Chapter 13

Cargo Insurance Certificate

A document indicating the type and amount of insurance coverage in force on a particular shipment. It includes the name of the insurance company and conditions of coverage

Blanket Policy

A variant of the open cover policy in which the shipper is not required to declare the individual values of each shipment.

All Risks Policy

Broad type of marine insurance policies. Covers any losses except for those expressly excepted in the policy.

Institute of London Underwriters (ILU)

Founded in 1884, the ILU is an association of marine insurance companies that publishes a manual of standard clauses.

Extraordinary Expenses

General average liability also occurs when the shipowner expends extraordinary expenses to insure the safe transport of the goods. In such cases, the shippers are obligated to pay a pro rata share of the extraordinary expenses.

Shortage

If the goods delivered are not in the condition as stated on the bill of lading or there is a shortage as to quantity, then the shipper or the party receiving goods meets its burden of proof by providing the bill of lading as evidence.

With Average

Marine insurance policies that covers less than total losses. The marine term for loss is the word average. The more comprehensive policy is one with average. This policy protects for partial as well as total losses.

17 COGSA Exemptions

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from: 1. Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship; 2. Fire, unless caused by the actual fault or privity of the carrier; 3. Perils, danger, and accidents of the sea or of other navigable waters; 4. Act of God; 5. Act of war; 6. Act of public enemies; 7. Arrest or restraint of princes, rulers, or people or seizure under legal process; 8. Quarantine restrictions; 9. Act or omission of the shipper or owner of the goods, his agent or representative; 10. Strikers, lockouts, stoppage or restraint of labor from whatever cause, whether partial or general: Provided that nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier's own acts; 11. Riots and civil commotions; 12. Saving or attempting to save life or property at sea; 13. Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods; 14. Insufficiency of packaging; 15. Insufficiency or inadequacy of marks; 16. Latent defects not discoverable by due diligence; or 17. Any other cause arising without the actual fault and privity of the carrier without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.1.

War Risk Policy

The F.C. & S. clause has been interpreted to exclude any losses due to war or civil strife, including rebellion and revolution. Coverage may be requested through an endorsement on the underlying policy or through a separate war risk policy

Hague-Visby Rules

The Hague-Visby rules updated the Hague rules. Under the Hague-Visby rules, the limit of liability is significantly increased.

Special Drawing Rights (SDR)

The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. The SDR is valued on a basket of currencies consisting of the euro, Japanese yen, pound sterling, and U.S. dollar.

Insured Value

The combined value of the goods, inland and ocean freight charges, cost of packaging, freight forwarding and consular fees, and the cost of the insurance.

Seaworthiness

The common carrier must satisfy two general duties in order to gain the protections of COGSA. First, it must perform due diligence in preparing the ship. Second, the ship must be seaworthy at the time of depature. The due diligence undertaking is to be performed before the ship departs from the port of shipment. The seaworthiness determination is done at the time of departure. In the event that the ship becomes unseaworthy after it leaves the port of shipment, the common carrier remains protected under COGSA. It depends on such factors as the type of vessel, character of the voyage, reasonable weather, navigational conditions, and type of cargo.

Hull Insurance

The most common property coverage, it protects the ship and cargo owners from an assortment of exposures, including damage to goods, damage to the ship, damage to other's property, and liability for injury and death.This protects the owner or charter party from losses due to damage to the vessel or its equipment.

Hague Rules

The most established and important of the international carriage conventions. It established a number of carrier responsibilities such as the requirement to undertake due diligence in providing a seaworthy ship, to not deviate materially from the carriage contract, and to provide shippers with the opportunity to declare a higher value for their goods. In return, the shipping companies are provided a limitation of liability to cap their potential liabilities, along with a number of exemptions from liability.

Harter Act of 1893

The primary objective of the Harter Act was to prohibit clauses whereby carriers attempted to eliminate their liability for acts of negligence. The Harter Act prohibited the enforcement of broad exculpatory clauses incorporated into the standard bills of lading by the shipping industry. It is the predecessor to the Hague Rules, the Hague-Visby Rules, and the Hamburg Rules.

Clause Paramount

a clause that is incorporated to COGSA that permits parties to agree to above-deck carriage

General Average

a doctrine provides that when a portion of a ship's cargo is sacrificed to save the rest from a real and substantial peril, each owner of property saved contributes ratably to make up the loss of the sacrificed property's owners. Three events that create a general average situation: (1) a common danger to which ship, cargo, and crew are all exposed and which is imminent; (2) a voluntary sacrifice of a part for the benefit of the whole; and (3) successful avoidance of the peril. Two classes of general average claims exist: those which arise from sacrifices of part of a ship or cargo made to save the whole venture, and those which arise out of extraordinary expenses incurred by the shipowner for the joint benefit of ship and cargo. General average claims are available to both shipowners and cargo owners.

Excess Insurance

a policy that incorporates one of a number of popular clauses that control when that coverage becomes operational. These clauses relate the excess coverage to the coverage provided by underlying policies.

Comprehensive General Liability (CGL) Coverage

a popular insurance policy. Their most salient feature is their comprehensiveness. Second, they provide a rather broad duty on the part of the insurer to defend. Thus, the insured is provided with the luxury of having legal services paid for by the insurance company even on claims where insurance coverage is suspect. Drafted through the Insurance Services Office (ISO), a private trade association.

Insurance Services Office (ISO)

a private trade association, drafts the comprehensive general liability coverage policy

Forwarder's Bill of Lading

a transport document, which is used in sea shipments and multimodal shipments, issued and signed by a freight forwarder, generally on a freight forwarder's bill of lading format, evidences the terms and conditions of the carriage of goods as specified by the freight forwarder.

Perils Only Policy

a type of marine insurance policies. It is the most common form of cargo insurance that pays only for losses due to expressly enumerated perils or causes. The burden is on the cargo owner to prove that the loss was due to one of the listed perils

Containerization

allows a single container to be used in different modes of transit.16 A container can be attached to a truck, placed on the bed of a railroad car, and loaded on to a ship.

Freight Forwarder

are agents for exporters and importers and are experts at transporting cargo worldwide. They coordinate the movement of the goods, secures the bill of lading, and completes other documentation as required in the letter of credit.

Warsaw Convention

as a contract of carriage, the air waybill incorporates by reference the pertinent international carriage convention. It limits liability for the common carrier and shares numerous similarities with the Hague Rules

Customs Brokers

assist importers with the entry of goods into foreign countries, their classification and valuation, and the payment of duties. They provide a variety of vital services including advising the importer on the formalities, regulations, and tariff (taxes or duties) fees for the specific country of import. They also utilized to deal with customs authorities and to comply with customs regulations

Misdelivery

can occur when a country's import documentation allows for such a release or when the receiving party and the common carrier make alternative arrangements.

Marine Extension Clause

clause extends the standard marine coverage to the period before the loading of the goods and the period between offloading and delivery to the consignee.

Excess Clause

covers all claims outside the coverage of the underlying policy

F.C. & S. Clause

free of capture and seizure clause to exclude any losses due to war or civil strife, including rebellion and revolution

Q Clause Exception

grants the carrier a general exemption for any damages that arise from a cause that was not the "actual fault of the carrier or those of the agents or servants of the carrier."

Air Waybill

is a bill of lading that covers both domestic and international flights transporting goods to a specified destination. It is a nonnegotiable instrument that serves as a receipt for the shipper. Unlike the ocean bill of lading, the air waybill does not act as a document of title. Therefore, it merely serves as a contract of carriage and a receipt for goods.

Reinsurance

is a contract between different underwriters instead of a a contractual relationship between an underwriter and the insured (shipper)

Exculpatory Clause

is a contract provision that relieves one party of liability if damages are caused during the execution of the contract

Bailee

is an individual who temporarily gains possession, but not ownership, of a good or other property. The bailee, who is also called a custodian, is entrusted with the possession of the good or property by another individual known as the bailor. The common carrier is liable for misdelivery, even after the goods are discharged from its ship, because the carrier remains a bailee of the goods until they are delivered to the holder of the bill of lading

Free of Particular Average (FPA)

is an insurance contract clause that eliminates an insurer's liability for partial losses. The of free particular average clause states that the insurance company does not have to pay the insured (assured) if he suffers less than a total loss.

International Monetary Fund (IMF)

is an international organization that aims to promote global economic growth and financial stability, encourage international trade, and reduce poverty.

Himalaya Clause

is commonly used to extend a carrier's defenses and liability limitations to certain third parties performing services on its behalf. It is is commonly inserted in the freight contract to extend a carrier's defenses and liability limitations (COGSA) to third parties performing services on its behalf, such as a stevedore company.

Cargo Policy

is made to cover risk of loss for periods of time before the loading and after the unloading of the goods. The restrictions on coverage in cargo insurance revolve around three factors: (1) the causes of loss that it protects against, (2) amount of coverage, and (3) duration of the coverage.

Through Bill of Lading

is one by which an ocean carrier or MTO agrees to transport goods to their final destination.

Charter Party

is one who leases the entire ship from the ship's owner.

Carriage of Goods by Sea Act (COGSA)

is the U.S. domestic version of the Hague or Hague-Visby Rules. The COGSA a United States statute governing the rights and responsibilities between shippers of cargo and ship-owners regarding ocean shipments to and from the United States. COGSA is interchangeable with Hague Rules.

Per Package Limitation

is the default provision meaning that if the shipper fails to declare a higher amount then the carrier's liability is automatically capped at $500 per package.

Force Majeure Clause

lists the type of events that allow the parties an excuse out of the contract. Force majeure events may include wars, blockades, strikes, governmental interference or approval, fire, transportation problems, and others. A force majeure clause should be custom drafted to take into account the type of industry, the countries, and type of carriage (transport) involved.

Deck Cargo

means cargo which by the contract of carriage is stated as being carried on deck or above-deck

Inchmaree Clause

or additional perils clause extends the list of covered perils usually to include losses due to negligence of the crew and damage arising from a latent defect. This clause is also commonly inserted in cargo insurance policies.

Warehouse to-Warehouse Clause

or marine extension, it extends the standard marine coverage to the period before the loading of the goods and the period between offloading and delivery to the consignee.

Pro Rata Clause

proportions the amount paid under the policy based upon the limits provided by all relevant policies

Hamburg Rules

provide an alternative to the long-established Hague Rules

York Antwerp Rules

provide the means for pro-rata assessment to all shippers with cargo on board a ship in which other shippers' goods were lost or damaged for the greater good of the ship and the remaining cargo.

Through Transport Policy

provides indemnification for third-party damage caused during inland transit.

Running Down Clause

provides protection from liability for damages to another vessel caused by a collision with the insured ship.

Protection and Indemnity (P & I) Policy

provides two broad categories of protection: third-party liability and contractual liability protection. Third-party liability coverage protects against damages caused to others due to marine collision. Contractual liability coverage includes protection against passenger liability, liability for loss and damaged cargo, and the discharge of hazardous materials.

Common Carrier

shipping company that delivers a goods to buyer. Is a guarantor of the description on the bill of lading even if it proves to be false or fraudulent.

Due Diligence

should provide answers to the following questions: (1) What formalities are needed to register or protect IP rights in the host country? (2) Will the transfer agreement or license need to be registered and approved by foreign government authorities? (3) What types of clauses are likely to be disapproved or violate foreign competition (antitrust) laws? and (4) Are there other mandatory legal rules that are specific to that particular country?

Federal Arbitration Act (FAA)

states that an arbitration clause is "valid, irrevocable, and enforceable."

S.R. & C.C. Clause

strikes and riots clause similar to the F.C. & S. Clause .

Customary Freight Unit (CFU)

the "package" for bulk transfers. The customary freight unit (CFU) liability limitation is applied to goods not shipped in packages. Typical goods that often fall under the CFU limitation scheme include bulk cargo, bulk machinery, and unpackaged equipment. Common measures of freight units include weight, cubic feet, and the actual cargo itself, such as an unboxed automobile.

Extension Clause

the insurance policy that protects the shipper from the start in the exporter's country until received in the importer's country generally does this

General Cover

the most common form of insurance policy. It is not limited to a specific shipment, but covers numerous shipments for a fixed period of time or until terminated by notice given by the shipper (insured) or the insurance company.

American Institute of Marine Underwriters (AIMU)

the trade association representing the United States ocean marine insurance industry as an advocate, educator and information center. A marine insurance association that publishes a manual of standard clauses related to marine insurance.

Fair Opportunity

to choose a higher liability by paying a corresponding greater charge. Common carriers generally honor their duty to provide fair opportunity to declare a higher value by providing notice and a space to declare a higher value on the face of the bill of lading.

On Board Bill of Lading

warrants that the cargo has been placed aboard a named vessel and is signed by the master of the vessel. This type of bill ensures the buyer that the goods are indeed on the ship in transit to the port of destination.

Statute of Limitations

warranty period that will be applied to any future claims of the parties. Upon the giving of the required notice of loss, COGSA provides a one-year statute of limitations.

Material Deviation

where the common carrier is held to be fully liable for all damages. Material deviation claims can generally be divided into two groups—those involving the above-deck carriage of goods and a change in the expected route of the ship.