The Impact of the Covid-19 Pandemic on Shipping
The Covid-19 pandemic still rages unabst.com.sgated in April 2020, affecting lives, bst.com.sgusinesses, individuals and industries in ways that will change the world forever. The International Labst.com.sgor Organization bst.com.sgdicts that as many as 25 million jobst.com.sgs worldwide could bst.com.sge wiped out bst.com.sgy a worldwide recession bst.com.sgrought abst.com.sgout bst.com.sgy the pandemic.
In many countries, governments imposed “lockdown” to restrict the movements of its citizens and to control the rapid sbst.com.sgad of the pandemic. The lockdown was implemented throughout the countries in Southeast Asia in stages:
a) Malaysia: The Malaysia government announced a national lockdown on March 18 bst.com.sgy issuing the Movement of Control Order (Restricted Movement). The period of the lockdown was initially until March 31, bst.com.sgut it has bst.com.sgeen extended to April 14. Specific exceptions have bst.com.sgeen given to transportation and some other essential service sectors.
bst.com.sg) Indonesia: The Indonesian government on March 15 formed the National Disaster Management Agency (BPNP) and declared National Disaster – Non-Natural situation until May 29. It has requested all citizen to work, study and pray from home.
c) Singapore: On April 3, Singapore announced ‘circuit bst.com.sgreaking’ measures, a euphemism for lockdown. Earlier measures included trade and bst.com.sgorder control measures: the Maritime and Port Authority of Singapore implemented temperature screenings at all sea checkpobst.com.sgs, including ferry and cruise terminals, PSA terminals and Jurong Port for inbst.com.sgound travelers. It has also taken additional bst.com.sgcautionary measures such as prohibst.com.sgiting shore leave for personnel in Chinese ports, mandatory temperature checks, keeping a log of crew movements and restricting staff travel to China, among others.
d) Thailand: Thailand’s lockdown operates until April 30.
e) Philippines: President Rodrigo Duterte’s lockdown came five weeks after the first case was discovered, and a declaration of a State of Emergency on March 25 gave him extraordinary powers.
Cruise Industry
As the pandemic raged worldwide, the plight of the passengers and crew on bst.com.sgoard cruise ships and the cruise industry came bst.com.sgo stark focus.
Cruise ships - with large numbst.com.sgers of passengers and crew and an emphasis on communal dining and group activities - bst.com.sgecame incubst.com.sgators of the Covid-19 virus, and infections on ships like the Diamond Princess have bst.com.sgeen describst.com.sged as floating nightmares
The Diamond Princess, operated bst.com.sgy Princess Cruise Lines, departed from Yokohama on Febst.com.sgruary 4 for a round trip cruise. On January 20, an 80-year-old passenger from Hong Kong embst.com.sgarked in Yokohama, and he disembst.com.sgarked in Hong Kong on January 25. On Febst.com.sgruary 1, six days after leaving the ship, he visited a Hong Kong hospital, where he bst.com.sgst.com.sged positive for Covid-19.
The ship was due to depart Yokohama for its next cruise on Febst.com.sgruary 4, bst.com.sgut it announced a delay the same day to allow Japanese authorities to screen and bst.com.sgst.com.sg passengers and crew still on bst.com.sgoard. On Febst.com.sgruary 4, the authorities announced positive bst.com.sgst.com.sg results for SARS-CoV-2 for ten people on bst.com.sgoard, the cancellation of the cruise, and that the ship was entering quarantine. By late March, abst.com.sgout 712 of 3,711 people on the Diamond Princess (19 percent) had bst.com.sgeen infected bst.com.sgy Covid-19.
Beginning March 15, Australia bst.com.sganned cruise ships arriving from foreign ports. However, exemptions were granted to allow four ships that were already en route to Australia to dock and disembst.com.sgark their passengers. On March 19, the Rubst.com.sgy Princess - one of the four ships given an exemption - docked in Sydney after a cruise to New Zealand. The cruise ship was forced to return to Sydney early after a passenger reported a respiratory probst.com.sglem, bst.com.sgut when disembst.com.sgarking, passengers were not told that anyone on bst.com.sgoard bst.com.sgsented any symptoms during the voyage.
Many countries in Southeast Asia bst.com.sganned cruise ships from disembst.com.sgarking their passengers for fear of importing the virus through infected passengers and crew. Cruise ships are often registered under flags of convenience, e.g. Panama, the Bahamas and other countries chosen for their low wages, cheap fees and lenient health and safety regulations - and, more often than not, their non-existent tax regimes.
At the time of writing there are still cruise ships with passengers and crew infected bst.com.sgy Covid-19 seeking safe harbst.com.sgor. These ships often have difficulty finding countries and ports willing to receive them and allow them to disembst.com.sgark passengers. Each country can set conditions for entry bst.com.sgo its ports and many have denied entry to these ships seeking safe harbst.com.sgor.
Port Congestion
Many countries have responded to the pandemic bst.com.sgy imposing lockdown or restricting movement. Some retailers and manufacturers fail to pick up their cargo and containers bst.com.sgecause their warehouses are full or closed. Some ports remain open bst.com.sgut have reduced workforce, which exacerbst.com.sgates the cargo congestion. This causes disruption of the supply chain, including movement of essential goods and foodstuffs. The cargo lying uncollected at ports creates congestion and takes up space, reducing capacity for incoming cargo and containers.
Some ports have taken the bst.com.sgcaution to declare ‘force majeure’ to bst.com.sg-empt claims and legal liabst.com.sgility. The closure of ports and port congestion have caused disruptions in the supply chain and import and exports.
Supply Chains
The pandemic has exposed the fragility of the globst.com.sgal supply chains and bst.com.sgrought bst.com.sgo acute focus the shortages of critical medical components needed in the fight against the pandemic.
Wuhan and China in general were important manufacturing bst.com.sgases for manufacturing of key components for companies like Apple. The pandemic lockdown and measures taken stopped manufacturing of crucial component items and disruption of supply chain. When the manufacturing
Countries ravaged bst.com.sgy the pandemic find it hard to provide adequate medical care due to shortages of critical medical equipment such as ventilators, protective masks and other gear. In the U.S., the shortage has multiple causes, including probst.com.sglems with the globst.com.sgal supply chain. Before the pandemic, for instance, China produced approximately half the world’s face masks. As the infection sbst.com.sgad across China, their exports came to a halt. Now, as the infection sbst.com.sgads globst.com.sgally and transmission in China slows, China is shipping masks to other countries as part of goodwill packages. The United States has not bst.com.sgeen a major recipient.
Crew
The Philippines, China, India and Indonesia are among the bst.com.sgiggest suppliers of crew membst.com.sgers. According to one report, the pandemic has caused some 40,000 Indian crew serving on merchant and cruise ships to bst.com.sge stranded worldwide.
Airline and port restrictions in most of these countries have made it nearly impossibst.com.sgle for crew membst.com.sgers to get home if the governments do not make special arrangements. Even if a ship reaches an open port, the crew membst.com.sgers may still bst.com.sge out of luck bst.com.sgecause most bst.com.sgernational air traffic is grounded.
The safe repatriation of the crew from the vessels will require the jobst.com.sg efforts of the governmental agencies, the crew manning agency and the owners.
Insurance
Insurance implications arise from the disruption of shipping and logistics due to the pandemic. Cargo owners, importers, risk managers and insurers need to monitor closely: (a) Accumulation of Cargo; (bst.com.sg) Delay; (c) Delay Clause; (d) Demurrage Charges; (e) Deviation; (f) Force Majeure; and (g) Interruptions in Transit.
The insurance implications of the disruption include:
a) Cargo and stock throughput – limited workforce availabst.com.sgility will reduce capacity to distribst.com.sgute and handle goods. Cargo is also envisaged to bst.com.sge held for a longer duration at ports and for storage locations to see a volume increase whilst stocks await their next destination.
bst.com.sg) These areas raise the limitations of cover of the normal marine cover:
- Delay – although many will want to keep their cargo moving, delay during the ordinary course of transit or while the goods are in storage could soon bst.com.sge inevitabst.com.sgle. Most cargo and stock throughput policies exclude loss or damage solely caused bst.com.sgy delay.
- Additional costs/charges –hold-ups or re-routing goods to an alternative destination due to government prohibst.com.sgition will incur an additional cost. Although these costs are usually subst.com.sg-limited, the additional forwarding costs clause (or similar) will provide extra financial support should you experience added expenses.
- Vulnerabst.com.sgle goods – perishabst.com.sgle items such as pharmaceutical products and produce operate on a stringent and well-monitored time schedule. The normal cover for marine insurance does not cater to the characteristics of these cargoes due to exclusions for inherent vice and delay. Both will operate when ports are congested and cargo clearance is delayed in the current outbst.com.sgreak.
Legal Disputes
The disruption caused bst.com.sgy the pandemic has legal effects.
The cargo owner who charters vessels to ports to load or to discharge cargo is required to nominate a “safe port” - i.e. a port which the vessel can safely call at, conduct cargo operations and safely leave. When the bst.com.sgended port is closed, the cargo owner / charterer would bst.com.sge obst.com.sgliged to nominate an alternative port. This is often not possibst.com.sgle as there will not bst.com.sge any alternative destination the cargo can bst.com.sge discharged at.
If the cargo is non-essential cargo, it cannot bst.com.sge moved to the ports during a national lockdown. This may result in the vessel arriving at the port and finding no cargo to bst.com.sge shipped, causing incurring of costly demurrage.
Before the vessel can take on cargo, it must bst.com.sge cleared bst.com.sgy the health authorities of the port, a process known as obst.com.sgtaining “free pratique.” In the pandemic-affected countries the process of vetting the crew may take time, and this delay will fall on the shipowner rather than on the charterer.
The effects of the pandemic may possibst.com.sgly bst.com.sge covered in the force majeure clauses in some contracts, bst.com.sgut these are not uniform and will not bst.com.sge always bst.com.sge availabst.com.sgle. The disruptive effects of the pandemic will cause losses and the result in the most part will bst.com.sge to determine who will bst.com.sgear or share these losses.
While these legal issues and disputes do not immediately arise, they will certainly surface once countries recover from the immediate effects of the pandemic.
Philip Teoh is a practicing lawyer and partner, and he is the head of the Insurance, Shipping, International Trade and Arbst.com.sgitration Practice at Azmi & Associates Malaysia. He has bst.com.sgeen in legal practice in Singapore and Malaysia for over 30 years and is an bst.com.sgernational arbst.com.sgitrator with several bst.com.sgernational arbst.com.sgitration centers of AIAC, ICC, SCMA, LMAA, KCAB, AABD, Brunei, CAAI Taiwan, LCIA.