Section 6 Extraordinary handling costs
The cover under this section is in respect of certain handling costs incurred by the Member. It constitutes an exception from the basic principle that the P&I Insurance provides protection only against third party liabilities. As an exception, the section should be given a restrictive interpretation.
The adverse consequences of cargo damage for the carrier are not limited to the risk of claims from the cargo owner and his underwriter. The carrier is often left with the difficult and expensive task of removing the damaged cargo from the ship. If the consignees refuse to take delivery of the damaged cargo, the carrier may have to arrange storage before the cargo can be disposed of. Worthless cargo may have to be dumped or destroyed at the carrier’s expense.
Such costs may be high. Wetted cement may turn into concrete in the hold and have to be removed with jackhammers. Asphalt, paraffin wax and high viscosity oil products may solidify after a breakdown in the heating coil system. Special storage tanks may have to be rented for contaminated oil pending reprocessing. The unforeseeable nature of such potential costs justifies the extended protection under the P&I cover.
There is no requirement that the Member should be legally liable to take the action for which compensation is requested. The Member is entitled to compensation for such costs reasonably incurred.
4.6.2 Discharging or disposing of damaged, rejected or worthless cargo
“Discharging” under item (a) implies that the cargo should have been on board the entered ship. Handling costs in relation to cargo left behind in the port of loading are not covered.
Discharging means bringing the cargo ashore. At some stage, the discharge of damaged cargo may turn into cleaning of the cargo compartments in preparation for the next voyage. The costs of such cleaning operations are not covered. Where to draw the line between discharging and cleaning may be difficult. It will be decided on a case-by-case basis.
Discharging should be performed at the contractual port of destination. Discharging costs in an intermediate port are covered only to the extent item (b) of this clause is applicable. The costs for the restowage of damaged or shifted cargo at an intermediate port are not ordinarily recoverable but may still be reimbursed under Rule 19, the Omnibus Rule.
For practical and administrative reasons, it may be impossible to perform the discharging of the damaged cargo at the port of destination. In such a case, the ship may have to deviate to another port. The costs of such a deviation are not covered. Compensation for loss of time, freight or hire are excluded under Rule 11 Section 2 (j).
18.104.22.168 Extraordinary handling costs
Costs to be compensated should be of an extraordinary nature. This means that a deduction should be made for any costs saved for the normal discharging and handling of the cargo, had the damage not occurred. The cover is limited to costs which are clearly for extra labour and equipment. The Member may be asked to supply records of previous, similar discharging operations in order to establish by comparison the extraordinary expenses recoverable under this section.
In addition to extraordinary costs of discharging, the carrier may be forced to store the cargo separately or destroy it, if this is required by the authorities, or if the cargo is worthless. All costs reasonably related to such handling are covered.
To be covered, the extraordinary expenses should be related to cargo which is damaged, rejected or worthless. No special reason for the rejection is required. It is sufficient that the receiver/consignee has failed to collect his cargo. When disposing of such cargo, it is important that all regulations are observed in relation to the receiver, customs and other parties involved. The Club and its local correspondent can assist the Member in this respect. It may be necessary to sell the goods at public auction. If any surplus is generated, it is to be used to limit the consequences of the loss or action taken.
Crew wages or overtime for the use of the ship and its equipment in connection with the handling, discharging or dumping at sea of damaged, rejected or worthless cargo are not compensated following the principle that the Member should use his own organisation to reduce his insurance costs. Rule 8 Section 2, however, may apply.
22.214.171.124 Handling costs of counterfeit/fraudulent cargo
It has become increasingly common that containerised cargo contains counterfeit or fraudulent cargo. Counterfeit cargo when detected by customs authorities is usually confiscated. Costs for destuffing the container into customs custody are either performed by and/or paid for by the carrier. The costs of destuffing are covered under this Rule. Fraudulent cargo may be exchanged for the intended product described in the bill of lading. As an example a container of new tyres is exchanged for used tyres or waste products in exchange for the weight of the intended cargo of TV sets. Costs of discharging and destuffing such fraudulent cargoes are also covered under this Rule.
4.6.3 Extraordinary handling related to Hull damage
Item (b) of the section defines the cover for certain costs or expenses in relation to the cargo where the ship has sustained damage recoverable under the Hull policy. When such damage has been sustained – and only then – the costs and expenses to discharge, handle, store and reload the cargo are recoverable.
Cargo handling described under this item is covered, for instance, to allow the entered ship to drydock for repairs following a casualty covered under the Hull policy. Storage of cargo during ship’s drydocking is however limited to 3 months. If cargo is expected to be stored for longer than 3 months, Members are requested to contact the Club to arrange additional cover. If one of the ship’s cranes is damaged by heavy weather during the voyage, the cost of hiring a shore crane to perform the necessary cargo operations is covered. There is no cover, however, if the crane breaks down due to wear and tear as that is not a marine peril recoverable under the Hull policy.
Costs or expenses for extraordinary cargo handling may sometimes be recoverable in general average. Compensation under this section is allowed only if and to the extent no such recovery is possible.
4.6.4 Cover is subject to Rule exclusions
The cover is subject to the exclusions under these Rules, especially Rule 11 Section 2. It follows for instance from item (c) of that section that there is no cover for costs or expenses incurred to discharge, reload, restow, store or tranship cargo or other similar measures caused by overloading, bad trim or incorrect stowage of the ship. Should the Club exercise its discretion to allow compensation under Rule 19, the Omnibus Rule, and a deduction will be made, for instance, for costs saved by the Member by not having effected the additional securing of the cargo, which might have prevented it from shifting in the first place.
4.6.5 Member’s knowledge
If the Member knew or should have known that the nature of the cargo might cause extraordinary costs as described in this section, no compensation will be allowed. For example, a product requiring heating may have been accepted for shipment in a tanker not equipped with adequate heating facilities, or a consignment of bitumen loaded although the drums were leaking.
4.6.6 Extraordinary costs of a preventive nature
If costs or expenses of this nature have been incurred to prevent or limit liability covered under these Rules, compensation may be allowed under Rule 8 Section 2.