Chapter 4 Flashcards
(20 cards)
Who is included as having insurable interest for a marine cargo policy, and what documents can determine that?
- Sellers
- Buyers
- Carriers
- Financial institutions
Terms of sale/contract and bills of lading
Identify the two items a broker will normally focus on identifying under the Terms of Sale
- The Incoterm under which goods are being shipped
- The method of payment for goods
Under incoterms, identify the three questions that address the issue of insurable interest
- Point in transit in which the seller fulfilled obligation
- Whether the buyer or seller is responsible for carriage from one point to another
- Party responsible for insurance
Explain the payment method “cash in advance”
The seller is paid in advance for goods and has no interest once goods are shipped. When payment is made, the sellers interest stops
Explain the payment method “open account”
Essentially a charge account where payments are made regularly in specified intervals, and provided only for reliable customers. The sellers continue to have insurable interest and should seek their own insurance coverage
Explain the payment method “draft”
Two types:
Sight draft
- paid immediately on presentation
Time draft
-future specified date of payment after presentation
The seller maintains insurable interest
Explain the payment method “letter of credit”
The most common method for exports. Pending receipt of letter of credit, seller agrees to provide goods. The letter of credit is delivered, then goods are shipped when all terms are met. Seller takes docs to bank and requests payment.
Why and how should the seller of goods protect their own interest?
Seller usually obtains insurance for the buyer, but they cannot rely on this to protect their interest and should purchase their own insurance. Payment of goods may be guaranteed in terms of sale but if the shipment is lost or damaged, the buyer may not pay.
Identify three functions of Bills of Lading
- Contract of carriage between shipowner and shipper
- Receipt for the goods
- Document of title to the goods
How does the bill of lading function as a “contract of carriage”
It represents contractual undertaking between shipper and carrier.
It establishes extent of carriers liability
It indicates the route of shipment
Establishes party responsible for freight charges
Provides additional information
Who is entitled to receive goods under
Straight bill of lading and,
Order bill of lading
Straight bill of lading: the cosignee only
Order bill of lading: others may take goods on cosignees behalf
Identify how goods are valued under
- released bill of lading and,
- valued bill of lading
Released: no specific value declared, but international agreements hold carrier responsible for a specific amount (500 per package)
Valued: shipper declares the value of goods, and the carrier is responsible for that value
Explain the storage conditions of
On deck bill of lading and,
Optional stowage bill of lading
On deck: goods stowed on deck at shippers risk. The carrier is only liable for loss due to gross negligence
Optional stowage: Carrier will choose where cargo is stowed
Identify the purpose for:
- received for shipment bill of lading
- clean bill of lading
- received: evidence the goods are received by the carrier
- clean: carrier declares no indication of problems with condition of cargo at time of acceptance
Identify the purpose of:
Count bill of lading
On board bill of lading
Count: shows number of units being shipped
On board: confirms receipt of goods and loaded on board of vessel
Identify three losses for which carriers are not responsible at law to the shipper
Acts of god
Acts of war
Acts of public enemies
Identify two types of cargo policies that can be purchased by shippers or cosignees
- Individual policy or certificate
-used for single irregular shipments
-provides certificate stating coverage - Open policy
-contract prepared in general terms, used for large volumes of shipments
Identify 5 characteristics of an open policy
- Sums are not stated on policy
- Can be extended to insure goods of every description
- There is automatic coverage
- It can be issued with no specific expiry date
- Premium rate is stated on the policy
What are two advantages of an open policy?
Helps create long term business relationships between insurer and insured, and allows insurer to provide tailor-made protection
The Valuation Clause provides method of determining value of goods and merchandise based on:
- The amount of the invoice
- All charges in the invoice
- Prepaid, advanced, or guaranteed freight
- Plus ten percent
