Earlier this month, a fire broke out on the Hapag-Lloyd vessel Yantian Express as it departed from the Canadian port of Halifax. Attempts to extinguish the fire were immediate, but weather hampered the efforts. Now, Hapag-Lloyd has formally declared General Average on its fire-stricken vessel and has diverted the vessel to the Bahamas for salvage purposes. General Average is a principle of maritime law with ancient origins, requiring all parties with cargo on the vessel to proportionally contribute to the total loss based on the voluntary sacrificed cargo and vessel’s value. Shippers who did not purchase cargo insurance for their cargo would be held responsible for payment to the ocean carrier.
For example, if the vessel is valued at $100 million and the cargo is valued at $150 million, the total value of the voyage would be $250 million. If the cargo loss and vessel repairs cost $90 million (36 percent of the voyage value) and your cargo was valued at $10 million, you would have to contribute $3.6 million (36 percent of the value of your cargo).
This unexpected cost could be detrimental to your business. Therefore, it is important to make sure you avoid cargo catastrophe. Here is how you can protect your cargo:
1. Purchase Cargo Insurance
Cargo insurance protects shippers’ financial investments during ocean, air, rail or truck transportation. It provides compensation for shippers in the case of natural disasters, fires, vessel collisions, cargo theft or mishandling by carriers.
If cargo is insured, the process to recover the cost of damaged cargo is straightforward. The insurance company will manage the claim process on the shipper’s behalf, dealing with the various transportation parties involved. The insurance provider would do their best to resolve the loss as quickly and efficiently as possible, minimizing the direct involvement of the client with the carriers.
2. Know Your Coverage
Insurance responsibility should always be outlined within the terms of sale between a buyer and seller. The terms of sale along with INCOTERMS will provide the details of when and where responsibility is transferred between international buyers and sellers.
When securing marine insurance, always insure the value of your freight plus an additional 10 percent to cover incidental costs in the event of a loss. Choose ALL-RISK coverage, which provides complete coverage in the case of an event such as the Yantian Express ship fire, as well as loss, theft, and damage. This coverage can help give the shipper extra peace of mind.
3. Have A Plan For Damaged Cargo
In the event of cargo damage, you will want to make sure you have a contingency plan in place. A major component of this plan should be securing appropriate cargo insurance from the shipment’s origin to the destination.
Fortunately, the team at Ascent Global Logistics is able to help you secure cargo insurance. We offer competitive rates, high-risk coverage and special quotes for large volume shippers. If you would like to purchase cargo insurance, please contact us or speak directly with your Ascent Global Logistics representative.