Are carriers liable for corrosion damage?

In our last blog we stated that, in general, the carrier is liable for product damage when it had control of the cargo. We also noted that the burden of proof is on the carrier’s part if they are going to defend against a damage claim.

So what type of claims have carriers successfully defended against?   According to transportationlaw.net, the following are valid defenses that a carrier could use in a court of law:

* Act of God;
* Act of public enemy;
* Act of public authority;
* Act of shipper;
* Loss or damage by the inherent vice or nature of the goods.  –source

The 2 most common defenses are 1) Act of shipper (most likely improper packaging) and 2) damage was due to the inherent nature of the goods.

One type of damage that could fall under either of these is corrosion.   After all corrosion happens even when a product is sitting in a warehouse, so a carrier should never be liable for corrosion damage, right?   Well, it turns out that there was a case where the carrier ended up being judged liable for corrosion and therefore had to pay the claim.

The case in question is written about in this document: – the document is entitled “SEAWORTHINESS AND THE CARRIAGE OF STEEL FEDERAL COURT OF AUSTRALIA AFFIRMS AN INCREASED BURDEN ON STEEL CARRIERS” and was written by the law firm of Holman Fenwick and Willan.   The case was about steel coils that were transported from Japan to Australia.     The claim was for corrosion damage on the coils due to condensation.

To summarize the ruling the carrier was held liable for damages: Because the carrier was required to properly handle and stow cargo, the court found that the presence of condensation was something that should have been prevented by the carrier.   Note the court did distinguish between standing water, which is commonly found everywhere on a boat and “condensation” which occurs under certain temperature and humidity conditions.

The carrier tried several avenues of defense that apparently was unsuccessful.

• Improper packaging:   The carrier asserted that the shipper should have wrapped the coils in a water proof vapor barrier. The court rejected this argument because the carrier had failed to show that there was any such product that would prevent condensation.
• Inherent nature of the product: The carrier asserted that the corrosion occurred without any fault of the carrier, that there was nothing the carrier could do to prevent the issue. The court rejected that argument because it had already established that the carrier improperly ventilated the stow area.
• Improper loading: The carrier claimed that the coils were loaded while wet, however the court ruled that the damage was not caused by water, but water vapor.

This case was tried in 2007 and we could not find any document in reference to an appeal to a higher court.   In regards to corrosion, according to www.transportationlaw.net: “The defense that the loss was caused by inherent vice and the nature of the goods is available when “existing defects, diseases, decay or the inherent nature of the commodity” cause it to deteriorate with the lapse of time. Concealed infestation, fermentation, decay, corrosion, rusting and freezer damage all have been topics of inherent vice.” Source. In other words, corrosion has been considered inherent vice in other cases.

One thing that we found surprising is that the discussion was about preventing condensation on the coils, rather that inhibiting corrosion. Cortec makes a number of corrosion inhibiting products that should have worked on the steel coils. For example wrapping it in VpCI®-126 Blue is a combination of plastic sealing wrap and a protective vapor that would have bonded to the coils to inhibit corrosion. Another Cortec product that would have worked was VpCI® 368, which is a temporary coating that can last several months and be removed with common solvents. It is unknown why failures to use corrosion inhibitors were not used by the defense as improper packaging. The size and type of coils were never specified in the document.

We would not recommend that a shipper rely on the carrier to prevent corrosion damage to its product, especially if the product is highly sensitive like an electronic product.   One question that would be asked by the court for determining liability by the carrier is “what could the carrier have done differently.” If the answer is that there was nothing realistic that could be done, then there is a chance that the carrier would not be found liable.   We certainly think that corrosion damage could be argued by the carrier to fall under the “Inherent vice or nature of the goods” clause because corrosion is an inherent characteristic of all untreated metals.

Even if the carrier was liable for the damage, a damaged shipment can result in loss of market share, customer dissatisfaction and added costs for shipping and/ or expediting new product. Corrosion protection is a relatively inexpensive way to avoid unneeded damage.

Packnet is a premier supplier of Cortec products, for more information on corrosion inhibitors, goes to Packnet’s Corrosion inhibitor webpage.