CLAIMS

1.Newly registered claims

(1) All policy years

In policy year 2001 there are a total of 1,106 newly registered claims for all policy years including policy year 2001 with an aggregated claim amount of US$ 42.15 million, representing 0.09% and 33.3% increase as compared with those of the same period last year. This shows that claims situation is deteriorating. ( table 1, 2 ).

Table 1 Newly Registered Claims for Policy Year 2001

Incident date Item	Before 2001	2001	Total
Number of claim	368	738	1,106
Amount of claim ( US$ 1,000)	8,850	33,300	42,150

Table 2

Policy year Item	2000	2001	Increase
Number of claim	1,105	1,106	+0.09%
Amount of claim ( US$ 1,000)	31,620	42,150	+33.3%

(2) Policy year 2000

There are totally 738 newly registered claims for policy year 2001 with an aggregated claim amount of US$ 33.3 million, a respective 5.9% and 74.9% increase as compared to 697 and US$ 19.05 million of the same period last year in respect of number and amount of claim. The claims situation is also deteriorating. ( table 3).

Table 3

Risk Type		Number of Claim
		2000	2001
1	Cargo liability	415	358
2	Club’s instruction	53	127
3	Crew claim	46	116
4	Personal injury or death (third party)	104	53
5	Collision liability	29	24
6	Fine	14	16
7	Loss or damage to property	/	14
8	Stowaways	9	11
9	Pollution risk	8	6
10	Wreck removal liability	6	5
11	Others	13	8
12	Total	697	738
Risk Type		Claim Amount ( US$ 1,000)
		2000	2001
1	Cargo liability	9,639	14,040
2	Loss or damage to property	2,623	9,950
3	Collision liability	3,521	6,476
4	Crew claim	594	831
5	Wreck removal liability	258	590
6	Stowaways	165	428
7	Fine	360	345
8	Personal injury or death (third party)	552	310
9	Pollution risk	1,137	199
10	Club’s instruction	/	57
11	Others	205	71
12	Total	19,050	33,297

(3) Major claims occurred in policy year 2001 (claim amount over US$ 400,000)

There are 11 major claims with total claim amount of US$ 23,474,318.95 occurring in policy year 2001. Compared with the figures of policy year 2000, the number and amount of major claims increased by +22.2% and +97.3%.

a. M.V. “Mo Li Xiang” of Shanghai Pu Hai Shipping Co., Ltd. sailed from Lian Yun Gang port on 13^th March 2001. Upon sailing the bow of the ship struck the wharf twice, causing damage to dock facilities. The port authority lodged claim against shipowner claiming repair cost in the amount of RMB 300,000 (covered by the hull underwriters) and loss of earning in the amount of RMB 3.74 million or about USD$ 451,333.85 (covered by the Club). Soon after the accident, the Association closely coordinated with the owner and assisted the member in appointing senior master and surveyor to go to the spot so as to ascertain the extent of actual loss or damage. After several rounds of negotiation the port authority’s loss of earning claim was finally amicably settled at RMB 190,000.

b. During its voyage from Thailand to Korea, M.V. “Chris” of Chang Bai Shan Shipping Co., Ltd. Collided with a Korean fishing vessel “Mansung No.1” 39 nautical mile off Mupa port. The mooring fishing vessel which was drawing nets in fishing operation sank as a result of the collision. Two fishermen were rescued but four others went missing. “Chris” was detained by the Korean marine police. The Association had to provide letter of guarantee in the amount of US$ 430,000 for personal injury and death claim. The club also instructed surveyor and lawyer to investigate the claim on behalf of the owner. After several rounds of hard negotiation a settlement of the claim was finalized in the amount of US$ 194,000 on lump sum basis. The satisfactory result protected owner’s interests.

c. On 21^st June 2001 M.V. “Tian Shen”of Tianjin Marine Shipping Co. Ltd., collided with M.V. “Tong Tian Shun” near Shibeishan of Shantou port during its voyage from H.K to Shanghai.. Water entered into “Tong Tian Shun” and part of its bunker leaked out from the vessel. After the occurrence of the incident “Tong Tian Shun” instructed Guangzhou Salvage Company to seal the oil tanks and clean up the oil. In order to prevent arrest of our vessel “Hai Shen” the Association put up letters of guarantee in the amount of RMB 4 million and RMB 2 million. Presently the Association worked with the owner and lawyer together for the defence of loss of earning and apportionment of collision liability.

d. M.V. “Jian Hua” of Fuzhou Mawei Shipping Co. Ltd. was taking shelter from typoon at Sanduao port of Fujian province on 23^rd June 2001. The vessel accidentally struck local fishermen’s fishing farm nets / units. The fishermen started 5 legal proceeding against the owner in Xianmen maritime court claiming loss of or damage to property and loss of earning in the total amount of US$ 5.21 million. The Association and the owner instructed lawyer and got well prepared for the defence of the case. Owner applied to the court for the appointment of expert to evaluate actual loss of the fishermen. The court issued first instance judgement in January 2002 holding owner responsible for 60% of the loss, which amounted to total payment of US$ 815,000 to the fishermen. The court also dismissed one of the proceedings on the ground that the evidence submitted by the plaintiff was insufficient to support their claim. Both plaintiffs and defendants lodged appeal in the high court. The Association will closely work together with the owner in order to obtain favorable result.

e. M.V. “Rui Chang Hai” of Guangzhou Ocean Shipping Co. Ltd., carried a shipment of rolled steel from Antwerp. It arrived at Philadelphia for discharge on 20^th July 2001. In February 2002 cargo receiver informed owner, on a sudden, that they rejected 13 pieces of the special rolled steel alleging that they were damaged by seawater. The total value of the rejected cargo is USD 400,000. The Association instructed local surveyor to carry out joint inspection of the damaged cargo. Now the investigation work is under way.

f. On 7th August 2001, M.V. “Dainty River” of Cosco Container Lines Co., Ltd. collided with “Yi Shan” of Sino Trans Tianjin 2 nautical miles Southeast off Dalian Dayaowan waterway. Part of light diesel oil from our ship leaked out as a result of the collision. After the occurrence of the incident, Dalian Maritime Bureau initiated “Oil Pollution Emergency Plan” to carry out clean up work. DMB also issued “oil pollution clean up payment and compensation guarantee order” to the two shipowners requesting them to advance US$ 1.5 million in cash each to the authority. Upon further negotiation and discussion with DMB the Association advanced RMB 2 million on behalf of the owner to DMB as mobilization fees for oil pollution clean up cost. Later the Association issued letter of guarantee in the amount of US$ 1.2 million to DMB. The clean up operation has now been completed. DMB has not submit any clean up bill to the owner.

g. The dangerous cargo stowed at the tween deck went on fire when M.V. “Heng Shan” of Guangzhou Ocean Shipping Co. Ltd. was discharging cargo at Manzanillo port of Mexico on 23^rd August 2001.. The situation became very serious. The Association promptly instructed surveyor, lawyer, fire expert and professional fire-fighting team to go to the spot to assist the owner and master. Due to extremely complicated and dangerous nature of fire-fighting, discharge operation and disposal of the cargo , the operation went on for almost two month. However owner had to incur huge expenses in the amount of US$ 1.88 million for fire-fighting and cargo disposal. Shipowner announced general average and the G/A adjustment is under way. Now our fire expert is preparing expert opinion on the cause of the fire. The Association will work closely together with the owner and lawyer for the defence of the claim.

h. M.V. “An Da Hai” of Shanghai Xin Hai Tian Shipping Co. Ltd., was taking sheltering from typhoon near Shantou port on 20^th September 2001. There was suspicion that when the vessel dropped and weighed anchor during that time it damaged Sino-US underwater optical cable. China Telecommunication Co. Ltd., started proceedings against owner in September 2001 in Guangzhou maritime court, claiming direct and indirect loss of the cable in the total amount of RMB 40 million. The Association has already instructed lawyer to assist the owner to get well prepared for the proceedings. There has been two hearings of the case up to now.

i. M.V. “Dong Yang” of Chang Yuan Shipping Co. (H.K) Ltd., encountered typhoon “Lekima” during its voyage from Taizhong to Hongkong. on 25^th September 2001. 32 containers were washed over board whereas 32 others sustained damage to various extent. The Association timely arranged surveyor upon arrival of the vessel in discharge port and collected defence documents. Although cargo interests has not lodged any formal claim, estimated claim for this case may well exceed US$ 400,000.

j. One piece of heavy equipment with a weight of 140 MT dropped from the crane of the vessel when M.V. “Da Qiang” of China Shipping Co., Ltd. was loading heavy and awkward cargo at a Korean port on 27^th December 2001. The cargo was found to be a constructive total loss after inspection. Upon vessel’s arrival at the US discharge port the Association issued letter of guarantee in the amount of US$ 495,000 to cargo owner to avoid arrest of the vessel. The club is now preparing the defence of the claim together with the owner and appointed lawyer.

k. M.V. “ Fu An Cheng” of Xiamen Ocean Shipping Co., Ltd. arrived at Philadelphia to discharge cargo on 25^th January 2002. Bagged cocoa beans loaded in hold No. three caught on fire suddenly. Although the crew made all efforts and distinguished the fire, cargo in the hold was seriously damaged due to the big fire. Cargo owner applied to the court to arrest the ship seeking huge amount of security. The Association provided 4 letters of guarantee in the total amount of US$ 2.98 million. The guarantee amount has subsequently been much reduced after completion of further detailed survey. The Association, the lawyer and the owners are investigating the claim and preparing for the defence.

2. Arrest of ship and letter of guarantee

In policy year 2001 the Association arranged security in various forms for 31 entered ships to avoid threatened arrest or release ships from actual arrest. The aggregated security amount is US$ 12,871,136.11. Most of the guarantees are in the form of Club letters. The net increase in terms of number and amount of security is +29.2% and +97.3% respectively by comparison with those of the same period last year.

Table 4:

Policy year	1999	2000	2001	Increase
Number	30	24	31	+29.2%
Amount ( US$1,000)	150,836,300	65，248，740	128，711，360	+97.3%

3. Claims handling

(1) Settled claims

In policy year 2001 there has been seen are 1,164 claims occurring in various policy years settled/closed. The total claim amount for these claims is US$ 54.22 million whereas total payment is US$ 13.63 million

Table 5 US$ 1,000

Policy Year	2000	2001	Increase
Number of Claim	1,073	1,164	+8.5%
Amount of payment	60,280	54,230	-10%
	1,617	1,363	-15.7%

(1) Payment position

The Association’s accounting statistics showed that total payment by the Association for claims of all policy years in 2001 policy year reached US$ 13.63 million out of which expenses accounted for US$ 1.92 million or 14.2% of the total payment.

(2) Report on major settled claims (please also refer to our previous reports)

1988 policy year

a. M.V. “Ming Hai” of Qingdao Ocean Shipping Co., Ltd. was discharging sweet potato pieces in bulk at Ravena port in Italy on 5^th April 1988. Upon completion of discharge about 17,953 MT cargo was found mould or rotten. Cargo owner started legal proceedings against the owner in the local court with a total claim over US$ 1 million. Total claim will exceed US$ 2 million taking into account all the interests and costs until the time of amicable settlement. The court surveyor’s findings showed that the cause of cargo damage should be contributable to negligence of the stevedores during loading operation. Because during that time there had been heavy rain and snow but the stevedores did not put any cover on the cargo. On the other hand there was nothing to blame on the part of shipowner for ventilation or care of the cargo. Later Qingdao maritime court carried out investigation of our crew at the request of the Italian court. The Association closely coordinated with the owner and the court to get fully prepared for the investigation work. There is only one fact which is unfavorable to owner’s defence. Small quantity of wet cargo was loaded on board our ship due to reasons beyond vessel’s control. The Association instructed our lawyer to actively defend owners in the local court. But at the same time considering the fact that the crew failed in preventing part of wet cargo from being loaded onto the ship we also kept door of amicable settlement at low level open. Because there was the danger that the owner could still be judged to lose the case by the local court on the ground that owner failed to properly and carefully to care for the whole cargo. After 12 years of hard negotiation, the two parties reached out of court settlement one month before judgement date with owner in total payment of US$ 164,000 only. The settlement greatly protected member’s interests.

1989 Policy Year

b. M. V “Shou Guang Hai” of Tianjin Ocean Shipping Co. Ltd., loaded agricultural products in bulk at four Italian ports form December 1989 to February 1990. Upon discharging cargo owners lodged various shortage, mould damage claims. There was presence of living insects and foreign material inside the cargo. The vessel was arrested at Ravena port. The Association had to issued club letters in the total amount of I.Lire 8,800 million to release the vessel. Cargo receivers subsequently started legal proceedings against the owner in the local court in the total amount of US$ 1 million. Survey report issued by surveyor instructed by shipowner and the club concluded that the cause of the cargo damage was high moisture content and low quality of the cargo. Living insects were also originated from the cargo itself. The charterers and shippers should be held responsible for all the claims in accordance with relevant charter party terms. Since owner’s defence on the merits of the case was not strong there was the big risk of owner losing the case in the local court and having to pay for high interests and costs. To eliminate such a risk the Association, with the co-operation of the owner and local lawyer, reached amicable settlement with four cargo receivers after hard negotiation and settled all four cases in the total amount of US$ 360,000. The result of the settlement is satisfactory if we take into account huge interests and costs already accrued. Later the Association assisted the owner in the recovery action against the charterers and shippers. But the recovery action failed for various reasons.

1995 Policy Year

c. M.V. “Ma Guan Hai” of Guangahou Ocean Shipping Co., Ltd .carried with timber from Flushing and Antwarp to Japan. Upon discharge on 7^th June 1995 some of the cargo was found wet, stained or mould. There was also shortage claim. Cargo interests started legal proceedings in London against the owner and arrested the ship for security. In order to release the vessel the Association provided letter of guarantee in the amount of US$ 270,000.The Association instructed the lawyer to lodge procedural defence such as jurisdiction and application to strike out the case for want of prosecution. Meanwhile owner reserved their right of recovery against the charterers. To reduce the risk of an unfavorable judgement as well as to save legal expenses ,owner managed to settle the claim with cargo interests at US$ 130,000 after several years of negotiation. Later the Association instructed lawyer to start London arbitration against the charterers. Finally charterers agreed to reimburse owners US$ 130,000 so as to amicably settle the case. The result of the case is very satisfactory to owners.

1996 Policy Year,

d. M.V. “Zi Yun Shan” of Guangzhou Maritime Transportation Co., Ltd. Loaded with steel cargo from Brazil to two Japanese ports on 15^th March 1996. Upon discharge cargo was found wet and rusted. Joint survey findings showed that the old - aged vessel was in poor condition. During the voyaged seawater entered several hatches causing rust damage to cargo during heavy weather (8-9 on the Beaufort scale). Both sides reached similar conclusions regarding the extent of cargo loss or damage. Cargo receiver lodged formal claim in the amount of J.Y 56,897,819 and requested security from the owner. Considering that owner’s defence in this claim was rather weak the Association instructed local correspondent to try to settle the claim out of court. The parties reached amicable settlement with owner paying JY 13 million to claimant. The result is not bad.

1998 Policy Year

e. M.V. ‘Song Shan Hai” of Cosco Bulk Carrier Co., Ltd. Carried a shipment of 32,138.6 mt soya bean from Brazil and arrived at Qingdao port for discharge on 8^th July 1998. The cargo was found mould, caked and discolored during discharge. The cargo receiver rejected the cargo and requested security in the amount of US$ 3 million. The Association issued letter of guarantee in the amount of US$ 1.25 million to avoid arrest of the ship. The subrogated cargo underwriters started legal proceedings against the owner in Qingdao maritime court in the amount of US$ 3.044 million. The Association instructed our lawyer to investigate actual loss of the cargo. We also requested claimant to submit evidence of actual cargo disposal price. Because there have been cases in which the court supported the view that claimant can only claim actual loss in stead of claiming depreciation value of the cargo ascertained by survey company. The case was finally settled with owner paying RMB 5.65 million or about US$ 686,400 to cargo owner.

1999 Policy Year

f. M.V. “Joint Docas” of Chang Bai Shan Shipping Co., Ltd. left for Japanese discharge port on 1^st February 1999. Soon after commencement of the voyage it struck Qixing rock near Minjiang river mouth. Despite repeated salvage attempts the vessel eventually sunk within the main waterway near Minjiang river mouth. The local port authority issued compulsory wreck removal order to the owner requiring removal work to be completed within given period. The hull underwriters refused to accept abandonment of the vessel. The Association assisted the owner with the bidding process with several professional wreck removal companies. Shanghai Salvage Bureau successfully removed the wreck by explosion in May 2001. The Association reimbursed the member for crew repatriation expenses, oil pollution clean up cost, marking of buoy and wreck removal expenses in the total amount of US$ 844,000.

g. M.V. “Wan He” of Cosco Container Lines Co., Ltd. carried 20 40’ FCL containers of tapes from Fuzhou to Los Angels. Upon discharge on 11^th November 1999 cargo was found damaged. Several receivers lodged formal claims against the owner and its agent company in U.S.A claiming US$ 1.27 million in total. Shipowner rejected the claim on the basis that the containers were shipped on CY-CY terms and delivered with seals intact. Having obtained sufficient evidence to support owner’s defence the Association recommended to owners that they refuse to grant any further time extension to cargo owner on the expiry of time limit. It appears that the cargo owners have not protected time bar nor started legal proceedings against the owner in the local court. Owner successfully rejected the claim.

h. Similar cargo claims occurred on the same vessel during discharge at Long Beach in U.S.A on 14^th September 1999. The total claim amount is US$ 724,387. Shipowner used the same argument to reject this claim pointing out that cargo interests lack sufficient evidence to prove that cargo damage occurred during the custody of the carrier

2001 Policy Year

i. M.V. “Mo Li Xiang” : please refer to report on newly registered claim – major claims

j M.V. “Chris”” please refer to report newly registered claim – major claims.

4. Special notes for claims incurred in policy year 2001 and 2002

(1) Indonesia prohibits export of logs and other forest products

On 8^th October 2001 Indonesia Ministry of Forestry and Ministry of Industry and Trade issued a joint decree prohibiting export of Indonesian log and other forest products with immediate effects. Exporters who have received Letter of Credit from buyers abroad before the issuance of the joint decree are required to report to the ministries and have to realize the export before 31rst October 2001. Violation of the joint decision will be resulted in punishment under the Smuggling Criminal Act No. 10 of year 1995. According to Indonesia Forestry Law of 1999, deliberate offender will face maximum 5 year imprisonment and minimum fine of I.Rupiah 10,000 million ( about US$ 1 million). The cargo concerned and the transportation vehicle will be auctioned and confiscated to the state. In early November 2001, 8 vessels were arrested in Indonesian ports and put into Indonesian navy custody because of alleged violation of the joint decree. Up to now three of our entered ships are still under arrest there. The vessels and crew must undergo investigation conducted by the local police headquarters, the public prosecutors and various government organizations. Shipowners suffered substantial loss economically. And the prospects of release of these vessels are not clear at all. Owners are also facing the huge potential risk of big fine and confiscation of their vessels.

The Association wishes to draw attention of the members to the new joint decree of Indonesia local authority in respect of prohibition of export of log and other forest products. When booking or fixing any charter parties these kinds of cargo must be excluded so as to avoid the reoccurrence of similar detentions. For more details please refer to club circular [2002] No. 004 dated 2^nd April 2002.

(2) Increased oil pollution inspections by the Korean and US Coast Guard – engine room, oily water separator, oil record book become the focus of inspection

Recently the Korean and US Coast Guard have increased oil pollution inspections while emphasizing more on engine room, oily water separator ( O. W. S ) and oil record book during the strict inspection. If any oil residues are found in the overboard valve or pipes of O.W. S. or there is direct overboard bypass pipe connected with O. W. S, the vessel will be punished for fearing that it has discharged oil bulge overboard without prior filtering or special treatment. In addition, if Coast Guard find out that the contents of the oil record book are not consistent with facts or normal condition or contains incomplete record of overboard discharge, the vessel will also face severe punishment. If above mentioned accidents occur in Korea the fine will be between US$ 20,000 – US$ 40,000 and the vessel will be detained. In the United States the crew may also face criminal charge and will have to appear before the federal grand jury at the given time. The vessel will be detained and fined. In a recent case the master and chief engineer of two Panamanian registered ships were arrested. They were charged with ( 1 ) making false entries into a ship log to hide discharging of oily bulge water into the sea, ( 2 ) obstructing Coast Guard investigation, ( 3 ) instructing the crew to lie to the federal grand jury and impeding justice. If found guilty they will face up to 10 years imprisonment and maximum criminal fine of US$ 250,000.

The Association wishes to draw members’ attention to the situation in Korea and USA. Prior to arrival at Korean or US port the crew must double-check oily water separator and oil record book. If necessary, e.g. in the case of a US port, they must cut off and remove any overboard bypass pipe from a O. W. S ( welding alone is not enough ). There shouldn’t be any oil residue in any such pipes including the removed parts. For details please refer to club circular [2001] number 005 dated 20^th July 2001.

(3) Tapioca chips exported from Vietnam and Thailand – excessive moisture content, wet damage, caking, moulded and self-combustion.

During early 2002 five entered ship carrying tapioca chips from Vietnam and Thailand incurred big cargo claim as a result of wet damage, caking, moulded or even self-combustion upon discharge, due to high moisture content of cargo.

In these cases the moisture content of the cargo was as high as 14%. According to information gathered from relevant surveyor companies production of this cargo in China is decreasing whereas import from Vietnam and Thailand is on the increase. But the imported cargo often comes from different places. The quality of the cargo is suspicious – the moisture content is normally excessive, the protein content is low and the price is also very low. However the local cargo inspection companies do not carry out strict inspection on the cargo. Therefore it is not rare that although the various export certificate standards can meet with the requirements, actual moisture content of cargo is usually higher than the sales contract requirement or safe carriage requirement. When the cargo arrives in China it is inevitable that mould or caking will occur. It is also reported said that the domestic market in China for tapioca chips is also dropping. Buyers are more likely to consider transferring market risk to owners. The Association suggests that owner should check out pre-shipment cargo condition closely when carrying this kind of cargo from Vietnam and Thailand. If necessary, member should inform the Association of such shipment. The club may arrange pre-loading cargo survey and to reject cargo with high moisture content or already damaged. During the voyage the crew must pay more attention to ventilation of the cargo and should write down and maintain detailed ventilation record.

(3) The United Sates improve checking on foreign vessels and foreign seamen entering into the States after 9.11.

After 9.11 incident, United States strengthened anti-terrorism work in the States by carrying out more strict inspections on foreign vessels and seamen entering the US water. Recently there are 5 reported cases in which Chinese semen were caught using public booth in the port area without holding valid shore pass when being inspected. The crew were fined by US Immigration and Naturalization Service (INS). The Association’s US lawyer advised that US House of Commons have already passed new anti-terrorism legislation. According to this new legislation US Coast Guard is empowered to embark on foreign vessels to carry out detailed inspection on the crew, bridge and various documents. Vessels with bad record will be on the list of top priority class (e.g. vessel with previous INS record) and subject to 76-hour notice and inspection. If a vessel is requested for inspection it will cause unavoidable delay. It is anticipated that the new legislation will be passed after debate in the House of Senate. It will come into effect when the President issued approval. The Association will keep our members closely advised on the latest development of this new legislation and will provide recommendations in due course.

(4) Special ports and areas.

In policy year 2001, Yemen, Bangladesh, Algeria are still top on the list of high- risk areas. In Algeria vessels loaded with rice, beans, sugar or other food are opt to pilferage, rough handling resulting in cargo shortage claims. Local claimants only accept bank guarantee. Loss of time is inevitable in case of arrest of ships. The Association recommends that member should take necessary precautionary measures, e.g. to carry out discharging supervision, to reduce potential shortage claim. When booking or fixing charter party, owner should also add protective provisions. For example charterers and as well as the stevedore company should be held responsible for the discharge work and any shortage claim caused by pilferage or rough handling.

The Association again draws members’ attention to this particular risk and the loss prevention work.