CARGO LOSS PREVENTION

Introduction

A  producer or the manufacturer of  the goods  will always  be delighted  for safe delivery of the goods to his customer within the stipulated time period.  It is easy to believe  that arranging for transportation of the cargo and obtaining insurance cover for the same will complete the responsibilities of the producer or the manufacturer of the goods, but when serious problem occurs during transportation of the goods, there may  be an adverse repercussions on the producer/manufacturer of the goods due to loss of reputation in the competitive market, delay in completion of any project, failure to comply with the contractual liability for late delivery, dissatisfaction  to customers and loss of business in some cases. All these losses may not be fully compensated but insurance of the goods in transit will compensate the loss to a great extent, provided  the cargo in transit  was physically damaged  due to the perils covered under the policy. However, cargo risk management is essential to eliminate the risk during transit. It is our experience that between 70% and 80% of cargo losses can  be  avoided  by proper risk management.

Cargo risk management  should be adopted considering the different kinds of hazardous encountered during transit including nature of the commodity, packing, mode of transportation, types of vehicles engaged, routing and weather condition of the country where the cargo will be intended to be despatched. With a view to achieving loss minimisation, the following aspects should be considered

Packing

Packing should withstand the normal stress and strain of transit. The packing materials used for packing of cargo should be sufficient to take load of the cargo. The packing should be done in accordance with the nature and shape of the commodity and to ensure suitable cushioning, fastening or blocking within the packing cases so that contains remain stable always during transit. An improper packing may cause squashing, dispersal, breakage, bursting or tearing of bags and loss of contents.  An improper handling, stowage and transit cause approximately 40% of all cargo losses. If loss or damage to cargo is caused due to  insufficiency of packing, the underwriters may avoid their liability under the policy, if  loss of or damage to cargo was caused solely due to insufficiency of packing as referred to Clause 4.3 of Institute Cargo Clauses.

Proper marking

The packages should be marked to identify the same. Marks should be legible and indelible. In some cases, it will be in order  to use standard initials and pictograms to facilitate identification of cargo, the hazards related thereto and the procedure for handling and storage/stowage instructions. It is important to note that proper marking will enable the Carrier to deliver the packages to the right consignees   The  sides of the packages reserved for shipping marks should be marked with information for transportation of goods or handling only. Any attractive marking on the packages should be avoided to prevent theft of cargo.

 

Stuffing of cargo into the containers

The shipper should select structurally sound container before stuffing the goods. The wear and tear of the containers may cause damage to the cargo due to ingress of  water  through  holes/cracks of the container. A container may also be severely damaged due to heavy pressure of cargo on the inner faces of the container during road, rail and marine transit due to the effects of ship’s motions, and of acceleration, deceleration, sudden breaking, bumps, etc. associated with road and rail transportation. The damage to container may cause due to mechanical damage arising out of improper handling and loading methods or from the use of unsuitable mechanical handling equipment.

It is to be ensured that all the sides of the containers are free from holes, dents, cracks and corrosion, and the doors of all the containers are watertight. The inside of the container should be adequately cleaned and free from odour. The condition of  the interior fittings for securing the stow of the goods and top and bottom corner castings for lifting and securing the container  should be  in order.

There are various types of containers suitable for carriage of the goods. The containers should be well ventilated considering the nature of the goods. If  perishable goods like butter, cheese, chocolate etc..are stuffed, the goods are likely to be damaged by odour. The wall of the containers should be cleaned and washed prior to stuffing

Selection of Carriers (Vessel/Vehicle)

The factors relating to vessel and their owners/ charterers/operators should be considered as a matter of underwriting prudence. The majority of the world’s merchant ships are engaged in transporting cargo on a commercial basis from one place to another. The types of ship involved in voyages may range in size from the smallest coasters to oil tankers with cargo capacity approaching half a million tonnes. In every case, the loading, distribution, stowage, security and monitoring of the cargo deserve prime importance to the safety of the ship including her personnel and equipment. Improper stowage of cargo may cause a ship to be unseaworthy where cargo on board is secured inadequately. Hence, a ship must be seaworthy and cargo-worthy at the commencement of every voyage.

The underwriters should not encourage shipment of goods by an excessively old vessel to prevent serious casualty due to structural failure in a seaway.

Storage of cargo

Storage losses occur due to inadequate storage places and poor storage facilities. In some cases, inadequate fire protection equipments and disorganised systems to deal with the fire and other emergencies may cause severe losses. In few cases the consequential losses are higher than direct losses. The occurrence of fire in Kolkata Bagri market in the recent past destroyed many shops before the fire was extinguished due to poor storage, inadequate spaces and non availability of instant fire fighting equipments therein. A major part of the safety of a store depends on the degree of foresight that goes into the original planning of the lay out. Storage places should provide sufficient space to store various sizes and weights of the cargo to allow free movement of the people and material handling equipment.

 

Stacking of cargo

Cargo should be stacked on level surfaces like cement floor. However, it will be in order to keep the cargo on  a wooden platform or on raised shelves, pallets or dunnage. Although, it is not practically possible to examine the storage places in all cases while writing a risk  but the policy may be issued with a condition to keep the cargo on a certain height to avoid water damage especially during monsoon period.

The height of the stacks will depend on the base area of the stack, strength of the individual packages so that the stacks will not be collapsed alongwith the cargo due to faulty stacking.

The fire fighting equipments should be adequately installed depending on the size of the storage places and it will be in order to examine all electrical connections of the storage places to prevent fire due to short circuiting.

 
Segregation of Commodity

When intermediate storage cover is granted under marine policy for the purpose of allocation, distribution and processing, it is essential for the go-down keeper to segregate the commodities according to the character of the commodities. Few commodities may be hazardous in nature whereas some of the commodities may be non hazardous which may lead to adverse reaction when all types of goods are stored together. The storage in the Carrier’s/C&F Agent’s godown/ Bonded warehouse may be vulnerable to fire  since mixed commodities like diesel, kerosene, cotton, food stuffs, agro products etc. will be stored therein without proper segregation. If the cargoes stored in the godown are incompatible with one another, it may produce disastrous result. The following rules should be maintained for safe storage operation:

  • To supervise condition of the godown or place of storage by the employees of the godown once in a day to ascertain the condition of the godown and the cargo stored therein
  • To remove waste materials and damage goods accumulated in the godown or place of storage
  • To avoid smoking and cooking in the godown or place of storage
  • To create enough space for movement of the traffic inside the godown or place of storage
  • To keep all hazardous, nonhazardous, extra hazardous, combustible, non combustible goods  separately with adequate protection
  • To examine all electrical wiring and switch board inside the godown or place of storage, if any, periodically
  • To examine fire fighting equipment monthly and damaged hand extinguishers, hoses, hydrants should be replaced
  • To give proper training to the warehouse and storage personnel to discharge fire extinguishers properly on fire.
  • To maintain 24 hours close vigilance to prevent occurrence of  fire and  theft of cargo

 

Supervised loading and discharge

Arrangement for supervised loading and discharge from the vessel/ land conveyance should be done for sensitive, delicate and sophisticated cargoes by the surveyors nominated by the underwriters. Supervised loading/discharge of bulk and heavy machineries should be done carefully to avoid dropping of cargo from the sling.

 

Prompt clearance of cargo from docks

In order to release the cargo from dock, documents should be filed with the Customs under ‘prior entry’ i.e. 15 days before the arrival of the vessel. Customs formalities and assessment of duty should be completed before hand so that clearance of the cargo will be effected soon after discharge from the vessel. The early clearance of cargo will prevent the chances of theft, pilferage, fire or water damage due to undue storage at port and the importers can avoid payment of heavy demurrage to Port Authorities.

 

Conclusion

Cargo losses may be accidental and beyond specific human control. However, most cargo losses are preventable through proper care, risk analysis and safe handling. In fact, management of pure risks may be done either be through elimination of the risks or minimisation. It is possible to reduce losses through risk analysis and institution of systems for loss prevention. The loss prevention measures should be an obligation to society.


Author

Sumon Ganguly

Marine Insurance- Consultant

Salasar Services ( Insurance Brokers) Pvt. Ltd

Axiom Insurance Brokers Pvt Ltd


Published : The Insurance Times, November 2018