Marine Cargo Handbook

7/30/2019 Marine Cargo Handbook

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Marine CargoOpen Policy Handbook

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arine

cargo

open

policy

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CouncilofNewZ

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Contents

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1 Whatisamarinecargoopenpolicy? 4

2 TermsoSale:importantdefnitions 4

3 Termsosale:howtheywork 5

4 Advantagesoamarinecargoopenpolicy 6

5 Importantmarinecargoopenpolicyterms 6

6 Periodoinsurance 7

7 Whatriskscanbecovered? 8

8 Policyextensions 8

9 Methodsodeclaringshipmentstotheinsurer 9

10 Lowerpremiumsthroughexcess 9

11 Chargingpremiumsundermarineopenpolicies 9

12 AdvantagesoinsuringinNewZealand 10

Specimenproposalorm 11

Detailed index next page

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This booklet is designed to assistexporters and importers.

We hope you find it useful.


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Index

Section Page

Advancelossoprofts(machinerytransit) 8 8

AdvantagesoaMarineOpenPolicy 4 6

AdvantagesoInsuringinNewZealand 12 10

BasisoValuation 5.4 6

BottomLimit(maximumsuminsured) 5.1 6

CharterersLiability 8 8

ClassifcationClause 5.3 6

Deckcargo 7.2 8

Declarations - Imports 9.1 9

- Exports 9.2 9

-NewZealandTransits 9.3 9

Dierenceinclauses(CIFimporter) 8 8

DurationoInsurance 6 7

Duty 8 8

ExcessonPolicies 10 9

ExtensionsAvailableonMarineCargoOpenPolicies 8 8

InsurableInterest 6.1 7

LocationClause 5.2 6

LowerPremiumRates 10 9

MarineCargoOpenPolicyspecimenproposalorm 11

PeriodoInsurance 6 8

PolicyTerms 5 6

PremiumCharging 11 9

Rejection/expenses 8 8

Returnedgoods 8 8

Risk,responsibilityorgoods 3 5

SellersInterest(FOBexporter) 8 8

StrikesDiversion 8 8

TermsoSale:importantdefnitions 2 4

TermsoSale:howtheywork 3 5

TransitClause 6 7

WarehousetoWarehouseClause 6 7

WhatisaMarineCargoOpenPolicy? 1 4

WhatRiskscanbecovered? 7 8

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A marine cargo open policy is theagreement between a merchant and the

insurance company to insure all goodsin transit falling within that agreementfor an indenite period, until theagreement is cancelled by either party.

The policy species:

the general description of the goods

the countries or places to or fromwhich the goods will be insured

the maximum value payable underthe policy

how the goods will be valued the conditions of insurance.

2.1 EXW(ExWorks)

The buyer is responsible for allcosts and risks from the time thegoods leave the sellers warehouseuntil they arrive at their nal

destination.

2.2 FAS(FreeAlongsideShip)

The seller is responsible forall charges until the goods arealongside the ship. (The denitionof alongside ship varies fromport to port. It may mean customswarehouse, ships storage shed andso on.) The buyer is responsible forall costs and risks from that point

until the goods arrive at their naldestination.

2.3 FOB(FreeOnBoard)

The seller is responsible for allcosts and risks until the goods areon board the vessel. The buyer isresponsible from then on.

The merchant agrees to declare details ofall shipments falling within the scope of

the policy, and the insurance companyagrees to insure such shipments,according to the terms and conditions of

the policy.

1 What ia a Marine Cargo open policy

2.4 CFR(CostandFreight)

The seller is responsible for allcharges incurred to the placeof discharge, except for loss ordamage after they have been

delivered unto the custody of theshipowner at the place of shipmentor point of FOB. It is the buyersresponsibility to insure the goodsonce they are delivered to the placeof shipment or FOB until they reachtheir nal destination.

2.5 CIF(Cost,Insurance,Freight)

The sellers responsibilities are thesame as for CFR sales, except that

the seller arranges insurance tothe nal destination of the goods,providing cover in terms that areusual to the trade. The buyer paysfor and takes title to the policywhen the goods are paid for.

2.6 FIS(FreeIntoStore)

The seller is responsible for allcosts and risks until the goods aredelivered to the buyers warehouse.The buyer does not need to arrange

insurance at all.

2 Terms of sale: important definitions

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Terms Risk transfers Insurance covered by

ExWorks(EXW) When goods have been placed Buyer from sellersat the disposal of the buyer warehouse

FreeCarrier(FCA) When goods have been Buyer (Seller up to the

delivered into the custody of carrier)the carrier

FreeAlongside When goods have been Buyer (Seller up to the ship)Ship(FAS) effectively delivered alongside

the ship at the named port ofshipment

FreeOnBoard When goods pass the ships Buyer (Seller up to the ship)(FOB) rail at port of shipment

CostandFreight As for FOB, but the seller Buyer (seller up to the ship)(CFR) prepays freight to destination

Cost,Insurance, When goods cross ships Seller (Insurance policy soldFreight(CIF) rail at port of shipment to buyer with cost of goods)

Deliveredat When goods put at disposal Seller (To frontier)Frontier(DAF) of buyer at named place at Buyer (From frontier)

frontier

CarriagePaidto... When goods delivered into Buyer (Seller until delivered(namedpointof custody by rst carrier who into custody by rst carrier)

destination)(CP) undertakes carriage fromplace of departure

DeliveredDuty When goods put at disposal SellerPaid(DDP) of buyer at named place of

destination

FreeIntoStore When goods accepted duty Seller(FIS) paid at the buyers warehouse

(not an internationallyrecognised term of sale)

3 Terms of sale: how they work

In commerce, sales are made underinternationally recognised terms

of sale. These have been dened indetail by the International Chamber ofCommerce in their booklet No. 460. Thissets out the rights and responsibilities

of the exporter and importer. Riskresponsibility for goods passes at

different stages of transit, according tothe terms of sale. This is a general terms.

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5.1 MaximumSumInsured

The policy shows a gure which is theinsurers maximum liability for a claimin any one conveyance. The customer

should make sure that the value shownis enough to cover the value of thelargest shipment and double this gureto cover the possibility of two shipmentsbeing sent in the same conveyance.

5.2 LocationClause

This clause limits the maximum amountpayable from one accident or series ofaccidents occurring in one location; forexample, before shipment. It is usually

but not always the same amount as thebottom limit.

5.3 ClassicationClause

The type or age of a ship is importantwhen xing the rate of premium.However the names of ships carryinggoods are not usually known whenxing premium rates for a marine cargoopen policy.

This clause provides that the pre-agreed

premium rate for the marine openpolicy refers to goods in transit in shipsunder a certain age and up to a certain

Standard/Class. An additional premiummay be payable for transits on otherships.

5.4 BasisofValuation

Commercial shipments are normallyinsured on the basis of the invoice valueplus all transit and other known costs,plus a percentage to cover hidden costsand a proportion of the buyers expectedprot. This value could be shown as CIFplus 10%.

The agreed basis is noted on the policyso that if a declaration is accidentallyoverlooked, a loss will remain

automatically covered for the valueagreed. This valuation is also used bythe merchant when declaring details ofshipments to the insurer.

When insuring imports, often twovaluations are often noted on the policy.One applies to FOB orders (for instance,FOB plus 30%) and the other to C & Forders (for instance, C & F plus 10%).The percentage added should be enoughto cover freight as well as other costs

for FOB orders. Having two valuationsmakes it easy for the merchant to decidewhich value is declared to the insurer.

5 Important marine cargo open policy terms

4.1 It provides guaranteed cover at pre-arranged rates arid conditions

4.2 Flexible policies are tailored to suitthe customers individual needs

4.3 Insurance protection starts from themoment goods are at the risk of themerchant

4.4 Losses are covered even ifthey occur before details of theshipments have been given to theinsurer

4.5 The policy remains in forceindenitely until cancelled, usually

by either party giving thirty daysnotice of cancellation (insurers

reserve the right to withdraw warrisks cover following seven days

notice)4.6 The cost of insurance is usually

lower than if separate policies arearranged

4.7 It avoids the need to arrangeseparate policies for each shipment

4.8 Exporters are able to offerinsurance in the cost of goods whennegotiating sales

4.9 The method of premium paymentcan be tailored to the customers

needs: annual adjustable; quarterly;or monthly declaration.

4 Advantages of a marine cargo open policy

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The Transit Clause, part of the InstituteCargo Clauses, is explained here:

Duration

This insurance attaches from time thegoods leave the warehouse or placeof storage at the place named for thecommencement of the transit, continuesduring the ordinary course of transitand terminates at either:

delivery to the Consignees or othernal warehouse or place of storageat the named destination,

delivery to any other warehouse orplace of storage, whether prior to orat the destination named, which theinsured decides to use either:

- for storage other than in theordinary course of transit or,

- for allocation or distribution

on the expiry of 60 days aftercompletion of discharge oversideof the goods insured from theoverseas vessel at the nal port of

discharge, whichever occurs rst.In the case of specic Institute Cargoand Commodity Clauses (for exampleFrozen Food Clauses and Meat Clauses),attachment and expiry dates may differ.It is important that attachment andexpiry dates are assumed only afterconsulting the relevant Institute andCommodity Clause.

6.1 To recover a policy under a marinecargo policy, a person must have

insurable interest at the time of loss,though the interest may not haveexisted when the insurance wasarranged.

6.2 From Section 3, you will see thatrisk responsibility for goods can

change at various points duringshipment, according to the terms ofsale. Although the duration clauseshows cover as being warehouse towarehouse, an importer only hasthis cover if it is purchased on EXWterms. Similarly, an exporter hasinsurance cover from warehouse towarehouse if the goods are sold ona FIS or CIF basis.

6.3 If an order is supplied on FOB

terms, the policy cover for animporter starts from the time thatrisk responsibility passes to theimporter (in this case, when thegoods cross the ships rail).

6.4 If a New Zealand exporter sellsgoods on CIF terms, the cover iswarehouse to warehouse. However,if the exporter sells the goods onCFR terms, the risk responsibilityis only held until they cross theships rail and, if the exporter hasinsured the period of transit fromwarehouse to ships rail, the coverceases then. (Section 7 explains howthis can be extended).

Marine Cargo Open Policy covercan provide wide protection for aNew Zealand importer or exporter.Certicates of insurance issued from themaster open policy are sub-sets of thiscover which comply with the requiredinsurance terms of a specic commercialsales contract.

This shows just how exible a marinecargo open policy can be. Coverautomatically starts when it is neededand protects a merchant for as long as isnecessary.

6 Period of insurance

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A variety of risks can be covered butthe most common and widest are the

Institute Cargo Clauses (A) (formerlyknown as the All Risks) which cover lossor damage to goods. In addition, WarRisks (while on board a seagoing vesselor an aircraft) and physical risks of lossor damage as a result of Strikes, Riotsand Civil Commotions may be insured.The War and Strikes risks are rated froman agreed scale to which all insurers arebound.

The risks insured are dened in sets of

conditions called the Institute Clauses.These are issued by the Instituteof London Underwriters. They areunderstood globally and are usedwidely.

7.1 Some types of loss are not insured.The main exclusions are loss ordamage caused by:

willful misconduct of the insured(the merchant)

ordinary leakage, loss in weight,

wear and tear of goods

insufcient packing, inadequatestorage in a container, inherent vice,

or goods deterioration caused bydelay

insolvency or nancial default ofthe owners, managers and so on, ofthe vessel.

7.2 Deck cargo, other than goods incontainers on container ships, iscovered against certain named risksas opposed to the wider conditionsof the Institute Cargo Clauses (A)

As many types of Institute Clauses are

available, so a marine cargo open policycan be tailored to suit your needs.

7 What risks can be covered?

The following additional covers can beconsidered:

Advance loss of prots (machinerytransit)

Strikes diversion

Sellers interest (FOB exporter) Difference in clauses (CIF importer)

Returned goods

Rejection/expenses

Charterers liability

Duty

This is not a complete list. Your

insurance advisor can provide you withmore information.

8 Policy extensions

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10 Lower premiums through excess

When transiting goods inside New

Zealand, it is common for carriersto be liable up to $1,500 per unit ofgoods (Carriers Liability Act 1979). Ifa merchant sends packages valued atmore than $1,500, it is possible to makesubstantial premium savings if theopen policy covering the sending has

an excess equal to the carrier s liability.

Savings can also be made on importspremiums if a merchant agrees to asmall excess on the policy, so that minorlosses are not claimed against the openpolicy.

11 Charging premiums under marine open policies

When details of shipments are beingdeclared to the insurer on a regularbasis, the insurer usually chargespremiums monthly, based on thereceived declarations.

In some cases the premiums may becharged annually. This method usuallyapplies to the insurance of goods intransit within New Zealand, wherethe merchant estimates the value to be

insured for a twelve month period. Adeposit premium is charged, calculatedon this estimate and an additional/return of premium adjustment made atthe end of twelve months, calculatedon the declaration of the actual valueof transits made by the merchantsaccountant.

9 Methods of declaring shipments to the insurer

9.1 Imports

The most popular method is for

the importer to note brief details ofshipments on a form supplied by theinsurer. The entry is usually made whendocuments are received from the bank.By using this method the importerknows that details have been declared.

Sometimes it is arranged for thesupplier to declare shipments direct tothe insurer. However, there is a chancethat the supplier may forget or perhapsdeclare the wrong value. It is the NZ

merchants responsibility to ensure thatevery shipment has been declared.

In other cases it may be possible forthe insurer to use the merchants ofcesystem documents as declarations.

9.2 Exports

The exporter usually produces a

Certicate of Insurance at the same timeother export documents are generated.This negotiable document gives briefdetails of the shipment, the conditionsof insurance and the value insured. Italso provides evidence of insurance forbanks.

9.3 NewZealandTransits(sales/sendings)

An open policy can be tailored to cover

all or just some of a merchants sales orsendings. This is why there are manydifferent methods of declaring thedetails of goods in transit.

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12.1Reducedcurrencyrisk

New Zealand importers do not have to

pay additional overseas funds if theyinsure the goods. However, if goods areinsured by the seller, this increases anyexchange rate risks.

12.2EfcientClaimsService

Insurance companies usually havebranches throughout New Zealandas well as a network of branches andagents around the world. No matterwhere a claim occurs, your insurer (or

insurance agent) is there to assist andsettle claims swiftly.

If you ever have to make a claim, youdeal with your insurer, not the agentof an overseas insurer. Some overseasinsurers do not have agents in NewZealand and you must apply directly tothe overseas insurer for settlement.

12 Advantages of insuring in new zealand

12.3TailoredPolicies

Your insurance policy can be tailored

to suit your individual needs. Theconditions of insurance policiesarranged overseas may not fully coveryour needs, leaving a shortfall inprotection.

12.4CompetitiveRates

If arranged off-shore, insurance ratesmay contain additional hidden costsloaded by the seller. Your insurerwill be pleased to provide you with

a competitive quotation for a marinecargo open policy.

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8. MeansoTransport

indicate the approximate proportion by each method

Imports:

Sea % Air % Post % Exports:

Sea % Air % Post %

NZsales/sendings*

rail/road % Air % Post % Own vehicle %

circle as applicable

Limited carriers risk/owners risk/declared terms/declared value terms

* Subject to the NZ Carriage of goods Act 1979.

9 TermsoTrade


Imports: Ex Works / F.O.B. / CFR / C.I.F.

Exports: Ex Works / F.O.B. / CFR / C.I.F. / F.I.S.

10 Basisovaluation

NZsales/sendings Invoice cost to customer

ImportsCFRpurchases Cost and freight plus % Exports Cost, insurance, freight plus %

Free into store contracts shall be the value as shown on the certied invoice

11. Nameoexistinginsurer

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12. DetailsoPreviouslossesasat:


Year Claims Paid Claims O/s Uninsured Losses

Imp/Exp/NZ 20 $ $ $

Imp/Exp/NZ 20 $ $ $

Imp/Exp/NZ 20 $ $ $

Imp/Exp/NZ 20 $ $ $

Give details of any losses over $5,000

13. Excess:Do you wish to have a general policy excess in order to gain lower insurance rates:

Yes $ No

Please note if any NZ sales/sendings are consigned at Limited Carriers Risk terms, anygeneral policy excess selected will apply in addition to the Carriers Legal Liability of$1500.

14. Anyotherinormationtoassistassessmentorisk:

15. Doyourequireanyotherinsuranceor:

Duty Yes/No

SellersInterest Yes/No

AdvancedProts Yes/No

16. Proposalsignedby

Date

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Acknowledgements

GrateulacknowledgementismadebytheInsuranceCounciloNewZealandInc.to:

F.A.I.(NZ)GeneralInsuranceLtdGeneral&CologneReManagementLtd

InternationalMarineInsuranceAgencyLtd

LumleyGeneralInsuranceLtd

MMIGeneralInsurance(NZ)Ltd

MunichreNewZealandService

NewZealandInsurance

QBEInsurance(International)Ltd

ZurichInternational(NewZealand)Ltd

andtotheGeneralAccidentInsuranceCompanywhooriginallyproducedthis

material.

2006 Insurance Council Marine Committee Members

PeterCooper AustralisUnderwritingAgencyLtd

KeithAuld MunichReinsuranceCompanyoAustralasiaLtd

JohnMcKelvie VeroMarineInsuranceLimited

AndrewScrivens AIGNewZealandChristopherBarrett SunderlandMarine

GrayRitchie IAGNewZealandLimited

PublishedbyTheInsuranceCounciloNewZealandInc.1998

Reprinted2006

Insurance Council website:

www.icnz.org.nz

Marine Cargo Handbook

Documents

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