Maritime Law Guidelines in force from 1 July 2016

In May 2014, the International Maritime Organisation (IMO) approved the guidelines regarding the Verified Gross Mass (VGM) of a packed container carrying cargo, which the South African Maritime Safety Authority (SAMSA) gave effect to on 26 June 2015.  These guidelines are an amendment to SOLAS (International convention for the Safety of Life at Sea) which requires a packed container’s gross mass to be verified prior to loading aboard a ship and are applicable to containers that are transported  on sea-going vessels.  The guidelines are in force as of 1 July 2016.

Peter Lamb, a Senior Associate at Norton Rose Fulbright South Africa, says, “According to these guidelines, the shipper is responsible for providing the VGM of the packed container in addition to the carrier receiving the VGM of the packed container prior to loading it on the vessel.  However, the definition of a shipper in these guidelines is astonishingly broad and could very well include freight forwarders, container operators, consolidators and the like – and not just the party with an interest (risk or ownership) in the containerised goods,” he adds.

Jeffry Butt, Marine Manager at Aon South Africa, says, “The vagueness of the definition of a shipper could create potential disruption in the supply chain in terms of producing acceptable shipping documents when the term ‘shipper’ is misunderstood. It could lead to the delay of shipments due to problematic paperwork, which could invalidate a cargo claim due to the delay exclusion contained in a cargo insurance policy. The exclusion will most likely be contained under the ‘exclusions’ heading within an insurance contract and will exclude loss damage or expense caused by delay, even though the delay be caused by a risk insured against,” explains Jeffry.

“Time sensitive cargo that needs to be delivered in accordance to contract agreements is at particular risk in this instance,” says Jeffry. “Delayed project cargo, for example, that needs to be delivered to a construction site within a specific timeframe could have a ripple effect on a project’s timeline, potentially incurring subsequent financial losses. Perishable cargo would also be affected, due to the inherent nature of the product,” he adds.

“Though, the obligation of the shipper to provide the gross mass of a packed container is not new, the fact that the shipper now has to determine the VGM by certified methods is new,” says Peter of Norton Rose Fulbright South Africa. The two prescribed methods are:

• The shipper needs to weigh, or needs to arrange that it is weighed by a third party, the packed container after it has been closed and sealed, requiring a weighbridge.
• The shipper, or a third party arranged by the shipper, needs to weigh all the individual packages and cargo items, including the mass of pallets, securing materials, dunnage and packing by adding the entire mass of the container to the sum.

There’s a limited number of third parties who have been appointed by SAMSA to facilitate the certification methods to support the second method. There is also a general malaise in the logistics industry about the implementation of the guidelines.  “Many shippers have criticised the IMO for a lack of guidance and understanding of the in-land manufacturing and supply chain process when it drafted the guidelines,” says Peter.  “Despite these difficulties, if the shipper does not provide the VGM of the packed container, it is likely that carriers will refuse to receive containers that do not have a VGM because their insurances may be adversely affected,” warns Peter.

Aon’s Jeffry adds that from an insurance perspective, “If a carrier refuses containers that do not have a VGM, it could create additional exposures to the goods that may not have been catered for under a shipper’s marine cargo policy.  The knock on effect of the timeline in the supply chain process could lead to consequent financial losses typically not covered by a cargo insurance policy,” explains Jeffry.

“A marine cargo policy only covers physical loss and or damage to cargo. In term of all risks policies all accidental and unforeseen events are catered for,” explains Jeffry.  “However, a risk exposure may arise where the loss may not be physical but rather financial as in the example of delayed project goods. Subsequent financial loss is not covered by a marine policy unless it has been specifically arranged,” Jeffry adds.

“From an insurance perspective the new regulations could jeopardise cover due to the delay exclusion contained within a marine policy,” warns Jeffry.  “Shippers will need to comply with the regulations and it is, therefore, in their best interest to familiarise themselves with the requirements to minimise their uninsured risk exposures as far as possible,” Jeffry recommends

Further Complications

In multi-modal transport, the shipper is not only responsible to confirm the weight of the container, but also the mass of the road vehicle.  In terms of the amended National Road Traffic Regulations, now in force for a year, a consignor is prohibited from offering goods to a road haulier if the vehicle is not loaded according to the National Road Traffic Act, which includes the instance where a vehicle is overloaded. 

Shippers will in any event most likely have to utilise weighbridges to verify the mass of a vehicle and any axle or axle unit of such a vehicle to ensure that it is not overloaded.  “In these circumstances, it appears that the National Road Traffic Regulations makes it impractical for a shipper to rely upon the second method of determining the VGM of a packed container as set out in the guidelines if it is already burdened with having to send the road vehicle over a weigh bridge,” says Peter.

Risk Management

Best practice will require cargo interests, freight forwarders, packers, consolidators and all parties in the supply-chain to consider and possibly review their agreements, standard business terms and house bills of lading, so that they include adequate protections for potential liabilities arising out of these guidelines.

All parties should contact their insurance brokers, in order to ensure that their respective insurance policies protect them from the new risks and liabilities.