Claims relating to wet damage to cargo are all too frequent. Many of these can be avoided entirely with a robust pre-loading condition checking procedure. While humidity and condensation are inevitable challenges through the supply chain, pre-existing CTU damages should be an easy check.

As TT regularly articulates, around 65% of cargo damage incidents are attributable in part to the way that goods are packed within the cargo transport unit (CTU). The CTU Code and the more recent ‘CTU Code – a quick guide’ and complementary container packing checklist published by the Cargo Integrity Group, provide invaluable guidance for actors in the supply chain to mitigate such risks. 

Pre-packing unit condition checks are a critical step in protecting the cargo during its journey. Checks for signs of pests, dust, debris, transferable stains and odours are vitally important. So too are checks for physical damage, holes, evidence of repairs and items such as rust or water trails that might indicate water ingress.   

“Pre-packing unit condition checks are a critical step in protecting the cargo during its journey”

What’s the main cause?

TT claims data for 2020 suggest that 25% of wet cargo damage were caused by water ingress to the CTU through pre-existing damage that probably should have been identified as part of the cargo packing process.

Once cargo has entered the intermodal supply chain, TT claims data suggest that a further 17% of wet damage claims stem from impact damage to the unit during transit. Of course throughout the intermodal transit there are a number of touch points at road, rail and maritime terminals, where damage might occur. It is evident that road traffic accidents may also give rise to cargo being exposed to the elements. 

Where does the exposure occur?

By mode, the TT data indicates that the greatest risk is posed by the maritime mode which accounted for 65% of reported claims. This in part is explained by the length of time that the cargo is in transit – extending the period of exposure – in addition to the different climatic zones through which the cargo is moved. Road transit was the next most prominent mode at 14%, where shorter journeys, fewer intermodal changes and operator owned units likely influence the better experience. 

Wet damage arising under air carriage contracts accounted for only 7% of reported claims in TT data for 2020, reflecting shorter transit periods and different handling parameters. Data suggest that the primary exposure, unsurprisingly, rests in the period between the airside warehouse and physical loading to or unloading from the aircraft.

Perhaps surprisingly, incidents where cargo was wet damaged while in storage accounted for 13% of reported claims. Causation varied, but included damage occurring to or within the storage facility itself and, with increasing frequency, incidence of flooding. Burst piping or malfunction of a sprinkler system accounted for 42% of storage related wet damage claims. However, 31% of these incidents followed sudden heavy rainfall that overcame drain provisions. This latter point highlights the importance of routine maintenance to ensure that drains and drain pipes are clear and undamaged, as well as indicating the prudence of carrying out periodic risk assessments to ensure that original building design parameters remain appropriate.

Considering operational practices

Poor operational practices also attributed to losses, with incidents of cargo temporarily stored entirely unprotected, cargo being transported on flat bed trailers/flat rack containers with insufficient coverings, and cargo being cross-stuffed during periods of rainfall. 

In too many instances, cargo had been unstuffed from units for the purposes of Customs inspection and laid out on the ground of the facility. Rainfall occurring whilst the goods stood unprotected awaiting inspection inevitably results in damage.  

The incident data also illustrate that the traditionally wetter summer months in the northern hemisphere are when cargo is at greater risk; recent extreme flooding across broad swathes of continental Europe corroborate this as an emerging (or emerged) risk exposure. Logisticians and facility operators need to consider this proactively. 

Prudent actions

While this analysis was limited to 2020 incidents, it was triggered by a deteriorating trend, potentially acting as an indicator to a potential increasing risk exposure. Fortuitous circumstances in many instances resulted in a disproportionate monetary consequence. 

While the outcomes are necessarily cargo specific, it is noteworthy that numerous consignments were eventually accepted by the beneficial cargo owner (BCO) with an element of rework, reducing the potential cost of the loss. While such solutions are pragmatic for all concerned, it is clear that all actors in the supply chain need to be mindful of the risks. 

Further, while there may be contractual defences to wet damage claims, such as where the bill of lading is noted ‘shipper load, stow and count’, there are inevitable consequences when damage is incurred in this way. Having entrusted their cargo into your care, custody and control, the BCO might be expected to be aggrieved when part or all of their valuable cargo has suffered wet damage – regardless of fault; reputational damage can be extremely difficult to repair. 

An additional factor that is often overlooked is the management time consumed in handling any dispute, claim and strained customer relationship. These claims are often complex, involving multiple parties and incurring costs in inspections, surveying and defence.

Anecdotally, the selection and sourcing of CTU equipment may be fraught, but anyone taking contractual responsibility has a clear interest in ensuring that freight arrives undamaged. Undertaking due diligence when appointing local agents and subcontractors, and building service level agreements (SLA’s) into contracts will clarify your expectations, resulting in greater certainty of outcome, including mitigating the risk of wet damage to cargo.  

“Anyone taking contractual responsibility has a clear interest in ensuring that freight arrives undamaged”

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We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.

We look forward to hearing from you.

Peregrine Storrs-Fox

Risk Management Director, TT Club