You have just been promoted to the position of international shipments coordinator for a company that sells manufacturing parts used in building commercial appliances. Unfortunately, your celebration of the promotion will be short-lived.
This morning, you received an urgent message from your distributor, Franco, in Argentina. Franco has received the metallic parts that your company shipped last month. However, many of the parts are not sellable because their packaging was soaked and the parts are now covered in rust. Although Franco noticed this problem, he accepted the shipment because he had a customer in urgent need of the parts. To recoup the losses on the damaged parts, Franco wants you to file a claim with the carrier.
You assure Franco you will handle the problem. To assess the damage and determine whether the carrier is responsible, you need to hire a surveyor. Before that, you must first determine whether your company is covered for such damage.
The goods were shipped under a CIP Incoterms rule, which includes insurance. However, there are a number of questions you need to answer:
- What coverage is included in the insurance policy that is associated with a CIP shipment?
- Does it cover water damage?
- Does your company have additional coverage beyond the one mandated by Incoterms rules?
As the head of international shipments for your company, it is your responsibility to get the answers to these questions and resolve this situation. In addition, you know that under CIP Franco will be the one responsible for filing the claim with the insurer. However, it will be up to you to help him through that process and ensure he is reimbursed. Franco’s company is a large customer you cannot afford to lose.
Knowing the complexity of international insurance, you want to make sure that your company is not exposed to more risks than it is capable of handling. Your position was created because your company’s international sales are increasing, and management is concerned about the risk exposure. It will be up to you to recommend how to resolve the issue with Franco and ensure that your company has adequate risk coverage for all of its international shipments.
How much do you know about international shipment risks? The Accenture Academy course Analyzing Insurance in International Trade explains the risks to which cargo is exposed in an international shipment, explores risk management strategies along with the intricacies of international insurance, and describes the types of coverage available.