If you’re shipping goods internationally via ocean freight, then it’s probably crossed your mind that your cargo – being stacked in a container – could fall overboard into the sea. Or potentially your cargo may be delayed by maritime incidents either at sea or at port.
While unlikely, this is certainly a risk you must consider when importing and exporting your goods. The World Shipping Council, in their 2020 Report, estimated that 1,382 containers are lost at sea every year on average.
Over the past couple of years, we’ve seen a surprising uptick in the number of marine incidents ranging from cargo losses and theft to containers lost at sea. It’s therefore vital that you’re prepared to deal with these incidents before they happen.
Below, we’ll outline everything you need to know about what happens if your cargo goes overboard (and the 4 ways you can prepare for that risk).
Containers overboard: maritime incidents of the 2020s
At the end of last year in November 2020, 1,816 containers fell off the One APUS including 64 containers loaded with dangerous goods.
The vessel had been travelling from China to California when it hit wind speeds of around 13-18 miles per hour. The weather led to a huge stack collapse and the master was forced to abort the voyage altogether.
The process of cleaning up the containers took several months, with the vessel finally leaving Kobe, Japan in March 2021. Insurance claims were estimated to exceed up to $50 million.
X-Press Pearl Fire
In May 2021, the container ship X-Press Pearl caught fire off the coast of Sri Lanka and burnt for 12 days, before finally sinking in the beginning of June. The incident has been called the worst marine ecological disaster that’s ever faced Sri Lanka.
The vessel had been carrying a shipment of around 1,486 containers and 193 items – including 325 metric tonnes of fuel and about 25 tonnes of nitric acid.
The vessel was en route from Hazira Port in India to Colombo Port, when it burst into flames approximately 9.5 nautical miles away from Sir Lanka’s Port.
All goods on board the X-Press Pearl have been completely lost, with a large-scale salvage mission underway.
The incident will no doubt give rise to a hefty insurance claim, as the Sri Lankan Government has already put forward a US$50 million claim against the owners of the vessel.
It’s also been estimated that cargo loss could skyrocket up to the $30 or $50 million mark, based on the vessel’s container capacity of 2,700 and the assumption that each contained between $15,000 to $20,000 worth of goods.
Ever Given Suez Canal blockage
In March 2021, trade at the Suez Canal came to a grinding halt as the Ever Given, one of the largest container ships in the world, ran aground and caused delays for hundreds of ships.
A colossal salvage operation ensued, finally resulting in the vessel re-floating after a week. The Suez Canal Authority (SCA) demanded nearly a billion dollars in compensation ($916 million), although this was eventually reduced to $550 million. In April, general average was called (more on what that means below).
The SCA took dramatic steps and arrested the vessel, leading the Ever Given’s insurer (UK P&I Club) to lodge an appeal before the Egyptian courts.
A hearing was held at Ismailia Economic Court on Saturday May 22nd, where recordings were presented showing disagreement between SCA pilots and its control center over permitting the ship to enter the canal in the first place (despite poor weather conditions).
Lawyers on behalf of the vessels’ owner argued that the ship should have been accompanied by at least two tugboats, suitable for the ship’s size, but that that never happened. They also argued that the work to refloat the vessel was not a ‘salvage operation’, but one of the duties of the SCA according to the traffic contract (so SCA could not seek a compensation for such an operation).
The owner of the vessel Shoei Kisen claimed $100,000 in initial compensation for the losses related to the detention of the vessel, but the SCA denied being at fault and reasserted that the responsibility for the vessel’s grounding lays with the ship’s captain alone.
But an agreement was finally reached. The Ever Given was allowed to leave the Suez Canal in July 2021. The details of the agreement, however, remain confidential.
In a TV interview the SCA had suggested that they could accept a reduced sum of $550 million and that a deposit of $200 million could be enough to release the ship with the rest payable separately. But the final details agreed upon remain unknown.
If your cargo is in a marine incident, what happens next?
You’ve now read some of the most high-profile cases of the past couple of years – but a lot of them are dramatic.
In fact, something as drastic as thousands of containers falling overboard couldn’t possibly affect your shipment.
Well, here’s the thing – it can.
And below, we’ll outline exactly what happens next of your cargo is involved in one of these marine incidents.
Depending on the circumstances, your cargo may be held for long periods of time. Even if your cargo wasn’t directly involved in the incident, your cargo may be stuck for a long period of time.
Take the Ever Given incident, for example. As the blockage was ongoing, Maersk announced that they had “near 50 vessels delayed for a full week or more due to the Suez blockage, either waiting at the Canal or being redirected South of Africa.”
They were completely upfront: “We urge our customers not to think that the situation is resolved and advise you to prioritise the most urgent/critical goods to be shipped first due to the foreseeable limitations in the weeks to come.”
Worse – if your cargo is involved in a marine incident, your cargo could be completely destroyed.
Case in point: the Gulf Livestock 1 incident.
In September 2020, the Gulf Livestock 1 was a livestock carrier en route from New Zealand to China, carrying 5,867 live cattle on board.
The cattle was being exported by the Australia-based company Australasian Global Exports, which owns a number of quarantine facilities in China and has its business focus on exporting live animals.
But tragically, off south-western Japan, the ship got caught in the powerful Typhoon Maysak and capsized. Dozens of crew members still remain missing. Three survivors were rescued, and one passed away.
Dozens of the cattle were found dead in the sea.
If general average is declared on a loss, that means that you as a cargo owner will be responsible for losses suffered by other people’s cargo.
Even if your cargo doesn’t actually suffer damage.
General average really does mean “general loss” – and it means that both the vessel owners and the cargo owners contribute to the losses incurred as a result of loss or damage suffered by cargo.
This may at first sound unfair – why should you pay for someone else’s loss? But it’s an ancient concept and has been recognised by maritime law for hundreds of years.
Basically, it requires that all stakeholders share the loss proportionally if an emergency requires a ‘voluntary’ sacrifice necessary to save the ship and its cargo (in order to prevent a greater danger from materialising).
Because “he who enjoys the benefit ought also to bear the burden”.
In Australia, section 72(2) of the Marine Insurance Act 1909 reads:
There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure.
And as the Federal Court of Australia said:
The right to contribution in general average arises because the property of one co-adventurer to a maritime adventure has been sacrificed in order to preserve the property of all other co-adventurers.
So, basically, if there are losses caused by extraordinary sacrifices made to preserve a ship and cargo, that comes within general average. Those losses must be borne proportionately by parties like vessel and cargo owners.
4 ways to prepare for marine incidents (and your containers falling into the sea)
As outlined above, there are huge risks when shipping containers overseas whether that be your containers falling over, being destroyed in a fire, or suffering significant delay if a vessel is run aground.
But there’s no need to worry.
There are three effective ways you can put in place right now to prepare for the worst.
1. Get insurance
The best thing you can do for your business if you ship goods overseas is to take out a robust marine insurance policy.
Marine insurance (also called transit insurance) is critical to mitigate exposure to general average claims and to cover your losses in the case of a maritime incident.
These policies are especially designed to minimise a policyholder’s loss in the event of accident, including if your containers fall overboard and are lost at sea. They also cover a whole range of other risks, such as if your cargo is stolen. It therefore allows you to be compensated in the event of an accident.
At ICE, we offer thorough marine insurance policies to cover the loss, damage or theft of your goods while in transit – be sure that we’ve got your back every step of the way.
2. Allow for delays
It is critical that you factor in contingencies such as potential delays when planning your shipping timeline.
In the especially unpredictable world of international trade during COVID-19, ocean freight timelines can change all the time. This is due to a whole raft of actors like:
- Cut off times being missed
- Blank sailings (when a voyage is cancelled)
- Lack of equipment
- Containers being “rolled” (i.e. when a cargo is not loaded because a vessel ran out of room)
- Delays at transhipment ports (which you can read more about here)
- Customs delays
It’s critical to build a buffer when factoring these changing timelines into your consignment. We recommend permitting at the very least a week at the beginning and at the end of the voyage when shipping by sea freight. That way, you’ll be giving yourself a two-week buffer to allow for the unexpected.
3. Make the proper declarations
Declare your cargo correctly so that vessels can properly store your cargo.
If you make a declaration with the incorrect Verified Gross Mass (VGM), for example, the mass of your container can’t be accurately verified. If this happens, the stowage of containers onboard of a vessel will be skewed as heavier containers may be stored on top of light containers.
The result will ultimately be the collapse of a container stack, and incidents like the ONE APUS as discussed above.
Do your part to reduce incidents at sea:
- Correctly and accurately declare your container weight
- Correctly and accurately declare dangerous goods
- Correctly and accurately declare all the items you are shipping and ensure they are packed securely for transport (also, make sure your cargo is labelled correctly!)
4. Use an expert freight forwarder
The world of importing and exporting can get frustrating and complicated if you’re not sure how to respond to the choppy waters of shipping delays (pun intended).
Communication to all stakeholders involved (your broker, your carrier, your supplier and your overseas partners) is all absolutely essentially to ensure a successful consignment.
At ICE, we take a completely direct approach with all our clients (and call or email as per their preference).
We also have a suite of automated reports available so you can keep up to date with your shipment – but in the event of a major incident, you’ll want to hear firsthand as soon as you are impacted.
We have outstanding connections with stakeholders across the globe, and an incredibly fast response team if your shipment runs into any problems.
So you can be sure your cargo is the hands of completely committed, highly experienced and well-connected professionals that’s got your shipment handled.
If you’re eager to learn more about keeping your cargo safe, get in touch with us today or leave a comment below.