scary sailing: insuring international shipments.
When early marine explorers began to look for new trade opportunities in the late Middle Ages, the map marked \"here is the Dragon\", indicating unknown waters that hide unknown dangers.
At that time, most of the Earth was unfamiliar.
Today, we can determine the coordinates anywhere on Earth.
We also enjoy faster and safer modes of transportation and advanced technology to help us navigate and communicate anywhere.
From the trend of the past decade, the desire to seek trade opportunities on distant lands has not diminished since ancient times.
For example, the International Monetary Fund reported that 20% of global GDP in 1997 came from international business ---
Related activities ten years ago.
Similarly, the number of US companies sending goods overseas is expected to reach 1.
This year is 2 million, three times the number of exporters five years ago.
According to U. S. Forecasts, this total is expected to double again by 2015S.
Ministry of Commerce. And U. S.
Exports are less than half the total. -
As a country, the United States has a trade deficit and imports are greater than exports.
Despite the attractive statistics, companies engaged in export and import still face a \"dragon \"---
Various conditions and circumstances that may cause loss or damage or delay shipment.
In today\'s expanding global marketin-
In a time-to-operate environment, an incomplete or missed delivery can make a good customer fire, or, worse, buy from someone else.
As a risk manager, knowing where the dragon lurks will help you to protect your company\'s goods and bottom lines and prevent the dangers that may be encountered when the goods are shipped overseas.
The first step in reaching an agreement to complete any successful transaction is the agreement between the buyer and the seller on the terms of sale.
This includes the terms of payment, the point of transfer of ownership of the goods between the parties, and most importantly, from the perspective of risk management, the point of loss risk transfer (see below).
For example, if you ship the goods \"free of charge\", it is your responsibility as a seller to ensure that the goods are properly packaged, delivered and loaded on a transport vehicle or vessel.
Your buyer agrees to take the risk of loss in actual shipping and delivery to his location.
Please note, however, that if you sell the goods on credit, you will still bear or have a credit risk;
The buyer may refuse payment if the goods are lost, late or damaged.
While the terms and conditions of each country may vary greatly, most jurisdictions will comply with a uniform set of rules established by the International Chamber of Commerce to interpret the terms of the contract-Incoterms.
Transport risk environmental conditions, facilities, equipment and worker skills vary from destination to mode of transport.
The key to delivering goods on time and in good condition is to understand the differences between international transport and domestic transport, and to pack the goods to withstand the hardest part of the journey.
Before the goods arrive at their final destination, your goods may encounter any or all of the following dangers: * the goods transported by sea may be subject to rolling, bumps and ups and downs, as well as waves impact, water damage, extreme temperature and navigation
* Air cargo may face changes in atmospheric pressure and temperature, as well as turbulence and other forces caused by rapid acceleration and deceleration.
* Ground Transportation (
By rail or truck)
Shock and vibration, sudden braking and acceleration of the goods.
The goods may also be damaged, stolen in the accident, and may also be hijacked if transported by truck.
No matter what method is used to carry the goods, damage or loss will occur during loading, unloading or storage.
Goods coming from or arriving at modern ports or cargo facilities are almost always handled by skilled workers using automated equipment.
However, if it is bound to a small port in a developing country, it may be unloaded manually, increasing the risk of workers falling or mishandling.
The more often the goods change the carrier or mode of transport, the greater the likelihood of accidental damage.
Goods stored at any location along the way may also incur additional risks due to crushing or improper stacking, fire, water damage, theft, contamination or deterioration.
Fortunately, there are ways to prevent these risks.
The first is to eliminate or minimize potential risks through proactive damage prevention, including appropriate packaging.
Carefully plan the shipping route and select the carrier and freight forwarder.
These measures should be supported by marine cargo insurance to provide a financial safety net for lost or damaged goods.
Despite its name (
Reminder of its origin)
The modern \"ocean shipping\" cargo insurance covers overseas goods, whether by air, land or by water.
You should seek full protection and almost protect your economic interests. to-door-
From the time your goods leave your facility to the time your buyer legally owns.
If the terms of sale expose your company to or have a credit risk, you may purchase an insurance if the buyer refuses to pay for the lost or damaged goods.
Because marine insurance is a highly technical field, it is necessary to have a skilled underwriting ability.
Only a handful of 4,000-
In addition, marine insurance is provided by property/accidental injury insurance companies in North America, and only a few companies maintain full coverage
Time staff dedicated to ocean business.
Unlike many types of commercial insurance, marine insurance should not be considered as \"off-site insurance\"the-
While certain coverage is standard, your company\'s policies should have restrictions, terms and rates that are specific to your needs.
The underwriting variables considered include the type of goods, destination, and mode of transport.
If your company is involved in international trade for a period of time, the rate will also reflect your previous loss experience.
Although expertise is required to cover marine policies, coverage is readily available.
If your company is shipping a small amount of goods, you may find that the cost is higher
The purchase of cargo insurance through a freight forwarder is valid because the policy purchased from the insurance carrier usually requires the payment of the minimum premium.
The volume of business enjoyed by freight forwarders provides economies of scale that may benefit customers.
When you explore the options, it is a good idea to get a quote from your agent or broker as well as the freight forwarder and compare rates and protection.
Keep in mind that your risk management needs may change as your trade business evolves.
Working closely with your broker or freight forwarder and the underwriting and loss control personnel of your insurance company will help ensure that your company is protected as it needs.
Like any type of insurance, evaluate the insurance company, and the Marine policy is only as good as the company behind it.
Regardless of your volume of transport, you should look for an insurance company with a rich history and extensive international network of claims and recycling services.
If you are in New York and the goods are damaged in Hong Kong, you will need someone to handle the investigation, arrange salvage or recycling services and make urgent payment to your client (
If required by the terms of sale)
It\'s better to use local currency.
There is nothing that damages the customer relationship more quickly than the goods go wrong, plus a slow or inaccurate claim payment.
It is also important that you will want access to services that prevent loss, such as delegates who are familiar with international port facilities, climate, political conditions and indigenous contacts, as well as local customs and personnel.
These people are best able to advise you on issues related to packaging, documentation and routes, and can provide specialized services such as marine surveys and operational reviews.
Big companies should also focus on the overall capabilities of insurance companies, the limits available, and the complexity of products and services.
Deductible policy with stop-
Loss insurance, exclusive insurance business and other alternative risk financing methods may be financially advantageous.
While these international shipping guidelines are not exhaustive, they will help you identify key issues and ask good questions to your agent, broker or freight forwarder.
As our trade predecessors will surely prove, knowing the exact location of the Dragon today will enable you to draw a more straight chart as your company begins to explore new business opportunities, provide safer courses for them.
Richard Decker is senior vice president of Inama insurance underwriting.
A Xinnuo property insurance company in Philadelphia