Insuring the Goods
Goods Insurance
For most international trade transactions, the contract between the seller and the buyer should clearly state who is responsible for arranging insurance and in some cases the point at which the responsibility moves from the supplier to the buyer. This will be reflected in the Incoterms that are used in the contract. Irrespective of the responsibility it is important that the insurance cover is in place for the entire journey being undertaken and this should include any loading, unloading and temporary storage. Think along the lines of ‘it is my responsibility once I have control/title to the goods from my supplier and it remains my responsibility until I sell the goods to my buyer and title has passed to them” this way at least the goods remain insured while in your care wherever they may be in transit or stored.
Supplier Insures Goods
Where the supplier is responsible for arranging the insurance, the insurance certificate or policy will be sent with the shipping documentation as evidence of cover. The documents may be sent direct or could come via an Import Documentary Collection or as one of the documents required under the Import Letter of Credit that the bank has issued on behalf of the buyer. Insurance cover arranged by the supplier may end when the goods are landed at the port of arrival and this could leave an open risk for the buyer/importer which could include:
•Cover needing to be arranged for the transport of goods from the port of arrival to the buyer’s/importer’s premises, the third party storage facility/independent warehouse or those of the ultimate buyer
•Goods arriving damaged or incomplete at the port of arrival and this can lead to disputes between the seller and the buyer/importers. This can be avoided in part if the goods are inspected pre-shipment by an independent third party (or the buyer’s own local representative/agent in the country of the seller) and to avoid any doubt, a further inspection on arrival. Without the foregoing it is going to prove difficult as to where the loss or damage occurred.
•Delay in settlement of claims if the insurance is arranged through an overseas insurer.
How to mitigate some supplier insurance risks
Some of the above mentioned problems can be avoided by:
•Extending the seller’s marine insurance cover to the ultimate destination with the buyer assuming responsibility for the insurance premium relating to the period after arrival at the port/ airport
•Separate insurance cover being arranged by the buyer covering the final stages of the transit though this may not resolve any demarcation disputes
•The buyer takes responsibility for the insurance from the supplier’s premises through to the ultimate destination
Potential Risks in the time line
Consider some of the potential risks
STATUS - Goods leave suppliers premises
RISK - While in transit to port/airport
STATUS - Goods at port/airport awaiting shipment
RISK - While waiting on quay or airport shed
STATUS - Goods Loaded
RISK - While on sea/ in air
STATUS - Goods arrive at port/airport
RISK - Arrival, unloading & transit to final destination/storage
STATUS - Goods arrive final destination
Goods Insurance
We can introduce you to brokers who can offer the right policy for your business
Goods Insurance - FAQs
You and your lender need to fully understand the cover and the associated risks and we will help you when presenting your business case to the financier.