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INSURANCE/NEWS Beware of the law of averages


A shipowner declaring ‘General Average’ can come as an unwelcome surprise. But it is possible to insure against it, explains Peter Lole & Co’s Rodd Bankier


a proportion of the value of his cargo has been lodged as security in respect of General Average. The cargo-owner is outraged.


He’s paid for the goods and the freight charges; clearance, delivery and Customs duty are still to be settled but now he is told that he must pay something more on top of all that.


For thousands of years, ships have traded the oceans despite the many and varied perils of the seas. Whilst most people appreciate to some extent the havoc that can be caused by fire, storm, collision and rocky coasts, there may be other hazards to consider.


Picture, if you will, the distress of the cargo-owner who is advised that his cargo has weathered all the perils of the voyage and arrived in apparently sound condition, but will not be released by the ship-owner until


The next he hears is from a company - perhaps in Germany or Greece - whose notepaper announces them to be ‘average adjusters’. In the accompanying paperwork, the adjusters gently explain that, following the engine breakdown, the ship found herself being blown onto a lee shore, thus imperilling everyone and everything on board, as well as the vessel herself. In consequence, the helpless ship accepted the services of tugs whose owners were now claiming salvage. As a result, the ship-owner had declared general average (GA)


and considered himself entitled to request from the cargo owners a proportion of the cost of towing his vessel to a safe port for repairs.


None of this alleviates the cargo-owner’s gloom in any way but his spirits recover somewhat when he goes on to read that, if he has insured the goods, he should contact his broker or the insurance company immediately. Wisely, he had declared this shipment against the open cover he’d arranged through a specialist


insurance


broker several months earlier. On ringing his broker, the cargo owner is asked to forward all the documents received and told the whole matter will be dealt with on his behalf. He does this and, a few days later, receives a call from his broker telling him that the required security has been posted by his insurer and he can arrange collection of his goods. Thus, our little story has


a happy conclusion for the importer since he has been told that his insurers will deal with the matter from here. The average adjuster, acting on the ship-owner’s instructions, has security against the adjustment he will draw up, apportioning the cost of towing the vessel to a safe port and, finally, the tug- owners have security for the salvage they will eventually be awarded.


So, how did all this come about? The principals of General Average - whereby the voluntary sacrifice of one of the interests involved for the preservation of the whole adventure is compensated (or, ‘made good’)


by all parties to the enterprise - go back far beyond written history and forms part of the ancient law of the sea. The practice is mentioned in the Justinian Code in about 530 AD and, in England it was first incorporated by an Act of Parliament in 1402. To explain in a little more detail, perhaps we should look at the 1890 York-Antwerp Rules which


govern the application


and adjustment of General Average: ‘There is a General Average act when, and only when, any extraordinary sacrifice or expenditure is


intentionally


and reasonably made or incurred for the common safety for the purpose


of preserving from


peril the property involved in a common maritime adventure.’ The points to note here are that sacrifice (for example, jettisoning cargo overboard in a storm to lighten the vessel or


ISSUE 3 2011


forcing her engines to free her, if


grounded) be or expenditure


such as that described above, must


extraordinary (not


normally encountered during a voyage) and for the benefit of the whole adventure (not just one of the interests). Unsaid, but of equal importance, is that it must be voluntary - albeit under the extreme pressure of circumstances. In consequence, the act giving rise to the sacrifice or expense must be successful in preserving the adventure - in the example above, there would have been no General Average if the ship had sunk before she was towed into port and losses would have lain where they fell.


Rodd Bankier is a director of specialist insurance broker Peter Lole & Co Ltd


www.peter-lole.co.uk


Kuehne + Nagel goes for the half century


Construction and mining technology company Metso Minerals (Tianjin) has extended its five-year oldd partnership with Kuehne + Nagel with a contract for a new distribution centre in Shanghai.


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In 2008, the logistics provider took over the management of Finnish-owned Metso Minerals’ Tianjin spare parts distribution centre. KN has established a dedicated 7,000 sq m facility with a monthly inbound handling capacity of more than 1,600 tons for Metso in Shanghai’s Baoshan district, providing a wide range of services, including warehousing, value-added services like batch management or picking and packing


as well as container


loading for seafreight exports. Kuehne + Nagel is generally expanding its market presence and product/service portfolio in the Asia Pacific region, particularly in China and India. It plans to open at least nine new offices in China in 2011, extending its network to around 50 locations. The new locations will include Changsha, Kunming, Leshan, Luoyang, Taicang, Wuxi, Yangzhou, Yinchuan and Zhengzhou. It is operating at more inland ports, such as Chongqing, Chengdu, Xian and Nanjing, in response to the rising domestic demand.


Kuehne + Nagel China has also


lately established an in-house, multi-purpose quality control centre near Shanghai city centre and Waigaoqiao seaport. Being in a non-bonded location, products can be quickly returned to factories or suppliers if need be. In line with China’s policies to encourage development in the west away from the eastern seaboard, Kuehne + Nagel plans to rapidly expand its presence in the country. For example it will develop its road logistics services in 2011. Starting from Shanghai and Tianjin, a total of ten transportation hubs will be established, offering a comprehensive portfolio of domestic FTL, LTL, carrier management, network analysis and IT solutions.


President of Kuehne + Nagel (Asia Pacific) management, Andy Weber added that the operator will also introduce road logistics services in Asia Pacific. “Growing local consumption coupled with the need for high quality domestic services, especially in China and India, call for this new service offering. Customers can thus truly benefit from an integrated range of logistics services from KN as a single-source provider.”


It also plans to further enhance its industry-specific and niche product services. For example, with over 30 leading biomedical science companies now established there,


Kuehne + Nagel has established a new department focusing on pharmaceutical and healthcare logistics in Singapore. It will also open two cool zones, one to the east and one to the west of the country. Hotel, Drinks and Perishables Logistics, Oil & Gas Logistics and Fairs & Exhibitions services will also be expanded across the region. KN will continue to apply its green logistics concept in Asia Pacific. Since 2010, major warehouses


in Australia and


Japan are ISO 14001 accredited. The company is committed to introducing “green features” at every new site developed across the region.


While China remains the ‘factory of the world’, says Weber, Vietnam is gradually building a reputation for outsourcing of manufacturing due to its low wages and relatively few bureaucratic hurdles. Nevertheless, the country’s infrastructure facilities, such as shallow ports, needs to be improved.


KN has been expanding its presence in Vietnam and, at present, operates at five locations in the country.


One remaining challenge in the region is finding qualified logistics talent. In China, for example, it is setting up a “Kuehne + Nagel


Development Centre”,


and has implemented training programmes for its employees.


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