INTERNATIONAL TRANSPORT LOSS

INTERNATIONAL TRANSPORT LOSS
1. DEFINITION
Loss is damage, fee or scarification of the subject-matter insured caused by international transport risks.
Loss is a general concept and can be classified into 2 following types:
 “Dynamic” loss: the loss of commodities caused by the external impacts and influenced the value of
objects. Ex: The impact of science and technology makes electronic appliances become outdated, or a decrease in the
price of commodities for some reasons is also considered as the "dynamic” loss. “Dynamic” loss is not insured.
 "Static" loss: the loss caused by damage, loss or sacrifice of objects. "Static" loss is usually insured and can
be one of the followings:
 Loss of the objects.
 Income loss caused by the loss of the use of the objects.
 Loss on costs (foreign exchange arising from the material loss of objects).
 Responsibility loss for others. Ex: There was a collision between ship A and ship B, ship A was
wrong completely, so ship A would be responsible for a compensation for ship B. Responsibility loss is also insured.
Distinguishing Loss from Damage
Loss is a risk that can’t be seen and can’t be touched. For example, we delivered 10 packages, but only 8
packages arrived at the port, so 2 missing packages were considered as loss that we can’t determine by eyes or by
hands.
Damage is a risk that we can see or touch. For example, when the commodities arrived at the port, they were
broken or scratched already ... we can realize these losses obviously.
2. TYPES OF LOSS
* According to the rate of damage:
 Partial loss: the commodities carriage is lost or damaged partially.
 Total loss: the commodities carriage is lost or damaged totally.
* According to the relations and benefits between The Insurers:
Particular average loss: involving one trader only.
General average loss: caused by intentional actions of people to protect the whole vessel, involving every ones
on the journey.
2.1 Partial loss
Partial loss is the loss of a part of the commodities or the actual value of insured commodity was decreased. The
inspectors are responsible for determining the causes and the rate of loss. When commodities have partial loss, the loss

is compensated or not depends on the conditions in the insurance contract which The Insured has selected.
Types of partial loss:
 Reduction in a part of the commodities’ value. For ex, flour was wet or mouldy and sour, so it just can be used
as food for cattle.
 Reduction in quantity, such as: a lack of some delivered packages…
Not abandon
the commodity
Answered
by the Insurer
Not be answered
by the Insurer
 Reduction in volume, such as: alcohol, gasoline, and oil contained in the tank leaked out.
 Reduction in weight, such as: rice or wheat was spilled because of broken packages…
2.2 Total Loss
A total loss can be an Actual Total Loss or a Constructive Total Loss.
2.2.1 Actual Total Loss
The insured commodities may be totally lost, totally deformed or cannot be given back to The Insured. The Actual
Loss includes of the following cases:
 The insured commodities may be totally lost in a shipwreck or a fire. For example, the ship is totally sunk or
destroyed by fire.
 The insured commodities may be damaged so that it may not have the quality as at first. In other words, the
insured commodities might have lost their commercial value or their uses; it is also called “Loss of Specie”. For
example, tea after the risks, although they may not be lost, but after making them, we can’t drink!
 The subject-matter insured may be totally destroyed.
 The loss of the subject-matter insured may be irredeemable. For example, the ship are pirated or confined…
Although the ship and the commodities may not be damaged but The Insured might have lost these commodities.
 When a ship is never heard from, and is announced missing for a certain period of time.
In the case of Actual Total Loss, no notice of abandonment needs to be given.
2.2.2 Constructive Loss
Constructive Loss is the risks which damage most of the commodities and to save the remaining parts of

commodities, the owner has to pay for the commodities restoration cost and the vessel salvation cost (these costs are
definite) that he can temporarily estimate. In fact, when these costs add up with the damaged commodities, they may
exceed the value of the damaged commodities.
As a result, the owner needs to evaluate the situation of them before saving the commodities. If he realizes that
wholly damaged commodities cost plus the expense are approximately the same or exceed the value of the insurance
contract, he must inform The Insurer and ask him to compensate the Constructive Total Loss.
It should be noticed that these risks must occur and damage the commodities when they are on shipping, not
when they had reached the destination port. Because if the commodities had reached the destination port, it means that
the Insured didn’t give the notice of abandonment and the loss is only considered the partial loss, so the Insurer just
have to compensate the exact loss which had occurred. But in fact, if the loss was too badly, the Insurer must
compensate fully.
The Insured made a notice of abandonment in papers and informed the Insurer about the commodities’ loss
situation. If the Insurer realizes that the situation isn’t serious, the ship is still able to arrive to the destination port
safely while the cost doesn’t exceed the insurance value, he may not accept this abandonment. In this case, the loss is
just considered the partial loss. But if the Insurer realizes that the situation is serious, the Insurance Company will
appoint their men to come to the scene or delegate the Insurance agency to come there. If the cost for this travel and
the cost of commodities loss exceed the insurance value, the insurance company will accept the abandonment. All the
silence of the Insurer don’t mean he accept or decline the abandonment. So in cases the owner doesn’t receive the
feedback from the Insurer, he must be back to the duty for the commodities loss. That means he must conduct the task
of limiting the loss with the anticipated cost.
In this case, the Insurer will have to compensate the owner not only the commodities loss but also the cost of
limiting the lost and other relevant cost. Whether these costs exceed the insurance value or not, the owner still has the
right to ask the Insurer to compensate fully including the surpassing value because they gave the notice of
abandonment but the Insurer doesn’t accept that.
Not abandon
the commodity
Answered
by the Insurer
Not be answered
by the Insurer

When the abandonment is accepted by the Insurer, the owner cannot change his mind although he knows that
the commodities can be sold with a higher price after being compensated by the Insurer.
Summary
Whenever loss occurs, the Insured can choose one of these options:
• Not abandon the commodities:
In this case, the loss will be considered partial loss and the Insurer will compensate the loss due to the
condition in the insurance contract.
• Abandon the commodities:
In this case, there are also 2 ways
- Abandon without a notice to the Insurer :
When the commodities reach the destination port, the loss is only considered the partial loss, and the Insurer
just has to compensate the exact loss which had occurred. But in fact, if the loss was too badly, the Insurer usually
compensate fully.
- Abandon with a notice to the Insurer :
When the Insurer receives the notice from the commodities’ owner, he must have to answer whether if he
accepts the abandonment or not. In this case, the Insurer has to consider the situation and calculate all relevant costs
quickly.
The Insurer will refuse the abandonment if he realizes that the situation isn’t serious or the cost doesn’t
exceed the insurance value. The ship is still able to arrive to the destination port safely. And the loss is just considered
the partial loss.
The Insurer will accept the abandonment if he realizes that the situation is serious. Then, the Insurance
Company will appoint their men to come to the scene or delegate the Insurance agency to come there. Or if the cost
for this travel and the cost of commodities loss exceed the insurance value, the Insurer will also accept the
abandonment. And the loss is considered total loss and the owner will be compensated 100%.
When the abandonment is accepted by the Insurer, the owner cannot change his mind although he knows that
the commodities can be sold with a higher price after being compensated by the Insurer.
All the silence of the Insurer don’t mean he accept or decline the abandonment. So in cases the owner doesn’t
receive the feedback from the Insurer, he must be back to the duty for the commodities loss. That means he must
conduct the task of limiting the loss with the anticipated cost. In this case, the Insurer will have to compensate the
owner not only the commodities loss but also the cost of limiting the lost and other relevant cost. Whether these costs

exceed the insurance value or not, the owner still has the right to ask the Insurer to compensate fully including the
surpassing value because they have already given the notice of abandonment but the Insurer doesn’t answer that.
Attention: When a constructive loss took place, the causes must be proved so The Insurer will accept
compensation.
In general, in case of constructive loss, The Insurer needs to calculate the expenses quickly, accurately in
order to announce acceptance or refusal timely. Because the longer it takes, the graver the loss is. And The Insurer
has to pay all the ultimately consequence.
Principles of Abandonment, according to The English Marine Insurance Law 1906:
The commodities
carriage is lost or
damaged totally.
Abandon the
commodity
Not abandon
the commodity
Partial loss
With a Notice of
Abandonment
Without any Notice
of Abandonment
Answered
by the Insurer
Not be answered
by the Insurer
Total loss +
relevant costs
Accepted
Refused
Partial loss
Total loss


Notice of abandonment may be given in writing, or by word of mouth, or partly in writing and partly by
word of mouth, and may be given in any terms which indicate the intention of the assured to abandon his insured
interest in the insured commodities unconditionally to the insurer.

Notice of abandonment must be given with reasonable diligence after the receipt of reliable information of
the loss, but where the information is of a doubtful character the assured is entitled to a reasonable time to make
inquiry.

Whenever having the idea to abandonment and leave the commodities for the Insurer, the owner has to
consider that if the Insurer accepts the abandonment, a part of the abandoned commodities’ value still can be saved.
But in fact, if they don’t have any value left and cannot bring in any benefit, the owner doesn’t have to give the notice
of abandonment. In this situation, he just has to prove and ask the Insurer to compensate 100%.
 Summary
1. According to the rules of notice of abandonment, if the insured decides to abandon the commodities, he must
give notice of abandonment to the insurer. If not, the loss can only be considered as a partial loss.
2. Notice of abandonment may be given in writing, in speaking, or both. It must indicate (that) the insured
abandons his ownership in the subject-matter insured without any conditions to the insurer.
3. Notice of abandonment must be given with reasonable diligence after receiving reliable information of the loss,
but if the information is unreliable, the insured has a period of time to make inquiry.
4.

When the insured wants to abandon the commodities, he has to consider whether the abandoned
commodities have any value left or not. If the abandoned commodities don’t have any value left and cannot bring any
benefit, the owner doesn’t need to give the notice of abandonment. In this situation, the owner just has to prove this
and ask the Insurer to compensate 100%.
5. When the notice of abandonment is given properly, the interests of the insured are guaranteed.
6. The acceptance of an abandonment may be express clearly from the insurer. The silence of the insurer after
notice cannot be considered as an acceptance.
7. When the notice of abandonment is accepted, the abandonment is irrevocable. The acceptance of the notice

conclusively admits liability for the loss and the sufficiency of the notice.
8. Notice of abandonment may be waived by the insurer
9. When an insurer has re-insured his risk to another insurer, no notice of abandonment need to be issued by him.
2.3 Particular Average Loss
Particular average loss is a partial loss of the insured commodities, caused by a peril insured against, and which
is not a general average loss.
If The Insurer is in charge of the particular average loss, The Insurer must compensate (in case the owner
bought insurance).
If both the carrier and The Insurer are in charge of the particular average loss (the owner bought insurance),
The Insurer will compensate for the owner and then on behalf of the owner will ask for compensation from the
carrier.
According to the English Marine Insurance Act 1906, in all cases the commodities with particular average loss
must have a direct or reasonable cause.
Expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured,
other than general average and salvage charges, are called particular charges. Particular charges are not included in
particular average.
Ex: In a voyage, a hold storing coal was fired. The fire also burned the hold storing clothes of another owner
and did a damage of 30%. Both fire cases happened accidentally. The sudden risk caused the damage was determined
to be particular average loss. In principle, this fire risk is the responsibility of The Insurer if both owners bought
insurance. However, if the investigation proved that the coal was fired because of its nature, The Insurer doesn’t have
to compensate due to its exclusion. So The Insurer is only responsible for compensating the damaged clothes.
According to the Marine Insurance Act 1906:
 Buying insurance with FPA (free particular average) condition which exclude particular average loss
insurance, The Insured can’t ask for compensation of a partial loss, except for loss caused by a sacrifice for general
average loss (if in the voyage there are grounding, sinking, collision or fire, The Insurer must compensate)
 In case the insurance exclude particular average loss, The Insurer must be responsible for the rescued cost,
particular cost and other cost according to the Suing and Laboring Clause to avoid an insured loss.
 Except for other requirements in the policy.
 In order to determine the rate, we must base on real loss that the insured service incurred. Particular cost
and other defined cost to prove that the loss must be excluded.

2.4 General Average Loss
G.A losses are expenses and damages incurred as the result of damage to a ship and its cargo and taking direct
action to prevent initial or further damage to the ship and its cargo.
General average applies when something happened and threatened the voyage. The accident has also required
payment of extraordinary costs (or material sacrifice intentionally and reasonably made) in trying to avoid the common
risks: collision, sinking, fire or grounding. The amount of the sacrifices and expenditures are divided equally amongst
the parties (including the ship-owner and cargo-owners) whose commodities have been preserved; it applies no matter
of any one’s fault in carrying out the contract of carriage.
Common examples of general average acts with resulting commodities loss and expenses include:
 Giving up part of cargo, discharging, storing, and re-loading of cargo; or grounding the ship in order to
refloat;
 Loss of or damage to cargo through fire extinguishment;
 Employment of lighters to lighten a ship which would sink;
 Towage, over run the engine - if a ship suffers from engine breakdown;
 Other saving efforts
G.A includes a general average expenditure as well as a general average sacrifice.
- G.A expenditure is the expense which is paid for the third person due to G.A in order to save the ship and
cargo like expenses of rescue, expenses of unloading, transferring, expenses of storing and expenses of estimating …
- G.A sacrifice is the loss belong to physical things of commodities, cargo, ship … like giving up or throwing
some cargo into the sea, some cargo will be wet due to breaking up the fire
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