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TATA-AIG NEWSLETTER EDITION- JULY 2013

IN THIS ISSUE

News Updates

Photo of the month – ICY WATERS

Know your Cargo – COTTON

BILL OF LADING

HUMOUR

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CONTACT US TATA-AIG GENERAL INSURANCE CO. MARINE LOSS CONTROL ENGINEERING r.balasundaram@tata-aig.com harshad.patwardhan@tata-aig.com

Cargo Ships Locked Together After Colliding in Aegean Sea

Efforts are underway in Greece to separate two cargo ships that collided in the Aegean Sea on July 4th. The Hellenic Coast Guard reported that the Maltese flag M/V KATHERINE and the Panama-flagged MV BARU SATU collided early Thursday about seven nautical miles southwest of Andros in the Aegean Sea. Photos show that the BARU SATU struck the port side of the KATHERINE, causing damage to both ships. The Hellenic Coast Guard said that the KATHETRINE was taking on water, but the ingress was brought under control. The BARU SATU sustained damage to her bow.

Basmati Rice likely to top list of agricultural exports:

Basmati Rice could again emerge as India's top agricultural export commodity after two years. During the last two financial years, guar gum had topped the list, in terms of value, primarily due to the shale gas boom in the US.

The commerce ministry expects Russia would lift a ban on Indian Basmati imports soon. The move is expected to further increase exports. Currently, a Russian delegation is inspecting rice mills in India. The delegation would provide a report on lifting the ban. Russia, earlier a net importer of Indian Basmati, had imposed a ban on these imports in February, owing to the detection of copra beetle infestation.

In April and May, Basmati exports rose about 25 per cent in volume terms and about 65 per cent in terms of rupee value (46 per cent in dollar terms), against the year-ago period. High demand from Iran, after the settlement of the payment mechanism with India following US sanctions, and a sharp depreciation in the rupee led to the rise in export realizations. Iran has started buying from India, which led to higher exports.

No injuries were reported from either vessel. The KATHERINE was on its way from Novorossiysk, Russia to Italy with a load of iron and the BARU SATU was sailing from Piraeus to Bulgaria with a load of sugar, according to the Hellenic Coast Guard. Reports indicate that the vessels remain locked together over fears that the KATHERINE will sink.

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PHOTO OF THE MONTH – ICY WATERS

AERIAL VIEW OF WATERS NORTH OF 66 DEG NORTH

NAVIGATING THROUGH ICY WATERS IN NORWAY

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Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus

Gossypium. The plant is a shrub native to tropical and subtropical regions around the world, including the Americas, Africa,

and India. Cotton is shipped in fully pressed bales, pressed to a considerable density, without harm. Bales vary in size,

according to country of origin, in weights between 100 kg and 330 kg., and are compressed to varying degrees, strapped by

steel bands or wire and covered with cotton, jute or synthetic fiber, and sometimes plastic sheet. These bales are loaded in

standard dry closed body containers for transportation.

There are four main factors to be considered when purchasing raw cotton:

a) Grade – Cotton is graded by cleanliness or color. Badly ginned cotton contains more ‘trash’ – dirt, leaf, cut seed, stains,

etc., which means higher wastage for the spinner. ‘Stain’ is caused by climatic conditions during growing. Lightning, for

instance, will cause a yellow stain on the mature bolls.

b) Staple – The length of the fibres. Evenness of fibre length is an important consideration.

c) Micronaire – A term used to describe the thickness and the maturity of the fibre.

d) Strength – the tenacity of the fibre at breaking point tested by instruments such as Pressley, Stelometer or the High

Volume Instrument (HVI).

Cargo handling: The cargo must be protected from moisture, since cotton is hygroscopic and readily absorbs moisture. This

may lead to discoloration, decay, mold, mildew stains and rot. In addition, the cotton may swell by absorbing water vapor,

resulting in an increase in volume of 40 - 45%. A high water content is difficult to detect from outside, since the cotton does

not feel damp even with a water content of 20%.

Do not use hooks for cargo handling, since they may lead to sparking when they come into contact with the strapping.

In addition, smoking is absolutely prohibited during cargo handling.

KNOW YOUR CARGO – COTTON

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KNOW YOUR CARGO- COTTON

There are six main causes of loss:

a) Fire

b) Country damage

c) Water

d) Contamination with sticky or other harmful substances

e) Burst bales

f) Internal damp

Fire: Cotton is assigned to Class 4.1 of the IMDG Code (Flammable solids). However, its specific characteristics and negative external influences may cause it to behave like a substance from Class 4.2 (Substances liable to spontaneous combustion) of the IMDG Code. Cotton, either in dry or wet condition, does not have spontaneous combustion properties. Cotton generates a lot of heat but is not enough for ignition. Fire to baled cotton is usually caused by a) bursting of bands contacting other ferrous metal and creating sparks, b) smoking, cigarettes, matches, etc., c) electrical faults, d) spread of fire from other commodities.

Country damage: This type of damage may be caused by rain, flood, mud, sand, bales standing on wet or damp ground, or

any combination of these causes. There is also the added damage that can be caused by insects, particularly ants and

termites. Surveyors at destination should readily be able to identify ‘country damage’ which, by its nature, will be external

in origin, extending inwards, depending upon the extent of the damage and density of the bale, as against damage

originating from the interior of the bale, referred to under ‘Internal Damp’.

Grease on bales Country damage Bale strapped correctly Straps can rust and leave stains

Internal Damp: This type of damage is normally not detectable from the exterior of the bale, but usually found when the

bales are opened at the spinner’s mill. This damage is caused at the time of pressing, when either too much water is used in

the press, or the cotton has been excessively wet when pressed. Damage is usually in pockets spread evenly throughout the

various layers of cotton, which will be warm to hot according to the heat generation in the bale, and in most cases is

accompanied by mildew or mould created by the heat generation.

When there is a fire in baled cotton, the extinguishing of the fire

will leave a coating of charred cotton on the exterior of the bale,

varying in depth according to the density of the fire.

Because of the properties of the cotton fibre oxygen remains in

a bale after pressing, and this allows, the rekindling of the fire,

days or even weeks after seemingly having been extinguished.

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KNOW YOUR CARGO – COTTON

Burst Bales: When bales burst during transit, this does not, in most cases, cause damage to the cotton, but does often

result in a loss of cotton. This loss can be ascertained by the bale being re-pressed or repaired and then weighed. The

average weight per bale of the sound cotton should then be used against the weight of the burst bales, to assess the weight

loss involved.

Contamination: Pressed bales of cotton from most producing countries are covered by hessian and bilges and ends only,

leaving the flats of the bales uncovered. Therefore, these exposed places are susceptible to damage by other commodities,

mainly due to bad stowage during transit. The main offenders of contamination are carbon black, coal, coffee, Sisal and ore.

Most of these commodities cause superficial damage by staining, which in most instances can be removed by brushing.

Cotton is liable to damage if in contact with oil and should not be stowed in the same compartment as any commodity

which may contain vegetable, animal or other oils as leakage or seepage, might bring oil in contact with the cotton.

Water Damage Contamination Not covered properly

Water Damage: Normally, wetting of bale cotton has no effect on the cotton fibres if drying follows quickly, but if the

wetting is caused either by rain, sea water or sweat and it remains on the bales for a period of time, it will penetrate slowly

into the bale and cause staining and rotting in the affected fibres.

Normally, baled cotton contains moisture up to 8.5%, the maximum allowed. In temperatures below freezing, there is very

little chance of wetting causing deterioration or rotting of the fibres, due to the low temperatures arresting the decay

process. In some cases where delay in dealing with the cotton could not be avoided it has been put into cold storage to

prevent the development of decay.

Artificial drying may sometimes be detrimental to the final appearance of the cotton as it may become spotted or yellow-

stained. The natural process of drying, if available, is to be preferred. Fumigation should not ordinarily be detrimental to

cotton.

Indian Cotton exports: Cotton accounts for 40% of the total global fibre production and is the most important fibre in the

world. India is a major player in world cotton market in terms of area and production. India is now the second largest

cotton producer, consumer and exporter in the world.

India has produced 35.3 million bales (each bale 170 kg) in year 2011-12 out of which 12.2 million bales were exported

worth nearly INR 20,000 crore. Production forecast for year 2012-13 is about 33.4 million bales (each bale 170 kg).

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BILL OF LADING

What is Bill of Lading?

It is a written statement from the master whereby he acknowledges to have received the goods onboard his ship and

undertakes to carry them to the place of destination and to deliver them in the same good order and in condition as he

received them on production of the original bill of lading.

There are various types of B/L, some common types of Bill of Lading and their use:

1) Negotiable or non-negotiable B/L: If a B/L uses the words ‘to order’ or ‘bearer’ or ‘holder’ or is left blank in terms of

who is the consignee, then the B/L is negotiable and can be transferred by delivery or endorsement. A Non-Negotiable

B/L is a B/L which is only transferable from the shipper to the consignee. If the consignee box in the B/L is filled in with

a name and the words ‘to order’ or similar are not included, then the B/L is non-negotiable. If a B/L is not negotiable it

cannot be transferred to any other person. Also known as a Straight B/L.

2) Clean Bill of Lading: A Clean Bill of Lading is simply a BOL that the shipping carrier has to sign off on saying that when

the packages were loaded they were in good condition. If the packages are damaged or the cargo is marred in some

way (rusted metal, stained paper, etc.), they will have to issue a "Soiled Bill of Landing" or a "Foul Bill of Landing."

3) Multimodal/Combined Transport Bill of Lading: This is a type of Through Bill of Lading that involves a minimum of two

different modes of transport, land or ocean. The modes of transportation can be anything from freight boat to air.

4) Shipped On Board Bill of Lading: A Shipped On board Bill of Lading is issued when the cargo arrives at the port in good,

expected condition from the shipping carrier and is then loaded onto the cargo ship for transport overseas.

It is receipt for goods

It is contract of carriage – E.g. Hague-Visby rules

It is document of title – the person who has the B/L is

the owner of the cargo, ownership can be

transferred on basis of this document, and this helps

a lot if the B/L is marked to order.

It gives the name and place of residence of shipper /

consignee / master, place of loading or discharging,

number of copies.

It gives the condition of the cargo. Eg. Shipped in

apparent good order and condition

Other details such as – Shipped bill of lading, On deck

at shippers risk, Weight measure quality, quantity,

condition and content and value unknown.

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BILL OF LADING Bill of Lading Frauds:

Why does a shipper ask for a bill of lading containing incorrect information? In most cases he will be paid by means of a

letter of credit, and unless the bill of lading complies with its terms exactly, he will not be paid. The shipper, the carrier and

the agent all know, or would be assumed to know, that in the vast majority of cases the bill of lading will be used to

negotiate payment.

The most frequent frauds for the issuance of a bill of lading are:

1) Mis-dating - Confirming loading on a date prior to, or subsequent to, the date on which the cargo was loaded. Pre-dating a

bill of lading only two or three days earlier than the cargo was actually loaded on the ship is fraudulent.

2) Incorrect description of cargo- bearing an incorrect description of the quality, quantity or condition of the cargo. The most

frequent mis-description of cargo is "clean on board" in respect of cargo which is known to have been damaged in some

way.

3) "Shipped on board" when not shipped - claused "shipped on board" before the cargo is loaded. In some cases before the

ship arrives at the port or even in the knowledge that the cargo has been shut out from the voyage in question.

4) Under deck bills of lading for break bulk cargo shipped on deck - claused "shipped under deck" (or bearing no reference to

shipment on deck) for cargo which is known to have been loaded on deck.

5) Incorrect port of shipment - Showing an incorrect port of shipment, in order to defeat boycotts by concealing the port of

origin. Bills of lading are often "switched" at intermediate ports to disguise the origin of cargo to take advantage of the

intermediate country's import quotas into, for example, the EU.

6) Letter of Indemnity: Perhaps the most common situation where a Letter of Indemnity is offered is for delivery of cargo

without production of a bill of lading. While this is an old problem, non-availability, or non-production, of a bill of lading is

becoming more common. Accepting LOI is very risky as, Owner is risking his insurance cover, in a situation where he may be

held liable for some misdeed, for example by delivering cargo without production of a bill of lading or delivering at a port

other than that shown on the face of the bill of lading. Secondly he takes an additional risk, as it is difficult to determine

whether the Indemnity he is receiving can in fact be relied upon.

Since LOI is widely used option to release cargo, The LOI must contain the following. Normally there should be three

parties: The carrier seeking the indemnity, the person granting the indemnity, who is usually the receiver of the goods, and

a bank backing that person granting the indemnity.

Electronic Bill of Lading: For many years, the industry has sought a solution to the difficulties, costs and inefficiencies

associated with paper bills of lading. The obvious answer is to make the bill an electronic document. The eB/L finally

became a reality with the operational launch last year with IT solutions such as, ESS’s CargoDocs Service, which enables

users to create issue and transfer eDocs, including an electronic bill of lading (eB/L), though the trade chain.

To be a true functional equivalent, an electronic bill of lading (eB/L) needs to replicate the existing attributes of a paper B/L

in an electronic world, while ensuring that the electronic bill of lading (eB/L) is transferred at a faster rate than the cargo to

which it relates, thereby eliminating or significantly reducing the current reliance on delivery LOIs.

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FEEDBACK

For more information / queries and feedback please contact

R. Balasundaram Harshad Patwardhan Vice President - Marine Marine Loss Control Engineering - India r.balasundaram@tata-aig.com harshad.patwardhan@tata-aig.com

DISCLAIMER

The publication is for private circulation only. It is for internal additional information of employees and associates. Views

expressed in the article are personal views of author and the publisher, editor does not own any responsibility legally or

otherwise. Though due care is taken to give accurate information, the readers are advised to verify independently the

correctness of the information given.

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HUMOUR

A guy got on the elevator and there was a very pretty blonde on the same elevator. The blonde thought

she would be nice and speak to the gentleman, so with a smile she said T.G.I.F. The guy looked at her with

a funny look and said S.H.I.T. The blonde thought he was just in a bad mood so she said it again with a

smile, T.G.I.F and the guy turned around, frowned again and said S.H.I.T. The blonde thought, that's it, I'll

try one more time, so she said T.G.I.F that means Thank God It's Friday. The guy turned around and with a

quick reply in a sharp voice said S.H.I.T that means Sorry Honey its Thursday.