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  • QA 209
    Question:
    Who is liable for fumigation costs on arrival of infested shipments?
    Background:
    In recent months we have received a number of shipments, spread over different vessels but from the same origin. These contained both live and dead insects, larvae and eggs even though we were supplied with phytosanitary certificates. The goods had to be fumigated and we are wondering who is liable for the cost of this? The underwriters or the shippers? The European Contract for Coffee seems to be silent on this?
    Asked by:
    Importer - European Union
    Answer:

    Laboratory analysis allows one to establish the country of origin and the age of an infestation problem. This is important because...

    • Infestation problems are literally unheard of in modern container vessels.  Therefore infestation during transit is considered if not impossible then certainly as unlikely in the extreme. Carriers will decline all such claims as a matter of course and any claimants will have to prove that the infestation in question took place during the time the goods were under the carrier's control.
    • The insurance perspective is that, without proof to the contrary, a landed infestation results from a shipped infestation. This is relatively easy to establish through determination of the type and age of the insects found on arrival. Therefore, the assumption is that fumigation costs do not result from an event during transit and therefore underwriters are not liable. They may decide to pay the odd claim but without setting any precedent, arguing that the problem is at origin and shippers should examine what their warehousing and fumigation companies really do. Of course the same goes for those issuing phytosanitary certificates…
    • The European Contract for Coffee states, clearly, that 'goods shall be of sound, merchantable quality'. Infested goods clearly are not which implies that shippers are responsible unless they can prove the infestation occurred after risk passed from them to the buyer. When selling/buying basis FOB (which is how most coffee is traded nowadays) this is when the goods pass the ship's rail. *

    This raises a number of observations.

    • Under ECC buyers trading basis FOB (or Cost and Freight) are responsible to insure the goods from the last place of storage immediately before shipment. Today this usually is the last container movement before crossing the ship's rail so infestation at that time is basically impossible.  Even where insurance also covers the actual stuffing of the container it is unlikely that infestation could occur during that exercise.  However, what if the last place of storage itself is infested?
    • This raises the question at which point do phytosanitary inspections take place? When the goods are first produced? When they are allocated for shipment? When they are stuffed in the container? If verification takes place earlier in the transport chain, say at an inland point, and the final place of storage before loading itself is infested - does this render a certificate null and void?
    • Alternatively, does the provision of a phytosanitary certificate absolve shippers from all responsibility? Presumably it could be argued that, just as the buyer is the final judge of the quality (irrespective of what a quality certificate may say), so too will the final examination on arrival determine whether a shipment is free from infestation or not.

    It seems fairly obvious that shippers must take responsibility for the cost of any necessary fumigation on arrival. However, we do not have definitive answers to the last three observations.

    What is certain however is that whenever shippers receive notification of infestation problems on arrival they should immediately verify where along the chain this could have occurred. And whether or not fumigation before bagging or stuffing in fact does kill all insects, larvae and eggs. Persistent problems should be reported to the national coffee authorities to ensure adequate action is taken to eradicate the problem at source.

    Without pro-active and visible engagement to remove infestation problems there will always be the risk that health authorities at the receiving end will place an offending origin on a watch list for regular inspections. And, individual national health authorities do exchange information on food safety issues…

    * The Green Coffee Association's (GCA) Contract does not make specific reference to 'sound or merchantable' quality and refers to Food and Drug Administration rules instead. Food imports into the US have to pass FDA inspection and, where so ordered, must be reconditioned before entry is possible. The cost of such reconditioning is always for sellers' account.

    Posted 15 December 2008

    Related chapter(s):
    Related Q & A:
    Q&A 002, 061, 180