Insight into holds inspection system

Introduction

The majority of bulk carriers calling at Argentine ports must clean their holds after discharging and before loading the next cargo – normally grains and associated sub-products. Most charter parties include cleanliness clauses, which usually state that holds must be cleaned to the satisfaction of the surveyor appointed by the charterer or shipper. In general, there is no mention of the requirement that holds must be cleaned to the satisfaction of government inspectors.
Argentina is one of the world's leading producers of grain for human consumption and has established strong phyto-sanitary regulations regarding the quality of grain to be exported and the cargo-worthiness of holds as a matter of public policy. As a result, government inspection is compulsory and inspectors must board all vessels loading grain in Argentina.
Unfortunately, inspections have generally caused delays for vessels and port terminals, leading in many cases to circumstances that are similar to the detention of a vessel.

Hold inspections

If a vessel fails to pass an initial hold inspection, the costs for subsequent inspections and unberthing, reberthing or shifting the vessel are more likely to be borne by the owner. As a result, if the vessel is under a voyage charter party, the notice of readiness will be deemed to be invalid and the time lost may not count as lay time. Further, if the vessel is under time charter party, charterers are more likely to place the vessel off-hire. Under existing legislation, holds can be rejected if a government inspector finds:

• rust residue;
• live insects;
• humidity due to condensation;
• washing water or filtration;
• questionable odours that persist even when the hatches are open or following adequate ventilation; and
• residues from previous cargoes.

The severity of the regulations have resulted in the widespread practice of government inspectors rejecting holds systematically based on minor grounds. For over 20 years, government inspectors have enforced a system in which the certificate of approval has become a tool for their own interests.
As the cleanliness of holds became legally irrelevant, the inspection system resulted in some vessels choosing not to clean the hold and instead focus on receiving official approval by other means. Consequently, government inspectors have accumulated authority over time which has on several occasions resulted in the unlawful rejection of vessels with holds that were suitable for transporting grain.
The unlawful rejection of a vessel by pytho-sanitary inspectors in Argentina can be challenged if the vessel is deemed to be cargo-worthy. There is no legal reason for a notice of readiness to be considered invalid due to the rejection of a vessel by government inspectors. Consequently, a potential demurrage claim can be successful. From a time charter party perspective, a charterer's decision to place a vessel off-hire can also be challenged.

Comment

As a result of the inspection system, when a vessel is not cargo-worthy, but has been granted approval by inspectors, it is not unusual for buyers to receive grain that has been contaminated by previous cargo, leading to a potential cargo claim somewhere else in the world and the potential arrest of the vessel.