Consignee's letter of credit
The L/C is certainly an important document for buyers, when purchasing goods abroad. Still however the documentary L/C is mainly a guarantee for the shipper to get paid, once the cargo is shipped, while the buyer remains rather unprotected, if the cargo dispatched does not correspond to the quality ordered.
It is therefore very important to select reliable trading partners, that will not be bankrupt, when you receive your goods and find out the quality does not come up to expectations.
Banks do not guarantee, that what is described in the Bill of Lading actually corresponds to the cargo packed. Shipping lines and forwarders do not examine the contents of the cartons or the containers, but trust that what is declared by the shipper corresponds to the truth. If you have any doubt about your trading partner, do not hesitate to contact our office for advice.
Cargo carriers such as shipping lines, truckers, port terminals generally only cover their liabilities in accordance to the contract of carriage (in shipping: the Bill of Lading). Generally the liability of a carrier is far below the actual value of the cargo. In any case damages may occur that are beyond the control of a carrier.
Read our pages on how to prevent damage.
If your contract is subject to the Incoterms 2000 you can consult this documentation about the portion of risk, that should be covered by the buyer. In no case it is however convenient to cover only a part of the whole stretch of transport: Insurance should always cover the whole stretch door to door.
Do also not forget that an ALL RISK insurance does only cover the risks specified, but not every risk!
In order to determine the correct insurance coverage for your cargo it is important to know:
Exact cargo descriptions
Type of packaging
Means of transport used
Route of transportation, storage & warehousing
Value to be insured (general rule: cargo value + transport & insurance costs + 10 percent)
Particular dangers (rusty, fragile goods, explosives etc)
Special conditions - (conditions of the L/C)
For more information do not hesitate to contact our office.