K LINE Cargo Acceptance Guidelines

1. K LINE Cargo Acceptance Guidelines CONTQC/CMG June, 2005

3. Preface (1) Preface (2) Cargo Acceptance Guidelines Bulk cargoes Chemicals with strong odor (UN1334 & UN2468) Cold wave container Dangerous goods destined for US inland via US rails Hide Hot cargo (1) Hot cargo (2) exceptional treatment Logs/ lumber Magnetic cargoes Malt Military goods Overweight containers Reefer as dry Scrap (Metal, Plastic, etc) Shippers own containers (SOC) Stone products Steel coil Steel products (pipes/sheet/plate) Used parts, machinery Valuable cargoes Contents :

4. Other basic guidelines Cargo screening procedures Container seal inventory control Containers used for DG for US DG placard Guidelines for handling cargo and cargo damage Guidelines for survey arrangement Partlow charts safekeeping Refrigerated foodstuff quarantine Standard vanning policy for dry containers Standard vanning policy for Flat rack containers Standard vanning policy for Open top containers. Contents (continued):

5. Preface (1) One year has passed since our first edition of KLINE basic guidelines forcargo acceptance was issued. While our Guidelines have been well penetrated into our colleagues, we have yet seen several serious and costly incidents caused by only a container with unscreened and risky cargoes. Just before preparing this third edition (now renamed to Cargo Acceptance Guidelines – CAG), we carried out an inquiry about cargo screening procedures to almost all of our offices over the world and learned that there is still large room for improvement to protect ourselves against risks to take doubtful cargoes from unfamiliar customers. The result of the investigation is being summarized in the section ‘Cargo Screening Procedures’, which please carefully read to make your current screening procedures more effective. Under the circumstances that the cargo volume we handle would be expected to increase further, we sincerely believe our efforts to improve cargo screening method must have very important role all the more. KLINE CONTQC/CMG (June, 2005)

6. Preface (2) All FCL (full container loads) container cargoes are received in a sealed and SLAC (shipper’s load and count)condition . Therefore Kline, as a shipping line, are not in a position to know the condition and securing arrangements of the contents of each container. It is, however, vitally important for us to understand cargo nature and securing manner from the cargoes description and/or customers’ business line through professional communication with them, because the nature of the cargo can cause damage to the cargo itself, the container and other objects (vessels, people and the eco system,etc). To help prevent such damage, it is essential for the entire Kline group to share some basic knowledge about cargo types and guidelines for cargo acceptance This booklet, which is a summary of instructions/recommendations, is compiled for that purpose. Please do not hesitate to contact TMO or us, whenever you have any doubts upon your accepting cargo in light of the guidelines. KL CONTQC/CMG (April 2004)

8. Cargo Acceptance Guidelines

9. Bulk cargoes The transportation of bulk cargoes (unpacked) has below mentioned risks. Minimum requirement from CONTQC is proper setting of bulkhead to protect container door, but the risks should be well considered upon booking. TMO may restrict the cargo by their own judgment. * Container doors and panels would receive strong pressure and easily bulge out by the cargo weight which could be further increased by rolling and pitching movement during navigation. * Consequently the locking devices of the container doors might break and the cargoes spill over. * Even if not broken, the bulge out itself would bring about handling difficulties. * In case of hole/cut damage, the cargo would easily suffer wet damage.

10. Chemicals with strong odor Certain chemicals have strong odor, which lingers for months and can not be removed easily, thus it causes huge extra cost for cleaning and deodorizing treatment, and in the worst case, total disposal of the unit. In 2003, following two products have been identified strong odor chemicals and prohibited without any exception. (1) Trichloroisocyanuric Acid (Class 5.1 UN2468) (2) Crude, Refined Naphthalene (Class 4.1 UN1334)

11. Cold wave container We sometimes receive inquiry about so called ‘cold wave container’ (container filled with dry ice to create ultra-freezing condition) and would reconfirm that Kline’s policy would not allow to accept such containers (neither Kline’s, SOC nor Partner’s) in any occasion due to not fully analyzed technical information, possible damage to containers and continuous outflow of CO2, which may threaten labor’s safety.

12. Dangerous goods destined for US inland via US rails(Improper blocking & bracing) A lot of containers stuffed with dangerous goods are being rejected and ordered to rework by US rail due to ‘improper blocking and bracing’. This brings about our operational inefficiency and cost recovery job. Inorder to avoid such operational interruption and extra cost, the shippers who were responsible for FCL cargo stuffing, should follow the guideline announced by US rails and our POL offices are likewise required to enlighten them accordingly. Main requirements are : * Min 2 x 6 inches lumber are required for blocking *Nails should be staggered side to side, not in a straight line, no more than 5 inches apart. *Container door must not be utilized to sustain cargoes. * Pallets should not be utilized as securing materials.

13. Hide Hide is basically categorized into two types; (1) Chrome hide This is half-finished products, which would not produce so-called ‘hide juice’. This is mainly transported in 40’ containers. (2) Wet salted hide This is hide treated with salt and brine and would sometimes cause hide juice and leave strong odor in container. 20’ containers are normally used, as wet salted hide is much heavier than chrome hide. Perfect packing and lining is prerequisite condition for acceptance in order to avoid juice/odor problem. In general, hide requires extra cleaning and 7-10days waiting time (due to remaining odor problem) after being devanned We do not apply overall prohibition policy on this commodity, but characteristics mentioned above and problems have to be reminded when accepting booking. Certain TMO prohibit this cargo as their own trade management policy.

14. Hot cargo (1) Hot cargo or hot stuffing can be simply defined as reefer cargo that has not been sufficiently frozen or cooled down to match the setting temperature of the reefer upon stuffing. What is sometimes not understood by shippers is the fact that reefer unitsare only designed to maintain temperatures and are not designed/able to freeze or cool down rapidly to the setting temperature. Therefore shippers should be reminded that it is their responsibility to ensure that potential cargoes are of a suitable temperature prior to being stuffed into reefers. General procedures are not to accept hot cargoes , or when it is required to be loaded by shippers, their Letter of Guarantee should be obtained before shipment.

15. Hot cargo (2)(Exceptional treatment for certain Asian countries) Despite our general rule stated in item Hot cargo (1), certain Asian countries express their difficulty to implement our rules perfectly because shippers are not fully accustomed to freezing or cooling down their cargo to the setting temperatures (partly due to lack of freezing facility) and unwilling to issue L/G. After interviewing with our Asian colleagues, we have compromised and established a practical rule, according to which L/G should be obtained without fail when the difference between the actual temp and setting temp is more than 5C (for frozen cargo only). We realize this is not legally recommended and subject to immediate review when we encounter certain problems. In order to avoid any unit disorder which is often reported concerning hot cargo stuffing, you are requested to advise to your shippers that unit should be always shut down during cargo stuffing and restarted upon (temporary) door closing. You may further have to suggest the necessity of manual defrosting, but this has to be done after fully consulting with IEC(ECNT) or other authorized experts.

16. Logs/Lumber Logs should not be accepted, because they cause serious damage to containers during stuffing, transporting and un-stuffing. Lumber also has risks of container damage, therefore it could be only accepted when their method of stowage and lashing is established and approved by TMO. If the lumber has been treated in any way (i.e. Creosote), then the container must be lined or the cargo is to be packed.

17. Magnetic cargoes Magnetic cargoes with strong magnetism may seriously affect nautical instruments on board. In this regard, before booking magnetic cargo, please obtain following information from actual supplier. (1) Magnetism leaking out of package. (The maximum magnetism to be accepted is 1 gauss) (2) Packing style and material　（Magnet shield packing is required) Then please send application to Central Planner for acceptance, as it may require special stowage position on board.

18. Malt Malt shipments to Japan have been regarded as very important base cargoes for various trade lanes. Due to the sensitivity of this cargo, Malt Task Force was set up in April, 2003 and General Guidelines for Malt/Hop shipments were issued. (Basic policy ) Container’s condition : Food grade status (no foul/toxic odor, no bird droppings, oil stain on exterior of container, No sharp objects which may tear liner bags, etc) Container’s age : Not younger than 12months and not older than 8 years Liner bags : Properly fitted inside container Stowage : Under deck stowage For more in depth details, please refer to the Malt Task Force General Guidelines (latest issue: May 31, 2004).

19. Military goods Weapons, ammunitions and other military goods have never been permitted under Kline policy and we would like to make it clear that this policy remains stringently in force. The range of goods, which have or potentially could have, a military or para- military application is of course wide and you are therefore required to take great care and exercise due diligence in this respect upon your accepting cargoes. The fact of the shippers and/or consignees being governmental bodies does not by itself amend this policy. The consequences for the carriage of prohibited or suspicious commodities can be severe, which could include a vessel being refused entry to port, heavy fines and potential claims for loss of hire, loss of credit, etc.

20. Overweight containers Overweight (in excess of max payload) containers must not be accepted nor loaded in any event, as it may cause serious physical damage to the containers and, as its result, might injure people who handle them. POD terminal may reject discharging them or require L/G for even slight excess of weight due to safety reason. Overweight containers must be detected through verification of booking office between manifested cargo weight and max payload of the containers. In case shipper’s manifestation is not correct, it also can be detected at Terminal gate or somewhere else, where the containers are actually weighed. Any shippers who are producing over-weight containers without taking proper measures should be blacklisted and their cargoes should be excluded. (There is also another weight restriction regulated by local traffic rules, which must be followed to avoid any troubles, penalties)

21. Reefer as dry (RAD) Reefer container as dry use (Reefer as dry) has been promoted to save empty repositioning cost. While this policy would be maintained, please be reminded that high-priced freezer or complicated structure inside the reefer containers might be easily damaged when the cargoes are not chosen nor stuffed into our containers properly. Please refer to the attached technical guidelines for acceptable RAD commodities and securing method to be observed during cargo operation.

22. Scrap (Metal,Plastic,etc) Scrap metal, plastic, etc are often confused with ‘Waste’ by unscrupulous shippers and tend to cause troubles at POD. Therefore it is very important to take similar steps described in the item ‘Waste’ in this guideline. Once it is proved to be non-waste, the cargo is still needed to be well secured in order not to damage our containers. Scrap in bulk must not be accepted without exception. ‘To order B/Ls’ should not be accepted. In 2002, we are involved in metal scrap case which was contaminated with radioactivity. This is a health hazard to all who handle the cargo and resulted in rejection at POD. All the scrap metal should be checked and ensured radioactivity free by shippers. In 2003, we are involved in the plastic scrap case, which was finally ordered to be shipped out by POD authority after staying almost two years in the terminal. In both cases, Kline had to bear extra cost and exert a lot of efforts to solve the problem.

23. Shippers own containers(SOC) When a booking is received and the cargo is to be loaded and shipped in a SOC container, then the container should be verified to have a valid CSC plate and class certificates (minimum of six months validity) and be suitable for ocean transport in all respects. It is also highly recommendable to sign an indemnity agreement with shippers, who indemnify Kline harmless from any and all consequences that may arise as a result of Kline’s accepting the SOC.

24. Stone products All stone products can potentially damage the container and in the case of slabs and blocks and stone products in bulk, the damage can be excessive. They are also often proved to have exceeded our vanning restrictions (stated in ‘Standard vanning policy’ of this guideline) at later inspection at POD. Therefore it is required to carry out condition survey at shippers account before the shipments, in order to ensure that it is safely secured according to KLine standard vanning policy. Our containers are also likely to be damaged during vanning and devanning operation due to its cargo nature or cargo handling method being used, therefore on TMO’s instruction it is appropriate to obtain Guarantee of Payment from shippers for any potential container damage.

25. Steel coil Steel coils are not suitable for closed van container transportation due to its particular shape and heavy weight. It would easily lead to heavy container damage or even more serious accident involving other containers, vessel, etc. Exception may be granted by CONTQC or TMO, provided - Weight of each coil should be less than 4kt. - Weight/m2 should be less than 2kt. - Choking, securing method should meet Kline’s requirement. Booking offices are required to send application to TMO with cargo and securing details and obtain their approval in advance.

26. Steel product (pipe/sheet/plate) Steel (metal) product such as pipes/ sheets/ plates/ingot often causes serious damage to our containers due to their particular shape and high density, therefore strict observation of our standard vanning policy in this guideline is required in order to protect our containers from any potential physical damage. When you receive booking of the cargo made of steel or other metals, please do not fail to obtain cargo details (dimension, weight, packing style, etc) and securing method for TMO’s approval.

27. Used parts, machinery Commodities such as used auto parts and used machineries, which may contain oil, would often cause serious leakage problem during navigation. It would not only damage our ships and other adjacent containers, but also possibly pollute our ocean. Besides, unscrupulous shippers may confuse them with unauthorized ‘Waste’ (please refer to item ‘Waste’ in this guideline). These commodities are only accepted, provided; (1) Shippers and consignees are environmentally conscious and reliable parties, who take full responsibility for any repercussions, environmental or equipment-related, that may result. ‘To order B/Ls’ should not be accepted. (2) Anti-oil leakage treatments should be arranged. These include the removal of all oil, the complete plugging of drain outlet and general examination of any sign of leakage. (3) Other anti-pollution treatments should be arranged. These include the laying of plastic sheets (strong enough for folk lift or other vanning /devanning machinery to be operated upon it), and the scattering absorbent such as saw dust on the plastic sheets and the making necessary arrangement to prevent oil from spilling out from plastic sheets to containers’ floor board.

28. Valuable cargo For any valuable cargo which includes but is not limited to platinum, gold, silver, jewelry, precious stones, precious metals, precious chemicals, bullion, specie, currency, negotiable instruments, securities, writings, documents, pictures, works of arts, curios, heirlooms, collection of every nature or any other valuable goods whatsoever including goods having particular value only for Merchant, you must seek approval from TMO in advance. It should be noted that Kline is not covered under its normal insurance policy for any claims for valuable cargo, therefore it is necessary for Kline to obtain special insurance cover for these types of cargo. TMO is requested to contact GALG for insurance coverage before accepting the cargo. It should be also noted that proper security measures must be worked out and implemented while the cargo is under our custody.

29. Waste Waste often causes serious problems, as international conventions such as Basel convention and national regulations are not fully recognized by concerned parties. Besides a waste, which is accepted today, might be banned tomorrow, because of change of regulations as a consequence of ardent environmentalist movement. It is perfectly possible for the carriage of certain types of this class of cargo to reflect negatively on Kline. Therefore if you have to take waste cargo, you must obtain TMO’s approval after confirming following points. * The commodity is non-hazardous and lawful in all respects for POL country/ Transit ports countries /POD country. This has to be proved by written confirmation of competent authorities. * Shippers and consignees are well known, reliable parties. ‘To order B/Ls’ should not be accepted. * The commodity is fully secured and do not cause any damage to our containers.

31. Other basic guidelines

32. Cargo screening procedures • Whether the shippers are credible or not comes first of all. If you have any doubt, proper investigation should be carried out through method established by each local office or TMO. ‘Know your shipper ’ would be the very basic and most important policy to enhance our security and protect ourselves. • If the cargo is dangerous goods (DG) , you would proceed to DG application /approval procedures. Any errors or flaws should be fully corrected according to DG Handling Guide and DG Application Tools before shipment. If it is general cargo, please screen it through these Guidelines and confirm the pre-condition for acceptance. Applications to TMO/Planners are required for awkward cargoes, steel products, etc. • If the cargo requires inland transportation, especially, by rail, your pre-investigation must be carried out with utmost care, because even only 1 inadequate container would cause catastrophic result (such as derailment) involving many other containers or people. If it is heavy cargo such as steel product, mold ,etc, please never fail to check each package weight and securing method and weight per M2,M3 for each product inside. Steel coils or similar products must not be booked without prior approval from TMO. (4) All the bookings have to be re-screened by a good system or responsible person before making it final.

33. Container seal inventory control Whilst in normal circumstances we would expect that our (Kline supplied) container seals are given to our shippers on ‘one seal per one booked container’ basis. It may also be the case that regular shippers, haulage contractors or terminals are supplied with a box in advance for operational convenience. In any case, we specifically require a strong control over the inventory of KLine seals (both of given and remaining seals), as you will appreciate a weak or non-documented inventory control could directly result in our being found liable for loss or damage to cargo. For your guidance, in recent case for which we could not escape our responsibility fully, two seals were given to a trucker for one booked container. The trucker (or their accomplice) put 2nd seal after pilferage to pretend that the container was intact. Our way of seal control was severely questioned in the lawsuit.

34. Containers used for DG cargoes for US This is an instruction circulated in February, 2004. US Coast Guard(USCG) seems to be very zealous in inspecting physical condition of containers stuffed with DG cargoes and even slight damage to door/front sill would cause trans-loading of entire cargoes. In this regard, it was instructed by GCCO that only Kline’s containers, which are manufactured in/after1998 and called ‘cone damage protector’ type (the lower parts of both ends of door and front sill are cut in order to avoid sill damage by stepping on twist cones or the similar during careless operation), should be assigned for the DG cargoes exporting to/from USA with immediate effect.

35. DG Placard • It is consignees’ obligation to remove the placards before their returning empty containers to our depot. Therefore it is primarily required to remind your customers (consignees) of this obligation. • It is then required to strengthen your control upon receipt of empty containers, e.g. by implementing ‘not to accept containers with old placard policy’ and charging them for removal expenses. • Then please supply only containers without old placards and any other old labels for new shipments. • Please guide your shippers to attach correct DG placard at correct positions. (DG placard requirement) a) Dimension : equal or larger than 250mm x 250mm b) Durability : able to withstand 90days water immersion c) Position : （for US) about 1.8 m above the bottom rail of equipment and away from any kind of marking by at least 3 inches. (for other area) about 1.2 m --- 1.8 m above the bottom rail.

36. Guidelines for handling cargo and container damage If we failed to take proper action in handling cargo and/or container damage upon being detected, our customers’ trust would be easily lost and extra cost for dealing with the troubles would be possibly increased. In this regard, we have issued ‘Guidelines for handling cargo and container damage’ on 31st March, 2005 as basic reference materials. You are requested to peruse and apply it in your daily scene.

37. Guidelines for Survey arrangement • Purpose of survey When our containers are reported seriously damaged or cargo claim is lodged, we have to think of sending a surveyor to protect ourselves, minimize losses, or proceed to cost recovery, by finding out exact cause, damage nature, its loss amount and responsible parties. (B) General procedures (1) First of all, please collect all the available information about incident and cargo/container damage condition through all the channels including clients. (2) Make best estimate about cause and loss. US$2,000 is important amount- wise criteria for your judgment on whether sending a surveyor or not, as the loss less than US$2,000 is not covered by our insurance. (3) Appoint a reliable surveyor and make your purpose of survey very clear upon making order. (4) Check carefully preliminary survey report and request amendment, if you find any disadvantageous description for Kline in the report. (5) Send survey report to all the related parties.

38. Partlow charts safekeeping Partlow charts must be carefully treated as confidential documents, because they are basically used to protect our interest against any cargo claims lodged by our customers. Our safekeeping policy are shown as follows. (1) Charts have to be removed before delivery of containers to customers. (a) CY delivery Charts have to be removed before gate-out. When our customers happen to have a chance to see Container upon statutory inspection or other occasions, Charts have to be removed beforehand and new Charts have to be attached. (b) Door delivery Charts have to be removed and new Charts have to be attached just before gate-out. Newly attached Charts have to be removed when the unit returns to our depot.. (2) Removed Charts have to be kept in safe places Removed Charts have to be kept for two years in safe places locally and be available upon our inquiry.

39. Refrigerated foodstuff quarantine Following recent outbreaks of livestock diseases such as BSE, Foot and mouth disease, and now Avian influenza(Bird flu), etc, most countries are introducing very strict animal quarantine and veterinary import regulations on foodstuffs. Typically the origin of the goods has to be an approved country or area, therefore trans-loading in other countries, or unauthorized door opening or seal exceptions would often lead to rejection by quarantine office at final destination. In this connection, please kindly note : * When a machinery malfunction occurs on a food stuff, first and best option is always to repair it. * If this fails and there appears to be no choice other than trans loading of cargo into another container, please contact TMO and POD office and confirm regulations at POD/POR in advance. The written approval of our clients is also required. * Any action taken without proper proceedings as above would result in more complicated situation and further increase of extra cost.

40. Standard vanning policy for dry containers The above list shows certain restrictions for cargo weight and size(individual), which can be accommodated within our containers safely. These restrictions were set up to protect our container from any potential physical damage. The high density cargoes such as steel products, stones, etc, may exceed [weight/m2] or [Weight] limit easily, therefore it is required to confirm cargo details and securing method for TMO’s approval. Other restrictions were set, taking safety operation during vanning and devanning into consideration.

41. Standard vanning policy for Flat rack containers • Flat rack containers may be used when the cargo nature or dimension are not suitable for usual dry containers (so called ‘awkward’ or ‘Out of Gauge = OOG’ cargo). The above diagram shows certain restrictions for flat rack containers. • Please be noted following points : • It does not mean that all the cargoes within the restriction could be automatically accepted. • Awkward cargo application/approval procedures should be followed without exception. • Lashing plans or other technical information should be submitted upon request. • Leased flat racks, which could accommodate heavier cargoes (max payload about 34,000kg/20’ and 39,650kg/40’), might be provided subject to availability.

42. Standard vanning policy for Open top containers Open top containers may be used when the cargo nature or dimensions are not suitable for usual dry containers (so called ‘awkward’ or ‘Out of Gauge’ cargo). The above diagram shows certain restrictions for open top containers. Please be noted following points : * It does not mean that all the cargoes meeting the restriction could be automatically accepted. Awkward cargo application/approval procedures should be followed without exception. * Lashing plans or other technical information should be submitted upon request.