844 Piracy Attacks on Cargo Vessels 2004 -2006 $16bn Year in Pirated Cargo
273 Hurricanes Hit USA 1851-2005 92 Were Major Category 3,4 & 5
GENERAL AVERAGE Ancient principle of equity in which all parties in a sea adventure (ship owner, cargo owner, and freight) proportionately share losses resulting from a voluntary and successful sacrifice of part of the ship or cargo to save the whole adventure from an impending peril, or extraordinary expenses necessarily incurred for the joint benefit of ship and cargo.
LOSS of BUSINESS INCOME : IMPORTERS NIGHTMARE A Property Insurance Policy Doesn’t Cover Loss of Business Income for Cargo Claims What if these were Yours’ at Peak Season? $30M
Sampling of Regulatory Risks Seizures for Failure to Timely File Advance Notice Seizure for non-Compliance with Wood Packaging Demand for Redelivery of Tainted or Suspect Product (FDA, AGR,…) Anti-Dumping Duty Craze & Byrd Amendment
The Ugly Truth About Carrier Financial Responsibility
Ocean Carrier/NVOCC Subject to terms of Carriage Of Goods by Sea Act (COGSA) $500 per Customary Shipping Unit as described on OBL Unit can be the container, a pallet, a crate, carton
Ocean carriers & NVOCC’s have 17 legal reasons not to pay 1.Act,neglect,default 2.Fire 3.Perils of the sea 4.Act of God 5.Act of War 6.Act of public enemies 7.Government seizure 8.Quarantine 9.Act or omission of shipper 10.Strike,lockouts, or stoppages 11.Riots & Civil commotions 12.General Average 13.Inherent Vice 14.Poor Packing 15.Poor Marks 16.Latent defects 17.Loss/damage outside control of carrier
Most Typical Carrier Defenses “ We didn’t pack it so we can’t confirm the number of pieces” “You can’t prove that damage happened when cargo was in our care,custody & control.
International Air & Indirect Air Carriers Subject to terms of the “Warsaw Convention” $9.07 pound/$20 Kilo or 17 SDR Kilo if Montreal Protocol ($23.15 kilo)
What About Distribution Centers? Warehouseman’s Terms & Conditions Rule Unless Changed by Contract Liability Typically a multiple of base rate 3PL’s and Forwarding Operations Often Limit Liability on Warehouse Receipts
Freight Forwarder & Customs Broker Liability Unless acting as a carrier and issuing a freight bill, 3PL’s & forwarders typically are not liable for loss or damage Customs Brokers use Terms & Conditions of service that Limit Their Liability to A Maximum of $50 per shipment
Action Steps A. Identify Risks in Supply Chain Where You Have Financial Interest B. Establish Clear Contracts with Buyers & Suppliers (Don’t Assume Incoterms Address It) C. If you Import, Control the Insurance
Action Steps Continued…/ D. If You Transfer Risk to Insurer 1.Protect Profits, Insure Selling Price 2.Raise Limits to Anticipate Peak Accumulation & Lost Profit 3.Move Inventory Coverage to Cargo Policy – Flood, Quake,Profit
Action Steps Continued…/ D. If You Transfer Risk to Insurer.. 4. Add Airfreight Replacement 5. Cover Extremes in Temperature 6. Contingent Financial Interest 7. Unexplained Shortages 8. Payment on Account – Disputes 9. Your Financial Interest Admitted regardless of Incoterms