Time of delivery(time of shipment), port (place) of shipment and port (place) of destination, partial shipment, transshipment, or lay days, demurrage and dispatch money. Chapter 6
1. What are the differences between general average and particular average?
Although both general average and particular average belong to the category of partial loss, there is still some differences between them: ·Causes: Particular average is a kind of cargo loss usually caused directly by sea perils, while general average is caused by intentional measures taken to save the common interest. ·Indemnification: Particular average is often borne by the party whose cargo is damaged, while general average should be proportionally contributed among all parties benefited from the intentional measures.
2. What are the conditions for general average? ·The danger that threatens the common safety of cargo and/or vessel shall be materially existent and is not foreseen. ·The measures taken by the master shall be aimed to remove the common danger of both vessel and cargo and shall be undertaken deliberately and reasonably for common safety. ·The sacrifice shall be specialized and not caused by perils directly and the expense incurred shall be additional expense which is not within the operation budget.
·The actions of the ship’s master shall be successful in saving the voyage
3. What are the differences between the scope of ICC(B) and ICC(C)?
The scope of ICC(C) covers loss of damage to the cargo attributable to fire or explosion, vessel of craft being stranded, grounded, sunk or capsized, overturning or derailment of land conveyance, collision or contract of vessel, craft or conveyance with any external object other than water, or discharge of cargo at a port of distress, general average sacrifice, or jettison.
Apart from those covered under ICC(C), the scope of ICC(B) also covers loss of or damage to the subject matter insured attributable to earthquake, volcanic eruption or conveyance, container, liftvan or place of storage, or total loss of any package lost overboard or dropped whilst loading onto or unloading form, vessel or craft.
4. What are the risks that are known as general additional coverage
1)T.P.N.D(Theft, Pilferage and Non-delivery), 2)Fresh Water Rain Damage, 3)Risk of Shortage, 4)Risk of Inter Mixture and Contamination, 5)Risk of Leakage, 6)Risk of Clash and Breakage, 7)Risk of Odor, 8)Heating and Sweating Risk, 9)Hook Damage, 10)Risk of Rust, 11)Breakage of Packing Damage 5. What are the main expenses involved in ocean marine insurance? How to define them? Marine cargo insurance also covers the expenses incurred to avoid or reduce the damage to or loss of the subject matter insured. There are mainly two types of expenses. One is Sue and labor expense, the other is salvage charges.
Sue and labor expense are extraordinary expenses made in a time of peril by the insured to act to avert, or minimize any loss of or damage to the subject matter insured. Salvage charges are
expenses resulting from measures properly taken by a third party other than the insured, his agent, or any person employed by them to preserve maritime property from peril at sea. 6. What documents are needed when an insurance claim is made? ·Original insurance policy or insurance certificate
·Original bill of lading or other transport document ·Commercial invoice ·Packing list
·Certificate of Loss(Survey) ·The landing account or weight notes(notes on weight) at destination ·Any correspondence with the carrier or any other party who could be responsible for the loss or damage
·Master’s protest.
Chapter 7
1. After Bank X advised exporter Y of the L/C, the shipment was made. When the cargo was on the way, the importer filed for bankruptcy. Is Y out luck of collecting the payment? Can the opening bank refuse to make reimbursement to the negotiating bank? Why or why not? No, exporter Y does not need to worry about the payment. Because the payment is by L/C, the issuing bank is responsible for making payment regardless of the importer’s situation. But the condition is that exporter Y can fulfill all the requirements listed on the L/C. According to UCP600, a credit constitutes a definite undertaking of the opening bank to pay or to pay at maturity in case of acceptance. Therefore once the stipulated documents are presented to the opening bank and the terms and conditions of the credit are complied with, the opening bank cannot refuse to make reimbursement to the negotiating bank.
2. An L/C does not indicate whether it is revocable or not. Is it revocable? Can a revocable credit be transferable?
According to UCP600, if an L/C does not indicate whether it is irrevocable or not, it will be considered as irrevocable. And a transferable L/C must be irrevocable. 3. After a gullible importer paid Bank C against the seemingly correct shipping documents, he went to take the delivery, but found out that the goods were inferior counterfeits. Is Bank C liable under UCP600? Can the importer do anything in order to recover the loss?
Bank C is not liable in this case because UCP600 stipulates that in credit operations all parties concerned deal with documents, and not with goods, services and/or other performances to which the documents may relate. In order to recover the loss, the importer should rely on the sales contract and seek for solution. 4. An exporter, Wu Co., received an L/C issued by Bank B and confirmed by Bank K. After Wu shipped the goods, Bank B declared bankruptcy. Will Wu have sleepless nights?
No, Wu Co. Does not need to worry about the payment. When the L/C is confirmed, the confirming bank holds the same definite undertaking as the issuing bank to pay or to pay at maturity in case of acceptance.
5. Does a payment credit differ from a sight credit?
A payment credit could be settled by sight payment or deferred payment. In both cases, a draft drawn on the issuing bank may not be necessary. While when a sight credit is used, payment would be made immediately against a sight draft and required commercial documents. 6. Are the following credits transferable? (A)This L/C assignable; (B)This L/C is transmissible; (C)This L/C is fractionable; (D)This L/C is divisible.
According to UCP600, a credit can be transferred only if it is expressly designated as
“transferable” by the issuing bank. Terms such as “divisible”, “fractionable”, “assignable”, and “transmissible” do not render the Credit transferable.
7. Under an anticipatory credit, the exporter made an advance, but disappeared without presenting the documents as required. Who is liable for repayment of the advance? The special clause is required by the applicant, as a result he has to make repayment of the advances if the beneficiary fails to present documents for settlement. 8. Why a back-to-back credit is needed? Give an example.
A back-to-back credit is normally used by middleperson for the protection of his interest. For
example, agent A received a documentary credit from the end buyer B, A can use this credit as a backup to apply for the opening of a new credit in favor of the end supplier C. By doing so A can be sure that neither B nor C would know each other, therefore well protecting A’s business confidentiality. 9. What is the difference between a back-to-back credit and a transferable credit?
When a back-to-back credit is used, there actually involve two credits. When a transferable credit is used, operation is based on only one credit.
Chapter 5
1. The price quoted by an exporter was “USD38 per case FOB Liverpool”. The importer requested a revised CFR Liverpool price. If the size of each case was 50cm*40cm*30cm, gross weight per case was 40kg, freight basis was W/M and the quotation for London is USD100 per ton of carriage, plus 20% bunker adjustment factor (BAF) and 10% currency adjustment factor (CAF), what would be the CFR price?
W=40kg=0.04M/T M=50cm*40cm*30cm=0.5*0.4*0.3=0.06cm3 M>W M will be used as freight basis for freight calculation.
Freight per case=M*basic freight*( 1+BAF rate)=0.06*100*(1+20%)=USD 7.2 Total freight per case=7.2*(1+10%)=USD 7.92 CFR=FOB+Freight=38+7.92=USD 45.92
The CFR price would be USD 45.92 per case CFR Liverpool
2. There is one consignment of 10 cartons of leather shoes, measurement of each carton is 50*50*50cm, gross weight of each is 15KG. The air freight are quoted for the flight required is USD1.3KG. How much air freight should be paid to the carrier? W=15kg M= (50*50*50)/6000=20.83kg M>W Freight=USD 1.3/kg*20.83*10 cartons=USD 270.79 The air freight is USD 270.79
3. Suppose: Company A exports 1000 cases of Commodity Y to London. The volume per case is 40cm x 30cm x 20cm, and the gross weight is 30kg per case. For Commodity Y, the freight rate basis is W/M, and the Freight Tariff (China —London) is USD230, with a 10% port surcharge. How much is the total freight?
Total weight: 0.03 M/T*1000 cases=30M/T Total measurement: 0.4x0.3x0.2*1000 cases=24M3
W > M, “W” is the freight basis
Total Freight=Total weight× Basic Freight Rate×(1+ Surcharge)=30×230×(1+10%)= USD 7590 The total freight cost is USD7590.
4. Company A wants to send one consignment to Sydney, Australia. The goods are packed in 50 cartons, each weighing 15kgs, with measurement as 50 x 40 x 30cm. The air freight rate is quoted at USD2.00/KG (W/M). How much would the total air freight cost?
W: 15 kg M: (50x40x30)/6000=10kg W> M, so W will be adopted for the calculation of air
freight
Air freight=Total Quantity× Basic Freight Rate=50 cartons×15kg×USD2.00/kg =USD 1500 The total air freight cost is USD 1500.
5. Suppose the working period at Port X is 8 hours a day and 7 days in a week. If there are four rainy hours unable for loading and unloading in a week, how many standard days are there under the above three methods of stipulation for lay time respectively? Days or Running Days or Consecutive Days=7 days
1 Weather Working Days of 24 Hours=8*7- 4(rainy hours)=52 hours=2 days
65 Weather Working Days of 24 Consecutive Hours=7*24-4=164 hours=6 days
6Chapter 6
11. A Chinese company offered to a British counterpart at USD500 per case FOB Shanghai. The British importer asked the exporter to offer a CIF price. Suppose the freight is USD 50 per case and premium rate is 0.6%, what would the new offer be? CIF=(FOB+F)/(1-110%*R)=(500+50)/(1-110%*0.5%)=USD 533 The new offer is USD 533 per case CIF Shanghai.
12. Company A transacted with Company B, exporting frozen food under CIF. The total amount of the invoice value was USD 10 000. The premium rate was 0.4% and the goods were insured for FPA with a markup of 10%. Please calculate the insurance amount and insurance premium respectively?
Insurance amount=CIF*(1+markup rate)=10 000*110%=USD 1100
Insurance premium=CIF insurance amount*insurance rate=1100*0.4%=USD 44
The insurance amount and insurance premium are USD 1100 and USD 44 respectively. 13. Our exporting company offered light industrial products to a British importer at GBP10 000 per metric ton CIF London (insurance for All Risks with 10% markup and 1% premium rate). However, the importer intended to effect insurance by himself, as a result, he count-offered CFR price. What is the CFR price? How much premium should the exporter need to deduct from the CIF price?
CFR=CIF*(1-110%*R)=10 000*(1-110%*1%)=GBP 9890 Insurance premium=CIF-CFR=10 000-9890=GBP 110
The CFR price is GBP 9890 per metric ton CFR London and the exporter need to deduct
GBP 110 from the CIF price as the premium.
14. Suppose a cargo vessel loaded with cargo of Party A and Party B stranded in transit. To save the vessel as well as the goods on it, the master ordered to throw 1000 cases of goods to the sea. The value of the goods thrown overboard for Party A is 20% of his goods (the total value of his goods is CNY20000) and that for Party B is 10% of his goods (the total value of his goods is CNY60000). Extra wages for the seamen to perform the act amounted to CNY5000. The value of the vessel is about CNY5000000. Based on the information above what is the G.A. contribution for each party involved?
Total GA loss=20000x20%+60000x10%+5000=CNY 15000
Total GA contributory value=20 000x 80%+ 60 000x90%+5 000 000+15 000= CNY 5 080 000
GA percentage = (Total GA loss / GA Total Benefit) x 100%=(15 000/5 080 000)x100%=0.295%
GA Contribution by Party A=20 000 x 0.295% = CNY 59 GA Contribution by Party B=60 000 x 0.295% = CNY 177
GA Contribution by the Carrier=5 000 000x0.295% =CNY 14750
15. Suppose the CIF invoice value is USD50 000 and goods are insured against All Risks and War Risks with premium rate to be 0.5% and 0.05% respectively. If markup rate is 10%, the insurance premium will be:
Insurance Premium (I)=50 000*(1+10%)*(0.5%+0.05%)=55 000*0.0055=USD 302.5
Chapter 5
1. ABC Co. signed a contract to export 200 M/T of beans. The letter of credit stipulated, “Partial shipment not allowed”. When the shipment was being made, the exporter loaded 100 M/T each on board the same vessel for the same voyage at the port of Shanghai and the port of Dalian. The shipment document was clearly marked with the ports of shipment and the dates of shipment. Did the exporter violate the terms of the L/C?