Supply Chain Sustainability – a Weighty Matter

  • Date: 15/09/2015

TT Club’s recently appointed Regional Director for EMEA, Kevin King makes the point that if safety and security in the container supply chain are to be maintained then all parties must act with the utmost good faith in operating within best practice standards and communicating accurate information

As a leading provider of liability, property and cargo insurance to the global freight industry, TT Club has long championed a variety of measures designed to increase safety throughout the container supply chain.  At the recent TOC Europe Conference in Rotterdam I took the opportunity to remind participants in the world’s myriad and complex supply chains that it is of crucial importance they act within the principles of the container industry’s best practices.  The future of a safe, secure and sustainable, freight transport environment depends on all involved doing their jobs in a professional and conscientious manner.

As the UK MAIB’s report into the loss of ‘MSC Napoli’ some years ago highlighted, safety margins are being eroded or eliminated as a consequence of inaccuracies in container weights leading to incorrect stowage onboard ships.  Cargo misdeclarations are thought to be behind a string of container ship fires and improper packing of containers and other transport units leads to countless vehicle accidents and incidents of bodily injury.  Cargo loss and damage, leading to inevitable disruption to supply chains, is another obvious consequence.

In the context of international trade, all should take up their responsibilities including, not just container carriers and hauliers, terminal operators and stevedores, but also shippers, forwarders, warehouse operators and others active in packing cargo transport units (CTUs) of all types.  It is perhaps time for all these entities to abide by the insurance doctrine known as ‘utmost good faith’, meaning all parties must not only operate to the highest standard but also always make a full declaration of the material facts.

While I feel the industry should not wait for the discipline of international regulation to be imposed such disciplines are inevitable.  An important amendment to the SOLAS Convention (Safety of Life at Sea) concerning verification of gross mass for containers was adopted in November 2014 and will become mandatory in July 2016. This relatively modest amendment in essence reiterates the shippers’ responsibility to declare gross mass accurately.  It is to be noted that if the ship or terminal loads a container on board without having the required verified gross mass, they effectively assume liability in addition to the shipper.  The amendment overtly, only names the ‘shipper’, the ‘master’ and the ‘terminal representative’, and – by implication – the competent authorities.

The complex nature of logistics means that the term ‘shipper’ may encompass a range of people involved in the contracting, packing and transporting of cargo. However, as stated in the WSC guidance, the key commercial relationship in question is with the person whose name is placed on the ocean carrier’s bill of lading. Thus, in many cases, the responsibility for actual ‘verified’ declaration will rest with a freight forwarder, logistics operator or NVOC. This means that often reliance will have to be placed on others to have adequate certified methods to provide verified gross mass – particularly for consolidation business. Of course many suppliers of homogenous shipments will already have advanced systems, which merely require some form of national certification.

Apart from having a sustainable method by which the gross mass is verified, the shipper also needs to communicate it (‘signed’ meaning that there is an accountable person) in advance of the vessel’s stow plan being prepared. The information will be sent by the shipper to the carrier, but with joint service arrangements there may be a number of carriers involved, with one taking responsibility to consolidate the manifest information, in addition to communication with the terminal.

The ‘master’ comprises a number of functions within the carrier’s organisation. Implicit in the SOLAS amendment is that the carrier sets in place processes that ensure that verified gross mass is available and used in planning the ship stow. Arguably, each carrier will need to amend systems and processes to capture ‘verified’ information. However, the simplest might be to amend the booking process, so that the gross mass information is left blank in the system until ‘verified’ data are available. This will be effective if it is clearly understood by all partner lines and terminals with whom the line communicates.
The explicit obligation of the master is simply that he shall not load a container for which a verified gross mass is not available. This does not mean that one with a verified gross mass is guaranteed to be loaded, since that would derogate from the traditional rights of a master.

Recognising the pivotal nature of the port interface, the ‘terminal representative’ has been drawn into the new regulation as a key recipient of information for ship stow planning and, critically, in a joint and several responsibility not to load on board a ship if a verified gross mass is not available.

There has been considerable debate as to whether terminals need to position themselves to be able to weigh containers, not least because of the cost of creating appropriate infrastructure, and amending systems and procedures, with uncertain return on investment. In addition there are commonly incidences of containers packed at the port, in which case the terminal activities could include assisting the shipper in producing the verified gross mass.

And talking of packing … TT Club’s own claims experience shows that 65% of incidents involving loss or damage to cargo are thought to be caused by poor or improper packing and securing.  This persistent statistic is echoed by the more granular figures from the ocean carriers’ Cargo Incident Notification System (CINS), where some 41% of incidents investigated were found to have been caused by poorly or incorrectly packed containers.

We have identified a variety of pertinent issues.  For example, often those involved in packing CTUs struggle to get a heavy item in and then believe that it could never move within the unit during transit.  Even where they consider it might move, they believe ‘surely that 25 mm square batten nailed to the floor will stop it’. Additionally, many also believe that placing the heavy load near the door will make it easier to get it out again, without thinking of the consequences of such weight distribution within the trailer or railcar.

There is inadequate awareness of the dynamic forces imposed on cargo during transit. In an attempt to make the nature of these forces more understandable, a domestic washing machine goes through about 6,000 movements in a typical wash cycle; in comparison a trans-Atlantic voyage on a container ship may put cargo through some 160,000 similar movements. In that context, it can be seen that ensuring cargo is properly secured is vital to its delivery in a safe and sound condition.

There is also an element of ‘out of sight, out of mind’.  Once those who packed the container at origin close the doors, they are generally relinquished of all responsibility.  The modern container passes through so many handling processes on its subsequent journey that it can be difficult to pinpoint liability for an incident even where poor packing is suspected. The consequences, however, are vast in terms of injury and loss of life as well as cargo damage and damage to other property.

Once more regulation is at hand. The Code of Practice for Packing Cargo Transport Units (CTU Code), which was approved by the three UN sponsoring bodies (ILO/IMO/UNECE) during 2014, provides guidance for all aspects of packing and securing cargo in CTUs (including trailers, swap bodies and railcars as well as containers).  Although it doesn’t have the force of law at this point, the code can be brought into litigation as describing industry good practice.  It must be remembered that once a unit is packed there is far less scope to correct things.

As to the integrity of the cargo unit itself, the ISO standards concerning container manufacturing and maintenance require more attention and stringent policing.  Container operators must be aware that it is not just accidents that are prevented by well-constructed and maintained containers but that significant cost savings can accrue from the reduction in repair costs, less equipment downtime and fewer disaffected customers.

So many, if not all, elements of container transport are these days are under the severest cost-cutting scrutiny.  The basic building block of the industry – the simple steel box – is not immune from the search for economies.  Indeed recently it has been somewhat of a focus.  It is worth reflecting, therefore on the value of quality in the manufacture of this vital unit.

Bringing all these issues, and others including fire prevention, protection against cyber- crime, care for perishable and hazardous cargoes and the reduction of vehicle collision in terminals and freight yards, to the attention of supply chain participants, is vital for the sustainability and ultimate profitability of the industry.  What is known about the contents of the ‘box’, how it has been placed there and how it is handled on its journey is so much a matter of trust – each party must act with the utmost good faith.

published in Hazardous Cargo Bulletin

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