Annual Report 2004

Annual Report 2004

Claims Handling

1.Newly registered cl= aims

A. All policy years

In policy year 2004, there were a total of 1,138 reported claims for all policy years (including newly registered claims of year 2004) with an aggregated claim amount of US$ 37.30 million. This represents a decrease of 5.5% and 34.6% to the preceding years of 1,204 and US$ 57.07 million respectively (as illustr= ated by Table 1&2). As a whole, the 2004 policy year evidenced considerable improvement of the claims situation.

Table 1 =

Newly Registered Claims for Policy Year 2004

In= cident date

Item

Before 2004

2004

Total

Number of claim

201

937

1,138

Amount of claim

( US$ 10,000)

431

3,299

3,730

Table 2

Po= licy year

Item

2004

2003

Increase rate

Number of claim

1,138

1,204

-5.5%

Amount of claim

( US$ 10,000)

3,730

5,707

-34.6%

B. Policy year 2004

There were 937 reported claims for 2004 policy year with an aggregated claim amou= nt of US$ 32.99 million, which represents a 2.9% and 35.8% decrease for the preceding year of 965 and US$ 51.34 million respectively. ( Table 3, 4 )

Table 3

Policy Year	2004	2003	Increase rate
Number of cases	937	965	-2.9%
Claim Amount	32,989,297.99	51,349,762	-35.8%

Risk Type	Number of Claim 2004	Number of Claim 2003
1	Cargo liability	412	431
2	Club’s instruction	217	228
3	Crew claim	188	184
4	Collision liability	24	25
5	Fine	19	25
6	Stowaways	7	17
7	Personal injury or death (third par4ty)	19	14
8	Loss or damage to property	17	14
9	Pollution risk	13	13
10	Others	18	11
11	Wreck removal	3	3
12	Total	937	965

US$10,000

Risk Type	Claim Amount 2004	Claim Amount 2003
1	Cargo liability	2,420.7	4,155.3
2	Collision liability	301	192.2
3	Crew claim	169	71.8
4	Loss or damage to property	138.3	81.3
5	Pollution risk	127.7	489.9
6	Fine	106.6	30.2
7	Club’s instruction	24.4	31.8
8	Others	11.3	17.9
9	Wreck removal	/	39.2
9	Through transit liability	/	20
10	Uncoverable GA contributions	/	5.3
	Total	3,299	5,134.9

Table 4 = &nb= sp; = &nb= sp;

Number and amount of claim= for the following policy years

Policy year

1998

1999

2000

2001

2002

2003

2004

Increase

Number of claim

823

624

697

738

791

965

937

-2.9%

Amount of claim

(US$ 10,000)

2962

2738

1905

3330

1887

5134

3299

-35.8%

Notes:

a. The increase rate is 2004/2003 figure.

b. Reference is requested to the above statistics to various annual reports of= the Association. The financial period starts from 21^st February of t= he current policy year and until the 20^th February the following year.=

C. Major claims incurred in policy year 2004 (claim amount over US$ 400,000 )

There were 15 major claims incurred in 2004 with a total claim amount of US$ 18.5= 6 million. The number of claim increased 15.38% as compared with last year’s fig= ure while the aggregated claim amount decreased 44.46%. (Ta= ble 5).

Table 5:

Major claims incurred in 2= 004 ( claim amount over US$ 400,000 )

= &nb= sp; = = &nb= sp; = &nb= sp; In US$ 10,000

.	Vessel	Member	Incident Date	Incident Place	Nature of Claim	Amount of claim or security
1	Le Sheng	Cosco Shipping	04.02.29	Ecuador	Cargo	100
2	J. Hope	J= iangsu Ocean Shipping	04.03.25	S= hantou	Cargo	85
3	New Argosy	Associated Maritime Company (HK) Limited	04.04.05	Z= hanjiang	Loss of property	82
4	Fei Yun He	Cosco Container Lines	04.04.23	Shanghai	Collision	121
5	Pu He	Cosco Container Lines	04.04.30	UAE	Cargo	138
6	An Lu Jiang	Fijian Jie An Shipping	04.05.11	Bangladesh	Pollution	43
7	An Lu Jiang	Fijian Jie An Shipping	04.05.11	Bangladesh	Cargo	250
8	Yi Hai	Cosco Bulk Carrier	04.07.23	UAE	Cargo	200
9	Le Ye	Cosco Guangzhou	04.08.04	Belgium	Cargo	170
10	Peng Yang	Shenzhen Shen Yue Marine	04.08.23	Hong Kong	Cargo	120
11	Wen Zhou Hai	Cosco Bulk Carrier	04.11.22	Qin Huang Dao	Fines	51
12	Shao Shan 1	Hunan Ocean Shipping	04.11.25	Spain	Cargo	48
13	H= ebei No.1<= /p>	H= ebei Ocean Shipping	04.12.11	Yemen	Cargo	147
14	Great Bright	Sinotrans Shipping	04.12.16	Panama	Collision	81
15	Great Zhejiang	Z= hejiang Ocean Shipping	05.01.26	UAE	Cargo	220
		Total:				1856

Brief of these claims are as follows:

a.M.V. “Le Sheng” of Cosco(HK) Shipping C= o., Ltd. Encountered severe weather on 23^rd Feb. 2004, while en route fro= m Japan to Ecuador. Part of the deck car= go fell over-board. The crew reinforced the lashing of the remaining deck carg= o on time, which were safely carried to the dischargi= ng port. In July 2004, The Association was informed by local lawyer that the consignees had filed a lawsuit in local court against the shipowner and the charterer for claim of US$ 1 million. T= he consignees applied for arrest of the vessel as well. The Association and the member is closely monitoring the development of the case and actively prepa= ring to defend the claim.

b. M.V. “J. Hope” Jiangsu Ocean Shipping Co= ., Ltd. capsized on 24^th March 2004, while carrying 4,849 tons chro= mium concentrate from Philippine to Taizhou. The crew were all saved, however, the vessel eventually sa= nk 60 nautical miles off Shantou in the EEZ of China. The MSA of Shantou issued compulsory oil removal order. The Association assisted the member in arrang= ing public bidding for the operation. The remaining oil was pumped out successf= ully with the bunker tank sealed up later. Up to date, the Association has reimbursed the member RMB 2.48 million covering the cost of diving and pump= ing out the oil. The Association is still currently handling this case.

c. M.V. “New Argosy” of Associated Maritime Company (HK) Limited collid= ed with a pile fender while its leaving berth in Shantou port on 5^th April, 2004. The accident was attributed to heavy weather and lack of cooperation with the tug. The Association provided a Le= tter of Guarantee in the amount of RMB 5 million to the port authority. The case= was settled at a low amount of RMB 950,000, largely owing to the Association’s prompt action right after the accident in arranging sur= vey for the damage and collecting first-hand evidence. The result is satisfacto= ry to the member.

d. M.V. “Fei Yun He&#= 8221; of Cosco Container Lines Co., Ltd. collided with M= .V. “Zhen Fen 5” of China Shipping Development Co., Ltd on 23^rd April 2004 in Changjia= ng Kou area. Both vessels suffered damage, and each filed claim against each other. The claim from M.V. “Fei Yun He” was RMB 9.35 million, while that of M.V. “Zhen Fen 5” was RMB 11.37 million. The parties involved eventually mutually agreed on t= he collision liability after several rounds of negotiation. A settlement agree= ment was reached based on that. The Association shared 1/4 of the collision liability, and reimbursed the member RMB 2.2 million.

e. M.V. “An Lu Jiang” of Fujian Jie An Shipping Co., Ltd grounded near the pilot station of Chittagong, Bangladesh at 0500 hou= rs on 12^th May 2004, while carrying 12,500mt fertilizer from Qinzhou, China. The attempts of self <= span class=3DSpellE>refloat and tug salvage both failed. The vessel sank = with all the cargo on board. All the crew members were saved. With the assistance from the Association, the member appointed professional salvage companies f= rom Chittagong and Singapore. They pumped out the remaining oil on board and effectively avoided oil pollution. The Port Authority of Chittagong ordered compulsory wreck removal. Following the advice of the Association and our local corresponden= t, the member assigned the ownership of the wreck to a local company along with all risks and liabilities that may arise from oil pollution and wreck remov= al. The assignment agreement stipulated that the local company will commence wr= eck removal process in due time. Subsequently the consignee filed a lawsuit aga= inst the shipowner in Bangladesh, claiming total lo= ss of cargo in the amount of USD2.73 million. The Association has appointed lawye= r on behalf of the shipowner to investigate the case, collect information and prepare a defence.

f. M.V. “Yi Hai” of Co= sco Bulk Carrier Co., Ltd carried 26,601mt of wheat from Australia to Sharjah, UAE in June, 2004. Wet damage was found in hold No.1 upon discharge. The ca= rgo interests suspended the discharge and claimed for total loss of cargo in ho= ld No.1 and requested a bank guarantee for US$ 2 million. After difficult negotiations, the consignee was finally persuaded to accept a letter of guarantee in the amount of US$ 2 million issued by our local correspondents. The Association provided counter letter of guarantee in the same amount to = the local correspondent. Although the vessel was detained for 12 days, we successfully avoided having to pay a huge commission which a bank guarantee would have caused, in addition to the inevitable delays arising from issue = of a bank guarantee. The member repeatedly requested the cargo interests to fulf= ill their obligation to minimize the loss, however, = due to the limited means of discharging cargo available at that port, it was impossible to segregate damage cargo from sound cargo. The Sharjah Municipality boarded the vessel and collected a sample. Later they held that the cargo in hold No. 1 was not fit for human consumption, and ordered re-export of the cargo as animal feed. T= he cargo interests subsequently put forward a claim for US$ 1.27 million. The Association arranged the local correspondent to be actively engaged in negotiation with the cargo interests to avoid a potential risk of lawsuit a= nd significant legal costs.

g. M.V. “Le Ye” of Guangzhou Ocean Shipping Co. carried cold rolled coi= ls from Changshu,= China to Antwerp on 4^th August, 2004. The consignee allegedly found serious rust damage upon discharge and appointed a court surveyor. The Association appoi= nted a local independent surveyor on behalf of the member to carry out survey on= the cargo. Under the threat of arrest of the vessel from the consignee, the Association provided a letter of guarantee in the amount of Euro 1.36 milli= on. The consignee subsequently filed a lawsuit against the shipowner at the Antwerpen court. The Association has ass= isted the member in appointing a lawyer to prepare the defen= ce.

h. M.V. “Peng Yang” of Shenzhen Shen Yue Marine Co. ran a= gainst rocks in Hong Kong waters on 23^{rd
August, 2004, while carrying 48,902mt of coal from Qin=

Huang Dao to Mawan power station in Shenzhen. T=
he
vessel was refloated successfully and repaired.=
The
member arranged barges to discharge the coal on board. The Association prom=
ptly
commenced investigation on potential P&I claims involving cargo, pollut=
ion,
fishery, environment, and salvage cost which can be allowable in GA. The ca=
se
is still under investigation at present.}

i M.V. “Hebei= No.1” of Hebei Ocean Shipping Co., Ltd. loaded 59,700mt of whe= at in Portland, USA between 18^th to 22^nd October, 2004. The cargo was bou= nd for Yemen. The vessel encountered severe weather and experienced shipping seas on deck, while sailing through the Pacific Ocean.= The Association arranged surveyor to board the vessel when it arrived at port <= span class=3DSpellE>Saleef of Yemen on 11^th December. The cons= ignee abruptly suspended discharge on 18^th December, and requested the local Quality Control to take sample from the cargo. On the following day, = the Quality Control delivered their decision, holding the cargo not fit for hum= an consumption. The consignee subsequently rejected the cargo (approximately 6,261mt) and applied for arrest of the vessel for claim of US$1.47 million (total loss of cargo). According to the surveyor appointed by the Associati= on, he only found one column of caked cargo in an area less then 1 m in diameter, the depth was around= 10 m. The local Quality Control only collected samples from the surface of damaged cargo and concluded its findi= ngs without a technical analysis. Therefore, the credibility of their findings = was questionable.

In the following couple of days, the Association and the member tried various chan= nels to conduct negotiation with the cargo interests. Without any success from t= he negotiation, the cargo interest still refused to resume discharge. The Association suggested to resume discharge so that the actual damage extend = can be ascertained, then the claim could be promptly determined. However, the Quality Control and consignee ignored this reasonable request. After repeat= ed negotiation with the claimant, it was finally agreed that the damaged cargo would be treated as animal feed, and the Association would pay a lump sum of US$650,000 to settle the case.

The discharge operation was resumed on 30^th December. The Association instructed our member to closely monitor the process and take samples from = time to time. After the vessel left Yemen, 10 samples collected were sent to reputable institution for analysis. The results indicated that the cargo was fit for its original purpose.

In this case, discharge was suspended for 12 days, the member suffered huge economic loss and loss of time. The Association will issue a detailed loss prevention circular on this case.

j. M.V. “Shao Shan 1” of Hunan Ocean Shipping Co. was dischar= ging rolled coils at Avils, Spain on = 25^th November, 2004, where wet damage to cargo was found. The consignee threaten= ed to arrest the vessel and ask for guarantees. The Association immediately appointed their local correspondent and surveyor to attend the case. Eventually, the Association provided a letter of guarantee in the amount of Euro 350,000 to the consignee and avoided arrest of the vessel. Now the Association is actively handling the case.

k. M.V. “GREAT BRIGHT” of Sinotrans Shippin= g Ltd. collided with Panama registered M.V. PYXIS at Panama on 16^th December, 2004. The latter vessel suffered damage to its starboard side. The Association arranged W.P survey respectively in Panama and Japan to make certain the ext= ent of damage to M.V. PYXIS. The other vessel raised a claim for Yen 85 million against the member. The Associated insured 4/4 collision liability of M.V. “GREAT BRIGHT”. The case is being handled by the Association currently.

l. M.V. “Great Zhejiang” of Zhejiang Ocean Shipping Co. Ltd carried a shipment of wheat from Argentina to Sharjah, UAE on 25^th January 2005. Rain occurred during loading. Moreover, the vessel experienced heavy weather and shipping seas on deck en route. Up= on discharging, wet damage was found. The consignee considered all the cargo already discharged a total loss, and demanded bank guarantee in the amount = of US$ 2.2 million, failing which they would not resume discharge. The Associa= tion immediately appointed local correspondent, surveyor and renowned profession= al analyst to inspect the cargo, and consulted with a local lawyer. Meanwhile,= the Association actively engaged in negotiations with the consignee so as to re= sume the discharge and minimize the loss. However, the cargo insisted that the c= argo had become a total loss.

The UAE Courts only accept bank guarantees and cash deposits, and they are not very efficient in processing cases. Therefore, once the case entered into legal proceedings, it is impossible to quickly conclude this claim. To maintain t= he bank guarantee of US$ 2.2 million, it would have cost hundreds of thousands= of US Dollars. The potential legal cost is significant as well. If the Sharjah<= /st1:PlaceName> Municipality becomes involved by request of cargo interests, they will probably hold that the ca= rgo is not suitable for human consumption and the import of such cargo is unlaw= ful. In the port of Sharjah, it is impossible to segregate the damaged cargo from sound cargo due to limited discharge equipment available. In this circumstance, the Sharjah Municipality would likely condemn = the entire cargo in the cargo hold where wet damage was found. The decision of = Sharjah<= /st1:PlaceName> Municipality is unappealable. Such decision would cause considerable = loss to the shipowner, which had occurred in July the preceding year to M.V. “YI HAI” entered with the Association. A= part from the potential huge loss, if the cargo interests detained the vessel, t= he member would suffer time loss of US$ 30,000 per day. Taking all of the above into consideration, the Association settled the case at US$ 350,000 with the cargo interests. The vessel sailed after discharge.

In the captioned case, there was indeed wet damage to part of the cargo, but the damage only occurred to cargo directly under the hatch coamings, the depth was no more than a few meters, the aff= ected cargo was less than 1000mts. According to the final report of our surveyor,= the actual loss of cargo was very little, only 6.5mts. In his opinion, the consignee would have suffered no depreciation once the damaged cargo was mi= xed with the sound ones. It is regretful the member suffered a loss of US$ 300,= 000 for no justifiable reason.

The Association will issue detailed loss prevention circulars concerning cases = of M.V. “YI HAI” and M.V. “Great Zhejia= ng” to avoid the occurrence of similar cases.

2. Arrest of ship and guarantee=

In the 2004 policy year the Association arranged for securities in various forms f= or 26 entered ships in the total amount of US$ 11.58 million. Most of the guarantees are in the form of Club letters. The decrease in terms of number= and amount of guarantees provided during the same period last year is 21% and 5= 0% respectively.

Table 6: = &nb= sp; = &nb= sp;

Arrest / Guarantee Cases

US$ 10,000

Policy year	2000	2001	2002	2003	2004	Increase rate
Number	24	31	31	33	26	-21%
Amount	652	1,287	507	2300	1,158	-50%

3.Claims handling=

A. Settled claims

In the 2004 policy year 1,116 claims occurring in various policy years were settled and closed. The total claim amount is US$ 47.25 million whereas tot= al net payment by the Association is US$ 10.52 million(Table 7).

Table 7 = &nb= sp;

= &nb= sp; = US$ 10,000

Policy Year	2004	2003	Increase rate
Number of claim	1,116	1,095	1.9%
Amount of claim	4,725	5,355	-11.7%
Amount of payment	1,052	1,074	-2%

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

1999 policy year

a. M.V. “An Ning Jiang” of Guangzhou Ocean Shipping Co., Ltd. carried nacelles of windtubines from Rotterdam to Xin= gang, Tianjin on 6^th June,1999. The vessel encounte= red Beaufort scale force 8-9 gale, after sailing into the Indian Ocean on 22^nd June. Vio= lent pitching and rolling of the vessel caused shipping seas on deck. The cargo suffered damages of various extent. The Association appointed a surveyor to investigate the cause and degree of the cargo damage when the vessel arrived at Xingang= on 20^th July. The consignee filed a lawsuit against the shipow= ner at Maritime Court for repair costs of Euro 1.32 million in August 2000. The cargo had to be shipped back to the = Netherlands for repair. Our local surveyor confirmed that the cost was reasonable. Taki= ng that into consideration, the Association agreed to seek an amicable settlem= ent with the claimant during trial. After several rounds of difficult negotiati= on, we finally achieved an out of court settlement with the claimant for USD 970,000.

2000 Policy Year

b. M.V. “PING HAI” of Hainan Shipping&Enterprises Co. collided with Panama registered M/V “Brother Glory” on 24th May, 2000 while carrying cargo en route from Jinzhou to Shekou. Seawater entered the cargo holds of = M/V “PING HAI” resulting in severe damage. 10,111.59 tons of yellow corns out of the 32,355 tons carried on board was lost or damaged. The sea carriage between Chinese ports is governed by Chinese Water Transport Regulation, which applies a stricter liability regime. The Association reimbursed the shipowner USD1.29 million in total. The collision liability was amicably determined= at 65:35 in favour of our vessel. The Association finally recovered USD620= ,000 from the opponent vessel after amicable settlement discussions.<= /span>

2003 Policy Year

c. M.V. “Hui Yang” of Guangdong Sonfont Shipping Co., Ltd. collided with M.V. “= Da Qing 767” at Wen Zhou Bay on 23^{rd
April 2003. The later vessel sank with 3 crew missing.
By request of the owner, the Association provided guarantees with aggregated
amount of RMB 7.5 million covering salvage, wreck removal, pollution hazard=
and
crew liabilities. The Association appointed lawyers on behalf of the owner.=
The
parties involved commenced arbitration at the China Maritime Arbitration
Committee in pursuant of the arbitration agreement. During the arbitration,=
we
applied for appraisal of the ship’s price so as to reduce the claimed
amount by limiting the vessel’s liability. Meanwhile, our lawyer put
forward an effective defence based on the exten=
t of
contributory negligence to the risk of collision. To the satisfaction of the
member, the arbitrator only awarded RMB 3.54 million to the other party.}

2004 Policy Year

“NEW ARGOSY”, “FEI YUN HE”, “HEBEI NO.1”, “GREAT ZHEJIANG”: please refer to the report on newly reported major claims.=

4= .Special notes on claims incurred in policy year 2= 004

A. Huge fraudulent cargo claims in Yemen, claimants arrest the vessel to compel cash settlement on the spot

For details, reference is requested to the report on newly registered major cla= ims i. Important measures to prevent fraudulent claims ar= e as follows:

a. Ensure the vessel is in acceptable condition, especially the water-tightness of hatch-covers, cargo holds, ballast tanks and any part of vessel which may affect cargo worthiness should be well maintained, free from rust, and sufficiently clean to carry grain. Special attention should be given to hatchcover watertightness= of overaged vessels. Measures should be taken to seal the hatches when necessary. =

b. Ensure that cargo is in good condition before loading. Master should be instructed= to closely monitor the weather changes during loading and take preventive measures. Once it rains, hatchcovers should be = closed immediately; wetted cargo should be properly disposed immediately.

c. If there is a charterparty involved, members should appoint a competent protecting agent. The Association can make recommendati= ons in this respect.

d. With regard to charterparties, members should endeav= or to obtain favorable provisions, so that when charterers fix the vessel to carry grains to such high-risk ports, they will share a portion of the risk of loss or damage of cargo, and time loss due to detent= ion. Members can contact the Managers for professional legal advice on protective provisions to be included into charterparties.<= o:p>

e. When problems are encountered in fixing the carriage contract, carrying or disch= arging the cargo, members should inform the Managers immediately to find the best solution in a timely manner.

B. Huge fraudulent cargo claims in UAE, claimants arrest the vessel to compel cash settlement on the spot

For details, reference is requested to the to report= on newly reported major claims f and l. Such cases in UAE share some common features with those in Yemen. Besides the loss prevention measures listed in section = A, members should pay special attention obtaining background information on the consignee and insurers of the cargo carried to UAE. If it is confirmed that= the consignee is Emirates Grain Products Co. and the insue= rer is Al Buhaira, members should notify the Associ= ation immediately.

C. Spontaneous combustion of South Amer= ican bagged fishmeal

Not too long ago, several entered ships of the Association carried bagged fishmeal = to Chinese ports from Peru, South America. Although the temperature difference between the cargo and its surrounding environment was in conformity with the IMDG rules for carriage of fishmeal, the cargo temperature may rise during = the long voyage. With high temperatures usually above 30℃degree at l= oading port, and cargo being stowed in a condensed manner, the heat generated from slow oxidation of fishmeal can not be dispersed through ventilation. When t= he vessel arrived at discharging port, the temperature of cargo will normally = rise to 35℃ degree in average, resulting in a 10℃ degree difference from the surrounding temperature. Local h= eat may occur, when the cargo was stowed near pipes and bulkheads which may be heated (eg engine-room bulkhead). Because the point of origin of the fire is normally = deep down in the cargo, using carbon dioxide to extinguish the fire sometime wou= ld not be productive. When coming into contact with fresh air while being discharged, the smoldering cargo in high temperature will generate flam, and cause further losses. On average, there were 2 such cases every year. In the 2003 policy year, the claim of one such single case reached RMB 3.7 million. Hence the Association issued a Loss Prevention Circular No. (2003) 005 to improve the awareness of members against such cases. However, such cases still occur from time to time.

Therefore, the Association suggests that members should avoid to c= arry fishmeal from South America to Chinese p= orts in early part of the year. If the vessel is fixed for such shipment, members are recommended to follow Loss Prevention Circular No. (2003) 005, and make relevant provisions in the carriage contract to the effect that the cargo o= wner and charterers, rather than the shipowners should be liable for loss and damage of cargo resulting from spontaneous combustion of fishmeal.

D. Containers fallen overboard<= /o:p>

According to the latest statistics of the Association, in recent policy years, cases involved containers falling overboard occurred repeatedly when entered ships carrying containers on deck encountered heavy weather. Members will face hu= ge claims in such cases, involving not only loss of containers and cargo, but = also compulsory wreck removal order from the port authority, sometimes even third party claims.

To avoid similar accidents in the future, members should carefully and properly stow, lash and reinforce the containers carried on deck in strict compliance with= the requirements in the security manual onboard.

E. Shortlanding cases in ports of Jiangsu pr= ovince

In the last two years, entered vessels from several members experienced shortlanding claims in ports of Jiangsu province, such as Lianyungang= , Taicang, and Taizhou. The= cases often occurred to general cargoes.

Repeated occurrences of such cases in the area suggests the accuracy the tally proce= ss in those discharging ports is less than described. The Association recommends to seal the cargo holds by an independent surveyor at load port, when the cargo is to bound for the above mentioned ports, which is an effective solution, as in these instances no short= landing claim was filed. In the meantime, members should instruct their crew to clo= sely monitor the tally process to avoid specious claim for shortlanding of cargo arising from documentary inaccu= racies or errors