Basic contents of insurance for import and export goods transported by sea I – Characteristics and responsibilities of related parties in the process of importing and exporting goods transported by sea: 1) Characteristics of the process of importing and exporting goods transported by sea – The import and export of goods is usually done through a contract between the buyer and the seller with the following contents: quantity, quality, markings, packing specifications, goods prices, and responsibility for chartering vessels. and pay the freight, insurance, procedures and currency of payment… – In the process of importing and exporting goods, there is a transfer of ownership of the imported and exported goods lots from the seller to the buyer.
Import and export goods are often transported across national borders, subject to customs control, quarantine… depending on the regulations and practices of each country. At the same time, to transport out (or in) across the border must buy insurance according to international trade practices. The insured can be a buyer (importer) or a seller (exporter). The contract of insurance represents the relationship between the insurer and the insured for the insured goods. If the seller buys insurance, he must transfer it back to the buyer, so that when the goods arrive in the country of import, if the goods are damaged, they can claim compensation from the insurer.
– Import and export goods are usually transported by different means of transport by means of multi-modal transport, including ships. The person who transports the goods is also the person who delivers the goods to the buyer. Therefore, the carrier as an intermediary must be responsible for protecting and taking care of the goods in accordance with the specifications, quality and quantity from the time of receipt from the seller to the time of delivery to the buyer.
2) Responsibilities of the parties involved. Import and export activities are usually performed through three types of contracts:
– Sale contract – Moving contract – An insurance contract
These three contracts are the legal basis to determine the responsibilities of the related parties and this responsibility depends on the delivery conditions of the sales contract. According to the international commercial terms “INCOTERMS 2000” (International Commercial Teams) there are thirteen delivery terms divided into four groups E, F, C, D with the following basic differences: First, group E- convention where the seller places the goods at the disposal of the buyer at the seller’s workshop (term E- workshop delivery); The second is group F- convention where the seller is required to deliver the goods to a carrier nominated by the buyer (term group F: FCA, FAS and FOB); Third is group C – whereby the seller must contract for the hire of a means of transport, but bear no risk of loss of or damage to the goods or additional costs arising from circumstances occurring after the goods have been shipped. sending goods and loading goods on board (condition group C: CFR, CIF, CPT and CIP); The fourth is group D – where the seller must bear all costs and risks necessary to bring the goods to the named place (group of terms D: DAF, DES, DEQ, DDU, DDP). The most common are FOB, CFR and CIF terms.
In terms of delivery, in addition to the price of the goods, depending on the specific conditions, there are additional freight and insurance fees. There are terms of delivery where the seller is not responsible for chartering and insuring the goods. Thus, although the goods can be sold, the transportation and insurance services will be assumed by the buyer (FOB terms). There are cases of delivery under the condition that in addition to exporting the goods, the seller is also responsible for chartering a ship and buying insurance for the goods (CIF terms). In fact, economic groups operate in many fields of production, transportation, insurance, etc., when delivering goods according to terms of groups C and D, besides selling, they also give them transportation services and insurance for the goods. Therefore, if you import goods under FOB terms, or CFR terms, you will keep the shipping and insurance services, or just the insurance services. If in import activities, sell goods at CIF prices, the seller also retains transportation and insurance services. This will contribute to promoting the development of the shipping industry and the insurance industry of that country. In general, the responsibilities of the stakeholders are divided as follows:
– Responsibilities of the seller (exporter): must prepare the goods in accordance with the contract in foreign trade in terms of quantity, quality, specification, type, packaging, etc. arrive at the port until the date of receipt, notify the ship to receive transport, deliver the goods to the ship when it passes the safety railing, the responsibility for the risks of accidents for the goods. In addition, the seller must do the customs procedures, quarantine, get the quality inspection certificate, pack the packaging must withstand normal transportation and handling conditions. Finally, the seller must obtain a clean bill of lading. If selling goods under CIF terms, the seller is also responsible for buying insurance for the goods and then signing an endorsement on the insurance policy to transfer insurance benefits to the buyer.
– Responsibilities of the buyer (importer): receive the goods from the carrier according to the correct quantity and quality… stated in the contract of carriage and foreign trade contract, obtain a certificate of tally, the record of delivery and receipt of goods with the ship owner, the record of damaged goods caused by the ship (if any), if there is a discrepancy in the quantity of imported goods, which is different from the purchase and sale contract but in accordance with the contract of carriage. transfer, the buyer reserves the right to claim against the seller. If the quality and quantity of goods received are different from the bill of lading, the buyer, based on the above record, reserves the right to complain to the owner of the means of transport. In addition, the buyer is also responsible for purchasing insurance for the goods if the goods are purchased at the CF price and buying insurance, the charterer pays the freight if the goods are purchased at the FOB price or the receipt of insurance documents issued by the buyer. sale and transfer if purchased at CIF price. – Responsibilities of the carrier: prepare means of transport according to commercial and maritime technical requirements, deliver and receive goods in accordance with the provisions of the contract of carriage. According to international trade practice, the cargo ship is required to participate in hull insurance and P and I. The carrier is also responsible for issuing the bill of lading to the consignor. Bill of Loading (Bill of Loading) is a maritime transport document at sea issued by the carrier to the consignor to express the legal relationship between the carrier, the consignee and the consignee. There are many types of bills of lading, but here are only interested in two basic types: the perfect bill of lading (Clean B/L), also known as the clean bill of lading, and the imperfect bill of lading (Unclean B/L). The carrier must be responsible for the risks that occur to the goods in accordance with the regulations and must be responsible for protecting and taking care of the transported goods during the journey from the port of departure to the port of destination. – Liability of the insurer: responsible for the insured perils caused to the insured cargo, the insurer is also responsible for checking the documents related to the goods, the shipping journey. carrier and the carrier itself. When a loss occurs within the scope of the insurance’s liability, the insurer is responsible for conducting the assessment, indemnifying the loss and claiming a third party if they cause this loss.
II – Types of risks and losses in the insurance of import and export goods transported by sea 1) Risks in insurance of import and export goods transported by sea. Risks in the insurance of import and export goods transported by sea are accidents, disasters, incidents that occur suddenly, randomly or dangerous threats, which, when occurring, will cause loss to insured object. For example: shipwreck, lost goods, broken or damaged goods… Risks in import and export of goods transported by sea have many types, based on the arising origin can be divided into risks the following types:
* Natural disasters: Natural disasters are natural phenomena that humans cannot control such as: rough seas, storms, whirlwinds, lightning strikes, bad weather, tsunamis… * Disasters of the sea: are disasters that happen to a ship at sea such as: the ship runs aground, collides, sinks, catches fire, capsizes, goes missing… these risks are so-called key risks. * Other unexpected accidents: are damages caused by random external impacts, not belonging to the above-mentioned marine disasters. Other unexpected accidents may occur at sea, but the cause is not a disaster of the sea, may occur on land or in the air during transportation, loading and unloading of goods, delivery, storage, and maintenance. Goods management such as: broken, sliced, steamed, missing, stolen, stolen, not delivered … these risks are called secondary risks.
* Risks due to the nature or special nature of the subject-matter insured or damages for which delay is the direct cause. According to the insurance business, the risks of import and export goods transported by sea can be divided into the following categories: Normal Insured Perils: These are risks that are normally insured under the original insurance conditions. These are random and unexpected risks that occur against the will of the insured such as: natural disasters, sea calamities, other unexpected accidents, that is, including main risks and secondary risks.
* Separate insurance risks: are risks that want to be insured, must be agreed separately, additionally, but not compensated according to the original insurance conditions. This type of risk includes: risks of war, strike, terrorism, which are insured under separate conditions. * Uninsured risks: are risks that are not insured by the insurer or are not compensated by the insurer in all cases. These are natural and certain risks or damages due to internal defects, the nature of the goods, the fault of the assured, damage directly caused by delay, risk of the nature of the disaster that humans cannot foresee, its scale, extent and consequences.
In short, the insured perils must be the direct cause of the loss. The division of direct causes or indirect causes is very important to determine whether the risk of loss is an insured risk or not. Only losses which are directly caused by the insured peril will be compensated.
2) Loss in insurance of import and export goods transported by sea:
Loss in import and export cargo insurance is the damage or damage to the insured goods caused by perils.
Based on the size and extent of loss, there are two types of loss: partial loss and total loss: Partial loss: is a loss where a part of the subject matter insured under an insurance policy is lost, damaged or destroyed. Part loss can be loss in quantity, weight, volume or value.
* Total loss: means the entire subject matter insured under the insurance contract is lost, damaged, damaged or deformed or deformed, no longer as it was when the insurance was newly insured. A total loss may be an actual total loss or an estimated total loss:
– Total loss is the fact that the entire subject-matter insured is lost, damaged or destroyed, and cannot be recovered as at the time of insurance. In this case, the insurer must indemnify the entire insured value or sum insured. Estimated total loss i.e. loss or damage of the subject-matter insured which is less than total loss but the subject-matter insured is reasonably abandoned because actual total loss would be considered impossible. avoidance or the costs of preventing or recovering from loss greater than the value of the goods insured. When the subject matter of the goods is abandoned, title to the goods passes to the insurer and the insurer has the right to dispose of the goods. At that time, the insured has the right to claim for total loss. Based on the nature of the loss and insurance liability, the loss is divided into two types: general average and special average:
General average means special sacrifices or expenses made intentionally and reasonably for the purpose of saving the ship and its cargo from a common, real danger to them. When a common average occurs, the shipper and the insurer must fill in the Affidavit, the Declaration of
Contribution to General average. This undertaking is presented to the shipper or the master upon receipt of the goods. Content in general, when a general average occurs, the insured must notify the insurance company so that the company guides the procedures not to voluntarily sign the Affidavit.
* Private loss: is a loss that causes damage only to one or several interests of the shippers and shipowners on a ship. Thus, a separate loss relates only to a separate interest. In a separate loss, in addition to physical damage, there are also related costs to limit the damage when the loss occurs, which is called loss of private expense. Loss and separate expenses are the costs of preserving goods to reduce damage or prevent further damage, including costs of loading, unloading, shipping, repacking, replacing packaging, etc. at the port of departure. on and along the road. Particular average costs limit and reduce specific loss, which can be a partial loss or a total loss. Whether a particular loss is indemnified by the insurer depends on whether the risk is agreed upon in the insurance contract, not like general average.
Source: VOER (Vietnam Open Educational Resources)