The EVER GIVEN - The Cargo Perspective - DAC Beachcroft

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The EVER GIVEN - The Cargo Perspective

Published 31 March 2021

A week since the 400m-long EVER GIVEN boxship first became wedged in the Suez Canal, blocking one of the key arteries of the international supply chain, she has been freed.  This will come as a significant relief to all affected, particularly as the prospect of the slow and expensive process of removing individual containers to lighten the bow of the vessel looked increasingly necessary.  While it is estimated that it will take up to three days to clear the backlog of at least 370 vessels waiting to transit the canal, the fallout for cargo interests and their insurers has the potential to roll on for months, if not years.

Loss of or damage to cargo

It seems highly unlikely that the incident as it has unfolded will have generated any particular average losses to cargo, that is to say indemnifiable damage to the cargo on board.  While it has taken six days to free the EVER GIVEN, the grounding was on relatively soft sand and mud, suggesting that the effect on the hull will have been limited, and the impact on the cargo non-existent.  To date, there are no reports of damage to cargo. 

Even if perishable cargoes were found on board which may have deteriorated during the time that the vessel has been stuck in the canal, the cause of the loss would likely fall within the delay exclusion in most marine cargo policies. A key focus will be to check whether such delay exclusions have been removed by endorsement.

Forwarding charges

With the EVER GIVEN now freed, she will undergo a full inspection at Great Bitter Lake, after which the decision will be made as to whether she can continue on her voyage to Rotterdam, or if she will need to enter the nearest available port for repairs. At this stage, the expectation is that the EVER GIVEN will be able to complete her voyage as the alternative is far from attractive.  Finding a suitable port of refuge for a vessel of this size could be difficult and the expenses and delays associated with transhipment would likely prove very significant.

If the voyage does have to be abandoned, cargo owners will likely incur costs in transhipment for which they will no doubt look to their insurers under the forwarding charges clause in most marine cargo policies. 

General average

A further, and probably more significant, consideration for cargo interests is that of general average.   Under Rule A of the York-Antwerp Rules, there is a General Average act where any (1) extraordinary sacrifice or expenditure is (2) intentionally and reasonably made or incurred for the (3) common safety for the purpose of (4) preserving from peril the property involved in a (5) common maritime adventure. 

Property will be considered as having been preserved from peril where there is a real and substantial (though not necessarily imminent) peril.  Where this and the other criteria are met, cargo interests will be obliged to bear their proportionate share of the salvage costs incurred for the purposes of preserving the ship and cargo from the peril.  

The owners of the EVER GIVEN are yet to declare general average and they may well await the outcome of the damage inspection before deciding how to proceed.  Most marine cargo policies will provide cover for general average and salvage charges “incurred to avoid or in connection with the avoidance of loss from any cause except those excluded” by the policy.  The words “any cause” are important, as this effectively converts the policy to an all risks policy for the purposes of liability to indemnify for GA, even if the policy is on the named perils Institute Cargo Clauses (B) or (C). The only limitation in those cases is where an exclusion applies, and while the cause of the grounding of the EVER GIVEN is awaited there is presently no indication that any of the standard policy exclusions will apply in this case.

The future of Ultra Large Container Ships

Looking ahead, the incident will also no doubt focus attention once more on the risks associated with vessels of this size, particularly when navigating restricted seaways.  The apparent cause of the grounding of the EVER GIVEN was side winds, and yet the conditions reported at the time were by no means exceptional. Thankfully, due to the efforts of the salvors, the vessel was freed after only a few days but the situation could be very different where a vessel of similar size suffered a more catastrophic casualty at a critical point on a trade route.  The salvage operation could take years (as was true in the case of the COSTA CONCORDIA).  The economies of scale offered by ULCSs will likely continue to outweigh these risks, at least for the time being, but the grounding of the EVER GIVEN highlights the fragility of trade routes and the vulnerability of bottlenecks in supply chains, and how quickly they can be impacted.

Key Contacts

Toby Vallance

Toby Vallance

London - Walbrook

+44 (0)20 7894 6257

Anthony Menzies

Anthony Menzies

London - Walbrook

+44 (0)20 7894 6948

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