5 Biggest threats to cargo owners

Imagine – you, in front of a container. What do you see? Maybe it’s a metal box, waiting to be filled with pallets. Maybe it is a cargo which must be delivered from point A to B. If you asked your customer, it’s a valuable investment for him, the one he has trusted to you. If the goods or equipment don’t reach consignee, there will be loss instead of profit. If the client is the most important for you, would you risk his future? You can carefully plan the route, select only trusted sub-contractors, but can you be 100% certain that you will avoid all the threats? I doubt.

In this article

Carrier`s liability

Risk – inevitable part of any voyage. Although, recently it has decreased due to advanced technologies, so much so that we frequently ignore it until the accident happens. The value of your customer`s cargo is more than a hundred or a thousand euros. It will likely surpass the limit that restricts carrier`s financial liability. The limits have been introduced to save sub-contractors from bankruptcy in case they lose your customers precious cargo. How you should know when limits are your friends or enemies:

  • Sea transport – liability up to 2,5 EUR/kg. The owner of the ship is responsible only for preparing a ship for a voyage. Anything that happens after the ship leaves port rarely ends up in shipowner’s liability.
  • Air transport – liability up to 20 – 23 EUR/kg
  • Trucks by land – liability up to 10,25 EUR/kg. The carrier is not responsible for packing and securing pallets.
  • Railroad – from 20 EUR/kg to unlimited liability. Rail company is liable for theft only and only when the seals are damaged.

Different types of transport have developed in different pace and all this has led to various legal regimes. This doesn’t secure cargo owners right to fair settlement.

Unique dangers

Sub-contractor`s liability limits is only the tip of the iceberg. It's hiding such situations like force majeure – when commodities are lost 1) suddenly 2) unexpectedly and because of 3) circumstances that can’t be affected by sub-contractor. Unfortunately, there are many more situations that have to be addresses before shipping containers:

  • Washing overboard the container at sea. Do you know that every year 10 000 containers do not reach their destinations? The modern days record belongs to Svendborg Maersk which lost 500 containers on a single voyage in 2014. Unfortunately, the highest compensation you could expect from shipping line is 2,5 €/kg.
  • General average at sea. That is the oldest maritime law – when ship is in danger – grounded or the engine has broken – salvage costs are shared among ship and cargoes owners. Your customer`s container might end up safe in harbor, but it will only be available to be picked up after submitting general average guarantee. The average adjustment of general average takes from 2 to 7 years and the obligation to settle salvage costs is being assumed by owner of the cargo. 
  • Every package that is loaded from one plane to another in intermediate airport is at risk of being lost. If this happens, you have several options – either to accept 19-22 EUR/kg settlement from airline or halt production and wait for 3-6 moths till the package is found.
  • Fake sub-contractors – persons that have single goal – steal your customer`s goods. These criminals don’t need to counterfeit documents, it`s enough to buy an existing transport company, complete several deliveries, that you would trust them and then wait for a valuable order.

Import of goods

There is no need to blame the carrier always. Almost 58% of all goods are damaged even before the voyage starts. Nobody can protect your customer`s and the goods he has ordered from reckless manufacturer who is in a hurry to load just another container that day. It`s enough to try to force the boxes in container or leave too wide gaps. The risk of condensation should not be ignored as well when the warm climate is replaced by cold weather as nobody likes to receive wet goods. If any of these situations occur, your customer will have to convince shipper in the far China or USA that it`s his responsibility to safely and properly pack the goods.

Terrorism and riots

Sometimes the cargo might disappear due to unfortunate circumstances and nobody is going to be at fault. How the voyage is going to end if a container with your customer`s temperature controlled production ends up in a port taken over by riots. Maybe worse, if the truck with cargo is set in flames by rioters. It might sound too far to be true, but every cargo crosses borders of numerous countries before reaching its destination and it is hard to predict what will happen on a way. The countries like Turkey, China, Russia, France, Egypt or Thailand all are among Top 30 locations according the number of terrorist events. In total 13 488 terrorist attacks have been recorded in 2016.

Institute Strike Clauses – designed to cover these events – include such risks as:

  • Strike – the employees are absent from their working place due to a conflict with employer over their unmet demands or due to employer requirements.
  • Lockout – employer prevents employees from accessing working location.
  • Terrorism – violence by non-state figures directed at persons or property fueled by political or ideological goals.
  • Riots – a form of civil unrest. Spontaneous and accompanied by violence, vandalism.

Logistic chain

If that hasn’t convinced you to take seriously all threats that might get in a way of cargo transportation, then imagine – your customer has just received a container from China with smashed pallets. Who you are going to blame for poorly completed order? Maybe you will chase a carrier who has delivered the container from port to warehouse or maybe a shipping line, the terminal can also be the one to blame or maybe a shipper in the Far East is at fault from improperly packing the goods. What is more, these situations raise not only the liability question, but it also brings different legal regimes.

Nobody wants to get in these situations and search for answers. Unfortunately, no matter how carefully you plan all the journey, accidents do happen. You can’t avoid them, but you can prepare your customer by suggesting to him to consider insuring cargo. That is not going to help to avoid incidents, but will minimize the losses.