Wise up to the intricacies of cargo insurance

One of the major problems with international trade is not knowing what to expect with the movement of cargo from one part of the world to another. This is a fact when it comes to a large number of importers and exporters, particularly when it is someone who is just starting out in international trade.

If the prospective client has their cargo ready to be shipped, and needs to insure the cargo, can you assist your client?

Recommending appropriate cover

The broker will need to know where best to place the required insurance. Do you have a good relationship with the insurer you are dealing with? Are you comfortable that they pay, and not repudiate, claims?

Assisting your client in dealing with imports and exports can be quite challenging if you are not 100% au fait with the process and technicalities going with this type of insurance.

Products react differently when transported. As the broker you need to be able to guide your client as to the best method of moving the cargo. You should know under which clauses will be best to insure the cargo.

Besides the A, B and C clauses, there are the airfreight clauses, bulk oils, coal, timber, refrigerated cargoes, frozen foods clauses to name a few. As the broker you need to know the difference between the clauses and under which it is best to insure the cargo.

You need to know your client’s products, and you need to advise your client on the correct insurance for all risks which can occur. It must be remembered that all risk cover does not mean “all risks”, but that what is known as a fortuity has to occur.

In other words, it is not something that is definitely going to happen, but there is the possibility of it happening. If it is something which will occur, it can be said that it is an inherent vice of the product insured for example, liquids will always have residue left in the container, so there will be a compulsory excess to cover this type of loss.

Another example is that of citrus which will ripen very quickly and rot if the vents of the reefer container are not fully open.

Be knowledgeable about the environment

A broker should have good knowledge of geography, plus the current political situations which are affecting various parts of the world. If cargo is coming from the Mediterranean Sea by ship, will the voyage be down the east coast of Africa or the West Coast? This has a bearing on piracy, particularly around the Horn of Africa.

Is cargo coming from India during June and July? This may be affected by monsoons. If it is coming from the West Coast of the USA, which route will it take? Will it go west to Taiwan and then on to South Africa, or down to the Panama Canal directly to South Africa?

Packaging

Packaging is a major concern and needs to withstand the rigors of the voyage from the supplier to destination. If there are any wooden cases or pallets, have they been treated correctly, remembering all requirements for the importation of any wood due to the strict requirements which are in force? Often, green timber is used for the manufacture of pallets which are then loaded into containers for the long journey from the Northern Hemisphere through to the Southern Hemisphere.

Besides going through the equator, the cargo is going from winter weather conditions to summer weather conditions in different hemispheres.

Take the weather with you

Containers stacked on the outside part, on deck of a ship can get extremely hot, which will cause condensation from any moisture in the container. Pools of water are known to form on the outside of any plastic shrink wrapping, cartons can get so wet that they fall apart and cannot hold the contents safe.

So there you have it, the risks associated with cargo are intricate to say the very least.