TIANJIN WARHOUSE EXPLOSION; THE AFTERMATH

The media coverage is now familiar to us. From above, it appears like a meteor impact: spectacular and horrific in equal measure. Then there's the images of smouldering, blackened, twisted metal that used to be thousands of shipping containers each carrying cargo either to or from international markets through the world's tenth largest container port.

More recently, the coverage has moved from the colossal power of the explosions themselves to the fallout. We are seeing stills of military personnel from the People's‎ Liberation Army's Chemical Defence Unit patrolling the wreckage in their protective gear and breathing apparatus. One photograph even illustrates how caged rabbits are being deployed to perform the somewhat antiquated – albeit no less hazardous – role of "canary in the mineshaft".

The conscription of rabbits highlights a profound problem faced by those charged with the clean-up operations‎. The wider issue of animal welfare aside, it underscores an unsettling truth investigators are facing: noone has any idea as to the nature and scale of the contamination risk facing the authorities in relation to the fallout from the explosions that ripped through Tianjin International Ruhui Logistic Co Ltd (Ruhai).

It is becoming apparent from official and state sources in China that, when the Licenced dangerous cargo facility‎ erupted at around 23:30 hrs on 12 August 2015, it appears that minimal care and attention was being paid to what precisely was being stored there and in what quantities. Indeed, if any "record" of what was actually being stored there existed at all, it has most likely been destroyed in the explosions.

An article produced by the State-owned Xinhua News Agency has repeated accusations that "silent owners" of Ruhai exploited connections within the local police, fire service and workplace safety officials to secure the necessary permits and certifications to operate warehouse facilities for the storage of hazardous materials‎. Such approval was granted in clear contravention of public health safety laws.

The Supreme People's Procuratorate (SSP) – an equivalent to the Uk's Director of Public Prosecutions – has issued a statement saying that they are thoroughly investigating "possible illegal acts such as abuse of power or dereliction of duty" perpetrated by officials and private individuals who have in some way facilitated ‎Ruhai's operations.

These include:

– The safety evaluation firm who "passed" the facility as fit to handle hazardous materials (a company specifically engaged, according to one of the now-identified "silent owners", due to its pre-engagement promise to award the facilities"pass marks");

– customs supervisors who have been described in an SPP statement as "slack and irresponsible" in supervising the operations at the Ruhai facilities;

– the Transport management Authority;

– the Production Safety Regulatory Agency;

– the Land & Resources Authority;

– Tianjin Port Authority

The current investigations include possible criminal indictments. A number of officers of the companies and authorities have been detained by investigators. . Given the nature of the suspected offences being related to serious corruption, further suspects may be subject to “Residential Surveillance” (what we would term “House Arrest”). Under China’s Criminal Procedure Law, detention occurs prior to charge and charge occurs prior to arrest. An arrested person charged with an offence may subsequently be indicted for trial‎.

The ruling Party’s internal disciplinary machinery operates outside this judicial process.

Civil/commercial liability for the losses will need to be determined on a case-by-case basis.

Our experienced Hong Kong Recoveries Team is well placed to provide our clients with a no cure-no pay service of the highest professional standard on matters relating to the Tianjin explosions. W. E. Cox & Co. (Recoveries) Ltd has proven expertise in investigating and assessing the most appropriate route by which to maximise recovery potential against liable third parties in China, East Asia and throughout the world. Please contact Gordon Blyth Snr, gblyth@w-e-cox.com.hk, or Rosetta Li, rli@w-e-cox.com.hk, for further advice.

Exposure

The total insurance exposure, both for local insurers and in the international/reinsurance market is estimated as ‎USD1.5 billion.

On top of marine, property and energy losses, there will be business interruption claims. Policyholders may find that Outsourcing facilities may have been destroyed or ‎severely damaged causing disruption in the supply chain.

The reduction in warehousing, transport and customs capacity at the port will undoubtedly affect Tianjin Port's operations for the foreseeable future‎.

The environmental impact has still to be quantified following the release of approx. 700 mt of sodium cyanide into the atmosphere following the explosions. Cyanide levels within the evacuated zone were reported at 356 times that of a level considered "safe". High cyanide levels in the nearby Haihe River have been blamed for its banks being carpeted with dead fish (albeit officials have declined to confirm whether cyanide is to blame and have stated that there is a "seasonal pattern" of increased salinity in the river that may account for the scale of the losses).

It is also reported that US Embassy staff in Beijing have been warned to avoid rainfall and, if exposed, to wash themselves and clothing as soon as possible. Given the extent to which plumes of smoke belched a cocktail of chemicals into the atmosphere, this precaution even at this distance would not appear to be an over-reaction.

We have discussed the issue of contamination‎ with experts in the field of testing. The major problem we face is with the fact that we do not know what was stored at this facility.

Analysis of samples is only as accurate as the tests you perform. Whilst we can test for sodium cyanide, potassium nitrate and ammonium nitrate, there is no single test to check for the presence of every known toxin/irritant/carcinogen.

Which is where we come back to the Chinese authorities use of live rabbits: Only through the autopsy of a dead rabbit can we possibly identify the nature of the contamination‎ in the absence of knowing what it is we are testing for.

This clearly has implications for any owner of cargo stored in the vicinity destined for human consumption, food packaging and the retail market. The exposure of final users to the risk of personal injury must be of prime concern to those whose products were in the vicinity of a toxic "cocktail" of an undetermined – indeterminable – nature. The risk of total loss is, therefore, increased and the mitigation options significantly reduced.

If you have any concerns regarding cargo surveying/assessment in and around the Tianjin Port area, CEEMIS Far East has agents available for inspections. Our agency network covers all provinces of China in the event that cargo is returned to the place of origin for exports or forwarded to the place of destination for imports. Please contact either Wendy Lee, wendy@ceemis.com.hk or Gordon Blyth Jnr, gordon@ceemis.com.hk, for further advice.

Current situation on the ground

Terminal operations and custom procedures resumed a week ago. However, capacity at the port has been adversely affected and delays are likely to continue for the foreseeable future. ‎Consignments may be re-routed to other ports and landing of hazardous cargo remains strictly prohibited by authories.

We are receiving updates from logistic operators that the local municipal government in Tianjin is liaising with local facility managers and insurance companies regarding clean-up operations and timescales for gaining access to areas which have been placed under restriction/quarrantine.‎

Restricted access to areas previously under exclusion is being allowed in order to facilitate a visual inspection.

Our own survey agents have been granted such access and have advised us that‎ the authorities expect a quick decision with regard to whether or not consignments which can be identified are to be collected and salvaged. Whether this means that there is a "deadline" by which time the authorities expect site to be inspected prior to their clearing operations, we cannot confirm. However, we anticipate that the following week shall be a busy period obtaining clearance to restricted areas in order to perform what will be limited to rudimentary visual identification rather than quantum surveys.

Containerised cargo will be in a preferential position by virtue of the fact that carriers will be equally keen to identify whether or not their own property (container) is sound or lost. The larger shipping lines, in conjunction with their insurer, will be coordinating their own ‎investigations and clients and their assureds are advised to remain in contact with local shipping agents.

Another problem we are currently facing is that cargo within the affected area is "bonded". Taxes and duties have to be paid (and this payment processed) in order to facilitate clearance. These arrangements have to be made with the local customs authorities prior to an inspection and, often, before delivery can be completed. However, we are dealing with a few cases where the cargo is en route to final destination in "bonded transit" pending official clearance.

Our local agents are liaising with shipping agents, customs agents and receivers in order to facilitate the timely release and inspection of cargoes.

We shall be proactive in the coming week in trying to gain access‎ to cargo as the clear-up operation continues.

If you have any queries regarding the situation, please feel free to contact gordon@ceemis.com.hk or wendy@ceemis.com.hk.

Expansion of W.E. Cox Casualty & Complex Claims Team 2/11/2022

As a result of the continued support of our clients around the globe

Read More →
x