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The risks of undeclared or improperly declared cargo are an increasing concern for shipping companies and their insurers as fires and explosions on board cargo ships continue to result in large losses.
But this long-standing problem is one that affects the entire marine, aviation and transport sector and requires ongoing focus on risk management and safety practices, including refusing to transport suspicious cargo in some cases, experts say.
Cargo that is erroneously declared, including incorrect labelling and packaging of dangerous goods, is believed to be a root cause of several cargo fires, according to a report by Allianz Global Corporate & Specialty SE.
This problem is exacerbated by larger vessels, which can make issues more difficult to detect, locate and combat, Allianz said in its Safety and Shipping Review 2019.
A recent chemical explosion and fire on a Korea Marine Transport Co. Ltd. containership at the port of Laem Chabang in Thailand May 25 is likely to have started in a box containing calcium hypochlorite, which has caused several ship fires in recent years.
“This is a problem. As seen most recently in Thailand (where a) container ship fire/explosion appears to be tied to misdeclared cargo,” said Andrew Kinsey, senior risk consultant at Allianz Global Corporate & Specialty based in New York.
“We shouldn’t be talking about putting fires out on containers, we have to look at preventing that cargo from ever getting to port,” Mr. Kinsey said.
“The problem really starts with goods that are not properly declared because they fly under the radar and they need to be properly detected. These are dangerous commodities which we are not aware of that are on board our vessels,” said Ken Rohlmann, senior director, dangerous goods at Hapag-Lloyd AG in Hamburg, Germany.
“The general ratio of undeclared cargo to container ship capacity is 0.059%. So, for instance, if a port has a container throughput of 20 million TEU, approximately 12,000 containers are not declared properly,” said Mr. Rohlmann.
Fraud is a problem in most cases where dangerous goods aren’t declared, he said.
To minimize the risks, Hapag-Lloyd developed an advanced cargo screening software, known as Cargo Patrol in 2012 that twice daily scans the booking documents of all cargo that has not been declared as dangerous goods, he said.
“We have a team of five experts that do further investigations on these bookings … Every suspicious booking that investigators place on hold is not to be transported further until investigations are complete,” Mr. Rohlmann said.
If after further investigation Hapag-Lloyd finds evidence that documentation is fraudulent, it refuses the shipment and leaves the container behind, he said.
“That solves the problem for Hapag-Lloyd but not for the industry because the container is still there and another shipping company that does not have an advanced cargo screening tool may accept the booking not knowing that dangerous goods are inside,” he said.
This is an issue that affects the entire marine, aviation and transport sector, experts say.
“Everybody taking part in transportation runs the risk of undeclared goods, whether it’s the airline industry, shipping, road, truck or rail,” said Mr. Rohlmann.
The maritime, aviation and transport insurance sector incurs $0.5 billion of avoidable losses every year, according to Peregrine Storrs-Fox, risk management director at U.K.-based TT Club Mutual Insurance Ltd.
“That isn’t all to do with fires and explosions, it’s cargos in general that are poorly packed or give rise to damage that could be avoided,” Mr. Storrs-Fox said.
As a result, the supply chain industry incurs an economic loss of in excess of $6 billion annually as a result of avoidable losses, he said.
Just this year, there have been five major fire and explosion incidents, including the May containership explosion in Thailand, he said.
While the cause is not fully known in each incident, “the clear attribution has been toward things that have been undeclared or misdeclared. There’s definitely a maritime problem and one that is causing many of us issues,” he said.
As some shipping companies look to increase inspections on shipping containers, TT Club has called on the International Maritime Organization to step up this process.
“Even a considerable number of inspections is inconsiderable. That’s a problem,” Mr. Storrs-Fox said.
The National Cargo Bureau Inc. is currently inspecting a sample of 500 inbound and export containers into and from U.S. ports as part of an initiative with shipping firms including AP Moeller Maersk A/S and other members of the Cargo Incident Notification System, according to Ian Lennard, president of the New York-based National Cargo Bureau.
“Compared with all the containers being shipped with hazardous cargo and general cargos, this is not a lot, but it will shed light on what’s going on,” Mr. Lennard said.
“There have always been container fires but there seems to be much more consistency in terms of the number and duration of fires. It’s more than just a blip,” he said.
There are many reasons why cargo is undeclared or improperly declared or secured, according to Mr. Lennard.
“Sometimes there are tariff issues; other times a particular cargo is banned either by a port or a line, and that tends to push the cargo underground, and it gets misdeclared so it can still go out,” he said.
“The idea is to try to come to grips with what is happening and better understand why and what is going on, and then maybe we can take some corrective action,” Mr. Lennard said.
Inspections will be completed in the next two weeks, and the findings will be announced afterward, he said.
Despite a record decline in shipping losses in 2018 to the lowest level this century, the industry faces increased risks from a changing climate and a range of environmental issues, according to a report by Allianz Global Corporate & Specialty SE released on Tuesday.