Spring 2022 Point to Point

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CARGO INSURANCE: THE BENEFITSOUTWEIGH THE RISKS

mind that incidents at sea happen a lot more frequently than the prime-time news is able to cover. While every accident that occurs at sea may not lead to direct losses on your cargo, there is one big reason you should consider coverage. And that is called General Average. U N D E R S TA N D I N G G E N E R A L AV E R A G E If a fire, natural disaster, or even a mechanical breakdown causes widespread financial losses during transit, ocean carriers can declare General Average. When declared, this rule dictates that all shippers with cargo on the ship are required to share financial responsibility for any damages or losses. Even if your cargo was not damaged during a fire, you would still bear part of the financial burden. Failing to pay the resulting fee would prevent you from receiving your cargo. It could also result in you being barred from moving international cargo in the future, which would be a critical supply chain disruption for any business. You might be surprised to learn that general average isn’t a rare occurrence. In fact, it happens numerous times every year. Sometimes the events that led up to the declaration that make the evening news. Others just fly under the radar. Recently, the Evergreen ship Ever Forward was grounded for a month in the Chesapeake Bay. After three weeks, due to the expenses incurred to refloat the vessel, Evergreen declared General Average. After 36 days, the Ever Forward was finally refloated on April 17. C O V E R A G E O P T I O N S T O C O N S I D E R There are varying levels of protection when it comes to cargo insurance coverage. In terms of ocean cargo insurance, here are three options to consider that provide protection from General Average declarations: H OW O F T E N D O E S G E N E R A L AV E R A G E O C C U R ? • “All-Risk”: This is the strongest protection a plan can provide. Perhaps the best benefit to “All-Risk” cargo insurance coverage is that you don’t have to prove liability. All damages and losses are covered. • For large claims, though, a surveyor may be sent out to verify the value of goods and damages. However, there are standard exceptions, including for improper packing or rejection of goods by customs. Another benefit to this plan is that it provides first-dollar coverage without a deductible. • Free of Particular Average (FPA): This is a good option for certain commodities, such as waste

materials and scrap metal. FPA doesn’t provide coverage for partial losses. It will cover losses for listed perils, such as sinking, collision, fire, and General Average. • With Average (WA): This is an extension to FPA coverage that provides protection from weather events. For example, shippers can add protections via WA, including theft and pilferage. O P E N C O V E R A G E V S . S I N G L E S H I PME N T I N S U R A N C E Aside from the protection options, you will also need to decide whether to purchase open cargo insurance or single shipment insurance. Your choice will depend on how often you import or export products or materials. If you move only a few shipments per year, it makes sense to choose single shipment insurance. For frequent international shippers, open cargo insurance can make the process a bit easier. This plan will provide a specified time frame of protection on all your international shipment moves. And like buying in bulk, it can save you money in the long run. S I MP L I F Y Y O U R L I F E B Y B U N D L I N G S E R V I C E S & I N S U R A N C E You know how those commercials tell you that bundling your home, auto, and life insurance can make all your paperwork and bills easier to manage? The same goes for your international shipments and cargo insurance coverage! Serving over 100 countries, Averitt provides end-to- end forwarding solutions that are protected all the way from the shipper’s dock to your dock. We even offer in-house customs clearance. Additionally, we strive to help protect our customers’ cargo because we know that the benefits outweigh the risks. Our team can help you secure the best plans through our U.S.-based marine cargo insurance partners. Our coverage provides protection for imports and exports moving via ocean and air. If you need just customs brokerage, we can assist you and provide insurance coverage as well. Even better, you can count on great customer service in the event you file a claim since our partner agents are in the U.S. Our team can help you manage and simplify your international shipping needs. With a dedicated team of international shipping experts, we’ll have your back through the good times and the challenging times! P to P

On March 1, 2022, the Felicity Ace sank in the Atlantic Ocean. Traveling from Germany to the U.S., the ship was carrying thousands of luxury cars from Volkswagen, including Porsches, Lamborghinis, and Bentleys. According to Reuters, without international cargo insurance coverage, the financial losses could equal upward of $155 million. Fortunately, Volkswagen’s losses will be saved by the company’s cargo insurance coverage. Insurance may not be the most exciting topic on shippers’ minds these days. However, its intrinsic value should always be top of mind. WH AT I S C A R G O I N S U R A N C E ? Cargo insurance is not designed just to protect shippers when disaster strikes. Like homeowner’s insurance, this type of protection helps you recover financial losses when your cargo or freight is either damaged or lost. In most cases, it is up to the shipper to ensure that it has insured its cargo. It can be tempting to cut costs by avoiding coverage of international cargo. However, there are many risks that you should consider when booking your next ocean or air shipment. Here are two direct risks to consider: • The initial financial losses on your damaged or lost goods • The additional costs incurred by replacing your cargo WH AT A R E T H E R I S K S O F N O T B E I N G I N S U R E D ? These are just a couple of the potential financial risks you could run into without coverage. And keep in

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