A guest appearance by erstwhile
FTW columnist Wharf Rat
There IS an aphorism which states that in war, truth is the first casualty; if so, then the War Risk Surcharge (WRS) has to be up there for an Oscar entitled "Best Con Since BAF", or ConSea, seeing that "ConAir" has already been used as a movie title.
Once all the hand-wringing and knee-jerking has subsided, those amongst us with half a brain will realise that what is being imposed by the international insurance market is not a realistic premium to counter an immediate threat, but merely a crude attempt to recover a huge financial deficit now on their books from anyone in the fall-out area still left with money.
The tragic loss of life and property in New York and Washington has to be paid for, but the attempts to recoup costs by levying a charge on anyone who trades into the PG (and also Colombo and Zimbabwe!) is as arrogant as it is preposterous. Consider the facts; the chance of anyone involved in a land war some 1500 miles away launching a paradise-seeking missile against a twenty-something merchant tub discharging in ports which support (actively or passively) their cause is bizarre. A few years ago there was a war that actually centred around the PG; it was, somewhat accurately, called the Gulf War. How many container or breakbulk ships were attacked then? Obviously the concept of 'No Claims Bonus' seems to have been conveniently forgotten, yet we are now being asked (no, forced) to pay for a threat that not only has neither practical existence nor theoretical precedent, but diminishes daily.
My friend Winston Lottering complains that the market cannot stand the increase, and he is right. Without arguing the obvious (that the cost merely be passed on to the receiver as 'force majeure') there is also the problem of fixed contractual prices, as he states. Here is a lesson to be learnt, and it is one that many suppliers and carriers faced when BAF reared its ugly head; ensure your contract with both the line and the receiver allows for unforeseen circumstances such as BAF, CAF and WRS.
These are tough suppositories, but they have to be inserted somewhere, so make sure it's not you, is my advice.
The rates quoted are of course what we would expect; scandalous bordering on fraudulent. 10% on breakbulk, and $100 on a TEU are being quoted freely. Again, let's look at the facts. An average breakbulk (K Class) ship will have a Hull and Machinery (H & M) value of $5M; the WRS for a PG main port is currently quoted as around 0.15%. Based on a typical load of 15 000 tons, it doesn't take the brains of an Archbishop to calculate the premium should be 0.50c/ton, yet lines are asking for between $2 and $4/ton. Question the rate and what do you get? "Yes, we've done our homework and the rate is correct. Explain how we get to it? No, that's not your concern and we won't tell you - just pay."
As usual MUR are showing honesty and integrity by invoicing WRS post-fixture, once exact costs are known, but they are to my knowledge the only ones.
Maybe I've got it all wrong, and again I'm just a voice crying in the wilderness, but I seem to recall asking the same questions when BAF was introduced - and getting the same answer. I repeat; until we are transparent with each other, there will never be trust between shipper and carrier, and lack of trust is something the SA shipping industry can ill afford
