1.NEWLY REGISTERED CLAIMS
A. All policy years
　　In policy year 2002, there are a total of 1,095 newly registered claims for all policy years with an aggregated claim amount of US$ 29.73 million, representing 1% and 29% decrease as compared with 1,016 and US$ 42.15 million of the same period last year. The aggregated claim amount is the lowest for the past six years.

Table 1

Newly Registered Claims for Policy Year 2002

Table 2

B. Policy year 2002

　　There are totally 791 newly registered claims for policy year 2002 with an aggregated claim amount of US$ 18.87 million, a respective 7% and -43% increase as compared to 738 and US$ 33.3 million of the same period last year in respect of number and amount of claim. ( Table 3, 4 )

Table 3

Table 4

Number and amount of claim for the following policy years

Notes:
a. The increase rate is 2002/2001 figure.
b. Please refer the above statistics to various annual reports of the Association. The statistic period starts from 21st February of the current policy year and cuts off on 20th February the next.

C. Major claims incurred in policy year 2002 (claim amount over US$ 400,000 )
　　There are 5 major claims incurred in 2002 with total claim amount of US$ 9.26 million. The number and amount of claim dropped 55% and 61% respectively compared with last year's figures (Table 5).

Table 5:

Major claims incurred in 2002 ( claim amount over US$ 400,000 )

a. M.V. "An Shan" of Guangzhou Ocean Shipping Co., Ltd. carried bagged sugar and arrived at Hodeidah, Yeman on 27th April 2002. Upon discharge some cargo was found wet damaged. The Association instructed local surveyor to carry out inspection on the cargo. In order to prevent arrest of the ship the Association arranged 4 bank guarantees in the total amount of US$ 380,000 to the receivers. Two consignees brought claims against the owner in the total amount of US$ 407,000 under 4 Bs/L. Claims under two Bs/L have been amicably settled. The Association is negotiating with the other claimants on behalf of the owner.

b. M.V. "Hong Yuan" of Weifang Great Ocean Shipping Co., Ltd. carried a shipment of silicon steel cargo from Japan. Cargo rust damage was found during discharge at Huangpu port on 6th June 2002. Yet receiver only notified owner of cargo damage two month after discharge. Later they lodged claim in the amount of US$ 1.1 million. The Association immediately instructed surveyor to ascertain the extent and cause of the damage and gather relevant evidence. The Association is now handling the claim on behalf of the owner.

c. M.V. "Feng Ping" of Guangzhou Ocean Shipping Co., Ltd. carried a shipment of bagged sugar from Thailand. Part of the cargo was found caked upon discharge at port Um Qaser, Iraq, upon discharge on 28th June 2002. 1,244 MT cargo was rejected by receivers and was loaded back to the ship. Cargo underwriters later sold 1,060 MT damaged cargo to a buyer in Dubai, thus disposing most of the damaged cargo. Receivers and their underwriters are claiming against owner in the amount of US$ 500,000. The Association is undergoing amicable settlement negotiation with the claimant.

d. M.V. 'Nan Shan" of Hunan Ocean Shipping Co., Ltd. carried a shipment of soybean and soybean meal from the U.S.A. Some cargo was found damaged upon discharge at Birdama and Hereke, Turkey. Cargo receivers arrested the ship through the court, requesting bank guarantee in the total amount of US$ 6.6 million. Considering huge amount of the claim, the Association instructed a local survey company without delay and at the same time appointed an agriculture expert from U.K to carry out survey on the spot. Because the local court would not accept any form of letter of guarantee, the Association had to arrange bank guarantees in the total amount of US$ 4 million for two cargo owners. Now three cargo owners started legal proceedings in the local court against the owner. The Association already appointed lawyers to protect owner's interest. Owner is now applying to the court to reduce the amount of guarantee based on shipowner's limitation and other law.

e. M.V. "Fei Yun Ling" of Dalian Ocean Shipping Co., Ltd. carried a shipment of log from Papua New Guinea to Zhangjiagang. During the voyage, seawater entered the holds. Despite hard rescue work by the crew the vessel sank off the Japanese Sea on 10th November 2002. The vessel sank together with 5,840 cubic meter of log on board. Fortunately all the crew were rescued. At the request of the Japanese Coast Guard, owner removed the lifeboats which were lost into the sea. Cargo receivers have appointed lawyer and lodged total loss claim in the amount of US$ 600,000. The Association is now assisting the member to investigate the claim and prepare for owner's defence.

2. ARREST OF SHIP AND GUARANTEE
　　In policy year 2002 the Association arranged security in various forms for 31 entered ships in the total amount of US$ 5.07 million. Most of the guarantees are in the form of Club letters. The net increase in terms of number and amount of guarantee is 0% and -61% respectively, by comparison with those of the same period last year.

Table 6:

Arrest / Guarantee Cases

US$ 10,000

3.CLAIMS HANDLING
A. Settled claims
　　In policy year 2002 there are 1,276 settled and closed claims occurring in various policy years. The total claim amount is US$ 44.59 million whereas total payment by the Association is US$ 6.93 million (Table 7).

Table 7
US$ 10,000

B. Payment position and the trend of claim
　　The Association's accounting statistics shows that total payment by the Association for claims of all policy years reached US$ 11.15 million. Compared with 13.53 million of the same period in 2001, the amount of payment decreased by US$ 2.38 million or 17.6%. Members loss prevention work during recent years accounted for the main reason of such decrease, as a result of which major incidents dropped noticeably, resulting in great improvement of the claims position.

　　Since 1995 both the number and amount of claim from entered ships have been kept on high level. The average amount of claim (1995-2000) has been in the range of US$ 56 million. The situation has only been improved since 2001. Started from 2002, it has kept on improving further.

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

1995 policy year
a. M.V. "Tian Yue" of Tianjin Marine Shipping Co., Ltd. encountered heavy weather on 7th November 1995 during her No. 268 voyage from H.K to Xingang. One peace of heavy and awkward cargo stowed in an open-top container was washed overboard. Cargo owner started legal proceedings against the owner in the total amount of US$ 499,000. The Association appointed lawyer to carry out investigation work and to obtain evidence in order to protect member's interests. Although the first instant court did not accept our heavy weather defence, it held that cargo loss was due to shipper's insufficient securing measures inside the container on CY-CY terms. As the cargo was lost overboard while the container itself did not move nor was it damaged during the heavy weather, shipowner should not be held responsible for total loss of the cargo. Shipowner won the case completely.

1997 Policy Year
b. M.V."Wen Zhou Hai" of Cosco Bulk Carrier Co., Ltd. carried a shipment of corn from U.S.A to Japan in January 1998. Cargo was found wet damaged upon discharge. The Association provided letter of guarantee in the amount of US$ 528,000 to avoid arrest of the ship. Cargo owner later started legal proceedings in H.K against shipowner. The amount of claim is US$ 857,000. Survey report issued by surveyor on behalf of shipowner concluded that cargo damage was attributable partly to seawater damage and partly to sweat damage, to the extent of which no division could be drawn. The Association therefore instructed our lawyer to put more emphasize on opponent's delay in the proceedings in order to apply to the court to strike out the claim for want of prosecution. We also insisted upon the other party's provision of security for our cost. Apart from the above procedure issues, we also put forward cargo's latent defect defence because the moisture content of the cargo was excessive. After several rounds of negotiations, the two sides finally settled the claim out of court at the relatively low level of US$ 269,500.

c. M.V. "Mei Gui Hai" of Qindao Ocean Shipping Co., Ltd. collided with a North Korean vessel "Kang Shen" off Changjiangkou on 28th February 1997. "Kang Shen" sank together with her cargo at Changjiangkou waterway following the collision. Since the owner of "Kang Shen" was unable to arrange removal of the wreck and the cargo to comply with the compulsory order issued by Shanghai Harbor Superintendence Bureau, our vessel was forced to put up letter of guarantee for wreck removal in the amount of US$ 500,000. The claim was finally concluded with our owner paying US$ 450,000 to the other ship as settlement of the hull claim and contribution to wreck removal liability. Total loss of our owner in respect of hull, loss of time and wreck removal contribution was in the range of US$ 690,000. The hull underwriters and shipowner differed on how to divide contributions between hull and P&I underwriters. In the end China Maritime Arbitration Committee made a final order which mainly supported P&I underwriter's views. It was held that the hull underwriters should contribute US$ 494,000 whereas the P&I underwriters should contribute US$ 170,000 towards the settlement fund. Member's loss as a result of contribution is therefore reduced.

d. M.V. "Da Ming Shan" of Guangzhou Salvage Co., was discharging steel cargo at New Ark port in U.S.A on 3rd January 1998. One local stevedore was allegedly injured following collapse of the cargo inside the hold. However neither the owner nor the Association were informed of such incident at that time. In February 2001 the stevedore lodged legal proceedings against the owner in New Jersey State court. The claim amount is US$ 800,000. The Association instructed our lawyer to put forward procedural defence on behalf of the member. Firstly we applied and were granted to stay the proceedings from the state court to federal court that is more experienced in maritime cases. Then we advanced argument to the effect that plaintiffs' service was defective either according to local law or the Hague Convention. We thus requested the court to dismiss plaintiff's case. In the end the court supported our procedural defence and dismissed stevedore's proceedings. Even if the plaintiff wanted to start a new action against the owner through proper service, the claim would nevertheless already have been time barred! Owner won the case.

e. M.V. "Qing Jiang" of Guangzhou Ocean Shipping Co., Ltd. carried bagged sugar from Santos, Brazil. to Dubai. Upon discharge on 19th July 1997, cargo was found short-landed and wet damaged. To avoid arrest of the ship, the Association, on behalf of the owner, issued letter of guarantee in the amount of US$ 800,000. Cargo owner subsequently lodged claim against the owner in the mount of US$ 950,000. Survey report issued by surveyor appointed on behalf of the owner revealed that the cause of the damage was due to entrance of seawater into the hold during heavy weather (8 - 9 on the Beaufort scale). It appears that some hatch covers were not watertight and to make it even worse the hull developed minor cracks. The Association appointed lawyer to investigate the case and collect relevant evident in order to prepare for owner's defence. During settlement negotiations we mainly focused our arguments on title to sue and receiver's failure to mitigate further loss and damage. After hard negotiation opponent was forced to accept settlement in the amount of US$ 200,000 to conclude the claim on low level.

2000 Policy Year
f. M.V. "An Yue Jiang" of Guangzhou Ocean Shipping Co., Ltd. was loading cargo at Dalian on 9th October 2000. One heavy and awkward cargo suddenly dropped from the crane due to loosened strings. Cargo owner brought claim against owner in the amount of US$ 510,000 for repair cost. Since owner's defence on merits of the claim is rather weak, the Association applied for package limitation under Chinese Maritime Code for shipowner. Cargo owner eventually accepted lump-sum settlement at RMB 620,000, which is a satisfactory result to member.

g. M.V. "Jia Ding Guan" of Dalian Ocean Shipping Co., Ltd. carried a shipment of Malaysian log to Zhangjiagang. On 29th December 2000 seawater entered cargo holds. The crew and other parties made great efforts to rescue the ship. However the vessel was totally lost on that date. All crew were saved yet 1,171 pieces of logs got lost with the vessel. The Association provided letter of guarantee in the amount of US$ 742,000 on behalf of the owner to prevent arrest of sister ship. Cargo receivers started legal proceedings against the owner claiming US$ 776,000. They alleged that the vessel was unseaworthy as leakage occurred at the beginning of the voyage. In addition they criticized that master and crew were incompetent in that the salvage attempt was improper and they gave up the ship too early. Owner argued that the ship was seaworthy at the beginning of the voyage and the loss could only be attributable to inherent vice of the ship itself, to which owner should be exempted. In the end the two sides settled the claim out of court at US$ 150,000.

2001 Policy Year
h. M.V."Jian Hua" of Fuzhou Mawei Huarong Marine Shipping Co., Ltd. was taking shelter from typhoon at Sanduao port of Fujian province on 23rd June 2001. The vessel accidentally struck local fishermen's fishing farm nets. The fishermen started 5 legal proceedings against the owner in Xiamen maritime court claiming loss of or damage to property and loss of earnings 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 first instant court issued judgement in January 2002 holding owner responsible for 60% of the loss, which amounted to total payment of US$ 815,000 by shipowners to the fishermen. The court also dismissed one of the proceedings on the ground that the evidence submitted was insufficient to support the claim. Both plaintiffs and defendants lodged appeal in the high court. Finally the Appeal Court issued judgement, generally maintaining the previous one. Although the final judgement amount is a little bit higher then the previous judgement P&I underwriters are not required to contribute to it because it was still within payment range of the hull underwriters.

i. M.V. "An Da Hai" of Shanghai Xin Hai Tian Shipping Co., Ltd. was taking sheltering from typhoon near Shantou port on 20th 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 instructed lawyer to assist the owner to prepare for the proceedings. After hearing the case for a few times the court issued judgement supporting owner's defence. It dismissed plaintiffs' claim on the ground that there was insufficient evidence. Plaintiffs did not appeal. Thus in this rather substantial claim owner won completely.

j. M.V. "Hun Jiang" of Cosco Shipping Co., Ltd. loaded plywood from Sungaipakning, Indonesia to Muara Sabak. On 4the April 2001 the vessel collided with an Indonesian craft en route Durian Strait. The little boat sunk after the collision. Owner of the small boat started legal proceedings against our owner in Jakarta court. The claim, including wreck removal, crew injury and medical fees, totaled US$ 650,000. The first instant court judgement held that our owner should compensate the other ship US$ 495,000. The Association assisted the owner for the appeal and settlement negotiation. Before the issuance of appeal judgement the parties endeavored to reach settlement agreement. The Association later indemnified owner US$ 51,700 as final settlement of personal injury and wreck removal expenses.

k. M.V. "Rui Chang Hai" of Guangzhou Ocean Shipping Co., Ltd. carried a shipment of rolled steel from Antwerp and arrived at Philadelphia, USA in July 2001. Cargo receiver did not notify owner of any cargo shortage or damage at the time of delivery. Yet seven months later receiver informed owner that 13 pieces of special rolled steel with a total value of US$ 400,000 were wet damaged by seawater. They rejected the cargo and claimed against the owner. The Association actively assisted the owner to investigate the claim and was able to successfully reject the same on time-bar basis.

4.SPECIAL NOTES FOR CLAIMS INCURRED IN POLICY YEAR 2002
A. Indonesia prohibits export of logs and other forest products: developments - the arrested ships were released after 9 - month detention.
　　We have detailed report on this subject in our annual report of 2002. In early November 2001 two entered ships, namely M.V "Rong Cheng" of Xiamen Ocean Shipping Co., Ltd. and M.V. "Fengwa Star" of Nanjing Ocean Shipping Co., Ltd. were detained by Indonesia navy due to allegation of log smuggling. Political struggle among various government bodies and other factors resulted in protracted investigation while the vessels were kept detained for a long time. Although international P&I Clubs considered that the incident should fall under non-covered risk - "illegal or imprudent trade", the Association provided legal advice to the owner to assist in releasing the vessels. Upon the decision and instruction of the Board, the managing director of the Association led claim team to Indonesia to participate in the rescue operation. The team also made necessary follow-up arrangements. The two vessels were eventually released in July 2002, thanks to the joint efforts made by the Chinese government, China Ocean Shipping (Group) Co., shipowner and the association as well as other parties. The local police's final conclusion was that "although the vessels were involved in criminal act, there was insufficient evidence to support prosecution". One Singaporean vessel entered with UK P&I Club also benefited from the joint action and was released at the same time of our entered ships. The Association indemnified the two owners in respect of certain fees in accordance with relevant club rules and the decision made in the 28th Board meeting. Nevertheless the two owners suffered substantial loss financially.

　　The Association wishes to draw attention of the members to the 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 2nd April 2002.

B. Cancellation of pre-loading survey requirements for bulk soybean meal exported from India
The Association issued a special report on this subject in our annual report of 1998. From 1997 to early 1998 major cargo claims for Indian bulk soybean meal claim and arrest incidents frequently occurred due to prolonged monsoon season. Subsequently the Managers issued a detailed loss prevention circular dated 18th March 1998 (Ref: CPI/Claims [1998] No. 006). It requests member to arrange pre-loading survey whenever any entered ship is scheduled to load soybean meal in bulk from India, so as to ensure that the moisture content of the cargo is below 12%.
From 1998 to early 1999, members arranged pre-loading survey for a dozen of such shipment in accordance with the club circular. No cargo claim was ever reported afterwards. Pre-loading survey effectively restrained the on-going deteriorating trend of soybean meal claim.
　　Recent statistics shows that pre-shipment quality problem of Indian soybean meal has greatly improved, the main reason being that the local monsoon season has come back to normal these years. As a result moisture content of the cargo can effectively been kept within the range of 12%.
　　From 2000 up to now, there have been few reported Indian soybean meal claims. The Association made several inquiries with our Indian correspondent and other international P&I clubs and came to understand that the improving quality of this cargo is indeed resulting in much less claims. The international P&I clubs have therefore cancelled the requirements for pre-loading survey. Taking all factors into consideration, the Association has decided to cancel the requirements for pre-loading survey of this particular cargo. Members should nevertheless take necessary precautions to avoid the re-occurrence of similar nightmares. For details please refer to our circular which is to be issued soon.

C. American soybean meal claim
　　In 2002 one entered ship carried soybean and soybean meal from U.S.A to Turkey. Upon discharge substantial cargo claim occurred in the amount of US$ 6.6 million. We also get to know that during recent years a great number of claims occurred for South American soybean meal shipped to Southeast Asian or China. The main cause of damage is high moisture content of cargo upon shipment. Meanwhile the long voyage from South America to Southeast Asia caused deterioration and damage to cargo en-route. The Association recommend that member should pay special attention when loading the cargo. The pre-loading moisture content should not exceed 12%. Members may approach the Association to arrange cargo pre-loading survey when necessary.

D. The danger of carrying log wood
　　The Association issued a special report on this particular problem in the annual report of 2000. During that policy year three entered ships carrying Indonesian log sank with the cargo on board. It is noticeable and regrettable that another entered ship sank after entrance of seawater into the holds while carrying the same cargo. The Association wishes to draw members' attention to the particularly dangerous nature of log carriage.

E. Default judgement
　　Recently there are a number of cases where members received default judgements issued by foreign courts for claims of their entered ships. In all these cases the Association knew nothing about the claims because members failed to notify the claims and the foreign proceedings. Very often local ship agent informed the owner when they received court summons. Yet in most cases owners have failed to advise the Association nor did they give proper instruction to the agent in time. The simple result is that the proceedings went on until judgement throughout which nobody made any defence or conducted any settlement negotiation on behalf of the owner.
　　Default judgment unavoidably put shipowner and the Association to very awkward total loss position. The Association strongly recommend that member should pay special attention to this problem. Members should timely notify the Association of any claim or proceedings to enable the club to instruct lawyer to investigate, defend and settle the claim. This may help to avoid default judgement.
　　The Association also wishes to remind the member that notification of claim in a timely manner is the basic requirement set out under the General Terms and Conditions of the Club Rules, which they must fully comply with.
F. Special ports and areas
In policy year 2002, Yemen, Iraq, Algeria and Mongla are still top on the list of high- risk areas. The problems can be summarized as following:

a. Yeman:
　　Many medium to small size claims frequently occur here. Local receivers, ship agent, correspondent, survey company, insurance company and the port authority normally belong to a few family group companies. They can easily work together to make one-shop-stop claim and request for high level on the spot settlement. Vessels can be easily arrested and owners have to put up bank guarantee. (e.g. M.V. "Dan Yang", "An Shan", "Tao Jiang", "An Guang Jiang", etc.)

b. Iraq:
　　The government receivers are very selective to the cargo. Minor cover tearing will result in rejection of the whole bag. The torn bags will have to be loaded back to the ship as rubbish. Later receivers will lodge shortage claim. (e.g. M.V. "Feng Ping", "Yuan Jiang", etc.)

c. Mongla:
　　Small cargo claims often occur here. It is the local ship agent who usually detains the ship and requests for on the spot settlement at high level even if without any documentary proof, failing which they will detain the ship and request bank guarantee. ( e.g, M.V "Shun Yi", "Ruaha", etc.)

d. Algeria:
　　In Algeria vessels loaded with rice, beans, sugar or other food are opt to pilferage and rough handling, resulting in cargo shortage claims. Local claimants only accept bank guarantee. Loss of time is inevitable in case of arrest of ships. ( e.g. M.V. "Tai Gu Hai", "Xu Chang Hai", "Nan Shan", "Fu An Cheng", etc.)

　　The Association recommends that member should take necessary precautionary measures, e.g. to inform the Association to carry out discharging supervision. When booking or fixing charter party, owner should also add protective provisions. For example charterers should be held responsible for the discharge work and any shortage claim caused by pilferage or rough handling by the Stevedore Company.