Shipping, legal & insurance developments in Latin America

Shipping, legal & insurance developments in Latin America

Most open insurance markets in Latin America for Marine, Aviation, Transport and International Transit insurances: Colombia and Chile

As we have recently received a number of questions for entering the above markets and/or compliance with offering MAT insurances for global insurance programs we would like to provide a brief overview from a more practical approach:

Colombia

In our February newsletter we already highlighted the financial reform of the Colombian insurance market for all MAT insurances as per the 15th of July 2013. Article 61 of law 1328 of 2009 will allow foreign insurers to underwrite MAT business on a direct basis or via a foreign broker in Colombia as of 15th of July 2013.

Insurance companies and intermediaries may offer outside Colombian territory, on a direct basis, solely and exclusively insurances associated with international shipping, international commercial aviation, space launching and freight (including satellites), that cover the risks associated with the goods being transported, the vehicle transporting the goods and any liability arising therefrom, as well as insurance that protects goods in international transit.

The Superintendencia Financiera de Colombia (SFC) has established a compulsory registration of foreign insurance companies or brokers seeking to provide such insurance in the country. Foreign insurers have to send to the SFC brief information, copies of their licenses, submit audited financial statements, if applicable identification of the foreign broker they will use and appoint a local lawyer to act as their local representative or special agent. This data will be registered in the RAIMAT database (Register of foreign insurers offering MAT insurances in Colombia), upon which approval will be granted.

All documents need to be translated officially to Spanish and apostille for the certificates.

Chile

Under General Rule 197, foreign brokers and insurers can underwrite on a direct basis all Marine, Aviation, & International Transit insurances in Chile. The Rule allows foreign insurers/brokers to solicit, broke or offer on a direct basis all MAT insurances.

In order to be able to call upon this exception as a foreign insurer or broker you will have an information duty to provide the following information to the Superintendencia de Valores y Seguros (SVS):

a) Certification of the financial authority where the foreign insurer/broker is registered stating that the subject insurer/broker is established in that country and is subject to supervision and has the ability to underwrite/broke MAT insurances

b) Power of attorney for a lawyer that will act as the legal representative in Chile

These two documents need to be translated officially to Spanish and apostille and you can apply for approval for registration in their database

For the Lloyds market we suggest to visit the profile of each country published on the Lloyds website. 

Chameleon can assist with any administrative or legal advisory services. Please contact : response@pandisa.com

Mysterious disappearance of Congo Ship and rumours of insurance fraud

We have provided a free translation from Dutch to English of this remarkable story.

The former Antwerp Congo vessel Charleville sunk on the 31st of May in the Baltic Sea, off the Polish coast. That concludes the Flemish Association for Industrial Archaeology (VVIA) from the movements of the tug that was to bring the ship to Lithuania. The tug sailed without the Charleville into the port of Gdansk. According to Professor Eric Van Hooydonk - Chairman of Water Heritage Flanders - the vessel was unsufficiently prepared and not seaworthy for his trip.

Linters regrets the state of affairs and the suspects Congo Boat sunk because of an insurance issue. The Charleville should have arrived in Klaipeda Lithuanianpossibly possibly to be scrapped.

"Tonight the tug 'Ajaks', that had to bring the Charles Ville to Klaipeda, made all sorts of strange movements," said the VVIA in a statement. "He then steamed full speed and headed straight to Gdansk. We lost the trail of the Charleville."

Scandals

At the place where Charles Ville "disappeared", according VVIA Chairman Adriaan linters was a Coast Guard ship around. Also, a message from the Polish Coast Guard that the VVIA could consult, pointed out a fatal outcome. "Hull of a ship with a length of 154 m sank," was mentioned in the message. "Meanwhile, also the harbor master of Rostock confirms, that the ship has sunk," linters said this morning.

He regrets the state of affairs and suspects the Congo vessel possibly sunk because of an insurance issue. "In any case, this matter will not be ended like this because in Germany there are several scandals more to come."

During the transformation of the vessel into a hostel there were put some extra portholes in the ship. According to our findings they careless sealed for dragging said Professor Eric Van Hooydonk.

According to Professor Van Hooydonk the vessel was before he was dragged away from the port of Rostock made sufficiently seaworthy for his trip. Van Hooydonk recent months did together with potential investors have made several attempts to rescue. Ship scrapping

Unseaworthy

"The transformation into youth hostel in Rostock are then put some extra portholes in the ship," says van Hooydonk. "According to our findings, which were not sufficiently sealed for dragging the vessel."

Water Heritage City will see in the coming days if there is still a chance that the vessel can be salvaged. "But it was already not an obvious file, with many opposition, and the cost because the vessel sunk will only increase. The legal situation is still very unclear regarding who is now the own and how this will be dealth with by the insurer. "

"Whether this is really an accident, is still questionable," Van Hooydonk was referring to the rumors about insurance fraud.

Valuables removed

Van Hooydonk states that he possesses footage that shows how during the days before towing a lot of valuable historical artifacts from the Charles Ville were removed. "There was, however, only a authorization to move the ship but not to modify anything. Also something that should be investigated."

The past few months in Belgium and Germany there have been several unsuccessful attempts to rescue the Charlesville from scrapping. The ship was the last remaining passenger ship that connected Antwerp with Congo. In recent years the ship was used in Rostock as a youth hostel, but that recently went bankrupt.

Source: http://www.demorgen.be/dm/nl/989/Binnenland/article/detail/1643400/2013/05/31/Congoboot-Charlesville-gezonken-voor-Poolse-kust.dhtml

Risk management in case of incidents when alongside

According to FONASBA "It is estimated that up to 150 separate actions may be necessary to get a ship into port, perform cargo operations and sail to the next port, many of which must be carried out in the very short timeframe allowed by the vessel’s schedule. Any delay in the progress of the port call, compliance with statutory requirements or arranging the delivery or collection of the cargo can have a significant effect on the cost of the call (and thus on the overall voyage) and on the vessel’s subsequent employment. There is very little consistency in the way these functions are handled – at the international, regional and even local level."

Being a shipping company its hence almost impossible to be aware of all different procedures, customs and regulations governed by different authorities (immigration, police, port state control, port health, customs, etc..) in each ports of call. A reliable shipping agent is consequently of utmost importance to decrease your risks when alongside and most importantly protect your bottom line.

FONASBA has issued a standard quality approval for shipping agents, in which the latter are subject to a quality control system and have to comply with certain international standards. In Latin America unfortunately only shipping agents in Argentina and Brazil are accredited. In most Latin American countries the profession is regulated by local maritime authorities, obviously conditions vary from country to country. One of the ambitious goals of the C.I.A.N.A.M - the Interamerican Chamber of National Associations of shipping agents - is to  standardize the port and shipping procedures of each country with the internationally accepted treaties, regional regulations, and common practices in the Americas.

Latin American ports are increasingly modernizing and thus simplifying procedures and most importantly transparancy is gaining importance, f.e. by publishing their operational procedures on the website of the port. Unfortunately most of them still have a long way to go, nevertheless, the basic import, export and customs procedures are often transparant.

However the procedures can become or "appear" to be suddenly very complicated and untransparant in case an incident occurs. Various local authorities will be involved with their own procedures. Different infomation from various parties is a daily occurrence and you might be informed that any subsequent procedure and its financial consequences will be "descretionary".

The financial consequences of what initially seems a minor incident often gradually increases as local parties will often communicate that the vessel will sail "mañana" and thereby keeping owners/charterers in the belief that the vessel will sail shortly. In a very typical situation every day additional obstacle arises that needs to be tackled, whether or not financially, and the incident will snowball generating additional problems. For example import licenses will expire, the vessel will require additional bunkers, etc.. All these additional problems on its turn generates additional local procedures to be solved and the situation suddenly looks "desperate".

Incidents unfortunately occur even when the necessary loss prevention measures are in place,  therefore its important to identify incident procedures when alongside and mitigate the risk by detecting such a "disaster" situation in very early stages and take control and ownership over the claims handling process before it further escalates and results in excessive unnecessary costs

Due to the legislative minefield in Latin America and the lack of transparancy of incident procedures when alongside we think its of utmost importance for ship operators to have busines controls in place when alongside.

Chameleon PandiSA is pleased to inform you that we will publish in the near future a risk management guideline for managing shipping agents, which is specifically designed for ship operators. This guideline will not cover all eventualities but should assist in identifying and possibly mitigating or avoiding risks when your organisation will be affected by deviations from normal operations.

When released parties can obtain a free specimen of the guidelines by simple request per email to Claudio Bruyninx: response@pandisa.com.

Rates for ocean freight could increase as much as 18 percent in South America’s east coast routes in the upcoming months

In an interview with Latin Trade, chief analyst at the Infrastructure Services Unit of the UN Economic Commission for Latin America and the Caribbean (Eclac), Ricardo Sánchez, predicted a small but significant recovery in the value of ocean freight rates, especially in the continent’s east coast routes. Sanchez expects rates to increase gradually over the year, to stabilize at the beginning of the last trimester of 2013, and then to rise again at the beginning of 2014.

“The revaluation of currencies in the continent will considerably drive up trade in the region; I will say around 7 percent on imports and 6.5 percent on exports. This will have an impact on on ocean freight rates, which could result in an increase of 18 percent in South America’s east coast routes,” says Sánchez.

Such recuperation would set prices almost at the same level they were in November 2012, before they tumbled 25 percent. According to Sánchez, the upturn should be credited to the route’s characteristic dynamism, as well as the incursion of container shipping companies into the reefer business.

However, these factors alone will not contribute to the predicted rise. After a 2011 price war caused freight rates to fall precipitously, maritime companies have changed their business strategy to one that allows them to make profit and not just gain market share.

General Rate Increases (GRIs) have been implemented by different shipping companies in order to restore the freight rates levels that had dropped drastically in 2009 and 2011. “Rates in 2012 were still very low and had become unsustainable for the industry,” says Michel Donner, senior advisor of Drewry Consultants, which specializes in ports and shipping. Donner expects more attempts to implement GRIs this year.

There is also the issue of rising bunker prices and their positive effect on the rise of rates. “While particularly hard to predict, it is expected that bunker surcharges should remain within a few percentage points of the 2011 levels,” adds Donner.

To reduce the industry’s overcapacity, shipping lines are taking measures such as scrapping older vessels and introducing new ones with more capacity. They are also reducing their navigation speeds to save on bunkers and increasing the number of ships serving a route. Additionally, they have entered new service alliances to idle more ships on each of their fleets.

Of these strategies, the introduction of ships with more capacity to the region’s routes could impact ocean freight rates negatively, say the specialists consulted by Latin Trade. “Container ships with a capacity of more than 9,000 TEUs will become the new standard in Latin American routes, and this could put a limit in the increment of freight rates,” says Sánchez.

Donner refused to be deterministic about the consequences, but conceded that if in the next couple of years Latin America upgrades its infrastructure to efficiently serve these types of vessels, trade could increase dramatically in the region.

Reports published at the beginning of March by ocean freight carriers Panalpina, CMA CGM, and Hapag-Lloyd stated that 2013 would be a year of positive, yet limited, recovery in freight rates due to uncertainty of the global economy.

If trends described by industry insiders and experts hold up, 2013 could be the year the maritime industry finally navigates away from a four-year market lull. (*) "Este boletín de noticias ha sido publicado con autorización de Claudio Bruyninx, director de Chameleon PandiSA www.pandisa.com"

Source: http://latintrade.com/2013/05/ocean-freight-rates-on-the-rise