1、Chapter 9Inspection and Insurancev 9.1 Background Informationv 1. Commodity Inspection v Usually, the goods will be inspected at the port of shipment and reinspected at the port of destination. If the quality, quantity or weight, packing, etc. of the goods ordered by the buyer should be found not in
2、 conformity with the contract stipulations upon reinspection by a commodity inspection department, the buyer shall have the right to lodge a claim against the seller by presenting the relative inspection certificates issued by a contracted inspection organization, within the time stipulated in the c
3、ontract.v 2. Insurance v As a practice, it will make plain in a contract as to who will cover the insurance and bear the expenses. If the goods are sold on CIF terms, the seller is responsible for the insuring and the premium. For CIF transactions, the seller usually effects insurance for 110% of th
4、e invoice value against (risks) as per Ocean Marine Cargo Clauses of the PICC or other insurance companies. As for FOB or CFR terms, the buyer should arrange the insurance and bear the covering expenses.v Insurance coverage varies in content. The Peoples Insurance Company of China provides three bas
5、ic types: Free from Particular Average (FPA), With Particular Average (WPA) and All Risks. Nevertheless, the terms of insurance must clearly specify what insurance clauses are applicable, for China Insurance Clause (CIC) is different from the Institute Cargo Clauses (ICC). In this way, it will avoid
6、 any possible misunderstanding with regard to the responsibility of parties concerned.v The purpose of insurance is to provide compensation for those who suffer from loss or danger that may be incurred. In fact, if goods are properly insured, neither the exporter nor the importer will suffer any los
7、s. In case of any damage or loss, the insured should claim quickly, usually within a month, by providing all the documents required.v 9.2 Situational Conversation v Section 1: Specifying the Inspection Rightv B=Brown; Z=Zhangv Z: Shall we go down to the question of inspection this morning, Mr. Brown
8、?v B: All right. Careful and proper inspection is an indispensable part to ensure the quality of the goods to be purchased.v Z: First we should specify the inspection right.v B: How do you stipulate the inspection clauses for your imports and exports?v Z: According to the inspection clauses, inspect
9、ion must be conducted before shipment by recognized surveyors. The certificates of quality and quantity issued by the recognized surveyors may be taken as the basis for negotiating payment. After the goods arrive, the commodity inspection bureau at the port of destination may reinspect the goods. Th
10、e inspection certificates issued by the inspection bureau of the destination port shall serve as the basis for filing a claim.v B: That is, the exporter should have the goods inspected before shipment, and the importer should have the goods reinspected after their arrival, right?v Z: You are right.
11、It is common in international trade today.v B: Very reasonable. The interests of both the buyer and seller are taken into account. v Section 2: How to Inspect the Goodsv B: Mr. Zhang, would you tell me how and by whom the commodity inspection is conducted before shipment?v Z: Our exports inspection
12、is to be conducted by China Commodity Inspection Bureau, which enjoys international reputation for impartiality.v B: When will the inspection be conducted?v Z: Usually inspection is conducted within 5 days before shipment.v B: How do they make the test and analysis of this item?v Z: They always use
13、the standard and method laid down in the contract.v B: What if there is no method or standard mentioned in the contract?v Z: Then the ISO or another internationally accepted method is used.v Section 3: Talking About the Coverage v B: Mr. Zhang, Id like to know what your insurance clauses cover?v Z:
14、We have three basic covers, namely, Free from Particular Average, With Particular Average and All Risks.v B: How long is the period from the commencement to termination of insurance?v Z: The cover shall be limited to 60 days upon discharge of the insured goods from the seagoing vessel at the final p
15、ort of discharge.v B: Whats the difference between “All Risks” and “All Marine Risks”?v Z: The difference between them is under the “All Marine Risks”, losses recoverable will only be confined to those arising from perils of the sea, and maritime accidents, whereas the “All Risks” cover will admit a
16、ll losses occurring at any time throughout the whole currency of the cover, irrespective of whether they are caused by accidents at sea or on land.v B: Could you cover the risk of breakage for us?v Z: Yes, we can. Risk of breakage is classified under extraneous risks. We can cover the risk of breaka
17、ge for you.v B: Who will pay the premium for the risk of breakage?v Z: The additional premium is for the buyers account.v B: A few points about insurance are not very clear to me. What does “I” cover according to your usual CIF terms?v Z: It covers All Risks and War Risks at 110 percent of the invoi
18、ce value.v B: Do you mean that risks such as breakage, leakage, TPND, hook and contamination damage are all included?v Z: Yes, you are right.v B: What about SRCC risks?v Z: It will cover them too, if you like.v B: By the way, how to calculate the premium?v Z: Thats a percentage of the total value of
19、 your goods. Its very low.v Section 4: What Should I Cover?v B: Dont you think you could make the price C&F for our future business? And how much will you take off?v Z: The rates quoted by the Peoples Insurance Company of China are moderate. They have very little effect on our CIF prices. Roughly sp
20、eaking, the difference between CIF and C&F is about 0.3 percent. The premium varies with the nature of the goods, the degree of cover desired and the place of destination.v B: 0.3 percent, that sounds reasonable. I have another question.v Z: What? I hope Ill be of help.v B: If we are given a CIF San
21、 Francisco price for some textiles, what coverage should we arrange for?v Z: In that case, you dont need All Risks Cover. v B: Why?v Z: You see, textiles are not delicate goods, and wont likely be damaged on the voyage. FPA is enough.v B: But FPA does not cover partial loss of the goods in transit.v
22、 Z: Then, what about WPA? A WPA policy covers you against partial loss in all cases. In that case, WPA is better to you.v B: How to calculate the premium?v Z: Thats also a percentage of the total value of your goods. Its very low.v 9.3 Email Communication v Letter 1: Applying for Insurancev Dear Sir
23、s,v Knowing that your company is the largest company in China with branches and sub-branches throughout the country and with claims settling agents in major ports of the world, China Arts & Crafts Import & Export Corp. wishes to insure with your company a shipment of Chinese porcelain valued $780,00
24、0 on board the vessel “Tong Soon” against All Risks, bound from Shanghai to London sailing on 20th of March.v We shall appreciate it if the goods could be insured at favorable rate.Yours trulyv Letter 2: Replying to a Request for Insurancev Dear Sirs,v We have for acknowledgment your letter 20th ins
25、tant and are pleased to note your readiness to insure with us a shipment of Chinese porcelain from Shanghai to London by sea.v The prevailing rate for the proposed shipment against All Risks including War Risks is 0.5%, subject to our own Ocean Marine Cargo Clauses and Ocean Marine War Risks Clauses. Copies thereof are enclosed herewith for your reference.v If you find our rate acceptable, please let us know, preferably, by cable, the details of your shipment so that we may issue our policy accordingly.Yours friendly
