Monday, December 6, 2010

Three day Seminar on "Marine Insurance" organised by Institute of Loss Adjusters

Institute of Loss Adjusters  a  Professional Forum of Surveyors and Loss Assessors organized a 3 day Seminar on “Marine Insurance” in the sylvan surroundings of

Karl Kubel Institute, at Anaikatti Road, Mankarai, Coimbatore 641 108 from 3rd Dec  to 5th Dec 2010.  It was a residential programme and was well attended.

Limonia acidissima ( Feronia elephantum,} [not to confuse with Vilvam ,  
in tamil  this is known as vilangai}- the inner is tasty and often placed before Lord Vinayaka

The Course Director was Mr C Venkatasubramaniam and the  Oranising  Committee consisted of Mr Velayudham, Mr A Chandramouli and Mr P Pandian.  It was a good effort in providing a platform for the practicing surveyors to discuss and deliberate various aspects of Marine Insurance as also the practical difficulties that impede them when they handle Marine assignments.   

CVS, Velyudham, me and Chandramouli

The agenda was neatly drawn with eminent speakers from Insurers, ITC and Logistics besides the doyen Velayudham, Chandramouli and CVS.

I was fortunate to be in the midst of Surveyors from various places speaking on “  Marine coverage as included in other Policies, Customs Duty, introduction, coverage and assessment as also some specific problems encountered at the time of settlement of claims ”.

I also handled the Q&A session when a barrage of questions were posted.  I had submitted a paper “Customs Duty”.  The presentation was not a mere rendition of the published document but was slightly different one laced with anecdotes, some personal experiences interspersed with some interesting photos, which captured rapt attention of the participants drawing appreciation on the manner of presentation. 

Here is a gist of the article submitted to the Forum.

Interactions like these provide glorious opportunity for sharing knowledge from the vast crowd of informed participants.  The effort of the Institutions in keeping their community of surveyors abreast with the developments and exchanging views on the practical difficulties encountered is indeed laudable.

Regards – S. Sampathkumar


Dear (s)   Here, I have briefly touched upon the coverage of goods in transit included in other Policies and dwelt at length about the evolution of Customs Duty and the coverage offered in Insurance Policies.

The modern world’s key word is change. Old timers will remember in all insurance related correspondence the first words would be "without
prejudice". It has been held all along that these mean exactly that litigants can write or say whatever they like, safe in the knowledge that such information will never be put before a Judge. Is that really so safe ??. Very recently UK Supreme Court has handed down a judgment on the hotly-debated exceptions to the well-known "without prejudice rule".

The Other Policies :

When we think of goods in transit, along with the cargo, which could be the subject matter of insurance, there also is the mode (truck /
train / ship / air craft) which also can be insured. Specifically, Ship and aircraft are covered as Hull in Marine and Aviation respectively. The cargo can be insured by the carrier in a Liability Policy to take care of the carrier’s liability; so also the container which houses various goods can be part of marine cargo coverage. There are standard cargo policies (Open cover, open policy, specific policy etc.,) covering cargo. In some ways, Erection and Construction also have a marine portion which are covered under MCE policies.

The carrier as a custodian is legally bound to hand over the goods at
destination properly and for loss or damage occurring whilst in his custody, is liable, subject of course to the terms and conditions of carriage, limited by the various Acts and conventions in force. In India, there is Carrier’s Liability Policy (for the road carriage by trucks). ……………………………………………..
There is added Marine coverage connected with Erection All Risks
Insurances of any project as also with Contractor’s All Risks. The machinery and construction equipments are to be taken to the construction site. These may involve imports and inland or inland transportation alone. From a loss assessment angle, anyway they will be assessed on their individual value but when it comes to adjustment of a claim, larger aspects of the components that form part of the sum insured will have to be determined. ……………………………..

We would start with a primary query as to why there should be imports at all ??

Availability (or the lack of it rather); Exclusivity of some products and Price are amongst the top reasons.  When goods are import occur, transportation, quality, delivery and exchange issues are some of the primary issues that manifest themselves.   There has been in vogue EXIM POLICY (Export Import Policy) –  a set of guidelines and instructions notified by the Govt once in 5 years.    The present one for the period 2009-14 was announced on 27th Aug 2009 at a time when the world was emerging from the shadow of challenging economic period. 

The term Duty from ‘due’ that which is owing is a sense of moral commitment. Nay not in that sense here. In Economics, duty is a kind of a tax often associated with Customs, a payment due to the revenue of a State levied by force of law. Specifically, Customs duty is an indirect tax on goods of international trade, kind of consumption tax.

Though Duty Insurance is independent, it is attached as a clause rather than as a Policy. The common wording used is provided in the annexure. This is an insurance on the increased value equivalent to the amount of duty leviable. This is a policy of indemnity and cannot be assigned. As an Underwriting precaution this Policy needs to be taken prior to the arrival of goods at destination, which does not require any explanation. Of course this is not applicable for Open Policies. The Sum Insured under the duty Policy will not be part of contributory value for General Average and Salvage charges.

Though in practice, the coverage will not be given independently, the
commodity insurance can be with another Insurer in some other country as well. Cargo is the subject matter, coverage is for increased value by incidence of duty, operation of peril goes with the main Policy – assessment and adjustment of a claim under this Duty Policy should be simple……………… but this is one of most complex forms which requires lot of understanding of various aspects associated with the ‘duty’.

Marine is all about the movement of goods from one place to another.
Bringing goods into the country is importation. All goods imported into India have to pass through the procedure of customs for proper examination, appraisal, assessment and evaluation. This helps the custom authorities to charge the proper tax and also check the goods against the illegal import. ………………………….

To regulate and have a proper and effective control on imports and exports the Customs Act enjoins certain liabilities on the carrier. Thus, they have to bring in the cargo imported into the country for unloading only at notified ports/airports/land custom stations. It is worth noting that no conveyance can leave a customs station unless the proper officer of customs has given a written order for clearance. The importers have to comply with prescribed customs clearance formalities. …………………………………………….

Though trade sans National borders had been practised from time immemorial, organized taxation on imports can be traced to 1786 when the British formed the first Board of Revenue in Calcutta. Naturally there have been many revisions in Policy and tariff – for some time there was Sea Customs Act and Land………………  Now there is Customs Tariff Act 1975 which has many  Some of them are : Chapter 1 - 5 ) - Section I-Live Animals; Animal Products;  Chapter 84 - 85 ) - Section XVI-Machinery and Mechanical Appliances; Electrical Equipment; Parts thereof; and more….

The Customs duty is primarily levied for restricting Imports for conserving
foreign exchange, protecting Indian industry from undue competition,
prohibiting imports / exports for achieving policy objectives of Govt.,
regulating the trade and coordinating legal provisions with other laws.
Basically there are three modes :
1) Specific Duty – where the value of the commodity is not taken into
2) Ad valorem Duty – a duty imposed on total value of commodity, where
the no. of physical units is not relevant.
3) Compound duties – combination of above.

Besides the basic duty there are others such as :  Additional duty, Special additional duty Countervailing duty (CVD), Anti dumping duty – which are detailed down below ……………………..

Here is something on some important sections of the Act : (published in some detail but not here)

Sec 13 of the Act deals with Duty on Pilferred goods :
Sec 14 deals with Valuation of goods for purposes of assessment :
Sec 15 deals with the date for determination of rate of duty and tariff valuation of imported goods.
Sec 22 : Abatement of duty on damaged or deteriorated goods
Sec 23 : Remission of duty on lost, destroyed or abandoned goods. For goods destroyed before clearance for home consumption.
Sec 27 deals with claim for refund of duty, which prescribes a time limit of expiry of six months from the date of payment of duty.

You might have observed that for passengers from abroad, there is a special clearance where by handing over a declaration, they walk through without being subjected to customs check. A similar facility known as Green challen facility exists for Importers of repute. There is directive of Central Board that containers which have Green Channel facility will be permitted clearance directly from the Port without transshipping the same to the Customs area. This is in vogue from 2000.

Whilst this is hassle free for the importer, this poses a peculiar problem for the Insurers, can you decipher how ?  In general, the work of examination which used to be a very cumbersome process is done on a percentage basis. This examination helps in classification, valuation, checking the import licence and assessment of duty. ……………………………..
If all these are clear, then there is exemption under Export Promotion Schemes of which there are many such as DEEC, DFRC, EPCG, REP etc., ……………

Thus even in Insurance where value is ‘Agreed value’, there needs application of various factors including adjustment of cenvat. The market is ever changing. The Surveyors, the Insurers and those concerned have to keep themselves abreast of various International conventions, the new Institute Cargo clauses, the change in Institute classification clause, the proposed changes in Incoterms, the coming into being of Carriage by Road Act 2007 and the Carriage by Road
Rules 2010.

This piece should serve as a good introduction to what is Customs duty and the coverage offered by Insurers for the same.

With regards – S. Sampathkumar.

The author is Claims Head with a leading Private Insurer
with more than 25 years of experience in Insurance.
The views expressed are that of the author and
does not represent the views of the Company.


  1. It was indeed a very useful session. Your experience combined with the clarity of thinking impressed every participant.

  2. Kudos to you Mr. Sampathkumar. Your sessions were too good

  3. I stumbled upon your blog and found the contents to be interesting even where the circumstances described look specific to India but could apply to other countries as well - Chris

  4. We have our insurances for ages with a PSU and till date have never had any clarity on what should be the Duty SI and how a claim as and when it occurs will be handled. - Nagaraj, CA

  5. Should appreciate your willingness and courage in sharing them. Good write up. Enjoyed reading them - Thiyaga

  6. Read this today and made a very good reference material - Kumar

  7. Loss Adjusters is really responsible job .It is beneficial to conduct seminars timely for Loss adjuster