insurance policy. The amount of money the insurer agrees to cover by insurance against the subject matter is the insured amount (which is usually the amount of CIF value of the consignment plus 10% representing an anticipated profit for the buyer). The sum of money the insured agrees to pay the insurer for an insurance policy is called
premium.This unit discusses the following: 1）the possible risks and losses exporters and importers might encounter during the transit of the goods; 2)?? the insurance coverage of China Insurance Clause, including that of the marine cargo transport and other modes of transport; 3)the insurance coverage of Institute Cargo Clauses; 4) the practice of cargo insurance.1 Risks and LossesRisks in cargo transport are of many kinds. Different risks mean different losses, and different risks are covered by different insurance clauses and further different insurance clauses mean different premiums. So we need to have a good understanding of the different risks and losses before we know how to effect insurance.?1. 1 Risks Here we focus on marine cargo transport. In marine cargo transport insurance, risks fall into perils of the sea and extraneous risks.1. 1. 1 Perils of the Sea Perils of the sea can further be either
natural calamity and fortuitous（意外事故） accidents. Natural calamity (自然灾害) refers to the perils under force majeure（不可抗力）such as vile weather, thunder storm and lightening, tsu’nami（海啸）, earthquake, flood, etc. (The ordinary action of the winds and waves is not taken as natural calamities.) Fortuitous accidents are such risks as ship stranding, striking upon the rocks, ship sinking, ship collision, colliding with icebergs or other objects, fire, explosion, ship missing, etc..1. 1. 2 Extraneous
RisksExtraneous risks can further be general extraneous risks and special extraneous risks. Risks caused by theft, rain, leakage, shortage, breakage, dampness, mildewing, heating, taint of odor, hooking and rusting are general extraneous risks（一般外来风险）, while risks caused by on deck, war, strikes, failure of delivery and rejection, etc. are special extraneous risks.（特殊外来风险）? ? Activities for
Comprehension:?1)What is the function of Cargo transport insurance?2) Who is the insurer and who is the insured?3) How many kinds of risks are there in marine cargo transport insurance?Please describe perils of the sea. 4) What are called special extraneous risks??1. 2 Losses Losses sustained by the insured because of the risks listed above come from not only the loss of the goods or the damage done to the goods, but also from the expenses the insured sustained in rescuing the goods in danger. The losses and damages done to the goods can fall into total loss and partial loss.?1. 2. 1 Total Loss Total loss of goods can further be actual total loss and constructive total loss. Actual total loss（实际全损） means the whole lot of the consignment has been lost or damaged or found valueless upon the arrival at the port of destination. The
constructive total loss （推定全损） is found in the case where the actual loss of the
insured goods is unavoidable, or the ship or the consignment has to be abandoned because the cost of salvage or recovery would exceed the value of the ship and the consignment in sound condition upon the arrival of the port of destination.When
constructive total loss takes place, the insured can ask the insurer to cover part of his loss or all of his loss. Under the later case, the insured must present to the insurer a notice of abandonment, by which he means to transfer all his interest and obligations to the insurer so that he might cover his total loss. The abandonment is effective only after it is accepted by the insurer.1. 2. 2 Partial LossPartial loss means that the loss or
damage to the goods is only partial. Partial loss can be either general average （共同海损）or particular average. （单独海损） Particular average （单独海损） means that a particular consignment is partially damaged.General average （共同海损） is in use when both the ship and the consignments on board are endangered and the captain, for the safety of the ship and the consignments on board, intentionally and reasonably does some sacrifices or makes some expenses. For example, when a ship goes aground and both the ship and the consignments on board are in peril, the captain, after all his efforts to refloat the ship have failed, may decide to jettison part of the consignments on board to lighten the ship. The loss, the sacrifice done for that purpose, is to be borne by both the carrier and the consignors in proportion to the value of their interest thus saved. This is called general average contribution（共同海损分摊）.1. 2. 3 ExpensesExpenses here fall into the following kinds: 1) Sue and labor expenses Sue and labor expenses （施救费用）are made by the insured or his agent to prevent them from suffering further losses. 2) Salvage charges（救助费用） Salvage
charges are made to those other than the insured, the carrier and the insurer who come to the salvage of the ship and the consignments.由保险人和被保险人以外的第三人采取了有效的救助措施，在救助成功后，由被救方付给救助人的一种报酬。 3)Continuation expenses Continuation expenses are made for continuing the journey of consignments after the journey has been stopped by risks under the cover of the insurance policy4)Loss evaluation charges （估损费用） After a loss is sustained, experts would have to be invited to evaluate the loss to be covered by the insurer. These expenses are usually covered by the insurer.?? Activities for Comprehension: 1) Where do losses come from? 2) Tell the difference
between Actual Total Loss and Constructive Total Loss. 3) When is General Average used? 4) Who should pay salvage charges??2 Ocean Marine Insurance under C.I.C. （中国保险条款） Cargo transport insurance falls into ocean marine insurance, overland transportation insurance, air transportation insurance, and parcel post insurance. Under China Insurance Clause (C.I.C.), for each type of transportation
insurance, there are basic risks coverage （基本险）and additional risks coverage （附加险）. Ocean marine insurance deserves our particular attention as the majority of the goods in international trade is transported by ship and also because ocean
transportation insurance is complicated in operation. 2. 1 Basic Risks Coverage for Ocean Transportation under C.I.C. （中国保险条款）Under China Insurance Clause, basic risks coverage falls into three groups: free from particular average（平安险）, with average（水渍险）, and all risks（一切险）. The insured may choose any one from these suitable for the carriage of his goods.2. 1. 1 Free from Particular Average (F.P.A.)
（平安险） F.P.A. covers the following losses: 1) Actual total loss or constructive total loss of the consignment caused by natural calamities such as vile/bad weather, tsunami, earthquake, flood. When the consignment is carried by a lighter to or from the ship, the goods aboard the lighter can be taken as a whole consignment. When the consignor asks the insurer to cover the constructive total loss, he must present the insurer a notice of abandonment.2)?Reasonable expenses the insured makes for the salvage of the goods insured, and for averting or minimizing the losses, provided the expenses do not exceed the insured amount. 3) Expenses incurred by discharge of the insured cargo at a port of distress following a sea peril as well as special charges arising from loading, warehousing, and forwarding of the goods at an
intermediate port of call or refuge.2)? Sacrifice in and contribution to general average and salvage charges.3) Such proportion of losses sustained by the shipowners as is to be reimbursed by the insured under the Contract of Affreightment “Both to Blame
Collision” clause.保险公司对由于自然灾害所造成的单独海损不负责任，而对于因意外事故所造成的单独海损则要负赔偿责任。2. 1. 2 With Average (W. A.) （水渍险） Aside from the risks covered under the F.P.A. condition as above, this insurance also covers partial losses of the insured goods caused by vile weather, lightening, tsunami, earthquake and/or flood.2. 1. 3 All Risks （一切险）.Aside from the risks covered under the F.P.A. and W.A. conditions as above, this insurance also covers all risks of damage to the insured goods whether partial or total, arising from extraneous risks during transit.?All Risks === F.P.A. （平安险）+ W. A. （水渍险）+ General Additional Risks （一般附加险）， excluding Special Additional Risks （特殊附加险）2. 1. 4 Commencement and Termination of the InsuranceInsurance takes effect as soon as the insured cargo is taken away from the warehouse listed on the insurance policy
irrespective of whether it is carried by overland transport, ocean transport, river transport, or lighterage（驳船装卸）. It terminates when the goods are carried to the final warehouse listed on the insurance policy, or 60 days after the goods are discharged from the ship in case they fail to reach the warehouse during a reasonable period of time. If within 60 days after the goods have been discharged from the ship, the goods are taken to some other destination other than the one specified on the insurance policy, the insurance
terminates thereupon.2. 1. 5 ExclusionsFor the three basic risks insurance coverage, the insurer is entitled to the following exclusions:1)Losses caused by the deliberate act or fault of the insured.2） Losses falling under the liability of the consignor.3)?Losses arising from the inferior quality or shortage in quantity of the consignment before the insurance takes effect.4) Losses arising from the natural loss, inherent vice or nature of the insured goods; losses arising from fluctuation of market and/or delay in transit and any expenses arising thereof.5)Risks and liabilities covered and excluded by the war risks clauses and strike, riot, and civil commotion clauses under C.I.C.? Activities for Comprehension: 1) Why does Ocean marine insurance deserve our particular attention? 2) How many losses do F.P.A. cover? 3) When does insurance take effect and when does it terminate??2. 2 Additional Risks Coverage for Ocean Transportation under C.I.C Additional risks complement the basic risks. When you ask for one or several of the additional risks coverage, you will have to ask for one of the basic risks coverage at the same time. Additional risks under C.I.C. fall into general additional risks and special additional risks.2. 2. 1 General Additional Risks
（一般附加险）General additional risks cover the losses caused by extraneous risks. They are together covered by all risks in basic insurance coverage. Hence, you do not need to ask for general additional risks coverage if you have asked for all risks coverage. General additional risks fall into 11 types: 1) Theft, pilferage, and non-delivery ( T.P.N.D.) 2) Fresh water and/or rain damage 3) Shortage 4) Intermixture and contamination 5) Leakage 6) Clash and breakage 7) Taint of odor 8) Sweat and heating 9) Hook damage 10) Breakage of packing 11) Rust2. 2. 2Special Additional Risks （特殊附加险）Special additional risks cover losses caused by special extraneous risks. They fall into 8 types. 1) War Risks War risks cover losses attributable to war, piracy, armed conflict, warlike or antagonistic acts, detention, seizure, and confinement because of acts therefrom. It also covers the general average, salvage charges, and sue and labor expenses arising from the above-listed acts. Losses caused by torpedoes and bombs of various kinds (except atomic bombs) are also answerable by war risk. But war risk commences when the goods have been shipped on board and terminates when the goods are unloaded from the ship. In case the goods remain on board the ship after the ship has arrived at the port of
destination, war risks insurance stops l5 days after the arrival of the goods at the port of destination. 2) Strikes This covers the losses caused by strikes, civil commotion and riot. There will not be additional charges for strikes if the insured has effected war risks. 3) On deck Under this insurance coverage, the insurer will cover the loss caused by cargo dropping into the sea because it is loaded on deck. 4)Import Duty Sometimes when the goods have been partially damaged during transit, the insured will still be asked to pay as much import duty as if the goods were in good condition. Import duty risk insurance covers the loss therefrom.5) Rejection Under this insurance coverage, the insurer will cover the loss caused by the rejection or confiscation of the goods by the authority of the importing customs or country. 6) Aflatoxin （黄曲霉素险） Under this insurance coverage, the insurer will cover the loss arising from the rejection, confiscation of the goods, or confinement in the usage of the goods because the aflatoxin the goods contain exceed what is allowed by the importing country.7) Failure to Deliver Under this insurance coverage, the insurer will cover the loss of the insured because of failure to deliver the goods within six months after its shipping, whatever the reason is. 8) Fire Risk Extension clause --- for storage of cargo at destination of Hongkong, including Kowloon, or Macao. Under this insurance coverage, the insurer will cover the loss caused by fire when the goods are in the warehouse appointed by the transfer bank. The insurance coverage terminates when the transfer bank has completed its negotiation or 30 days after the goods have been unloaded from transportation vehicles.2. 3 Specific Ocean Marine Insurance Coverage Special ocean marine insurance coverage covers the risks caused by the carriage of frozen goods. They can be seen as basic risks 2. 3. 1 Ocean Marine Insurance for Frozen ProductsOcean marine insurance for frozen products can further be of two types: 1) Risk for shipment of frozen products Apart from the losses caused by the risks under W.P.A., risk for shipment of frozen products also covers the losses caused by the consecutive stopping of the refrigerators for 24 hours. 2) All risks for shipment of frozen products Apart from the losses covered by the risk for shipment of frozen
products, this insurance coverage also covers the losses caused by the extraneous
risks.2. 3. 2 ExclusionsApart from the exclusions under the general marine cargo insurance listed above in 2.1.5., the exclusions under ocean marine cargo insurance --- frozen products also cover the losses caused by the improper processing and packing of the goods, misplacement and innate deterioration of the goods, and the lack of moisture isolating facilities. 2. 3. 3Commencement and Termination The commencement and termination of marine cargo insurance--frozen products is rather the same as listed in 2.1.4., except that it continues to be effective for 10 days after the goods have been
unloaded within 30 days after the ship has arrived at the port of destination and the goods are stored in the warehouse for refrigerated products. It terminates immediately when the goods are moved out of the warehouse even within the period during which the insurance is still effective.?2. 4 Ocean Marine Cargo InsuranceUnder this insurance coverage, the insurer covers the losses caused by shortage, leakage, contamination, or deterioration whatever the reason is. “Warehouse to warehouse” also applies to this insurance coverage. But this insurance coverage expires if the goods have not been unloaded within 15 days after the ship has reached the port of destination. And this is allowable only if the clause “Partial shipment to be allowed” is agreed upon in the sales contract. If partial shipment is not allowed, the clause “No partial shipment” or the like should be given in the contract.?? Activities for Comprehension: 1) What does General Additional Risks cover? 2) When does war risk begin and when does war risk finish? 3) Under which insurance coverage will the insurer cover the loss caused by fire? 4) How is “Warehouse to warehouse” used?计算题：（1）我出口CIF合同规定按金额110％投保一切险和战争险，如出口金额为15000美元，一切险保险费率为0.6％，战争险保险率为0.03％。试问，投保金额是多少？应付保险费若干？ （2）某公司出口货一批，报价为每公吨2000美元CFR××港，•现客户要求改报CIF价，加一成投保一切险和战争险，查一切险费率为１％，•战争险费率为0.03％。试计算在不影响我外汇净收入前提下的CIF报价。Judge whether the following statements are true or false: 1) If you want to cover the partial losses arising from vile weather and the losses arising from hook damage, you need to effect W.P.A. and all risks at the same time.
( F )2) Ocean marine cargo insurance does not cover the losses caused by the ships. ( F )3) Import duty covers the expenses caused by paying the import duties at the importing customs. ( F )1) Ocean marine cargo
insurance takes effect immediately when the goods are loaded on board the ship. (F See 2.1.4)2) Ocean marine cargo insurance terminates immediately when the goods are unloaded from the ship. ( F, See 2.1.4)?3 Overland, Air transportation and Parcel Post Insurance 3. 1 Overland Transportation InsuranceOverland transportation insurance falls into overland transportation risks（陆运险）, overland transportation all risks （陆运一切险）, overland transportation insurance--frozen products （陆上运输冷藏货物险） and overland transportation cargo war risks --by train. The first three types are basic risks while the last one is accessory risk. Overland transportation risks （陆运险）can be compared to W.P.A （水渍险）. of marine transportation. Under this insurance the insurer answers for the total or partial losses caused by natural disasters such as storm, lightening, flood, earthquake, and fortuitous accidents such as collision, overturn,
derailing, fire, explosion, etc.. The insurer also covers the salvage charges （救助费用）
and sue & labor expenses （施救费用） provided they do not exceed the insured amount.Overland transportation insurance--frozen products not only covers the partial or total losses caused by natural disasters and fortuitous accidents but also the losses caused by the failure of refrigerating machines and the moisture isolating facilities. It begins to take effect as soon as the goods have been loaded on the transportation vehicles at the warehouse as listed in the insurance policy. It terminates when the goods have been unloaded and put into the warehouse at the destination. In case they are not put into a warehouse after the goods have been carried to the station of destination, the insurance expires ten days after the goods have been carried to the station of destination. Overland transportation all risks（陆运一切险）, like All Risks in marine transportation, not only covers the losses by natural disasters and fortuitous accidents, but also covers the losses caused by extraneous perils. Overland transportation insurance has the same time limit of filing claims as under marine transportation, i.e. the insured should file the claim within two years after the goods have been carried to the station of destination.Overland transportation cargo war risks--by train is effected by the
People's Insurance Company of China while many foreign insurance companies would not cover it. It can only be included in one of the above-mentioned basic risks and is only applicable to train transportation. This kind of insurance coverage covers the losses caused by war, warlike activities, antagonistic activities, armed conflict, losses caused by conventional weapons or bombs. But it does not cover the losses caused by nuclear bombs and the losses or expenses caused by the detention or detainment by the relevant authorities or military groups. It commences as soon as the goods are loaded on the train at the station listed in the insurance policy. It terminates when the goods have been unloaded from the train at the station of destination as listed in the insurance policy(以货物置于运输工具时为限). Apart from the war risks, in overland transportation, strikes can also be effected in the same way as in marine cargo
transportation.3. 2 Air Transportation Risks InsuranceAir transportation insurance falls into air transportation risks（航空运输险）, air transportation all risks （航空运输一切险）and air transportation cargo war risk. The first two are basic risks while the third is a kind of additional risks. Air transportation risks can be compared to W.P.A. in marine transportation, which covers the total or partial losses caused by natural disasters like thundering, lightening, explosion, vile weather, or the like and the fortuitous
accidents like collision, falling, or disappearance of the airplanes. Air transportation all risks cover the total or partial losses caused by extraneous perils.The exclusions for air transportation risks and air transportation all risks are the same as in marine transportation. “Warehouse to warehouse” is also applicable to transportation insurance, except that in case the goods are not carried to the warehouses listed in the insurance policy after they are unloaded from the plane, the insurance terminates 30 days after the goods are discharged from the plane at the place of destination. Within this period, if the goods are carried to the place not listed in the insurance policy, the
insurance terminates when the carriage takes place.3. 3 Parcel Post Insurance邮包运输险Parcel post insurance falls into parcel post risks（邮包险）, parcel post all risks （邮包一切险）, and parcel post war risks （邮包战争险）. The first two are basic risks while the third one is a kind of additional risk. Parcel post risks cover the losses caused by natural disasters and fortuitous accidents, while parcel post all risks cover the
losses caused by extraneous risks. Under these insurance coverage, the insurer does not cover the losses caused by war, warlike activities, armed conflicts, antagonistic activities, strikes, and the delay in transport, innate defects, deliberate activities or blunders of the parcel deliverer, and the natural deterioration or waste.Parcel war risks is a kind of
additional risks. It can take effect only after either of the basic risks has been effected and after the insured has negotiated with the insurer. It has the same insurance coverage as under marine transportation. It commences as soon as the parcel has been received by the post office. It terminates after the parcel has been delivered to the parcel receiver by the post office at the place of destination as listed in the insurance policy.? Activities for Comprehension:1) How to distinguish parcel post risks, and parcel post war risks? 2) Judge whether the following statements are true or
false:a.Overland transportation risks does not cover the losses caused by extraneous perils.b.Overland transportation insurance--frozen products covers the losses caused by fortuitous accidents.c.?The insured can file claims against the insurer within 60 days after the goods have been delivered at the place of destination.d.Overland
transportation war risks--by train also covers the losses caused by the detention of the goods by some armed groups.e.Air transportation risks does not cover the losses caused by explosion as it is covered by air transportation cargo war risks.f.Air transportation all risks expires as soon as the goods are discharged from the plane at the airport of destination. 2. Judge whether the following risks coverage clauses to be effected by the seller are correct or not. Make corrections if there are incorrect ones: 1) all risks, fresh water & rain damage, hook damage. (wrong) 2) W.P.A., sweat and heating.(right) 3) F.P.A., T.P.N.D., war risks. (right) 4) T.P.N.D., war risks, strikes. (wrong) 5) Parcel post all risks, T.P.N.D. (wrong)?8. 4 Institute Cargo Clauses 英国伦敦保险协会制定的“协会货物保险条款” The Institute Cargo Clauses, shortened as I.C.C. were set forth by the Institute of London Underwriters. They have exerted great influences in the
development of international insurance. Most countries in the world have referred to them more or less in making their own insurance clauses. Institute Cargo Clauses have undergone revisions for many times. The latest revision came into effect on Jan.1, 1982. The old clauses of I.C.C. were basically the same as the ocean marine cargo clauses of the People's Insurance Company of China. The new version has a different system.Insurance coverage under the new version of I.C.C. falls into six clauses:
Institute Cargo Causes A; Institute Cargo Clauses B; Institute Cargo Causes C; Institute War Clauses-Cargo; Institute Strikes Clauses-Cargo; Malicious Damage Clauses.?4. 1 Institute Cargo Clauses AInstitute Cargo Clauses A does not list all of the risks under its coverage as they have too many. Instead, it lists the exclusions. That is, Institute Cargo Clauses A covers all of the risks except those listed in the exclusions. Its
exclusions fall into five groups. 1) General exclusions. The insurer does not cover the losses or expenses caused by the deliberate or illegal activities of the insured; the losses or expenses caused by natural leakage, ordinary wear and tear; the losses or
expenses caused by inappropriate or insufficient packing; the losses caused by the innate flaws of the goods; the losses directly caused by delay; the losses or expenses caused by the bankruptcy of the owner, or manager, or the ship charterer; and the losses or expenses caused by atomic or nuclear bombs.2) Exclusions of unseaworthiness or
uncargoworthiness. If the insured knows beforehand that the cargo-carrying ships are
unseaworthy, or the cargo-carrying ship, transportation vehicle, or the container is
uncargoworthy, the insurer does not cover the losses or expenses thereby.3) Exclusions of War. The insurer does not cover the losses caused by war, antagonistic activities,
capture, detention (except those by the pirates), underwater mines, or torpedoes （鱼雷，水雷）.4) Exclusions of strikes. The insurer does not cover the losses caused by strikes, labor disturbances, civil commotion, or riot. 5) Exclusion of malicious damage. The insurer does not cover the losses caused by terrorists, or people with special political motives.?4. 2Institute Cargo Clauses BUnder Institute Cargo Clauses B, the insurer covers the partial or total losses arising from the perils as listed below. a) Fire, explosion b) Striking upon rock, sinking, or capsizing of the cargo ship or bargec)? Overturn or derail of the overland transport vehiclesd)?Striking of the cargo ship, barge, or transportation vehicle upon other objects e) Unloading of the goods at the port of distress f) Earthquake, eruption of volcano, lightening g) General average contributionh) Jettison（丢弃物品） either because of general average（共同海损） or some other reasons i) Loss overboardj)??Entering of sea water, lake water, river water into the cargo carrying ship, barge, vehicle, container, or storehousek)?The total loss caused by cargo dropping into the sea or on the ground while loading or unloadingl)?Such proportion of losses sustained by the shipowner as is to be reimbursed by the insured under the Contract of Affreightment “Both to Blame
Collision” clauseExclusions: Apart from the exclusions listed under Institute Cargo Clauses A, the exclusions under Institute Cargo Clauses B rule that the insurer will not cover the losses caused by piracy, and malicious damages caused by terrorists or people with special political motives.4. 3Institute Cargo Clauses CInstitute Cargo Clauses C covers the losses because of all the perils listed under Institute Cargo Clauses B except f, I, j, k as shown above. Institute Cargo Clauses C has the same exclusions as those under Institute Cargo Clauses B.If necessary, the insured should also effect war risks, strikes risks, and malicious damage risks. Institute Cargo Clauses also have other rules governing the duration, claims, benefit of insurance, minimizing losses, sue and labor charges (SL/C), avoidance of delay, and law and practice. Sometimes, our exporters are asked by foreign importers to effect insurance as per I.C.C. for consignments under CIF or CIP, and generally this request is granted.? Activities for
Comprehension:1)? How many clauses does the new version of I.C.C. cover? 2) Why is Institute Cargo Clauses B necessary?3) Judge whether the statements are true or false. If false, state the truth:a.General average contributions are covered by the insurer under all of the three major cargo clauses of I.C.C.b.?Institute Cargo Clauses A does not cover the losses caused by the entering of sea water into the cargo carrying
ships.c.??Institute Cargo Clauses A does not cover the losses caused by extraneous risks.d.? Institute Cargo Clauses C covers the losses caused by pirates.e.? Institute Cargo Clauses C does not cover the partial losses caused by the striking of the cargo carrying ships upon rocks.???5 Export and Import Insurance Practice?5. 1 Export Insurance Practice?5. 1. 1 Formalities in Export Insurance PracticePrice terms for the sales of products are usually negotiated between the sellers and the buyers. But, to help the development of our insurance industry, exporters should try to conclude the sale with CIF or CIP terms. It should be known that generally our insurance premium rates under C.I.C. are lower than those of other countries or insurance systems. For sales under C.I.F., the exporter should effect insurance as soon as he has received the
letter of credit from the buyer. To effect insurance, the seller need first of all prepare the invoice and a proposal form or analysis list, with these the insurer comes to the seller to effect insurance. The insurer, upon receiving the required insurance documents, will produce the insurance policy.Should the seller find it necessary to make some
corrections or alterations after he has received the insurance policy, he should present an application to the insurer. If granted, an endorsement will be produced by the insurer to such an effect, which will be stuck to the insurance policy and a seal is made upon the line of conjunction. Then the endorsement will take effect for insurance settlement. Insurance should be made before shipment is made or before the consignment is delivered to the carrier. Like transportation documents, insurance policies can be transferred without the agreement of the insurer, and it is not necessary to notify the insurer of the transference of the insurance policy. Transference can be made even after the subject matter insured is damaged or lost during transit. Transference is made with the endorsement of the insurer in the way as required by the letter of credit (see 7.4.1.2. for further reference.) when he comes to the negotiating bank for the settlement of the payment.5. 1. 2 Conformity of Insurance Policy with Sales Contract and Letter of CreditThis means that the relevant clauses on the insurance policy, sales contract and letter of credit must conform with one another. The exporter must see that the insurance risks he lists on the proposal form should be identical with those listed in the letter of credit. But sometimes the risks listed in the letter of credit are not the same as those listed in the sales contract. They might be of the following types. 1)The sales contract states that W.P.A. is to be effected but the letter of credit requires the buyer to effect all risks. Under such cases, the seller can effect all risks if he can get the additional premium from the buyer. Sometimes the seller is required to effect specified general additional risks in addition to all risks. This can be granted without additional premium charges and on the insurance policy both of all risks and the specified general additional risks are listed, though to list the latter on the insurance policy is in fact unnecessary. 2)Generally in a sales contract the insured amount is 110% of the contracted price of the consignment, but sometimes in a letter of credit the insured amount is more than that. For this the insurer can grant this wish if the insured amount is within 130% of the contracted price of the consignment, but the additional premium should be paid by the buyer.3)Sometimes in the a contract, the price term is CIF, while on the letter of credit the price term is changed to CFR. Under this case, the seller should first of all ask the buyer to make corrections. Failing to do so, the seller is obliged to refund to the buyer the insurance premium. On the other hand, when the buyer has changed the price term from CFR to CIF on the letter of credit, the seller should effect insurance but the premium should be paid by the buyer. 4)In examining the letter of credit, the bank and the insurer should also make sure that the letter of credit does not require the insurer to cover risks they should not cover, e.g. losses covered by the innate flaw of the goods, losses caused by the delay of transport ships, etc..? Activities for Comprehension:1) Why is it necessary for us to conclude sales contract under CIF or CIP?2) What happens when an exporter wants to make corrections or alterations to the insurance policy?3)?Should we notify the insurer when we want to transfer the insurance
documents?4) Should the exporter ask the importer for more insurance premium if the sales contract states that All risks is to be effected while in the L/C the importer wants the exporter to effect also some specified general risks? ?5. 1. 3 Insurance
Documents?5. 1. 3. 1 Insurance Policy 保险单/大保单This is the most often used insurance document. It has legal effect, and is binding upon the insurer and the insured. It has the following content:1) policy No.2)name and address of the insurer3)? subject matter to be insured (marks and No., quantity, description of goods, amount insured.) 4) premium 5) conveyance steamship 6) sailing date, port of shipment and port of destination 7) risks to be covered 8) place where claim can be made 9) insurance date On the back of the insurance policy, there are more clauses about the obligations and rights of the insurer and the insured.5. 1. 3. 2 Insurance Certificate 保险凭证/小保单Insurance certificate is the simplified insurance policy. It doesn’t have the clauses on the back, while on the front page, it has the same clauses as listed on the insurance policy. It has the same legal effect as the insurance policy.?5. 1. 3. 3 Combined Certificate联合凭证Combined certificate is further simplified. The insurer here lists the risks to be covered, the insured amount and the policy No. on the invoice provided by the insured, and the other clauses are to be seen on the invoice. 5. 1. 3. 4 Open Policy or Open Cover预约保单Open policy or open cover is a pre-contract concluded between the insurer and the insured by which the
insurer offers insurance to the insured for the consignments he dispatches within a certain period of time. Open policy is only applicable to the imported goods from foreign
countries to China. As soon as the carriage for the consignment under the open policy is made, it is under the insurance cover of the open policy in accordance with the terms listed on the open policy. But every time when the dispatch is made, the insured should present to the insurer a dispatch notice (on which there are descriptions of goods, quantity, insured amount, transport vessel or vehicle, starting place of the voyage, and dispatch or shipment date.)5. 1. 4 Franchise 免赔额 and Right of Subrogation （担保人代偿债务后）取代（债权人）Franchise is often claimed by the insurer for goods that are breakable or easy to lose weight. If the insurer does not claim franchise, then it is
insurance coverage irrespective of percentage (I.O.P.). If franchise is claimed, then there is nondeductible franchise and deductible franchise. The insurer does not cover the loss that does not exceed the franchise. If the loss has exceeded the franchise, the insurer who claims nondeductible franchise will cover the losses including that with the franchise while the insurer who claims deductible franchise will only cover the losses in excess of the franchise.In insurance, to prevent the insured from recovering twice from the same loss, the insurer is entitled to be subrogated to all the rights and claims the insured has against the third party that has caused the damages of the goods provided he has duly indemnified the insured. This is called the right of subrogation. In practice, the insured usually will sign a letter of subrogation for the insurer after he has received the indemnity. Then the insurer, with this right of subrogation and the required documents, such as the bill of lading, will claim against the third party.5. 1. 5 Insurance Clauses in a Sales ContractInsurance clause in a sales contract should specify the insured amount, and the risks to be covered by the insurer. Here are several insurance clauses in sales contracts. 1) Insurance to be effected by the sellers for 110% of the invoice value against all risks and war, as per Ocean Marine Cargo Clauses and Ocean Marine Cargo War Risks Clauses of the People's Insurance Company of China. 2) Insurance to be effected by the seller for 110% of invoice value against Overland Transportation All risks as per Overland Transportation Cargo Insurance Clauses of the People's Insurance Company of China, including shortage in weight in excess of 3%.5. 1. 6
Insurance Claim Settlement for Damages to Exported GoodsIf the exported goods are damaged or lost during transit, the consignee or his agent should settle claims against the Survey and Claim Settlement Agent of the insurer at the place of destination. The Survey and Claim Settlement Agent will come to examine the damages and losses of the
consignment and pay indemnity to the consignee. The address of the Survey and Claim Settlement Agent of the insurer is given on the insurance policy. Sometimes on the insurance policy there is only the name and address of a surveying agent of the insurer. He is only responsible for the survey of the damages to the goods and after that he will present to the consignee a survey report on examination of damage or shortage. Then the consignee will send the insurer relevant documents such as survey report, insurance policy, invoice, bill of lading for the indemnity of the damage of the goods. Sometimes the consignee sends the documents to the consignor, who is then to decide who should be responsible for the damages or losses of the consignment. If the damages or losses done to the goods are caused by the perils covered by the insurer, the consignor should send the documents to the insurer for claim settlement. If he is
responsible for the losses or damages, such as under the case when the losses are caused by innate defects of the goods or inappropriate packing of the goods, he should then settle it properly by himself.? Activities for Comprehension:1)What is the difference between the insurance policy and insurance certificate?2)?Under what circumstances is an open policy necessary?3)? What is the difference between deductible franchise and non-deductible franchise?4) Why should the insurer have the right of
subrogation?5)?Who should the importer come to if the consignment is damaged or lost during transit for sales under CIF?5. 2Import Insurance PracticeIn import practice, it is generally the practice for the Chinese importer to conclude the sales contract under FOB or CFR, as the insurance premium rate under C.I.C. is lower than other insurers and also it will be convenient for the importer to conduct claim settlement because the insurer is within the easy reach of the importer. It is to be borne in mind that even for sales under CIF, the risks are not borne by the exporter but by the importer, for as soon as the goods are carried over the rail of the ship, the risks will be transferred to be borne by the importer. So, when the goods are damaged or lost during transit, it is the importer instead of the exporter that should come to the insurer or his agent for claim settlement.It is very easy to effect import insurance. Once the importer has received the shipment notice from the exporter, he can come to the insurer for insurance. When he has paid the insurance premium and got the insurance policy, the insurance will have been effected. Once the insured has learned that the goods have been damaged or lost during transit, he should immediately notify the insurer or his agent. Meanwhile, he should get the cargo damage or loss report, which is provided by the stevedore and signed by the carrier or his agent. The insured should produce a cargo survey report together with the insurer, and if necessary, they should ask the relevant cargo inspection institution to make the cargo survey report. Listed on this report are generally not only the damages or loss of the goods, but also the reasons which are supposed by the surveyor to have caused the damages or losses. Meanwhile, the insured should take measures to minimize the damages or losses to the goods. The expenses in so doing will be covered by the insurer in so much as they do not exceed the insured amount of the consignment. And also the insured should launch claims against the third party who is responsible for the damage or loss of the goods. This right will be transferred to the insurer if he has duly got the
insurance money from the insurer.In conducting claim settlement with the insurer, the insured should present the following documents: 1) Insurance policy or the like 2) bill of lading, airway bill, or the like 3) invoice 4) packing list and weight memo 5) cargo damage or loss report 6) sea protest 船长证明书 7) cargo survey report 8) statement of claim 9) document testifying the claim against the third party? Activities for Comprehension:1) Judge whether the following statements are true or false:a.??Under CIF, the risks are not born by the exporter but by the importer.b.? As soon as the goods are carried over the rail of the ship, the risks will be transferred to be borne by the importer.c.??Once the insured has learned that the goods have been damaged or lost during transit, he should immediately notify the seller.d.??The cargo damage or loss report is provided by the stevedore and signed by the carrier or his agent.2)Who will cover the expenses in taking measures to minimize the damages or losses to the goods?3)What is the limit to the expenses in minimizing the damages or losses to goods?
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