Insurance Advocate




February 1997

Keeping That Cargo Dry & Viable

by Don Lawson

A major concern for overseas shippers is excessive moisture, a common problem for cargo subjected to drastic changes in humidity. Eliminating moisture damage can protect product integrity and have a favorable effect on marine insurance premium -- in some cases, reducing them by millions of dollars per year.

For shippers and their insurers, loss prevention during marine shipping is often difficult to implement, since neither party is willing to assume the financial obligation such a program requires. In addition, insurance companies, generally, do not have the manpower or expertise to guide their shipping clients toward the correct tools to prevent loss. Instead, companies usually employ marine surveyors to make recommendations, but this happens, for the most part, only after a claim has been filed. As a result, shippers expose themselves to potential loss of business when severely damaged and unusable merchandise reaches the customer.  

Even though insurance recovery may make the shipper whole, the customer may look elsewhere for sorely needed merchandise or parts or machinery.

To avoid such unproductive and costly circumstances, it is essential that, prior to making shipping arrangements, both the insurer and the insured evaluate the potential risk and explore all possible preventive strategies. One such method is the use of a desiccant, a drying agent that protects products susceptible to moisture damage by absorbing moisture contained in packaged products. It quickly reduces shipping container humidity to a predetermined lower level and keeps it there for an extended period of time.

Condensation On Cargo--A Major Risk Factor
While cargo theft on piers or warehouses is generally recognized as a major loss exposure for shippers or consignees, and efforts are made to stem such attacks, too little attention is paid to loss as a result of excessive moisture in the shipping container. That's ironic, because the container development was, in part, a response to cargo theft and poor aboard ship stowage. Excessive moisture damage can occur not only in marine shipping, but also to cargo shipped by rail, truck or air under inland marine coverage.

Temperature changes as well as other natural elements, can result in the build-up of moisture and the formation of mold and mildew, rust on metal, discolored or peeling product labels and unwanted product odors. These destructive results stem from extreme climatic changes which occur along shipping routes and include fluctuations in temperature and humidity.

Condensation develops in the air space inside the shipping container fouling the contents and invisible until uncrated.  In addition, humid air trapped inside containers, or certain hygroscopic (moisture -containing) items within them, such as wooden pallets, can intensify the moisture problem. This type of irreversible damage can lead to millions of dollars in escalated shipping and materials costs, increased claims, higher insurance premiums and, in extreme or repeated cases, cancellation of the insured's marine policy.

The most effective way to reduce the risk of moisture or humidity damage in the shipping container is the use of container desiccants. Specifically developed to combat condensation during long-haul transport via air, sea, or land, container desiccants contain a clay compound capable of absorbing up to half their weight in moisture. These desiccants activate whenever the dew point is reached and condensation starts to form inside the shipping container.

The desiccants, which were designed to accommodate cargo containers, are a cost- and labor-efficient solution for moisture prevention. The lightweight, environmentally-safe bags are simply placed in between packages of cargo as they are being loaded into a container prior to shipment, and removed upon arrival.

According to Hans Ruhlandt, regional vice president for the National Association of Marine Surveyors, Inc. (NAMS), a non-profit organization dedicated to the enhancement of the marine industry and the marine surveying profession, "Desiccant products can prove to be a priceless commodity to worldwide shippers, whose cargo can travel through different climates and experience extensive lag time in transportation."   Ruhlandt explains that cargo is often held up in non-climate-controlled storage areas or hot, sun-drenched docks for extended periods of time, which can cause or intensify the formation of condensation. Ruhlandt cites desiccant technology as one of the most effective means of addressing moisture problems.

"As surveyors, we are called upon by the insurance companies to evaluate packing methods and make suggestions to prevent claims. We recommend desiccants whenever we evaluate a cargo load of high-tech or moisture-sensitive products, such as computers, metal products, or cargo that consists of metal cans," says Ruhlandt. "In many cases, desiccants can prevent claims to insurance companies and thereby reduce premiums."

Marine insurance policies calculate premiums on a per hundred dollar value basis (for example, 50 cents per hundred dollars). In many cases, if the insured can demonstrate to an underwriter that a desiccant product can reduce risk, a lower premium per hundred, such as 40 cents, can be negotiated. This type of reduction, when multiplied over hundreds of cargo containers can mean millions of dollars in savings for a large commercial exporter.

Proper Use Leads To Success
A company that uses desiccants, however, must first be knowledgeable about their use. "In the absence of engineering, the use of a desiccant is a futile effort," says John Colletti, CMS, of John R Colletti Associates (Pittsburgh, PA), a company that specializes in marine cargo surveying. Colletti describes a recent example in which a cargo container that utilized desiccants was opened, only to find the desiccants soaking wet and excess moisture in the bottom of the container. "The shipper had the right idea, but there was not enough research done to calculate the proper amount of desiccant. As a result, the cargo was destroyed by moisture," he explains.

There are a number of variables that affect the amount of desiccant to be used in the shipping container. The rule of thumb is to use 32 one-pound bags of container desiccant per 20 feet of container. These recommendations are for overseas voyages of approximately 30 to 40 days, and will vary depending on the time and mode of transportation. Required desiccant amounts can also be determined by the quantity and composition of the transported item; anticipated length of the trip; temperature and climate changes experienced during transport; and other factors.

AGM distributes Container Dri II, a container desiccant.