Cargo Jettison: How to Protect Yourself from a Growing, Throwing Problem
In maritime shipping, extraordinary circumstances call for extraordinary measures. While sea travel has become significantly safer over the past few decades thanks to new propulsion and navigation technologies, every ocean voyage still comes with a measure of risk. And, while in most cases this risk amounts to minimal ship damage or cargo delivery delays, cases of extreme weather or equipment failure can necessitate more drastic action: cargo jettison.
As noted by Vice, the loss of cargo is a regular occurrence for ships at sea, but the combination of increased supply demands and growing ship sizes in 2020 contributed to greater-than-average jettison. In just 60 days, between November 30th, 2020 and January 30th, 2021, ships lost 2,675 containers – twice the typical annual average.
With supply chains now diversifying to meet evolving consumer demand and reduce the disruptive risk of future pandemic-level events – even as ship sizes continue to increase – jettison is likely to become both more frequent and more expensive.
For shippers and freight forwarders, this emerging issue presents a potentially costly concern. Here’s what companies need to know about cargo jettison, its impact on the logistics market at large, and how they can protect both customers and business bottom lines.
What is cargo jettison?
Cargo jettison occurs when cargo containers are lost during sea travel, either as a result of inclement conditions forcing them off the deck or if crews must abandon containers to save the lives of those on board in an emergency situation.
While the lives of crewmembers will always trump the monetary value of transported goods, jettison comes with its own set of problems, including:
- Environmental impact
Crews don’t have time to think about the cargo they’re tossing overboard during an emergency. As a result, anything can end up in the ocean – everything from furniture to fitness products and electronics has been lost over the past few years. Metal or plastic shipping containers are also lost during jettison; in combination, this cargo loss can lead to a significant environmental impact. The jettisoned cargo is very rarely recovered, left to litter the ocean floor for generations to come.
For example, batteries dumped into the ocean can leak harmful chemicals into the ocean which may decimate local marine life populations. In addition, jettisoned plastic containers may not decompose for hundreds or thousands of years underwater, in turn causing damage to sensitive ecosystems such as coral reefs.
- Shipping delays
The loss of cargo from an ocean carrier also causes significant shipping delays for customers. Even if products can be immediately replaced and reshipped, freight forwarders must secure new shipping vessels, complete new customs paperwork, and inform clients of missed delivery dates. Despite shippers having no control over cargo jettison, customers are often frustrated with their first supply chain point of contact: freight forwarders.
- Lost profit
This frustration can also lead to lost profit, both from the value of actual goods thrown overboard and the decision by customers to reduce shipping volumes or cancel current contracts. Companies may also face reputation damage if significant losses are incurred, especially if there are questions surrounding the nature of the emergency and the response of the crew.
Who pays the price?
When it comes to cargo jettison, someone has to pay the price for lost cargo. The York Antwerp Rules of 1890 (amended in 1994) defined a framework for this loss calculation called the “general average”. This legal tool ensures that if cargo is jettisoned, all cargo owners share responsibility equally for the loss.
Here’s why: During emergencies, crews don’t have the time to determine exactly which cargo goes overboard and which stays behind. The outcome is that one shipper’s goods could be entirely lost while another shipper’s remain intact, in turn putting the burden of cost on a single company. Understandably, this led to debates about the common risk shared by all freight forwarders using the same vessel – since emergencies were beyond the ability of sailors to control, was it fair to assess loss in isolation?
Maritime Insight offers a succinct definition of the general average: “Each party’s share in the general average should not be determined by fault-based approach. The risk borne by all should be equal in all aspects.” The result? Even if companies don’t lose their goods during transport, they may still be responsible for a portion of the loss.
How can freight forwarders protect themselves (and their customers)?
Cargo insurance is the easiest way to protect your investment from potential loss. In many cases, customer contracts or financial institutions will specifically require the purchase of insurance by freight forwarders as a way to offset possible risk.
The caveat? Not all insurance is created equal. Some policies may contain exceptions for emergencies or extreme acts of weather, leading to a situation where companies believe they are protected from jettison but are still responsible for their part of any general average losses.
Cargo insurance from Magaya, meanwhile, automatically includes jettison coverage in the certificates of insurance when shippers and beneficial cargo owners insure cargo to help reduce the impact of lost cargo in the event of maritime emergencies. While shipping timelines may be delayed and customers must still be informed, jettison insurance means customers won’t be on the hook for unexpected costs and won’t be left in the dark about the status of their cargo for months or weeks while insurance evaluations are completed.
Coverage offered through Magaya Insurance Services also offers the benefit of complete integration with Magaya software. This ensures that all data – from shipping agreements to quotes, customs forms, and insurance reports – is centrally stored and easily accessible. As a result, companies don’t need to spend time and effort tracking down disparate reports and data; instead, they can quickly and easily track down relevant information and supply it to applicable third parties such as insurance adjustors, carrier lines, or customers.
Solving the Cargo Conundrum
Cargo jettison is a growing problem for shippers, carriers, and customers alike. Although this unexpected action only occurs in extreme circumstances to save ship and crew, it can have significant environmental and operational impacts that can drive both reputation damage and profit loss.
While it’s impossible to prevent jettison and its accompanying general average effects entirely, companies can minimize the impact of lost cargo with comprehensive, integrated insurance solutions from Magaya.
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