Letter of Credit Forum

Whilst, I could offer some guidance, with due respect, I feel that Phill may be better qualified to give a clearer response.

As Phill comments, this is a wide ranging and complex topic and impacts across various logistical regimes. However, along with conducting your own research, as a starting point you may wish to review the following :

1. The relevant article in  UCP600 ( Article 28), and paragraphs 170-180 in the ISBP , which give further guidance insofar as they relate to application under LCs.

2. The Institute Cargo Clauses (A) , Institute Strikes Clauses (Cargo), and Institute War Clauses (Cargo). Institute Cargo Clauses (A) has the most comprehensive cover, and a table of the difference between this and the lesser cover clauses is listed here : http://www.export911.com/e911/ship/newInsti.htm

"All Risks", although existing under the old cargo clauses,  is no longer a defined risk cover, and has been suprseded by ICC (A).

For further guidance here are the full texts of the individual Institute Cargo Clauses

1. Institute Cargo Clauses (A) : http://www.lgt.polyu.edu.hk/hkdata/HK_Shipping/Law/MI%20Law/Cargo/ICC-A%2082.pdf

2. Institute Cargo Clauses (B) : http://www.jus.uio.no/lm/institute.marine.cargo.clauses.b.1982/portrait.pdf

3. Institute Cargo Clauses (C) : http://www.cmbol.com/trade/CargoInsurance/pdf/ying/Institute%20Cargo%20Clauses%20(C)%201er%20Janvier%201982.pdf

4. Institute Strike Clauses : http://www.jus.uio.no/lm/institute.marine.cargo.clauses.strikes.1982/portrait.pdf

5. Institute War Clauses: http://www.jus.uio.no/lm/institute.marine.cargo.clauses.war.1982/portrait.pdf          

Hello

OK – I can tell you 10 things, and maybe if other posters add to these ten, collectively you might have what you need…or close to it.

1.       Insurance is a free-market issue so like any contract it has terms and conditions and many players – the devil is in the Detail!.

2.       The commonest set of clauses comprises the Institute of Cargo Clauses (ICC) issued through the International Underwriting Association of London or ILA (formally the ILU) – these are the A B and C clauses.

3.       You can source the Institute of Cargo Clause A, B & C via the net. The essential difference is that B&C tell you what you are covered for: so they list the risks you are indemnified for (and they only cover total losses arising out of these risks) whereas the A clause list what you are NOT covered for (the pertinent exclusions), so you are indemnified for loss (including partial loss) caused by anything NOT listed.

4.       The C clauses provide the lowest level of cover – total loss arising from fire, capsizing, collision and so forth; the B clauses add additional protection (earthquakes, volcanic activity, washing overboard, damage during loading onto / offloading from the ship). Neither of these covers loss due to theft, robbery or pilferage.

5.       Unless the sales contract dictates otherwise, the C clauses are the minimum requirement under Incoterms CIF and CIP (or the local equivalent of the C clauses )

6.       All of the ICC clauses cover General average and jettison (in seafreight) and the Air clauses are very similar to the A clauses.

7.       Normally, a credit will call for ICC clauses A, with the value uplifted by 10%. This upliftment is to cover against the minimum calculation in the event of a General Average, but it is rarely ever the appropriate upliftment for cargo claims other than through a GA. If you want to understand more on this, ‘Google’ the Marine Insurance Act of 1906 and also have a look for sites dealing with General Average issues. Insurance will need to be proven by the beneficiary on presentation of documents or by the applicant as part of the application to get the credit opened in the first instance.

8.       Many countries have restrictions on Marine insurance. You might want to look on the AIMU site www.aimu.org where a comprehensive list of restrictions is given (follow the 'regulations' link) – e.g. countries where the ICC clauses are not in force, not allowed or must be replaced by the local equivalent..

9.       War, strikes, riot and civil commotion cover is a common supplementary cover but clearly is only available when on offer i.e. you may not actually be able to buy it.

10.   There is no such thing as “all risks” insurance. What you are dealing with is ‘most risks’, which is normally read as the ICC clauses A. The  terms of which begin “This insurance covers all risks of loss or damage to the subject matter insured…” and everyone stops reading there: however, the sentence continues “…except as provided in clauses 4,5,6 and 7” (the pertinent exclusions)

Right, that’s my 10…

fellow posters?

cheers

phill doran

"...in armour bright, the merchant men..."