Over 200 Cargo Ships Sink Each Year

1. Managing The Risks of Global Shipping Presented by Greg J. Kritz,CICVice PresidentRoanoke Trade Services, Inc. www.roanoketrade.com

2. Over 200 Cargo Ships Sink Each Year

3. Average 20 MajorEarthquakes per year of • 7 or higher magnitude

4. U.S. Cargo Losses Exceed $18 Billion Annual Impact on U.S Economy

5. CARGO CRIME SOARING • Theft & Unexplained Shortages (shrinkage/Leakage) • 4 Easy Ways to Access • An Ocean Container • Without Leaving a Trace

6. 30% of Cargo Losses • NOT Preventable

7. 844 Piracy Attacks • on Cargo Vessels • 2004 -2006 • $16bn Year in Pirated Cargo

8. 273 Hurricanes Hit USA • 1851-2005 • 92 Were Major • Category 3,4 & 5

9. GENERAL AVERAGE • Ancient principle of equity in which all parties in a sea adventure (ship owner, cargo owner, and freight) proportionately share losses resulting from a voluntary and successful sacrifice of part of the ship or cargoto save the whole adventure from an impending peril, or extraordinary expenses necessarily incurred for the joint benefit of ship and cargo.

10. LOSS of BUSINESS INCOME:IMPORTERS NIGHTMARE • A Property Insurance Policy Doesn’t Cover Loss of Business Income for Cargo Claims What if these were Yours’ at Peak Season? $30M

11. Sampling of Regulatory Risks • Seizures for Failure to Timely File Advance Notice • Seizure for non-Compliance with Wood Packaging • Demand for Redelivery of Tainted or Suspect Product (FDA, AGR,…) • Anti-Dumping Duty Craze • & Byrd Amendment

12. The Ugly Truth About Carrier Financial Responsibility

13. Ocean Carrier/NVOCC • Subject to terms of Carriage Of Goods by Sea Act (COGSA) • $500 per Customary Shipping Unit as described on OBL • Unit can be the container, a pallet, a crate, carton

14. 1.Act,neglect,default 2.Fire 3.Perils of the sea 4.Act of God 5.Act of War 6.Act of public enemies 7.Government seizure 8.Quarantine 9.Act or omission of shipper 10.Strike,lockouts, or stoppages 11.Riots & Civil commotions 12.General Average 13.Inherent Vice 14.Poor Packing 15.Poor Marks 16.Latent defects 17.Loss/damage outside control of carrier Ocean carriers & NVOCC’s have 17 legal reasons not to pay

15. Most Typical Carrier Defenses • “We didn’t pack it so we can’t confirm the number of pieces” • “You can’t prove that damage happened when cargo was in our care,custody & control.

16. International Air & Indirect Air Carriers • Subject to terms of the “Warsaw Convention” • $9.07 pound/$20 Kilo or 17 SDR Kilo if Montreal Protocol ($23.15 kilo)

17. What About Distribution Centers? • Warehouseman’s Terms & Conditions Rule Unless Changed by Contract • Liability Typically a multiple of base rate • 3PL’s and Forwarding Operations Often Limit Liability on Warehouse Receipts

18. Freight Forwarder & Customs Broker Liability • Unless acting as a carrier and issuing a freight bill, 3PL’s &forwarders typically are not liable for loss or damage • Customs Brokers use Terms & Conditions of service that Limit Their Liability to A Maximum of $50 per shipment

19. Action Steps • A. Identify Risks in Supply Chain Where You Have Financial Interest • B. Establish Clear Contracts with Buyers & Suppliers (Don’t Assume Incoterms Address It) • C. If you Import, Control the Insurance

20. Action Steps Continued…/ • D. If You Transfer Risk to Insurer • Protect Profits, Insure Selling Price • Raise Limits to Anticipate Peak Accumulation & Lost Profit • Move Inventory Coverage to Cargo Policy – Flood, Quake,Profit

21. Action Steps Continued…/ • D. If You Transfer Risk to Insurer.. • 4. Add Airfreight Replacement • 5. Cover Extremes in Temperature • 6. Contingent Financial Interest • 7. Unexplained Shortages • 8. Payment on Account – Disputes • 9. Your Financial Interest Admitted • regardless of Incoterms

22. Thank You • For Letting Me Be With You Today !