Trade Terms in Exports

In any export transaction, the responsibility for arranging insurance will be either with the seller or buyer as agreed in the contract of sale. If the contract includes Incoterms 2000, then the responsibility for the arranging and payment of the insurance will be absolutely clear. For example, under an FOB sale, the goods are at the risk of the exporter until such time as they have effectively crossed the ship’s rail and he will generally arrange his own insurance for that leg of the journey. Once they have crossed the ship’s rail, the goods will be at the buyer’s risk and it is up to him to effect the insurance coverage. If goods are sold CIF then it is the responsibility of the seller to arrange, at his cost and in a form that is transferable, a policy of Marine Insurance. The transferability of the policy under a CIF sale is vital. Whilst the seller takes out the policy and pays the premium to cover the risk all the time the goods are in transit (i.e. while they are still owned by the seller), the most likely time for damage to be discovered is after discharge when the ownership has passed to the buyer.