Trade Risk, Insurance, Claims and Dispute Management

Introduction and Context

International trade creates value by separating production, finance, logistics and consumption across jurisdictions. The same separation also creates exposure. Goods may be damaged while in transit, a buyer may default, a government may impose exchange controls, documents may be rejected by a bank, or a contractual disagreement may escalate into arbitration or litigation. Effective trade-risk management is therefore not merely an insurance function. It is an integrated managerial process linking contract design, country analysis, payment choice, logistics control, documentary discipline, insurance, claims administration and dispute resolution.

Risk management in international business is concerned with uncertainty that can affect an organisation’s objectives. A useful distinction is between a hazard, which increases the probability or severity of loss; an event, which materialises the risk; and a loss, which is the financial or operational consequence. For example, inadequate packaging is a hazard, seawater ingress is an event, and the resulting cargo damage and replacement cost are losses.

The central managerial challenge is not to eliminate every risk. Complete elimination is usually impossible and may be uneconomic. The objective is to identify material exposures, allocate them deliberately, reduce their probability or impact, transfer appropriate residual exposures, and establish procedures for recovery when an adverse event occurs.

Learning Objectives

By the end of this chapter, the reader should be able to:

1. classify country, commercial, transport, documentary and operational risks;
2. construct and interpret a risk matrix and scenario analysis;
3. select cargo, trade-credit and political-risk insurance appropriately;
4. distinguish insurable loss from contractual non-performance and uninsured business risk;
5. administer a cargo or credit claim from notification through settlement;
6. design contracts and evidence systems that improve recovery prospects; and
7. evaluate arbitration, litigation, mediation and other dispute-resolution mechanisms.

1. The Architecture of International Trade Risk

1.1 Major risk categories

Country risk arises from conditions in the state in which a party, asset, bank or transaction is located. It includes political violence, sanctions, expropriation, exchange controls, sovereign payment restrictions, regulatory change, corruption and macroeconomic instability. Country risk can affect even a financially sound counterparty if the counterparty cannot legally transfer funds or obtain an import licence.

Commercial or counterparty risk concerns the willingness and ability of a buyer, seller, bank or service provider to perform. Insolvency, fraud, refusal to accept conforming goods, late payment and opportunistic renegotiation are typical examples. Commercial risk differs from ordinary market risk: a fall in demand or price may reduce profitability without constituting a counterparty default.

Transport and cargo risk includes physical loss or damage, delay, theft, contamination, temperature excursion, improper stowage, container failure, general average and liability disputes among carriers, freight forwarders and terminal operators. The applicable allocation depends on the contract of carriage, the chosen Incoterm®, governing law and the insurance wording.

Documentary risk is the possibility that a required document is missing, inconsistent, late, incorrectly signed or issued by an unacceptable party. Under documentary credit practice, banks generally examine documents rather than goods. A shipment may therefore be commercially perfect yet unpaid because of a discrepancy such as an incorrect description, late presentation or inconsistent quantity.

Operational risk covers failures of people, processes, systems and external service providers. Examples include incorrect master data, poor segregation of duties, cyberattack, lost originals, unauthorised amendments, weak sanctions screening and ineffective escalation.

1.2 Risk allocation across the transaction lifecycle

Risk changes as the transaction moves from negotiation to delivery and payment. Before contracting, country and counterparty analysis dominate. After contract formation, performance, transport and documentary risks become more prominent. During payment and post-delivery, credit, fraud, warranty and dispute risks may dominate. A risk register should therefore identify an owner, trigger, control, evidence requirement and residual exposure for each stage.

Incoterms® rules allocate selected responsibilities, costs and risks between seller and buyer, especially in relation to delivery, carriage, export and import formalities, and insurance in specified rules. They do not determine title, payment, quality standards, remedies, sanctions compliance or the entire law of the contract. A frequent professional error is to treat an Incoterms® rule as a complete sales contract.

2. Risk Assessment: Matrices, Scenarios and Expected Loss

2.1 The risk matrix

A basic risk matrix rates each risk by likelihood and impact. A five-point scale is common, but the scale must be defined rather than assumed. Likelihood may refer to the estimated frequency during a stated period; impact may refer to financial loss, operational interruption, legal exposure, safety consequences or reputational harm.

A simple priority score is:

where R is the priority score, L is the likelihood rating and I is the impact rating. The score is ordinal, not a precise monetary forecast. Multiplying ratings does not prove that a risk rated 12 is exactly twice as important as one rated 6. The matrix is useful for prioritisation, escalation and resource allocation, but it should be supplemented by scenario analysis and financial modelling.

A professional risk register may include:

2.2 Expected loss and insurance economics

Where probabilities and financial consequences can be estimated with reasonable confidence, expected loss provides a more informative basis for comparison:

Here, EL is expected loss per defined period, p_i is the probability of scenario i, and L_i is the monetary loss if scenario i occurs. The probabilities should cover mutually exclusive scenarios and sum to 1 when they represent a complete distribution. Expected loss is an average over repeated comparable exposures; it does not predict the loss in a particular shipment.

For example, a shipment has a 2% probability of total loss of USD 120,000, a 5% probability of partial loss of USD 20,000, and a 93% probability of no physical loss. Expected physical loss is:

If annual premium is USD 2,700 and the policy deductible, exclusions and claims costs are acceptable, insurance may be economically attractive. However, comparing premium only with expected loss is incomplete. Insurance also protects against volatility, liquidity strain, catastrophic tail loss and the cost of investigation. Conversely, moral hazard, exclusions, deductibles, aggregate limits and insurer credit quality reduce the value of a policy.

2.3 Scenario analysis and stress testing

Scenario analysis asks what could happen under coherent combinations of conditions. It is especially useful where probabilities are unreliable, such as sanctions escalation or port closure. A trade team might examine:

• Base case: normal transit, compliant documents and payment at maturity.
• Adverse case: a two-week port delay, storage charges and a buyer request for deferred payment.
• Severe case: sanctions designation, blocked payment, cargo held by authorities and termination of the route.

Each scenario should identify operational consequences, contractual rights, cash-flow effects, insurance response, alternative routes and decision thresholds. Stress testing should include correlated risks. For example, a hurricane may simultaneously damage cargo, close a port, delay documents and impair the buyer’s ability to pay. Treating these as independent events can materially understate exposure.

3. Risk Treatment and Control Design

Risk responses are commonly grouped as follows:

1. Avoidance: do not enter a prohibited market, route or transaction.
2. Reduction: improve packaging, dual-source suppliers, verify documents or use secure payment terms.
3. Transfer: use insurance, contractual indemnities, guarantees or specialised logistics providers.
4. Retention: accept a controlled exposure because mitigation costs exceed the expected benefit.
5. Contingency planning: prepare alternative routes, substitute suppliers, emergency funds and communication protocols.

Controls should be proportionate to risk. A high-value shipment to a politically unstable destination may justify enhanced due diligence, confirmed documentary credit, political-risk cover, GPS monitoring and independent inspection. The same control package may be wasteful for a low-value, repeat transaction with a highly reliable buyer.

Segregation of duties is particularly important. The person approving a buyer’s credit limit should not unilaterally amend payment instructions. Bank-account changes should require independent verification through a trusted channel. Documentary preparation, checking and release should have separate review responsibilities for material transactions.

4. Insurance Selection for International Trade

4.1 Cargo insurance

Cargo insurance protects against specified or broad categories of physical loss or damage to goods, subject to the policy wording. The commercial scope may include warehouse-to-warehouse transit, multimodal movement, loading and unloading, temporary storage, general average contributions and particular average losses. Coverage is determined by the policy and clauses, not by the invoice or an informal assumption that “the carrier is responsible.”

Important questions include:

• What is the insured interest and when does coverage attach and terminate?
• Are the goods insured on an all-risks basis or only for named perils?
• Are delay, inherent vice, ordinary leakage, inadequate packing, war and strikes excluded or separately covered?
• Is the sum insured adequate for invoice value, freight, duty and anticipated profit where permitted?
• What deductible, franchise, sub-limit and valuation basis applies?
• Are survey, salvage, sue-and-labour and general-average provisions included?
• Does the policy respond to the route, conveyance, commodity and storage arrangement actually used?

“Institute Cargo Clauses” are widely encountered in marine insurance practice, but the applicable version and amendments must be read carefully. A cargo policy does not automatically cover carrier liability, commercial dissatisfaction or late delivery.

4.2 Trade-credit insurance

Trade-credit insurance protects against non-payment by commercial buyers, usually subject to approved credit limits, waiting periods, deductibles, reporting duties and exclusions. Policies may cover protracted default, insolvency and, where agreed, political or transfer risks. They typically require the insured to manage credit prudently and to report overdue accounts promptly.

Credit insurance is not a substitute for credit management. The insured must investigate buyers, respect approved limits, maintain accurate invoices and avoid unauthorised extensions. A policy may decline a claim if the insured shipped after cancellation of a credit limit, failed to disclose material adverse information, or agreed to payment terms outside the policy.

4.3 Political-risk insurance

Political-risk insurance may address such exposures as currency inconvertibility, transfer restriction, expropriation, political violence, forced abandonment and sovereign or public-entity non-payment. Cover is highly dependent on the insured project, jurisdiction, waiting period, exclusions and evidence of governmental action. It should be integrated with sanctions advice and contractual force-majeure provisions.

4.4 Guarantees and alternative risk transfer

A bank guarantee, standby letter of credit, export credit agency support, parent guarantee or performance bond may transfer or strengthen payment and performance protection. These instruments are not interchangeable. A demand guarantee may be payable upon compliant demand, while an accessory guarantee may depend on proof of the underlying default. The governing rules, expiry, demand wording and counter-guarantee structure must be reviewed by specialists.

5. Claims Administration

A claim is a structured assertion that an insured event has caused a covered loss and that the insured has complied with policy conditions. Good claims administration begins before the loss through accurate records, policy review, packing evidence, inspection certificates and chain-of-custody controls.

5.1 Immediate response

When loss or damage is discovered, the insured should:

1. protect people and prevent further damage;
2. notify the carrier, terminal, insurer, broker and relevant authorities promptly;
3. issue written reservations or notices of apparent damage within applicable contractual deadlines;
4. preserve packaging, seals, temperature records, photographs and electronic logs;
5. segregate damaged goods and avoid disposal without consent, unless safety requires it;
6. appoint a surveyor where required;
7. mitigate loss without admitting liability; and
8. preserve recovery rights against carriers, warehouses and other responsible parties.

The insured should distinguish facts from assumptions. “Container seal was intact at discharge and cartons were wet on opening” is stronger than an unsupported allegation that the carrier caused the damage.

5.2 The claim file

A robust file normally includes the policy and endorsements, commercial invoice, packing list, transport document, certificate of origin where relevant, inspection or survey report, photographs, delivery receipt, correspondence, temperature or tracking data, repair or replacement invoices, salvage evidence, customs records and proof of the insured’s interest.

The claim amount should be reconciled to the policy valuation basis. A simplified indemnity expression is:

This expression applies only as a simplified case where the loss is covered, the deductible is monetary, and no co-insurance, average, sub-limit, salvage recovery or other adjustment applies. If the policy contains underinsurance provisions, the calculation may require a proportionate reduction. The final amount must follow the policy wording and applicable law.

5.3 Claims governance

Claims should be logged with dates, responsible persons, reserve estimates and next actions. Escalation is warranted when liability is disputed, limitation periods may expire, sanctions affect payment, evidence is at risk, or the loss could create a precedent. Settlement authority should be separated from investigation where practicable. A closed claim should generate a lessons-learned review addressing root cause, control failure, recovery from third parties and policy adequacy.

6. Dispute Management and Resolution

6.1 Prevention through contract design

Dispute management begins with a well-drafted contract. Important clauses address product specifications, inspection and acceptance, delivery rule and named place, payment, title where relevant, transfer of risk, force majeure, sanctions, compliance, limitation of liability, liquidated damages, notice, governing law, dispute forum, arbitration seat, language, confidentiality and service of notices.

A clause should identify the legal mechanism clearly. “Arbitration in London under English law” may still leave uncertainty about the institution, rules, seat and number of arbitrators. A carefully drafted arbitration agreement normally specifies the administering institution or ad hoc rules, seat, language and appointment method. The seat determines the procedural law and supervisory court; it is not necessarily the physical hearing location.

6.2 Negotiation and mediation

Negotiation is flexible, confidential when properly structured, and inexpensive relative to formal proceedings. It is effective where commercial relationships matter and interests are not entirely opposed. Mediation introduces a neutral facilitator who assists settlement but generally cannot impose a binding decision. Both processes can preserve supply continuity and avoid public escalation, but they may fail where one party seeks delay or refuses to disclose essential information.

6.3 Arbitration

International arbitration offers party choice, procedural flexibility and, in many jurisdictions, enforceability of awards under the New York Convention, subject to its requirements and local law. It may be suitable where parties require neutrality or confidentiality. Disadvantages include tribunal fees, institutional costs, complex jurisdictional objections, limited appeal and difficulty joining non-signatories.

The tribunal’s authority derives from the arbitration agreement. Questions of jurisdiction, separability, competence-competence, interim measures, evidence and enforcement must be considered early. Parties should preserve the contract, correspondence, version history, inspection records and a chronology. A claim should identify the legal basis, facts, causation, quantum and remedy sought.

6.4 Litigation and expert determination

Court litigation may be preferable where urgent public-law relief, broad joinder, precedent or powerful court procedures are required. It may also be mandatory for certain disputes. Expert determination can efficiently resolve technical valuation, quality or measurement issues when the contract gives the expert an appropriate mandate. It is unsuitable if the dispute involves broad legal questions beyond the expert’s authority.

6.5 Limitation and evidence

A meritorious claim can fail because it was notified late or filed after a contractual or statutory limitation period. Each transaction should have a limitation calendar covering carrier claims, insurance notification, payment demands, warranty claims and arbitration or litigation deadlines. Electronic evidence should be preserved with reliable timestamps, access controls and an auditable chain of custody.

7. Integrated Applied Case

Illustrative case: Meridian Components and the delayed multimodal shipment

Background. Meridian Components, an exporter of industrial control units, sells USD 500,000 of equipment to Delta Energy in Country Z. The contract requires delivery under an agreed Incoterms® rule, payment 60 days after shipment, and compliance with Country Z import regulations. Delta is a new buyer. Shipment moves by truck, vessel and rail. Meridian purchases cargo insurance but not trade-credit insurance.

Problem. During transit, a port strike diverts the vessel. The container remains in humid conditions for twelve days. On arrival, Delta reports corrosion and withholds the entire invoice, alleging late delivery and non-conformity. The transport document records no apparent external damage. Meridian discovers that its packing specification required desiccant but the warehouse used an outdated version. The country’s currency also becomes temporarily inconvertible.

Analysis. The exposure is multi-dimensional. The port strike and currency restriction are country and transport risks; the buyer’s withholding is commercial risk; the obsolete packing instruction is operational risk; and the absence of a prompt damage reservation creates documentary and recovery risk. The cargo policy may respond to physical corrosion if the insured peril and exclusions permit, but it may exclude delay, inherent vice or inadequate packing. It will not automatically insure Delta’s refusal to pay for a separate contractual dispute. The currency restriction may require political-risk cover, which Meridian did not purchase.

Approach. Meridian should first preserve evidence, notify the insurer and carrier, arrange a joint survey, and issue formal reservations. It should separate the physical damage claim from the payment dispute. It should review the contract’s inspection and acceptance provisions, force-majeure clause, payment trigger and dispute clause. It should request payment of the undisputed amount, place the balance in a controlled account if commercially feasible, and negotiate a technical inspection without admitting liability. Internally, it should reconstruct the packing process and identify why the obsolete instruction remained active.

The insurer will assess coverage, causation, valuation, deductible and possible recovery from the carrier or warehouse. Meridian should not dispose of corroded units before obtaining consent. It should calculate alternative remedies: repair, replacement, salvage or credit. If negotiation and mediation fail, the agreed arbitration or court process should be commenced within the applicable deadline.

Outcome. Assume the survey finds that USD 80,000 of damage resulted from humidity and USD 30,000 from inadequate packing. The policy covers humidity damage but excludes loss attributable to inadequate packing, with a USD 10,000 deductible. Subject to the policy’s actual wording, the simplified insured recovery is USD 70,000. Meridian separately pursues the warehouse or responsible contractor for the excluded USD 30,000 and negotiates payment of the remaining conforming goods. The currency restriction is escalated to management because it threatens cash conversion rather than physical cargo.

Learning points. First, one event can generate several distinct risks requiring different instruments. Second, insurance cannot cure weak operational controls or poor evidence. Third, payment withholding should be analysed against the contract rather than treated automatically as an insured loss. Fourth, clear separation of facts, causation, coverage and remedy improves both negotiation and formal proceedings. Finally, post-claim root-cause analysis should lead to controlled document versions, packing verification and reconsideration of trade-credit and political-risk cover.

8. Governance, Ethics and Contemporary Practice

Risk management must comply with sanctions, anti-bribery, export-control, customs, data-protection and financial-crime requirements. A claim should never be inflated, evidence altered or a loss mischaracterised to obtain insurance payment. Brokers, surveyors, adjusters and experts should disclose conflicts of interest. Commercial pressure to ship despite a known sanctions concern is a governance failure, not merely a business decision.

Digital trade platforms, electronic bills of lading, automated document comparison, satellite tracking and artificial intelligence can reduce errors and improve visibility. AI can flag inconsistent quantities, dates and addresses, classify claims and identify unusual payment behaviour. It should not replace accountable human judgment in sanctions decisions, coverage interpretation or settlement authority. Models may reproduce incomplete data, miss context or generate confident but unsupported conclusions. Access rights, audit trails, data quality and human review are essential.

Contemporary risk practice is also moving from static annual assessments toward continuous monitoring. Indicators may include buyer payment ageing, port congestion, sanctions alerts, currency convertibility, adverse media, route deviations and repeated documentary discrepancies. The purpose is not surveillance for its own sake but earlier intervention and better allocation of scarce management attention.

9. Limitations and Best Practices

Risk matrices can create false precision, especially when ratings are subjective. Expected-loss models can fail when events are rare, correlated or structurally changing. Insurance can create moral hazard and may contain exclusions that become visible only after a loss. Arbitration can be enforceable yet expensive and slow. Contractual allocation may be ineffective against insolvency or mandatory law. These limitations require professional judgment rather than mechanical reliance on a single tool.

Best practice is to:

• combine risk matrices with scenarios and cash-flow stress tests;
• define ownership and escalation thresholds;
• align Incoterms®, payment, insurance and contract remedies;
• conduct counterparty, sanctions and country due diligence;
• maintain controlled documentary workflows and version history;
• insure catastrophic and liquidity-threatening exposures, not merely frequent minor losses;
• read exclusions, deductibles, limits, warranties and notification clauses;
• notify losses promptly and preserve recovery rights;
• maintain a limitation calendar;
• use negotiation and mediation strategically without sacrificing legal deadlines; and
• convert every material claim or dispute into a control improvement.

Chapter Summary

International trade risk is a connected system involving country, commercial, transport, documentary and operational exposures. A risk matrix supports prioritisation, while expected-loss analysis and scenario testing improve financial and strategic judgment. Risk responses include avoidance, reduction, transfer, retention and contingency planning.

Cargo insurance addresses covered physical loss or damage; trade-credit insurance addresses defined non-payment exposures; political-risk insurance addresses selected governmental and transfer restrictions. None replaces due diligence, sound contracts or operational control. Effective claims administration depends on prompt notice, mitigation, evidence preservation, accurate valuation and protection of recovery rights.

Dispute management begins with contract design and continues through negotiation, mediation, arbitration, litigation or expert determination. Governing law, forum, seat, limitation periods and evidence management are strategically important. Ethical conduct, sanctions compliance, accountable technology use and lessons learned are essential elements of advanced trade-risk governance.

Key Terms

Country risk: Exposure arising from political, economic, legal or regulatory conditions in a jurisdiction.

Commercial risk: Risk that a private counterparty will fail or refuse to perform.

Transport risk: Risk of loss, damage, delay or disruption during carriage and handling.

Documentary risk: Risk arising from inaccurate, incomplete, inconsistent or late trade documents.

Operational risk: Loss resulting from failures of people, processes, systems or external providers.

Risk matrix: A tool that ranks risks using defined likelihood and impact scales.

Expected loss: Probability-weighted average monetary loss across defined scenarios.

Scenario analysis: Evaluation of coherent combinations of conditions and consequences.

Residual risk: Exposure remaining after controls are applied.

Cargo insurance: Insurance covering specified physical loss or damage to goods in transit.

Trade-credit insurance: Cover for defined commercial or political non-payment exposures.

Political-risk insurance: Cover for selected losses caused by governmental or political events.

Deductible: The amount or portion of loss retained by the insured.

Subrogation: Insurer’s right, after payment, to pursue a responsible third party.

General average: A maritime contribution mechanism for extraordinary sacrifice or expenditure made for common safety.

Force majeure: A contractual mechanism addressing extraordinary events that impede performance.

Arbitration: Private adjudication by a tribunal whose authority derives from agreement.

Mediation: Assisted negotiation conducted by a neutral facilitator without imposed adjudication.

Seat of arbitration: The legal jurisdiction supervising the arbitral process.

Limitation period: The legally or contractually defined period for bringing a claim.

Review Questions

Short Answer Questions

1. Distinguish a hazard, an event and a loss in an international trade transaction.
2. Why should a risk matrix not be interpreted as a precise monetary forecast?
3. State three immediate actions after discovering cargo damage.
4. What is the principal difference between cargo insurance and trade-credit insurance?
5. Why is the seat of arbitration important?

Long Answer Questions

1. Explain how country, commercial, transport, documentary and operational risks can interact in one transaction.
2. Discuss the strengths and limitations of expected-loss analysis and scenario testing.
3. Compare cargo, trade-credit and political-risk insurance, including typical exclusions and managerial responsibilities.
4. Describe a complete claims-administration process from loss discovery to recovery and lessons learned.
5. Evaluate negotiation, mediation, arbitration and litigation as methods of international dispute resolution.

Analytical / Application Questions

1. Construct a risk register for a USD 1 million shipment to a new buyer in a politically unstable market using documentary credit and multimodal transport. Identify at least six risks, controls, owners and escalation triggers.
2. A shipment has a 3% probability of total loss of USD 200,000 and a 7% probability of partial loss of USD 30,000, with no loss otherwise. Calculate expected loss and explain why premium comparison alone is insufficient for the insurance decision.
3. A buyer refuses payment after a port closure and alleges late delivery, while the cargo also shows physical damage. Design a response plan that separates insurance, contractual, carrier, credit and dispute-resolution issues.

Multiple Choice Questions with Answers

Question 1

Which statement best describes the purpose of a risk matrix?

A. To provide an exact prediction of annual losses

B. To prioritise risks using defined likelihood and impact assessments

C. To replace insurance underwriting

D. To determine the governing law of a contract

Correct Answer: B. To prioritise risks using defined likelihood and impact assessments

Question 2

Using EL = ∑(p_i × L_i), what is the expected loss when there is a 2% chance of USD 120,000 loss and a 5% chance of USD 20,000 loss, with no other loss?

A. USD 2,400

B. USD 3,400

C. USD 7,000

D. USD 140,000

Correct Answer: B. USD 3,400

Question 3

Which insurance most directly addresses a buyer’s defined failure to pay for delivered goods?

A. Cargo insurance

B. Trade-credit insurance

C. Hull insurance

D. Warehouse property insurance

Correct Answer: B. Trade-credit insurance

Question 4

What is a critical immediate action after discovering cargo damage?

A. Dispose of all damaged goods immediately

B. Admit carrier liability in writing

C. Preserve evidence and notify relevant parties promptly

D. Alter the packing list to reflect the damage

Correct Answer: C. Preserve evidence and notify relevant parties promptly

Question 5

Which item is generally outside the automatic scope of cargo insurance?

A. Covered physical damage

B. A policy-defined deductible

C. Commercial dissatisfaction without insured physical loss

D. A policy-defined general-average contribution

Correct Answer: C. Commercial dissatisfaction without insured physical loss

Question 6

What does the seat of arbitration primarily determine?

A. The physical location of every hearing

B. The procedural law and supervisory court framework

C. The price of the goods

D. The insurer’s premium

Correct Answer: B. The procedural law and supervisory court framework

Question 7

Which control best reduces the risk of fraudulent bank-account changes?

A. Allowing one employee to approve and implement changes

B. Independent verification through a trusted channel

C. Removing all payment records

D. Using verbal instructions only

Correct Answer: B. Independent verification through a trusted channel

Question 8

A policy has a covered loss of USD 90,000, a policy limit of USD 100,000 and a USD 10,000 deductible. Under the simplified indemnity expression, what is the payment?

A. USD 80,000

B. USD 90,000

C. USD 100,000

D. USD 10,000

Correct Answer: A. USD 80,000

Question 9

Which process uses a neutral facilitator but does not normally impose a binding decision?

A. Mediation

B. Arbitration

C. Adjudication

D. Expert determination

Correct Answer: A. Mediation

Question 10

Why should a physical cargo claim be separated from a buyer’s payment dispute?

A. Because insurance always covers payment disputes

B. Because different facts, contractual rights, causes and remedies may apply

C. Because cargo evidence is irrelevant to payment

D. Because buyers cannot raise quality allegations

Correct Answer: B. Because different facts, contractual rights, causes and remedies may apply