International Trade and Insurance

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CHAPTER I

INTRODUCTION

The regulation of international trade is done through the World Trade Organization at theglobal level, and through several other regional arrangements. International trade is the exchange

of goods and services between countries. This type of trade gives rise to a world economy, in

which prices, or supply and demand, affect and are affected by global events. In most countries,

it represents a significant share of gross domestic product (GDP). While international trade has

been present throughout much of history its economic, social, and political importance has been

on the rise in recent centuries.

International trade allows people to expand their markets for both goods and services interm of industrialization,advanced transportation, globalization, multinational corporations, and

outsourcing are all having a major impact on the international trade system. Increasing

international trade is crucial to the continuance of globalization. Without international trade,

nations would be limited to the goods and services produced within their own borders. In

international trade its has own agreement which different part counries of the world that have

Asia Free Ttade Agreement(AFTA), North American Free Trade Agreement (NAFTA) and

Europe Union (EU). All this agreement will have thier own benefits to the country that

participate and to take responsibility all the trade business.

International trade is in principle not different from domestic trade as the motivation and

the behavior of parties involved in a trade do not change fundamental regarding of whether trade

is across a border or not. Global trade allows wealthy countries to use their resources because

countries are endowed with different assets and natural resources (land, labor, capital and

technology) some countries may produce the same good more efficiently and therefore sell it

more cheaply than other countries. The main difference is that international trade is typically

more costly than domestic trade. If a country cannot efficiently produce an item, it can obtain the

item by trading with another country that can and it’s known as specialization in international

trade.

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CHAPTER II

INTERNATIONAL TRADE AND INSURANCE

2.1. Incoterms Related to Maritime

The Incoterms (International Commercial Terms) is a universally recognized set of

definition of international trade terms such as fob, cfr & cif, developed by the International

Chamber of Commerce (ICC) in Paris, France. It defines the trade contract responsibilities and

liabilities between buyer and seller. It is invaluable and a cost-saving tool. The exporter and the

importer do not need to have a long negotiation about the conditions of each transaction. Once

they have agreed on a commercial terms like fob, they can sell and buy at fob without discussing

who will be responsible for the freight, cargo insurance and other costs and risks.

2.1.1. Purpose and scope of incoterms

The purpose of incoterms is to provide a set of international rules for the interpretation of

the most commonly used trade terms in foreign trade. Thus, the uncertainties of different

interpretations of such terms in different countries can be avoided or at least reduced to a

considerable degree. Frequently, parties to a contract are unaware of the different trading

practices in their respective countries.

This can give rise to misunderstandings, disputes and litigation with all the waste of time

and money that this entails. incoterms do not deal with the consequences of breach of

contract and any exemptions from liability owing to various impediments. It has always

been primarily intended for use where goods are sold for delivery across national

boundaries. However, incoterms are in practice at times also incorporated into contracts

for the sale of goods within purely domestic markets.

2.1.2. Clarification on maritime incoterms

i. FAS- Free alongside Ship

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Goods are placed in the dock shed or at the side of the ship, on the dock or lighter, within

reach of its loading equipment so that they can be loaded aboard the ship, at seller’s

expense. Buyer is responsible for the loading fee, main carriage/freight, cargo insurance,

and other costs and risks In the export quotation, indicate the port of origin(loading)after

the acronym FAS, Example: FAS New York and FAS Bremen. The FAS term is popular

in the break-bulk shipments and with the importing countries using their own vessels.

ii. FOB - Free On Board

It can be defined as the delivery of goods on board of vessel at the port of origin at

seller’s expenses. Buyer is responsible for the main carriage/freight, cargo insurance and

other costs and risks. In the export quotation, indicate the port of origin (loading) after the

acronym FOB, for example FOB Vancouver and FOB Shanghai.

iii. CFR - Cost and Freight

Cost and freight is delivery of goods to the named port of destination (discharge) at the

seller’s expenses. Buyer is responsible for the cargo insurance and other costs and risks.

The term CFR was formerly written as C&F. Many importers and exporters worldwide

still use the term C&F.

iv. CIF - Cost, Insurance and Freight

The cargo insurance and delivery of goods to the named port of destination (discharge) at

the seller’s expense. Buyer is responsible for the import customs clearance and other

costs and risks. In the export quotation, indicate the port of destination (discharge) after

the acronym CIF, for example CIF Pusan and CIF Singapore. Many importers and

exporters still use the term CIF in the air freight.

v. DES-Delivered Ex Ship

The delivery of goods on board the vessel at the named port of destination (discharge) at

seller’s expense. Buyer assumes the unloading free, import customs clearance, payment

of customs duties and taxes, cargo insurance, and other costs and risks. In the export

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quotation, indicate the Port of destination (discharge) after the acronym DES, for example

DES Helsinki and DES Stockholm.

vi. DEQ- Delivered Ex Quay

The delivery of goods to the Quay (the port) at the destination at buyer’s expense. Seller

is responsible for the importer customs clearance, payment of customs duties and taxes, at

the buyers end. Buyer assumes the cargo insurance and other costs and risks. In the

export quotation, indicate the Port of destination (discharge) after the acronym DEQ, for

example DEQ Libreville and DEQ Maputo.

The term generally implies that the shipper will choose the carrier who offers the lowest rate to

the shipper for the shipment. However, better insurance or faster transit time will cause the

shipper to choose an option other than the lowest bidder.

2.2. Nature of International Trade

International trade is the exchange of products, services, and money across national

borders which are essentially trade between countries. When consumers in the Malaysian

purchase Swiss-made watches, Chinese-made toys and electronics, and Japanese-manufactured

automobiles, they experience the end result of international trade. International trade has been

maintained since the dawn of time. Trading goods were transported on the backs of tradesmen

across tribal boundaries and bartered or sold among neighboring with accommodating tribesmen.

The Silk Road between Europe and Asia is one example of the sometimes beneficial, but

sometimes troubling essentials of international trade. Asian silks and spices were traded for

European technology and weapons, with varying benefits and consequences. International trade

is raises national gross domestic product (GDP) by providing vastly expanded economic

opportunity.

In addition, the ability of nations to trade freely with all others is also vital for profits.

Free trade, fair trade, and profits are the cornerstones of global economic well-being. Poorer

nations, able to provide cheap labor and lower production costs are subservient to richer and

more consumer-oriented nations. As the productive nations gain wealth through their

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productivity, the consumer nations are forced to become productive themselves through the

transfer of their capital to the productive nation. Thus, the process is reversed. The burgeoning

imbalance of trade between the United States and China is one example of the cycle where the

consumer nation is becoming economically beholden to the producing nation. International trade

is most commonly recognized in the exchange of goods or products. However, trading services

such as expertise in a particular field, or the ability to facilitate the trade of goods is another

common form of foreign trade.

2.3. Classification Society and Insurance

In the international trade, more than 80% of world’s goods are transported by sea freight.

Classification society is important to maintain the international standards for quality of the

vessels that carrying cargo. It involves shipbuilders, ship owners, flag state, port state and other

parties. It also provides a uniform set of rules or standards on which financial agencies, ship

owners and cargo owners with confidence in the physical condition of vessel.

Classification societies are organizations that survey and classify ships, both during their

construction and operation. They are the principal means by which standards of construction and

maintenance are enforced, and ship certificates can be issued by Flag States. There are 12

classification societies under International Association of Classification Society (IACS) andsome of the classification societies are:

• American Bureau of Shipping (U.S.) (ABS)

• Bureau Veritas (France) (BV)

• China Classification Society (CCS)

• Det Norske Veritas (Norway) (DNV)

• Germanischer Lloyd (Germany) (GL)

It is a fact that Classification Societies are relate to marine insurance which is the

insurance and the marine transit rates as agreed in the policy or open cover apply to cargoes and

interests carried by mechanically self propelled vessels of steel construction classed with a

classification society and the point state that:

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• A member or associate member of the International Association of Classification

Societies. (IACS)

• A national flag society but only where the vessel is engaged exclusively in the coastal

trading of that nation including trading on an inter-island route within an archipelago of

which nation forms part.

However, cargoes or interests that carried by vessels are not classed as above must be notified

promptly to underwrites for the rates and conditions which must be agreed.

2.4. Importance of Insurance in International Trade

Insurance is important due to claim any losses or damage which is goods or cargoes are

always exposed with too many risks. Thus, insurance is one of devices by which risks may be

reduced or eliminated in exchange for premium that is called sum of money paid by the assured

in consideration of the insurer’s incurring the risk of paying upon given contigency. In

international trade, insurance is very important which is help to cover any compensation that

become liable for. The following are the basic principle of insurance that must be concerned:

i. Utmost good faith. All types of contracts of insurance are depend on the contract of

utmost good faith. Both parties in the contract must disclose all material facts for the

benefit of each other. False information of any important fact makes the contract

avoidable. Hence, the conditions is to show utmost good faith is very important or strict

on the part of the insured.

ii. Insurable Interest. The insured must possess an insurable interest in the object insured

which defined as a financial interest in the subject matter of contract. The presence of

insurable interest is a legal requirement. In spite of that, the insurance contract without

the existence of insurable interest is not legally valid cannot be claimed in court.

iii. Principle of indemnity. All types of contracts except life and personal accident insurance

are contract of indemnity. With that, the insurer undertakes to indemnify the insured

against a loss of the subject matter of insurance due to insured cause. The principles of

indemnity is based on the idea that the assured in the case of loss only shall be

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compensated against the actual total loss. But if nothing cases happen, the insured has not

to received any amount and that makes the profit for the Insurer.

iv. Doctrine of Subrogation. This principle applies to the contract of indemnity only such as

marine and fire. According to this doctrine, where a loss occurs and the insurer pays as

for a total loss, he is entitled to all the rights and remedies which the insured has against a

third party in respect of loss so paid for. As example, ‘A’ has damaged ‘B’ is motor car

negligently. If he pays ‘B’ is loss in full, ‘B’ cannot collect the same from the insurance

company. On the other hand if ‘B’ applied to his insurance company for indemnity under

his policy, he will not be permitted to collect the damages from ‘A’.

v. Cancellation. Both parties have right to cancel the policy before its expiry date. The

period of the policy comes to an end on the cancellation of policy. Beside that, the

protection is provided by the insurer to the insured which is to stops from the date of such

cancellation. The premium received by the insurance company is also returnable to the

insured.

The growth of the international trade of the country has been greatly helped by shifting of

risk to insurance company. A ship sailing in the sea faces some miss-fortune. Insurance is one of

the devices by which these risks may be reduced or eliminated. So exporter may gives their full

attention toward the promotion of business which may increase the export activities. These are

the importance of insurance in international trade:

i. Removing fear. Insurance helps to remove various types of fear from the mind of the

people that is responsible in trading. The insured is secured in the knowledge that the

protection of the insurance fund is behind him if some bad event happens. It also creates

confidence and eliminates worries which is difficult to evaluate, but the benefit is very

real.

ii. Employment opportunity. Insurance provides employment opportunity to jobless persons

which is helpful for the improvement and progress of social condition.

iii. Growth of business competition in international trade. Insurance enables the small

business units to compete upon more equal terms with the bigger organization. Without

insurance it would have been impossible to undertake the risks themselves. On the other

side bigger organization could absorb, their losses due to great financial strength.

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Moreover insurance removes uncertainty of financial losses arising out of the certain

causes. It increases knowledge which is one of the most important preconditions of

perfect competition.

iv. Reduction of the chances of loss. Insurance companies spend large sums of money with a

view to finding out the reasons of fire, accidents, pilferage and suggest some measures to

prevent them. They also support several medical programme in order to make the public

safety minded. Without such losses preventive activities of insurance companies, the

chances of loss would have been greater than they are at present days.

v. Productive utilization of funds. Insurer accumulates large resources from the various

insurance funds. Such resources are generally invested in the country, either in the public

or private sector. This facilitates considerably in over all development of the economy.

vi. Removal of uncertainties. Insurance company takes the risks of large but uncertain losses

in exchange for small premium. So it gives a sense of security, which is real gift to the

organization. If all uncertainty could be removed from company or organization, income

would be sure. Insurance removed many uncertainties and to that extent is profitable.

vii. Benefits to the company. Insurers protect the organization or company from financial

collapse. Natural disasters or other bad events would drain economic resources without

insurance. Insurance enables company to build itself while the industry recycles

premiums back into the economy as investment capital.

In the international trade, every company becomes legally responsible for taking all the

neccesary steps to protect and preserve the properties. For instance, the forwarder which is liable

to the owner for any susequent damage or loss. Forwarding is not just about handling cargo, but

they should know when a certain ship is due to leave, a country’s important regulations and the

current rate of duty for a particular product. However, the forwarder is legally entitled to limit

the amount they are liable for, provided that these trading conditions have been agreed in

advance.

2.5. Bill of Lading

A bill of lading is a document issued by a carrier to a shipper, acknowledging that non

specified goods have been received on board as cargo for conveyance to a named place for

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delivery to the consignee who is usually identified. A through bill of lading involves the use of at

least two different modes of transport from road, rail, air, and sea. It can be used as a traded

object. The standard short form bill of lading is evidence of the contract of carriage of goods and

it serves a number of purposes:

• It is evidence that a valid contract of carriage, or a chartering contract, exists, and it may

incorporate the full terms of the contract between the consignor and the carrier by

reference issued by the carrier sets out all the terms of the contract of carriage.

• It is a receipt signed by the carrier confirming whether goods matching the contract

description have been received in good condition.

• It is also a document of transfer, being freely transferable but not a negotiable instrument

in the legal sense, i.e. it governs all the legal aspects of physical carriage, and, like a

cheque or other negotiable instrument, it may be endorsed affecting ownership of the

goods actually being carried.

The BL must contain the following information:

• Name of the shipping company.

•

Flag of nationality.

• Shipper's name.

• Order and notify party.

• Description of goods.

• Gross/net/tare weight.

•Freight rate/measurements and weighment of goods/total freight.

2.5.1. Types of Bill of Lading

i. Straight Bill of Lading. This type of bill states that the goods are consigned to a

specified person and it is not negotiable free from existing equities. In other words

any endorsee acquires no better rights than those held by the endorser. For example,9



should the carrier or another hold a lien over the goods as security for unpaid debts,

the endorsee is bound by the lien. However, if the endorser wrongfully failed to

disclose the charge, the endorsee will have a right to claim damages for failing to

transfer an unencumbered title. This type of bill is also known as a non-negotiable

bill of lading.

ii. Order Bill of Lading. This type of bill uses express words in oder to make the bill

negotiable. For example, it states that the described delivery is to be made to the

further order of the consignee by using such words as "delivery to Company Ltd. or

to order or assigns". In this respect, the specific bill can now be endorsed by

Company Ltd. or the explicit right to take delivery is able to be transferred by the

physical delivery of the bill which is accompanied by adequate evidence of Company

Ltd.'s intention to transfer.

iii. Bearer Bill of Lading. This type of bill states that delivery will be made to the

holder the bill. Such bill may be created explicitly or it is an order bill that fails to

nominate the consignee whether in its original form or through an endorsement in

blank. A bearer bill can be negotiated by physical delivery.

iv. Surrender Bill of Lading. Under a term import documentary credit the bank

releases the documents on receipt from the negotiating bank but the importer does

not pay the bank until the maturity of the draft under the relative credit. This direct

liability is called Surrender Bill of Lading (SBL), i.e. when we hand over the bill of

lading we surrender title to the goods and our power of sale over the goods.

2.6. Letter of Credit (L/C)

A letter of credit (L/C) is a bank’s conditional promise to pay issued by a bank at the

request of an importer, in which the bank promises to pay an exporter upon presentation of documents specified in the L/C. An L/C reduces the risk of non completion because the bank

agrees to pay against documents rather than actual merchandise.

2.6.1. Parties to a Letter of Credit (L/C)

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• The essence of the L/C is the promise of the issuing bank to pay against specified

documents, which must accompany any draft drawn against the credit.

Figure 1: Parties to L/C

• To constitute a true L/C transaction, all of the following five elements must be

present with respect to the issuing bank:

Must receive a fee or other valid business consideration for issuing the L/C.

The L/C must contain a specified expiration date or definite maturity.

The bank’s commitment must have a stated maximum amount of money.

The bank’s obligation to pay must arise only on the presentation of specific

documents.

The bank’s customer must have an unqualified obligation to reimburse the

bank on the same condition as the bank has paid.

• Commercial letters of credit are also classified:

Irrevocable versus revocable

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Confirmed versus unconfirmed

• The primary advantage of an L/C is that it reduces risk – the exporter can sell

against a bank’s promise to pay rather than against the promise of a commercial firm.

• The major advantage of an L/C to an importer is that the importer need not pay

out funds until the documents have arrived at the bank that issued the L/C and after

all conditions stated in the credit have been fulfilled.

Figure 2: Steps in Typical Trade Transaction

2.6.2. Letter of Credit Method

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Figure 3: Link or connection of L/C method

1. Seller and Buyer conclude a sales contract, with method of payment usually by letter of

credit (documentary credit).

2. Buyer applies to his issuing bank, usually in Buyer's country, for letter of credit in favor

of Seller (beneficiary).

3. Issuing bank requests another bank, usually a correspondent bank in Seller's country, to

advice, and usually to confirm, the credit.

4. Advising bank, usually in Seller's country, forwards letter of credit to Seller informing

about the terms and conditions of credit.

5. If credit terms and conditions conform to sales contract, Seller prepares goods and

documentation, and arranges delivery of goods to carrier.

6. Seller presents documents evidencing the shipment and draft (bill of exchange) to paying,accepting or negotiating bank named in the credit (the advising bank usually), or any

bank willing to negotiate under the terms of credit.

7. Bank examines the documents and draft for compliance with credit terms. If complied

with, bank will pay, accept or negotiate.

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8. Bank, if other than the issuing bank, sends the documents and draft to the issuing bank.

9. Bank examines the documents and draft for compliance with credit terms. If complied

with, Seller's draft is honored.

10.Documents release to Buyer after payment or on other terms agreed between the bank

and Buyer.

11.Buyer surrenders bill of lading to carrier (in case of ocean freight) in exchange for the

goods or the delivery order.

2.7. Liability of ship owners

1. HAGUE

2. HAGUE VISBY

3. HAMBURG RULES

First for all, Hague, Hague Visby and Hamburg rules is a contract of carriage of goods by sea

is between the shipper and the ship owner or carrier. The terms of the contract of carriage are

generally evidenced by a document called a bill of lading. This is a receipt issued by the ship

owner acknowledging that goods have been delivered to him for the purpose of carriage and the

terms of the contract are incorporated in the bill of lading. This document is generally issued

only after the contract of carriage is well on its way to performance.

The official title is "International Convention for the Unification of Certain Rules of Law

relating to Bills of Lading" and was drafted in Brussels in 1924 The Hague Rules were adopted

in 1924. The Hague Rules have been approved or enacted by eight Latin American countries

which are Argentina, Bolivia, Cuba, Dominican Republic, Ecuador, Mexico, Paraguay and Peru.

The Hague Visby Rules in 19682 and 19793 and have been adopted in Latin America by

Ecuador and México. The Hamburg Rules4 in 1978 and have been adopted by three Latin

American countries which are Chile, Dominican Republic and Paraguay. Each international

convention in turn attempted to broaden its application in order to avoid a missing part to

encompass all contracts of carriage as well as bills of lading, and to permit incorporation by

reference.

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Under the common law the parties to contract of carriage of goods by sea covered by a bill of

lading or similar document had complete freedom to negotiate their own terms. This led the

carrier to a stronger bargaining position. Ship owners/carriers went on incorporating exclusion

clauses in the bills of lading, which provoked the cargo owners. Most shippers were expected

either to ship on terms dictated by the carrier or not to ship at all.

2.7.1. HAGUE RULES

The general principle regarding the application of The Hague Rules is that they apply by

their own force (ex proprio vigore) to contracts of carriage covered by a bill of lading or

any similar document of title.

Art. 1(b) -'Contract of carriage' applies only to contracts of carriage covered by a bill of

lading or any similar document of title, in so far as such document relates to the carriage

of goods by sea, including any bill of lading or any similar document as aforesaid issued

under or pursuant to a charter party from the moment at which such bill of lading or

similar document of title regulates the relations between a carrier and a holder of the

same.

2.7.2.HAGUE VISBY

The Visby Rules (the Brussels Protocol of February 23, 1968) should not be considered

as a separate convention. The Visby Rules are amendments to the Brussels Convention

1924 and art. 6 of the Protocol stipulate:

• A bill of lading is issued in a contracting state.

• The carriage is from a port in a contracting state.

• The Rules are incorporated by reference into the contract of carriage.

• U.K.'s Carriage of Goods by Sea Act 1971 at sect. 1(6) (b) applies the Hague/Visby

Rules to non-negotiable receipts when they specifically invoke the Hague/Visby

Rules.

• The Hague/Visby Rules can also be applied to domestic carriage as is the case in the

Scandinavian nations35 and in Canada.

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2.7.3. THE HAMBURG RULES

The Hamburg Rules 1978234 attempt to resolve the defects in the application of the

Hague and Hague/Visby Rules. The Hamburg Rules apply to “all contracts of carriage by

sea” at art and not merely to bills of lading or similar documents of title:

• When the port of loading is in a contracting state, at art. 2(l)(a), (similar to art.

10(b) of the Hague/Visby Rules)

• When the port of discharge is in a contracting state, at art. 2(l)(b), (this is not too

dissimilar to the inwards and outwards application of COGSA235)

• When one of the optional ports of discharge is in a contracting state, at art. 2(l)(c);

• When the bill of lading or other document is issued in a contracting state, at art.

2(l)(d), (similar to art. 10(a) of the Hague/Visby Rules)

• When the Hamburg Rules are incorporated by reference, at art. 2(1)(e), (similar to

art. 10(c) of the Hague/Visby Rules).

2.7.4. Ship owners responsibility

The liabilities of the ship owner are different for according to the rules convention. Itdepend on what convention that the ship owner taken. So below are some of the different

between Hague rules, Hague Visby and Hamburg rule in term of ship owner

responsibility:

i. Limitation of Liability

• Hague rule. £ 100 per package coupled with the provision that it was to be

“gold value”. [This in practice was not satisfying any objections being achieved

by a limit of liability in an international convention].

• Hague Visby. Retained the “package or unit” limitation of liability for

individual items of cargo of high value but also introduced an alternative formula

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based on the weight of the cargo, the shipper being entitled to invoke which ever

alternative produced the higher amount [Article IV Rule 5 (a)].

• Hamburg . The limits are “835 units of account per package or other

shipping unit or 2.5 units of account per kilogram of gross weight of the goods

lost or damaged, whichever is the higher”.

ii. Documents

• Hague Visby Rules. Operation where a bill of lading or similar document

of title covers the contract of carriage by sea [Article I ((b)] Section 1(b) of the

U.K. Carriage of Goods by Sea Act 1971 provides that the rules will have the

force of law where the bill of lading concerned expressly provides that the rules

shall govern contract.

• Hamburg Rules. Apply to the contract of carriage and not to the bill of

lading but the Hamburg Rules still envisage that the carrier should issue a bill of

lading. Provision has been made for facsimile and electronic transmission of bills

of lading.

iii. Notification of loss or damage

• Hague & Hague Visby Rules. Notice of loss or damage must be given in writing

to the carrier or his agent at the port of discharge before or at the time of delivery,

or where the loss or damage is latent, within 3 days of delivery. A failure to give

such notice is prima facie evidence of delivery in accordance with the Bill of Lading.

• Hamburg Rules. Notice of loss or damage must be given in writing by the

consignee or carrier no later than 1 working day after the goods were delivered to

consignee, or where the loss or damage is latent, within 15 consecutive days after

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delivery to the consignee (Article 19). A failure to give such notice is prima facie

evidence of delivery in accordance with the document of transport, of if no such

document has been issued in good condition.

iv. Burden of Proof

• Hague and Hague Visby. Shipper must show cargo was delivered to the carrier in

good order and condition but received at destination in damaged condition. A

clean B/L is prima-facie evidence of this. Under English law the claimant must

establish breach of a seaworthiness obligation or failure to properly and carefully

carry the goods. Once this is established, the burden of proof shifts to the carrier

to show either due diligence or the application of one of the defenses.

• Hamburg . Carrier must prove that reasonable steps to avoid loss were taken

unless damage is caused by fire.

v. Delivery of the goods

• Hague and Hague Visby. Rules are silent – No express obligation to

deliver goods beyond the port Carrier’s obligation continues until delivery of

discharge, however, the carrier can contract to do so.

• Hamburg Rules. Carrier responsible until goods is delivered to the consignee.

CHAPTER III

CONCLUSION

As a conclusion of that, international trade allows people to expand their markets for both

goods and services in term of industrialization, advanced transportation, globalization,

multinational corporations, and outsourcing are all having a major impact on the international

trade system. Furthermore, international trade is typically more costly than domestic trade

whereby it obtain the item by trading with another country with specialization. In maritime, they

recognized the set of incoterms which is to provide a set of international rules for the

interpretation of the most commonly used trade terms in foreign trade.

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Furthermore, most of the world’s goods are transported by sea freight. Thus,

Classification society is playing role to maintain the international standards for quality of the

vessels that carrying cargo. It also provides a uniform set of rules or standards on which financial

agencies, ship owners and cargo owners with confidence in the physical condition of vessel.

Classification Societies are relate to marine insurance which is the insurance and the marine

transit rates as agreed in the policy or open cover apply to cargoes and interests carried by

mechanically self propelled vessels of steel construction classed with a classification society.

Insurance is important due to claim any losses or damage which is goods or cargoes are

always exposed with too many risks. Thus, insurance is one of devices by which risks may be

reduced or eliminated in exchange for premium. Insurance is very important which is help to

cover any compensation that become liable for. It includes a bill of lading which is a document

issued by a carrier to a shipper and a letter of credit (L/C) that is a bank’s conditional promise to

pay issued by a bank at the request of an importer. Furthermore, a contract of carriage of goods

by sea is between the shipper and the ship owner or carrier such as Hague, Hague Visby and

Hamburg rules that must be issued.

REFERENCES

i.INCOTERMS , Type of agreement for the purchase and shipping of goods

internationally with 13 different terms. (2 August 2011).

URL: www.foreign-trade.com/reference/ incoterms

ii.S Cho (2004). International trade law scholars, 763. THE NATURE OF REMEDIES ININTERNATIONAL TRADE LAW. awreview.law.pitt.edu/issues/65/65.4/Cho.pdf

iii.D. Hummels. Changing Nature of World Trade. David Hummels, Dana Rapports, and

Kei-Mu Yi. The world's economies have become increase- ingle integrated and

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http://www.foreign-trade.com/reference/incoterms.cfm

http://www.foreign-trade.com/reference/incoterms


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increasingly. (18 August 2011).

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