Cargo Insurance Cargo Insurance
The handling of transportation is similar for domestic and export orders. Export marks are added to the standard information on a domestic bill of lading. These marks show the name of the exporting carrier and the latest allowed arrival date at the port of export. Instructions for the inland carrier to notify the international freight forwarder by telephone on arrival should also be included. You may find it useful to consult with a freight forwarder to determine the method of international shipping. Because carriers are often used for large and bulky shipments, you can reserve space on the carrier well before the actual shipment date. This reservation is called the booking contract.
International shipments are increasingly made on a bill of lading under a multimodal contract. The multimodal transit operator (frequently one of the transporters) takes charge of and responsibility for the entire movement from factory to final destination.
e cost of the shipment, delivery schedule, and accessibility to the shipped product by the foreign buyer are all factors to consider when determining the method of international shipping. Although air carriers may be more expensive, their cost may be offset by lower domestic shipping costs (e.g., using a local airport instead of a coastal seaport) and quicker delivery times. These factors may give the U.S. exporter an edge over other competitors.
Before shipping, your company should check with the foreign buyer about the destination of the goods. Buyers may want the goods to be shipped to a free trade zone or a free port, where they are exempt from import duties
Two Kinds of Insurance
Damaging weather conditions, rough handling by carriers, and other common hazards to cargo make insurance of shipments an important protection for U.S. exporters. Your shipper or freight forwarder will contract with an insurance company to cover the goods you export. A second kind of insurance, however, also is recommended: The sale must be insured against nonpayment. The buyer’s lender and other financial institutions named in your sale terms increasingly require credit insurance to cover risks of nonpayment. Contingencies include default by buyer or lender, political causes, or foreign currency disasters that put your payment at risk.
If the terms of sale make you responsible for insurance, your company should either obtain its own policy or insure the cargo under a freight forwarder’s policy for a fee. If the terms of sale make the foreign buyer responsible, you should not assume (or even take the buyer’s word) that adequate insurance has been obtained. If the buyer neglects to obtain adequate coverage, damage to the cargo may cause a major financial loss to your company. Shipments by sea are covered by marine cargo insurance. Air shipments may also be covered by marine cargo insurance, or insurance may be purchased from the air carrier.
Export shipments are usually covered by cargo insurance against loss, damage, and delay in transit. International agreements often limit carrier liability. Additionally, the coverage is substantially different from domestic coverage. Arrangements for insurance may be made by either the buyer or the seller in accordance with the terms of sale. Exporters are advised to consult with international insurance carriers or freight forwarders for more information. Although sellers and buyers can agree to different components, coverage is usually placed at 110 percent of the CIF (cost, insurance, freight) or CIP (carriage and insurance paid to) value.