CARGO POLICIES

SUBJECT 31

INCOTERMS

The Incoterms rules are series of pre-defined commercial terms that are widely used in
international commercial transactions or procurement processes. The rules are intended
primarily to clearly communicate the tasks, costs, and risks associated with the transportation
and delivery of goods.

1. FOB (free on board)

- Price of cargo does not include insurance and freight,
- Insurance is arranged by the buyer.

FOB means that the seller fulfils his obligation to deliver when the goods have passed
over the ship’s rail at the named port of shipment. This means that the buyer has to
bear all costs and risks of loss of or damage to the goods from that point.

2. C&F (cost and freight)

- Price of cargo includes freight, but not insurance,
- Insurance is arranged by the buyer.

C&F means that the seller must pay the costs and freight necessary to bring the goods
to the named port of destination but the risk of loss of or damage to the goods, as well
as any additional costs due to events occurring after the time the goods have been
delivered on board the vessel, is transferred from the seller to the buyer when the
goods pass the ship’s rail in the port of shipment.

3. CIF (cost, insurance & freight)

- Price of cargo includes freight and insurance,
- Insurance is arranged by the seller.

CIF means that the seller has the same obligations as under C&F but with the addition
that he has to procure marine insurance against the buyer’s risk of loss of or damage to
the goods during the carriage. The seller contracts for insurance and pays the insurance
premium.

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INSTITUTE CARGO CLAUSES

INSTITUTE CARGO CLAUSES (A) 1/1/82

Risks Covered

1. Risk Clause “All Risk”

The expression “All Risk” comprehends any loss or damage occasioned fortuitously, but
not that which occurs inevitably

2. - general average and salvage charges

- the contract of affreightment and/or the governing law and practice
- incurred to avoid or the avoidance of loss

Principles of General Average

That which has been sacrificed for the benefit of all shall be made good by the
contribution of all

Elements GA
- Sacrifice or expenditure
- Intentionally and reasonably
- For common safety (of ship and cargo etc.)
- Preserving from a peril (insured against)

3. Both to blame collision

Exclusions

4. General Exclusion

1. attributable to wilful misconduct of the assured

Wilful misconduct means a course of action undertaken either deliberately, knowing
it to be wrongful so far as others are concerned, or recklessly, without caring
whether it is wrongful or not

2. ordinary leakage, loss in weight or volume, or ordinary wear and tear

Ordinary leakage or loss is to be contrasted with leakage or loss due to fortuity,
which would be covered within “all risk”. It is submitted therefore that “ordinary” in
its context means non-fortuitous or inevitable.

Example: evaporation of liquid cargo, reducing of moisture content of bulk cargo

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 3. insufficiency or unsuitability of packing
• Shall be deemed to include stowage in a container. The loss or damage due to
bad stowage in a container or liftvan is not covered in two circumstances:
a. When the stowage is carried out before the attachment of the insurance, or
b. When the Assured or their servants carry out the stowage.

• The test is whether the packing is adequate “to endure the ordinary
contemplated handling and carriage”. If the type of packing is in accordance with
normal custom of trade, this would raise a strong presumption that it is
adequate.

4. inherent vice or nature

A loss by inherent vice is one which is proximately caused by the natural behavior of
the subject-matter insured, being what it is, in the circumstances in which it was
expected to be carried.
Example: spontaneous combustion to coal, normal rusting on steels cargo

5. proximately caused by delay

Example: part of cargo of fruit deteriorated owing to delay occasioned on the voyage
by the ship requiring to be repaired on account of collision damage

6. insolvency or financial default

The intention of this exclusion is to exclude all types of claim for recovery and
forwarding of the goods arising from the abandonment of a voyage by shipowners or
operators who run out of funds while the voyage was still in being.

7. use of any weapon of war

if a ship and cargo were contaminated by fall-out from the test of a nuclear device
intended to form the basis of a weapon, it is submitted the exclusion would apply.
On the other hand, if the contamination occurred as a result of a radioactive
emission owing to an accident at a nuclear power station, underwriters insuring on
“All Risk” conditions would respond for the loss or damage so caused.

5. Unseaworthiness and Unfitness Exclusion

1. unseaworthiness
unfitness
privy to such
2. waive any breach of

Logically, Clause 5.2 has to be considered first. In the absence of such a waiver of the
implied warranty of seaworthiness, the Assured would have no claim at all if his goods
was loaded on to an unseaworthy ship.

6. War exclusion
1. war civil war
2. capture
3. derelict mines
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7. Strike Exclusion
1. strikers
2. strikes
3. terrorist

Duration

8. 1. from the time the goods leave the warehouse or place of storage
“leaving” involves physical movement of the goods with the intention to
proceed on the transit. The mere loading into a lorry, which then remains on
the premises, is not sufficient.

1.1 on delivery
1.2 the assured elect to use either
1.2.1 for storage other than
1.2.2 for allocation or distribution
or
1.3 the expiry of 60 days after completion of discharge

whichever shall first occur

8. 2. if, after discharge overside from the oversea vessel...

This clause is intended to deal with the situation of a resale to a customer of the
Assured, and to make it quite clear which insurance would be in force, the clause
provides for termination of the original insurance at the time when the new
transit commences.

8. 3. this insurance shall remain in force...

This clause sets out the circumstances in which the underwriters are content to
maintain the cover, notwithstanding that the listed circumstances add to the risks
initially contemplated at the time the insurance was placed.

This insurance remains in force, without any obligation on the part of the
Assured to give notice to the underwriters, during delay beyond the Assured’s
control, any deviation, forced discharge, resipment or transshipment during the
voyage and any permitted variation of the contract of carriage.

Termination of Contract of Carriage

9. Termination of contract of carriage

This clause sets out one of the circumstances in which underwriters will require
prompt notice to be given by the Assured with a request for continuation of the
cover, in order to maintain the insurance, subject ot any additional premium that
may be required.
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Change of Voyage

10. Change of voyage

When a change of voyage occurred under the Assured’s control, policy does not
cover any loss occurred, except promp notice given by the Assured to the
Insurer. This is not applied for innocent Assured.

Insurable Interest

11. Insurable Interest Clause

- Every person has an insurable interest who is interested in a marine
adventure.
- A person is interested in a marine adventure where he stands in any legal or
equitable relation to the adventure or to any insurable property at risk
therein, in consequence of which he may benefit by the safety or due arrival
of insurable property, or may be prejudiced by its loss, or by damage
thereto, or by the detention thereof, or may incur liability in respect thereof.

Forwarding Charges

12. Forwarding Charge Clause

This clause recognizes an important principle that what insured is not merely the
physical property of the goods, but also the voyage to which they are committed.

Constructive Total Loss

13. No claim for Constructive Total Loss shall be recoverable hereunder unless the
subject-matter insured is reasonably abandoned either:
- on account of its actual total loss appearing to be unavoidable
or
- because the cost of recovering, reconditioning and forwarding the subject-
matter to the destination to which it is insured would exceed its value on
arrival

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Increased Value Clause

14.1 If any Increased Value insurance is effected by the Assured on the cargo insured
herein the agreed value of the cargo shall be deemed to be increased to the total
amount insured under this insurance and all Increased Value insurances covering
the loss, and liability under this insurance shall be in such proportion as the sum
insured herein bears to such total amount insured.

In the event of claim the Assured shall provide the Underwriters with evidence of
the amounts insured under all other insurances.

14.2 Where this insurance is on Increased Value the following clause shall apply:
The agreed value of the cargo shall be deemed to be equal to the total amount
insured under the primary insurance and all Increased Value insurances covering
the loss and effected on the cargo by the Assured, and liability under this
insurance shall be in such proportion as the sum insured herein bears to such
total amount insured.

In the event of claim the Assured shall provide the Underwriters with evidence of
the amounts insured under all other insurances.

Minimizing losses (Duty of the Assured)

When the loss recoverable under the Policy there are duties (which will be reimbursed) of
the Assured to

- take reasonable measures for averting or minimizing such loss,

- ensure all rights against carriers, bailees or third parties are properly preserved and
exercised.

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COMPARISON ICC (A) 1/1/82 & ICC (B) 1/1/82
ICC (A) 1/1/82
Risks Covered
1. all risks of loss of or damage to except
as provided in clauses 4, 5, 6, & 7
Exclusion
4.7 loss damage or expenses arising from
the use of any weapon of war employing
atomic or unclear fission an/or fusion
or other like reaction or radioactive force
matter
X 4.8
ICC (B) 1/1/82
1.1 reasonably attributable to
1.1.1 fire or explosion
1.1.2 stranded grounded sunk or capsized
1.1.3 overturning or derailment
1.1.4 collision or contact of vessel
1.1.5 discharge of cargo at port of distress
1.1.6 earthquake volcanic eruption or
lighting
1.2
1.2.1 general average sacrifice
1.2.2 jettison or washing overboard
1.2.3 entry of sea lake or river water
1.3 total loss of any package
4.7 deliberate damage to or
deliberate destruction of
subject matter insured or any
part thereof by the wrongful act or
of any person or persons
loss damage or expenses arising from
the use of any weapon of war
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COMPARISON ICC (B) 1/1/82 & ICC (C) 1/1/82

ICC (B) 1/1/82 ICC (C) 1/1/82

Risks Covered

1.1.6 earthquake volcanic eruption lightning 1.1.6 X

1.2.2
jettison or washing over board 1.2.2 jettison
1.2.3
entry of sea water ….. 1.2.3 X
1.3 total loss of any package lost overboard 1.3 X
dropped whilst loading on to unloading
from
COMPARISON INSTITUTE CARGO CLAUSES (A) 1/1/82 & 1/1/09

General
- Terms ‘goods’ and ‘cargo’ is substituted by ‘subject matter insured’
- Terms ‘underwriters’ is substituted by ‘insurers’

Risks covered
- Terms ‘except as provided’ is substituted by ‘except as excluded’, giving impression that
the clause refers to the exclusions

Exclusion

1982
4.3 loss damage or expense caused by insufficiency or unsuitability of packing or preparation of
the subject-matter insured (for the purpose of this Clause 4.3 “packing” shall be deemed to
include stowage in a container or liftvan but only when such stowage is carried out prior to
attachment of this insurance or by the Assured or their servants)

2009
4.3 loss damage or expense caused by insufficiency or unsuitability of packing or preparation of
the subject-matter insured to withstand the ordinary incidents of the insured transit where
such packing or preparation is carried out by the Assured or their employees or prior to the
attachment of this insurance (for the purpose of these Clauses “packing” shall be deemed
to include stowage in a container and “employees” shall not include independent
contractors).

Changing:
- Terms ‘liftvan’ is deleted
- Terms ‘servants’ is substituted by ‘employee’ with additional explanation that
‘independent contractor’ is not ‘employee’

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1982
- 4.5 loss damage or expense proximately caused by delay, even though the delay be
caused by a risk insured against (except expenses payable under Clause 2 above)

2009
- 4.5 loss damage or expense caused by delay, even though the delay be caused by a risk
insured against (except expenses payable under Clause 2 above)

1982
- 4.6 loss damage or expense arising from insolvency or financial default of the owners
managers charterers or operators of the vessel

2009
- 4.6 loss damage or expense arising from insolvency or financial default of the owners
managers charterers or operators of the vessel where, at the time of loading of the
subject-matter insured on board the vessel, the Assured are aware, or in the ordinary
course of business should be aware, that such insolvency or financial default could
prevent the normal prosecution of the voyage. This exclusion shall not apply where the
contract of insurance has been assigned to the party claiming hereunder who has
bought or agreed to buy the subject-matter insured in good faith under a binding
contract.
The exlusion is not applied for innocent Assured.

1982
- 4.7 loss damage or expense arising from the use of any weapon of war employing
atomic or nuclear fission and/or fusion or other like reaction or radioactive force or
matter.

2009
- 4.7 loss damage or expense directly or indirectly caused by or arising from the use of
any weapon or device employing atomic or nuclear fission and/or fusion or other like
reaction or radioactive force or matter.

1982
- 5.5.1 In no case shall this insurance cover loss damage or expense arising from
unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or
liftvan for the safe carriage of the subject-matter insured, where the Assured or their
servants are privy to such unseaworthiness or unfitness at the time the subject-matter
insured is loaded therein.

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 5.52 The underwriters waive any breach of the implied warranties of seaworthiness of
the ship and fitness of the ship to carry the subject-matter insured to destination, unless
the Assured or their servants are privy to such unseaworthiness or unfitness.

2009
5.5.1 In no case shall this insurance cover loss damage or expense arising from
- 5.1.1 unseaworthiness of vessel or craft or unfitness of vessel or craft for the safe
carriage of the subject-matter insured, where the Assured are privy to such
unseaworthiness or unfitness at the time the subject-matter insured is loaded therein

5.1.2 unfitness of container or conveyance for the safe carriage of the subject-matter
insured, where loading therein or thereon is carried out prior to attachment of this
insurance or by the Assured or their employees and they are privy to such unfitness at
the time of loading

5.2 Exclusion 5.1.1 above shall not apply where the contract of insurance has been
assigned to the party claiming hereunder who has bought or agreed to buy the subject-
matter insured in good faith under a binding contract.
5.3 The Insurers waive any breach of the implied warranties of seaworthiness of the
ship and fitness of the ship to carry the subject-matter insured to destination.

The excludsion applies when:

- The Assured is privy to (i.e. is aware of) unseaworthiness/unfitness
- The container or conveyance is unfit for the safe carriage of the goods and
a. the loading is carried out prior to attachment or
b. the loading is carried out by the Assured or their employees and they are privy to
that unfitness

Duration

- 8.1 ‘from the time the goods leave the warehouse’ is substituted by ‘from the time the
subject matter insured is first moved in the warehouse or at the place of storage (at the
place named in the contract of insurance) for the purpose of the immediate loading’

- 8.1.1 dan 8.1.2 ‘on delivery to’ is substituted by ‘on completion of unloading’

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INSTITUTE COAL CLAUSES (1/10/82)

The risk covered are those contained in ICC (B) with following differences:
1.1.1 fire, explosion or heating, even when caused by spontaneous combustions, inherent vice
or nature of the subject-matter insured.

General Exclusion Clause

The list of exclusions is shorter than those contained in Institute Cargo Clauses. There is no
need to refer to “insufficiency of packing” since this is not relevant to a cargo of coal in bulk.
The usual exclusion of inherent vice and nature of the subject matter insured is also omitted,
since the risk is included by Clause 1.1.1 above.

Unseaworthiness and Unfitness Exclusion Clause

This is in the same terms as in the Institute Cargo Clauses, although the references to craft,
conveyance or container are unnecessary.

Transit Clause
The duration of the risk is limited, an except when the cargo is forced discharged at port of
refuge, it extends only to the period of time that the cargo is on board the “oversea vessel”.

The risk attaches as the subject matter insured is loaded on board. If only part of the cargo has
been loaded at the time of a loss, the risk will attach in respect of the cargo which is on board
the oversea vessel, but not in respect of the part cargo which remains on the shore.

Termination of Contract of Affreightment Clause

The period of time for which underwriters will agree to continue the cover (subject to any
agreed extension) is limited to fifteen days, compared with 60 days under Institute Cargo
Clauses.

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INSTITUTE BULK OIL CLAUSES (1/2/83)
The list of perils insured covered is generally in line with the provision are those contained in
ICC (B) with following variations/differences:

- “damage” as referred to ICC (B) is substituted to “contamination”

- No washing overboard
- Covers includes:
• Leakage from connecting pipelines in loading transshipment or discharge
The words used express two limitations upon the risk of leakage: (i) the
leakage must occur in the course of loading shipment or discharge of the
cargo; (ii) the leakage must be from connecting pipelines.

• Negligence of Master Officers or Crew in pumping cargo ballast or fuel

In order to find a claim under this sub-clause, the loss or contamination
has to be caused by the negligence of those concerned “in pumping”.

• Contamination resulting from stress of weather

General Exclusion Clause

The exclusions correspond to those which are set out in Clauses 4.1, 4.2, 4.4, 4.5, 4.6 and 4.8
of the Institute Cargo Clauses (B).

Unseaworthiness and Unfitness Exclusion Clause

This is in the same terms as in the Institute Cargo Clauses.

Transit Clause
The duration of the risk is from shore tank to shore tank.

Termination of Contract of Affreightment Clause

The period of time for which such extension may be granted is 30 days, compared with 60 days
as provided in the Institute Cargo Clauses.

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INSTITUTE FROZEN FOOD CLAUSES (A) – Excluding Frozen Meat

Risk
It is to be noted that the Risks Clause is not quite as wide as “All Risk”, since claims for loss or
damage resulting from variation in temperature are limited to those attributable to the causes
set out in Clauses 1.2.1 to 1.2.6.

In respect of perils causing variation in temperature, the most important is “breakdown of

refrigerating machinery resulting in its stoppage for a period of not less than twenty-four
consecutive hours”.

It has been held that the expression “breakdown of machinery”, by itself, does not necessarily
involve the machinery coming to a full stop. Therefore, the addition of the words “resulting in
its stoppage” which has the effect of excluding claims arising from variation in temperature due
to the mere mal-function of the refrigerating machinery.

It is also to be noted that in order to found a claim under this clause, the Assured must be able
to show, presumably by evidence obtained from the carrier, that the stoppage of the
refrigerating machinery extended for a continuous period of not less than 24 hours.

The other listed perils from which “variation in temperature” claims may arise are the same as
set out in Institute Cargo Clauses (C).

Exclusion
The exclusion 4.1 to 4.7 corresponds with the exclusions contained in the Institute Cargo
Clauses (A). In particular, the exclusion 4.4 (the inherent vice exclusion) differs from the usual
form, the words in parenthesis being added to make it clear that underwriters will not raise this
defense against any claim resulting from variation in temperature which has come about
through one of the specific causes mentioned in Clause 1.2.

There are two exclusions (4.8 and 4.9) which are particular to the Frozen Food Clauses. The
exclusion 4.8 exempts the underwriters from liability for any claim arising from the failure of the
Assured, or the Assured’s servants, to take reasonable precautions to ensure that the goods are
kept in properly refrigerated or cool and insulated spaces. Exclusion 4.9 provides in effect that
no claim under the policy will be recoverable if prompt notice of it has not been given to the
underwriters within 30 days after the termination of the insurance.

Transit
- The insured transit commences at the time the goods are loaded into conveyance. This is
one stage earlier than is provided in the Institute Cargo Clauses.

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- The words “warehouse or place of storage” are replaced in the Institute Frozen Food
Clauses by “freezing works or cold store” to describe the location where the goods are
loaded, and by “cold store or place of storage” at destination.
- The transit cut-off is a mere five days after discharge of the goods from the ocean vessel.

INSTITUTE FROZEN FOOD CLAUSES (B) – Excluding Frozen Meat

Risk
This clause is in the same terms as the corresponding clause in Institute Cargo Clauses (C).

Exclusion
Exclusion 4.7 (deliberate damage to or deliberate destruction of the subject matter insured or
any part thereof by the wrongful act of any person or persons) does not appear in the Institute
Frozen Food Clauses (A).

POLIS STANDAR ASURANSI PENGANGKUTAN BARANG INDONESIA

- Jaminan Satu
- Jaminan Dua
- Jaminan Tiga

Items stipulated in PSAPBI which are not found in Institute Cargo Clauses:
- Preamble
- Definition
- Duty of disclosure of material fact
- Premium payment
- Currency Clause
- Exclusion of loss of cargo from a container which seal or lock is intact
- Loss of right to obtain settlement
- Closing

LAND AND AIR TRANSIT

- Cover B
- Cover A

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ISM ENDORSEMENT
The International Safety Management Code (ISM) or the International Management Code for
the Safe Operation of Ships and Pollution Prevention came into effect on July 1, 1998. The ISM
Code requires passenger ships, including passenger high-speed craft, oil tankers, chemical
carriers, gas carriers, bulk carriers and cargo high-speed craft of 500 GRT and over to have
safety and pollution prevention rules and implement a Safety Management System.

The shore-based management organization of each ship must have a “Document of

Compliance”, which is issued when the ship owner has complied with all requirements of the
Code. In addition, a “Safety Management Certificate” is required to verify that each ship and its
shipboard management are operating in accordance with the approved Safety Management
System.

The term of sale also determines the responsibility of sellers/buyers regarding the selection of a
vessel. In FOB, it is the buyer who nominates a vessel, but in CIF of CFR the duty to select a
vessel is on the seller. Therefore, the ISM endorsement protects the innocent assured in case of
non-compliance with ISM.

CLAIM
Marine claims come under four headings:

1. Loss
- Total loss à Actual Total Loss, Constructive Total Loss
- Partial loss
2. Damage
3. Expenses
4. Liablity

CLAIM DOCUMENTATIONS
In order to recover from Insurers, the Assured must provide evidence that the loss or damage
has occurred and render the necessary documents to validate a claim. The documents required
will vary according to the type of claim.

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