Marine Cargo Insurance

Who is responsible for cover?

When cargo is moved from one place to another, numerous parties can be involved, each with their own responsibilities. The contractual agreement between buyer and seller, known as the ‘Terms of Sale’, determines who is responsible for what during the transaction. These internationally recognised terms are called ‘Incoterms’ and here is an explanation of the most commonly used Incoterms:

• Ex Works (EXW) – responsibility for everything is on the buyer. The seller need only make the goods available at their premises for collection by the buyer.
• Free on Board (FOB) – the seller is responsible for the risk and for costs of transporting the goods up to the point that the goods are safely loaded on to the vessel, after which the buyer assumes full responsibility.
• Cost, Insurance and Freight (CIF) – a contractual obligation is on the seller to purchase insurance. The insurance is assigned to the buyer at the point that goods are loaded on to the vessel, when the title and risk transfer to the buyer. Although the insurance is arranged by the seller any claims for loss or damage which occur after the point of assignment are payable to the buyer.
• Delivered Duty Paid (DDP) – the seller is responsible for the risk and for costs of transporting the goods up to the point that the goods are presented ready for unloading at the buyer’s named place. Crucially, the seller also has an obligation to clear the goods not only for export, but also for import, to pay any duty for both export and import and to carry out all customs formalities.