Credit required, among other documents, a marine insurance policy endorsed in blank for the invoice value plus 10% covering all risks.
How would the insured amount be computed in the following cases: -
1.Under additional conditions, it is stipulated that 'Signed commercial invoice evidencing 5% deduction for beneficiary's commission acceptable'
2.Where the invoice tendered showed a deduction of $XXX being advance payment made
I feel that the insured amount should be 110% of the full invoice value (i.e. including the deduction)
Your advice would be much appreciated.
Thank you.
Insured amount
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serenachang
- Posts: 10
- Joined: Fri Apr 05, 2019 5:26 pm
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Insured amount
Commission or advance payment are side issues to this L/C. As the L/C called for insurance value to be invoice value plus 10%, that is exactly what the insured value should be.
Laurence A. J. Bacon
Laurence A. J. Bacon
Insured amount
If the invoice is to show advance payment, deductions, commission and/or discounts and insurance is based on discounted invoice value, then the cargo would be under insured for the part discounted. In case of total loss, the full CIF value of the cargo cannot be claimed.
We must ask ourselves what is the purpose of cargo insurance? Of course it is to cover the perils of the sea and other risk exposed to the full CIF value of the cargo.
With the objective of cargo insurance clarified, then no matter what (including advance payment and discounts to be deducted from the invoice value), the full CIF value of the cargo must be covered by insurance, for the benefit of the beneficiary (in case of payment dishonour), applicant and the issuing bank (holding BL as security for loan extended).
Our recommendation is to change the instructions of the LC in insurance cover, instead of 110% on the invoice value (discounted), it should have stated 110% on CIF value or the full invoice value before the discounts and deductions.
If the invoice is in FOB, then it is not the duty for the beneficiary to cover insurance. His duty is only to send a timely shipment advice to the buyer/applicant for timely arrangement of insurance of the later, under the Incoterms 2000.
If the LC is giving inappropriate instructions, we should not follow blindly (although it is safe for discrepancy sake, it may create other harms) and should have asked for an amendment.
We are from www.tolee.com
[edited 6/17/01 4:31:17 PM]
We must ask ourselves what is the purpose of cargo insurance? Of course it is to cover the perils of the sea and other risk exposed to the full CIF value of the cargo.
With the objective of cargo insurance clarified, then no matter what (including advance payment and discounts to be deducted from the invoice value), the full CIF value of the cargo must be covered by insurance, for the benefit of the beneficiary (in case of payment dishonour), applicant and the issuing bank (holding BL as security for loan extended).
Our recommendation is to change the instructions of the LC in insurance cover, instead of 110% on the invoice value (discounted), it should have stated 110% on CIF value or the full invoice value before the discounts and deductions.
If the invoice is in FOB, then it is not the duty for the beneficiary to cover insurance. His duty is only to send a timely shipment advice to the buyer/applicant for timely arrangement of insurance of the later, under the Incoterms 2000.
If the LC is giving inappropriate instructions, we should not follow blindly (although it is safe for discrepancy sake, it may create other harms) and should have asked for an amendment.
We are from www.tolee.com
[edited 6/17/01 4:31:17 PM]