How to Determine the Actual Total Loss and Presumptive Total Loss of Shipping

How to Determine the Actual Total Loss and Presumptive Total Loss of Shipping

If you want to ship goods from China to countries like USA, UAE and Saudi Arabia, you need to know a lot about freight or find a reliable freight forwarder to help you all the way. Either way, knowing more about freight forwarding can help you move more safely in this industry.


Congestion occurred in the international maritime industry of the Suez Canal, and major containers caught fire. The concept of “actual total loss, presumed total loss, general average, and individual average” in international shipping has been brought to people’s attention. Perhaps most of them have just entered the international shipping industry. Friends in the field of trade do not know these terms. Next, Dantful freight forward will give you detailed answers.


In the insurance business, the loss caused by the insured goods can be divided into total loss and partial loss according to the degree of loss. All loss, referred to as “total loss”, refers to the total loss of the insured goods in transit by sea. According to the nature of loss, total loss can be divided into actual total loss and presumed total loss.


1. Actual total loss


Actual total loss, also known as absolute total loss, means that in the process of international shipping, the insured goods may have completely lost their original purpose, which is equivalent to total loss. The following situations mainly constitute actual total loss in insurance business.


1) The cargo ship sank to the bottom of the sea after sinking, and all the insured goods were lost.


2) If the cargo ship is robbed by pirates or detained by a hostile country, etc., although the cargo still exists, the insured’s property rights have been completely lost and cannot be recovered.


3) Certain insurance goods, such as cement hardened after immersion in sea water, and moldy tobacco leaves after being damp, lost their original commercial value or use.


2. Presumptive total loss


Constructive total loss means that the actual total loss of the insured goods is unavoidable, or in order to avoid the actual total loss, the sum of the transportation costs to be paid for salvaging, restoring, repairing the damaged goods and transporting the goods to the original destination has exceeded. The value of the goods at the destination, the insured goods constitute a constructive total loss as follows.


1) After the insured goods are damaged, the repair fee exceeds the repair fee.


2) After the insured goods are damaged, the cost of sorting and continuing to transport them to the original destination port exceeds the value of the goods after they arrive at the original destination port.


3) The actual total loss of the insured goods cannot be avoided, and the rescue cost required to avoid the loss will exceed the value of the goods after they are rescued.


General average


When the ship, cargo owner, cargo owner and other interested parties are in distress or common danger, the ship party consciously and reasonably makes sacrifices or pays special expenses in order to maintain the common safety of the ship and cargo or to continue the voyage. Such special sacrifices and expenses called general average. Generally, general average must have the following characteristics


1) The danger of causing general average must firstly exist, or be unavoidable, rather than subjective speculation, and the danger must be a threat to the common safety of international shipping ships and goods.


2) All measures must be reasonable in order to eliminate the common dangers of ships and goods by international shipping.


3) The loss must be a direct or reasonable consequence of the general average measure, which is of a special nature, and the cost must be paid separately. Therefore, the sacrifice and cost of the general average should be borne by all interested parties.


There are many uncertainties in ocean shipping, but our years of experience can help you avoid unnecessary risks, we will help you solve all cargo problems, and deliver your goods safely to your hands!

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