FOREIGN TRADE UNIVERSITY ENGLISH FOR SPECIFIC PURPOSE
FACULTY
MARINE INSURANCE ASSIGNMENT TOPIC: THE AFFECTION OF
TARIFFS ON MARINE CARGO INSURANCE

Teacher: PhD.Nguyễn Thu Hương Class: TAN432(2-1920).5
Group 10:
Hà Mai Linh

1711120090

Nguyễn Cẩm Dung

1711110134

Phạm Thị Vân Anh

1714420006

Lê Thảo Vân

1711110778

Hoàng Thuý Hằng

1714420028

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Contents
I.

The reason for choosing the topic

II.

Over view of Marine insurance

III. The roles of Marine cargo insurance
IV. Tariffs affections on valuation
V.

Example of a claim adjustment

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I.

The reason for choosing this topic
The first issue to adress here is “Why do we choose this topic” ? And “Why
is the much-discussed 232 and section 301 tariffs that are currently implemented
or currently underview”.
-Duty rate are on the rise: These tariffs curently stands as follow: 25% on
steel imports into the US and 10% on aluminum. And then there are 3 lists
currently published under the section 301 tariffs with only one list currently

being enforced as of July 6th. Also in more recent news, a duty rate of 25% may
be imposed on list 3 instead of the originally proposed 10%
 So as you can see it’s a very current news and there are still a lot of
moving pieces but the truth of the matter is duties are on the rise and is going to
affect many aspects of international trade beyond duty. One aspect that has not
really been really discussed much is how these higher duty rates may affect
marine cargo insurance coverage
-The primary way policy holders will be affected is in the valuation process
for their policy. So let’s take a quick step back and define valuation as it
typically works. Valuation is an estimation of the cargos worth which then
informs the amount of coverage that the policy provides. Historically, duty is not
written into the valuation although it can be written in as a specific clause on
your policy. The way duty is factored into a policy is typically through a 10%

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uplift. The standard in the industry is for valuation to be calculated as a basis of
CIF+10%, which stands for cost, insurance and freight. This means we would
take the CIF value of the goods and then add 10% uplifft. This uplift is to cover
incidentals that arise during the importings process including items like duty
port fees and broker fees. Since duty rates were typically less than 10% in the
past, this 10% uplifft was more than enough to cover all the incidentals.
II.

Over view of marine insurance

1. Definition of marine insurance

Marine Insurance is a type of insurance that covers cargo losses or damage
caused to ships, cargo vessels, terminals, and any transport in which goods are
transferred or acquired between different points of origin and their final destination.
Types of risks in marine insurance
Base on the causes
 Act of god, vile weather, thunderstorm and lightening, tsunami, earthquake,
flood, volcanic eruption,etc.
 Perils of the sea: Ship strike upon the rocks, ship sinking, ship collision,
colliding with icebergor other objects.
 Risks caused by political actions: War, SRCC (Strikes, Riots, Civil,
commotions).
 Risks causes by particular actions of people: Thieves, robbers.
 Risks causes by other sources.
Base on the insurance technique
a) Insured common perils: The risks that are normally insured in original
insurance clause
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Main risks

Auxiliary risks

1) Stranding

1) Theft

2) Sinking

3) Fire

or

explosion
4) Collision
5) Jettison
6) Missing

2) Leakage
3) Breakage
4) Dampness
5) Heating
6) Hooking
7) Rusting

b) Relative excluded Perils: Risks that are not included in standard insurance
clauses.
 War
 SRCC
c) Absolutele Excluded Perils: Risks that are not insured in any circumstances:
 Loss, damage or expense attributable to wilful misconduct of the assured
 Ordinary leakage, ordinary loss in weight or volume, or odinary wear and tear of
the subject – matter insured.
 Loss, damage or expense cause by insufficiency or unsuitability of packing or
preparation of the subject – matter insured.
 Loss, damage or expense caused by inherent vice or nature of the subject matter
insured.
 Loss, damage or expense proximately caused by delay, even though the delay be
caused by a risk insured again.

 Loss, damage or expense arising frokm insolvency or financial default of the
owners, managers, charters or operators of the vessel
 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
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Types of losses and damage in marine insurance
Total loss.
Actual total loss

Actual total loss

Means the whole lot of the
consignment

has

been

lost

Found in the case where the

or actual loss of the insured good is

damaged or found valueless upon unavoidable,

arrival at the port of destination.

or

the

ship

or

consignment has to ba abandone
because the cost of the recovery
would exceed the value of the ship
and

the

consignment

in

sound

condition upon the arrival of the port
of destination.
Partial loss: Means that the loss or damage dine to the goods is only partial.
 Particular average( Ton that rieng) :losses of each insured interest
individually due to acts of god or perils of the sea.
 Insurer’s liability: Compensate for both of the losses and reasonable costs
caused by particular average

III.

Marine cargo insurance

In order to trade goods and other merchandise usually have to travel from one
country to another. We buy-in raw materials and components, assemble or
manufacture them into something else and then sell them overseas or to shops in
our own High Streets. This national and international movement of property
gives rise to the need for a particular type of insurance, one that provides
coverage throughout the duration of the transit, that offers protection from risks
peculiar to transit and can be handed on from seller to buyer as the property
itself changes hands. That’s why the Marine cargo insurance is provided
1. The features of Marine cargo insurance


Coverage for limited carrier liability
The carriers, by law, are not responsible for many common causes of loss
that occur in transit (for example, acts of God, general average, etc.). And, even
if they are liable, carriers’ liability in the event of a loss is limited – either by

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contract in the bill of lading or by law. In most cases, you will only recover cents
on the dollar from the carrier.


Cargo insurance is important in international trade. Businesses need cargo

insurance to reduce risk in importing and exporting. Cargo insurance is covered
under risk policy or floating policies.



80% of international cargo transportation is carried out by sea. Again the
overwhelming amount of sea transportation is handled via containers. Any
voyage of cargo ship not only has a long distances and takes a few month to
completed, but also has a lot of risks (ex: Fire, Lightning, Explosion, Riot,
strikes, malicious damage, storm, etc…)

2. The conditions of marine cargo insurance of UK
a) ICC 1963
 Free of particular average ( FPA)  
 With particular average (WA)
 All risk (AR)
 War risk (WR)
b) ICC 1982 ( ICC 2009 ) Change 3 main conditions
FPA => INSTITUTE CARGO CLAUSES C
WA  => INSTITUTE CARGO CLAUSES B
AR   => INSTITUTE CARGO CLAUSES A

There has been some updating of the language used in the clauses. In particular:
- The terms ‘goods’ and ‘cargo’ have been replaced by ‘subject matter insured’. - The
term ‘underwriters’ has been replaced by ‘insurers’. - The marginal side headings in
the 1982 Clauses have been replaced by sub-headings.

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The Strikes and War Clauses have been amended in line with the A Clauses and
we have only shown below the Risks Covered Clauses of each for ease of reference.
3.The conditions of marine cargo insurance of Vietnam
a) QTCB 1965
b) QTC 1990
c) QTC 2004
IV.

Tariffs affection on valuation

As we have mentioned earlier in the first part, the duty rate were typically less
the 10%, which is less than the uplift. So in the past, this 10% uplift was abundant
to cover all the unfortunate accidents. How ever this is currently changing for a very
large number of bussinesses as a result of the section 232 and the section 301
tariffs. With duty rates increasing up to 25% on a variety of products, the typical
10% uplift may no longer be enough to cover a policyholders incurred duty and all
of the other incidentals that can come up during a claims. It is also important to
understand that these tariffs will affect both businesses importing goods into the US
and bussinesses exporting out to other countries. A number of countries have begun
to implement their own higher tariffs in retaliation(trả đũa) to section 232 and
section 301 tariffs from the US. So if your marine cargo insurance policy for
shipments being exported to one of these countries, your policy may be affected as
well
V.

Example of a claim adjustment

To help clarify how this can affect a marine cargo insurance claim, let’s walk

through an example of a claim for policy holders that is subject to a new 25% tariff that
has an standard of 10% uplift on their policy. Before we start this example, we need to
define a term that will be used in this example claim. The term is incurred duty,so
duty is considered incurred when the legal obligation arise….EX. Therefore, if you’re
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bringing a shipment of goods into the US, the duty would be considered incurred if you
have already paid it, the goods have arrived at the airport and the goods have been
released by Customs. If you prepaid your duty before they arrive at the port and
something happens to your shipments while they’re in transit, the duties are not
considered incurred since the goods were never officially entered into the country. In
that case, the prepaid duty would have to be refunded by Customs and wouldn’t be
eligible to be included in a claim.
Example situation of how these higher tariffs may affect a marine cargo
insurance claim
Slide 6:24;
In this example, we stuck two whole numbers for the sake of simplicity. Let’s take
an insurance policy holder that ships a CIF value of $100.000 is subject to the new
25% tariff, has a $1000 deductible and has no enhancement clauses or carrier
compensation to take into account. With an insurance policy written uder CIF+10
valuation, we would have the following potential coverage on a claim. The total CIF
value of $100000+10% uplift=$110000. This is the agreed value of the cargo. Once
you consider $1000 deductible. That means the policy is able to pay out a total of
$109.000.
Slide 7:16
Now let’s consider that 25% duty rate. In this claim we had a full loss of $100.000
of cost and freight. With the duty rate of 25% the amount of incurred duty included in

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the claim is %25.000. That means the total loss amount is 125000. Now as we
illustrated in the previoú slide, the total recoverable amount under the policy is
109.000. That means the insured is out 16,000 since the policy can’t cover any more
than that. But they had a 10% uplift so we didn’t include any port fees, broker fees or
other incidentals that may built up. So the difference between the loss amount and the
total amount recoverable could potentialy be much larger
-How can we prepare for this change? We can update our procedures in order to
write policies as CIF+!0%+duty. This change will enable the policies to be cover those
higher expenses. The trade off of this is that it may result a slight increase in premium
since the overall value your policy covering will also be increasing. This is just a
approach since every marine cargo insurance policy is different
Slide 9:12
Let’s go back to our previous example and see the result under a policy written
under CIF+!0%+duty. We’re using the same number but now see that in additin to
addig the 10% uplift, we’re also adding $25.000 since that would be the amount of
duty paid on a $100.000 shipment at a duty rate of 25%. So then after considering the
$1000 deductible, the total the policy is able to pay out is $134.000.
Slide 9:46
Now let’s see how that amount holds up on the same claim for full shipment loss
and incurred duty at 25%. The full loss is still $100000 in cost and freight with a duty
rate of 25%, the amount of incurred duty isn’n included in the claim is $25.000. This
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means the total loss amount is $125.000. However, the total amount recoverable is
$134.000, which we saw calculated in the previous slide. There for in this situation, the
full amount of loss would be recoverable with room for incidentals like port fees and
broker fees that we didn/t consider in the example

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