Methods to Avoid Shipping Risks in Cross-Border Foreign Trade

In the dynamic landscape of cross-border foreign trade, the cross-ocean journey of goods is fraught with challenges, testing even the most experienced shippers. As businesses strive to expand their reach and participate in global commerce, intricate transportation networks create countless pain points and current issues. Understanding and addressing these challenges is critical to ensuring the smooth flow of international trade. Let’s dive into the turbulent waters of cross-border shipping and explore the pressing issues that often plague users.

What are the common risks in maritime transportation?

Maritime transportation involves the movement of goods and passengers by sea and involves various risks. Common risks in maritime transportation include but are not limited to:

Shipwreck risk

Maritime disaster risk mainly refers to the risks that occur during or accompanying maritime transportation of ships and goods. It includes natural disasters and accidents. Among them, natural disasters refer to disasters caused by destructive forces caused by variations in nature. Accidents refer to accidents caused by unexpected reasons.

Natural disasters

Storms, hurricanes and severe weather conditions can pose significant risks to offshore operations. These risks are mainly caused by natural disasters. High winds, rough seas and heavy rain can affect a ship's stability and safety.

Navigation and collision accidents

Navigation errors, human error and technical glitches can all lead to collisions between vessels. Poor visibility, incorrect course planning or non-compliance with international navigation rules can all contribute to these risks.

Such as accidents caused by accidents such as ships running aground, running aground on rocks, sinking, colliding with each other, or colliding with other solid objects such as ice drifts, piers, disappearances, fires, explosions, etc., or other similar accidents.

Non-man-made external risks

Non-man-made external risks refer to risks caused by shipwrecks due to various other external reasons. This type of risk can be roughly divided into two situations: general external risks and special external risks. Among them, general external risks refer to risks caused by theft, rain, moisture, heat, etc. during transportation of goods.

And special external risks such as wars, strikes, refusal to transport goods and other risks and losses caused by political, military, national bans and control measures. In addition, new policies or new control measures promulgated by some countries, as well as certain bans by international organizations, may also cause losses to goods that cannot be exported or imported.

Fires and Explosions

Fires and explosions can occur on board ships due to engine failure, electrical problems or dangerous cargo. These incidents pose serious safety risks to the crew and can result in the loss of the ship.

Piracy and armed robbery

Certain maritime routes are prone to piracy and armed robbery, especially in the Gulf of Aden, the Strait of Malacca and parts of the South China Sea. Pirates may hijack ships, kidnap crew members or steal cargo.

Contamination and oil spills

Collisions, grounding, or equipment failure can cause accidental releases of oil and other hazardous materials. These events can have serious environmental consequences and can result in legal and financial liability for the shipping companies involved.

Equipment failure

Mechanical failure of the engine, propulsion system or other critical equipment on board the ship can affect the safety and operational efficiency of the ship.

Regulatory Compliance and Responsibilities:

Compliance with international maritime regulations and standards is essential for the safety and environmental protection of maritime activities. Failure to comply may result in legal consequences, fines and reputational damage.

Goods damaged or lost

Improper stowage, handling or securing of cargo may result in damage or loss during transport. This could cause financial losses to shipping companies and impact supply chains.

Terrorism

Maritime transport is vulnerable to terrorist activity, including attacks on ports, ships and critical infrastructure. While safety measures are in place to mitigate these risks, they are still concerning.

Human factor

Human factors such as fatigue, inadequate training and communication failures can contribute to maritime accidents and incidents.

Maritime fraud risk

There is currently no precise international definition of maritime fraud. The generally accepted view is that: artificially deceiving and concealing transportation routes, cargo conditions, costs, etc., in order to obtain illegal gains and cause losses to innocent parties. The spread and rampant behavior of this kind has become a major obstacle to international trade and poses a serious threat to the commerce, shipping, insurance, and financial industries of various countries.

Document fraud risk

Document fraud, also known as document fraud, refers to unscrupulous merchants forging documents such as ocean bills of lading, commercial invoices, insurance policies, certificates of origin, quality certificates, commodity inspection certificates, consular invoices, etc. that meet the requirements of letters of credit, in order to obtain foreign exchange. payment behavior. It is the most common and dominant form of international maritime fraud.

Ship fraud risk

Ship fraud refers to the fraud committed by shipowners using ships. There are two main methods: shipwreck fraud and ghost ship fraud. Ghost ship fraud is the most encountered in international trade. Ghost ships are those ships that have a "shadow" identity. The owner of the ghost ship is actually a leather bag company, and sometimes even starts operations

It was only established two days ago and uses a temporary office location. Therefore, the credibility of such shipowners is not high, or even zero. It is very dangerous for such shipowners to transport goods.

Charter party fraud risk

Charter party fraud is a way of using charter contracts to commit fraud. It can be divided into two types: time charter party fraud and voyage charter party fraud. In time charter party fraud, fraudsters first register and establish a leather company in a remote tax haven, and then sign a time charter contract with the ship owner as a charterer. After the fraudsters paid the initial rent to lease the ship, they then renamed the ship and sublet it out as the second owner of the ship in the form of voyage charter. After fully loading the goods at the shipping port, issuing a prepaid shipping bill of lading for the goods, and depositing the prepaid freight collected into your own account, you declare bankruptcy or simply run away.

The charterer first prepaid the freight to the shipowner so that the goods could be loaded onto the ship smoothly. However, in maritime transportation, shipowners require changes in payment terms or higher payment standards for various reasons, otherwise the ship will divert or transship and sell the goods in other areas. In order to avoid greater losses, the cargo owner had no choice but to accept the shipowner's conditions. Fraudulent practices of this kind abound in international trade.

Fraud risks in marine insurance

Marine insurance fraud refers to the behavior in marine insurance business where the insured or beneficiary attempts to defraud insurance compensation by fictitious insurance subject matter, intentional fabrication, forgery or false reporting of insurance accidents.

Measures to be taken to deal with maritime transport risks

Shipping lines and maritime authorities implement various safety measures, training programs and technological advancements to mitigate these risks and improve the overall safety of maritime transport. To deal with these risks, corresponding measures should be taken, such as selecting appropriate transportation methods, ship inspections, skills training, etc. In addition, you can choose the appropriate insurance category to insure your cargo.

How to choose the appropriate shipping method?

Ships and transportation routes. Of course, in order to comply with the requirements of other factors such as the sales contract, a reasonable shipping time must be arranged and transportation routes must be discussed.

Hull inspection

It is necessary to carefully check the own safety issues of the shipping vessel so that it cannot become a hidden danger to navigation safety; use navigation instruments correctly to achieve scientific escort.

Skills training, improving professional knowledge

Conduct regular skills training for offshore operators to improve their professional knowledge and ensure error-free navigation operations.

You can choose the appropriate insurance category to insure your cargo

Measures to be taken in response to maritime fraud risks. Because maritime fraud activities cause huge harm, preventing maritime fraud should be a long-term and arduous task. This task is particularly urgent for China, which is strengthening its economic strength and moving toward the world. my country's foreign trade companies should be more vigilant about international maritime fraud and actively take preventive and remedial measures. They can start from four aspects:

1. Enhance my country’s risk awareness of foreign trade enterprises and strengthen credit investigations of partners.

Before signing a trade contract with a foreign party, it is necessary to conduct a detailed investigation of its name, liability form, registered capital and legal representative's true situation, balance sheet, bank account and business reputation, etc. In accordance with international practice, you can also ask for a credit certificate issued by an authoritative organization.

2. Choose appropriate trade terms, consider contract terms, and prevent loopholes from occurring.

It is necessary to ensure that the conditions for the performance of the contract are not easily changed during the execution of the contract; when signing an import and export contract, attention should be paid to choosing trade terms that are beneficial to oneself. In my country's export trade, we should try our best to adopt CIF and CFR conditions; in import trade, FOB conditions can be used.

In this way, we have the initiative to charter ships and book space, which is conducive to the connection of ships and cargoes and prevents possible fraud during transportation. When the right to charter a ship and book a space cannot be obtained, the chartering standards should be strictly formulated in the contract and corresponding guarantee clauses should be added. At the same time, the payment method should be reasonably selected.

3. Choose safe ships, strengthen supervision of loading and unloading cargo, and keep track of the shipping status of the ship in a timely manner.

It is necessary to choose a shipping company with good credit for the shipment of goods. When the goods are loaded at the shipping port, the buyer can send someone to accompany them to check the condition of the goods and the ship; after the goods set sail, the buyer should know the course of the ship at any time and report to the carrier or ship regularly. The shipowner inquires about the ship's position. If any abnormality occurs, report it to the insurance company immediately and launch investigation as quickly as possible.

4. Strengthen awareness of legal protection and actively take legal remedies.

Strengthening awareness of legal protection is not only reflected in reviewing contract terms and eliminating loopholes, but also in actively seeking legal remedies and recovering economic losses after fraud occurs. After the case occurs, the parties should promptly file a claim within the claim period. In the case of arbitration, they should first try to conduct it in a domestic arbitration institution in my country. Secondly, you can choose an international arbitration institution with good performance to arbitrate.

Ocean transportation is developing faster and faster with the process of world economic integration.

At the same time, the development of ocean transportation has also promoted the continuous progress of my country's foreign trade, showing a thriving scene. In order to better develop my country's foreign trade, earn more foreign exchange funds, improve the country's comprehensive strength, and effectively promote domestic economic development , we must make every effort to ensure the smooth progress of ocean transportation, and take precautions against risks that may occur during transportation.

As we enter the realm of mitigating cross-border foreign trade transportation risks, it is imperative to explore innovative methods and strategic approaches to address these pain points. Join and use ShopV's shipping services and we will introduce practical solutions to meet challenges and ensure the success of your global shipping career.