Weeks after 76 containers fell off a cargo ship off of the North Carolina coast, the Coast Guard is still warning mariners to look out for missing containers from March 4th incident. Deemed hazardous due to toxic materials and overall size of the containers floating, shippers are once again reminded that mother nature rules over the waves.
But this isn’t the first time where containers have fallen off of a vessel or have experienced one catastrophe or another on the high seas, but a reminder of how important it is to protect against potential liabilities that can result from missing or damaged cargo. An average of 1,678 containers are lost at sea each year, and given how unpredictable weather conditions can be, it’s no surprise that some containers don’t make it to their final destination.
On average, five to six million shipping containers traverse interntional waters daily, making it no surprise when accidents from collisions, heavy weather, and a slew of other environmental challenges occur. Between 2011 and 2014, the number of lost containers at sea increased by 297%.
COMMON MARINE SHIPPING RISKS
- Physical Loss
- Damage
- Rejection
- Exhibition
- Cargo Legal Liability
- Professional Liability
- Political Risk
- Supply Chain or Trade Disruptions
In the event of a disaster, you could be liable for more than just your loss of goods. General average, a maritime law, states that all parties involved, including cargo owners, are responsible to cover a proportional part of the total loss – including, for example, the replacement of an entire vessel, if required.
The rule also covers any cargo deliberately thrown overboard to save a vessel or the majority of its content and was used in 2012 when a carrier declared general average following an explosion. The steamship line then billed cargo owners whose freight arrived safely at the destination, to proportionately cover the loss of the tossed shipments.
Importers are involved in a general average claim once every 8 years.
If your cargo is involved in a general average event, here’s what shippers can expect:
- Importer must immediately post an average bond if they don’t have marine cargo insurance in place;
- Average bonds are based a percentage of the CIF (cost, insurance, and freight terms of sale) value of the cargo;
- Cargo will only be released pending cash bond or, marine insurer guarantee;
- General average claims can take up to 5 years.
BEWARE THE (INCO) TERMS OF SALE
When selling goods under FOB, FAS or CFR terms of sale (incoterms), the buyer is responsible for loss or damage to the goods. But until the cargo passes the ship’s rail or is loaded onto a vessel, the seller remains the owner and must ensure protection until the authority passes. Shippers needs to be aware of the insurance coverage as it pertains to the terms of sale agreed to with their manufacturer; manufacturers should also purchase maximum coverage, in the country of destination, if selling on CIF terms.
When an importer purchases on CIF terms, they:
- Trust totally that their supplier’s insurer of choice will pay the U.S. claim timely;
- Are relying on an unknown, foreign insurance company (do you know their name?);
- Understand the insuring conditions, scope of coverage, exclusions & deductibles;
- Accidentally pay duties on CIF value, are paying an unknown premium;
- Agree to file the claim in a foreign legal system, potentially in a foreign language.
“I’M ALREADY COVERED BY MY CARRIER.”
Take a look at the back of your bill of lading and you’ll soon find that international law limits the liability of ocean carriers to $500 per package and the liability of air carriers to $9.07 per pound. Truckers and warehousemen also limit their liability for loss according to their tariff.
What you’re actually buying is the right to, well…fight – because carriers are only liable if you can prove negligence. No carrier must pay for losses that occur beyond their control.
INSURE WHAT YOU LOVE
Most people have never made a claim again their homeowner’s poliy, but continue to insure their homes. Do you value your business any less? Approximately 30% of losses in transit are unavoidable due to risks like long voyages, extensive lifting, thieves, moving, shifting, loading, and even piracy.
Green Worldwide we offers an “All-Risks” marine insurance policy that covers CIF + 10% of the cargo value on domestic and international shipments from the time the goods leave the seller’s premises until they reach the buyer’s warehouse.
Reach out to a local Green freight expert to protect your assets today at [email protected]
