Major fire in a CFS in Chennai – the need for comprehensive transport insurance coverage.

There are reports of a fire in a cargo godown near Avadi (Chennai, Tamilnadu) on the early hours of 14^th April 11 and goods worth more than 18 crores were reportedly damaged.  Newspaper   reports indicate that the goods were mainly furniture.  In another major incident, fire raged in a chemical godown at Madhavaram (NDR godown) – it housed about 13 companies storing chemicals meant for export  in separate building.   The fire reportedly broke out in a building and chemical suspected to be hydrogen peroxide began to leak and resulted in fire.  As many as 16 fire tenders and 50 water tankers fought to douse the fire.  A thick blanket of smoke engulfed the nearby residential areas causing concern.  The newspaper report puts the loss at close to 100  crores.  

Interesting photo that appeared in The Hindu – horse drawn vehicle –

thick smoke engulfing containers  in the background

There are various Container Freight stations in Chennai notified under the Customs Act 1962 by the Govt of India.  At Kanakkanchatram, Madhavaram, Chennai 110 there is an authorized WH permitted to handle LCL import / export cargo admeasuring more than 54000 sq.ft.

Marine is all about movement of goods and those involved in the trade are exposed to many a risks – some unforeseen and not visualized by those concerned.  Trade is all about buying and selling of goods – and goods being exchanged for money and sent from one place to another.  The goods pass through many places and are handled by various people – some carefully and some with neglect.  In a simple transaction involving trade between two countries – the goods are manufactured by procurement of raw materials and some process at a factory, then they are packed and made ready for sale – upon a sale transaction, the goods are moved within the factory, mostly trucked to a CFS or WH which may be thousands of kilometers away, depending on whether this manufacturer is placed geographically, moved to yards nearer Ports in the Port of Origin city, could lie in waiting anywhere in between on the truck or on hard ground – some closed and some open –moved to Ports and could remain waiting on the quay  for the vessel to berth -  then loaded on to ships – feeder or main vessels – could get transshipped at some gateway ports where again they could remain on hard for days – loaded on to mother vessel – reach the destination port – get discharged – wait custom clearance again lying for no. of days in the port – moved to CFS – then trucked to the final destination, which again could be some place in another country also. 

Some of these are anticipated and some happen in the course of their ordinary transit.  As one would know, all goods imported into India have to pass through the procedure of customs for proper examination, appraisal, assessment and evaluation.  This is to ensure charging of tax as appropriate as also to check, restrain, (actually prevent) the illegal importation of any goods.   The clearance after payment of duty is called ‘home consumption’.

The duty can be paid in piece-meal as and when the importer requires the goods – this is done by storing the goods under customs control known as bonding and releasing them in parts on payment of duty.  

From the days when cargo was offloaded and distributed at Ports, we have moved a longway to custom notified warehouses situated in many places in the city.   These are licensed places under Customs Act 1962.  How long the goods can be kept under bond depends on whether they are imported by EOU and whether they are capital goods. Of course the rules which permit bonding up to one year will not apply to goods which are likely to deteriorate. 

Though the goods are at Customs custody, they continue to be owned and the Owner with the sanction of proper office and on payment of prescribed fees can inspect the goods, separate damage or deteriorating goods from the rest, sort the goods or change their containers for the purpose of preservation, sale, export or disposal, show the goods for sale, take samples and deal with the goods or change their containers as may be necessary to prevent loss or deterioration.  There would always be circumstances where the owners do not take any action to do any of what they could perform and leave their precious cargo entirely at the mercy of Custom House Brokers. 

CHA are licensees entited to transact business pertaining to the entry or departure of goods.    They generally take care of all documentation pertaining to such import / exports and facilitate movement of goods also.  The goods owners may not have the time and requisite knowledge in clearing the goods and leave it to CHA to deal on their behalf.   Often there exists very little or no documentation and their acts go unchecked.   Under Sec 146 of Customs Act, which allows the agents to act on behalf of importers and exporters, there is clear mention of their liabilities also.  Some of these are in the nature of liability of an agent under the Indian Contract Act 1872.  The goods owner needs to remember the common law principle that an agent’s actions bind the principal.  

         

The fire in the godown was put down after four hours or intense fighting and reported to have been triggered by an electrical short circuit.  

         

This accident once again bring to fore the perils associated with the movement of goods and the circumstances that would remain beyond the scope of the Insured and other interested parties.  Make sure that your Insurance policy covers all these contingencies………

Regards – S. Sampathkumar.