The COVID-19 outbreak has resulted in a worldwide quarantine of cruise and cargo ships. Shipping and airlines are unable to carry cargo to their contractual destinations. In recent developments, airlines have started to use even their passenger aircrafts for cargo hauling.
Although cargo movements never stopped entirely, ships are being asked to undergo for 14 days of quarantine period before being allowed to enter ports, leading to undue delays. This in turn is affecting the turnaround time of fast-moving container and Ro-Ro ships. With shipping lines cancelling many sailings and/or avoiding countries where the effect of COVID-19 is severe has also resulted in diverting of ships, cargoes, and this is subsequently affecting timelines of cargoes to their final destinations. An official statement noted around 600 blank sailings till March 31, 2020. The quarantine time has now become the norm around the world. On a more serious note, Australia and South Africa have closed their ports for certain types of ships and freight.
As of now, pharmaceutical medicines and medical machineries are the priority, seconded by support equipment to affected countries and regions.
CARGO RISK MANAGEMENT
India and now most countries worldwide have implemented partial to complete lockdown of any movement of its citizens and transportation. This has resulted in uncertainty about supply chains and availability of logistics options. Though movement of essential items was never stopped, but on-ground confusion resulted in panic buying, thereby resulting in shortages of even the most common items.
Governments had to rethink the lockdown options and plan allowance on movement of cargoes. There is also a dramatic shift in the sensitivity of cargoes and items like hand sanitisers, disinfectants, and even toilet papers have become highly theft-targeted cargoes at recent times. The situation may become worse for essential commodities and lockdown may also result in such desperation attempts on other cargoes.
IN TRANSIT CARGOES
Cargo owners will need to review their distribution contracts, discuss the prospect of recovering damages from carriers and determine the degree to which they have coverage under their insurance agreements. Cargo delay or damage claim liability against the carrier or contractor will depend in contract subject to the terms of that contract.
In India, the effects are already evident on domestic cargo movements, with trucks and cargoes stranded due to the lockdown. By the 1st week of April 2020, it was reported that almost 3.50 lakh loaded trucks were stranded across the country. Transport unions and agencies have already sent out notices that if the lockdown continues without any relaxation on transportation of cargoes, drivers will abandon trucks and cargoes. In fact, this has already started happening, and the worst part is that cargo owners are completely helpless in such a situation.
Here, a bigger challenge for cargo owners is seamless insurance coverage of their cargoes during transit. Cargo owners must discuss all the aspects of their inland coverage, and also have a complete understanding on what is not covered under their sea cargo coverage. They must be informed about how and what they can do to ensure that their cargo stays fully covered during the lockdown in case their cargo gets stranded during transit or after completion of first leg of cargo, i.e. up to the load port.
PLANNED CARGO TRANSIT
In the coming weeks, cargo owners will need to take due diligence in completing timely orders, executing transits and planning exports or imports. It is important for the cargo owners and their logistics departments to work very closely with their insurance departments and understand their insurance coverage. Cargo planning must include prior and complete information on the ground situation of the destination, the transit methods and the alternatives available. With mass migration of labourer, there will also be issues with handling, packaging, loadings and unloading of cargoes at various points during cargo transits. If freight requires multimodal movement at international level, then same must be worked out including each and all transshipment locations/regions.
In extreme conditions, cargo owners must also keep their options open and have arrangements in place for return shipments of their cargoes. In these times, cargo owners are urged to take support of risk managers, whether in house, or insurers.
The article has been authored by Sushant Sarin, Executive Vice President, and Head – Commercial Lines & Reinsurance, Tata AIG General Insurance Co, and edited by Upamanyu Borah, Sub-editor, CargoConnect