However, for the “Chang Chi”, its troubles are not limited to the narrow canal route, but a series of ensuing claims is the real swamp it is mired in. The Egyptian side has come up with a huge bill for the ship owner to pay.
March 30, China National Lawyers Association, deputy director of the Maritime and Marine Professional Committee Chen Yuzumu said in an interview with the 21st Century Business Herald, the current crazy rumors of billions of dollars in compensation water is too large, the expected losses and costs of about 520 million U.S. dollars, such as hull losses of 120 million U.S. dollars, canal operating losses of 100 million U.S. dollars and rescue costs of 300 million U.S. dollars, these are relatively clear can claim, the rest The rest of the claims are not easy to be supported.
Another professional in shipping insurance revealed to the reporter that the shipowner asked the salvage company to get the Chang Chi out of the grounded state, the huge salvage cost is to prevent the common loss of the hull and cargo, so it will be shared between the shipowner and the cargo owner as common sea loss. This means that the cargo owners on board the “Chang Chi” will have to share the huge cost.
Xinhua (Photo by Suez Canal Authority)
400 million dollars per hour of trade losses
These five categories of people can file a claim
The blockade of the canal, which attracted global attention, began on March 23, when the large container ship “Chang Chi”, sailing from Yantian, Shenzhen to Rotterdam, the Netherlands, encountered high winds and a sandstorm when entering the Suez Canal from the Red Sea northward, and the ship was stuck laterally in the channel of the Suez Canal, resulting in the blockage of the north-south passage of the canal. The ship was 400 meters long.
The giant ship is 400 meters long, 59 meters wide, weighs 224,000 tons and can carry over 20,000 containers, making it one of the world’s largest ocean-going vessels. It is owned by The Japanese ship lender Shoei Kisen, and is operated by the Taiwanese shipping company Evergreen Marine on lease, under the Panamanian flag, with the captain and crew mostly Indian.
The accident caused the worst blockage of the Suez Canal in 45 years. The Suez Canal Authority (SCA) said that more than 400 ships were piled up in the northern and southern parts of the Suez Canal before the relief of the Evergreen. According to estimates by the Egyptian Financial Statistics Authority (EFSA), the Changi caused about $400 million in trade losses per hour while stranded in the canal, and also caused about $14 million in damage to Egypt. This does not include the large number of potential claims from cargo ship operators and owners who have had their cargo delayed due to the canal’s failure.
Now the Chang Chi is being towed to the Great Bitter Lake anchorage north of the Suez Canal to await further hull safety checks. On March 30, experts were already on board the Longchamp to see the extent of the damage to the cargo ship and also to try to determine the cause of the ship’s grounding. The latter will be the key to determining who is responsible for the accident and is also the subject of a series of lawsuits.
In recent days, news of the astronomical claims facing the Chang Chi has been widespread, with some analyses suggesting that the claims would amount to billions of dollars. The most widely circulated claim, for example, is that the loss of trade caused by cargo ships blocking the Suez Canal was about $400 million per hour, according to a list by shipping data and news company Lloyds Register (Lloyds). Plus more than 400 cargo ships sailing schedule blocked, resulting in huge losses, it seems that all can make a claim to the Chang Chi.
In this regard, Chen Yumu Mu believes that there are five parties that can make a claim:
One is the owner of the “Chang Chi” ship, which can claim for damage to the cargo or delayed delivery of losses.
The second is the local Egyptian salvors and the international salvors hired by the ship owner and the insurer, such as the Dutch marine salvage company SMIT), who will probably claim the salvage costs from the owner of the vessel and the ship’s cargo owner.
The third claimant is the Suez Canal management, which may claim against the owner of the vessel for direct and indirect damages arising from the blockage of the canal.
The fourth party is the owner of the vessel, who is entitled to claim against the charterer or cargo owner of the vessel for salvage costs or other costs incurred for common safety.
“The first three categories of claims are for the Japanese owner of the Chang Chi, but the fourth is for the cargo owner,” Chen Yumu Mu said.
Tips the fifth category is due to the canal blockage, resulting in a large number of ships waiting, stopping and rounding the Cape of Good Hope generated costs, the respective ship operation of the ship owners, charterers and cargo owners between a large number of legal disputes, this part of the claim is more troublesome.
Among these claimants, it is clear that they can claim for direct losses including salvage costs and loss of revenue due to canal closure. As for the fifth category of claims, it is difficult to obtain support.
“A source from a shipping company, who did not want to be named, told 21st Century Business Herald that the company was also highly concerned about the subsequent impact of the Chang Chi and had internal discussions to review the case of the Chang Chi, concluding that the fifth category of claims was difficult because the law did not support unforeseen loss claims.
He explained, for example, that if someone drove a car and knocked down a power pole, and the pole fell to the ground and damaged a house, the loss of the house owner, the cost of restoring the pole and the loss of electricity revenue during this period at the power plant are three pieces that are clearly calculable and claimable, while the loss of production at the factory in this area due to the power outage is a remote loss, which is very difficult to claim.
According to the above-mentioned source, the loss of salvage and Suez Canal management is clear and is expected to be claimed successfully. Although there is a controversy about the cause of the accident, the ship owner and the captain of the Chang Chi pointed out that the weather was the main factor, but the Egyptian side believes that even if the weather was the cause, but the human factor is greater. The dispute between the two sides will gradually become clearer with the investigation.
It is expected to pay more than 500 million dollars
All out of the insurance company’s pocket?
Even if only the first four sides of the claim, the Chang Chi will face a huge amount of compensation. According to Chen Yuzumu, the damages and costs can be expected to be around $520 million, such as $120 million for hull damage, $100 million for canal operation and $300 million for salvage costs. Who should bear such a high compensation depends on the results of the accident investigation. However, if there is no accident, it should be borne by the insurance company in the end.
The above shipping people who do not want to be named explained to the 21st Century Business Herald, usually shipping companies will buy two types of insurance for their ships, one is called ship insurance or hull insurance, this type of insurance is purchased in commercial insurance companies, the scope of protection is to insure the ship’s hull and the loss of machinery in the hull, with some provisions will insure the ship’s collision liability, but here the collision refers to the collision liability between the ship and its ship.
However, collision between a ship and an object other than a ship is called touching in shipping industry terminology, and commercial insurance companies are not responsible for touching liability. Therefore, shipping companies will also purchase a kind of P&I insurance from various P&I associations to cover the scope that is not covered by commercial insurance, such as liability for cargo, liability for personnel, liability for wreck salvage and liability for collision during ship operation.
The P&I Club is a kind of mutual insurance organization for shipowners, and there are more than a dozen of them worldwide. Therefore, the grounding of the Chang Chi will be jointly handled by the hull insurer and the P&I insurer, and the different losses will be shared by different ship insurers.
For example, the damage to the hull of the Chang Chi will be claimed from its hull insurance and marine insurance insurer, while the damage to the canal embankment and operational damage caused by its touching will be covered by the P&I Club.
Photo/Xinhua News Agency
Cargo owners to share the huge salvage costs?
“In fact, these two losses are not big, the bigger loss is the salvage cost” the above shipping source explained, the shipowner asked the salvage company to get the Chang Chi out of the grounding state, the salvage cost is to prevent the common loss of the hull and cargo, so it will be shared between the shipowner and cargo owner as a common sea loss. According to it, if the loss belongs to the hull will be borne by the ship’s insurer. And at the same Time the ship container has many cargo owners’ goods, if the goods share the salvage cost, it is borne by the cargo insurance insurer behind the goods.
There is a big controversy about whether the cargo owner should bear the common sea loss. Some shipping people believe that the Chang Chi is applicable to the common sea loss, but many freight forwarders and cargo owners are opposed to the view.
Information shows that the common sea loss is in the same sea voyage, when the ship, cargo and other property encounter common danger, in order to common safety, intentionally and reasonably take measures directly caused by the special sacrifice, pay the special cost, by each beneficiary proportional share of the legal system.
The cost of common marine loss includes salvage remuneration, the cost of reducing The load of a stranded ship and the damage suffered as a result, port of refuge expenses, wages and other expenses paid to crew members sailing to and in the port of refuge, etc., repair costs, substitution costs, advance handling and insurance fees, interest on common marine loss, etc.
“It seems inappropriate to propose common sea loss because there is no evidence that the ship and cargo are in danger.” According to Cai Jiaxiang, permanent vice president of China Cargo Owners Association, if there is indeed evidence that the ship is in danger to throw away part of the cargo to ensure the safety of the ship, it only belongs to the nature of common sea loss.
If it belongs to the common maritime damage, first of all, determine the occurrence of the accident of the insurance company’s inspection agency in accordance with the accident of the common maritime damage determination, to provide the bill of lading, packing list, invoice, the original policy and the captain of the common maritime damage release letter and common maritime damage adjusting book can be claimed.
However, Cai Jiaxiang thinks that the Egyptian canal management claims that human error or the reason for the trapping of the Changchi, and requests to claim from the Changchi, which shows that the ship’s common sea damage is not established.
China International Freight Forwarders Association vice president and secretary-general Li Zhimin also believes that the goods are not lost, just postponed, so the freight forwarder will not pay, you can find the insurance company to sue the freight forwarder is only jointly and severally liable.
But the shipping person pointed out, although the cargo owners will have objections, but usually their defense will not be established, because even if the shipowner’s driving management behavior caused by the grounding, or touching accident and collision, according to the relevant laws of various countries, the shipowner’s behavior to the cargo owner is exempt. Therefore, “the cargo owner for common sea damage and salvage cost sharing should not escape”. Unless, of course, the cargo owners can prove that the ship was unseaworthy and caused such damage, then the cargo owners can hold the shipowner fully liable.
“This incident has caused the ‘Chang Chi’ ship the same sea voyage of the ship and cargo and other property structure in common danger, has constituted a common sea damage.” Chen Yuzumu think, whether can ask the ship charterer as well as cargo owners share, also need to look at the cause of the accident. If it is caused by the shipowner’s exemption from liability, such as the grounding accident caused by navigational negligence, then the owner of the vessel “Changci” has the right to request all parties to share the common sea damage.
If all parties of the Chang Chi are to share the common sea damage, how high is the amount of compensation? The shipping source said, “Estimates have to be based on 10% of the value of the entire ship to estimate, a rough calculation of more than 22,000 boxes of cargo value is expected to be at least 500 million U.S. dollars or more, which means that the cargo owners have to share at least 50 million U.S. dollars of common sea damage.” But this is only a very rough estimate, and the amount of the joint maritime damage will be clarified in a lengthy lawsuit.
More problematic for the cargo owners is that the lawsuit could be so lengthy that their cargo will be held on board unless a joint damage bond or deposit is issued to pick up the cargo.
If the cargo owners for their goods to buy the appropriate insurance, but also by the insurance company to disperse the pressure to pay, but if you do not buy the corresponding insurance to save money, the pressure of the huge amount of compensation now I’m afraid will crush some of the small guys small cargo owners and freight forwarders. “This incident once again sounded the alarm, remind cargo owners and freight forwarding companies, ocean shipping after all, there are risks, or should buy the corresponding insurance for the goods”, the shipping source said, on the contrary, the Chang Chi ship owner Japan Zheng Rong Co., Ltd. and leasing party Evergreen Marine, does not seem to be so much pressure, after all, there are relevant insurance for its burden compensation. “They will not go bankrupt because of this”, multiple interviews with reporters have made this judgment.
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