Mr. Chan is the owner of a metal recycling company. His major business is to collect recycled metal which is then sold to collectors in China. Last month, he transported two containers of recycled metal to China by sea as usual. However, unfortunately, despite the calm sea voyage, one of the containers exploded and some other cargoes were also affected by fire caused by the explosion.

After the incident, Mr. Chan filed his claim with his cargo insurer for damages, but it was rejected. Why did Mr. Chan’s insurer decline his claim?

There are various reasons why cargo might explode and be damaged. For the above example, cargo of scrap metal for recycling, one of the reasons for the explosion could be mishandling of the recycled metal, such as leaving gas residue in lighters or fuel residue in motors etc. Damage by such causes is excluded from cargo insurance policy.

Although self-explosion of the above example is excluded by cargo insurance and the value of recycled metal is not high, it is still suggested to take out cargo insurance at the minimum cover of Clause C. This is because if a case of “General Average” should happen, the cargo owner is still protected by cargo policy in “Contribution”.

Learn more about our insurance plans:
Cargo
Pleasure Craft

The United States and European Union regulation to prohibit trade with Iran was promulgated and enforced on 27 October 2010. At the same time, a clause named “Sanction Limitation and Exclusion Clause” was drafted and implemented to all marine cargo policies.

According to the new regulations, extensive business activities with Iran are prohibited, including but not limited to transportation of certain key equipment or technology or provision of financing for key sectors of the oil and gas industry in Iran. Transfer of sums of over EUR10,000 must be notified to the designated competent authorities and transfer of over EUR40,000 requires application for prior authorisation, etc.

In relation to marine insurance, it is commonly excluded by marine treaty reinsurance protection with effect from 1 Jan 2011 which means no marine insurance cover can be offered for shipments to Iran and other sanctioned or prohibited trade countries. Penalties of imprisonment and/or a fine will be imposed for the breach of the regulations.

You may visit the Trade and Industrial Department of Hong Kong SAR for more details about the list of sanctions countries: http://www.tid.gov.hk

It is always useful to understand the trading regulations well when dealing with your clients. It is a win-win situation that you can earn more business and clients can enjoy comprehensive cover. This will not only help you smoothen procedures when clients take out cargo insurance with you, but also reassure them that their cargo is protected.

Learn more about our insurance plans:
Cargo
Pleasure Craft

Earlier this year, a number of anti-government protests erupted in many of the middle and eastern parts of North African countries, including Egypt where the Suez Canal is located. The Suez Canal is a hub for worldwide cargo transport despite being the world’s biggest non-gated canal. If cargo vessels sailing between Europe and Asia do not use the Suez Canal, they will have to spend more time going round the Cape of Good Hope in South Africa. During the anti-government protest in Egypt, the world’s largest marine transport container group closed quite a few facilities within the Suez Canal, including a container terminal. As a result, cargo vessels which had planned to unload in the Suez Canal would now have to resort to alternative measures.

In order to fulfill their contracts and have cargoes sent to their destinations, shipping companies and/or cargo owners may choose to re-route and transport the goods to ports nearby. This may cause transport delays which could result in owners suffering losses. So, will transport delays caused by re-routing due to emergencies be covered by cargo insurance?

According to the Institute Cargo Clauses, any direct or indirect losses caused by cargo delay is considered as an exclusion in cargo insurance. Hence, when cargo owners consider re-routing and unloading cargo in nearby consignee ports due to any emergencies, they must provide a written notice to their insurance company to obtain the company’s consent before such re-routing takes place, or they may discuss extending the coverage of original policy with the insurance company. Under any other circumstances, if the voyage deviates from its original planned route, cargo owners may lose relative cover of the cargo insurance.

Learn more about our insurance plans:
Cargo
Pleasure Craft

The earthquake and tsunami in Japan in 2011 has caused severe radiation leakage which affected worldwide trade and shipping. A Japanese merchant vessel “MOL Presence”, sailing to California, first put into Tokyo then proceeded to Xiamen. Unfortunately, abnormal radiation levels were detected on the deck and on the containers stored on the deck when the vessel entered Xiamen in China’s Fujian Province in the east of the country. As a result, the Chinese authorities refused to allow the vessel to berth at Xiamen and recommended the ship be cleaned before being allowed to offload cargo there.

The ship thus departed Xiamen to undergo a thorough cleaning in Kobe, thereafter departing to Hong Kong where it received permission to berth after passing local testing.

Mainland China has tightened its radiation testing after the serious radiation leakage in Japan. Therefore, cargo owners should take into account any unexpected circumstances that may arise and build in buffers when planning sailing schedules.

In the above case, if the cargo owners foresee a delay in the voyage and expect the transition of goods to exceed the contractual period and/or insurance cover, they should contact their insurance company to negotiate an extension of their cargo insurance policy. For more details regarding duration of cargo insurance cover, please click here.

To further elaborate on the impact of radiation leakage, cargo owners should take note that radiation contamination is a common general exclusion in cargo insurance policy. It is listed under the “Institute radioactive contamination, chemical, biological, bio-chemical and electromagnetic weapons exclusion clause (CL 370)” which states that any loss caused by radiation contamination will not be covered, using specific clause shown below for reference:

Quote:

“…1. In no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from…1.2 the radioactive, toxic, explosive or of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof…”

Learn more about our insurance plans:
Cargo
Pleasure Craft

The Hong Kong Police seized over 20 boxes of arms and ammunition – the collection of a retired correctional staff member, which he was keeping in a public housing unit. The question arises whether the confiscated collection will be covered by property insurance. In fact, it is market practice for property insurance to exclude any loss or damage in consequence of permanent or temporary dispossession of property(ies) resulting from confiscation by any lawfully constituted authority.

This practice can also be applied to cargo insurance. According to Institute Cargo Clauses (A), any loss arising from “capture, seizure, arrest, restraint, or detainment (piracy excepted) and the consequences thereof or any attempt thereat” is excluded from the cargo insurance policy. For instance, if a cargo owner ships chewing gum, which is a banned import, to Singapore and such goods are confiscated by the Singapore authorities, then unfortunately a cargo policy does not cover such losses.

It is crucial for shippers to check carefully whether the cargoes are prohibited or restricted imports to the destination country. Otherwise, owners may suffer loss from confiscation of cargoes. If re-examination of the goods, or re-application for the import licence, are required, cargo owners will need to negotiate for an extension of the cargo insurance with their insurers since the cargoes were held up during the voyage.

All in all, it is recommended that cargo owners do sufficient preparation work to ensure that their goods are allowed to enter the import country. This is especially recommended for medicines, which are more strictly regulated.

Learn more about our insurance plans:
Cargo
Pleasure Craft

Dangerous cargoes are articles or substances which are capable of posing a significant risk to health, safety, property or the environment. If they are not handled properly during shipment, the consequences could be significant.

Today, there is a set of guidelines for transportation of dangerous goods. The International Maritime Organization has developed the International Maritime Dangerous Goods Code to accommodate aspects of marine transport, including matters such as packaging, container traffic and stowage. It classifies dangerous goods into nine categories as follows:

Class 1 – Explosives
Class 2 – Gases
Class 3 – Inflammable (flammable) liquids
Class 4 – Inflammable (flammable) solids or substances
Class 5 – Oxidising substances (agents) and organic peroxides
Class 6 – Poisonous (toxic) and infectious substances
Class 7 – Radioactive materials
Class 8 – Corrosives
Class 9 – Miscellaneous dangerous substances
Dangerous goods should be clearly marked with diamond-shaped signage.

Cargo owners owe a duty of care to their cargoes. They should know clearly the nature of their cargoes and inform their carrier accordingly, so the carrier can handle the cargoes appropriately to avoid accident and/or loss.

Learn more about our insurance plans:
Cargo
Pleasure Craft

The implementation of a Road Cargo System (ROCARS) enables the freight industry stakeholders to submit electronic advanced cargo information to the Customs and Excise Department (C&ED) before the cargo consignment enters or exits Hong Kong. Then, the trucker will make use of the On-Board Trucker Information System (OBTIS) to group the custom cargo reference number of the cargo consignment and his vehicle’s reference number, and send to C&ED through ROCARS. This way, C&ED can determine whether a truck needs to be inspected in advance, and all cross boundary trucks can enjoy seamless custom clearance at the land boundary. 

As well as providing a faster track of clearance, electronic custom clearance can also reduce risk of loss of cargoes during transportation. OBTIS utilises the global positioning service (GPS) where truck routes and locations can be tracked. It also builds up a real-time connection platform with all stakeholders such as forwarding agents, warehouses and customs agencies, so that operation transparencies can be enhanced, and cargo owners can better keep track of the transportation status of their cargoes. 

Cargo owners may consider using electronic custom clearance, applying ROCARS and OBTIS, to ensure the truck will not be diverted from designated routes when transporting valuables to reduce the risk of loss. Cargo owners can also opt to take out cargo insurance if they want to enjoy extra protection to cover the cargoes from damage or loss. In this way, cargo owners can focus on growing their business without worrying about transportation logistics.

Learn more about our insurance plans:
Cargo
Pleasure Craft

“War Perils” refer to perils that are caused by hostile acts by authorities using political or executive powers. Since “War Perils” can embrace many forms of loss, all insurance contracts covering war risk will specify the perils covered and incorporate exclusion clauses to ensure the cover can be clearly understood.

A policy insuring against war perils is called War Risk Insurance and is usually issued as a companion to a Marine Cargo Insurance policy. Such companion policies generally cover specified “War Perils” as illustrated below:

1.1 War, civil war, revolution, rebellion, insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power
1.2 Capture, seizure, arrest, restraint or detainment, arising from risks covered under 1.1 above, and the consequences thereof or any attempt thereat
1.3 Derelict, mines, torpedoes, bombs or other derelict weapons of war

It also covers general salvage charges incurred to avoid loss from a risk covered under these clauses.

However, perils such as terrorist activities, riots or civil commotions are not included within the term “War Perils”.

To safeguard shipments from risks such as war, civil wars and rebellion, etc. it is recommended to take out War Risk Insurance as most Marine Cargo Insurance policies do not cover goods against these perils. War Risk Insurance usually comes with a separate premium charge which is determined by the political situation of the final destination and therefore may vary shipment by shipment.

Learn more about our insurance plans:
Cargo
Pleasure Craft

Similar to “War Perils”, insurers exclude “Strike Perils” in Marine Cargo Insurance, and a companion policy to a Marine Cargo Insurance policy will usually be required at a separate premium to cover “Strike Perils”. The companion Strike Risk insurance will cover loss of, or damage to, the insured cargo caused by:

1.1 Strikers, locked-out workers, or persons taking part in labour disturbances, riots or civil commotions
1.2 Any terrorist or any person acting from a political motive

Also:

2. General average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice incurred to avoid, or in connection with, the avoidance of loss from a risk covered under these clauses.

“War Perils” and “Strike Perils” are covered by different companion policies to Marine Cargo Insurance as both risks cannot be included in the same set of clauses as the coverage is effective over different durations. The cover of war risk insurance takes effect when insured cargo is loaded onto an oversea vessel and terminates when it is discharged from an oversea vessel at the final port. Whereas strike risk insurance cover starts when the insured cargo leaves the warehouse, continues during the ordinary course of transit, and terminates on delivery to the final warehouse.

Considering the different durations and risk types, cargo owners are advised to take out both war risk and strike risk insurance to ensure comprehensive protection of their shipments.

Learn more about our insurance plans:
Cargo
Pleasure Craft

Jettison refers to throwing property overboard to lighten a vessel in times of potential danger that threatens the safety of the vessel or crew members. In general, when cargo is sacrificed in saving a common adventure, it will probably be allowed in general average and will be considered as a general average sacrifice with the loss being shared by ship owners and cargo owners (including owners of different cargos). Whereas for jettison of deck cargo, the York-Antwerp Rules 1994 give the following explanation:

“No jettison of cargo shall be made good as general average, unless such cargo is carried in accordance with the recognised custom of the trade.”

This means that even where there is a general average act but the jettisoned cargo is not of a type customarily carried on deck (i.e. not livestock, logs, manufacturing goods and equipment, oil tanks or any dangerous goods, etc.) the cargo owner will have no claim under the York-Antwerp Rules 1994 to a general average contribution from other parties to the adventure, and will be liable for the loss of goods by himself.

In difficult times during an adventure, deck cargo will often be sacrificed and thrown overboard first because of its relatively convenient location. To help prevent cargo owners from suffering possible losses from jettison cargo, MSIG recommends that every cargo owner carefully checks the storage method and location of any cargo he is transporting. Since storage location will affect his insurer’s risk assessment, if the cargo is to be shipped on deck, cargo owners should ensure that they declare this to their insurer, and make sure the insurer has agreed to the goods being shipped on deck. Cargo owners should also ensure that their cargo policy covers jettison as an insured peril.

Learn more about our insurance plans:
Cargo
Pleasure Craft