Episode Transcript
[00:00:03] Speaker A: Hello, welcome to the Freight Buyers Club. I'm Mike King. We're here at London International Shipping Week where I'm joined by Chris Grievison who's the managing partner of Wittburg Rhine.
We're hovering is London officers. Hello Chris. Welcome Mike.
[00:00:18] Speaker B: Really good to be with you.
[00:00:20] Speaker A: We're going to talk to Chris in a moment but just a bit of housekeeping. This episode is is supported by Antigos Cloud who help freight forwarders maximize their profitability. Please do like subscrib follow so we can continue offering this content for free Now Chris, today you've been hosting a panel on the dangers for cargo owners of container shipping fires. Can you tell me how that the, the main points to take away from this conference if, if you're a shipper or you're a forwarder?
[00:00:49] Speaker B: Well, it's certainly a big problem. I mean we had a lot of statistics today, 500 plus vessel fires in the last 12 months.
1 I think that the most telling things about that is that it's 20% up on the previous 12 months. There's been a number of what you would think of as serious fires involving container ships. Maybe 12 years ago you were seeing the suggestion that was happening every 90 days. Now the frequency's up to every 60 days.
So there is a big issue.
What is the main cause of that? I think the main cause of that is obviously cargo catching fire. But why does that cargo catch fire? The answer is probably because it's either not what it says it is, so maybe it's not being carried correctly. So heat sensitive cargoes being carried in incorrect places might be getting heated by bunker tanks or something like that. Other issues are obviously cargoes that are not necessarily being packed correctly and then the stow is collapsing that might cause leakage of chemicals, it might cause batteries to all sort of fall in on each other and then you can start a heating chain, something like that.
A misdeclaration generally perhaps people putting cargoes on board ships that simply shouldn't be there.
[00:02:06] Speaker A: Do you mean fraud by that?
[00:02:08] Speaker B: Well, fraud is a, is a heavy word for a lawyer but I mean it's people trying to avoid paying $100, $200 a surcharge on a particular container because you probably most of the big grown up lines are going to charge you that for bringing DG cargo on board. There's their vessel. And so yeah, I mean it is, it is a fraud of sorts. But yeah, it's probably people just trying to cut a corner and that's how they would see it right rather than fraud. But it does have a massive impact and ultimately, I think some of your members or your readers, people who, particularly those who've got insurance or they're very large and so they've got some real worth behind them, if they happen to have handled a box and they happen to be someone who is mentioned somewhere in the contractual chain, they're in for putting that box on a vessel and it catches fire, then probably people like me are going to come looking for them at some point and try to get back some of the money that all of the underwriters who underwrite the ship or the underwrite the charters have paid out on the these claims because they're tens, if not hundreds of millions of dollars each time. So, yeah, it's a. It's a big issue for everyone in the industry and it can come back even to the sort of smallest of operators in the freight chain.
[00:03:22] Speaker A: Why, why have these incidents been increasing, though, in frequency? Did you pinpoint that today?
[00:03:28] Speaker B: Well, I think people pointed towards a lot of potential reasons for that. Whether we know the exact reasons, I'm not entirely sure. I mean, frequency has increased in terms of big incidents. Well, we can see it in terms of all fires as well, so there must be some underlying reason for that. But I suspect one of the reasons for the being more big incidents is just because the size of the ships have got much, much bigger. So if you have a fire and it takes hold of a large vessel, it's going to be much, much more noticeable than on a smaller vessel. There may be other issues as well, which is that, you know, over time, China has become the world's manufacturing workshop. And I have yet to be involved in one of these cases where a box catches fire where the goods didn't come from China. But then having said that, most of the boxes that go from the UK back towards the Far east are either empty or they're carrying waste product for recycling that will probably then come back again as new manufactured goods. So price of container freight, as you know, has gone up quite a lot in recent years.
Maybe that means that people are trying to cut corners.
Maybe there are issues like that in manufacturing.
It's not entirely clear, but I think it's the same root causes and maybe it's just, you know, more volume of shipping and more goods being moved around the planet that means that there are more incidents.
[00:04:55] Speaker A: I'll come back to who pays exactly, and how that affects freighter forwarders and shippers, particularly, in a second. But the World Shipping Council has Launched a cargo screening booking AI tool.
Is this the type of initiative that helps address some of this?
[00:05:10] Speaker B: Yeah, definitely. At the cargo screening stage that's really, really important. I think one of the things we talked about today was that the biggest lines are very, very concentrated on safety. They have very serious big departments, you know, who sit in places like Singapore where they are between the alliances, they're working very carefully on looking at anything that's booked in as a dangerous cargo. They have experts within these centers who are looking at that all of the time and they're putting into place preventative measures now that you perhaps you wouldn't see five, 10 years ago. So we know that a number of the lines that we've worked with are very keen on Vanning survey. So you say you want to put a DG on my vessel and I'm one of the big lines, then I'll say that's fine. But I need a Vanning survey. So I can actually see what's been loaded into that box, how it's been loaded into that box, how it's lashed and dunnage within, within that box. I know that it's not all going to fall over because as soon as the box comes on a chassis and it's delivered to a port, you know, to a, to a terminal, which is going to probably be a port, but it might be delivered to inland concentration center or something like that. It's really difficult for any port operator, for any liner operators to start checking what's in the boxes. Just such volume, you know. And when a ship's loading in port, it can be thousands of boxes are loaded literally within a 24 hour period. So nobody has the time to check that then. So the lines are pushing right back to the beginning of the, of the freight journey to see what's happening. And I think that is making a difference. But I think we also identified in the conference today that you have the big boys doing that, but it's always possible, you know, if you've got something that you happen to shift a lot of, something that's probably a little bit noxious, you don't want to pay too much money or all the big boys have said this is a bit dangerous to carry this, we don't really want it. You can find ways in through smaller operators, through smaller ships where perhaps no one's going to check this stuff quite so thoroughly, then it gets feeded into a bigger vessel and so it can still be on a bigger vessel and cause a fire later. So yeah, it's because it's within the industry rather than at a regulatory level. I would say the big boys are policing themselves and adopting best practice. But yeah, there are still people that don't want to pay for things because they operate on small margins. And that's, you know, how the world economy works.
[00:07:33] Speaker A: Right, of course, of course. From a media perspective. Right. So this is how, say some of our YouTube watchers might have seen this. They might have seen the dramatic fire, you know, fire on a container that's, that's spread right across the ship and that the story would follow it, follow a narrative as anyone being, as anyone be of the crew safe, who rescued them, what happened to the ship, what's happening to the environment.
And then after that things can get lost a little bit in the ether. As time drags on, where did the ship goes? I think this ties into who pays. So who does pays? Obviously it's the insurance and other parties.
But then after that, how freight forwarders and shippers exposed this ties in with general average. Maybe, maybe we can start with general average and you can maybe explain how that might affect a forward. They didn't really understand what this was.
[00:08:22] Speaker B: Okay, so general average is a very ancient concept. It's back to the days of the, the old sailing ships. When the ship went off around the world, the ship owner had no way of communicating with the ship. And in order to make it sort of a worthwhile exercise for people to be ship owners, they didn't end up buying or bearing all of the cost of when things go wrong. So and the same thing was a little bit about all the people who put goods on the vessel to be taken to the destination. So there's this whole idea that everybody's involved in this thing called the common maritime adventure. And the idea is that you want to try to get to the end and deliver things. And so if you were on a big old fashioned sailing ship and somehow or other, you know, you encountered bad weather and you had to cut away one of the masts because it broke or, you know, and you had to throw away sails or something in order to survive, then that was a general average act. In the same way, if you happen to have a load of cargo on the deck and they needed to jettison cargo over the side of the ship to stop her taking water, then the people who lost their cargo, they would be able to look to everybody else who participated in the voyage, in the maritime adventure to get back their losses. And that still exists now as a concept, it's much more sophisticated and you're not really seeing examples of crew trying to climb up on the front of a container ship and try to push boxes off the front to save the vessels. I mean, you can't do that. You'd have to be Hercules to push a container off a ship ship. But what you do start to see is that when there's been a big casualty, then typically you do declare ga. Those ship owner will declare ga. A number of boxes may be completely damaged and beyond repair because that's particular average. So for example, they're the victims of the fire. But the people whose boxes are say perhaps below deck and the holes get filled up with water and their cargo is destroyed, that will be a GA sacrifice. Their cargo has been sacrificed to save the ship. So they may be able to make a claim. But everybody else who's still got sound cargo at the end of the voyage they will be asked to make a contribution, they'll be asked to put up security. And the ship owner's in a difficult position because if the ship owner allows the cargo to be taken away then that means that there's never any chance of getting security. So the ship owner has this big problem when the vessel's brought into port eventually that they need to try and maintain this general average lien over all of these boxes and make sure that they get the security. And we talked about this a little bit today that not everybody buys cargo insurance. So if I buy cargo insurance and some of the lines will offer you a product. Right. So you don't actually have to just come in there.
[00:11:02] Speaker A: Actually Chris, because TT Club told me that 90% of cargo on some trade lanes, on others it's nowhere near as high as that. But on some up to 90% of cargo might, might travel without insurance. So that becomes a huge potential risk for these people.
[00:11:17] Speaker B: Yeah, I'm sure that's right. I mean we've, we've had some cases recently where cargoes are ultimately going to end up in West African ports or African ports. And it tends to be that a lot of the cargoes that are inside the containers then are quite low value. Not all of them, but quite a lot of them.
People seem to ship a lot of secondhand bicycles to Africa, although I suspect that that might be sort of secondhand bicycles and inverted commas. There's probably other things in there that they don't want to tell the customs about.
[00:11:43] Speaker A: There's a lot of cars come from the UK as well, isn't it?
[00:11:45] Speaker B: A lot of second hand cars as well. Yeah, I'm not sure that they Want to declare those either. They're not strictly got all of the necessary export paperwork, you might say.
So I think, you know, you will see cargo that isn't insured and that, that's a big problem for the, for the ship owner and for the insurers. When you've got a situation where there's been a casualty and you're looking to collect all of this security because if you've got cargo insurers for each individual box, then you know, somebody phones you and you're the owner of the, the cargo, you want to collect your cargo and you speak to the freight forward, you say I want to collect it from the port. And they say, oh, you can't because someone's exercising a G alien over it. And he said, I have no idea what a G alien is. What am I supposed to do that? And they said, well just talk to your insurer and your insurer will put up the security that works fine for all those guys. They get, they get their cargo back. Yes, there's a bit of a delay because of the, the fact that there's been a casualty. But people who haven't put up that kind of skier, bought that kind of insurance, they have to put up the security and some of them, they just walk away, they're not interested and they leave you with cargo if you're the ship home. I mean, we were involved in a case at the moment, public information.
There's about 150 boxes were abandoned at the end of the casualty. Nobody put up any security for them and they've been sent to public auction in Malaysia just to raise contribution towards the ga. And interestingly, it's a bit like these people who buy secret suitcases, you know, from the, from the airlines or something. Some person just come along and bid to buy 150 containers with no idea what's really in them, but they just bought a whole lot on mass and then they'll see that they can make a profit.
[00:13:21] Speaker A: Modern day treasure, treasure hunting.
[00:13:23] Speaker B: Absolutely, absolutely, Mike. So yeah, so that's kind of how the GA side of things works. But you were sort of asking the question about who pays for everything. So damage to the ship is paid for by the hull underwriters. But you know, depending on who owns the, the ship, quite a lot of ships are just owned by people who are purely ship owners. A number. A lot of the ships in the container trades are obviously owned by the big liner operators. But if you're just a pure ship operator, somebody puts a cargo on your ship and that cargo causes the fire. Your instinctive reaction logic and the Lord generally supports the position that it's the responsibility of somebody who either rented the ship from you or the person who put the cargo on board. And if you can't determine which cargo caused the fire because all the evidence has disappeared, then you'll probably go after the people who chartered the ship.
When you get to the level of sort of the big operators, your Maersk's, your mscs, all of these kind of guys who are actually owning and operating their ship, they probably aren't using all of the slots for their own boxes. So they may be looking to their slot partners who put the box on to reimburse them and then that's all insurance funded, effectively. So then it's basically, it's a battle in the names of the ship owners, but basically between different insurance companies to get their money back. And as I say, ultimately when those guys have worked out who's paying, then they're probably looking to the people who ship the dodgy goods, if they can, if they've got a deep pocket, if they think they've got some insurance to try and make a recovery. So that's who's paying in the first instance. Who's paying at the end of the day is probably you and I right on the price of the goods because it's all, it's all factored into the cost of an iPhone or the cost of anything really, because everything comes on a container ship.
Yeah. So, and it's a little bit of it I think is definitely added to the freight premium that your readers pay.
[00:15:17] Speaker A: As we finish up. If you're going to give one piece of advice to the cargo owners about how to avoid liability, what would it be?
[00:15:26] Speaker B: Pack your cargo properly, tell everybody what it is really, and make sure you've got a really good set of records to show that before you, before you send it off to the ship and.
[00:15:35] Speaker A: Get the insurance as well.
[00:15:36] Speaker B: Definitely buy some insurance. Yeah. Then that's a good idea. Then it's not your problem when it's all gone wrong.
[00:15:41] Speaker A: Chris Greaverson, Managing partner at Wickburg Ryan. Thank you so much Dave, for joining me on the Freight Buyers Club.
[00:15:46] Speaker B: That's a pleasure.
[00:15:47] Speaker A: Mike, good to see you and thanks everyone for listening. As I mentioned earlier, this is supported by On T Goll's Cloud. Please do like follow and subscrib.
