It’s 10 pm, do you know where your cargo is?

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By now, the only people not to hear of the Hanjin receivership might be an aboriginal tribe in the outback.  But with cell phones nowadays that might not even be a safe bet. 


As this article is sent to print, there is a host of questions left unanswered that only time and perhaps the legal beagles will sort out – ideally sooner rather than later to many with cargo affected.  In the interim, shippers are scrambling to discover precisely where their cargo rests, who owns various containers and/or vessels, and which cargo gets delivered as scheduled.  In the end, all involved will learn a heck of lot on just how interwoven this global shipping community has become. 


Advice, opinions, rumors, and changing scenarios are rampant at this stage as we hit unprecedented levels of involvement of ships, containers, and trade lines – all exacerbated by the frantic seasonal Christmas rush. 

So naturally, after every shippers’ traffic departments comb through recent bills of lading, liaise with forwarders and steamship representatives, and scour ship and container tracking websites to finger any possible tie to Hanjin to identify their very real exposure, the next call is invariably to their cargo insurer. 


Our first response is always to remind the Assured to act prudently and to do everything in your power to mitigate loss.  As one prominent marine Underwriter confirmed, the first objective should be “to get your cargo out of Hanjin’s care, custody, and control.” 

While most shippers are incensed that their cargo might be held at bay despite their freight charges already having been paid, or gladly paying their freight to get their cargo released, ports and stevedores face great uncertainty at who will pay their bills.  This creates a helpless situation for shippers where vessels are anchored just outside territorial waters avoiding the clutched hands of creditors lying in wait to arrest the vessel when it berths. 

We immediately delve into the individual facts of each case to identify exactly what has occurred and how that has affected the shipper. 


Chris Dunn, Managing Partner of Waltons & Morse, a London based solicitor specializing in marine insurance, has very timely enumerated five potential exposures cargo interests face ranging from delays in loading/unloading, demurrage, repossession of equipment and transshipment costs in his recently posted Briefing series.   

Once properly identified exposures are shown to impact the shipper, it leads to our second response:  let’s read your policy, in particular your exclusions! 

This is where the water can get very murky very quickly.   


Remember, “all risk” policies are NOT “all loss” policies.  Cargo policies at the most fundamental level cover PHYSICAL loss or damage from external causes.  So, a simple question is what physical loss or damage has occurred to the goods? 

In this vein, two very germane and paramount warranties – read exclusions – would come into play:   losses caused by delay or loss of market. 

This can be especially poignant for commodity shippers trading under very specific trade rules, who have perhaps have forward sold and are fulfilling obligations within contractual delivery periods.  Additionally, letters of credit could have been opened and the timer is running on producing compliant documents.  In these situations, it is important to know your trade rules to see exactly what remedies might be available. 


An additional relevant exclusion often found in cargo policies, especially those written under the Institute Cargo Clauses (A) is for losses caused by “insolvency or financial default of the owners, managers, charterers…” (clause 4.6). 

Dunn importantly points out, however, that in the 2009 edition “the Insurers must prove that the insolvency caused the loss (which does not have to be direct) and that the Assured knew, or should have known, that the insolvency would cause such a loss.”  


Fortunately, well constructed cargo policies will have an explicit provision to cover the additional forwarding charges occasioned by such insolvencies of the carrier.  Again, the key is to be prudent and do your diligence to make sure that charges are necessary as all sorts of opportunists will suddenly appear.   Detailed records of all charges paid are a must. 

In every loss or near miss there lies an opportunity to improve our business. 

Carriers could be checked for any possible ISO status/procedures to help improve their credit worthiness. 

Forwarders and freight brokers might be able to implement better or additional data that will provide more ownership information of containers being used or carriers ultimately being contracted. 

Traffic departments might be able to integrate or input a few additional fields to their Contract Management programs at time of booking to link vessels, bills of lading, and equipment to enable an immediate aggregation of its total exposure to any one carrier … maybe even setting limits similar to current credit lines for its buyers? 

Shippers can review their cargo insurance coverage to make certain they have the knowledge to adequately address the exposures that impact them. 

Insurers can better tailor coverages and explanations to meet the very specific supply chain needs of its policyholders. 


It will be years before the full impact will be known.  Undoubtedly new standards and conventions will be implemented to better enable the continuing flow of global cargo.  In the meantime, those with quality partners and most able to adopt new tools and risk controls will sleep more comfortably knowing exactly where their cargo is. 

Article originally published in ⁠Tea & Coffee Trade Journal.

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