!!To be able to see this page correctly, you need to have Flash player 7 or higher installed!!
Please click here to start installing the player.
Please click here to start installing the player.
The about-turn policy
February 2007
Phil Hastings, International Trade Today
Forwarders operating in the UK should soon be able to resume offering shippers all-risk marine insurance of goods in transit on the same basis as their counterparts elsewhere in Europe and many other parts of the world.
That, at least, is the hope of the country’s forwarding industry following a government decision to remove its two-year-old requirement for companies in that sector to be registered with the national Financial Services Authority (FSA) if they want to provide such insurance.
Prior to that legislation, UK forwarders were free to purchase policies for all-risk marine insurance of goods in transit and then effectively pass on that cover to their customers as a service. Subsequently, UK forwarders had to be FSA-registered in order to offer that option.
Now, says the British International Freight Association (BIFA), the trade body for UK forwarders that has led a four-year industry campaign against the present regulation, it appears that the legislative processes required to abolish that more recent requirement could be completed during the first half of this year.
‘However, this does not mean that members can rush out and purchase marine insurance policies,’ warned BIFA director general Colin Beaumont. ‘We recognise that there are a number of steps that have to be taken before this becomes law.’
The issue originally arose from a piece of EU legislation called the Insurance Mediation Directive (IMD), which required member states, including the UK, to regulate various activities associated with the selling and administering of insurance contracts, including long-term insurance business, commercial insurance and reinsurance.
The IMD was implemented in the UK at the beginning of 2005 by giving the FSA responsibility for regulating the sale of general insurance products in addition to its existing regulatory role in respect of long-term contracts.
As part of that new regulatory regime, the UK – unlike most other EU countries which opted to exempt the forwarding sector – included the sale of marine insurance (which can cover air, road and other means of transport as well as ocean freight). That meant forwarders either had to stop offering such insurance, forcing customers to source their own cover, or register with the FSA in order to continue providing that service. The latter option, claimed forwarders, meant incurring ‘significant’ extra costs.
‘We know of some BIFA members who signed up to register with the FSA but found the whole process to be extremely bureaucratic and time-consuming, with the result that they subsequently de-registered,’ commented Beaumont.
One UK forwarder that opted to remain registered was leading UK independent Davies Turner, whose extensive portfolio of activities includes Asian ocean and air cargo services. ‘We were one of the first UK freight forwarders to register with the FSA before the new IMD took effect and have, therefore, been able to continue providing marine insurance cover for our customers,’ said joint managing director Philip Stephenson. ‘But the FSA registration process was not a simple one and significant costs have been involved, both in support of registration and its continued maintenance, including staff training.’
In fact, he said, the total cost to the group as a whole, including time spent on FSA reporting by the company secretary, FSA fees, additional requirements for professional indemnity and extra administration/ documentation, was probably around £15,000 a year.
‘OK, we are a near £130m company in terms of annual turnover and you could say that sort of figure is not the end of the world. But, nevertheless, it is an added cost,’ said Stephenson.
During its long campaign against the UK interpretation and implementation of the IMD in the forwarding sector, BIFA argued that the provision of insurance by forwarders using marine open cover policies in their own name did not fall within the definition of ‘insurance mediation’. The association also pointed out that other EU states had not included such insurance in their implementation of the directive.
Finally, BIFA last year achieved a breakthrough in its battle with UK Treasury officials over that issue with the securing of ‘clarification’ from the European Commission that such inclusion was not necessary.
Subsequently, the Treasury issued a statement confirming its intention to remove forwarders from the scope of FSA regulation. Specifically, the Treasury stated that although the industry’s marine insurance activities were currently regulated by the FSA, the Government did not believe there were any significant consumer protection issues.
‘Following dialogue with the EC and the industry, the Government has decided that it is no longer appropriate for the FSA to regulate these activities,’ it added.
DOOR TO THE FUTURE?
Exporters and shipping lines could start operational trials with a new type of door-less intermodal cargo container on transatlantic and other major global ocean freight trade routes within the next few weeks.
Called CakeBoxx, the patent-pending equipment has been developed by a US company of the same name to provide both high-security against theft/potential terrorist activity and ease of access for inspection by customs or other authorities.
‘One shipping line has already told us they are ready to buy some of the containers, assuming the units get the relevant ISO and other certifications,’ commented CakeBoxx founder and chief executive Garry Whyte. ‘We also have a large industrial customer that wants to run trials on the transatlantic route. We hope to see the first trials get underway in March.’
The new container design, said to be suitable for any standard ISO box size, is loosely based on the concept of a presentational cake plate with protective box over it – hence the name. The steel alloy unit actually comprises a separate floor/base and door-less top section.
Once cargo has been loaded onto the floor/base, the top part of the container is dropped down and secured to the bottom part using a latching system to lock more than 30 attachments points. At final destination or for Customs inspection, the latching system is released and the top section is lifted off.
Whyte added that the lifting and lowering of the top part of the container could be achieved using a standard forklift truck equipped with a spreader, ‘although we expect some of the larger customers we are targeting will probably use an automated system, as will Customs authorities’.
