Incident Overview
On August 9, 2024, a significant explosion occurred at Berth No. 2 of the Phase III terminal at Ningbo-Zhoushan Port's Beilun Second Container Terminal in Zhejiang, China. The explosion, caused by a container of hazardous goods on board the container ship "YM Mobility," ignited a fire. Despite the severity of the incident, no casualties were reported. However, six hazardous goods containers (DG containers) near the explosion site were likely affected, and an estimated 20 containers were damaged. This raises an important question: Can the owners of these damaged goods receive compensation?
Cause of the Explosion and Background
The explosion involved 16 tons of tert-butyl peroxybenzoate, an organic peroxide classified under hazard class 5.2. According to its Material Safety Data Sheet (MSDS), the Self-Accelerating Decomposition Temperature (SADT) of tert-butyl peroxybenzoate is 60°C. SADT indicates the temperature at which the substance will spontaneously decompose, potentially leading to a hazardous reaction. Therefore, the substance must be stored and transported at temperatures significantly below its SADT.
The explosion occurred around 1:50 PM during the peak of summer, with ambient temperatures extremely high. If the container was exposed to direct sunlight without adequate protection, the internal temperature could have reached 60-70°C, triggering the substance's decomposition and resulting in the explosion. The exact cause of the explosion is still under investigation.
Can Compensation Be Claimed Without Insurance?
Even if the goods were not insured, cargo owners can still apply for compensation from the shipowner. However, the shipowner's liability is conditional and limited. While the shipowner is responsible for the vessel's safety and the proper transport of goods, certain circumstances, such as damage caused by "force majeure" events, allow the shipowner to invoke exemption clauses under maritime law, particularly Article 4 of the Hague-Visby Rules, to avoid liability.
Scope of the Shipowner's Liability
According to Article 51 of the Maritime Code of the People's Republic of China, the carrier may be exempt from liability for the loss or damage to goods during transport if the loss or damage was caused by:
Negligence in the navigation or management of the ship by the master, crew, pilot, or other servants of the carrier;
Fire not caused by the carrier's negligence;
Perils, dangers, or accidents of the sea or other navigable waters;
War or armed conflict;
Acts of government or competent authority, quarantine restrictions, or judicial seizure;
Strikes, lockouts, or labor restrictions;
Efforts to save lives or property at sea;
Acts or omissions of the shipper, owner of the goods, or their agents;
Inherent nature or defect of the goods.
Based on these provisions, the carrier can likely invoke the fire exemption clause unless the cargo owner can prove that the fire resulted from the carrier's negligence.
Assessment of Actual Losses and Compensation
If no insurance is in place, the assessment of losses typically involves the following parties:
Carrier (Shipowner or Shipping Company): Conducts an initial inspection to determine the extent of the loss and the likely cause. The claims department will handle the claim, including communicating with the cargo owner to determine the compensation amount.
Consignee (or Cargo Owner): Inspects the goods upon arrival. If damage or shortage is found, they must immediately file a claim with the carrier and note the damage on the bill of lading or delivery note. The consignee must provide relevant documents and evidence to prove the occurrence and extent of the loss, including photos, lists, invoices, etc.
Notary Public or Third-Party Inspection Company: In some cases, an independent notary public or inspection company may be hired to assess and report the loss. These reports carry legal weight in the claims process.
If the parties cannot reach an agreement, the matter may need to be resolved through legal proceedings, with a court or arbitration body making a ruling based on the evidence and independent inspection reports.
Claims Procedure for Insured Goods
If the cargo owner has purchased cargo insurance, they should promptly report the incident to the insurance company and prepare the following documents:
Insurance Policy
Bills of Lading
Sales Contract
Commercial Invoice
Packing List
Customs Declaration
Letter of Subrogation
Letter of Authorization: This document is required when a party not bearing the risk (e.g., a buyer in a CIF transaction making a claim through a domestic insurance company in their own country) needs to manage insurance claims on behalf of the party who does.
Any other documents requested by the insurance company
What to Do If the Shipowner Is Liable but No Insurance Was Purchased?
Under Article 56 of the Maritime Code of the People's Republic of China, the shipowner's liability for cargo loss is subject to limitations based on units of Special Drawing Rights (SDR). The compensation limit per unit or per kilogram is 666.67 SDRs or 2 SDRs, whichever is higher.
For example, if a cargo weighs 10 tons and the weight is stated on the bill of lading, the shipowner may limit their liability to 20,000 SDRs (approximately RMB 190,000). However, the actual compensation depends on the extent of the loss. If the loss is valued at 800 RMB, the shipowner would only compensate for the actual loss, even if the liability limit allows for a higher amount.
What If the Shipowner Declares General Average?
If the shipowner declares general average, the cargo owners whose goods were not damaged should immediately report to their insurance company and prepare relevant materials, including the insurance policy, bills of lading, sales contract, commercial invoice, packing list, and any guarantees required by the shipowner.
If the cargo owner does not have insurance, they will need to arrange for a guarantee deposit and prepare the necessary documents as required by the shipowner.
What If the Shipowner Does Not Declare General Average?
Even if the shipowner does not declare general average, cargo owners should closely monitor the incident's progress, including transshipment arrangements, and maintain communication with their foreign buyers to protect customer relationships and interests.
Recommendations
To mitigate potential financial losses, it is recommended that cross-border trading companies purchase insurance for their goods immediately after loading is completed. This proactive step can significantly reduce the risks associated with unforeseen incidents.
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