ICC Digital Library Forum

What's the connection between non-Incoterms (e.g. C&F) and marine insurance ?

In the absence of a response in a few days I will answer.

Laurence

The tip from us is "C&F" is without "I" and the word "marine". You may diverse into different issues in marine cargo insurance from this point alone, such as sum insured, which party liable for insurance coverage, procedure-wise and cost-wise, insurable interest, whether applicable also to air transport? etc. etc. The more one knows about marine cargo insurance, the more complicated this query becomes.

For this query we would like to play the role of Rivaldo again. Who is Ronaldo? Please show up or Laurence has to take up this role himself finally.

Depending on the answer provided, we may have an opportunity to make this query more complicated after Ronaldo has made a goal, such as playing the role of a naughty referee and declare that the goal is void due to Ronaldino is off-side.

www.tolee.com

[edited 7/10/02 7:17:31 PM]

I would like to make the following distinctions:

1. There are trade terms that are used in DC’s with complete reference to Incoterms, e.g. “CFR Incoterms 2000” which means that the term is interpreted in accordance with ICC’s standard definition, thus, avoiding problems of conflicting national laws and definitions.
2. There are trade terms used without specific reference to the current Incoterms, i.e. without appending the words “Incoterms 2000”, e.g. CFR. An incorrect practice followed in int’l trade but still existing.
3. There are trade terms taken from previous Incoterms versions, e.g. in the Incoterms 1980, we have the acronym C&F (Cost & Freight). Laurence, are you referring to this category as non-Incoterms?

In any case marine insurance’s connection to a C&F trade term is that it is not made part of the said term agreed upon between the buyer and the seller. It is a separate obligation of the buyer at an additional cost. The objective is obvious: to cover the risk of a possible financial loss due to merchandise damage or destruction during transport.

The issuing banks usually require marine insurance coverage (insurance policy in negotiable form, made out in the name of the bank) to be provided for non-CIF/non-CIP (other than EXW) credits. The types of risks to be covered, the currency & the amount are defined.

Dimitri

Dimitri,

I am no history expert, but I understood that C&F existed long before Incoterms or the ICC and it is in this respect that I refer to non-Incoterms. You are also correct in stating that a term such as CFR is not an Incoterm unless so stated and indicating which version of Incoterms applies.

However, neither T.O. nor you seems to be on the right track so far regarding the link between insurance and non-Incoterms.

Any guesses from anyone else ?

Laurence

My thanks to Dimitri & T.O. for their contributions, but I will not add to the suspense any longer.

The connection between non-Incoterms & marine insurance for most people lies in the fact that they only become important when one needs to rely on them. Many people routinely complete insurance certificates, but if one were to ask them to prove that payment in full for a claim on a single shipment was certain, it is only then that they would look in detail at all aspects necessary to be 100% successful.

Similarly, we often see DCs citing CIF at an inland destination. Sometimes CIF is followed by "Incoterms 2000" & sometimes not. If it includes the Incoterms reference, it displays a lack of understanding. If it does not, it may be arguable that it has acceptance locally. Either way, as with insurance, it is only when things go wrong that it will be tested, often in court by judges who have scant knowledge of the subject.

Laurence

Laurence,

Your “connection” is a bit too generalized. We can say the same connection exists in the followings:

(1) A DC and a sales contract;

(2) Negotiation and bank's service contracts on a valid discrepancy being missed out by the negotiating bank and later being picked up by the issuing bank; or missing the documents during transit and other disputes not governed by the UCP 500 or ISBP.

(3) A charter party BL and the charter party,

so on and so forth, where parties would not look at the documents until troubleshooting.

This is exactly the good reason to keep us consultant alive.

Do you agree?

We will tell you what we have in mind tommorrow about our specific views on the connections between Incoterms (C&F etc.) and cargo insurance.

www.tolee.com

[edited 7/16/02 3:54:52 PM]

T.O.,

all of the documents listed by you, with the possible exception of the bank's service contract, are generally examined in detail by at least one person in the normal course of business. I suggest, however, that this does not happen when considering shipment terms or insurance cover. Parties to a contract sometimes erroneously assume that they know the true meaning of a term (shipping or insurance) and where there is repeat business may continue to do so for years without apparent difficulty. It may only be when one of them has to rely on the term used, that the error comes to the surface.

When DCs, sales contracts or charter parties etc are used, they must be drawn up to mirror the wishes of the parties involved. This forces consideration of the terms to be used. However, a human weakness is to assume the commonplace. This can lead to certain details being overlooked. If such detail results in an error which will become apparent upon shipment, it can usually be rectified quickly. What is more difficult to spot is an error that is repeated over a long period of time, based on the mistaken assumption/s of the parties involved.

Laurence

Laurence,

From our experience in resolving DC disputes, sometimes, the DC and the sales contract are handled by different departments and they never communicate until troubleshooting. Then they would play politics and put all the blames to the other department. The bigger the organisation, the more frequent we see this sort of things happen.

www.tolee.com