By Brian Dunn

The issue of abandoned and mislabelled cargo was brought to the attention of Canadians last year by the well-publicized case of garbage being labelled as recyclable plastics, and shipped to the Philippines in 2013 for “recycling”. For the past six years, the shipper, ZIM Integrated Shipping, and its Philippine agent were embroiled in a conflict and Philippine President Rodrigo Duterte threatened to “declare war on Canada,” as a result. Finally, on May 30, 2019, the waste was returned to Canada at a cost of $1.2 million to Canadian taxpayers.

The case was highlighted during BLG’s 31st Annual Maritime Law Seminar in Montreal on Dec. 6. It was also pointed out by BLG Partner Robin Squires that waste is the most common problem related to abandonment. Cargo is abandoned for a number of reasons, including inability to pay duties or storage fees that exceed the value of the cargo. “The Canadian government learned a lot from the issue and how to deal with the problem going forward,” Mr. Squires added.

Refrigerated cargo is considered abandoned if unclaimed five days after being discharged and 15 days for dry cargo, according to Mark Newcomb, counsel and Vice-President – Claims, Insurance & regulatory Matters, ZIM Integrated Shipping, who had to deal with the Philippines case four days after joining the company. “We have 10,000 unclaimed units (containers) or two per cent of our total units, costing about $20 a day in storage and the trend is going in the wrong direction. When I joined ZIM a few years ago, there were 2,200 unclaimed units.”

China accounts for about 29 per cent of ZIM’s unclaimed cargo with 19 per cent originating from Canada and 17 per cent from the U.S. Haiti accounts for about 36 per cent of the company’s unclaimed cargo and over 30 per cent of that figure relates to cargo shipped from Canada. Most of it is unclaimed relief goods and 78 per cent of it is due to the inability to pay storage fees, according to Mr. Newcomb.

Canada may find it harder to export goods to be recycled since countries like China and India are beginning to refuse them, he added. “If you can’t sell them, you can’t move them, which incurs more costs. We are not equipped to handle abandoned cargo as we don’t have the resources. You are in better shape if you know your customer and know what’s in the container. You also need to know who is shipping and who is receiving.”

If illicit cargo is abandoned, it’s often difficult to trace the shipper, according to Susan Lee, senior claims executive, Thomas Miller (Americas), managers for the U.K. P&I and Defence Clubs. And reefer cargo delays can often result in abandonment. There is also the potential for fraud, such as used cars being stolen at their destination. P&I organizations will often provide indemnity coverage and legal defence fees and some support for third-party liability and intermediaries, Ms. Lee added. There is also coverage for agents when liable, in lieu of carriers in some countries. “But we do not cover lost opportunity costs when containers can’t be used for other business.”

Ship-source Oil Pollution Fund (SOPF) celebrated its 30th anniversary in 2019. It has cash balances of over $411 million on hand, and compensation for claimants is now unlimited, the Fund’s Administrator Anne Legars told the seminar. Over 400 claims have been paid since the fund began in 1989. “The Fund compensates victims of pollution by any type of oil from any ship or boat anywhere in Canadian waters. The largest ever claim was over $4.5 million, but historically, a majority of claims are under $50,000.” Compensation covers different types of damages, including clean-up costs, damage to the environment, property damage and losses affecting the economy, fisheries and tourism.

There have been a number of recent legislative amendments to the Fund, noted Ms. Legars. One is the availability of emergency funding of $10 – $50 million a year to the Department of Fisheries and Oceans (DFO) in the event of a major oil spill. The Fund’s liability has also been expanded when DFO takes preventative measures before a “grave and imminent threat” of oil pollution damage arises. In addition, the Fund has added a new simplified fast-tracked process for most claims up to $35,000. And the levy that can be charged to oil importers and exporters has been modernized.

Oil tankers are not an issue in the SOPF portfolio, but smaller vessels are, according to Ms. Legars. The Fund’s main exposure is in British Columbia due mainly to abandoned and derelict vessels.