FLOWSERVE CORPORATION OCEAN CARGO INSURANCE HANDBOOK

Transcription

1 FLOWSERVE CORPORATION OCEAN CARGO INSURANCE HANDBOOK Updated July

2 TABLE OF CONTENTS Description Page Introduction / Terms of Sale 3 Policy Summary 5 In Case Of Loss 8 Glossary 9 Common Ocean Cargo Abbreviations 17 2

3 FLOWSERVE OCEAN CARGO HANDBOOK Ocean cargo shipments are those which include some transit via water, such as New York to U.K. Ocean Cargo shipments are covered while in due course of transit from Warehouse to Warehouse. In other words, coverage attaches when the goods leave the manufacturing facility and continues during the ocean transit until goods arrive at the warehouse at final destination including most inland transit after the goods are off-loaded from the ocean vessel at the port of import. If either the buyer or the seller directs that the transportation of goods be stopped, the shipment is no longer in due course of transit and coverage ceases. The insurance company is to be notified promptly in the event the transportation of a shipment is interrupted for more than thirty (30) days due to causes beyond the control of either the buyer or seller. TERMS OF SALE The importer and exporter must exercise caution when entering into a sales agreement. The point at which title and risk of loss passes from seller to buyer must be clearly spelled out in the sales contract so that the responsibilities of both parties are understood. Globally accepted terms of sale are used in sales contracts to identify the obligation of both buyer and seller because they define responsibility for loss or damage at any point in transit. The following commonly used terms of sale delineate the responsibilities of both buyer and seller. EXW Ex Works (Ex Plant, Ex Factory, Ex Warehouse, etc.) Ex Works indicates that the buyer s responsibility for loss or damage begins as soon as the merchandise has been made available the buyer at the named place of delivery not loaded. Under these terms, the price quoted applies only to the costs of the merchandise at the point of origin. F.A.S. Vessel, Named Port of Export (Free Alongside Ship) The term F.A.S. indicates that the seller quotes a price which includes delivery of the merchandise alongside the vessel or on the dock designated by the buyer at the named port of export. The seller s obligations are fulfilled when the goods have been placed alongside the ship on the quay or in lighters at the named port of shipment. The buyer bears all costs and risks of loss or damage from the time the merchandise is delivered alongside the vessel or on the designated dock, including responsibility for loss or damage to the merchandise while awaiting loading. 3

4 F.O.B. Named Port of Shipment (Free on Board) The Term F.O.B. indicates that the seller quotes a price covering all expenses incurred until the merchandise is placed on board a ship by the seller at a port of shipment named in the sales contract. The risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods are loaded on board the ship at the named port of shipment. The buyer is responsible for paying for main carriage and destination charges including customs clearance. C.F.R. Named Port of Destination (Cost & Freight) C.F.R. indicates that the seller quotes a price that includes the cost of the merchandise and the cost of all transportation to a named destination. The seller must pay the merchandise and freight costs necessary to bring the goods to the name port of shipment at destination. Risk of loss or damage to the goods transfers from the seller to the buyer when the goods are loaded on board the ship at the origin named port of shipment. C.I.F. Named Port of Destination (Cost, Insurance & Freight) C.I.F. indicates that the price quoted includes the cost of the merchandise, all transportation charges to the named destination and the costs of insurance coverage to that destination. Risk of loss or damage to the goods transfers from the seller to the buyer when the goods are loaded on board the ship at the origin named port of shipment. Title to the insurance is usually transferred from seller to buyer through the use of a certificate of insurance. Ocean Cargo Certificate A Certificate of Insurance is issued to cover a specific shipment. It is used whenever it is necessary for the Assured to provide evidence of insurance to a bank, consignee or other third party. It is a negotiable document used to transfer the title of the insurance, and is one of three documents usually required to complete a commercial transaction. (The other two documents are the Commercial Invoice and the Bill of Lading.) Certificates are generated online through MarshCargo at To logon, enter your User ID and password. Please note that the sharing of User Ids and passwords is not allowed. Refer to the MarshCargo Quick Start Guide for detailed instructions. To obtain a User Id or to request webinar training, please contact Flowserve Risk Management: Judy Rogers, Senior Risk Management Analyst Phone: (972) jurogers@flowserve.com 4

5 POLICY SUMMARY WORLDWIDE MARINE CARGO/WAR RISK COVERAGE Policy Number: UM MA17A Policy Effective Date: July 1, 2017 Policy Expiration: Insurer: Until Cancelled XL Specialty Insurance Company NAMED INSURED AND ADDRESS: Flowserve Corporation 5215 N. O Connor Blvd., Suite 2300 Irving, Texas COVERAGE AND LIMITS: Coverage: All Risks of Physical Loss or Damage from any external causes except those risks as may be excluded by the Free of Capture & Seizure (FC&S) and other warranties and exclusions as specified in the policy. Limits: Any one Conveyance $20,000,000 Deductibles: A deductible of $10,000 shall apply to any one Loss; however, this deductible shall not apply to (i) survey fees, (ii) general average, salvage or special charges, (iii) loss, damage or expense covered under the Sue and Labor, Constructive Total Loss or Debris Removal clauses, a total loss or the S.R. & C.C. Endorsement. 5

6 Geographical Limits: Covers all shipments, except to the extent coverage is prohibited by the laws and governmental decrees of the United States of America, at and from ports and/or places in the world to ports and/or places in the world directly or via ports and/or places in any order, including the risk of transshipment by land, air, water or otherwise. However, excluding domestic transit shipments originating and terminating wholly within one country. Coastal steamer and coastal barge shipments originating and terminating in the same country are covered. Exclusions & Limitations of Coverage: Include, but are not limited to: Unlawful shipments and/or unlawful merchandise Loss or damage due to: Loss of Market Delay Inherent Vice Radioactive Contamination Chemical, Biological, Bio-Chemical, Electromagnetic Terrorism Exclusion Major Conditions: Include, but are not limited to: Shipments are insured subject to S.R.&C.C. Endorsement (Form No. 12A) Valuation: C.I.F. (Cost, Insurance & Freight) plus 10% Debris Removal 10% of limit of liability Contingent Interest/Unpaid Vendors Difference In Conditions Guarantee of Collectability Concealed Damage Clause (90 Days) Warehouse to Warehouse Coverage 6

7 Rating Structure: Marine: Flat Annual Premium based. Premium is based on annual insured shipment sales. War/SR & CC: Included in Marine Premium unless On Application $120,290 Flat Annual Premium and Payable Quarterly for July 1, 2017 to July 1, Shipments of other goods or by other vessels and/or between other places, or all shipments on deck, at rates to be agreed. Rates are effective with respect to all shipments of insured goods and/or merchandise and/or property which are shipped on metal-hulled, self-propelled vessels which are not over 20 years of age nor less than 1000 net registered tons and which are classed A1 American Record or equivalent by a member of the International Association of Classification Societies; or vessels over 20 years of age which are approved by This Company, and which are not less than 1000 net registered tons and classed as above, but only while operating in their regular trade; but in either case excluding vessels built: For service on the Great Lakes Solely for military or naval service For Carriage of Dry Bulk or Liquid Bulk cargoes - which are more than 15 years of age, unless specifically approved by This Company. 7

8 IN CASE OF LOSS In the event of loss or damage to shipments insured under Marine Insurance Policy UM MA17A, speed is of the essence. To permit a claim to be handled as expeditiously as possible, immediately report details of the loss to Flowserve s Risk Management Department: Judy Rogers, Senior Risk Management Analyst Phone: (972) jurogers@flowserve.com OR Timothy Bologna, Director of Risk Management Phone: (972) tbologna@flowserve.com 8

9 GLOSSARY Acknowledgement: A form issued to acknowledge that insurance is in effect for a specific shipper or consignee. The issuer may not have details of the actual coverage provided by the policy. Actual Total Loss: Merchandise insured is completely lost or so badly damaged that it is unsalvageable. Ad Valorem Bill of Lading: See Valued Bill of Lading. Advance: An agreed percentage increase applied to the total of invoice plus freight. This provides for unknown expenses at the time of shipment and covers a portion of the assured's profit. It also may be used to develop sufficient value on the merchandise in order to prevent coinsurance in the event of a General Average. Advanced Freight: Freight paid by the shipper when merchandise is accepted for shipment. Not refundable, even if the vessel and/or cargo do not arrive at the intended port of discharge. Also referred to as Prepaid Freight. Air Waybill: A bill of lading issued by an airline acknowledging receipt of merchandise and indicating conditions for carriage. Application: A written form, submitted to underwriter to obtain quotation for a risk. It contains all particulars of the risk. Average: Loss or damage. Average Adjuster: One who specializes in settlement of marine claims. Bill of Lading: The most common form of contract of carriage that serves three purposes: 1. As a receipt for merchandise shipped. 2. As a contract of carriage which sets forth the liability of shipper and carrier. 3. As a negotiable document in that interest in the merchandise described can be assigned to someone other than the original party of contract. Binder: Completed application which has been signed by both the underwriter and the individual offering the risk, and is evidence that insurance is in effect pending issuance of a formal contract. Blank Endorsement: See Endorsement in Blank. 9

10 Bonded Shipments: Shipments that are stored under supervision of customs until the import duties are paid or the goods are exported. Carriage of Goods by Sea Act 1936 (COGSA): A U.S law which among other provisions establishes statutory responsibility for the carrier s liability for certain types of damage. Example: The vessel or carriers are responsible for damage of goods resulting from negligence in loading, stowing or discharge of cargo however not responsible for damage caused by errors of navigation, perils of the sea, fire, etc. Certificate of Insurance: A document presented by the insurance company or assumed as evidence to a third party that insurance is in effect. The assured may assign his rights under this negotiable document to a third party, usually the consignee, by endorsing the reverse of the certificate in the same manner as a personal check (See Endorsement in Blank). Charter Party: Is a lease or agreement to hire a vessel to transport goods on a designated voyage to one or more locations? Clean Bill of Lading: A bill of lading receipted by carrier for goods received in apparent good order and condition without damages or other irregularities. Contract of Carriage: A contract which sets forth the obligations of both a shipper and a carrier concerning transportation of the merchandise. The most common forms of affreightment are Bills of Lading and Waybills. COGSA: See Carriage of Goods by Sea Act. Collect Freight: Freight which is not payable to the carrier unless the merchandise arrives at the port of discharge named in the bill of lading. Commercial Invoice: A document clearly identifying the seller and buyer of goods the merchandise being sold, type of packaging used, number of units being shipped, per unit cost and the total cost up to the point named in the terms of sale. It should also include identifying numbers such as invoice number, shipping date, mode of shipment, delivery and payment terms. Common Carrier: Any ship-owner or other carrier who offers his vessel or other mode of transportation to the public, in general, for the purpose of transporting merchandise. Constructive Total Loss: Not an actual total loss, but one which can only be prevented by incurring expenses that when added to the amount of damage would exceed the actual value of the merchandise. Consular Invoice: Special invoice required by some countries to control merchandise shipped to them. The form required may vary from country to country and it must be notarized or validated by the country's consulate prior to shipment of merchandise. Consumption Entry: See Customs Entry. 10

11 Contingency Insurance: A secondary insurance coverage which will protect an assured's financial interests if the primary insurance coverage effected by others does not respond for a covered loss. Contributory Value: The value of property saved as a result of a General Average Act which forms the basis for determining each party's contribution in General Average. Count Bill of Lading: A bill of lading which shows the actual number of units being shipped. Especially important on lumber shipments, which are normally shown in number of board feet (although actually shipped in bundles). A count bill of lading would show the actual number of bundles shipped. Cover Note: A non-negotiable document evidencing insurance which may or may not indicate the terms of coverage (See Acknowledgement). Customs Broker: A firm which specializes in clearing imported merchandise for transit to the interior. Normally responsible for obtaining and submitting all documents for clearing merchandise through customs and arranging inland transport as well as paying all charges related to these functions must be licensed by respective countries of import. Customs Entry Form: A form required by U.S. Customs for all merchandise entering the United States. It indicates country of origin, description of merchandise and amount of estimated duty to be paid before merchandise is released by customs, unless other arrangements have been made. Declaration: Form supplied by insurance companies, and used by assureds in reporting shipments under an Ocean Cargo Policy when no evidence of insurance is required. Deductible: A specific dollar amount, or percentage of the insured value, which will be deducted from all losses recoverable under a policy. It is normally used to correct adverse loss ratios by eliminating small claims and their loss handling expense. It may apply to all losses, or only to specific types of losses. Detention: In general, any time merchandise is stopped in transit short of final destination. Also used to describe merchandise prohibited entry into the United States by the Food and Drug Administration or other government agency. Difference in Conditions (D.I.C.): A secondary insurance coverage which provides coverage for perils which are not included under the primary insurance effected by others. Dock Receipt: A form issued by a carrier or his representative as evidence that merchandise was in fact received by the carrier for shipment often referred to as a Received for Shipment Bill of Lading. Door to Door: Refers to merchandise shipped in containers, trailers or vans from the original point of manufacture to the final destination also referred to as House to House. 11

12 Draft: A payment order prepared by a seller instructing the buyer to pay the face amount at a certain time. Presentation of the draft to the buyer is usually done by a bank and payment is required either at the time of presentation (Sight Draft) or within a specified period of time (Time Draft). Due Course of Transit: The orderly transit of merchandise from the point of origin to the final destination without interruptions or delays resulting from the action or inaction of any party at interest. Endorsement in Blank: By endorsing the reverse of a Special Cargo Policy or a Certificate of Insurance, the assured may assign his rights to insurance to another party. The firm name is typed or stamped on the document and it is signed by an individual authorized to execute the Special Policy. Order Bills of Lading are negotiated in the same manner. F.O.B./F.A.S.: INCOTERM A term of sale. Also a secondary insurance coverage added to a cargo policy to protect a seller's financial interest during the period of time that the buyer is not responsible for loss or damage when terms of sale are F.O.B. or F.A.S. Forced Discharge: Discharge of merchandise at a place other than the intended port of discharge due to an accident to the vessel. Franchise: Used to eliminate normal expected losses on certain commodities. It represents a percentage of the insured value or a fixed amount which the loss must equal or exceed in order to be paid. If the amount of the franchise is met or exceeded, the loss is paid in full. Freight Forwarder: Firm specializing in arranging transport of merchandise and completing documentation required for the orderly transport of merchandise. Occasionally, they will take merchandise for the purpose of packing or consolidating with other cargo for export to the same country. Full Value Declared (FVD): A notation on an air waybill which indicates that a specific value has been declared to the carrier for carriage of the merchandise. General Average: A voluntary sacrifice or extraordinary expense incurred during transit to protect all interest from an impending peril. General Average Contribution: The amount each party involved in a General Average must contribute. It is determined by applying the General Average percent to each party's contributory value. General Average Guarantee: A form of promissory note provided by a party involved in a General Average guaranteeing payment of all contributions legally due. If insured under an Ocean Cargo Policy, the insurance company will usually provide their Guarantee. General Average Percent: A percentage derived by dividing the total amount of loss and expense incurred as a result of a General Average by the total amount saved as a result of General Average, which is applied to each party's contributory value. 12

13 Guaranteed Freight: Freight which is not prepaid but which is payable whether or not the merchandise arrives at the final point of destination. House Air Waybill: An air waybill issued by a freight forwarder for an air shipment. House to House: See Door to Door. Immediate Delivery Entry: See Customs Entry. Immediate Entry Entry: Customs form allowing merchandise to be delivered before payment of duty. Consumption Entry Form must be filed within ten days after the date of entry, at which time duty must also be paid. Immediate Transport Entry: Customs form allowing the merchandise to move "in bond" to an inland destination where customs inspection will be made, and duty, if any, will be paid. Inchmaree Perils: Any physical loss of or damage to goods resulting from bursting of boilers, breakage of shafts or any latent defect in machinery, hull or appurtenances of vessel or from faults or errors in navigation or management of vessel by master, mariners, engineer or pilots. Increased Value: Difference in value between the importer's declared value and the seller's declared value of commodities also a type of secondary insurance coverage which insures this difference. Inherent Vice: A nature or quality of goods or property that causes such goods or property to damage or destroy itself. Invoice: A bill of sale issued by the seller to the buyer indicating the items purchased and the amount the two most common types being a Commercial Invoice and a Consular Invoice. LASH (Lighter Aboard Ship): A ship specially designed with an on onboard deck crane capable of loading and unloading lighters (barges). Letter of Credit: Method of payment between buyer and seller. The buyer opens a Letter of Credit in favor of the seller at his local bank by depositing the amount of the purchase price and dictating certain documents which the seller must present in order to obtain payment. The Letter of Credit will be sent to a bank in the vicinity of the seller and upon presentation of the documents called for, the local bank will release payment. Lighter: An open or covered barge towed by a tugboat and used mainly in harbors and inland waterways for the transport of cargo. Lightering: Carrying of merchandise aboard small craft between an ocean vessel and a port or between two vessels. 13

14 Master Air Waybill: An air waybill of lading that covers a consolidated shipment of goods and lists the consolidator (freight forwarder) as the shipper. Merchandise: Commodities or goods which may be bought or sold. No Value Declared (NVD): A notation on an air waybill which indicates that no specific value has been declared to the carrier for carriage of the merchandise. Liability of the carrier would therefore be as defined by statute or as incorporated in the waybill also referred to as a Released Bill. Non-Delivery: Unexplained disappearance of an entire shipping package rather than the contents themselves or a portion of the contents. Non-Vessel Operating Common Carrier: A firm that offers the same services as an ocean carrier. They usually accept small shipments (LCL), consolidate several into full containers and arrange, as primary shipper, transportation by ocean common carriers. They are required to file ocean tariffs with the Federal Maritime Commission and are subject to the same laws and statutes as apply to a primary common carrier. On Board Bill of Lading: A bill of lading issued by the steamship company, confirming the receipt of merchandise and the fact that it was loaded on board the ocean vessel. On Deck Bill of Lading: A bill of lading which states that the cargo has been stowed on deck and is at the shipper's risk. The carrier is not liable for loss or damage unless due to gross negligence. Optional Stowage Bill of Lading: A bill of lading which gives a carrier the right to stow cargo wherever he sees fit, especially with respect to the stowage of containers on deck. Order Bill of Lading: A bill of lading which shows the shipper or buyer as the consignee. It is a negotiable document and interest is transferred from one party to another by endorsement in the same manner as a Special Policy or Certificate of Insurance. Particular Average: Partial loss borne only by party whose merchandise was damaged. Perils of the Sea: The basic coverage provided under an Ocean Cargo Policy. Pilferage: Theft of the contents, in whole or in part, of a shipping package. Policy of Insurance: See Special Cargo Policy. Prepaid Freight: Freight paid by the shipper to the carrier when merchandise is tendered for shipment. Not refundable if the merchandise does not arrive at the intended destination. Pro Forma: When coupled with the title of another document (Example: pro-forma invoice) it means an informal document presented in advance of the arrival or preparation of the required documents. 14

15 Received for Shipment Bill of Lading: Bill of lading issued by the carrier evidencing actual receipt of merchandise for shipment also referred to as a Dock Receipt. Released Bill: Type of carriage where no specific value has been declared for carriage (See No Value Declared). Secondary Coverage: Any form of insurance provided to an assured who is not responsible for providing ocean marine insurance but still has an unprotected financial interest. Short Form Bill of Lading: Summary-type bill of lading which does not spell out all obligations and responsibilities of both parties. Unless a shipper is familiar with the carrier's tariff, he should request a full bill of lading. Sight Draft: Document issued through the seller's bank to the buyer's bank that sets forth the purchase price for the merchandise shipped. Upon payment of this amount, the buyer's bank will release the documents needed to take delivery of the merchandise from the carrier. Special Cargo Policy: Similar to a Certificate of Insurance, except it is insurance in and of itself and not subject to the underlying terms of an Open Policy when title has been transferred to a third party. Special Risk: Individual shipment on which an insurance company has provided coverage and for which there is no other insurance in effect. A Special Cargo Policy indicating the insuring terms provided is issued to the assured. Steamer Additional: Additional charge added to the regular marine rate under an Open Policy when the vessel used is over twenty years of age, under 1000 net tons, or not classed by a recognized classification society such as Lloyd's Register or the American Bureau of Shipping. All policy rates are predicted on the use of vessels which fall within these criteria unless otherwise agreed upon. In most instances, steamer additional is reimbursed by the steamship company. Straight Bill of Lading: Nonnegotiable bill of lading that designated a consignee who is to receive the goods and that obligates the carrier to deliver the goods to that consignee only.. Terms of Sale: Usually refers to an internationally accepted set of definitions which outlines the responsibilities of a buyer and seller for loss or damage to merchandise during transit and payment of transportation also known as INCOTERMS. Unpaid Vendor: Seller who ships merchandise before receiving payment usually used to denote a seller who is not providing insurance during ocean transit and who may need contingency insurance. Valued Bill of Lading: Bill of lading issued by the carrier that indicates the amount shipper has declared as the value of merchandise. The carrier will be liable for this amount in the event he is found responsible for loss or damage to the merchandise. 15

16 Warsaw Convention: Defines the responsibilities and liabilities of air carriers transporting merchandise in international trade. Waybill: A bill of lading issued by a carrier showing the merchandise to be transported and shipping instructions. It is usually used by airlines and truckers. 16

17 COMMON OCEAN CARGO INSURANCE ABBREVIATIONS A/R AWB B/L All Risks Air Waybill Bill of Lading C. & F. Cost and Freight C.I.F. CERT COGSA cs CTL ctn ctnr D/A D/D D.I.C. ETA EX FAK F.A.S. F.C.& S. FEU Cost, Insurance and Freight Certificate Carriage of Goods by Sea Act Case Constructive Total Loss Carton Container Deductible Average Door to Door Difference in Conditions Estimated Time of Arrival From something (e.g., ex dock, ex warehouse, ex ship, etc.) Freight All Kinds Free Alongside Free of Capture and Seizure Forty-foot Equivalent Unit (Refers to container capacity of vessels) 17

18 FO/FO F.O.B. F.P.A. F.P.A.A.C. F.P.A.E.C. frt FVD G.A. G/L icc iop I.V. Float on/float off Free on Board Free of Particular Average Free of Particular Average-American Conditions Free of Particular Average-English Conditions Freight Full Value Declared General Average Great Lakes Institute Cargo Clauses or Interstate Commerce Commission Irrespective of Percentage (without franchise) Invoice Value, Insured Value or Increased Value J. & W.O. Jettison and Washing overboard L/C LASH lkge LO/Lo LCL M.E.C. M/V ND NVD NVOCC O/A O/D Letter of Credit Lighter Aboard Ship Leakage Lift on/lift off Less Than Container Load Marine Extension Clause Motor Vessel Non-Delivery No Value Declared Non-Vessel Operating Common Carrier On or After, On or About On Deck 18

19 O/P' OP PA pilf PP R/I RO/RO R/P ROC S/D slg S.R. & C.C. str S/S TEU TND TPND U/D WA waiop WHSE/WHSE WPA W/W Open Policy Particular Average Pilferage Parcel Post Reinsurance Roll on/roll off Return Premium Rust, oxidation and Corrosion Sight Draft Sailing or Sling Strikes, Riots and Civil Commotion Steamer Steamship Twenty-foot Equivalent Unit (Refers to the container capacity of vessels) Theft and/or Non-Delivery Theft, Pilferage and Non-Delivery Under Deck With Average With Average Irrespective of Percentage Warehouse to Warehouse With Particular Average World to World or Warehouse to Warehouse 19