Tiểu luận TIẾNG ANH CHUYÊN NGÀNH KINH TẾThe affection of tariffs on marine cargo insurance TIẾNG ANH CHUYÊN NGÀNH KINH TẾ

Let’s get started with the primary toic we will be covering today – The effect that the new
tariffs could have on your marine cargo insurance needs
The first issue to adress here is Why do we choose this topic ? And Why is the muchdiscussed 232 and section 301 tariffs that are currently implemented or currently underview.
-Duty rate are on the rise: These tariffs curently stands as follow - 25% on steel imports into
the US and 10% on aluminum. And then there are 3 lists currently published under the
section 301 tariffs with only one list currently being enforced as of July 6th. Also in more
recent news, a duty rate of 25% may be imposed on list 3 instead of the originally proposed
10%
 So as you can see it’s a very current news and there are still a lot of moving pieces but the
truth of the matter is duties are on the rise and is going to affect many aspects of
international trade beyond duty. One aspect that has not really been really discussed much
is how these higher duty rates may affect marine cargo insurance coverage
-The primary way policy holders will be affected is in the valuation process for their policy.
So let’s take a quick step back and define valuation as it typically works. Valuation is an
estimation of the cargos worth which then informs the amount of coverage that the policy
provides. Historically, duty is not written into the valuation although it can be written in as a
specific clause on your policy. The way duty is factored into a policy is typically through a
10% uplift. The standard in the industry is for valuation to be calculated as a basis of
CIF+10%, which stands for cost, insurance and freight. This means we would take the CIF
value of the goods and then add 10% uplifft. This uplift is to cover incidentals that arise
during the importings process including items like duty port fees and broker fees. Since duty
rates were typically less than 10% in the past, this 10% uplifft was more than enough to
cover all the incidentals.
Tariffs affect on valuation: How ever this is currently changing for a very large number of
bussinesses as a result of the section 232 and the section 301 tariffs. With duty rates
increasing up to 25% on a variety of products, the typical 10% uplift may no longer be
enough to cover a policyholders incurred duty and all of the other incidentals that can come
up during a claims. It is also important to understand that these tariffs will affect both
businesses importing goods into the US and bussinesses exporting out to other countries. A
number of countries have begun to implement their own higher tariffs in retaliation(trả đũa)
to section 232 and section 301 tariffs from the US. So if your marine cargo insurance policy

for shipments being exported to one of these countries, your policy may be affected as well.
Example of a claim adjustmentTo help clarify how this can affect a marine cargo insurance claim, let’s walk through an
example of a claim for policy holders that is subject to a new 25% tariff that has an standard
of 10% uplift on their policy. Before we start this example, we need to define a term that will
be used in this example claim. The term is incurred duty(thuế phát sinh), so duty is
considered incurred when the legal obligation arise….EX. Therefore, if you’re bringing a
shipment of goods into the US, the duty would be considered incurred if you have already
paid it, the goods have arrived at the airport and the goods have been released by Customs.
If you prepaid your duty before they arrive at the port and something happens to your
shipments while they’re in transit, the duties are not considered incurred since the goods
were never officially entered into the country. In that case, the prepaid duty would have to
be refunded by Customs and wouldn’t be eligible to be included in a claim.
Example situation of how these higher tariffs may affect a marine cargo insurance claim
Slide 6:24;


In this example, we stuck two whole numbers for the sake of simplicity. Let’s take an
insurance policy holder that ships a CIF value of $100.000 is subject to the new 25% tariff,
has a $1000 deductible and has no enhancement clauses or carrier compensation to take
into account. With an insurance policy written uder CIF+10 valuation, we would have the
following potential coverage on a claim. The total CIF value of $100000+10% uplift=$110000.
This is the agreed value of the cargo. Once you consider $1000 deductible. That means the
policy is able to pay out a total of $109.000.
Slide 7:16
Now let’s consider that 25% duty rate. In this claim we had a full loss of $100.000 of cost and
freight. With the duty rate of 25% the amount of incurred duty included in the claim is
%25.000. That means the total loss amount is 125000. Now as we illustrated in the previoú
slide, the total recoverable amount under the policy is 109.000. That means the insured is
out 16,000 since the policy can’t cover any more than that. But they had a 10% uplift so we
didn’t include any port fees, broker fees or other incidentals that may built up. So the

difference between the loss amount and the total amount recoverable could potentialy be
much larger
-How can we prepare for this change? We can update our procedures in order to write
policies as CIF+!0%+duty. This change will enable the policies to be cover those higher
expenses. The trade off of this is that it may result a slight increase in premium since the
overall value your policy covering will also be increasing. This is just a approach since every
marine cargo insurance policy is different
Slide 9:12
Let’s go back to our previous example and see the result under a policy written under CIF+!
0%+duty. We’re using the same number but now see that in additin to addig the 10% uplift,
we’re also adding $25.000 since that would be the amount of duty paid on a $100.000
shipment at a duty rate of 25%. So then after considering the $1000 deductible, the total the
policy is able to pay out is $134.000.
Slide 9:46
Now let’s see how that amount holds up on the same claim for full shipment loss and
incurred duty at 25%. The full loss is still $100000 in cost and freight with a duty rate of 25%,
the amount of incurred duty isn’n included in the claim is $25.000. This means the total loss
amount is $125.000. However, the total amount recoverable is $134.000, which we saw
calculated in the previous slide. There for in this situation, the full amount of loss would be
recoverable with room for incidentals like port fees and broker fees that we didn/t consider
in the example