Perils of the Sea
From Supply Chain Management Encyclopedia
(→Table 1. Summary on Perils of the Sea MAINLY: David, P., Stewart, R. International Logistics: The Management of International Trade Operations - Thomson: Mason, Ohio. 2007. – http://www.atomicdogpublishing.com/home.asp) |
(→Table 1. Summary on Perils of the Sea MAINLY: David, P., Stewart, R. International Logistics: The Management of International Trade Operations - Thomson: Mason, Ohio. 2007. – http://www.atomicdogpublishing.com/home.asp) |
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| '''GENERAL AVERAGE'''|| align="left" | '''General average''' is a general indemnity made by all interested parties concerned for a maritime loss incurred voluntarily but necessarily for the safety of the remaining property when in peril <ref> http://www.m-i-link.com/dictionary/default.asp?term=general+average </ref> '''Average adjuster''' is one who investigates and apportions general average losses on behalf of ship | | '''GENERAL AVERAGE'''|| align="left" | '''General average''' is a general indemnity made by all interested parties concerned for a maritime loss incurred voluntarily but necessarily for the safety of the remaining property when in peril <ref> http://www.m-i-link.com/dictionary/default.asp?term=general+average </ref> '''Average adjuster''' is one who investigates and apportions general average losses on behalf of ship | ||
| - | owners <ref> Trade Facilitation Terms: An English - Russian Glossary, United Nations, New York, Geneva, 2011 - http://www.ipaeurasec.org/docsdown/conference_0711/glossary_ed2_rev2.pdf </ref> ||align="left" | | + | owners <ref> Trade Facilitation Terms: An English - Russian Glossary, United Nations, New York, Geneva, 2011 - http://www.ipaeurasec.org/docsdown/conference_0711/glossary_ed2_rev2.pdf </ref> The concept of General Average is exclusively used in marine insurance. It predates the concept of insurance, and was the idea that, when there is an "'''Average'''", — a term derived from the French word '''avarie''', which means "damage to a ship or its cargo", — or a major loss on a ship, ''all cargo owners and the ship owner share in the loss''. ||align="left" | The concept is applied in a very unusual fashion; when a portion of the cargo is lost in bad weather, or when there is a major fire on board, or when a portion of the cargo is jettisoned to save the ship, all of the owners of the cargo and the owner of the ship (or their insurers) pay for the lost cargo if a "General Average" is declared by the ship owner. For at least a portion of the owners of cargo on board, General Average means that the owners of the goods that arrive safely have a liability toward the owners of the goods that did not arrive. Companies that had sufficient insurance have only their goods to worry about; companies with no insurance will have to place a cash deposit with the adjuster of roughly one-third of the value of the goods on the ship. |
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Revision as of 01:20, 23 July 2011
General
Perils of the Sea could be defined as fortuitous accidents or casualties, peculiar to transportation on a navigable water, such as stranding, sinking, collision of the vessel, striking a submerged object or encountering heavy weather or other unusual forces of nature. A shipment by ocean is subject to a large number of risks, most of which are only vaguely familiar to a land-based exporter accustomed to shipping by truck or rail to its domestic customers.Most losses covered by a marine insurance policy come within the comprehensive expression "perils of the sea," which refers to damage caused by heavy weather, strandings, strikings on rocks or on bottom, collision with other vessels, contacts with floating objects, etc. The Table 1. below gives a summary of main and acceptable for an insurancs coverage perils of the sea.
==The Vernacular of Insurance Industry==[1]
The insurance industry, and in particular the marine insurance industry, speaks an obscure language. Nevertheless, it may be useful to discuss perils in the vernacular. A peril is the nature or kind of loss. It is that which causes a loss, that is, fire, collision, pirate attacks, war, or the like. Firms insure against perils. The word “average” in insurance terms, refers to the extent of coverage. A “particular average” loss is one that affects specific interests only. A “general average” is one that affects all interests in a voyage including that of the vessel itself. Ancient convention has established that all parties to a voyage, shippers and owners alike, share in the benefits of the voyage and should therefore also share in the perils thereto. Thus, should a vessel sink, all interests (that is, persons having an interest) share in that loss. Both “general average insurance” and “particular average insurance" cover against total loss resulting from perils of the sea (that is, the action of the wind and sea). “FPA” coverage (that is, free of particular average) covers only for total (general) loss or partial losses resulting from certain named perils (for example, stranding or fire). That is to say, in the event of a partial loss due to these perils, only a partial amount is recoverable. The “with average insurance ” or “WA” insurance covers the full amount of the loss. FPA is a more restrictive and narrower insurance than WA coverage. Basically, FPA will cover only in the event of a total loss while WA will allow for recoveries on partial losses.The so-called “all risk” coverage is most commonly used by traders of general commodities. All risk insurance does not, as the name implies, cover against all risks. Certain risks are specifically excluded, such as those arising from war and losses attributable to delays in transit.
Table 1. Summary on Perils of the Sea[2]
| KIND OF PERILS | DEFINITION/EXPLICATION/JUDGEMENT | COMMENTS |
| FIRE | Fire is a fairly significant peril of shipping by ocean cargo containers. | All dangerous cargo can only legally travel internationally by ocean—and not by air — such cargo is often present on board; fireworks, explosives, compressed gases, ammunition, and chemicals of all sorts are crowded on deck. If these items happen to be poorly stowed, or are damaged in a storm, they can leak and mix with one another, resulting in fires or explosions. |
| CARGO MOVEMENTS | A shipment by waiving/storming ocean is subjected to numerous cargo movements, many more than during a strictly land-based domestic shipment. A ship at sea may move in six different direction. Ship motions can reach 30 degrees from side to side (roll) and 10 degrees front to back (pitch). These regular movements are accompanied by drops (heave) that can reach 10 meters, as well as brief movements forward (surge) or sideways (sway) that end in a violent shock when the ship hits another wave. When a sea voyage lasts two to three weeks, and the motions are repeated every 30 seconds or so, the cargo is subjected to more than 100,000 movements, and it better be well packaged to endure this very long “roller coaster” ride. | In the case of containerized cargo, the goods are placed in the container at the exporter's facility and loaded onto a truck. Generally, this is done carefully as the employees of the exporter are aware of the contents and of their value. However, once it has left the exporter's shipping dock, the goods are in the care of less scrupulous hands. The goods are unloaded in the port, placed in a holding area, handled a couple of times, then loaded onto the ship by a stevedore in a hurry, handled again several times in the same manner in the port of arrival, then loaded onto a truck for final delivery. A typical container will be handled four to six times in each of the ports of departure and destination. In some cases, the goods are loaded onto another ocean shipment as the container is transited though a port before being sent, by ocean, to its final destination. In some cases, the container is damaged in these multiple handlings and the cargo can be damaged. |
| WATER DAMAGE[3] | Water damage starts slowly, mostly unnoticed by the ship crew. Even a small amount of water can cause great damage if it is consistently present in an area that needs to be dry. Due to storms there is also a strong possibility of mechanichal water damage to the cargo on ships unless the cargo is very well packed and protected. In some instances, the pounding of the waves is such that it deforms the container walls and crushes the cargo inside. Another possibility is that the storm will cause cargo to shift on board and to damage the ship to the point where water seeps in the hull. Finally, cargo can be damaged by container “sweat.” | As the ship tosses and shakes in a stormy sea, waves wash overboard and can slowly infiltrate the cargo containers or the break-bulk cargo on board. While it is traditional for a shipper of higher-value merchandise to request that the cargo be stored “under deck” (i.e., inside the ship) rather than “on deck” (outside, exposed to the elements), the way a container or cargo is actually stowed is mostly out of the control of the shipper. In addition, on very modern containerships equipped with stack bars, the concept of deck has disappeared, making the distinction moot and increasing the possibility that a cargo will be exposed to serious quantities of sea- and rainwater. Most containers are pretty tightly closed, and no air circulation takes place. If some of the cargo inside the container has a high moisture content (agricultural or forestry products, for example), or if the cargo was loaded in a hot and humid area, then the humidity can condense on the inside walls of the container and damage the remainder of the cargo. A similar problem can happen for break-bulk merchandise placed in a tight cargo hold, as the ship “sweats” as well. These humidity problems can be solved by proper packaging and the use of desiccants. |
| OVERBOARD LOSSES | The very common problem for cargo is the fact that it can be lost overboard in a storm or during badly done loading/unloading operations. | It happens that ships lose containers overboard — actually, worldwide, it is a daily occurrence [4]. The containers placed on top of the ship's deck are lashed down with bars holding them to the deck and to each other. However, the cargo inside a container can shift, causing the container's balance to change. The container can also be improperly tied down, or the cleats holding the container can be damaged, and therefore the lash bars break or become loose, allowing some containers to fall overboard. The remainder of the container stack usually collapses as well, a situation that is called a deck stow collapse and leads to crushed and damaged cargo. |
| JETTISON | The act of intentionally throwing cargo overboard e.g. with the objective of lightening a vessel, which has run aground, such for the common good of all interests: vessel, crew and remaining cargo. | Sometimes a container lost overboard can be not an accident. The captain of a ship, — who thinks that this action will save the ship and the remainder of the cargo, — is allowed to toss containers or cargo overboard to lighten the ship, to remove a container that may have become dangerous because it became loose, or to throw overboard some cargo to free a stranded ship. Such acts are also called "jettisoning" and they are a fairly common occurrence. When this is the case, an old maritime tradition, called “general average,” dictates how the owners of the jettisoned cargo are compensated. Namely, all parties on board pay for this loss. |
| SINKING | The ship's sinking can be one of the most serious consequences of bad stormy weather. The possibility of sinking is always present. | While most of the ships lost every year to sinking are older bulk ships, even the most modern ships can fall prey to a rogue wave and be lost or seriously damaged at sea. The International Union of Marine Insurance reports on the number of ships lost at sea, as well as the human casualties. In 2010, there were 70 ships lost at sea, practically equal to the 75 casualties of 2008 and sufficientle less than 175 vessels lost in 1994 [5]. |
| STRANDING | Mechanical breakdown, stormy weather, and sometimes incompetent crews are responsible for ship's stranding and, as a result, a significant number of grounded ships takes place every year. The improvements made on navigational technologies, such as the Global Positioning System, have improved the precision with which ships operate. However, they cannot rely on precise maps: Only about 35% of the world's oceans have been accurately mapped and many charts rely on data that were collected—somewhat inaccurately — some fifty to 100 years ago. Also, currents, coastal rivers, and strong storms modify the relief of coastal areas frequently; this is why many ports employ pilots to guide ships in their approach to port. | Direct damage to the cargo is not very likely when a ship is stranded. Nevertheless, because stranded vessels can take days or weeks to be freed, the cargo on board can be damaged while it waits; it is obviously the case for refrigerated or produce cargo. When the ship is freed, cargo is often "lightered" onto another ship, with all the perils associated with a transfer of cargo in less-than-ideal conditions. If the ship's hull is damaged, there can also be significant water infiltration and the cargo can be flooded. Besides, part of the cargo is simply jettisoned to lighten the ship. This is more often the case with bulk cargo of low value rather than with cargo of higher value or containerized cargo. Where a marine policy excepts a loss unless a ship is “stranded”, the insurer is liable for any excepted loss, whether or not the loss is attributable to the stranding, if the risk has attached before the stranding and, in the case of a marine policy on goods, the damaged goods are on board the ship [6]. |
| GENERAL AVERAGE | General average is a general indemnity made by all interested parties concerned for a maritime loss incurred voluntarily but necessarily for the safety of the remaining property when in peril [7] Average adjuster is one who investigates and apportions general average losses on behalf of ship
owners [8] The concept of General Average is exclusively used in marine insurance. It predates the concept of insurance, and was the idea that, when there is an "Average", — a term derived from the French word avarie, which means "damage to a ship or its cargo", — or a major loss on a ship, all cargo owners and the ship owner share in the loss. ||align="left" | The concept is applied in a very unusual fashion; when a portion of the cargo is lost in bad weather, or when there is a major fire on board, or when a portion of the cargo is jettisoned to save the ship, all of the owners of the cargo and the owner of the ship (or their insurers) pay for the lost cargo if a "General Average" is declared by the ship owner. For at least a portion of the owners of cargo on board, General Average means that the owners of the goods that arrive safely have a liability toward the owners of the goods that did not arrive. Companies that had sufficient insurance have only their goods to worry about; companies with no insurance will have to place a cash deposit with the adjuster of roughly one-third of the value of the goods on the ship. | |
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References
- ↑ Wood, D.F., Barone, A.P., Paul R. Murphy, P.R., Wardlow, D.L. International Logistics, Amacom, New York, etc., 2002 – p.329
- ↑ MAINLY: David, P., Stewart, R. International Logistics: The Management of International Trade Operations - Thomson: Mason, Ohio. 2007. – http://www.atomicdogpublishing.com/home.asp
- ↑ The Perils Of Water Damage - http://www.articlesbase.com/home-improvement-articles/the-perils-of-water-damage-1906171.html
- ↑ Containers overboard - American Shipper - http://www.americanshipper.com/ecc/ECC_story.asp?news=150438
- ↑ Graham, Ph., Casualty and World Fleet Statistics as of 31.12.2010,” International Union of Marine Insurance, http://www.ingenierosnavales.com/uploaded/2010%20%20CasualtyandWorldFleetStatistics.pdf
- ↑ Marine Insurance Act, SC 1993 - http://www.canlii.org/en/ca/laws/stat/sc-1993-c-22/latest/sc-1993-c-22.html
- ↑ http://www.m-i-link.com/dictionary/default.asp?term=general+average
- ↑ Trade Facilitation Terms: An English - Russian Glossary, United Nations, New York, Geneva, 2011 - http://www.ipaeurasec.org/docsdown/conference_0711/glossary_ed2_rev2.pdf
