Managing The Risks of Global Shipping Presented by Greg J. Kritz,CIC Vice President Roanoke Trade Services, Inc.

Over 200 Cargo Ships Sink Each Year

Average 20 Major Earthquakes per year of 7 or higher magnitude

U.S. Cargo Losses Exceed $18 Billion Annual Impact on U.S Economy

CARGO CRIME SOARING Theft & Unexplained Shortages (shrinkage/Leakage) 4 Easy Ways to Access An Ocean Container Without Leaving a Trace

30% of Cargo Losses NOT Preventable

844 Piracy Attacks on Cargo Vessels $16bn Year in Pirated Cargo

273 Hurricanes Hit USA Were Major Category 3,4 & 5

GENERAL AVERAGE Ancient principle of equity in which all parties in a sea adventure (ship owner, cargo owner, and freight) proportionately share losses resulting from a voluntary and successful sacrifice of part of the ship or cargo to save the whole adventure from an impending peril, or extraordinary expenses necessarily incurred for the joint benefit of ship and cargo.

LOSS of BUSINESS INCOME : IMPORTERS NIGHTMARE A Property Insurance Policy Doesn’t Cover Loss of Business Income for Cargo Claims What if these were Yours’ at Peak Season? $30M

Sampling of Regulatory Risks Seizures for Failure to Timely File Advance Notice Seizure for non-Compliance with Wood Packaging Demand for Redelivery of Tainted or Suspect Product (FDA, AGR,…) Anti-Dumping Duty Craze & Byrd Amendment

The Ugly Truth About Carrier Financial Responsibility

Ocean Carrier/NVOCC Subject to terms of Carriage Of Goods by Sea Act (COGSA) $500 per Customary Shipping Unit as described on OBL Unit can be the container, a pallet, a crate, carton

Ocean carriers & NVOCC’s have 17 legal reasons not to pay 1.Act,neglect,default 2.Fire 3.Perils of the sea 4.Act of God 5.Act of War 6.Act of public enemies 7.Government seizure 8.Quarantine 9.Act or omission of shipper 10.Strike,lockouts, or stoppages 11.Riots & Civil commotions 12.General Average 13.Inherent Vice 14.Poor Packing 15.Poor Marks 16.Latent defects 17.Loss/damage outside control of carrier

Most Typical Carrier Defenses “ We didn’t pack it so we can’t confirm the number of pieces” “You can’t prove that damage happened when cargo was in our care,custody & control.

International Air & Indirect Air Carriers Subject to terms of the “Warsaw Convention” $9.07 pound/$20 Kilo or 17 SDR Kilo if Montreal Protocol ($23.15 kilo)

What About Distribution Centers? Warehouseman’s Terms & Conditions Rule Unless Changed by Contract Liability Typically a multiple of base rate 3PL’s and Forwarding Operations Often Limit Liability on Warehouse Receipts

Freight Forwarder & Customs Broker Liability Unless acting as a carrier and issuing a freight bill, 3PL’s & forwarders typically are not liable for loss or damage Customs Brokers use Terms & Conditions of service that Limit Their Liability to A Maximum of $50 per shipment

Action Steps A. Identify Risks in Supply Chain Where You Have Financial Interest B. Establish Clear Contracts with Buyers & Suppliers (Don’t Assume Incoterms Address It) C. If you Import, Control the Insurance

Action Steps Continued…/ D. If You Transfer Risk to Insurer 1.Protect Profits, Insure Selling Price 2.Raise Limits to Anticipate Peak Accumulation & Lost Profit 3.Move Inventory Coverage to Cargo Policy – Flood, Quake,Profit

Action Steps Continued…/ D. If You Transfer Risk to Insurer.. 4. Add Airfreight Replacement 5. Cover Extremes in Temperature 6. Contingent Financial Interest 7. Unexplained Shortages 8. Payment on Account – Disputes 9. Your Financial Interest Admitted regardless of Incoterms

Thank You For Letting Me Be With You Today !