Managing The Risks of Global Shipping

Presented by

Greg J. Kritz,CICVice President

Roanoke Trade Services, Inc.

www.roanoketrade.com

Over 200 Cargo Ships Sink Each Year

Average 20 Major Earthquakes per year

of 7 or higher magnitude

U.S. Cargo Losses Exceed $18 Billion

Annual Impact on U.S Economy

CARGO CRIME SOARING

Theft & Unexplained Shortages (shrinkage/Leakage)

4 Easy Ways to AccessAn Ocean ContainerWithout Leaving a Trace

30% of Cargo Losses NOT Preventable

844 Piracy Attackson Cargo Vessels2004 -2006

$16bn Year in Pirated Cargo

273 Hurricanes Hit USA1851-2005

92 Were Major Category 3,4 & 5

GENERAL AVERAGE

Ancient principle of equity in which all parties in a sea adventure (ship owner, cargo owner, and freight) proportionately share losses resulting from a voluntary and successful sacrifice of part of the ship or cargo to save the whole adventure from an impending peril, or extraordinary expenses necessarily incurred for the joint benefit of ship and cargo.

LOSS of BUSINESS INCOME:

IMPORTERS NIGHTMARE

A Property Insurance Policy Doesn’t Cover Loss of Business Income for Cargo Claims

What if these wereYours’ at Peak Season? $30M

Sampling of Regulatory Risks

Seizures for Failure to Timely File Advance Notice

Seizure for non-Compliance with Wood Packaging

Demand for Redelivery of Tainted or Suspect Product (FDA, AGR,…)

Anti-Dumping Duty Craze & Byrd Amendment

The Ugly Truth About Carrier Financial Responsibility

Ocean Carrier/NVOCC

Subject to terms of Carriage Of Goods by Sea Act (COGSA)

$500 per Customary Shipping Unit as described on OBL

Unit can be the container, a pallet, a crate, carton

Ocean carriers & NVOCC’s have 17 legal reasons not to

pay 1.Act,neglect,default2.Fire3.Perils of the sea4.Act of God5.Act of War6.Act of public enemies7.Government seizure8.Quarantine 9.Act or omission of shipper

10.Strike,lockouts, or stoppages11.Riots & Civil commotions12.General Average13.Inherent Vice 14.Poor Packing15.Poor Marks16.Latent defects17.Loss/damage outside control of carrier

Most Typical Carrier Defenses

“We didn’t pack it so we can’t confirm the number of pieces”

“You can’t prove that damage happened when cargo was in our care,custody & control.

International Air & Indirect Air Carriers

Subject to terms of the “Warsaw Convention”

$9.07 pound/$20 Kilo or 17 SDR Kilo if Montreal Protocol ($23.15 kilo)

What About Distribution Centers?

Warehouseman’s Terms & Conditions

Rule Unless Changed by Contract

Liability Typically a multiple of base rate

3PL’s and Forwarding Operations Often Limit Liability on Warehouse Receipts

Freight Forwarder & Customs Broker Liability

Unless acting as a carrier and issuing a freight bill, 3PL’s & forwarders typically are not liable for loss or damage

Customs Brokers use Terms & Conditions of service that Limit Their Liability to A Maximum of $50 per shipment

Action Steps

A. Identify Risks in Supply Chain Where You Have Financial Interest

B. Establish Clear Contracts with Buyers & Suppliers (Don’t Assume Incoterms Address It)

C. If you Import, Control the Insurance

Action Steps Continued…/

D. If You Transfer Risk to Insurer1. Protect Profits, Insure Selling

Price2. Raise Limits to Anticipate Peak

Accumulation & Lost Profit3. Move Inventory Coverage to

Cargo Policy – Flood, Quake,Profit

Action Steps Continued…/

D. If You Transfer Risk to Insurer..4. Add Airfreight Replacement5. Cover Extremes in Temperature6. Contingent Financial Interest7. Unexplained Shortages8. Payment on Account – Disputes9. Your Financial Interest

Admitted regardless of Incoterms

Thank You For Letting Me

Be With You Today !