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Chapter5, Carriage of Goods by Sea and Marine Cargo Insurance A bill of lading is document issued by a carrier to a shipper, signed by the captain, agent, or owner of a vessel, and stating the conditions in which the goods were delivered to (and received by) the ship; and an engagement to deliver goods at the prescribed port of destination to the lawful holder of the bill of lading. A bill of lading is, therefore, both a receipt for merchandise and a contract to deliver it as freight. It is a document of title to the goods, enabling the shipper or owner of the goods to endorse title to other parties, sell goods in transit, and Present to banks with other documents in seeking payment under documentary credits. Abbreviated generally as B/L, it is the most important document for sea transport. There are a number of different types of bills of lading. Shipped (On Board) B/L and received for shipment B/L ■ Shipped B/L is issued by the shipping company after the goods are actually shipped on board the designated vessel. Since shipped bill of lading provides better guarantee for the consignee to receive the cargo at the destination, the importer will normally require the exporter to produce shipped B/L and most bill of lading forms are preprinted as "Shipped Bill". ■ Received for Shipment B/L arises where the word "shipped" does not appear on the bill of lading. It merely confirms that the goods have been handed over to, and are in the custody of the shipowner. The buyer under a CIF contract will not accept such a B/L because, in the absence of the date ofshipment, he is in no position to anticipate the arrival of the consignment. Clean B/L and unclean B/L ■ A clean bill of lading is a bill of lading where the carrier has noted that the merchandise has been received in apparent good condition (no apparent damage, loss, etc.) and which does not bear such notations as "Shipper's Load and Count". ■ If defects are found on the exteriors of the goods, or the shipping company does not agree to any of the statements in the B/L, the bill will be marked as "unclean", "foul" or "... packages in damaged condition". Unclean B/L is usually unacceptable to the buyer and banks. Straight, blank and order B/L ■ A Straight bill of lading indicates that the shipper will deliver the goods to the consignee. The document itself does not give title to the goods (non-negotiable). The consignee need only identify himself to claim the goods. A straight bill of lading is often used when payment for the goods has been made in advance. ■ Blank B/L also called Open B/L or Bearer B/L, means that there is no definite consignee of the goods. There usually appear in the box of consignee words like "To bearer". Anyone who holds the bill is entitled to the goods the bill represents. No endorsement is needed for the transfer of the blank bill. Due to the exceedingly high risk involved, this bill is rarely used. ■ Order B/L, or Shipper's Order B/L is widely used in international trade. A Shipper's Order Bill of Lading is a title document to the goods, issued "to the order of" a party usually the shipper, whose endorsement is required to effect its negotiation. Because it is negotiable, a shipper's order B/L can be bought, sold, or traded while goods are in transit and is commonly used for letter-of credit transaction. The buyer usually needs the original or a copy as proof of ownership to take possession of the goods. Direct, transshipment, through bill of lading ■ Direct B/L means that the goods are shipped from the port of loading direct to the port of destination without involving transshipment. ■ Transshipment B/L means that the goods need to be transshipped at an intermediate port as there is no direct service between the shipment port and the destination port. ■ It is sometimes necessary to employ two or more carriers to get the goods to their final destination. In this case, usually the first carrier will sign and issue a through bill of lading. The on-carriage may be either by a second vessel or by a different form of transport. Liner B/L, container B/L and combined transport B/L ■ Liner bill of lading is issued by a liner company for shipment on scheduled port calls through scheduled routes. ■ Container B/L is becoming more common in use with the development of containerization. It covers the goods from port to port or from inland point of departure to inland point of destination. ■ Combined transport B/L is issued by combined transport operator that covers the multi--modal transport on a door-to-door basis in one contract of carriage. It is ideal for container movements. It differs from "through B/L" in that combined transport is operated by only one carrier. Long form and short form B/L ■ Long form B/L is more detailed with shipping contract clause printed on the back of the page. ■ Short form B/L, as the name implies, is an abbreviated type of document, smaller and not containing the long list of detailed clauses that generally appear on bills of lading. In certain circumstances it may not, therefore, be considered a suitable form of evidence of contract or of freight. On Deck B/L, stale B/L, ante-dated B/L and advanced B/L ■ On Deck B/L is issued when the cargo is loaded on the ship's deck. It applies to goods like livestock, plans, dangerous cargo, or awkwardly-shaped goods that can not fit into the ship's holds. In this case, the goods are exposed to greater risks and therefore usually specific insurance must be taken out against additional risks. ■ It is important that the Bill of Lading is available at the port of destination before the goods arrive or, failing this, at the same time. Bills presented to the consignee or buyer or his bank after the goods are due at the port of destination are described as "Stale B/L". As a cargo cannot be collected by the buyer without the Bill of Lading, the late arrival of this all-important document may have undesirable consequences such as warehouse rent, etc. and therefore should be avoided. Sometimes especially in the case of short sea voyages, it is necessary to add a clause of "Stale B/L is acceptable". ■ Ante-dated B/L means when the actual shipment date is later than that stipulated in the L/C, the carrier sometimes, at the shipper's request, issues a B/L with a date of signature that suits the requirement so as to avoid non-acceptance by the bank. Due to the risk of the goods being rejected by the buyer arising from the issuance of such a bill, it is advisable to avoid this mal practice even when it seems necessary in certain circumstances. ■ Advanced B/L is issued when the expiry date of the L/C is due but the exporter hasn't yet got the goods ready for shipment. The purpose of issuing such a bill is to negotiate payment with the bank in time within the validity of the L/C. It is also regarded as unlawful and risky and should be avoided Still there are some other types of B/L such as Groupage B/L which covers a number of consignments from different shippers, and House B/L issued by a freight forwarder to each individual shipper. House B/L is issued by the freight forwarder before he gets one groupage B/L from the shipowner All the above mentioned bills are not independent of each other. Several types may be combined into one like "Clean on board, to order, blank endorsed B/L". A received for shipment bill may also be a straight and clean bill. Bills of lading are made out in sets, consisting of a number of originals (usually three) and a number of copies and marked "original" and "copy" respectively. Only the originals signed by the carrier enable the consignee to take delivery of the goods. The copies are just for reference. Marine Cargo Insurance Insurance provides a pool or fund into which the many contribute and out of which the few who suffer loss are compensated. Insurers frequently re-insure a portion of the "risk" they have accepted. The insurance of large "risks" is spread directly or indirectly over a large number of insurance or re-insurance companies or underwrites. In international trade, the transportation of goods from the seller to the buyer is generally over a long distance by air, by land or by sea and has to go through the procedures of loading, unloading and storing. During this process, the potential for damages and loss to good, in comparison with land and air transportation, is tremendous. In order to protect the goods against possible loss in case of such perils, the buyer or seller before the transportation of the goods usually applies to an insurance company for insurance covering the goods in transit. A. Marine Insurance Policies and Certificates In an export transaction, the terms of the contract of sale provide normally whether the costs of marine insurance shall be borne by the seller or by the buyer. It the goods sold on FOB term these costs have to be paid by the buyer and that is even true if the FOB seller, by request of the buyer, has taken out the policy on behalf of the buyer. If the goods are sold on CIF terms, it is the duty of the seller to take out the policy and pay the costs of insurance. The marine insurance policies or certificates from part of the shipping documents. Regard shall in particular be had to floating policy, open cove policy and blanket policy. Floating policy is of great importance for export trade. It is, in fact, a convenient method of insurance goods where a number of similar export transactions are intended, e. g. where the insured has to supply an overseas importer under an exclusive sales agreement or maintains permanent sales representatives or subsidiary companies abroad. A floating policy covers the shipments, as soon as they are made, under previous arrangement between the insured and the insurance company and particulars of the shipment may be supplied to the insurance company later on. Open cover policy is similar to floating policy. While a floating policy is usually limited to 12 months, the open cover may be limited in time or may be permanent. Where the open cover is perpetual in character, a clause is inserted enabling both parties to give notice of cancellation of the cover within a stated time, e. g. thirty days or three months. Blanket policy usually provides that the insured need not advise the insurer of the individual shipments and that a lump sum premium-instead of a premium at several rates-shall cover all shipments. In the case of a floating policy or open cover the insured has normally to make declarations of the individual shipments falling under these insurances to the insurer. This is inconvenient to the exporter and requires an excessive amount of labour and costs where the various consignments are of small value or the voyage is of short duration. In these cases the blanket policy is a better choice. B. Perils and Losses Goods during transportation on sea and in the course of loading and unloading might meet various kinds of perils and the goods might suffer loss of one kind or another. In marine insurance, perils are generally of two kinds: l. Perils (1 ) Perils of the sea. This include natural calamities and fortuitous accidents, such as weather, thunder and lightning, tidal wave, earthquake, floods, ship stranded, striking upon the rocks, ship sinking, ship collision, colliding with icebergs, fire, explosion, etc. (2 ) Extraneous risks. This cover theft, rain, shortage, leakage, breakage, dampness, etc. they may include special risks, such as war risks, strikes, non-delivery of cargo, refusal to receive cargo, etc. 2. Losses Losses fall into two main classes: total loss and partial loss, (1 ) Total loss. This loss can either be actual total loss(实际全损) where vessel or cargo are totally and irretrievably lost, or constructive total loss(推定全损) in a case where the ship or the goods have been abandoned because the cost of salvage or recovery would have been out of proportion to the value, (2) Partial loss. This means the loss to the goods is only partial. In case of partial loss a fine distinction is drawn between particular average and general average. In marine insurance average has an entirely different meaning from its normal usage and it means loss or damage to the goods in the course of sea transportation due to natural calamities and accidents and extraneous risks. (a) Particular average (单独海损) is a partial loss to the insured cargo and the loss must be borne by the owner of this individual consignment. (b) General average (共同海损) is a loss that results when extraordinary expenses or losses are incurred in saving the vessel or its cargo from danger at sea. This ancient principle of maritime law, which was developed long before insurance was available, spreads the risk of a disaster at sea by making all parties to the voyage contribute to any loss incurred. Under this rule, if A's cargo is damaged or "sacrificed" in the process of saving the ship, and B's cargo is saved as a result, B or its insurer must contribute to A for the loss. A's claim is a general average. In other words, the owner of the cargo that was sacrificed would have a general average claim for contribution against the owner of the cargo that was saved. For example, when fire threatens an entire ship, and certain cargo is damaged by water in putting the fire out, the owners of all of the cargo must contribute to the loss of the cargo that was damaged by the water. The owners of cargo that is thrown overboard to save a sinking ship may have a claim against those whose cargo was thereby saved. General average claims are typically covered by marine insurance. In order to prove a general average claim, the claimant must show that (1) the ship, cargo, and crew were threatened by a common danger; (2) the danger was real and substantial; and (3) the cargo or ship was voluntarily sacrificed for the benefit of both, or extraordinary expenses were incurred to avert a common peril. The set of standardized rules on general average is the York-Atwerp Rules, an effort to develop commonly accepted principles of general average started in England as early as 1860, with work on the rules being completed in 1890. Following World War II, an international effort to achieve universally accepted general average rules resulted in the revised York-Antwerp Rules of 1950. The l950 rules have achieved widespread acceptance by the maritime industry. The rules are not the subject of treaty or convention, and have no been enacted into national laws. They traditionally have become a part of the contract of carriage because their provisions are generally incorporated into all modern bills of lading. C. Insurance Cover According to the stipulations of the People's Insurance Company of China, the following basic insurance covers are available in marine insurance: 1. Free From Particular Average Insurance (FPA) (平安险) Under free from particular average insurance the insurance company will be responsible to pay claim for total or constructive total losses suffered by the whole lot of cargoes during transportation due to such natural calamities as vile weather, thunder and lightning, tidal wave, earthquakes, and floods, or for total or partial losses due to the ship or carrier being on fire, stranded, sinking, colliding or meeting other fortuitous accidents. 2. With Particular Average Insurance (WPA) (水渍险) The cover of this insurance is more extensive. The insurer is liable, in addition to the total or constructive total losses covered by FPA insurance, also for the partial losses of the insured goods due to the risks caused by natural calamities mentioned under FPA insurance. 3. All Risks Insurance (一切险) Among the three kinds of basic insurance, under an "all risks" policy the goods are insured against all risks, e. g. from natural calamities, fortuitous accidents at sea, or general extraneous risks, irrespective of percentage of loss, total or partial. A natural deterioration of perishable goods, delay, loss or damage caused by inherent vice or nature of the subject matter are not covered.
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