TRANSPORT: Exporters Urged To Consider Risk Factors
Recent Western Cape Business News
With South African importers and exporters handling millions of tonnes of cargo via sea every month, amounting to a value of billions of Rands, it is crucial that these businesses fully understand the major risk factors involved in the transport of marine cargo to ensure the business is adequately covered in the event of theft, loss or damage to cargo.
Latest statistics from the Transnet National Ports Authority in South Africa show that 22 million tonnes of cargo was handled and 841 ship calls were reported at the eight commercial ports in the month of March 2012 alone.
Peter Moodley, Managing Director at CargoTransit Insurance Underwriting Managers, specialists in marine cargo and transit insurance cover and underwritten by Compass Insurance Company Limited, says not only is it crucial that businesses operating in the import/export industry have sound insurance cover in place due to the many risks of transporting goods overseas, but they must also ensure they are fully aware of all the clauses in their insurance policies.
“Businesses could face an insurance claim repudiation if they do not fully understand the terms and conditions of the insurance policy, which can result in additional financial strain to the loss, theft or damage of the cargo. Therefore, the services of specialist marine brokers is highly recommended when it comes to dealing with high value goods because expert advice can greatly assist in mitigating the risk of claim rejections by extending the polices for specific types of cover required.”
A good understanding of the International Commercial Terms (Incoterms) 2010 (version 2012) is also necessary to ensure that importers and exporters are aware of their respective obligations as buyers as sellers of goods, says Moodley. “It is recommended that these terms are clearly reflected on the suppliers invoice to avoid disputes in the event of a claim, as the reference to the Incoterms in sales contract reduces the risk of legal complications.”
Industry statistics on the main causes of loss and damage of cargo reported in South Africa show that handling and stowage damage and loss accounted for 39% of all claims reported, while 30% were due to accidental damage, 21% of losses were due to theft, and 10% were due to water damage.
With claims related to handling and stowage accounting for the largest percentage of loss, businesses must ensure they pay particular attention to the proper packaging clause within their policies, says Moodley. “The packaging and protection of cargo must be durable enough to protect it from the ordinary rigors of the journey. If cargo is not properly secured with the correct packaging, claims submitted for loss or damage to such goods may be rejected.”
He says another area of the marine cargo insurance policy that must be understood is the clause regarding the consequential loss as a result of damage to cargo. “The resultant cost of delays of damaged goods is typically included in this clause so policyholders must ensure they are fully aware of any exclusions. Demurrage costs, which include fines and surcharges from the carrier or ship-owner for the extra use of the vessel, may also be excluded should the claim be a result of a delay in delivering of the goods.”
Moodley says in addition to sound insurance cover, there are a few additional measures businesses can take to best protect goods being imported or exported. “Proper control should be exercised during the packing of cargo, adequate supervision during the loading, stowage and unloading phases must be present, and the routing of the voyage must be properly planned with the services of a reputable carrier who understands the requirements and protocols of international trade.”
“Businesses transporting cargo can also request a special contract that stipulates that the type of vehicle to be used must be of a good quality. There is also the option of hiring security guards to look after goods while they are being transported,” says Moodley.
“While businesses have little control over unforeseen events faced when transporting goods via sea, taking the proper precautions by ensuring all aspects are considered by using the services of a specialist marine broker when it comes to marine cargo and transit insurance is the best way to mitigate the chances of any financial, reputational or legal consequences,” concludes Moodley.
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