Савчук. Foreign trade

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4.What is the banker’s transfer?

5.What is the B/E?

6.What does discounting the B/E mean?

7.What is a documentary B/E?

8.What is the L/C?

BUSINESS TALKS

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B: Unfortunately we can’t accept the payment by a Letter of Credit as in this case, we are not only bound to pay 3% of the price of goods to the Bank, but also to make a 30% bank deposit for the term of the validity of the Letter of Credit. It means that we’ll have to freeze a sum of money of approximately 0,3 of the value of the goods for about 2 months. In other words we’ll have to withdraw this sum from the commercial turnover. This will considerably cut our profits from this transaction. We suggest transferring a telegraph payment within 15 days after the goods arrive at the port of destination and are delivered to our shipping agent.

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B: We are known as a very reliable firm. So the sum of our transaction will hardly affect the firm’s financial standing.

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B: In this case we can offer as a security of the payment a Letter of Guarantee of a first-class bank for 60 days from the date of the Bill of Lading. It’ll cost us much less. And as this bank is a correspondent of the Russian Bank for Foreign Trade it will give you the required official guarantees.

164

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170

CHAPTER 9 INSURANCE

INSURANCE

Insurance has become more and more important as commerce has developed. The idea of insurance is to obtain indemnity in the event of any happening that may cause loss of money; insurance is against risk. Indeed, these days it is possible to insure against almost any eventuality that may cause loss of one kind or another.

A somewhat different kind of insurance provides for money to be paid to a person at a certain age as an income or as a lump sum, or to be paid to the person' s heirs on his or her death: this is life insurance, now generally known in Britain as assurance.

It is not possible in this chapter to go into the various forms of insurance for private individuals, and we will concern ourselves only with the insurance of goods. Goods are normally insured for the full amount of their value, which is calculated as: cost of goods + amount of freight + insurance premium + a percentage of the total sum to represent a reasonable profit for the seller.

While goods are being stored ± in a warehouse, for example ± the insurance usually covers the risks of fire and burglary, and other risks may also be covered. As soon as the goods are in transit, in other words being moved from one place to another, they are insured against the same risks. The term warehoused or in transit means that the goods are insured whether they are in a warehouse or in process of being moved.

The usual procedure is to insure against all risks. This involves a W. A. clause (with average clause, explained below).

The word average as used in insurance means damage (it is derived from the French word avarie). With average means that the insurers pay claims for partial losses, whereas free of particular average (F. P. A.) means that partial losses are not covered by the insurance.

Particular average means partial loss or damage accidentally caused to the ship or to a particular lot of goods. Particular average must be borne by the owners of the property suffering the loss, and is distinct from general average, which is distributed over the whole ship, freight and cargo. If, for example, some of the cased cycles become corroded by sea-water a particular average loss has occurred.

General average means any extraordinary loss, damage or expenditure incurred for the purpose of preserving all the interests imperiled ± the ship, the cargo and the freight: these are said to form a common adventure. A general average sacrifice is when cargo has to be jettisoned, that means thrown into the sea, to lighten the ship; when cargo is damaged by water used to put out a fire; the

171

cost of towing a ship into port for repair, etc. General average is, in fact, the application of the principle: ª that which is sacrificed for all is borne in proportion by all interested in the adventureº . It is older than insurance.

The York-Antwerp Rules: In earlier times there was some conflict between the law of one maritime country and another concerning general average, so a code was drawn up called the York-Antwerp Rules, and this is amended from time to time.

INSURERS

Insurers is the name given to the people who undertake to indemnify the insured ± that is to say the owners of the goods, whether sellers or buyers, who pay what is called a premium to the insurers.

The insurers are also called underwriters, and are said to underwrite the proportion of the indemnification they are prepared to bear. (The word originated with the insurer' s signature under ± now usually beside ± the proportion he agreed to pay).

The insurers are either companies, like other business firms, or they belong to the famous organization of LLOYD' S. This is a very old society that started in London in the eighteenth century; the members operate as individuals and their liability cannot be limited.

DOCUMENTS USED IN INSURANCE

The policy is the principal document and is the instrument embodying the contract, but as the policy may cover a certain period of time, or many shipments of goods, another document is used called the certificate. This is issued for each shipment that is made, the particulars of the consignment are entered on a declaration form and the insurance agents issue the certificate to the senders on behalf of the insurers.

The policy may be known as a floating policy, that is to say, it covers a large quantity of goods for a fairly long period, usually a year, or it covers goods up to a large sum of money, and such a policy is represented by certificates for each separate consignment.

There is also a procedure of insurance often used now, known as open cover, by which there is a rather general arrangement between the insurer and the insured, that the latter will have all consignments insured by the former.

A cover note is a small document issued by the insurance agents to their customers, to tell them that their goods are insured, and to give proof of this until the policy is ready.

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The premium is the name given to the sum of money paid by the firm insuring its goods, and it is quoted as a percentage.

Match the following definitions on the left with their explanations on the

right:

OVERSEAS TRANSPORT

By rail

British Rail will see to the insurance of the consignments, whether carried by their train-ferries or by train and B. R. vessel; the consignors can deal direct with