MSC LEGAL NEWS - it.mscchile.clit.mscchile.cl/claims/ISSUE 5 MARCH 2018 MSCUSA.pdf · available...

MSC LEGAL NEWS

ISSUE 5 • MARCH 2018 • USA

MSC LEGAL NEWS · ISSUE 5 · USA 1 | PAGE

EDITORIAL

Every year, MSC is paying Millions of dollars of Insurance

premiums. High value cargoes, sensitive products,

commodities falling outside our standard P&I cover,

special terms in our service contracts, etc. The risk to

have a massive claim is real and one single large claim

could drastically affect our P&I Loss Record and

therefore increase the risk to see our premiums blowing

up the next year.

One of the task of our department is to assess the risk

and ensure that proper covers are bound. We strive to

provide an efficient support to our Line managers and

agents by giving swift guidance together with

competitive solutions.

The list of extra covers available is getting bigger

every year as we are more and more asked to

provide support and to offer additional

alternatives to our Line Managers in Geneva and

to all our agents worldwide.

The most commonly used - top 2

covers are without any doubt the

“High Value Pharmaceutical Cover”

and the “Charcoal Cover”.

The first one has been implemented in 2011,

following large claims of pharmaceutical goods.

It has been decided by our former Head of

department, Mr. Jan-Christian SEVERIN and our

current Commercial Vice President Mr. Pasquale

FORMISANO, to put in place a systematic cover

for all shipments of pharmaceutical goods, when

the cargo value per container exceeds USD

200’000. The main issue with this type of

commodity is that a small variation of

temperature can lead to a total loss of the

cargo. There is rarely only a part of the

consignment damaged.

Procedure “High value pharma goods”:

http://members/legal/high_value_pharma_go

ods.html

The Charcoal cover has been established more

recently, in 2014. Once again, this insurance

cover has been created following a serious fire

on board one of our vessel, the MSC

CHARLESTON. A container of pressed block

briquettes (charcoal) self-ignited on deck

causing damage to other containers, creating a

massive anti-fire operation on board and

provoked an extra call to Sines, where cleaning

costs were engaged. Unfortunately, our

recovery action against the liable parties are

often unsuccessful because the merchant is not

solvent or disappeared. That’s where insurance

comes in!

Procedure “Charcoal cover”:

http://members/legal/insurance_charcoal_shi

pments.html

We are also closely monitoring the shipments of

high value goods, other than pharmaceutical

products.

JIMMY MARTIN Insurance & Administrative

Officer

MSC GVA

http://members/legal/high_value_pharma_goods.html

http://members/legal/high_value_pharma_goods.html

http://members/legal/insurance_charcoal_shipments.html

http://members/legal/insurance_charcoal_shipments.html


Our procedure stipulates

that the booking agent must

contact our department as

soon as they get a request

for a cargo with a value

exceeding USD 500’000.

This extra insurance is not systematic unlike the

pharma cover. It must be assessed on a case-by-

case basis. It’s not because a cargo is worth USD

2 Million that we will take extra

insurance/measures. We need to get as much

information as possible to define our exposure

and to say if yes or no an extra cover is

recommended. We have to look at what will be

the cargo description on our BL and what will be

the jurisdictions/counties involved. Our decision

will be very much based on our chance to limit

our responsibility based on the applicable

Maritime Conventions. We are frequently told

by our agents that the clients already have their

own Insurance cover for their shipments. But

our concern is different since we are protecting

our-self against their insurers’ recovery action

they may have against MSC.

These extra covers are really benefic to MSC

since we have a waiver a recourse from our

Insurers (insurers agreed not to claim against

MSC once they have compensated the cargo

owners) and most of our insurance covers have

nil deductibles so we are cover from ground up.

All the above to say that we would like our

agents to keep in mind that we are available for

them at any time and all our procedures are

available 24/7 in our Intranet, to assist and to

support them as much as we can. Our goal is to

protect MSC’s interests. We are open to

questions and suggestions.

You are in direct contact with

our clients so you also know

what can be improved and makes

MSC more competitive.

During the past 2 years, we have been working

hard on improving our well-known Themis

system. New features have been implemented in

order to make Themis a better tool, allowing us

to have at the same place, a platform for claims

handling, Insurance and Refunds Management.

The Insurance and Refunds section of Themis is

restricted to MSC Geneva HQ only. The recently

launched updates are now permitting us to

provide our Management with some better and

useful statistics. We will continue to constantly

improve our procedures and system, to ease

our daily work and to be more productive.

I really hope that you will enjoy this new edition

of the MSC Legal News!

All the best to all of you.

Jimmy

“


CASE STUDY

BLIZZARD & RECORD-BREAKING LOW TEMPERATURES

OF WINTER: HOW IT AFFECTED CLAIMS

As you might have seen in the news, the past winter time from

mid-December until now has set a record breaking low

temperatures in United States and Canada, including a bomb

cyclone in early January, bringing up to 15 inches of snow in New

York City alone, and some areas of the country registering

temperatures as low as -30C: a phenomenon not seen for more

than 80 years.

THE PROBLEM

We expected that this incurrence would affect

our claims, especially commodities carried in dry

van containers moved by rail to Chicago, Kansas

and Midwest areas - the coldest part of the

country. Since dry van containers can’t control

the temperature, cargoes as wine and liquids in

general were expected to freeze, resulting in

cargo claims from our customers. To worsen the

scenario, many facilities as warehouses,

terminals and rails were closed in part because

of the holidays (Christmas & New Year) and in

part because of the snow storms. The after

storm also affects logistical operations because,

although the storm passed, it still takes time to

clean off the snow from the roads and

properties, and in some cases the ice will take

weeks to melt, ultimately resulting in delays to

move and deliver the cargo, exposing it to severe

weather conditions. As a result, we started to

receive the cargo claims related with frozen

cargo right after the holiday season, in early

January.

The claims receiv ed by MSC USA

consist mainly of wine, beers,

and olive oil affected by freezing

damages, but we also had a case

for frozen resin.

SHEILA PEREIRA MSC USA

Cargo Claims


DEALING WITH THE SITUATION

In some of the cases, claimant’s argument is that

due snow storm the rail facility had a record of

congestion and many of the truckers were

voided out. Some of the shipments could only

be delivered about 5 days after the estimated

time, causing those containers to remain at the

terminal’s yard exposed to the weather

conditions. Although the delivery was on carrier

responsibility (Intermodal shipment, MSC door

delivery), our Bill of Lading terms and conditions

clearly specify that the carrier shall not be liable

for damages or losses resulting of delays (clause

08).

FOR THE PORT OF NEW YORK

ALONE, 06 CLAIMS WERE

RECEIVED IN JANUARY.

Each of those claims were considered to be a

total loss, with an average commercial invoice on

the amount of US$45,000.00 which figure a total

of US$270,000.00 in cargo loss. On top of that,

there are costs with cargo disposal and surveyor

fees. In the upcoming months, those numbers

are expected to increase as our customers

prepare their claims to be filed.

RESOLUTION

As unfortunate as it is, our challenge will be to

educate customers to the fact that, although the

loss is real and happened under carrier

possession, there are provisions that regulate

our Bill of Lading terms and conditions and

protect the carrier against

liability for damages caused

by natural events.

All shipments to and from United States are

subject to COGSA Law, and its section §1304 -

Rights and immunities of carrier and ship, that

rules about “uncontrollable causes of loss”

includes fire, act of God, act of war, quarantine

restrictions, riots and civil commotions, and any

other cause arising without the actual fault and

privily of the carrier.


IMPROVEMENTS

In 2017, we’ve received 44 claims related with

wine cargo for the POD New York alone – data

retrieved from Themis report tool. A

considerable number of claims are related to the

fact that shippers carried wine in dry van

containers, subject to humidity and temperature

fluctuations.

Wine is a very sensitive commodity; if not

properly kept may cause total loss of the

product. In the summer, a dry van container can

reach +300F inside the unit, causing the cargo to

ferment and become vinegar.

And during the winter, a dry van container will

cause the cargo to freeze. It comes to represent

a significant amount of loss.

In view of the above, why do

we still book shipments of

wine in dry van containers, if

ultimately the claim will be

filed against ourselves?

We suggest to our commercial team to make a

campaign with our main wine importers and

exporters worldwide to educate them about the

risks of shipping the wine in a dry van

equipment, and suggest instead to use reefer

units. It would have key benefits: First, increase

our revenue, since to ship reefers is profitable

for the carrier than ship dry containers. Second,

we would increase our reefers market share.

And third, we will prevent such losses and reduce

significantly our number of claims related with

wine.

Make Campaign Inform worldwide Risks & suggestions

Increase revenue

Increase market share

Prevent losses

Reduce claims


RELATED ARTICLES

COGSA

The Carriage of Goods by Sea Act (1936) is a United States statute

leading the rights and responsibilities between transporters of

cargo and vessel owners regarding ocean shipments to and from

the United States. The carrier’s liability exposure is limited to

US$500.00 per each “package” manifested on the Bill of Lading.

However, COGSA neither defines what qualifies as a package or

a freight unit, nor does it clarify which situations and

circumstances will prompt courts to disregard the limitation.

What is a COGSA Package?

The most commonly explanation defines a COGSA

package as “a class of cargo, regardless of size, shape or

weight, to which some packing preparation for

transportation has been made which facilitates handling,

but which does not necessarily cover or completely

enclose the goods”. Items fully enclosed, such as bales,

boxes, bundles, cartons, coils, crates, pallets, rolls and

skids, almost always qualify as packages. However, items

that are not completely concealed or enclosed may or

may not be considered as packages. When a bill of

lading clearly describes a unit of packing that can be

interpreted as a package, a court will accept the bill of

lading’s package definition as a COGSA package.

Litigation might arise when bill of lading’s description of

package is imprecise.

Ocean Containers as COGSA Package

COGSA has not yet been clarified to include

consideration of ocean containers. COGSA

simply does not address whether ocean

containers are “packages”. Consequently, the

courts carry the burden of determining whether

and when ocean containers qualify as COGSA

packages. Once in force, the United Nations

Convention on Contracts for the International

Carriage of Goods Wholly or Partly by Sea, the

Rotterdam Rules, will clarify the limitation. The

shipping industry began using containers during

the 1960s.

Carriers began amending bills of lading to define

containers as packages under COGSA. Before the

arrival of sealed containers, carriers could

identify shippers’ packages by inspecting the

cargo. With the arrival of containers, carriers

a class of cargo,

regardless of size, shape or

weight, to which some packing

preparation for

transportation has been made

which facilitates handling, but

which does not necessarily

cover or completely

enclose the goods

“ “ MARÍA PANTOSIN

Cargo Claims Ass. Manager,

MSC USA


began arguing that they should not be liable for

that which they could not see and, therefore,

the US$500.00 package limit should be

applicable to containers.

When Congress enacted COGA, containers did

not exist. Courts were forced to search for

criteria to determine if containers were

packages. This include information obtained

from bills of lading, the nature of the goods and

the ownership of the container.

The package concept was first

extended to containers based

upon a “functional economics

test.”

If goods could be shipped in packages, these

parcels were considered functional packages. If

not, the container was deemed the package. The

test was abandoned in 1981. Now carrier

furnished containers with disclosed contents are

not packages, regardless of their contents’

packaging. However, if the bill of lading gives no

description of the contents, then the container

might be considered a package. If the bill lists

the container as a package and fails to describe

its contents as objects that can reasonably be

understood to be packages, the container is

then deemed the COGSA package. Goods

shipped in containers and described as not

separately packaged will be classified as goods

not shipped in packages. This limits the carrier’s

liability to US$500.00 a “customary freight unit.”

TIME BAR - COGSA Under COGSA, the time bar commences running

on the date of “delivery” of the goods to the

consignee. But “delivery” is not defined by the

statute or Act. Case law states, essentially, that

COGSA “delivery” occurs when the consignee

receives the goods, either actually or

constructively, that is picking them up, or has

had a “reasonable opportunity” to do so.

Accordingly, if the Notice of Arrival is sent and

the consignee waits 30 days to collect the cargo

but can’t, for example because a fire consumed

it on the 15th day sitting at the port, it is all but

certain “delivery” will have occurred after five

days, so the loss will be the consignee’s, even

though it never physically received the cargo.

Where there is a pick-up of the cargo, the issue

is clearer and dominion by the consignee’s

agent, typically the trucker, satisfies the

“delivery” requirement under COGSA.

If the cargo was a “door” move, meaning MSC

was responsible to haul the container to the

consignee’s warehouse, then the question

becomes more difficult. One can argue the ocean

leg of the transit ended when the container left

the port, regardless of whose trucker was used.

Accordingly, the COGSA time bar would become

irrelevant and land-based time bars would then

control the issue of the timeliness of a suit.

However, both the terms of MSC’s B/L and

recent US Supreme Court cases, Kirby v. Norfolk

Southern R.R. and K Line v. Regal Beloit, make it

fairly certain the ocean bill of lading continues to

remain viable even over the land phase of an

intermodal move. That appears true even when

conflicting land-based law would otherwise

apply. Accordingly, we believe the COGSA time

bar would control in a door move. But, as the

consignee would only receive its cargo when the

overland leg was completed, the time bar would

only begin to run, when the cargo reached the

consignee’s designated location for “delivery”

of its cargo to it. In such a case, “delivery” would

not be when the container was “out-gated”, but

instead when it was “gated-in” at the warehouse

or FINAL destination. Only then would COGSA

“delivery” be accomplished, and, accordingly,

only then that the time bar would start to


CARRIER LOSS MITIGATION

The Oxford English Dictionary defines mitigation as “the action of

reducing the severity, seriousness, or painfulness of something”.

For us dealing with claim settlements, the definition of mitigation

could be put, in simple terms, as the action of reduce the costs.

Quite often claimants exaggerate their claim amounts, for

multiple reasons: ignorance about regulations; lack of experience

with claims and salvage proceeds; or simply bad faith. Our Bill of

Lading Terms & Conditions (clause 20.4) states: “Refusal by the

Merchant (…) to mitigate any loss or damage thereto shall

constitute an absolute waiver and abandonment by the

Merchant to the Carrier of any claim whatsoever relating to the

Goods or the carriage thereof”.

From the carrier perspective, loss mitigation is logical and essential response. Each claim received must

be carefully analyzed and pondered, to guarantee that we don’t pay more than what would be needed.

In 2017 alone, MSC USA received about 827 priced cargo damage claims, generating a total of

US$7,912,199.81 in claimed amount, thus the importance of reducing claim amount as much as possible.

PORT CLAIMS AMT CLAIMED BALTIMORE 51 $ 216,932.51

BOSTON 21 $ 54,034.92

CHARLESTON 28 $ 1,316,998.23

FREEPORT 3 $ 15,491.56

HOUSTON 59 $ 302,483.75

JACKSONVILLE 10 $ 474,650.46

LONG BEACH 71 $ 529,955.69

LOS ANGELES 42 $ 496,131.72

MIAMI 7 $ 25,336.11

MOBILE 0 $ -

NEW ORLEANS 9 $ 15,595.33

NORFOLK 56 $ 479,721.73

OAKLAND 12 $ 89,230.09

P. EVERGLADES 31 $ 635,148.69

PHILADELPHIA 55 $ 845,470.89

SAVANNAH 51 $ 388,641.57

SEATTLE 114 $ 191,324.80

TAMPA 1 $ 309.76

TOTAL 827 $ 7,912,199.81

(data retrieved from Themis’ reports generator tool)


Cargo Claims


Simple steps, if correctly taken, could come to

represent a huge claim amount reduction. Let’s

take a recent case as example: In February 2017,

we’ve received a priced claim in the amount of

US$78,105.00 for 82 missing cases of cargo at

New York terminal; the shipment consisted of

644 cases of luxury shoes made in Italy, for the

well-known brand Salvatore Ferragamo. The

lawyer-claimant argued that it was reasonable

for them to claim based on the commercial value

of the cargo itself, which means the amount

would consider the potential profit after sales,

not based on the commercial invoice; his

arguments were supported by previous court

decision Valerina Fashions v Hellman, 897 F.

Supp. 138 (S.D.N.Y. 1995) which we couldn’t

refute.

One of the first things to be

checked in this scenario is the

seal integrity.

Therefore, in the possession of TIR from port of

load, transshipment and port of discharge, we

could determine that seal discrepancy occurred

at port of discharge. The second

thing to be checked is the cargo’s

weight registered in both TIRs.

However, by comparing the

weight, we couldn’t tell that

there was missing cargo (shoe

is a light weight commodity,

would be hard to catch a

significant weight discrepancy

for 82 cases of shoes). The third

factor checked was the pictures

provided to us; it displayed

torn and hand-opened

carboard boxes all over the

container, an evident sign that

someone had broken into the

container. The fourth piece of

information to be checked was the container

timeline; using the multiple tools of tracking

available we could stablish that container

remained 04 days at the terminal yard - for

instance an enough time length to have the

cargo stolen - and in some point remained in a

low yard position (ground) - which could be

easily reached.

We then started the liability dispute with the terminal, and after a long debate providing the evidences

we had against them, we got an offer of 50% of claimed amount –

Now the challenge would be to make the

lawyer-claimant to accept this amount.

“


Thus, we used the

below arguments against him

• MSC had no records of incidents reported involving the unit while

under our possession and control

• There are no damage / incident reports issued neither by vessel nor by

terminal

• There is no Police Report provided by the customer / terminal

• There is no Survey report provided by the customer

• Customer out gated the container without clarify / address the seal

discrepancy with the terminal; didn’t request the terminal to issue a

report about seal incident

• The weight recorded on the TIRs didn’t show signs of missing cargo

• There wasn’t undoubtful evidences provided by the customer that

cargo had been stolen under MSC possession

Due the above, lawyer-claimant accepted the offer,

and case was successfully closed –

with recovery in full.

So, the lesson that remains here is to always

make sure You are checking every

single aspect of the situation,

because it gives you support to make

your arguments and reach satisfactory results.

“ “


WHAT IS COMING : 2M ALLIANCE AND DEVIATIONS IN USA CAUSED BY MAERSK

In the past year MSC USA registered at least 07 big cases of

deviation files resulting of the fact that MAERSK Line had

discharged hundreds of MSC containers at the wrong port,

mostly happening at East Coast. For all the cases, MSC USA had

to coordinate logistically the reallocation of those units to its

intended port: not only an operational challenge but also a legal

one. All the units had to be trucked to the correct port, which

came to represent a cost of US$244,429.92 and a great amount

of time. You might be thinking ‘why did we truck it instead of

putting the units back onboard and deliver it by sea’.

The answer is: because in USA there

is something called ‘The Jones Act’.

The Merchant Marine Act of 1920 is a United States federal

statute that provides for the promotion and maintenance of the

American merchant marine. Its purpose is to regulate the

maritime commerce in US waters and between US ports. Section

27 of the Act is also known as the Jones Act, named after Senator

Wesley Jones, who introduced it. Part of the act deal with

cabotage, which is the transport of goods and/or people

between ports of the same country along coastal waters. The

Jones Act is a means of protectionism, because it prohibits

foreign-built, foreign-owned, foreign-flagged vessels from

engaging in coastwise trade within US waters.

Referring to our initial example, this has caused a huge problem

for MSC because we could not simply put the containers on

another vessel and discharge the containers at their original

ports of discharge; we would have faced a Jones Act violation,

as in the eyes of the United State Customs and Border Patrol,

these containers had already discharged in the US and therefore

could not move to another US port via a foreign-owned and

flagged vessel. Incidences like this don’t often happen but when

they do it causes a great deal of distress to those who must

handle the situation. Most importantly, it is critical to notify the

United States Customs and Border Patrol immediately when a

container must be discharged from a vessel in a port when it was

originally loaded at another US port. The fine for such offense

could be tens of thousands, or even the value of the cargo itself

should the USCBP want.


Cargo Claims

VITO TOTINO MSC USA

Cargo Claims Manager


The Jones Act was criticized in the news recently

when there weren’t enough US-flagged vessels

available to ship relief materials to the island of

Puerto Rico, a US territory, and therefore subject

to the Jones Act.

After two hurricanes, Irma and Maria, wipe out

most of the island’s infrastructure, the US

congress ended up voting in favor of and

granting waivers to foreign-flagged vessels to

allow supplies to make it to the island.

Now, as the time has passed, MSC USA started to

receive the U.S. Customs fines in result cases

above mentioned. Last penalty received from US

Customs of the Port of Norfolk, figuring the

amount of US$5,000.

Thankfully, after MSC present

its defense to Customs, they

agreed to reduce the penalty to

US$500,00.

Two key points shaped Customs

verdict

It was the first time that MSC

had been fined in Norfolk for

that matter, and

MSC was able to prove that it

was unintentional and resulting

of MAERSK fault alone.

However, we can’t guarantee that U.S.

Customs will be so understanding in the

future, and it is still unclear if MSC USA

will be fined for all the cases. Although

the Customs rules are the same for every

Customs District, each port director can

apply it at their own discretion; some of

them will consider that we must be

penalized, while others will consider it

as a mistake with no penalty

consequences. Therefore, we cannot

confirm that we will receive a penalty for

some or all the cases; we can confirm

however that all of them are at the same

risk level of receiving a penalty.

1

2


HONORING CAPTAIN

NANIK KIRPALANI

In December 21st, 2017, our

dearest Capt. Nanik

Kirpalani retired from his

position as MSC USA Legal

Manager.

Captain dedicated

the last 18 years of

his life working for

MSC USA; he joined

MSC in 12-20-1999

and always worked

on the Legal /

Claims Department .

As his colleagues and friends,

we just would like to reserve

this space to show him our

sincere appreciation. While

he may not read this, we are

truly grateful for Captain’s

years of dedicated service. He

is a wealth of knowledge;

always providing us with

mentorship about the legal aspects of our claims, and we all surely

learned a lot with all the articles he wrote for us on maritime laws

and the rules & regulations of the shipping industry. The shortest

answer was always accompanied with a great explanation. Above

all, he is not only an excellent professional but also a magnificent

human being with a big heart who was always ready to help

everyone; a kind person and a friend. We will surely miss Captain

Kirpalani, but we wish him all the best for the future and that he

may fully enjoy his well-deserved retirement.


OUR TEAM – MSC USA CLAIMS DEPARTMENT

Standing, from left to

right: Capt. Michael

Morales, Shay

Pietrowicz, Endi Liu,

Vito Totino

Sitting, from left to

right: Lale Karakus,

Maria Pantosin,

Sheila Pereira


ABOUT MSC LEGAL NEWS

MSC Legal News is an educational E-newsletter published internally once every 2 months by Legal team

of different MSC Agency worldwide.

EDITORIAL BOARD

Your opinion is important, please let us

know how we can serve you better &

improve the content of MSC Legal News!

Disclaimer

The advice offered in this E Newsletter is intended for informational purposes only.

The opinions, beliefs and viewpoints expressed by the various authors reflect their personal beliefs only.

Every case is different and the legal approach MSC has dealing with each case individually depend on full

set of circumstance

LINA JASUTIENE

P&I, Legal, Claims department

MSC Geneva

LJUBINKA BASIC

Claims Handler MSC Chile

MARÍA LUISA RAMELLO

Marketing & Statistics

Assistance

MSC Chile

MSC LEGAL NEWS - it.mscchile.clit.mscchile.cl/claims/ISSUE 5 MARCH 2018 MSCUSA.pdf · available...

Documents

Transcript of MSC LEGAL NEWS - it.mscchile.clit.mscchile.cl/claims/ISSUE 5 MARCH 2018 MSCUSA.pdf · available...