Answers to Our Most Popular Questions


Cargo Insurance


Cargo insurance is an insurance policy taken up to protect against loss of or damage to your goods while they are being transported. The policy is meant to indemnify you if there is any loss or damage to your cargo. Cargo insurance would cover the goods while they are being transported over sea, air and land (includes parcel post and carryings by courier service).

Although the term "marine cargo insurance" is sometimes used, cargo insurance also includes cover for the land transit commencing from the moment the goods leave the place of storage mentioned in the policy up until they arrive at the final warehouse.

The standard practice is to cover the invoice cost plus freight plus a percentage to cover the anticipated profit (normally 10% to 20% is adequate). The largest shipment anticipated with the added freight and the percentage of advance added is normally the policy limit. The shipments can be reported monthly to the Company and billed at the end of each month, so unlike property policies, the cargo policy can be issued on a "pay-as-you-go" basis.

While physical damage on transit claims may not be a problem, importers and exporters should be aware that over 50 voyages a year encounter heavy weather where shipping containers are lost overboard. Due to the international policy of all shippers with safe-landed cargo contributing to the loss, the owner of the goods is required to either put up a cash security or post a bond. Otherwise, they will be unable to have the goods released from the carrier until a financial guarantee is given to respond for the contribution. With an open cargo policy, the insurance company will post the bond and ensure the speedy release of the owners' cargo.

If you are the buyer and are importing goods from overseas on terms of sales such as C.I.F. (Invoice Cost, Insurance plus Freight), where you are not required to insure the goods, you may still have a "contingent" exposure that you could cover if the seller placed coverage that was "limited" and not offering the broad terms available in the insurance marketplace in your country.

Cargo insurance is different than other liability or property policies - the scope is international and the extensions of coverage available are specific to the industry and broader than other lines of insurance. An example of an extension that is unobtainable in other lines of business is War Risk Coverage. The "cargo insurance" is international and all coverages have been created to give the innocent shipper or importer the broadest protection available from most external causes of loss.

Single Voyage Policy

This is the most popular form of cargo insurance coverage. A voyage policy, as its name implies, offers coverage for a particular voyage for which is taken up. It offers coverage from the time the cargo leaves the seller, while it is in transit, up until it reaches the buyer. Often, the port of loading, transshipment and discharge are also required to be disclosed in the proposal form.

Open Cover

An open cover is not an insurance policy. It is actually an agreement between the insured and the insurance company to insure all the shipments which fall within the terms and conditions agreed by both parties. These terms and conditions, which are agreed upon in advance, include details of voyages, maximum value of cargoes carried in any one shipment, nature of cargo, and packaging and rates applicable. The insured would then have to declare his shipments to the insurer on an individual or monthly basis.

As long as the details of the shipment are within the terms and conditions of the open cover agreement, the shipment is automatically covered. The insurer is also obliged to accept all declarations made by the insured under the open policy if they come under the terms and conditions of the open cover.

Open cover is especially beneficial to those who ship goods frequently as it saves them the need to apply for cargo insurance for each of their shipments. There would also be no need to wait for these individual policies to the approved because, as mentioned, all shipments are automatically approved if they come within the terms of the open cover and a declaration is made for the shipment.

The premium cost of cargo insurance is based on individual experience, shipment volume, mode of transit and values shipped. The underwriter determines what premium will be required to meet the anticipated losses and expenses on each account. The premium can also be impacted as the shipper includes additional coverages; such as processing in a foreign country, exhibition coverage at sales conventions in foreign countries overseas and temporary storage overseas.

Your policy would not cover shipments to or from countries which you are legally prohibited from shipping to or from. Also, certain countries require that imports or exports be insured in local insurance markets. Lastly, most ocean cargo policies do not automatically insure purely domestic shipments.

In addition, not all of your shipments may be covered automatically because of restrictions in the policy pertaining to the types of goods covered or the conveyances used.

Depending upon your specific needs, most insurers will extend their ocean cargo policies to include domestic shipments; provided there are no state insurance regulations prohibiting them from doing so. In the latter instance, insurers can usually arrange a companion domestic transit policy.

Inland transit covers domestic transits via land conveyances and/or air shipments (domestic vessel transits are usually insured under an Ocean Cargo Policy). Ocean Cargo Insurance provides coverage for International ocean and/or air shipments on a warehouse to warehouse basis (including land connecting conveyance transits).

Coverage in transit insurance is often referred to as Warehouse to Warehouse. It is important to note however that coverage is actually determined by the terms of sale used in each transaction (F.O.B., etc.). Coverage is warehouse to warehouse only when the "Assured" is responsible to provide such coverage based on the sales terms. This coverage begins at the point at which transit commences, and terminates when the cargo is delivered to the final destination. Both the attachment and termination points may be far inland, many miles from the ports of loading and discharge.


Surety Bonds


Generally any shipment with a value of $2500 or greater requires a bond. There are, of course, certain exceptions which your Customs Broker can familiarize you with.

The importer is responsible for obtaining the bond. As part of the import transaction, a bond must be secured or the merchandise will not clear Customs.

There are many different types of bonds, however the Immediate Delivery and Consumption Entry Bond is the most prevalent. The type of bond depends upon the volume and nature of the transaction involved. There are single-entry bonds for one-time transactions or continuous bonds under which any number of transactions may be processed. This is an important consideration as there are savings available for continuous bonds.

It is determined by the description of the goods and/or the use of the goods. Rates and requirements vary for each rating code; for example, goods entered for temporary importation vs. goods being delivered to a bonded warehouse vs. goods subject to FDA approval, to name just a few of the classifications. To be sure you are paying the appropriate rate and hence, the lowest premium available for that specific classification, requires extensive knowledge in this area.