Introduction
It is quite important to
evaluate the transportation risk in international trade for better financial
stability of export business. About 80% of the world major transportation of goods is carried out
by sea, which also gives rise to a number of risk factors associated with
transportation of goods.
The major risk factors related to shipping are cargo, vessels, people and
financing. So it becomes necessary for the government to address all of these
risks with broadbased security policy responses, since simply responding to
threats in isolation to one another can be both ineffective and costly.
While handling transportation in international trade following precaution
should be taken into consideration.
- In case of transportation by ship, and the product
should be appropriate for containerization. It is worth promoting
standard order values equivalent to quantities loaded into standard size
containers.
- Work must be carried out in compliance with the
international code concerning the transport of dangerous goods.
- For better communication purpose people involve in
the handling of goods should be equipped with phone, fax, email,
internet and radio.
- About the instructions given to the transport
company on freight forwarder.
- Necessary information about the cargo insurance.
- Each time goods are handled; there risk of damage.
Plan for this when packing for export, and deciding on choice of
transport and route.
- The expected sailing dates for marine transport
should be built into the production programme, especially where payments
is to be made by Letter of Credit when documents will needs to be
presented within a specified time frame.
- Choice of transport has Balance Sheet
implications. The exporter is likely to received payments for goods
supplied while they are in transit.
- Driver accompanied road transport provides peace
of minds, but the ability to fill the return load will affect pricing.
Export and import in international trade, requires transportation of goods
over a long distance. No matter whichever transport has been used in
international trade, necessary insurance is must for ever good.
Cargo insurance also known as marine cargo insurance is a type of insurance
against physical damage or loss of goods during transportation. Cargo insurance
is effective in all the three cases whether the goods have been transported via
sea, land or air.
Insurance policy is not applicable if the goods have been found to be
packaged or transported by any wrong means or methods. So, it is advisable to
use a broker for placing cargo risks.
The following can be covered for the risk of loss or
damage:
- Cargoimport, export cross voyage dispatched by sea, river,
road, rail post, personal courier, and including associated storage
risks.
- Good in transit (inland).
- Freight service liability.
- Associated stock.
However there are still a number of general exclusion such loss by delay,
war risk, improper packaging and insolvency of carrier.
Converse for some of these may be negotiated with the
insurance company. The Institute War Clauses may also be added.
Regular exporters may negotiate open cover. It is an umbrella marine
insurance policy that is activated when eligible shipments are
made. Individual insurance certificates are issued after the shipment is
made. Some letters of Credit Will require an individual insurance policy
to be issued for the shipment, While others accept an
insurance certificate.
Whereas standard marine/transport cover is the answer for general
cargo, some classes of business will have special requirements. General
insurer may have developed specialty teams to cater for the needs of
these business, and it is worth asking if this cover can be extended
to export risks.
Cover may be automatically available for the needs of the
trade.
Example of this are:
- Project Constructional works insurers can cover the movement of
goods for the project.
- Fine art
- Precious stonesSpecial Cover can be extended to cover sending of
precious stones.
- Stock through put cover extended beyond the time goods are in
transit until when they are used at the destination.
An exporter selling on, for example FOB (INCOTERMS 2000) delivery
terms would according to the contract and to INCOTERMS,
have not responsibility for insurance once the goods have
passed the ship's rail. However, for peace of mind, he may wish to
purchase extra cover, which will cover him for loss or will
make up cover where the other policy is too restrictive . This is
known as Seller's Interest Insurance.
Similarly, cover is available to importers/buyers.
Seller's Interest and Buyer's Interest covers usually extended cover to apply if
the title in the goods reverts to the insured party until the
goods are recovered resold or returned.
Importers buying goods for a particular event may be interested in
consequential loss cover in case the goods are late (for a reason
that id insured) and (expensive) replacements have to be found
to replace them. In such cases, the insurer will pay a claim and
receive may proceeds from the eventual sale of the delayed goods.
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