By Rafael Guarda Martínez, Senior Lawyer at Associated Risk Management
Recent announcements issued by some shipping companies have revealed the application of the “Slow Steaming”, “Speed Reduction” or “Slow Navigation” model on freight transport.
This refers to the practice of operating ships, particularly container ships, at a lower than the maximum speed or even lower than its optimum design speed.
This has been motivated mainly by the constant increase in the price of oil, as well as by an attempt by the International Maritime Organization to reduce gas emissions from the industry to comply with the Paris Agreement.
Independently of the benefits that this measure may generate for the economy of the shipping industry or for the environment, it also generates a concern for users – especially those involved with perishable goods, since the increase in shipping times can affect the quality of the goods.
The motor manufacturer Wärsila estimates reducing a ship’s speed from 27 knots to 18 knots is equivalent to between four and seven more days for trans-Pacific routes and would increases the travel time between Asia and Europe by a week. Also, a statement from Chile and Peru sent to the IMO states that “a shipment of cherries from Valparaíso, Chile to Shanghai, China, would take 33 days at 20 knots and 44 days at a lower speed of 15 knots”, according to Climate Home News.
The increase in transit time for the horticultural products can directly affect the quality on arrival the destination markets, decreasing their sale price and exporters’ expected returns.
The speed reduction adopted by transporters imposes new challenges for intermediaries in the transport of perishable goods, including companies that deliver controlled atmosphere services, reefer container suppliers, freight forwarders, and exporters, as it will be necessary to deliver the fruit in the same conditions there are at present but with the increase in the travel time.
Although new technologies have been developed to attain these results – by monitoring the cargo conditions in real-time or increasing the autonomy in the controlled atmosphere kits – the time it takes for the cargo to be delivered to the destination is key when it comes to getting the expected profits.
In order to reduce the risk associated with the increase in the transit time of the merchandise, it is important that the intermediaries – and especially the exporters – take into consideration some of the following measures.
Firstly, they should take out a maritime transport insurance plan with coverage in case of fruit quality loss due to delay or quality loss during the trip.
In Chile, there are several insurers, both national and international, that offer specific policies for each type of cargo, but it is important that they have clauses that cover the aforementioned risks and even incorporate slow steaming within the coverage. With this, the exporters can transfer the risks of loss of value or quality to their insurance company, reducing possible economic losses due to delay or poor arrival conditions.
Secondly, it is important that those participating in fruit transport make use of the information that the service providers give them. By this we mean constantly monitoring the conditions in which the cargo travels, since the detection of an error in real-time gives notice to the shipping company and consignee so they can take measures to reduce the damage.
In addition, a control of information in real-time helps the correct administration of the insurance policy, so the exporter can reduce their accident rate, achieving economic benefits in the medium-term.
Finally, it is important to note that both domestic and foreign legislation establish responsibilities for carriers in case the condition of the fruit varies during the time in transit, either by a breach in the conditions supplied to the cargo or by the delay in arrival to destination. This point is important, since the application of speed reduction measures adopted by shipping companies must be made transparent through the offer of services they deliver, since if they do not meet the stipulated times, the law makes them directly responsible of the damages that this may cause.