Welcome to the world of Marine Cargo Insurance

It is about Transit risk and associated legislation, conventions and norms. 

Marine Insurance (Queen Mother of Insurance)

Understanding history helps us in understanding the development of current practices.

• Marine Insurance is the oldest form of Insurance however its origin is lost in Obscurity.

• Rhodian Merchants initiated marine practices viz. Bottomry: loan on Ship & Respondentia: loan on cargo; both not repayable if Ship or Cargo lost in adventure; In 14th century Italian merchants refined this concept 

• Also concept of General Average is credited to Rhodians, this dates back to 916 B.C. 

• Chinese merchants used to load part cargo on several ships to safeguard their interest in trade on the Yangtze river.

 • Several ancient Indian texts have a mention of marine insurance concepts  and practice viz. ‘Jokhami Hundi’ was prevalent in India

Development of Marine Insurance

• Today, world is a Global Market

• Competition has necessitated cut in delivered price of products and just-in-time delivery  

• The shipping industry has responded with dramatic changes like advanced ship& navigation, containerization, etc

• Door 2 Door Intermodal service is commonplace today 

• Historically, Hull& cargo insurance was provided in form of SG policy (Ship& Goods) which required overhaul 

• To avoid litigation, The British underwriters kept the original wording intact and modified the coverage

   by adding clauses

Marine Policy development

• Institute of London Underwriters came into being in year 1884

• The first set of Institute Time Clauses were formulated in December 1888 

• The technical and Clauses committee is responsible for drafting them

• Their work now embraces, in addition to  clauses on Hull& Machinery, and Cargo; War& Strike, Freight, Disbursements etc 

• Prior to 1982, the SG form of policy was issued with one of the following clauses: ICC (All risks) 1963 or ICC (WA) or ICC (FPA)

• The latest set of cargo clauses is 2009 and Hull clauses is 2003

• The latest version of the Marine Policy form is the MAR91

• Subject to warranty of Seaworthiness and Legality of adventure (MIA)

Marine Insurance (Definition)

• A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured ,in the manner and to the extent thereby agreed,  against marine losses, that is to say, the losses incidental to marine adventure. (By Sea, inland waterways, Rail, Road, Air, Post parcel, Courier)

• The completed Marine Policy Form, with the necessary clauses attached, duly stamped according to Indian Stamp Act 1899, and signed by insurers forms the Legal evidence of contract of insurance to be placed before the court of law, if such necessity should arise

Marine Insurance Act (Section 25)

  The following is required to be specified in  marine Insurance policy as per section 25 of MI Act 1963

• The name of the Insured; The subject matter (with reasonable certainty); The voyage or period of time covered by insurance; The sum insured; The name of the insurer; and Signature of the insurer 

• Cover note:  When complete details of shipment are not available a Temporary document is issued as evidence of marine insurance pending issuance of Marine  Policy.

• As per Marine Insurance Act, 1963, a contract is concluded when a proposal is accepted by the insurer, whether a policy is issued or not. Reference may be made to proposal or slip and cover note. 

• Though an unstamped document and not enforceable in the court, still it is recognized by the Insurers world around as evidence of marine insurance contract.

Marine Insurance Act (Utmost good faith)

• Every contract is a contract of ‘Uberrimae Fidei’  

• Representations are communications made with the underwriter either by the assured or his broker, and may be of three types–

• Material Fact: Must be true e.g. Packing (voidable, if untrue)

• Fact: Must be substantially correct e.g. Insurance arranged on 10th and date of dispatch represented as 12th, whereas actual date was 14th (acceptable) however if actual date of dispatch was 5th then it is material fact (voidable)

• Expectation or Belief: Sufficient if made in good faith 

• In absence of inquiry following need not be disclosed; Circumstance which diminishes the risk, or which is known/ presumed to be known to insurer, or to which information is waived by insurer, or which is superfluous due to any warranty, any provision of law,  or facts of common knowledge e.g. riots in city    

Marine Insurance Act (Insurable interest)

• Every person has an insurable interest who is interested in a marine adventure 

• Legal and equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he is –

• benefited by its safe arrival or

• prejudiced by its loss or damage

• Incur liability as a result of such loss, damage or detention 

• It is not essential to have insurable interest at the time of effecting insurance (reasonable expectation is enough) however Insurable Interest is must at time of Claim

• Marine Cargo policy is freely assignable unless prohibited e.g. Sellers Interest, Duty policy etc

Valued and Unvalued Policy

Valued Policy e.g. Cargo

• A valued policy is a policy which specifies the agreed value of the subject-matter insured. e.g. CIF+10% In absence of fraud, value fixed by the policy is, as between the insurer and assured, conclusive of the insurable value of the subject intended to be insured, whether the loss be total or partial.

Unvalued Policy e.g. Cargo

• In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the expenses of and incidental to shipping and the charges of insurance upon the whole.  

• Customarily Cargo is insured under valued policy whereas Duty and Increased value policies are Unvalued policies (actuals)

Specific and Open Policy/ Cover

Specific Policy

• Stamped policy (voyage)

• Written on merits of specific transit, individually arranged

• Useful for transit not covered by open policy/ cover or for infrequent transits

• No compulsion to insure all transits

Open Policy

• Stamped Policy in case of Inland  and Agreement in case of overseas transit (1 year)

• Terms are agreed and all transits within the terms are covered

• Declaration need to be made and certificate issued (stamped in open cover) as agreed

• Savings in premium, assurance of cover availability for Insured

International commercial terms 2010 (Inco terms)

“ Provide a set of international rules for the interpretation of the most commonly used trade terms in domestic/foreign trade.”

Inco terms help infer that the following will be At whose cost, obligation and and risk.    

• Goods made available for transport

• Loading

• Local Transport

• Custom/Security Clearance 

• Main transport 

• Unloading

• Custom/Security Clearance

• Local transport

• Final delivery

Inco terms 2010

Each rule represented by 3 letters (e.g. EXW, CIF , DDP).Mere mention of the 3 letter term in the sale contract provides clarity :

• Reduces the need to include details of the INCOTERMS Rules in the contract

• Provides an international standard

• Provides rules which are universally recognized 

• Eliminates Uncertainty and 

• Interpretation slippage

INCOTERMS will work successfully ONLY IF parties to the sale include a specific named port or place.

Inco terms do not ____

• Does not determine ownership/title or when title passes 

• Does not deal with payment terms

• Does not deal with payment methods 

• Does not replace Contract of Sale-Can be made part of Contract of Sale by express incorporation 

• Does not deal with consequences of breach of contract barring a few exceptions 

• Does not provide relief from obligations of liability from Unforeseen/ unexpected events.

Passing of title (ownership or property in goods) is a complex issue and depends on, among other things, ‘national’ laws-it is for  this reason that INCOTERMS deal with “risk” rather than “title” issues.

Inco terms 2010 Graphic representation

Some terms like FOB and CIF are only used when main leg of transit is by Sea.  

Institute Cargo Clause 2009 - ICC 'C' cover

Loss or damage to cargo caused by: 

• Fire or explosion 

• Vessel or craft being stranded, grounded, sunk or capsized 

• Overturning or derailment of land conveyance 

• Collision or contact of vessel craft or conveyance with any external objects, other than water 

• Discharge of cargo at port of distress 

• General Average sacrifice 

• Jettison 

• Salvage charges  incurred to avoid losses, 

• Liability under ‘both to blame’ clause payable

Institute Cargo Clauses (General Exclusions)

• Willful misconduct of the assured 

• Ordinary leakage, ordinary loss in weight or volume, ordinary wear and tear 

• Loss, damage or expense caused by insufficiency or unsuitability of packing 

• Loss damage or expense caused by inherent vice 

• Loss damage or expense caused by delay, even though the delay be caused by a risk insured against 

• Loss damage or expense caused by insolvency or financial default of the owners managers charterers or operators of the vessel 

• Deliberate damage to or deliberate destruction of the subject-matter insured or any part thereof by the wrongful act of any person (Covered in ICC A)

• War & SRCC (Can be added to all ICC clauses)

Institute Classification Clause 2001

1. QUALIFYING VESSELS.

This insurance and the marine transit rates as agreed in the policy or open cover apply only to cargoes and/or interests carried by mechanically self-propelled vessels of steel construction classed with a Classification Society which is

1.1. a Member or Associate Member of the International Association of ClassificationSocieties (IACS*), or

1.2. a National Flag Society as defined in Clause 4 below, but only where the vessel is engaged exclusively in the coastal trading of that nation (including trading on an inter-island route within an archipelago of which that nation forms part).Cargoes and/or interests carried by vessels not classed as above must be notified promptly to underwriters for rates and conditions to be agreed. Should a loss occur prior to such agreement being obtained cover may be provided but only if cover would have been available at a reasonable commercial market rate on reasonable commercial market terms.

2. AGE LIMITATION

 Cargoes and/or interests carried by Qualifying Vessels (as defined above) which exceed the following age limits will be insured on the policy or open cover conditions subject to an additional premium to be agreed.Bulk or combination carriers over 10 years of age or other vessels over 15 years of age unless they :

2.1. have been used for the carriage of general cargo on an established and regular pattern of trading between a range of specified ports, and do not exceed 25 years of age, or 

2.2. were constructed as container ships, vehicle carriers or double-skin open-hatch gantry crane vessels (OHGCs) and have been continuously used as such on an established and regular pattern of trading between a range of specified ports, and do not exceed 30 years of age.

CRAFT CLAUSE

3). The requirements of this Clause do not apply to any craft used to load or unload the vessel within the port area.

NATIONAL FLAG SOCIETY

4). A National Flag Society is a Classification Society which is domiciled in the same country as the owner of the vessel in question which must also operate under the flag of that country.



Institute Cargo Clause ICC B

ICC 'B' covers Loss or damage to cargo caused by:

• ICC C perils and 

• Earthquake, volcanic eruption 

• Lightning 

• Washing overboard 

• Entry of sea, lake or river water into vessel, craft, hold, conveyance, container, lift-van or place of storage 

• Total loss of any package lost overboard or dropped whilst loading to or unloading from vessel or craft (Sling loss)

Institute Cargo Clause B & C (Extra Covers)

  • Theft, pilferage, non-delivery 
  • Fresh/rainwater damage 
  • Hook damage 
  • Sling loss 
  • Damage by mud/oil/acid/any extraneous substance 
  • ‘Heating’ – Damage due to heating :dry out and become brittle (stowage and ventilation) 
  • ‘Sweating’ 
  • Leakage & breakage 
  • Bursting/ tearing of bags.

General Average & Salvage

• Extraordinary, Voluntary, Intentional Loss suffered to save common adventure 

• Sue& Labour/ Forwarding expenses/ Cost incurred to prevent or minimize loss in an general average event, may be paid in addition to total loss

• All interests (even who lost) will contribute to the GA fund in proportion of their contributory value (destination port) 

• Whereas salvage charges payable are contributed for at the port of refuge otherwise it is similar to GA

  • GA is settled as per York Antwerp rules 2004 by qualified Average adjuster
  • Cargo interests will contribute on Invoice value of cargo

Liability under ‘both to blame’ clause

Example 

• Two cargo vessels A  and   B collide

• Responsibility for blame- A is 60% and B is 40% 

• Cargo owner of vessel A suffer damage of Rs.$ 40000

• Cargo owner of vessel A claims from his insurer under ICC and his rights against vessel B are subrogated to Insurer

• The insurer of cargo owner of vessel A peruse recovery of $40000 from vessel B 

• Vessel B could proceed recovery of 60% against vessel A and recovers $24000

• But the vessel A is not responsible for this loss as per contract of carriage and therefore proceed to recover this amount $24000 from the cargo owner 

• As per clause 3 of ICC, the insurer accepts this liability of $24000 being 60% of the loss and reimburses the insured.

• The net liability of Insurer of Cargo owner of vessel A comes to $24000

• Under U S Laws, when two vessels collide, the cargo owner is entitled to claim from either vessel IN FULL, unless a clause in his contract of affreightment prohibits from recovering from the cargo carrying vessel.

ICC Duration Clause

• Insurance attaches from time goods leave the warehouse ((under 2009 clauses: subject matter insured is first moved  in the warehouse or at the place of storage (at a place named in the contract of insurance) for the purpose of the immediate loading into or onto the carrying vehicle or other conveyance)) for commencement of transit,

 —Continues during ordinary course of transit, and, terminates on completion of unloading, either

On delivery at final warehouse or place of storage at destination; 

On delivery to any other warehouse prior to or at the destination elected for storage/allocation/distribution or

When the assured or their employees elect to use any carrying vehicle or other conveyance or any container for storage other than in the ordinary course of transit or

On expiry of 60 days after discharge at final port of discharge, whichever shall first occur

Instead of 60 days as above, ICC (Air) All risk provides for 30 days period after discharge. 

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Termination of Transit Clause

—If the contract of carriage is terminated at a port or place other than the destination named therein or

—The transit is otherwise terminated before unloading of the s/m insured as provided for in Duration clause

 —Then the insurance shall also terminate unless prompt notice is given to insurers and continuation of cover is requested when this insurance shall remain in force, subject an additional premium if required by the insurers, either

—Until the s/m insured is sold and delivered at such port or place, or Unless otherwise specially agreed, until expiry of 60 days or

—If the s/m insured is forwarded within 60 days to the destination named in the contract of insurance or to any other destination, until terminated in accordance with the provisions of clause 8

—If the reason for termination is not insured peril then insurers are not liable to pay forwarding charges

Miscellaneous clauses and warranties

• Institute Replacement clause- machinery or second hand machinery 

• Label clause- applicable to canned and bottled goods 

• Pair and Set clause- applicable to crockery and like items

• Cutting Clause- applicable to pipes and like items 

• Pickings Clause- applicable to cotton, wool and like items

• Garbling clause- applicable  to tobacco, coffee, and like items 

• Theft, pilferage and Non delivery- to widen scope of ICC B& C

• Comprehensive clause (extraneous perils) - to widen scope of ICC B 

Institute replacement clause - Machinery

• ‘In the event of a claim for loss or damage recoverable here under, the company only to pay the cost of repairing, or if necessary, replacing the damaged part or parts, but such cost in no case to exceed the insured value of the parts so damaged’.  

• For ‘Second Hand Machinery’ : Clause has ‘New for Old’ provision for damaged parts of Second hand machinery whereas Suitable depreciation is charged in case of TL/ CTL. 

Miscellaneous clauses

Label clause

• Applicable to canned and bottled goods to be identified by consumers, 

• Cost of new labels and re-labeling ; also labour charges are payable

OR 

• Warranted free from all claims in consequence of labels being washed off or damaged

Brand and Trademarks clause

. Brand or Trademark is removed before damaged goods are sold as salvage or insured may offer reasonable salvage value and destroy the damaged goods

Concealed Damage Clause

• For delayed opening and notifying loss to insurer say up to 45 days

Miscellaneous clauses

Pickings clause

• Applicable to Cotton, wool and similar fibrous items whipped in bales. Country damages makes the bales damaged on the surface outwardly. 

• By picking out the damaged fibres, the remainder of the bale may be considered as sound 

• Insurer shall pay cost of picking  and the cost of re-baling of sound and undamaged material

Garbling clause

• Applicable to tobacco, coffee beans or grain. 

• Garble means to sift, to cleanse, to separate sound from the whole, which got mixed with some other material

• The insurer shall pay the cost of garbling

Loading/ Unloading clause

• For Loading/ Unloading on to the truck or railway wagon (add on with ICC Clauses)

Theft Pilferage and Non delivery clause

• Applicable when the coverage is extended to cargos covered under ICC ‘C’ or ‘B’ 

•‘ In consideration of an additional premium, it is hereby agreed that this insurance covers loss of or damage to the subject-matter insured caused by theft or pilferage, or by non-delivery of an entire package, subject always to the exclusions contained in this insurance’ 

• TPND is a major contributor to marine losses due to skillful pilferage of containerized cargo

Other Warranties used

1.Excluding shortage from sound bag/ package unless due to insured peril

2.Warranted excluding the blowing of tins (tinned foodstuffs) 

3.Warranted excluding natural loss in weight and or trade shortage

4.Warranted excluding risk of rejection by government authorities

5.Warranted excluding risk of pitting and oxidation (rust damage)

 6.Warranted shipped under deck against a clean bill of Lading 

To limit scope of ICC ‘A’ 

1.Warranted excluding risk of breakage, chipping, denting and scratching 

2.Warranted excluding risk of Mould and Mildew 

3.Warranted excluding risk of sweating, heating, and fresh water damage

Institute container clause 1.1.1987

• All risk of loss or damage, provided loss is fortuitous and is not excluded 

• General Average and Salvage charges

• There is a liability for loss or damage to machinery of the container in 1.TL/ CTL claims; GA sacrifice 2.Overturning/ derailment or other accidents to conveyance or aircraft 3.Fire or explosion originating external to machinery 4.Vessel or craft being stranded, sunk, grounded or capsized and in case of collision or contact with any external object other than water 

• Cover is subject to sea and territorial limits, breach of limits is held covered 

• Mysterious disappearance, unexplained losses are excluded

Institute Trade Clauses

Institute Commodity Clauses ‘A’ ‘B’ & ‘C’

• for Insurance of Cocoa, Coffee, Cotton, Fats and Oils (not in bulk), Hides, Skins, leather, Metals, Oils seeds and Sugar (raw & refined) and Tea

• Some exclusions s/as Insolvency, Unseaworthiness, are modified and these exclusions do not apply to assignee.

Institute Coal Clauses

• are similar to ICC ‘B’ except Fire and Explosion is extended to cover spontaneous combustion

Institute Jute Clauses

• are similar to ICC ‘B’ except EQ, Volcanic eruption and Lightning are not covered 

• Cover attaches after loading (FOB) and Time limit after discharge is 30 days only

Trade Clauses and Institute Bulk Oil Clauses (IBOC)

• Institute Bulk Oil Clauses (IBOC) are similar to ICC ‘B’ except leakage of oil from connecting pipelines, contamination or loss of oil caused by negligence of crew, contamination due to stress of weather are covered. 

• Duration is from Tank to Tank and time limit is 30 days after reaching port of discharge

• Other trade clauses are Institute Natural rubber Clauses, Institute Timber Trade federation Clauses, Institute Frozen Food Clauses, etc

Sellers contingency policy

• In almost all exports where credit is allowed by the seller to the buyer and the goods are not exported on CIF  basis, responsibility for the goods passes to the buyer when the goods are loaded on to the overseas vessel

• But ownership does not change until the buyer accepts the goods and relative documents, thus if the seller is allowing credit to the buyer and has shipped goods on FOB terms, buyer shall arrange vessel and insurance

• In case of any contingency the buyer is supposed to take delivery and seek claim from its insurer. If the buyer disowns the goods and liability of loss then the seller is again at risk.

• Tocover such risks of exporters, Sellers contingency policy is permitted even in FOB sale. The policy is not assignable and claims shall be settled INR

 •A confirmation shall be required that buyer has not taken delivery of goods  and documents of title as well as not claimed from its insurer.

Duty Insurance

•This policy is issued for the custom duty charged at the destination before the goods arrive in Indian port or airport

•The policy is subject to same clauses and conditions as the insurance on cargo policy (CIF policy)

•Normally the rate of premium charged for duty insurance is 75% that of CIF policy

•Claims in regard to duty are payable on the goods damaged after landing in the  country, excluding total loss of whole or part of cargo prior to duty becoming payable

•Duty policy is not valued policy but is issued on provisional basis and adjusted on  paying actual duty. Lost or not lost provision shall not apply in duty policy

•In the event of a claim the assured shall give a notice of loss or damage to the insurer to arrange survey/assessment

•A claim on Customs shall also be lodged immediately and within stipulated time period for refund of duty on damaged goods

Increased Value Insurance

•When the market price of an imported item at destination is more than CIF and Duty value, an Increased value policy is issued for that increase in value

•Increased value insurance cannot be granted 100% of CIF value of cargo

•This is not a valued policy but actual increase policy

•The increased market value is to be established by the assured as notified by appropriate authority in the country

•The rate, terms and conditions shall be same as that of CIF policy •The claim in this case is paid 75% of actual loss suffered

•Increased value insurance may not be granted to cover exports as this cover is designed for benefit of Indian importers only

Multi transit policy

•A Marine Policy terminates if during the transit the goods come into the control of the assured for storage other than in ordinary course of transit, allocation or re-distribution.

•Subsequent transits are considered separate.

•Multi-transit  policies ensure continuous cover even in case of  such exigencies.

•It fulfills the requirement of traders who have to send the goods for further job work/fabrication at the intermediate points enroute till final destination.

•Irrespective of the number of transits the cover stays operative. 

•Storage periods which may or may not include some processing can also be covered.

•A higher rate of premium is charged taking into account the storage periods and multi transits enroute. 

•Rating logic is Basic rate+ 50% (multi transit)+ 0.01% for every week (storage)/ 0.03% for every week (processing)- this formula may not apply in practice. 

Marine cum Erection and DSU

•Project value to include landed costs of imported machinery equipments, including invoice cost, freight, insurance, handling charges, forwarding charges up to site, customs duty, if applicable

 •A comprehensive Marine-cum-Erection Policy, comprising marine, storage and erection risks as a package is issued

 •Two separate policies- one for Marine and the other fore Storage cum erection insurance are issued and attached together

 •Marine transits could be one time (single) or multiple transits (open/declaration)

 •Cost + insurance + freight + a chosen percentage, generally 10 to 15 %

 •Could include add-ons like War & SRCC

 •Could be subject to warranties

 •Marine ALOP (DSU) Insurance is issued in conjunction with MCE policy

 •Covers delay in transit due to Loss/ Damage to cargo or to vessel or to conveyance in which insured property is being carried or when vessel involved in GA, Salvage or Life salvage operations

 •Time excess is Variable (depends on Period of Indemnity) , all delays are clubbed together and a single claim is admissible

Other Policies in Marine market

• Shut- Out Cargo Cover

 • Exports Incentive Insurance

 • Special Storage Risk Insurance (Tariff)

 • Package under Duty Exemption Scheme (Tariff)

 • Stock Throughput Policy

 • Sales Turnover Policy

 • Buyers Contingency Policy

 • Difference in Condition Policy

 • Rejection Insurance (Food)

 • Freight Contingency Insurance *

 • Strikes/ War Expenses Cover *

 • Increased Value Insurance (High seas sales) *

 (International Market*covers)

Institute War clauses (Cargo)

•Risks Covered: Loss or damage caused by- 

1.1  War, civil war, revolution, rebellion, insurrection or civil strife or any hostile act by or against a belligerent power

1.2 Capture, seizure, arrest, restraint, detainment arising from risks covered under 1.1 above, and the consequence thereof or any attempt threat  that is war-like only

1.3 Derelict (meaning abandoned or drifting) mines, torpedoes, bombs or other derelict weapons of war

 • General Average and salvage charges incurred to avoid a loss from a risk covered

 • Under Duty of the Assured Clause, charges reasonably and properly incurred to avert or minimise an insured loss and to preserve and pursue recovery rights, are also covered

Institute War clauses - Duration

Duration of the Cover: 

•The cover is waterborne and therefore does not attach until the goods are  loaded on the overseas vessel and terminates when the goods are  discharged from the overseas vessel or

 •Until 15 days from the midnight of the day of arrival of the vessel a destination port, which ever is earlier

 •If the goods are transshipped, the cover continues during transshipment but subject to 15 days from the arrival of the ship at transshipment port

 •However, the war cover reattaches on loading of the goods onto the on-going  vessel

 •Transit to and from vessel when goods are in craft, cover can be extended to cover the risks of mines and derelict torpedoes only, whether they are floating or submerged

•Additional Exclusion: Frustration clause- Any claim based upon loss of or frustration of the voyage or adventure; The insurance covers only physical loss or damage to the cargo and does not guarantee the completion of the voyage

Institute Strikes clause (Cargo)

Risk covered: Loss or damage caused by-

•Strikers, locked-out workmen or persons taking part in labour disturbances, riots and civil commotions; 

•Any terrorist or any person acting from a political motive

•General Average and Salvage charges incurred to avoid loss from a risk covered

 •Charges reasonably and properly incurred to avert or minimise an insured loss and to preserve and pursue recovery rights (Duty of assured) [if ppt]• •Duration/transit clause is same as in ICC clauses (60 days)

 •Two additional exclusions: 

•Loss damage or expense arising from the absence shortage or withholding of labour of any description whatsoever resulting from any strike, lockout, labour disturbance, riot or civil commotion

 •any claim based upon loss of or frustration of the voyage or adventure

Stamp Duty and Service Tax

•Sea voyage or transit by country craft or postal sending involving sea voyage: 

10 paise for every Rs. 3000 or part thereof

 •But when rate (including War& SRCC) is 0.125% or less the stamp duty shall be 50 paise

•For other than sea voyage including postal sending by rail, road, air-

25 paise when the SI is Rs.5000 or less •50 paise when the SI is over Rs.5000

 •Effective July 2012, Premium paid towards insurance policy covering Marine Transit will be subject to Service tax @15% (to be recovered from Insured)

As per market practice the minimum Stamp Duty collected is Re. 1  (unless rate is more than 0.125% by Sea)

Inland transit clauses (Rail & Road)

ITC A covers -

•Loss or damage  caused by All fortuitous perils other than those excluded

ITC B covers - 

•Loss or damage  caused by; 1.Fire 2.Lightning 3.Breakage of bridges 4.Collision/accident to carrying vehicle 5.Overturning of carrying vehicle 6.Derailments

Exclusions under Inland clauses (cargo) is similar to Institute cargo clauses; ITC A& B can be extended to cover SRCC, and ITC B to cover TPND, Rain water and fresh water damage etc. however War cover is not available for Inland transit.

Inland Transit clause - Duration

•Insurance attaches from time goods leave warehouse for commencement of transit, continues during ordinary course of transit, and, terminates either 

On delivery at final warehouse or for transits by rail only or rail & road, until expiry of days after arrival of rail wagon at final destination railway station or

for transits by road only, until expiry of 7 days after arrival of vehicle at final destination town, whichever shall first occur. 

•  ‘Sending by Post’ is insured under ICC ‘A’ with ‘SRCC’ suitably amended; Interest should be insured with postal authority, Attaches form time parcel is registered and terminates on delivery or 15 days from notice of arrival given to addressee, War risk is covered, No cover for loss of content from sealed packages and No cover for condemned parcel and loss due to incorrect address. 

FOB clause - Inland Transit

•Exporters shipping under FOB or C&F terms may protect their interest by obtaining following insurance 

•Appropriate inland transit commencing from time goods leave the exporters warehouse and extended to cover the interest until placed onboard the carrying vessel or LASH barges (including Sling loss) or 

•Until expiry of two weeks after arrival of goods at place of storage at the port town and or docks awaiting shipment, whichever shall first occur 

•If cover is subject to Clause ‘B’ and if loading is done midstream then insurance will also cover loss or damage due to Stranding, Grounding, Sinking, Capsizing, Collision, Contact Fire, Lightning and also Total loss of any package I  loading, transshipment or discharge; including risk of jettison due to stress of weather only

Inland Transit - Storage and Private carrier

•Special Storage Risk Extension

•Generally given in conjunction with an open policy for Inland transit to cover storage at railway yard or carriers premises, pending clearance by consignees

•Cover attaches on expiry of 7 days after the rail wagon/ vehicle reaches destination town and may be given for maximum 8 weeks including 7 days under cargo policy 

•Policy is not assignable and claim is subject to location limit

•Private Carriers Warranty

•Insurers liability for goods sent by a private carrier i.e. where liability of carrier is restricted by special contract between carrier and insured  or where proper LR is not available (vehicle not belonging to insured) is restricted to 75% of claim

Insurance of Cargo (Sailing vessel)

•Three types of covers are available 

•Clause ‘A’ TL/ CTL of Cargo due to TL/ CTL of vessel only 

•Clause ‘B’ Loss/ damage due to vessel being burnt or sunk; or due to jettison if necessitated by stress of weather only 

•Clause ‘C’ Loss/ damage due to vessel being burnt , stranded or sunk; Loss/ damage due to jettison if necessitated by stress of weather, stranding, or sinking, or burning or collision at sea 

•Exclusions: G A contribution, Unlawful conduct or negligence of crew or consignees, detention or seizure by govt for engaging in illegal trade 

•Duration: From loading of cargo till discharge or 8 days from arrival at port of discharge, whichever occurs earlier 

•In case of termination of adventure due to accident or stress of Insurance ceases with discharge of cargo at such intermediate port or directly into another vessel 

•If voyage is not abandoned and cargo remains in the vessel then insurance continues up to 30 days from taking refuge.

Marine Cargo Underwriting consideration

•Scope of cover & warranties; per bottom/ location 

•Nature of the commodity, its packing and whether in container - FCL vs. LCL

 •Port facilities (Cargo handling (manual or mechanized), Storage (sheds or Open)) 

•Voyage (Origin and Destination of the goods, Port of calls) 

•Loss record of the insured & his moral hazard 

•Whether goods are to be transshipped 

•Sum insured & annual turnover of shipments 

•Carrying vessel- Class, Flag, Tramp vs. Liner;  Chartered vs. Owned; Singleton vs. Fleet;  Containership, LASH ship, Reefer, Ro-Ro etc

Cargo Claims

•Actual Total Loss

•Where cargo is so damaged or destroyed as it ceases to be a thing of the kind insured (loss of specie) or where the assured is irretrievably deprived, or . Where the ship concerned in an adventure is missing, and after lapse of a reasonable time no news of her has been received, an actual total loss may e presumed. 

•In the event of total loss, the insured value under a valued policy or the insurable value under an unvalued policy is paid by underwriters. 

•Constructive Total Loss

•Where the actual total loss of the goods appears to be unavoidable, or Where the goods could not be preserved from actual total loss without an expenditure which would exceed their value, or Where the assured is deprived of possession of his goods and it is unlikely that he can recover them, or the cost of recovery would exceed their value when recovered; Where the cost of repairing damage and forwarding the goods to their destination would exceed their value on arrival; Where there is a loss of voyage, that is, it is impossible to send the goods on to their destination. Notice of abandonment must be tendered to the insurer. In the absence of such notice, claim for CTL cannot be made. The amount recoverable under CTL is the sum insured/ insurable less any proceed of sales which are due to the insurers

Cargo Claims

•Partial Loss (Particular Average)

•This includes damage to or partial loss of goods caused fortuitously, and thus does not include damage voluntarily incurred, such as general average (GA) damage. Recovery of particular average (PA) is sometimes made subject to a stipulated percentage or franchise being reached. 

•Total Loss of Part Cargo 

•Where part of the goods is totally lost, the measure of indemnity is such proportion of insured value as the insurable value of the part lost bears to the insurable value of the whole. When the cargo is of identical units, the insured value can be apportioned per unit, e.g. per bag 

•Where the cargo is of different types or value is insured under one valuation, the insured value must be divided proportionately between the cargos according to its insurable value. In practice, the apportionment of insured values is usually based on the invoice values of various goods. 

•Note: Loss of whole specie or of all goods comprised in one valuation is recoverable as a total loss and not as particular average

Recovery from carriers

•Indian COGSA: Notice of loss to be given at time of taking delivery or within 3 days if loss is not apparent •Limit of liability: 666.67 SDR per package or 2 SDR per kg of gross weight, whichever is higher 

•Railway Act: Notice within 6 months of date of Rail Receipt •Limit of Liability: INR 50 per kg or actual value (as declared and charges paid) 

•Carriers Act: (Road): Notice within 6 months of date of loss •Limit of Liability: Invoice value (same as insurer) 

•Warsaw convention (Air): Notice within 14 days for loss/ damage; 21 days for delay •Limit of Liability: : 17 SDR per kg or actual value (as declared and charges paid) 

•Multi Modal Transportation: •Notice of loss to be given at time of taking delivery or within 6 days if loss is not apparent •Limit of liability: 666.67 SDR per package or 2 SDR per kg of gross weight, whichever is higher •(If no sea or inland waterway is involved than the limit is 8.33 SDR per kg of gross weight) 

 SDR*: Special Drawing Rights ( Weighted Average of Euro, Japanese Yen, Sterling pound, US dollar)

Customs Duty recovery

•If any goods are lost or destroyed before the clearance for home consumption, no duty is payable on such goods.  For this purpose, lost or destroyed means that such goods can no longer be recovered or retrieved.  For example, lost in fire etc. (sec 23) 

•If any imported goods are damaged or deteriorated at any time before or during unloading or are damaged at any time after unloading but before their examination by the customs Officer, abatement (reduction or decrease) of duty is allowed. (sec 22) 

•If any imported goods are pilfered after unloading, but before the proper officer has made an order for clearance the importer shall not be liable to pay duty on such goods.  However, if such goods are restored to the importer after pilferage, no such relief is available (sec 13) 

•If any goods are short landed (duty paid on full consignment), the importer should get a certificate form the carriers indicating the details of the goods not landed.  Such a certificate is known as ‘Short Landed Certificate’. 

• On the basis of this certificate the importers should necessarily file a refund claim with the Asst. Commissioner concerned within the time limit (Six months).

Concluding remarks

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