect the interests of their clients. This may involve:

Rapidly gathering information about the cause and extent of the loss.
Contacting relevant stakeholders such as carriers, adjusters, and surveyors to gather information and coordinate efforts.
Reviewing available resources, such as cargo insurance and mitigation experts, to determine the best course of action.
Actively communicating with the client to provide updates and ensure their needs and concerns are being addressed.

DOCUMENTATION

In the event of salvage or destruction, certain documentation is required, including

Justify the cost of salvage
Reasonableness
Destruction certificate
Salvage invoice

7. The role of marine surveyors

Consider involving a marine surveyor early in the claims process.

A marine surveyor plays a crucial role in the investigation of damaged cargo. They conduct an examination of the contents and condition of the container to determine the cause of any damage or spoilage. A high quality global network of marine surveyors can greatly benefit claims handlers in the event of cargo damage.

SURVEY REPORT
Claims handlers use survey reports to make informed decisions regarding damage to cargo. The report provides information on the cause and extent of damage, helping handlers assess liability as well as determining settlement amounts and aiding negotiations with stakeholders. It also provides recommendations for mitigating losses.

8. Legal aspects

Ensure that all relevant legal aspects are considered when handling a claim.

To effectively address this challenge, claims handlers should prioritize understanding of crucial legal considerations and take action to comply with them.

This may include:

Applicable regulations: Claims handlers must be aware of and comply with all relevant regulations and laws, such as maritime law and insurance laws, that govern the claims process.
Limit of liability: Claims handlers must understand the limits of liability under the insurance policy and ensure that settlements are consistent with these limits.
Claim period: Claims handlers must be aware of the time frame for filing a claim and take steps to initiate the claims process within this period.
Time bar: Claims handlers must be aware of any time limitations or deadlines that apply to the claims process, such as the statute of limitations, and take steps to comply with these requirements. By taking these legal considerations into account, claims handlers can ensure that the claims process is conducted in a legally compliant and effective manner.

Managing reefer cargo claims is a task of immense responsibility and intricacy within the logistics sector. The variables at play, from human errors to mechanical challenges, demand meticulous attention and profound knowledge. The key to successfully handling these claims lies in prevention, proper documentation, and swift, efficient response when issues arise. In the ever-evolving world of maritime transportation, staying a step ahead by continuously educating oneself and leveraging technology to one’s advantage is paramount.