Surveyors, Consultants and other Transport Industry Professionals: Tuesday 3rd October

12.20 - 13.00 Ian Bloor - Cargo Recovery Consultants Ltd

"Salvaging Distressed Cargoes"

Directors, managers, members of ITIC, ladies and gentlemen :

First of all we would like to thank ITIC for their invitation to address you today as part of the 75th anniversary celebrations. Some of you may never have heard of Cargo Recovery Consultants before. It is perhaps appropriate that we have been allocated the pre-lunch session as some of of you who do know us may well label us as "Vultures, who are always hungry".

Let me first of all give you some background about CRC, our beginnings and what we do. We have been active for over 25 years. The company was originally formed by Ted Naef, a name familiar to many of you. We have a head office in Switzerland with offices in Haslemere, Surrey and in Singapore. Over the years we have built up a multitude of contacts all over the world and at the same time we have acquired substantial knowledge about most of the commodities which are being shipped around the world.

The people within CRC all come from a commodity trading background, primarily in what we would refer to as soft commodities such as grains, animal feeds, sugar, dairy products. The company initially functioned as a trading company but almost by accident , if you will forgive the pun, became involved in the the purchase and resale of damaged goods, when one day in the 70's a vessel carrying damaged grain arrived in Liverpool.

We have to make it clear that we are not salvors, we do not own our own equipment, apart from cameras and sample bags! You cannot compare us with the likes of Smit, Wijsmuller, Tsavliris and Titan, the recognised leaders in real high seas salvage. Having said that, over the years we have worked very closely with those companies, after they have performed a successful salvage operation.

Many of you will label us as salvage buyers. We prefer to call ourselves maritime problem solvers. True we buy and sell distressed cargoes but in addition we have the ability to provide commercial solutions to complex stalemate situations all over the world. We act as a completely independent company and as principals. We believe that since our first steps into the dangerous waters of distressed cargoes we have provided a valuable service to the martime industry.

Our business can be divided into two quite distinct categories. The first is when there is a damaged or distressed cargo such as the one in Liverpool mentioned earlier. The cargo can be on a vessel in the middle of an ocean , on a vessel in port, discharged on the quayside or into a warehouse. The cargo may have been subject to physical damage, such as ingress of water, the other old favourite "Inherent vice" , or it might be the subject of a contractual dispute, for example when its specifications do not comply with those stated in the contract of sale. The cargo can even be the subject of a local ruling as a result of which it cannot enter the intended country of destination.

Whichever way you look at it such a cargo can prove to be a major headache for the shipowner, who cannot trade his vessel, the vessel's P and I Club, facing a potential claim, possibly the shippers or receivers, underwriters and even the ship's agents at the port of destination. We have seen instances where the local agent for a vessel with a problematic cargo has been practically stopped from doing regular business because he is in the direct firing line. The local Port Authority hold him responsible as the agent for the vessel which has the distressed cargo on board.

Don't get me wrong it is not bad news for everybody, as those surveyors and any lawyers amongst you will agree!

As a rule the longer such disputes continue the worse the result for all concerned. In such cases CRC are willing, at our own cost, to travel to the cargo location and make an offer to buy the cargo "AS IS., WHERE IS", thus bringing a prompt conclusion to the financial suffering of the concerned parties. It would then be upto us to deal with the cargo as we see fit.

Needless to say this can only be done with the agreement of all parties thus enabling proper transfer of title to the cargo to CRC. We will not buy or take over goods when proper title cannot be passed - we have enough to worry about and do not want to feature in IMB bulletins or Lloyds List reports, for the wrong reasons!! For us there is never the guarantee of a business being concluded simply because we are willing to go on the spot and investigate. There have been occasions in the past when we have jumped on a plane, eventually reached the port only to find that the vessel had sailed! Another example which springs to mind was several yaers ago. I travelled to visit a disabled reefer in Suez Bay.

After spending a day travelling and then half a day or more waiting to obtain permission to go into the port and take a launch to the vessel, you can imagine my disappointment when as we neared the vessel I could see a gaping hole in her side. Close to the opening there were a number of small local fishing boats whose occupants were armed with large nets. There they were scooping once frozen chickens, still packed in plastic bags but bloated to the size of small ostriches, out of the approaches to the Suez Canal. The vessel had spewed most of the contents of its reefer chambers into the water, there was nothing CRC could do - except avoid chicken on then menu of the local hotels. This was an instance when the local vultures pounced before the ones from overseas had a chance to do so.

We will return to this aspect of our business a little later.

Before that just a quick description of our second area of activity. It is quite different. On many occasions whilst cargo maybe damaged the original receivers still want to take delivery of it. A vessel might have suffered a serious casualty but the cargo is intact - yes we deal with sound cargo too! Put another way the cargo underwriters may insist that the assured take delivery, or the cargo might not even be insured. The problem for the cargo owner is that perhaps the vessel carrying their cargo is far away, is too damaged to complete the intended voyage, or they do not have the experience to deal with it. The vessel may have been the subject of a Lloyds Open Form salvage and/or general average.

In situations like this we can enter the scene. By being independent from the various interests who may be at loggerheads, we are able to formulate rescue plans to the benefit of the litigating parties. One of the benefits for them is that whatever we do is done on our own initiative, at our cost and in our own time. Ultimately we aim to get the cargo to where it should have been going in the first place on "NO CURE, NO PAY" terms, meaning that whilst we will be secured for a pre-agreed fee, not a single penny is paid to us until such times as the cargo in question arrives at the intended destination. For the cargo interests this means they are not throwing good money after bad.

How many times have we all seen instances of ships breaking down, cargo contributing towards repairs and then the vessel mysteriously coming to a halt a few hundred miles further down the Red Sea. Should we fail, which we never have, (where's something wooden?) - the consolation for the cargo owner is that it will not have cost him anything, the preagreed fee will be returned to him.

As a point of interest our business is not a one way street by any means. We are putting money into the shipping industry too, we appoint surveyors, we pay insurance premiums, we charter ships, tugs and ancilliary equipment.

We use brokers and we appoint ship's agents. Dare we say it but we even employ lawyers!

Let us return to our main topic Salvaging Distressed Cargoes. At this point we would like to show you a number of examples of the type of cargoes we have handled. You ought to find them interesting. You may ask what on earth can anybody do with cargo like that?

SLIDE PRESENTATION.

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2-3 short case studies - based on specific examples (as time allows)

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You will we hope appreciate the business we are in is high risk. For the people with the problem you could say that CRC are a RISK TRANSFER MECHANISM. We go onto a vessel. On board there might be say 25,000 mts of bulk grain, all we can see is the surface and, if we are lucky with the help of shovels and a few cooperative crew members perhaps a metre below the surface, With this limited information coupled with our own commercial experience we have to decide what we can afford to pay for the cargo. How do we know what the cargo on the tank top is like, is the cargo heating, will the vessel be able to make it to our selected destination, and once there will the crew allow us to discharge the cargo? These are the risks we have to take. We cannot cry after the event if it all goes wrong. We cannot go cap in hand to anybody and seek compensation.

In the recent past we have seen an increasing tendency towards settling cargo claims by agreeing a discount with the receiver of the distressed cargo in question. On certain occasions we agree that this is a good policy. There are other times though when owners/underwriters are being held to ransom.

If we are invited on the scene and asked to make an offer for the cargo, pressure is brought to bear on the receiver. He may have been thinking that with no competition he could dicate his own conditions for agreeing to take deliveryof the goods. One of two things will happen - the receiver will either accept the goods with at a lower discount than originally demanded or the seller of the goods will find that CRC are able to pay a better price and thus reduce their exposure. That is not to say we agree with the practice adopted in some areas where we make the running and then the local receiver is told that if he offers USD 1 more than CRC the cargo is his. You would be surprised how many calls we get to simply pick our brains - what 's left of them. It is a service we give free of charge in the hope that one day there will be a pay back.

We are in the service business, we win some we lose some. What we do can be great fun, it is different but it can also be very worrying ( I was young when I started look at me now!). We encounter new problems all the time and have to adjust our thinking to come up with novel solutions. We meet fascinating people in desirable and sometimes less desirable surroundings. The main thing is we enjoy what we do and believe we are able to provide a useful service.

Should any of you encounter damaged cargoes in the future we would be very happy to hear from you. We are not wishing misfortune on any of you but accidents do happen - especially in shipping..

We wish you all an enjoyable lunch. If in the remaining time you have any questions please feel free to ask. Once again our thanks to ITIC for the invitation to participate in this forum.