Let the shippers be aware!

By Tom Shinya, Deputy General Manager, Marine Underwriting Dept. Tokio Marine & Nichido Fire Insurance Co. Ltd. and IUMI Cargo Committee member

A shipper’s responsibility and liability regarding the disclosure of dangerous goods has been focused on following certain recent incidents and accordingly so has a cargo owner’s liability insurance. The incidents are somewhat noteworthy from an underwriter’s perspective as well.

The MSC Flaminia case decision in September 2018 estimated a USD 280 million liability was caused by the explosion in 2012. Although not finalised (due to appeal), this case illustrates the possibility of a significant amount of liability that a shipper and the NVOCC may face. In this case, the US district court determined that the shipper and the NVOCC breached the legal duty of warning as well as the contract. It was found that the chemical cargo was already at risk due to negligence before being loaded on the vessel although not reported as such. Going through the judicial document of the case, it appears that the essential elements that shaped the negligence were simple clerical omissions that could have easily been avoided. Although the SOLAS, IMDG code etc., stipulate the shipper’s duties of disclosure, there may be room to consider implementing stronger measures, when such loose clerical work turn into such a catastrophic incident. The point is, these catastrophic losses are not caused by acts of God but by human error, which means they are “avoidable”.

This brings us to a shipper’s responsibility of disclosure on dangerous goods - “air cargo” which any cargo underwriter would write today. There is a new international regulation, soon to be implemented, that provides a framework for ‘competency-based training’. The ICAO (International Civil Aviation Organization) has come up with this for the parties involved in dangerous goods shipping including “air freight forwarders” and “shippers”. Under this regulation, any shipper will be required to train their employees in the proper handling of dangerous goods which includes identifying, classifying, packing, marking, labelling and documenting subject to international regulations.

This global initiative will be implemented 1 January 2021, which means that there will soon be a “global” movement in shippers training their employees in the handling of dangerous goods in an appropriate manner. This begs the question of why not take advantage of this on the ocean cargo side as well? Like air cargo, training could be one way, but considering the relatively wide ranged shippers on the ocean side, an inspection and penalty type of approach could also be an option, especially when there are said to be certain amount of “intentional” misdeclarations to avoid extra freight. For example, during the very recent fire incident on the KMTC Hong Kong hundreds of people were effected and ended up in hospital; and it has been reported that there were deliberately concealed chemicals within the containers. Facing such major incidents, I believe taking proactive measures for further prevention is needed rather than hoping for a better year. Especially, when these huge container vessels are becoming the new norm.