Avoiding Insurance Claims

The import / export trade can be highly profitable, offering opportunities to reach customers globally. But that is not to say that it is smooth running all the way. The road to international trade success is littered with challenges.

Insurance is as vital to your product delivery plans as are safe vehicles and good sturdy cartons. When you ship important cargo many miles away and completely out of your control, you do not want to take any chances on your vessel foundering in a massive mid-ocean storm or your airline simply losing track of your cargo altogether. If situations like these occur, you must be compensated for your cargo’s value – but what can you do to help ensure that your cargo doesn’t become a marine insurance claim in the first place?

1. Pack with dock loading and unloading procedures in mind.

Your cargo may be slung around (or skewered) by anything from a forklift to a sling or net, and then, if it survives that, left outdoors to rot. Often, cargo is “stored” on port decks or out on airplane cargo tarmacs, without any covering. If you’re unfamiliar with overseas port operations and don’t have the right packaging, you can lose cargo.

2. Pack to expect Mother Nature’s worst.

Container loads can shift during heavy seas and storms. Someone else’s cargo can smash into yours — or vice versa. A sea voyage may be good for a human’s health, but it can be murder on merchandise. Think heat and humidity, salt air (which is incredibly corrosive), rain and sea spray. When any or all of this gets into your containers, you can end up with rust, blistering, mold, mildew and moisture damage.

3. Pack to expect human nature’s worst.

Some people just can’t resist somebody else’s goods. Theft can be a problem, especially when containers are left on the docks for a long time.

4. Pack smart

Use adequate packaging materials; make sure your merchandise is cushioned against blows. Waterproof everything possible. Have package exteriors shrink-wrapped. Use waterproof lining on interiors. Coat exposed metal parts on machinery, for example, with grease or some other rust arrester. Use heavy strapping and seals. Discourage theft by eliminating trademarks or content descriptions on container exteriors.

5. Value your products correctly

It is common practice amongst certain traders to under-value their products in order to reduce customs clearange charges. This might seem clever to some people, but the repercussions of improperly valuing your goods can cause your company significant damage.

Should you wish to make an insurance claim it is common for investigators to liaise with customs officials to ascertain the declared value of previous shipments. If you go ahead with a claim using an undervalued commercial invoice then you will also miss out on recovering the full value of the goods.

If earlier shipments were valued at a lower or higher price then customs officials are likely to become involved and investigate further. If that happens you’ll need to have a good reason for the discrepancy otherwise you risk having your goods confiscated. The buyer on the receiving end may also be subject to legal action in their own country even though they may be totally blameless.

6. Conform to market regulations

Every export market sets its own standards on packaging, product quality, language and even labeling. Certain products are restricted or their entry controlled into specific markets. This requires special documentation from relevant authorities in your country.

Failure to conform to these requirements is the easiest way to fail in global trade. Your goods will automatically get rejected at customs and lead to unwarranted loss.

The sure antidote to this unpleasant outcome is to invest time into your foreign market entry strategies. This will vary from one target market to the next and needs to be updated constantly as rules keep changing.

While the buyer will often offer precise product specifications, do not be satisfied with that. Get more information on the product from the International Trade Council (assuming you’re a member). This is the only way to be sure that you get it all right from start to finish and conform accordingly.

7. Properly insure your goods

Damaged or stolen goods happen. Ships crash, modern piracy exists and is quite strong in some waters, temperatures can go up into triple digits and fall below freezing on the same voyage, cargo gets jostled, falls overboard…

Stuff happens. That’s why cargo insurance is important.

Too often, shippers try to bipass insurance or improperly insure their goods.

Insurance is different for different types of goods. For example, household goods have to be professionally packed by certified professionals in order to be insured. Not knowing little things like this, some people have paid money and thought their cargo was insured when, because of something like how their goods were packed, they’d bought worthless insurance.

It’s important to not only insure the cargo you’re importing or exporting, but properly insure it.

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