PracticalCourseforImport&ExportBusiness

InsuranceDocumentsinExportBusinessChapterSixSection1.AgeneralknowledgeofthemarinecargoinsuranceSection2.DocumentationoftheinsuranceapplicationformCONTENTSSection4.CalculationoftheinsuredamountandtheinsurancepremiumSection3.ContentsanddocumentationofaninsurancepolicySection5.ExercisesSection16.1AgeneralknowledgeofthemarinecargoinsuranceToadapttothedevelopmentoftheinternationalmarinecargoinsurance,thePeople’sInsuranceCompanyofChina(PICC)hasmanipulatedChinaInsuranceClauses(CIC)onthebasisofinternationalpracticesandtheactualconditionsofChina.CICcontainsTheOceanMarineCargoClauses,TheOceanMarineCargoWarRiskClausesandotherspecialclauses.TheOceanMarineCargoClausesarethemostwidelyadoptedmarinecargoinsuranceclausesbyChinesetradingcompaniesandthemostrecentrevisionoftheclausesisthe2009version.Section

ONE6.1.1CoverageofthemarinecargoinsuranceunderCICMarinecargoinsuranceunderCICfallsintotwogeneralcategories:basiccoverageandadditionalcoverage.6.1.1.1BasicCoverageUnderCIC,thebasiccoverageofoceantransportationrisksconsistsofthreekinds:FreefromParticularAverage(FPA),WithParticularAverage(WPA),andAllRisks.(1)FreefromParticularAverage(FPA)FPAisthemostlimitedformofcargoinsurancecoveragecoveringthefollowinglosses:1)Theactualtotallossortheconstructivetotallossoftheconsignmentcausedbynaturalcalamitiessuchasheavyweather,tsunami,earthquake,flood,etc.2)Thetotallossorthepartiallosscausedbyfortuitousaccidentssuchasstranding,strikingSection

ONEupontherocks,icebergsorothers,collision,fireandexplosion.3)Thepartiallossattributabletoheavyweather,lightningand/ortsunami,wheretheshiphasbeenstranded,sunk,orburned,irrespectiveofwhethertheeventtookplaceafterorbeforesuchaccidents.4)Thepartialortotallossconsequentonthefallingofanentirepackageorpackagesintotheseaduringloading,unloading,andtransshipment.5)Reasonableexpensestheinsuredmakesforsalvageofthegoodsinsured,andforavertingorminimizingthelosses,providedtheexpensesdonotexceedtheinsuredamount.6)Expensesincurredbythedischargeoftheinsuredcargoesataportofdistressfollowingaseaperilaswellasspecialchargesarisingfromloading,warehousingatanintermediateportofcallorrefuge.7)Sacrificesinandcontributionstogeneralaverageandsalvagecharges.8)Lossesreimbursedbytheinsuredtotheship-ownersasisundertheContractofAffreightment“BothtoBlameCollision”clause.(2)WithParticularAverage(WPA)AsidefromtheriskscoveredunderFPAconditionsasabove,WPAalsocoverspartiallossesoftheinsuredgoodsdirectlycausedbynaturalcalamitiessuchasheavyweather,lightning,Tsunami,earthquakeorflood.WPAprovidesamoreextensivecoverageagainstalllossesorDamagesduetomarineperilsthroughoutthedurationofthepolicy.(3)AllRisksAsidefromtheriskscoveredunderFPAandWPAconditionsasabove,thecoverageofAllRisksmeansthattheinsurershallundertaketheliabilitiestoindemnifytheinsuredthetotalorpartiallossonthecargoinsuredeitherarisingfromperilsoftheseaorgeneralextraneousrisksduringthecourseoftransit.AllRisksisthemostcomprehensivecoverageamongthethree.However,thiscoverageshallnotcoverallrisksoflossordamage.6.1.1.2AdditionalcoverageWhilethebasicinsurancecoveragecanbetakenoutindependently,theadditionalcoverageshallbemadecomplementarilywiththeinsurancecompanyaccordingtotheactualsituation.Theadditionalinsurancecoverageincludesgeneraladditionalrisksandspecialadditionalrisks.(1)GeneraladditionalrisksGeneraladditionalriskscoverthelossescausedbygeneralextraneousriskswhicharecoveredbyAllRisksinthebasicinsurancecoverage.Thereare11typesofgeneraladditionalrisks:(1)Theft,Pilferage,andNon-delivery(TPND);(2)FreshWaterRainDamage;(3)RiskofShortage;(4)RiskofIntermixtureandContamination;(5)RiskofLeakage;(6)RiskofClash;(7)RiskofOdor;(8)HeatingandSweatingRisk;(9)HookDamage;(10)RiskofRust;(11)BreakageofPackingDamage.(2)SpecialadditionalrisksSpecialadditionalriskscoverlossescausedbyspecialextraneousrisks.Thereareeighttypesofspecialadditionalcoverage:(1)WarRisks;(2)Strike,RiotsandCommotions(SRCC);(3)FailuretoDeliveryRisk;(4)ImportDutyRisk;(5)OnDeckRisk;(6)RejectionRisk;(7)AflatoxinRisk;(8)FireRiskExtensionClause(forStorageofCargoatDestinationHongKong,includingKowloon,orMacao).(3)SpecialrisksAccordingtothefeaturesofcertaininsuredgoodsinoceantransportation,C.I.ChasdevelopedspecificallyFrozenProductsRisksandBulkWood-oilRisks.Inordertopromoteforeigntrade,C.I.ChasalsoestablishedSeller’sContingentInterestRisks.Thesespecialriskscanbeeffectedindependentlybytheinsuredaccordingtotheactualdemand.6.1.2DurationofthemarinecargoinsuranceThedurationofinsuranceistheperiodthroughoutwhichtheinsurancecompanyundertakesaninsuranceliability.Inmarinecargoinsurance,thedurationofthebasiccoverageisgenerallydefinedbyWarehousetoWarehouseClause,whichmeansthattheinsurancetakeseffectfromthetimethegoodsleavethewarehouseortheplaceofstorageattheplacenamedintheinsurancepolicyforthecommencementofthetransit,continuesduringtheordinarycourseoftransit,andterminateswhenthegoodsarriveattheconsignee’sfinalwarehouseortheplaceofstorageatthedestinationintheinsurancepolicy.Ifthegoodsfailtoreachthefinalwarehouseforwhateverreason,theinsuranceterminates60daysafterthegoodsaredischargedfromtheship.TheWarehouse-to-WarehouseClauseisnotsuitableforWarRisks.6.1.3ExclusionsofthemarinecargoinsuranceInthemarinecargoinsurance,thefollowinglossesanddamagesarenotcoveredbytheOceanMarineCargoClauses:Lossesordamagescausedbythedeliberateactorfaultoftheinsured.Lossesordamagesfallingundertheliabilityoftheconsignor.2.Lossesordamagesarisingfromtheinferiorqualityortheshortageinquantityoftheconsignmentbeforetheinsurancetakeseffect.3.Lossesordamagesarisingfromnormallosses,theinherentviceornatureoftheinsuredgoods,thelossofmarketand/ordelayintransitandanyexpensesarisingtherefrom.4.Risksandliabilitiescoveredandexcludedbythewarrisksclausesandstrike,riot,andcivilcommotionclausesunderC.I.C.6.1.4MajortypesofinsurancedocumentInsurancedocumentsareofmanykinds.Thecommonlyusedinsurancedocumentsare:insurancepolicy,insurancecertificate,openpolicyandendorsement.6.1.4.1InsurancepolicyTheinsurancepolicyisadocumentissuedbyaninsurancecompanytotheinsureddetailingthenameoftheinsured,detailsofgoods,thetypeandamountoftheinsurancecoverageofaninsurancecontract.Itisthemostoftenusedinsurancedocumentbindingupontheinsurerandtheinsured.Onthebackoftheinsurancepolicyarethesetclausesabouttheobligationsandrightsoftheinsurerandtheinsuredwhileonthefrontarethemaincontents.Generally,aninsurancepolicyhasalotofstandardclauses.6.1.4.2InsurancecertificateTheinsurancecertificateisthesimplifiedversionoftheinsurancepolicyissuedbyaninsurancecompany.Ithasthesamelegaleffectastheinsurancepolicy.Itdoesn’thavetheclausesontheback,whileonthefrontithasthesameclausesaslistedontheinsurancepolicy.Theinsurancecertificateisrarelyusedinpractice.6.1.4.3OpenpolicyOpenpolicyisalsocalledopencover.Itisapre-contractconcludedbetweentheinsurerandtheinsuredbywhichtheinsureroffersinsurancetotheinsuredfortheconsignmentshedispatcheswithinacertainperiodoftime.6.1.4.4EndorsementEndorsementisadocumentissuedbytheinsurertoaddorchangeoreveneliminatesomeitemsoftheinsurancepolicyupontherequestoftheinsured.Itisanintegratedpartoftheinsurancepolicy.InsurancedocumentsshallbepresentedinaccordancewiththetermsoftheL/C.IftheL/Crequiresthepresentationofaninsurancepolicy,onlyaninsurancepolicycanbeaccepted;ifaproofofinsuranceundertheopenpolicyisrequired,aninsurancepolicymaybesubstituted.Section26.2DocumentationoftheinsuranceapplicationformAfterselectinganinsurancecompanyanddecidingontheinsurancecoverage,theinsuredshouldfilloutanapplicationformandpresentittotheinsurancecompany.Theinsurancecompanywillproduceaninsurancepolicyinaccordancewiththeapplicationform.Everyinsurancecompanyhasitsownapplicationform,butthecontentsaremostlysimilar.Aninsuranceapplicationformincludesthefollowingitems.6.2.1InsurerItistobefilledinwiththenameoftheinsurancecompany.6.2.2InsuredItisgenerallyfilledinwiththebeneficiaryoftheL/C(thenameoftheexportcompany).IftheL/Crequiresotherwise,itistobefilledaspertheL/Cstipulations:a.IftheL/Cspecifies××companyastheinsured,itshouldbefilledinwith“××CO.,Ltd”.b.IftheL/Crequiresittobetransferredtotheissuingbankorathirdparty,thenameofthebeneficiaryshouldbewritteninthiscolumnfollowedby“heldtotheorderof×××bank/×××”.6.2.3PolicyNo.Itisusuallyfilledinbytheinsurancecompany.6.2.4PolicyDateItistobefilledinwiththeactualdate.6.2.5ShippingMarksTheshippingmarksshouldbefilledinasthesameasthoseintheB/L,especiallyinstrictconformitywiththeactualmarksprintedontheouterpackingofthegoods,soastoavoidthefutureconfusioncausedbytheinspection,verificationandcompensationandthedeterminationofliability.6.2.6Packing&QuantityThemodesofpackingandquantityshouldbefilledinclearly.6.2.7DescriptionsofgoodsDescriptionsofgoodsshouldbefilledinwiththespecificnameofthecargoratherthanthegeneralwordssuchastextiles,groceriesorgeneralmerchandise.6.2.8InsuredAmountGenerally,theinsuredamountis110%ofCIFvalueoftheinsuredcargo.Ifotherpercentageisdesired,thereshouldbeanagreementbetweenthetradingpartiesandtheconsentoftheinsurancecompany.Fractionalamountshouldberoundedup.Forexample,USD134.01shouldbefilledinwithUSD135.6.2.9ConveyanceItshouldbestatedclearlywiththenameoftheship,thetransshipmentandthemodesofcombinedtransport.6.2.10PortofLoading&PortofDischargingItshouldbefilledinwiththeactualnameoftheport.6.2.11SailingDateItshouldbefilledinwiththeactualdateofshipmentaccordingtothedateofshipmentontheshippingcompany’scargoallocationdata.6.2.12ConditionsTheconditionsaretobefilledinwiththenameoftheinsurancecoverageagreedbythetradingparties.6.2.13ClaimsPayableatTheclaimspayableplaceisgenerallytobefilledinwiththeplaceofdestination.6.2.14PremiumThepremiumisgenerallyfilledinwith“asarranged”.6.2.15IssuingDateTheissuingdateshouldnotbelaterthanthedateofsailing.Section36.3DocumentationofaninsurancepolicyAninsurancepolicyisalegalevidenceoftheinsurancecontractconcludedbetweentheinsurerandtheinsured,servingasthebasisoflodgingandsettlinginsuranceclaims.ForaCIF/CIPcontract,theexporterisobligedtoinsurethegoodsandsubmittheinsurancedocumentstotheimporter.TheexportermustfilloutaninsuranceapplicationforminaccordancewiththecontracttermsortheL/C,andtheinsuranceinstituteoritsagentissuesformaldocumentsafterverification,generallythreeoriginalsandtwocopies.UnlessotherwiseprovidedbyaL/C,theinsurancedocumentshallgenerallybeinatransferableformandendorsedbythebeneficiaryasanapplicant.6.3.1ContentsanddocumentationofaninsurancepolicyThecontentsofinsurancedocumentsissuedbydifferentinsurancecompaniesaremuchthesame,mostlymadeonthebasisofS.G.policy.6.3.1.1PartiestoaninsurancecontractPartiestoaninsurancecontractincludetheinsured,theinsurer,theinsurancebroker,theinsuranceagent,theinspector,theindemnityagent,etc.6.3.1.2NameofaninsurancedocumentThiscolumnistobefilledinaccordingtothecontracttermsandtheL/C.Forexample,iftheL/Cstipulates“INSURANCEPOLICYINDUPLICATE”,itrequiresaninsurancepolicyratherthananinsurancecertificatetobeissued.6.3.1.3InvoiceNo.Thiscolumnistobefilledinwiththenumberofthecommercialinvoiceoftheinsuredgoods.6.3.1.4PolicyNo.Fillinthenumberoftheinsurancepolicyinthiscolumn.6.3.1.5DescriptionsofgoodsDescriptionsofshippingmarks,packingandquantityshouldbemadeconsistentwiththoseontheB/L.6.3.1.6AmountinsuredTheinsuredamountisthehighestcompensationamountundertakenbytheinsurertopayforindemnity.Generally,theinsuredamountis110%oftheCIF/CIPinvoicevalue.Ifthepercentageofadditionisover10%,theadditionalpremiumshouldbebornebythebuyer.TheinsurancepolicyundertheL/CmustbeconsistentwiththestipulationsoftheL/C.Iftheinvoicevalueincludescommissionandadiscount,thediscountmustbedeductedfromtheinvoicevaluecalculatingtheinsuredamount.Theinsuredamounthastobeexpressedinbothwordsandfigures,andthefractionalamountshouldberoundedup.6.3.1.7AmountinsuredincapitalThiscolumnonlyneedstobefilledinwiththeinsuredamountincolumn6incapitalsandthedenominationcurrencyinfull.TheinsuredamountshallbeinthesamemonetaryunitasintheL/C.6.3.1.8InsurancepremiumandpremiumrateThepremiumandrateareusuallyprintedwith“AsArranged”beforehand,bothofwhichmaynotbespecificallydisplayedonthepolicy.IftheL/Chasotherstipulationsuchas“INSURANCEPOLICYENDORSEDINBLANKFULLINVOICEVALUEPLUS10%MARKEDPREMIUMPAID”,thenfillinthiscolumnwith“PAID”,ordeletethewords“AsArranged”andtype“PAID”afterstampingtheproofreadingstamp.6.3.1.9PerConveyanceS.S.Thiscolumnistobefilledinwiththenameofthecarryingvessel.Allthenamesoftheshipsinvolvedinthetransportationshouldbestated.Forexample,ifthefirstvoyageiscarriedoutby“EastWind”whilethesecondvoyageby“RedStar”,thiscolumnistobefilledwith“EastWind/RedStar”.6.3.1.10DateofcommencementItistobefilledinwitheithertheonboarddateoftheB/Lor“AsPerB/L”or“AsPerTransportationDocuments”.Thefillingof“theportpflading”“theportofdestination”and“perconveyance”mustbeconsistentwiththatintheB/L.6.3.1.11ConditionsConditionsaretheessenceofaninsurancepolicy,thefillingofwhichmustbeinstrictconsistencywiththosestipulatedintheL/C.IfthereisnostatementofconditionsintheL/CortheL/Cjuststipulates“Marine/Fire/LossRisk”“UsualRisk”or“TransportRisk”etc.,theinsuredmaychooseoneofthebasicrisksfromAllRisks,WPAandFAPbytakingintoconsiderationtheinsuredgoods,tradingparties,theshipmentrouteandsoon.IftheL/CrequirestheinsuranceclausestobeusedasCIC,ICCorAICC,theinsuredmustinsurethegoodsaccordingtotheL/C.6.3.1.12ClaimpayableatThiscolumnistobefilledinaccordingtothecontracttermsortheL/C.IfthereisnoclearstipulationintheL/C,theclaimpayableplaceisalwaystobetheplace/portofdestination.Thecurrencyofindemnityshallbethesamecurrencyoftheinsuredamount.6.3.1.13IssuingdateTheissuingdateoftheinsurancepolicysignifiesthedateonwhichthecoveragetakeseffect.Inthemarinecargoinsurance,thedurationofthebasiccoverageisgenerallydefinedbyWarehouse-to-WarehouseClause,sotheexportershouldeffecttheinsurancebeforethegoodsleavethewarehouseattheportofloading.6.3.1.14Issuingplace.Itisgenerallytobefilledinwiththeportofloading.6.3.1.15AuthorizedsignatureAninsurancepolicyisofficiallyeffectivewhensignedandsealedbyaninsurancecompany.6.3.1.16EndorsementPolicyendorsementcanbedividedintoblankendorsement(indicatingthenameoftheinsuredonly),fullendorsement(lessusedinbusiness)andToorderendorsement(marking“ToOrderof×××”andthenameoftheinsuredonthereversesideofthepolicy).Ablankendorsementoftheinsurancepolicymeansthattheinsuredoranyinsurancepolicyholderisentitledtoclaimcompensationfromtheinsurerintheeventthatthesubjectmatteroftheinsurancesuffersfromlossesarisingfromtheriskscoveredbytheinsurance.AToorderendorsementindicatesthatonlytheendorseehastherighttoclaimcompensationfromtheinsurancecompanyoritsagent.6.3.1.17NumberofcopiesofpolicyGenerally,theexportersubmitsafullsetofinsurancepolicieswithoneoriginalandoneduplicate.IftheL/Chasspecificrequirementsontheoriginalandthecopy,theexportermustfollowthestipulation.Theonebearingtheword“ORIGINAL”onitsfaceistheoriginalandtheonebearing“COPY”onitsfaceisacopy.6.3.1.18SpecialconditionsIftheL/Candsalescontracthavespecialstipulationsontheinsurancepolicy,theyaretobefilledinthiscolumn.Forexample,iftheL/Cstates“L/CNO.MUSTBEINDICATEDINALLDOCUMENTS”,thenthiscolumnshallbefilledinwith“L/CNO.×××”.6.3.2Pointsforattentionwhenfillinganinsurancepolicy1)Aninsurancepolicyandaninsurancecertificatehavethesamelegaleffect.Theinsurancepolicyhasonitsbackthedetailedinsuranceclausesandiscommonlyusedinpractice.Ifitisrequiredtopresentaninsurancepolicy,aninsurancecertificateisnotpermitted.However,ifitisrequiredtosubmitaninsurancecertificate,aninsurancepolicycanalsowork.2)OpenpoliciesarecommonlyusedbycompaniesinvolvedinhighvolumetradeoveralongperiodoftimeortheimportedgoodsfromforeigncountriestoChina.Thebiggestbenefitsofanopenpolicyare:preventingmissedcoverage,facilitatingcustomersandeliminatingtheneedtonegotiateinsurancetermsforeverytransaction.3)UnderFOBandCFRterms,thesellercanaffectinsuranceonbehalfofthebuyeraccordingtothestipulationsoftheL/Corcontracttermsifthereisaguaranteeofpremium.4)Itissignificantfortheinsuredtomakeasounddecisionabouttheinsurancecoverage.AllRisksshouldnotbetheonlychoice.Theinsuredshoulddeterminetheappropriateinsurancecoveragebyconsideringthetypesofgoodsanddifferentcontractterms.5)ThestipulationoftheWarehouse-to-WarehouseClauseintheinsurancepolicydoesn’tmeanthattheinsurancecompanywillcompensateforallthelossesinthetransitofgoodsfromwarehousetowarehouse.UnderFOB/CFRterms,theinsurancewillnotcoverthegoodsbeforethegoodshavebeenloadedonboardtheship.6)TheinsuranceapplicationformcanbewrittenbothinChineseandEnglish,buttheinsurancepolicymustbemadeinEnglish.6.3.3Effectinginsurance1)ForgoodsexportedonCIFbasis,theexportershouldeffectinsurancebeforethegoodsareactuallyloadedonboardthecarryingshipafterthepreparationforgoodsanddeterminingthedateofshipmentinaccordancewiththecontracttermsorstipulationsoftheL/C.Theexporteristofillinaninsuranceapplicationformandsubmitittotheinsurancecompanytogetherwiththerelevantdocuments(theL/C,thecontract,etc.).Aftercheckingandconfirmingthesedocumentsbytheinsurancecompany,aformalinsurancecontractcanbeconcluded.2)Uponthereceiptoftheinsuranceapplicationform,theinsurancecompanywillproduceaninsurancepolicyaccordingly.3)Iftheinsuredwantstochangetheitemsofthepolicysuchastheriskscoverage,theinsuredamount,thetransportmeansandsoonaftertheissuingoftheinsurancepolicy,hemustapplytotheinsurancecompanyforthechange.Thedocumentissuedtostatethechangesofthepolicyitemsisknownasanendorsement.Anendorsementisanintegratedpartoftheinsurancepolicyandshouldbeattachedtothepolicy,anditslegaleffectispriortothatoftheinsurancepolicy.4)Theinsuredmustpayaninsurancepremium,whichisthepreconditionfortheinsurancecontracttotakeeffect.Theinsurancecompanychargesapremiumforacertainpercentageoftheinsuredamount.5)Afterissuingablankinsurancepolicytotheinsuredbylistingtherelevantitemssuchastheinsurancepolicynumberandsoon,theinsuredhastofillintheinsurancepolicyandsubmitittotheinsurancecompanyforconfirmationandsignature.6.3.4InsuranceclaimsAninsuranceclaimreferstotheacttakenbytheinsuredtoclaimcompensationfromtheinsurerintheeventthatthesubjectmatteroftheinsurancesuffersfromlossesarisingfromtheriskscoveredbytheinsurance.Iftheinsuranceiseffectedbytheseller,theinsurancepolicyshouldbeendorsedbythesellerandtransferredtothebuyerorhisagentimmediatelyafterdeliveryofthegoods.Uponthearrivalofgoodsattheport/placeofdestination,ifthegoodsarefounddamagedorlost,thebuyerorhisagentshouldlodgeaclaimagainstthelocalinsurer.ThePeople’sInsuranceCompanyofChinahasestablishedinspectionorclaimsagenciesinmorethan100countries,facilitatingtheinspectionandclaimsofthegoodsexportedfromChinaattheport/placeofdestination.6.3.5Pointsforattentionwhennegotiatinginsuranceclauses1)Theexportershouldrespecttheimporter’ssuggestionandrequirement.Therearemorethan40countrieswhichhavetheregulationthattheinsurancefortheimportedgoodsfromforeigncountriesmustbeeffectedbytheimporter.Thesecountriesarelistedasfollows:NorthKorea,Burma,Indonesia,Iraq,Pakistan,Ghana,Yemen,Sudan,Syria,Iran,Mexico,Argentina,Brazil,Peru,Somalia,Libya,Jordan,Algeria,Zaire,Nigeria,Ethiopia,Kenya,Gambia,Congo,Mongolia,Romania,Rwanda,Mauritania,etc.Therefore,theexportcontractswiththesecountriesshouldnotbeconcludedontheCIFterm.6.3.5Pointsforattentionwhennegotiatinginsuranceclauses2)Theexportercanaccepttheimporter’srequirementfortheinsurancetobesubjecttotheInstituteCargoClause(I.C.C)andstateitclearlyinthecontract.TheInstituteCargoClausehaveexertedgreatinfluencesonthedevelopmentofinternationalinsurance,andimportinsuranceinmanycountriesisinclinedtobesubjecttoI.C.C.3)Thee