With the implementation of open economic policy, the amount of foreign investment in northwestern China has increased in recent years. As more and more factories are set up, it is common for investors to move their production line to China. In order to save cost, many of them will import re-conditioned or used machines.

When investors take out cargo insurance for machinery, most insurers would expect that these machines are newly manufactured. If the machines have been re-conditioned or previously used, investors need to declare this to the insurer in advance. This is because if there is any damage, it is difficult to access whether that damage is pre-existing or whether it occurred accidentally during transit.

To minimise any ambiguity, investors should employ a professional surveyor to prepare a pre-shipment report, including photographs, that details the condition of the machines. In the event that no such report is provided, the responsibility of proving the cause of damage to the machines would rest with the insured whenever a claim arises. 

Notwithstanding, when taking out cargo insurance for these machines, the sum insured should be the new replacement value instead of the current market value of the machines. If the sum insured is underestimated, the insurance company shall reserve the right to take an average in case of a partial loss.

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