What are the implications for forwarders and master carriers?
With at least 160 dead and over 6,000 injured this major catastrophic incident leaves a huge scar on the city of Beirut. Whilst details are still emerging, we know the explosion and subsequent blast occurred within the port area and destroyed almost everything in the port and the surrounding area up to a radius of 10km. The explosion could be heard from Cyprus.
The cause of the explosion on August 4 is believed to have originated from a fire which spread to a storage facility containing ammonium nitrate. Apparently 2,750 tonnes of this highly explosive material was seized from a ship in 2014 and stored in a warehouse at the port without any protective measures, and in close proximity to the city.
If stored in the wrong conditions or contaminated, ammonium nitrate can become volatile. Contamination through oil, grease or even wood products could change the product’s thermal properties.
The majority of the port’s infrastructure has been destroyed, including all offices of major shipping lines, and of course cargo within the vicinity is either destroyed or irretrievable for the foreseeable future.
What does this mean for Forwarders?
There will be multiple issues, but due to the Port of Beirut being out of operation, the immediate problem is that carriers will terminate the voyage at one of the neighbouring ports, such as Tripoli and Alexandria.
Can Carriers legally do this?
They can, and they are allowed to do this without any extra cost or risk to themselves. Most carriers express this within their terms and conditions under a termination of voyage clause in their Bill of Lading.
Can the Merchant demand freight be returned because the voyage was not fulfilled?
No, all freight is earned. As soon as it sails the freight is earned. The freight must be paid or collected.
Client has cargo insurance, and will they cover these extra shipping charges?
Check with your insurance provider. Some cargo policies include a Forwarding Expense Clause which could cover these charges.
Client is insisting the Forwarder covers these charges
This scenario will clearly have a negative impact on client relations. The Forwarder should be able to rely on the same defences as the Master Carrier. Check your terms and conditions. Any claim for additional costs should be referred to your liability insurers immediately so they can act on your behalf regarding any defence.
As this matter develops, we will keep you posted on updates from local representatives in the area.
If you have any cargo within the Port of Beirut or rerouted, you must notify your cargo and/or liability insurers immediately.
Please contact Richard Kamppari Baker, Chief Executive Officer of Cornice Claims Associates for additional information and advice.