Atlanta
International Magazine
AVOIDING THE PITFALLS OF INTERNATIONAL SHIPMENTS AND MARINE
INSURANCE
By Richard L. Boger
Aside from obtaining the order and receiving
payment the next most important aspect of international trade is delivering
the goods safely and efficiently to the customer.
With apologies to David Letterman, I would like to offer my own "Top Ten List of
Ways to Avoid International Pitfalls":
10. "Penny Rich and Pound Foolish"
Just like anything else, you get what you pay for. Use quality materials and services and
don't scrimp on pennies when you have thousands of dollars of merchandise at risk. Deal
with reputable professionals and service providers who will stand behind the services they
render and carry them out effectively and efficiently as promised.
9. "Proper Labeling"
Madison Avenue is the place for glitz in packaging and labeling. Make sure your labels
contain all the information necessary to move the goods along the transportation route,
but are anonymous so as not to entice a potential thief from helping himself to
your valuable goods. Use a set of codes known only to you and your customer to adequately
(but not excessively) identify the contents of the shipping packages. American goods make
attractive targets for all types of criminal activity. Don't take any unnecessary chances.
8. "Select the Right Ports"
You wouldn't let your local butcher perform open heart surgery, nor would you show up at
the tennis courts with your golf clubs. For the same reasons you need to match the ports
of export and import with your products. Do the ports have the facilities to handle your
products? If you need temporary storage, are these facilities available at the ports you
are considering? What security is available at these ports? What reputation does each port
facility have? If you avoid problematic ports, your chance of safe, efficient delivery is
maximized.
7. "Proper Stowage"
Just as you select the right port facility, select a vessel and shipping line which have
the capability of handling your specific cargo. Match your cargo with the most efficient
vessel. The range of vessels spans a wide spectrum. Terms such as: "break
bulk", "bulk handling", "containers", "Ro-Ro",
"LASH", and others, can be confusing and a mismatch can be devastating to
the delivery of your goods. Make sure the vessel you have selected can properly stow and
secure your cargo.
6. "Containers"
The most popular conveyance for shipping general merchandise and products internationally
is the container. Containers come in all types and sizes for both ocean and air shipments.
Careful inspection of each container before loading can prevent a possible loss in the
future. Is the container in sound condition? Are there any visible marks, punctures or
other physical deterioration which exhibit past mishandling or abuse? Are the seals in
good order and secure to prevent break-ins or theft? The proper container will eliminate
several possibilities for losses during shipment.
5. "Invest in Good Packaging"
The most common causes of loss in international shipments are water & motion.
To minimize the potential for water or motion damage, properly securing the goods in
quality packaging is a must. Cartons can be made of wood, reinforced corrugated cardboard,
barrels or drums, or reinforced bagging. Packages should be securely packed in the cartons
to avoid motion damage. Loose packages, being jostled about, are a certain cause of
breakage or damage during shipment. To avoid oxidation on parts subject to moisture
damage, techniques such as spray coating with a water resistant lubricant or
shrink-wrapping can be employed. The latter can be used even if the goods are bolted onto
flats outside of shipping cartons. Money invested in good quality packaging will pay
dividends many times over.
4. "Accurate Documents"
To begin with, make sure you know and have selected a complete set of documents necessary
for each specific voyage. A missing document can cause lengthy hold-ups in clearing your
goods through to their destination. Once the package of documents is identified, care
should be taken to complete each document thoroughly and accurately. Information must be
complete and in a form necessary for the reader to properly process the document.
3. "Seek Out Assistance"
There are a wealth of competent professionals and service providers who can help you every
step of the way in the international shipment. Packaging Surveyors and Loss
Adjusters can be retained to consult on proper packaging techniques to minimize loss.
International Freight Forwarders and Customs House Brokers can not only
assist with the proper selection of a shipping line and vessel but also with documentation
necessary to clear your goods for export and import. International Bankers can
identify and review the necessary documents for securing payment for the goods. Marine
Insurance Brokers can counsel on the requirements for insurance with each shipment
and provide Open Marine (Cargo) Policies designed especially for you and
competitively priced to protect your interests in the shipment via insurance. Federal and
state governments have resources available to provide assistance. U.S. Department of
Commerce and state departments of commerce and trade have people and publications
available to assist with everything from marketing to payment, and everything in between. Regional
Export Assistance Centers conveniently located throughout the U.S., including
Atlanta, are available as "one-stop shops" for assistance when dealing with
various governmental agencies in the international trade spectrum. Private service
providers are referred by these governmental personnel as needed. Seek out publications
available in the "Export Yellow Pages", "The Export Hotline
1-800/USA-XPORT (1-800/872-9767)", "The Internet/Worldwide Web", as
well as federal, local and state governments and Chambers of Commerce, Marine Insurance
Companies, trade associations, and others. Don't be afraid to ask, or be intimidated by
the sheer volume of assistance available. Seek out sources which can work best for you.
2. Beware the "Unpaid Vendor"
Most international payments are facilitated through the use of Letters
of Credit. Among other things, letters of credit identify, in conformance with the
precise "INCOTERMS" of the transaction, who is responsible for marine
insurance, and what type. Often, Certificates of Insurance or Special Marine
Policies are required. As trade with familiar and established customers grows, more
and more exporters are quoting "Open Account" repayment terms. Unlike
letters of Edit, open account sales shift the "money risk" to the exporter,
hence, the "Unpaid Vendor". Until you are paid, the Unpaid Vendor
should control the marine insurance. This may be counter to the business instinct of
shifting as much responsibility as possible to the other party in the transaction. I am
often reminded of the sign which appears on the desks of many credit managers: "A
sale is a gift until it is cash!" It is surprising how many exporters are
exposed to the money risk and fail to insure that risk properly through their own tailored
marine (cargo) insurance policies.
1. "Know the Customer!"
This is the principle axiom to any business transaction. It is especially true in
international trade because of the distance and cultural barriers which naturally exist.
While bad apples will always cause problems, a quality, good customer will not only honor
his/her word but also provide an invaluable resource for facilitating and completing the
international transaction. Your good customer can assist with complying with local
"red tape" in its country, and provide access to a network of service providers
located there to be called upon as needed. Problems can always arise from unexpected
sources, so competent local contacts will always be useful to successfully complete the
deal.
Everyone can probably come up with their own "Top Ten List", but
my experience and contacts have led me to the above. Good Exports! Great Profits!
Special thanks for information contributing to this article go to Ms.
Kristen Smith, Marine Insurance Services, Inc., Atlanta, whose invaluable experience in
the marine insurance industry have assisted us and our clients for several years. CIGNA
Insurance Company has issued many valuable publications dealing with all aspects of
successful marine transportation, including a recently released video entitled "At
Case of Good Judgement - to Better World Trade" for companies involved with
international shipping. An article recently prepared for the Small Business Exporters'
Association authored by Mr. Thomas A. Cook, Managing Director, S.O.S. Global Express, New
York, entitled "International Freight Shipments - Avoiding the Pitfalls"
also provided much information.
Richard L. Boger, President,
Export Insurance Services, Inc.
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