The Shipping Journey Explained

The shipping journey explained

Having the right insurance to protect cargoes as they travel can save businesses time, money and hassle.

To demonstrate the global shipping journey, we explain the steps in a typical export journey for containerised goods, noting the relevant risks and insurance policies along the way.

Seller’s warehouse

Every global freight journey begins with goods in a warehouse or facility.

As orders come in, you arrange exports through a freight forwarder or shipping line. Before the transport can be insured, you must complete all relevant documents (such as commercial invoices and packing lists).

Cargo policy coverage begins the moment the goods are first moved in the warehouse to be loaded onto the conveying vehicle.

Remember:

Typically, there’ll be an ISR or a Biz Pack policy to cover the stock hold. When goods are in the seller’s warehouse, a cargo policy wouldn’t attach or start until the goods are moved to be loaded onto a truck from the warehouse.

Common risks

 Cover has not yet begun under the cargo policy

Insurance policies

 Stored or stationary goods can be covered under your ISR or Biz Pack policy

 Cargo insurance doesn’t apply as transit hasn’t begun

Export haulage

Once you’ve confirmed a booking with a shipping line, you must arrange transport to take your cargo to the port.

Full container load (FCL): Empty container collected from depot and delivered to packing facility. Container packed and sealed, temperature set etc. CWD/PRA completed, delivered to terminal.

Less than container load (LCL): Deliver product to packing depot where consolidation company handles as per FCL protocol.

Some large shippers don’t engage a forwarder, instead handling shipments directly with their shipping line.

Remember:

This is where there’s a bit of crossover because the owner of the goods might have a cargo policy in place to protect their shipment. And then, the freight company hauling the goods should have a carrier’s policy in place to cover themselves.

 Loading and unloading

 Container condition (e.g. light test to identify any holes)

 Accidental damage

 Packing and securing the load

 Theft or other loss

 Truck overturning or collision

Insurance policies

 Cargo policy:

Attaches once goods are moved to be loaded

 Carrier’s policy:

The carrier transporting goods may have a carrier’s policy in place to protect their interest if they damage the goods

Export customs clearance

Before the goods arrive at the terminal for loading, they must be cleared by customs.

The requirements for this step di er depending on country and jurisdiction. In Australia, the steps are as follows:

1. Classify your goods with HS (harmonized system) codes

2. Calculate your duties and taxes payable

3. Complete Export Declaration either electronically or at a Border Force counter

4. Certify your goods for export (Marine Export Certificate)

5. Organising your documentation ahead of time can help avoid unnecessary delays or additional fees.

Remember:

This is a matter of having all your documentation completed and in the one place, paying all the taxes and duties you need to export your goods. Have it all done ahead of time, so there’s no delays or fees.

Common risks

 Loading and unloading

 Container condition (e.g. light test to identify any holes)

 Accidental damage

 Packing and securing the load

 Theft or other loss

 Truck overturning or collision

Insurance policies

 Cargo policy: Attaches once goods are moved to be loaded

 Carrier’s policy: The carrier transporting goods may have a carrier’s policy in place to protect their interest if they damage the goods

Terminal handling

Once customs clears your cargo, the next step is terminal handling.

This consists of the following:

1. Container is unloaded from the truck and transferred to the terminal staging area for processing

2. Terminal authorities validate all the details and customs documents to ensure the container is cleared for export.

The container is then stored, waiting for the vessel to be ready for loading.

Remember:

Accumulation is a common risk at the terminal handling stage. If you have multiple containers waiting together, your risk exposure is greater because if an incident occurs – like a fire – you might have to claim for damage to more than one. We have clauses in our contracts to protect against this extra risk. But you should check that your cargo policy limit is su icient to cover your risks.

Common risks

 Accumulation (e.g. if a major weather event hits and you have multiple consignments present there is an accumulation risk)

 Accidental damage (check policy limits to ensure coverage)

 Loading and unloading risk as containers are moved around port

 Theft or other loss

 Explosions (e.g. Port of Tianjin and Port of Beirut – volatile chemicals in storage exploded)

Insurance policies

 Cargo policy

Sea voyage

Once the vessel is cleared for loading, your container is loaded and the voyage begins.

The voyage may be direct or your cargo might be trans-shipped, meaning it calls into a port that isn’t the final destination to be loaded onto another vessel to complete the voyage.

Remember:

On the voyage there are risks like water damage, loads shifting, handling and packing problems, temperature control problems, theft and more. ‘General average’ might be declared if there’s damage to lots of containers – which means everyone with an interest on the voyage (cargo and ship owners) pays an equal share of the claim.

Common risks

 Water damage

 Load shifting

 Damage caused by insu icient packing

 Load dropped while loading or unloading

 Temperature (in refrigerated containers)

 Theft, pilferage and non-delivery

 Moisture or condensation

 General average

Insurance policies

 Cargo policy

Import customs clearance

Once the cargo arrives at the destination port, certified copies of the authorised export documents must be signed in addition to pre-arrival customs documents.

Import customs clearance will be required for any shipping entering the country. A declaration of the type of goods and the value will be made for registration purposes and calculation of any duties and/or taxes that may be payable.

Remember:

This is the same as export but on the other end of the journey. The same considerations apply: ensure you have all your documents in check. Your container might be detained if you don’t have your paperwork in order. That can get expensive – you’re hiring the containers and demurrage fees can really rack up.

Common risks

 Inaccurate or incomplete documentation (administration and business risk, not an insurance risk)

 Fumigation costs if ordered by government authorities

 Delay risk if documents aren’t in order

Insurance policies

 Cargo policy (ref. fumigation clause)

Destination handling

When your goods arrive, the terminal operator will carry out a verification process.

This will include checking documents received at the port of origin and providing the shipping line with the initial bill of lading.

The container will then be accepted, unloaded and transported to the destination warehouse, where it can be inspected and sorted.

Remember:

Goods are rarely unoladed at the port. Containers are made available from the terminal, from where they’re delivered to an import warehouse and unpacked.

Common risks

 Accumulation (e.g. if a major weather event hits and you have multiple consignments present there is an accumulation risk)

 Accidental damage

 Loading and unloading risk as containers are moved around port

 Theft or other loss

 Explosions (e.g. Port of Tianjin and Port of Beirut – volatile chemicals in storage exploded)

Insurance policies

 Cargo policy

Import haulage

The final stage of the journey is import haulage, where the goods are transported from the import warehouse to the consignee’s warehouse.

Similar to the Export Haulage stage, this can be done via road, rail, barge or multimodal transport, depending on the terrain.

A local road transport operator may be used, or the consignee may choose to receive the cargo at the import warehouse and complete the import haulage themselves.

NTI’s cargo policy ceases once the goods have been unloaded at the consignee’s warehouse.

Remember:

This is the journey from the port to the end location. Our policy ends the moment the goods are unloaded from the truck at the insured’s warehouse or the end destination.

Incoterms (international commercial terms)

The ICC (International Chamber of Commerce) sets Incoterms and they’re widely used in terms of sale. They define the seller’s and buyer’s responsibilities and at what point in a journey risk and ownership transfer from the seller to the buyer.

There are 11 Incoterms and they form a spectrum, with buyers having complete responsibility at one end and sellers having complete responsibility at the other. Common Incoterms include:

EW (ex works)

Most responsibility is with the buyer; the seller only needs to make the goods available for collection. Ownership and risk transfer at the seller’s warehouse. No insurance responsibility on the seller. Buyer must arrange cover for inland transit to port, sea voyage and to final destination.

FOB

(free on board)

Moderate responsibility on the seller. The seller arranges inland insurance to the point of departure and pays for the goods’ transportation to the port of shipment, plus loading costs. Once the goods are loaded on the ship (the ‘Terminal Handling/Sea Voyage’ stage), ownership and risk transfer to the buyer, who arranges sea voyage and inland transit insurance.

CIF

(cost, insurance & freight)

The most commonly used Incoterm. Unique in that the seller only needs to arrange and pay for transport to the port. Once goods are loaded on board responsibility transfers to the buyer. However, it is still the seller’s responsibility insure the sea voyage on the buyer’s behalf. Risk transfer occurs at the ‘Sea Voyage’ stage.