Steamship Lines Declaring “Force Majeure” in Dealing With the Aftermath of Hurricane Sandy

New York and New Jersey are still recovering from the aftermath of Hurricane Sandy. One thing we began seeing at the end of last week as everyone began to account for the devastation, was that the steamship lines were not going to be able to dock all their vessels at the port terminals. Carriers have already begun to announce the diversion of vessels to other ports (mainly Norfolk and Baltimore). In doing so, they have also declared “Force Majeure.”

What does this mean for importers? A declaration of “Force Majeure” allows the carriers to terminate their obligations at the diversion port rather than the original port of unloading. The carriers will no longer be obligated to bring the goods to the port of New York / New Jersey. Importers will be required to complete the remainder of the transportation via their own selected method of transportation.

One thing to be aware of is that most carriers are requiring that the container and chassis equipment be returned to the diversion port. For importers who are shipping to destinations further inland, this may result in significant cost as truckers will have to provide round-trip service, returning the empty container back in Norfolk / Baltimore.

One carrier has been offering the option of barge service at a cost of ($750/40′???)from the diversion port to New York / New Jersey. However the backlog for barge service is currently one week. The on-the-water transit time for barge service is also estimated at one week. Barge service may therefore end up taking two weeks total. This may be unacceptable to many importers.

Some importers have asked whether freight insurance will cover the extra expense as a result of the declaration of “Force Majeure.” Unfortunately, freight insurance would only cover physical damage to the freight as a result of the declaration. Freight insurance will not cover the extra transportation cost.

This is another example of the risks involved in international shipping. Unfortunately, this is one risk that an importer has few, if any options of avoiding.

Wishing those affected by Hurricane Sandy a speedy recovery.

-Jimmy Ting

jimmyting@great-world.com

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