Inventory Cash Conversion Expansion under Extended Freight Lead Times
Extended ocean lead times expand days inventory outstanding under FOB terms, requiring structured trade finance lines to prevent working capital exhaustion.
Freight Insurance
Meaning
Indemnity contracts protect the value of cargo against physical loss or damage while it moves through the global supply chain. Obtaining freight insurance ensures that a business can recover its investment if a vessel sinks or a truck crashes. This coverage is a standard requirement for most international trade finance deals.
Claim Eligibility
Documentation proving the value of the goods and the condition they were in before transit is necessary to receive payment. Most freight insurance policies require a bill of lading and a commercial invoice to process a loss. Proof of the event that caused the damage is also mandatory.
Loss Prevention
Carriers and shippers implement packaging standards to reduce the likelihood of a claim being filed. While freight insurance provides protection, it does not cover losses resulting from poor packing or inherent vice in the goods. Proper containerization is the first line of defense.
Liability Limitation
Maritime law often limits the amount a carrier must pay for damage to a small fraction of the goods’ actual value. Therefore, freight insurance is the only way for a shipper to recover the full cost of their cargo. The policy fills the gap between the carrier’s legal minimum and the total invoice amount.