Changes to the New Zealand Carriage of Goods Act 1979
On 1 September 2017, the New Zealand Carriage of Goods Act 1979 (and amendments) will be repealed and replaced by Part 5, Subpart 1 of the Contract and Commercial Law Act 2017.
The only effective change to Vero Marine Carriers’ Legal Liability policy wording is that we have to amend our definition in the policy document (page 11 of 13). So instead of the definition of “Act” referring to the Carriage of Goods Act 1979, it will refer to part 5, subpart 1 of the Contract and Commercial Law Act 2017.
A revised Carriers’ Legal Liability policy wording shall apply and the updated wording will show on our website on 1 September 2017 reflecting this change. Please click on the following link to access our policy documents:
The day-to-day application of Vero Marine Carriers’ Legal Liability policy wording and our settlement of any claims under the new Act remains unchanged from that which previously applied under the old Act. The terminology used in the new Act remains the same. Like us, your clients may have to update their own documentation to reflect the fact that the New Zealand Carriage of Goods Act 1979 will be repealed and replaced with the Contract and Commercial Law Act 2017 insofar as its application to the carriage of goods under Part 5, Subpart 1, on 1 September 2017.
Electronic delivery of documentation update
In the March edition of The Navigator we gave you a heads-up about our plan to roll out electronic delivery or documentation. Less than a week later our first renewal run went out leaving a few brokers rather perplexed at the unusual hours our underwriters seemed to be working. This was the beginning of our implementation of electronic documentation delivery.
The project moved full steam ahead revising processes and rolling out changes on a regular basis culminating with the ability to deliver electronic policy documentation in late May. Ensuring our policies were delivered with the correct documentation including a welcome letter for new business, policy schedule, policy wording, Institute clauses and the odd endorsement thrown in required a lot of programming changes, coordination and testing and the feedback we have received has been positive. But we're not quite finished yet, mid-term endorsements are the next in line to be generated and delivered quickly and efficiently and should be available later this month.
We apprediate your patience as we work through any teething issues that may occur. Please let us know as soon as possible if you come across anything that hasn't emailed correctly or that is not complete. The sooner we know about any issues the sooner we can fix them.
Over the next six months or so you will notice changes to look and feel of our documents in line with the revised Vero branding found on the Vero website. And speaking of the website, we hope that you are enjoying having the Vero Marine information in the same website together with the rest of Vero. Our standard policy wordings and forms are all there in one easy-to-find location too! Below are some handy marine quick links:
Marine landing page: https://www.vero.co.nz/marine
Staff contact details: https://www.vero.co.nz/documents/marine/marine-contact-details.pdf
Marine Insurance documents: https://www.vero.co.nz/insurance-documents.html#marineFSL and EQC Calculations: https://www.vero.co.nz/documents/marine/fire-service-levies-and-earthquake-levies-calculations.pdf
Things you may not know:
The USA’s Jones Act 1920 is a longstanding federal statute that regulates maritime commerce in US waters and between US ports. Perhaps its most important provision is Section 27, which deals with cabotage: it requires all goods transported by water between US ports be carried on US-flag ships, constructed in the United States, owned by US citizens, and crewed by US citizens and US permanent residents. Cabotage – the transport of goods or passengers between two places in the same country by a foreign transport operator – was done away with in New Zealand in 1994. The argument against cabotage is that it restricts economic growth and drives up prices for consumers by limiting the extent to which visiting foreign-flagged ships can move goods around a country’s coastline. It has been reconsidered from time to time, both here and in Australia, in an amended form, to re-build coastal shipping to take pressure from less efficient land transport, and so reduce CO2 emissions.
Tensions are building in the South China Sea over China’s increasingly aggressive stance in building and enhancing island reefs (such as the Spratly Islands) as military outposts. With this in mind, the Straits Times in Singapore reports (June 2017) military analysts' predictions that by 2030, more than 250 submarines are projected to be operating in the Pacific, which includes new and emerging players such as Bangladesh, Thailand and the Philippines. Tactically, a submarine demands a disproportionate counter-measure resource, which is why those countries opposed to China’s expansionism are building or buying submarines. The South China Sea is shallow, with relatively few but well-known deeper channels. And, just above, on the surface: one of the world’s busier shipping lanes.
In May 2017, the largest capacity vessel to transit through the expanded Panama Canal was the 13,926 TEU OOCL France. The expanded Panama Canal was inaugurated last year. Previously the canal could only allow 5,000 TEU vessels. TEU means ‘Twenty-foot Equivalent Unit’ i.e. a small standard shipping container. Most standard larger containers these days are 40’, or 2 TEUs. Tauranga was the first New Zealand port to gear up to take up to 10,000 TEU container vessels. Not only do channels and berths need to be deeper for these larger vessels, but new container cranes must be able to reach across to the far ship’s rail without the ship having to turn around.
Bloomberg reports that BHP & Rio Tinto, two of the world’s largest mining companies, are looking to adopt autonomous ships to transport millions of tons of iron ore, copper, and coal around the world in the next decade. A little less ambitiously, a Norwegian chemical company, Yara, recently announced it was about to begin trials of the world’s first all-electric autonomous container ship along the coast from its Porsgrunn production plant to the ports of Brevik and Larvik in 2018. Initially it will be fully crewed, but the plans are that it will sail itself from 2020. Rolls Royce predicts that there will be totally crewless ocean-going cargo ships in operation by 2035.
- The USA is set to withdraw from the Paris Agreement on climate change. However, it’s important to note the White House decision does not directly impact climate talks at the International Maritime Organisation (IMO). Shipping was not included in the Paris Agreement. Negotiations on maritime pollution control, the use of HFO (heavy fuel oil) in polar waters, and cuts to ship CO2 emissions, continue including the USA at the IMO.
What marine cargo insurance protection is there if war breaks out between the USA and North Korea?
There are two answers to this question, depending on whether the conflict is nuclear or conventional. (As to what the USA’s options might be with North Korea, a place to start is this article in The Atlantic).
It’s important to realise that, ever since the first effective aerial bombing during the Spanish Civil War in the 1930s, the world’s main marine reinsurance markets, London in particular, have not insured war risk on land. The Waterborne Agreement was signed in 1936. With very few limited exceptions (in the main to do with transhipments, and ports of refuge), cargo is only insured for war risks whilst it is afloat. The current position is set out in a long and convoluted Duration Clause 5 of the Institute War Clauses (Cargo) 01/01/2009.
Seoul and its nearby port Incheon is within range of North Korea’s conventional artillery, as both are a similar distance to the border. For years, North Korea has had extensive batteries of conventional artillery—an estimated 8,000 big guns—just north of the demilitarized zone, which is less than 40 miles from Seoul, a metropolitan area of more than 25 million people. So, it’s possible that cargo could be on board a ship in Incheon, and be lost or damaged in a bombardment, and be covered by a marine open policy.
From what we understand, North Korea would be unable to win any war with the South by conventional means, so this may indicate either nuclear or chemical weapon strikes if the North attacks. Cover for loss or damage from nuclear chemical weapon strike from the North is not covered even where the cargo is afloat on a ship in port.
It’s not a cheerful point to consider. The USA is unlikely to easily accept North Korea having long-range rocketry, but it may have no option as the alternatives are too risky. So, either North Korea is going to have to be convinced it’s not going to be attacked and so it should give up its nuclear capabilities, or things will come to a head. It’s a moot point whether this means convincing its generals, still stuck in their last war whilst enjoying their pick of the North’s meagre GDP, or convincing their Great Leader. It’s almost certainly both.
The cover provided by the Institute War Clauses (Cargo) 1/1/09 is specific events based with exclusions, in particular Exclusion 3.8 which reads:
“3 In no case shall this insurance cover …..
3.8 Loss damage or expense directly or indirectly caused by or arising from any hostile use of any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter”
It is also important to note that the exclusions contained in the Institute Radioactive Contamination, Chemical, Biological, Bio-Chemical and Electromagnetic Weapons Exclusion Clause – 10/11/03 contained elsewhere in the policy remain in place and the purchase of the Institute War Clauses (Cargo) 1/1/09 does not override them.
In essence “standard” cargo war coverage is only geared to cover damage from ‘conventional’ conflicts
What has happened already is that cargo vessels trading to Korea have had, in some instances, the costs of their hull war risk insurance increase. These additional costs have been passed on in freight rates.
The latest London advisory can be found at: http://watch.exclusive-analysis.com/jccwatchlist.html.
War risks encompasses civil war too, which is important on this particular peninsular as the North-South Korea conflict has never been resolved.
There are no absolute legal definitions or ‘war’ and ‘civil war’ as such, as the courts prefer to judge each case on its merits. The Institute Clauses are subject to English law.
Finally, it should be noted that War Cover for Cargo is only intended to protect Cargo that is on the water at the time of the outbreak of a covered event, and Insurers have the right to cancel such cover for future shipments.
Setting the correct cargo policy limit
One of the more memorable moments in our last internal Suncorp corporate audit was when an auditor asked: “If this is the Bottom Limit, what’s the Top Limit?” We took some delight in nonchalantly assuring him that they were the same thing.
A Bottom Limit is an archaic marine insurance term that refers to a ship’s bottom, or hull. In translation: it is the maximum amount of cargo that is insured per ship. Often, perhaps to spare more confusion, we now refer to this as the Conveyance Limit, as this also allows for land and air cargo.
Here are some points you should consider when requesting or reviewing a Cargo Conveyance Limit:
shipping schedules on regular cargo routes are subject to the vagaries of weather, engine breakdowns and port congestion. New Zealand has the longest trade routes of any westernised country, so these issues are exacerbated by trans-shipments en route. Cargo that was planned for two ships may end up going on one.
whilst the New Zealand Dollar (NZD) has been relatively stable against the USD for some time, this can quickly fluctuate. Most New Zealand exports are invoiced in USD.
Most Cargo policies are arranged on the basis of the value of annual sendings, so during the year there is less attention paid to monthly values. High volumes and values in the months of the high export season can quickly stress a Policy Limit.
Sometimes, with imports in particular, there can be a large and unusual consignment.
What we’re suggesting here is that brokers consider building in a healthy margin above the expected per vessel value, and revisit these assumptions every year. Marine insurance is not like some other insurance lines, i.e. we treat a large shipment that exceeds the Conveyance Limit as insured up to that Limit, subject to the description of the Subject-matter Insured on the Schedule, and contribution. However – once over the Limit, the Assured is their own insurer.
There is limited assistance for unplanned accumulations at transhipment ports, “or on a connecting conveyance, by reason of any interruption or variation in transit beyond the control of the Assured” in our standard Accumulation Clause. This clause automatically doubles the standard policy limit in these situations up to a maximum of NZD 10m, but note that the accumulation has to be an unplanned and unexpected one.
The insurance cover Vero Marine offers importers and exporters is wide in scope, but it’s a broker’s role to assess its ‘height’.
If it helps, our own rule-of-thumb is that the Policy Limits should be approximately 2x the average on-ship value for high frequency sendings accounts, with particular attention paid to routing, known bottlenecks and high season concentrations.
Bottom’s Up! (We couldn’t resist).
Language of the British merchant seaman
Another sea-faring expression from the book 'All Hands and the Cook' by Captain Barry Thompson:
To flog a dead horse
Upon signing on, a seaman often received an advance of a month's wages and was rarely prepared to do any extra work until he had worked off his debt to the shipowner. At the end of the 'dead' period when he began to earn again, a stuffed effigy of a horse was paraded around the deck before being hoisted to the yardarm and cut adrift to fall into the sea. (this ceremony refers principally to the sailing ship era and to the days before overtime was paid for extra hours worked.)
'All Hands and the Cook' - The Customs and Language of the British Merchant Seaman 1875 -1975' by Captain Barry Thompson is available for purchase by contacting firstname.lastname@example.org