Peru - Loss Allowances for Bulk Cargoes

January 2001

It has long been recognized in the bulk trades that transportation and shipment of bulk products, either liquids or solids, involve inevitable intransit losses as well as discrepancies in their measurement. In the case of bulk liquids measurement of quantity is affected by temperature and density which will vary considerably during a voyage. Moreover, a certain amount of clingage is often unavoidable . Bulk cargoes are subject to loss of moisture, dispersal in the wind and spillage. Differences in methods of calculation between the load and discharge ports is also an area for error. Consequently, "paper" shortages often occur even when vessels can be shown to have discharge all loaded cargo. In recognition of this, the Hague and Hague/Visby Rules provide that a Carrier shall not be liable for "wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods" (article IV 2 (m)).

Many cargo insurance policies recognize that shortages are often inevitable and they therefore include a deductible which is proportionate to a percentage of the shipment. This is often 0.5% or 1%.

Similarly, most shipping nations make provision by statute to recognize a customary loss allowance and this normally 1% or even up to 2 or 3% in some instances.

The Supreme Court of Peru has recently decided* that a statutory tolerance of 1% will be applied to bulk shipments to Peru. Carriers will not be liable for any shortages in bulk cargoes up to this limit. This decision has now established as law a principle previously often recognised in practice.

*The "Nikos N" – Supreme Court of Peru, December 2000