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Pay attention to packing terms, says insurer

[ November 8, 2023   //   ]

The Incoterms that define responsibilities in the global supply chain have a crucial bearing on who bears the risks relating to the cargo in transit, especially when it comes to packing and securing, says a leading insurer.

Intermodal specialist TT Club says that 65% of cargo damage claims can be attributed to inadequate packing and securing and the question of responsibility for packaging and packing has an important impact on the safety of the supply chain.

Risk management director, Peregrine Storrs-Fox, said: “Poor packing practices, including improperly secured loads and mis-declared goods, give rise to the majority of incidents resulting in damage to cargo both on land and at sea, and potentially in injuries or broader incidents. While INCOTERMS seek to standardise the responsibilities and costs between seller and buyer under a sale of goods contract, where the goods are to be transported, such that there is clarity for delivery, the influence on the fulfilment of the transport (or ‘carriage’) contract may be less understood.

“There is, therefore a need to increase awareness for those involved in trading goods to ensure that responsible decisions are taken in relation to the physical packing operations or, indeed, placement of cargo insurance.”

When incorporated, INCOTERMS will determine when responsibility, and therefore risk, is transferred from the seller to the buyer for delivery of the goods, which includes not just who is contracting for the transport but also packaging and packing. For example, under ‘Ex Works’ (EXW), the risk is transferred from the seller to the buyer at the seller’s premises. This means that the buyer assumes responsibility for packing and transporting the goods from that point onward. In contrast, under ‘Delivered Duty Paid’ (DDP), the seller is responsible for delivering the goods to the buyer’s premises, including arrangements for transport.

But Storrs-Fox added: “Issues impacting safety within the supply chain are not directly answered by INCOTERMS, and thus the concern. As with much of logistics, the range of practices is complex, but there is silence or insufficient clarity around issues of safe packaging and packing that impacts the interface between the differing types of contracts involved (including sales, financing, carriage and insurance). These terms may mitigate certain risks associated with cargo safety,” concludes Storrs-Fox. “Businesses need to consider carefully the implications of the choice of terms of sale, specifically ensuring that packaging and packing are adequately understood to enhance safety.”

TT has, along with its sister insurance mutual UK P&I, recently released an update to the ‘Book it right and pack it tight’², joint publication, now reflecting Amendment 41-22 of the International Maritime Dangerous Goods (IMDG) Code, which becomes mandatory on 1 January 2024.

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