A Bulk Carrier Attacked by Houthi

On October 28th, a bulk carrier flying the Libyan flag was attacked by Houthi armed forces?while crossing the Mandeb Strait in the Red Sea.?The ship's captain reported an explosion nearby, just 150 meters away from the vessel. Within the following two hours, two more explosions occurred within 200 meters of the ship.

The United Kingdom Maritime Trade Operations?stated that the ship was not hit, the crew was safe, and the vessel continued to its next port of call.

On the evening of October 28th, a Houthi spokesman confirmed the attack on the ship and claimed unverified attacks on two other container ships in the Arabian Sea.

As early as March of this year, a cargo ship flying the Barbadian flag, departing from China, suffered a Houthi anti-ship missile attack near the Port of Aden in Yemen, causing severe damage to the hull, three crew members were unfortunately killed, and four were injured.

From the various actions of the Houthi armed force, it is evident that terrorist attacks have caused irreversible harm to global shipping.?In addition to terrorist attacks and piracy, shipping also faces other risks.

International trade goods may be subject to various risks during the process of maritime transportation, loading and unloading, and storage. The first is maritime risk, which is mainly natural disasters and accidents, and external risks, which are mainly theft, moisture, damage,?etc. of goods during transportation, or risks and losses caused by political, national bans and regulatory measures such as war, strikes, and refusal to deliver goods.

It is worth noting that there are also risks of maritime fraud in the trade process. Generally defined as one party in international goods trade and shipping intentionally providing false information or deliberately concealing the truth, promising to fulfill certain trade, transportation, or financial obligations for another party, in order to induce the other party to make incorrect expressions, thereby illegally obtaining the other party's money, goods, or ships. It is mainly divided into the following aspects:

1.Document Fraud

Document fraud, is the most common and primary form of international maritime fraud.?It mainly includes bills of lading, commercial invoices, insurance policies, certificates of origin, quality certificates, inspection certificates, consular invoices, etc. Unscrupulous merchants forge these documents to meet the requirements of letters of credit and use them to defraud payment for goods.

2.Vessel Fraud

Vessel fraud refers to fraudulent acts carried out by shipowners using vessels, mainly in the form of sinking ship fraud and phantom ship fraud. Due to the high cost, great risk, and potential for leaks associated with sinking ship fraud, unscrupulous shipowners tend to use phantom ship for scams. The owner of a phantom ship is essentially a shell company,?sometimes established just two days before the operation begins, and using temporary office locations, making such shipowners untrustworthy and extremely dangerous for transporting goods.

3. Charter Party Fraud

Charter party fraud can be divided into two types: time charter fraud and voyage charter fraud.

In time charter fraud, fraudsters first register a shell company in a distant tax haven, then sign a time charter contract with the shipowner as the charterer. After receiving the initial rent and taking possession of the vessel, the fraudster renames the ship and re-leases it as a second shipowner in a voyage charter. Once the vessel is loaded with goods at the port of loading, issues a prepaid shipping bill of lading for the goods, and deposits the prepaid freight into their own account, they declare bankruptcy or flee.

Under voyage charter conditions, the freight is calculated based on the distance of the voyage. The charterer first pays the freight to the shipowner, and the goods are successfully loaded onto the ship. However, during maritime transport, the shipowner demands changes in payment terms or an increase in payment standards for various reasons, otherwise, the ship may deviate from its course or transfer the goods to another region for sale. To avoid greater losses, the cargo owner has no choice but to accept the shipowner's terms.

4. Marine Insurance Fraud

Marine insurance fraud refers to the act of insured or beneficiaries fabricating insurance subjects, intentionally forging or falsely reporting insurance accidents, with the intention of defrauding insurance compensation in marine insurance business. Marine insurance has developed with international trade and maritime transport; it serves international trade and is an integral part of it.?However, for a long time, unscrupulous merchants or shipowners have violated the principle of honesty and credit, using the opportunity to insure with insurance companies to cause losses to ships and goods, and then claim compensation from the insurance companies to defraud large sums of compensation.

Maritime fraud often involves large sums of money, so measures must be taken to counter its occurrence.

1.Enhance awareness of foreign trade risks and strengthen credit investigations of partners.??

Before signing trade contracts with foreign parties, it is necessary to investigate in detail the partner's name, form of responsibility, registered capital, business scope, and the true situation of the legal representative, legal qualification certificates, business licenses, balance sheets, bank accounts, business reputation, operating performance, and even the authorization letter of the contracting representative.

2.Choose appropriate trade terms to prevent loopholes.

Ensure that?the conditions for contract performance are not easily changed during the execution of the contract; when signing import and export contracts, attention should be paid to choosing trade terms that are advantageous to one's own side. In China's export trade, efforts should be made to use CIF and CFR terms; in import trade, FOB terms can be used.

3.Choose safe vessels, strengthen supervision, and keep abreast of shipping status.

Choose reputable shipping companies for the transportation of goods,?and when goods are loaded at the port of loading, send personnel to verify the goods and the condition of the vessel; after the goods are shipped, the buyer should always be aware of the vessel's course and regularly inquire about the vessel's position from the carrier or shipowner.

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

Enhance legal protection awareness, strictly review contract terms to eliminate loopholes, and actively seek legal remedies and recover economic losses after fraud occurs. After the incident,?the parties should timely file a claim within the claim period.?In the case of arbitration,?firstly?try to conduct it?in the country where the shipowner is located. Secondly, choose an international arbitration institution with a good reputation.

E-PORTS is a third-party platform with rich port and shipping resources that can intelligently match the best ports, service providers, and service plans according to customer needs, reducing manual inquiries and consultations caused by poor information flow, as well as time costs.?At the same time, shipowners, shipping agents, or shipping suppliers can all obtain digital service support from the platform, efficiently communicate online with any party in the business in real-time, and effectively avoid operational risks associated with email transactions and online fraud through platform operations, enhancing risk control capabilities.?For more information, please call 400-9208810?for consultation.