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Podcast

Hazardous materials and mis-declared cargoes: The risks and potential impact for ports and terminals

Waves Podcast Series: Season 1, Episode 1

January 30, 2025

Marine
N/A

Recently, the marine industry's spotlight has been drawn to the critical issue of mis-declared cargoes following an explosion at the Chinese port of Ningbo, Zhoushan. This incident, potentially linked to improperly stored hazardous materials like lithium-ion batteries and parabens, serves as a stark reminder of the urgent need for enhanced safety measures.

Hazardous materials and mis-declared cargoes

Transcript for this episode

NIGEL CASSEY: Focus on handling dangerous goods should extend much further into storage procedure rather than just transport methods. I think there probably needs to be a greater awareness of storage environments which can vary significantly according to the types of hazardous cargoes. There also needs to be greater scrutiny to avoid misdeclaration or mislabeling because once the mistake is made at source it is likely to stay until something goes wrong.

NARRATOR: Welcome to our marine insurance podcast, Waves by Willis, a WTW business. This podcast series explores key topics and trending issues facing the maritime industry.

PETER YATES: Hello and welcome to today's episode of Waves by WTW Marine. I am your host; Peter Yates and I'm delighted to be joined by Sarah Foxton and Nigel Cassey from our Ports and Terminals team. In this episode, we will explore hazardous materials and their impact on ports and terminals. Recently, the marine industry's spotlight has been drawn to the critical issue of mis-declared cargoes following an explosion at the Chinese port of Ningbo, Zhoushan. This incident, potentially linked to improperly stored hazardous materials like lithium-ion batteries and parabens, serves as a stark reminder of the urgent need for enhanced safety measures. Join us as we delve into the implications of this event, its similarities to past tragedies and the growing concerns surrounding the handling of dangerous cargo and emerging energy technologies. Stay tuned for an insightful discussion with our expert panel. Hello, Nigel, can you describe for us some of the major risks associated with hazardous materials and mis-declared cargoes in the ports and terminal sector?

NIGEL CASSEY: Well, Peter, I think everyone's aware that hazardous cargoes should be transported and handled in accordance with IMD regulations... and by the way, IMDG standing for International Maritime Dangerous Goods Code. However, whilst most of the regulations are mandatory, some are actually only recommendations. The IMDG code sets out many regulations focused on the transport of dangerous cargoes at sea, but there tends to be less focus on the actual methods of storage once delivered to a destination port. We have to acknowledge that the risks associated with storage are as equally hazardous, as those during transportation. In fact, perhaps more so and the reason I say that is when hazardous cargoes are put on a vessel, the description and labeling of them is obviously essential, but vessels tend not to carry a large mixture of hazardous cargoes all at one time. Once they get delivered to a port where the cargoes might be stored for a period of time, the environment can actually change significantly because numerous cargoes of different hazard levels and qualities have all been delivered in several separate shipments at different times. You basically end up with a cocktail of chemicals in one place. Now, these types of cargoes may well be stored in a specific and isolated hazardous cargo zone area within a warehouse, but they really shouldn't be stored in close proximity to each other.

PETER YATES: So how does the IMDG code classify these hazardous cargoes?

NIGEL CASSEY: Well, there are nine IMDG codes for hazardous cargoes ranging from explosives and flammables to oxidizing and corrosive substances. Each type of IMDG coded cargo can have very significant and different qualities and required methods of storage. So for example, certain cargoes may become unstable when in contact with air, whilst others may react dangerously if they come into contact with water and then you also have to consider that a lot of these dangerous cargoes need to be stored in a stringent temperature-controlled environment. So what you get is a mixture of variables involved with the hazardous qualities of different cargoes, which means that any misdeclaration of cargoes or mislabeling of products can lead to cargoes being stored in a very unstable environment - and that is where things can go wrong.

PETER YATES: So what are the potential consequences then of mis-storing such hazardous cargoes in a port or terminal?

SARAH FOXTON: So the consequences of getting this wrong can lead to huge warehouse fires, massive property losses and possible loss of life. The real values of third-party cargoes in a port are often not known until the incident. So with numerous contracts and multi cargo types stored at any given time, the cargo's values at port can exceed hundreds of millions of dollars. So for instance, an automated sprinkler system in a warehouse that has been activated due to a fire could actually cause a situation to deteriorate to catastrophic levels if other hazardous cargoes in the same warehouse should come into contact with water.

PETER YATES: What are some notable incidents that highlight the dangers of mis-declared cargoes?

NIGEL CASSEY: Well Peter, we could probably give you a thousand of those, but to give you a typical example, one of our clients had a fire in their warehouse which led to a further explosion, and then the fire spread into a neighboring warehouse which covered I think about 13,000 square meters of rack storage. You can perhaps imagine the consequences. The two warehouses and their contents were completely destroyed. CCTV recordings showed that the initial start of the fire was on a higher rack level and they did some forensic examinations, and it was discovered that the origin of the fire started in a specific storage area set aside for dangerous cargoes which was properly regulated in accordance with IMO IMDG regulations. Then they did a further investigation which showed the fire was caused by an exothermic reaction - and for those of us who don't know or aren’t chemical engineers, that basically means a chemical reaction. This actually happened though due to the proximity of one chemical cargo that should not have been next to another, which itself had been classified as a corrosive oxidant. The whole thing was a complete disaster. The original estimate of the claim came in at about $17 million, but later inventory of the cargo stored in the warehouse resulted in the claim exceeding $45 million. The assured never even realized they had such values in their warehouse. So this is a typical incident that highlights the potential exposures of unknown cargo values at a port which are not even clear until the event actually occurs. Sarah, I think, you had some pretty shocking statistics that were relevant to this.

SARAH FOXTON: Oh, yes, I did. Right. So to put this into perspective, containerized goods. So according to the National Cargo Bureau, in 2023, 6.5% of containers were found to be carrying mis-declared dangerous cargoes, things like charcoal, flammable liquids, and lithium-ion batteries. Now, given that 250 million containers are moved every year, this equates to a staggering 16.25 million containers with mis-declared dangerous cargos. So it's quite likely somewhere in your port you've got a container with mis-declared dangerous cargoes that you just have no idea about.

PETER YATES: Thank you. So we've heard something of the shocking outcomes that can be expected from mis-declared and hazardous cargoes when it goes wrong. But what are the typical consequences of non-compliance with the regulations for handling and the storage of hazardous materials?

NIGEL CASSEY: Well, in answering that question, Peter, I think we should consider that non-compliance is not likely to be an intentional act, and these are genuine accidents or just human error. Non-compliance with transport and logistics regulations in the IMDG code definitely has significant relevance in the handling and storage of dangerous cargoes, but it's not infallible. Human error is always going to be present in any operation and while the stringent regulations set by the IMO and IMDG codes tend to deal with issues in the shipping sector, managing a greater variation of cargoes while stored in warehouses, and providing correct storage areas in a port is far more challenging. The thing is... that non-compliance can occur due to lack of knowledge or a slack attitude such as storing all hazardous cargoes in one area together, when they should actually be separated. What often gets overlooked are the consequences of getting this wrong, as referred to previously. Sarah, you and I were talking about this the other day, and you had a couple of very relevant incidences that show what consequences the industry should be looking at.

SARAH FOXTON: Yes, I think I've talked about these quite a lot lately, actually. Two notable examples are Tianjin incident in 2015 and the Beirut incident in 2020. So in Tianjin, there was two huge explosions which tore through an industrial area where toxic chemicals and gas were stored in a Chinese port of Tianjin. An investigation found the stocks of flammable nitrocellulose, which is a chemical used in nail polish, had caught fire and spread to stores of a fertilizer, ammonium nitrate. The blast destroyed buildings, shipping containers and thousands of new cars, and they shattered windows in a two-kilometer radius of the port. It was also felt seven kilometers away. So, over 800 people were injured, and more than 271 seriously and roughly 173 were killed, including many firefighters and police, and the total loss was estimated at approximately $6 billion. So not insignificant. Beirut, a fire broke out in a warehouse on August 4th in 2020, leading to the largest non-nuclear blast in modern history. The fire ignited 2,750 tons of ammonium nitrate that had been unsafely stored for six years. The explosion killed at least 163 people, injured more than 6,000, and destroyed some 6,000 buildings as well. The arrangement and poor condition of the materials in that warehouse, as well as the long-term bureaucratic neglect and ignorance, meant it was essentially a makeshift bomb waiting for a catalyst.

PETER YATES: Goodness. Well, what can be done then to improve safety and compliance in the transportation and the storage of hazardous materials in these areas?

NIGEL CASSEY: Oh, that's a tough one, Peter and if I really had a solution to this, I may well be sitting on a beach on some island in the Caribbean right now... but in all honesty, the regulations set out under IMO and IMDG are pretty thorough and no matter how stringent they may be, not everything is going to go right all the time. After all, that is what insurance is for. There are perhaps a couple of areas that could be focused on with a little more intent. The nine categories of hazardous cargoes are all shown to have their levels of danger according to flash points, instability, and things like fumigation and pollution levels. Even an average warehouseman or stevedore will know that a label with a bright red flame or skull and crossbones means they can't race around the warehouse on their forklift doing drifts around the rack storage towers. However, what they don't necessarily know is that under no circumstances should they put the two together or in fact, anywhere near each other and this is where storage procedures need to be clearer and more accommodating. Rather than simply having an area where all hazardous cargoes are stored in proximity. The concept of “they're all dangerous - put them in the dangerous corner”- is not a solution and categorized hazardous cargoes really need to be stored in categorized and separated storage zones. Perhaps with dangerous cargoes classified from those things I was talking about earlier, being 1 to 9, there should be a clear instruction in laboring, for example, that a class 3 dangerous cargo should never be anywhere near a class 6 or 7 cargo. The trouble is that even if the storage method is adhered to properly, if the cargo has the wrong label on it, nobody will know better until it all goes wrong. Perhaps you could add further to that, Sarah.

SARAH FOXTON: Thanks, Nige. You've just taken me away from my Caribbean island. I think you've covered a lot there. I think my only add ons would be for regular training, which is continually being updated and also providing the terminals with sufficient equipment to react to an incident. The IMDG code is incredibly thorough, but there's still aspects of the code that are recommendatory, such as training and even the ISPS code training is more focused on security issues rather than the handling of dangerous cargoes. So regular training should be provided to all employees to understand the potential severity and the impact of incorrect storage or handling. We're in an ever-evolving world with a level of dangerous goods being handled increasing daily. Now, another very topical issue that's occurring globally is the number of claims associated with lithium-ion batteries, which are continually on the rise and clearly some terminals just don't have the knowledge or correct equipment, for instance, with these batteries. So, for example, we've seen terminals submerge lithium-ion battery cars that are on fire into skips full of water. Now, this only works temporarily, and the minute is taken out of water, it reignites again and in some instances, we've heard that these fires have been tackled head on with no protective clothing on. The black smoke that emanates from a vehicle is seriously toxic, leading to serious injuries and sometimes death. So currently the code lists this as miscellaneous dangerous cargoes, which is actually being revised by IMDG, as I understand. But it isn't just miscellaneous dangerous cargoes, it's also flammable liquids and toxics. Therefore, guidelines on how to handle this may well be different. There's also a rise in ammonia in a gas form, not nitrate. Although we've heard previously that ammonium nitrate is incredibly explosive. This is on the rise as an alternative fuel and this is highly toxic. It's also lighter in air, so it travels really easily. With only a level of 0.15% in the atmosphere deemed to be the maximum safe level. High exposures to ammonia will ultimately lead to death within hours, whereas lower levels above the maximum threshold still can lead to death weeks or a few months later. It might also be worth ports and terminals considering implementing a fine structure as well, in the similar fashion to which shipping companies did back in 2019. Because we saw many claims due to a rise of mis-declared cargoes which subsequently saw shipping lines fining clients who are concealing, omitting or mis-declaring cargoes and these fines range from anywhere between 15 to 35,000 per container. So it might be worth the ports thinking about implementing that sort of fine penalty.

PETER YATES: Sarah Nigel, thank you very much. Wide ranging conversation We've heard something of the situation surrounding hazardous materials and mis-declared cargoes. You've given us examples of losses, the compliance to the various codes which are in place to try and police the situations, the training that's available and might be implemented to help ports and port authorities and terminals deal with situations prior to them arising and confronting the issues when a loss is in progress. What might be your conclusion, the key takeaways for our listeners?

NIGEL CASSEY: Well, I think there are a number of key issues to be taken away here and they can probably be broken down into several points. I think the first point would be to really understand the risks associated with hazardous materials and mis-declared cargoes. Some of the IMDG regulations are recommendations rather than compulsory procedures and the focus on handling dangerous goods should extend much further into storage procedures rather than just transport methods. I think there probably needs to be a greater awareness of storage environments which can vary significantly according to the types of hazardous cargoes and there needs to be greater scrutiny to avoid misdeclaration or mislabeling because once the mistake is made at source it is likely to stay until something goes wrong. The next main point would be that there needs to be a better understanding of the potential consequences of mis-storing hazardous cargo such as Sarah mentioned, you can end up with huge warehouse fires, property losses as well as loss of life and there also needs to be a better understanding of the risk exposures of other third-party cargoes on site at a port when something happens, as well as being aware that, for example, sprinkler systems can exacerbate situations if water reacts dangerously with specific stored materials. I think the last point would be to improve safety and compliance which could involve a number of things. Some of the main points would be clearer storage procedures with categorized hazardous cargoes being stored in separate zones, regular training for employees to understand the severity and impact of incorrect storage or handling, improved labeling and documentation, which is obviously essential to avoid storing incompatible cargoes together. I think there's also a need to concentrate on protective equipment for personnel at terminals as well as more training in handling incidents when the storage of hazardous materials goes wrong and something that probably won't go down well and Sarah did mention it... but the implementation of fines similar to those imposed by shipping companies, which might deter misdeclaration and improve compliance. Really, overall, we usually hear people going on about the need for a port to be proactive in their procedures, but actually, when it comes to the subject of hazardous cargoes, it really is just as important to be reactive to a situation.

PETER YATES: Sarah and Nigel, we truly appreciate your insights and contributions to today's discussion. Thank you too to all our listeners for tuning in. We're glad you joined us for this episode of the Waves by WTW Marine podcast series. Until next time.

NARRATOR: Thank you for joining this WTW podcast featuring the latest perspectives on marine insurance risk.

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Podcast host


Associate Director - Marine Client Management, Global Marine

Peter Yates joined WTW in February 2016 from a large offshore oil & gas contractor, where his focus was project engineering, design risk solutions for blue chip clients on their large CAPEX greenfield offshore oil & gas projects.

Prior to joining the Marine insurance broking team in 2019, Peter worked with the International Construction and Real Estate teams, and Global Property & Casualty, winning new business. Peter works to support WTW teams find protection for growth for clients. This is across direct, retail, and wholesale maritime opportunities, internationally. With over 24 years’ experience of management in risk & threat environments, the early part of Peter’s career was in leadership and management: as an army officer; in defence intelligence & security; design engineering & defence manufacturing production management.

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Podcast guests


Executive Director - Marine Special Risks, Global Marine

Nigel started his marine insurance broking career in 1984, first with Hogg Robinson and then Sedgwick and CE Heath, before joining the Global Marine division of WTW in 2005. His primary role focuses on the development of WTW’s International Marine Liability portfolio, specifically Ports and Terminals accounts.

He is responsible for executing the placement strategy for client’s Terminal Liability and PD/BI risks in the marketplace. Nigel works closely with the wider account team to ensure the broadest terms and coverages are obtained at optimal prices.

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Director – Marine Special Risks, Global Marine

Sarah joined WTW in November 2021, prior to joining WTW, Sarah worked at a large multinational broking company in their Marine Liability team for over 11 years.

Sarah’s specialism is in providing Ports and Terminal operators Package Insurances, Marina Operators packages, Social Responsibility Insurance and Shiprepairers Legal liability however services Global clients providing them with a wide variety of Marine Liability coverages including the development of bespoke liability programmes.

Sarah is a Client Relationship Manager and Broker in the Marine Special Risks team. She is responsible for client relationships and placing small and large complex placements into the London and International market.

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