Imagine your $50,000 dollar shipment arrives from Mexico damaged. Who’s liable? You are.
A common mistake that many new importers make is assuming that their Freight On Board (FOB) Transaction is automatically insured. It is not.
Your shipper is only responsible for placing your goods on board an ocean carrier or air transport. After that, you bear the risk for any damages to your cargo.
3 Reasons Why Insurance Makes Sense
1. Carrier negligence is difficult to prove: When your imports come from another country, it is likely that it will touch many hands. For this reason it is difficult to prove that the carrier is directly responsible for the damage. In fact, the carrier’s liability is extremely limited; as they are not obligated to pay for a loss that occurs beyond their control or one that is not directly caused by their negligence.
2. You cannot make a claim without cargo insurance. In the event that your shipment is damaged your customs broker will file an exception report, take a photo, and file a claim. Your broker can back trace your shipment and find if there are other exceptions filed by anyone who has handled your goods which may strengthen your case. Also, when damage or loss is found, a surveyor for the insurance holder must be contacted for physical inspection. Without insurance, you are denied this process and face the prospect of a total loss of your shipment.
3. Insurance is inexpensive and easy to get. You can easily place cargo insurance on your inbound, or outbound cargo by requesting it with your freight forwarder or customs broker. It is your option to have your shipper insure your goods from the country of origin with transaction terms under Cost & Insurance (C&I), or Cost, Insurance, and Freight (CIF).
How Much Does Your Cargo Insurance Cost?
The insured value of the shipment is based on:
- The Invoice value of the shipment,
- plus the freight charges and duty expenses,
- multiplied by 110%, or CIF plus 10%.
For example, if you have a $50,000 shipment coming from Mexico, with an air cargo freight of $2,000 and no duty, then the CIF for the shipment is $52,000. Multiply that by 110% and the insurable liability is $57,200.
Your premium will range from $0.20 to $0.75 per $100 insured value. So the insurance premium on $57,200 shipment at $0.75 per $100 is only $429.00.
A relatively nominal fee to ensure that your valuable shipment arrives safely.
Please note that some insurance companies have restrictions on insuring certain commodities. Having knowledge of the restriction beforehand will help you make a better business decision.
If you have any questions, please contact a Packair agent today.