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Marine Cargo

Any business concern that exports or imports property, should effect Marine Cargo insurance. A loss to the property could happen at any time e.g. en route to port, whilst at sea a, whilst being off loaded etc. The risk attachment point for marine cargo insurance can be complex, since it is governed by the agreed terms of sale,which usually are Incoterms shipping terms. It is crucial that businesses appoint a qualified risk professional to assist with the construction of a marine cargo policy that is tailor made to your risk and needs.

Marine Cargo

The Grammar Of Global Trade

Any business concern that exports or imports property should effect marine cargo insurance. A loss to the property could happen at any time, en route to port, whilst at sea, whilst being off loaded etc.

The risk attachment point for marine cargo insurance can be complex, since it is governed by the agreed terms of sale, which usually are Incoterms shipping terms. It is crucial that businesses appoint a qualified risk advisor to assist with the construction of a marine cargo policy that is tailor made to your risk and needs.

Overview

Cover For Goods In Motion

International marine cargo insurance protects your goods while they move through the supply chain by sea, air, road or rail and, where arranged, while they wait at ports, airports, warehouses and distribution centres.

Despite the name, it is not only insurance for goods travelling on ships. It can protect the things your business buys, sells, manufactures, imports, exports or is financially responsible for while they are moving internationally, using various modes of transport, including air, rail and road.

A container does not become less valuable merely as it is somewhere between Shanghai and Durban being inspected by people with clipboards.

For importers, exporters, manufacturers, distributors and businesses with overseas stock, cargo insurance can be the difference between a minor interruption and a major hit to the balance sheet.

Who Needs It

If Something Never Arrives

If your business imports stock, machinery, equipment, components, raw materials or packaging, you should establish what happens financially if those goods never arrive. If you export goods, you should understand exactly where your financial responsibility ends and whether you could still lose money after the transport risk has technically passed to your customer.

Manufacturers

Raw materials travelling from overseas suppliers, finished products being sent to foreign customers and machinery being moved between different facilities.

Retailers & Distributors

Goods moving through ports, customs facilities, third party warehouses and overseas fulfilment centres long before they reach a customer.

Construction, Mining & Industrial

Construction, mining, renewable energy and industrial businesses can have individual pieces of plant or machinery worth millions of rand moving across several countries before reaching the project site.

Overseas Stock & Fulfilment

Businesses using Amazon style fulfilment centres, overseas logistics providers, contract manufacturers or foreign warehouses can have significant stock exposures outside South Africa.

The starting question is, if there is a loss to your goods tomorrow, who loses?

Who Carries The Risk

Freight Is Not The Same As Risk

Before deciding who should arrange insurance, establish who carries the financial (insurable) risk at each stage of the journey. Who pays the freight does not necessarily tell you who carries the risk.

Your overseas supplier may arrange and pay for transport all the way to South Africa while you carry the risk of loss or damage for most of that journey. You could also be exporting goods and paying for transport to your customer's country even though the physical risk has already passed to your customer.

This is where understanding Incoterms becomes extremely important.

The practical question should always be, if the goods are destroyed at this exact point in the journey, does your business lose the money? If the answer is yes, that exposure needs to be understood and insured.

Your Freight Forwarder Is Not Your Cargo Insurer

Using a professional freight forwarder, shipping line, airline, courier or road carrier does not remove the need for cargo insurance. A carrier's legal liability and your cargo insurance are two different things.

If your R5 million shipment is lost, the carrier may have limited liability under its contract or an international transport convention. It may also deny liability entirely if it did not cause the loss through circumstances for which it is legally responsible. Your cargo policy protects your financial interest in the goods, subject to the policy terms.

Where your insurer pays an insured claim, it may then exercise rights of recovery against the carrier or another responsible party. That recovery process generally is the insurer's challenge after a valid claim has been paid, not the basis on which you decide whether you can afford to lose the shipment.

The important question is therefore not whether the transporter has insurance. It is whether your own goods are properly insured if something happens to them.

What's Covered

The Scope Of Cover

At its simplest, marine cargo insurance covers accidental physical loss of or damage to insured goods during an insured journey. The exact protection depends on the policy selected. Cover can extend to events such as:

  • Fire, explosion, collision
  • Sinking, grounding, overturning, derailment
  • Theft and non delivery
  • Water damage
  • Accidental handling damage
  • Goods lost overboard

It can also cover General Average and certain salvage charges. These are unusual marine exposures where you can face a financial demand even when your own cargo has not been physically damaged.

Cover can continue while goods are being loaded, unloaded, transferred between different forms of transport or temporarily stored in the ordinary course of the insured journey.

All risks is an insurance term. It means broad accidental physical loss or damage subject to the exclusions in the policy. It does not mean that literally everything that can go wrong is insured.

War, strikes, riots, civil commotion, terrorism and other political risks require particular attention. Some of these risks are dealt with under separate clauses or insurance arrangements rather than ordinary cargo cover.

Institute Cargo Clauses

Choosing Your Level Of Cover

Institute Cargo Clauses A, B and C are the three standard levels of marine cargo cover. They set how broad, or how narrow, the insured events are. That ranges from accidental "all risks" damage down to a short list of named catastrophes.

ICC A: All Risks

The broadest of the three levels, often described as "all risks" cargo insurance. It covers accidental physical loss of or damage to the insured goods from an external cause unless the cause is excluded. It suits manufactured goods, electronics, machinery, equipment, consumer products and high value containerised cargo. Poor packing, ordinary deterioration, inherent vice and loss caused purely by delay remain excluded. Piracy is generally included, subject to the wording, routes and any endorsements.

ICC B

Narrower protection: instead of broad accidental damage cover, it insures a specified range of events: major transport accidents such as fire, explosion, vessel grounding, sinking or capsizing, collision, overturning or derailment, together with certain natural events and specified water related losses, including goods washed overboard or a package totally lost during loading or unloading. It does not give the same broad theft, pilferage, non delivery or accidental handling protection as ICC A. For ordinary commercial goods, weigh the premium saving against the much narrower cover.

ICC C

The narrowest of the three: principally catastrophe style insurance against major named events such as fire, explosion, vessel grounding, sinking, capsizing, collision, overturning, derailment, jettison and General Average sacrifice. Theft, pilferage, ordinary non delivery, handling damage and many water related losses are not automatically covered. It may suit certain low value bulk commodities, or a business knowingly choosing limited catastrophe protection. It is a poor place to discover, after a claim, that an expensive container of finished goods was insured far more narrowly than thought.

How Cover Is Arranged

Per Shipment, Or All Year Round

01

Single Transit

Protects one specified shipment. Works well for an occasional import or export, one piece of machinery, or a particular project shipment. The cargo, journey, value, packaging, transport method and destination must be described accurately. Any material change should be told to your broker or insurer before assuming the original cover simply follows the goods.

02

Annual Open Cargo

A more practical framework for businesses that regularly import or export, insuring qualifying shipments through the year, subject to policy terms, shipment limits and declaration requirements, so cover doesn't need arranging every time a container leaves a supplier. Turnover, maximum shipment values, accumulation exposure, routes, commodities and declarations still need to reflect what the business is actually doing.

03

Stock Throughput

Built around the stock, not just the journey. It combines transit and storage protection so goods stay insured from supplier, through international transport, customs, warehouses and distribution, towards the customer. Useful where the line between transit and storage is hard to manage under separate cargo and property policies. It does not automatically mean every warehouse anywhere is insured; locations, values, territories and accumulations still need disclosing and agreeing.

General Information Only

Chadwicks provides general information about insurance. The cover suitable for you depends on your contractual responsibilities and specific risks and is determined by the policy wording, schedule and endorsements, including all relevant terms, conditions, exclusions and limits. Please review these documents with your broker or insurer before making any insurance decisions.

Where Cover Starts & Stops

Warehouse To Warehouse Almost

This is one of the most misunderstood areas of marine cargo insurance. “Warehouse to warehouse” does not mean indefinite cover from one warehouse to another regardless of what happens in between.

Under standard Institute Cargo transit provisions, cover normally begins when the insured goods are first moved at the starting warehouse for the purpose of the insured transit. Cover then continues during the ordinary course of that transit. It can end when:

The goods are unloaded at the final destination warehouse
They are delivered to another warehouse for storage or distribution rather than normal transit
A container or vehicle is deliberately used for storage outside the ordinary course of transit
The relevant time limit following discharge from the overseas vessel expires

Under the standard clauses, the commonly recognised outer limit is 60 days after completion of discharge from the overseas vessel at the final port of discharge, subject to the other events that can end cover earlier. The 60 days, or the period stated in the policy, should never be treated as a guaranteed period of free warehouse insurance.

If your goods reach Durban and are deliberately placed into a warehouse for allocation to customers, cargo cover may end long before day 60. The real question is not how long the container has been in South Africa. It is whether the goods are still genuinely in the ordinary course of the insured transit.

Setting The Insured Value

What The Number Should Include

The amount insured should represent your real financial exposure if the shipment is completely lost. Simply copying the supplier's invoice can leave important costs uninsured.

For an import, start with the value of the goods and then include:

Freight
Insurance costs
Customs duty, VAT and other taxes
Clearing costs
Inland transport
Any agreed uplift

As a general rule, include VAT when setting the insured value unless your marine policy specifically states that sums insured exclude VAT, which is rare. If your business is VAT registered, the VAT is dealt with as part of the claim and your normal VAT accounting, so dual payment of VAT is eliminated.

Take care not to add the same cost twice where freight or insurance is already included in the invoice price.

For an export, the selling or invoice value may already include your profit. Adding a separate profit allowance again can therefore overstate the value. The correct basis should be agreed rather than relying on a formula copied from the last shipment.

Many marine policies use an agreed uplift, often around 10% to 20%, to provide some allowance for costs and profit. That percentage is not a law. Your insurance should reflect your exposure and the valuation basis stated in the policy.

General Average & Import Costs

Costs Beyond The Invoice

General Average

A maritime principle that can require everyone with property on a voyage to share certain extraordinary costs or sacrifices made to save the vessel and cargo from a serious danger. If a vessel suffers a major fire and incurs substantial costs to reach a safe port, you may have to contribute even if your own goods are completely undamaged. The shipping line may also refuse to release your cargo until the required security has been provided. Marine cargo insurance normally covers an insured General Average contribution and can provide the required security, subject to the policy terms.

Duty, VAT & Import Costs

Imported goods can carry costs far beyond the supplier's invoice. Customs duty can become a significant part of the financial exposure. Import VAT also needs to be considered, although VAT that the business can recover as input tax is not the same financial loss as VAT that cannot be recovered. There may also be clearing charges, inland transport costs, inspection fees, storage charges and other expenses associated with replacing the shipment.

Not every additional cost is automatically insured merely as it has been included in a value calculation. Storage charges, demurrage and other costs arising solely from delay may fall outside normal cargo cover unless the wording specifically provides otherwise. The insured value and the insured causes of loss need to be considered separately.

Incoterms

Plain English Incoterms

Incoterms are internationally recognised trade rules that help define responsibilities for delivery, transport costs, risk and customs formalities. They do not determine ownership of the goods. They do not replace the sales contract. They also do not guarantee that adequate insurance has been arranged.

Incoterms use the words "buyer" and "seller". Those words are not particularly helpful when you are trying to work out what happens to your own business.

If you are importing goods, the other business is your Supplier. If you are exporting goods, the other business is your Customer. That makes the question much easier: when does the risk become yours and when does it stop being yours?

Only two Incoterms, CIF and CIP, specifically require one party to arrange cargo insurance for the other party's interest. The other Incoterms still determine where risk transfers, so insurance remains important even where the Incoterm itself does not require anyone to buy it.

Always state the exact named place or port and the version of the rules being used, for example "FCA Supplier Warehouse, Shenzhen, Incoterms 2020". A three letter Incoterm without a precise place creates more arguments than clarity.

The Four Categories

Who Carries The Risk

Incoterms set the point at which the Supplier has delivered the goods and the risk of loss or damage passes to the Customer. That point is not necessarily the final destination of the goods. This is particularly important under the C Terms. The Supplier may arrange and pay for transport all the way to South Africa even though the risk passed to the Customer near the beginning of the journey.

E-Terms

Where the Seller (Exporter) makes the goods available to the Buyer (Importer) at the Seller's own premises only.

F-Terms

Where the Seller is called upon to deliver the goods to the carrier appointed by the Buyer.

C-Terms

Where the Seller has to contract for carriage, but without assuming the risk of loss to the goods or additional costs due to the loss occurring after shipment. CIF and CIP are exceptions, where the Seller is compelled by the terms to arrange Marine Insurance in addition to contracting for carriage (no greater obligation than Institute C Clauses & valuation of CIF plus 10%).

D-Terms

Where the Seller has to bear all costs & risks needed to bring the goods to the country of destination (these terms are normally only used by the motor trade).

Which Mode Of Transport

Not Every Term Fits Every Journey

Any Mode Of Transport

EXW · FCA · CPT · CIP · DAP · DPU · DDP

Sea & Inland Waterway Only

FAS · FOB · CFR · CIF

That distinction matters when selecting the Incoterm. A shipment may eventually travel on a ship, but that does not automatically mean a sea only Incoterm such as FOB or CIF is the most appropriate term. Containerised goods are often handed to a carrier at an inland depot or container terminal before they are loaded onto the vessel, which is one reason FCA can be more appropriate than FOB in many containerised transactions.

Incoterm By Incoterm

The Eleven Incoterms

Incoterms determine where the Supplier has delivered the goods and where the risk of loss or damage passes from the Supplier to the Customer. The delivery point is not necessarily the final destination. Once risk has passed, the Customer needs to make sure insurance continues for the remaining journey until the goods reach the final insured warehouse, factory or other destination. Tap any term below for where it starts, where it ends and how far your cover needs to reach.

EXW Ex Works Any Mode

The Supplier makes the goods available to the Customer at the named place, usually the Supplier's factory, warehouse or another agreed location. The Supplier does not normally have to load the goods onto the Customer's collecting transport or clear them for export.

Supplier's Obligation Ends

When the goods are placed at the Customer's disposal at the named place, normally before they are loaded for collection.

Customer's Risk Starts

At that same point. The Customer can therefore carry the risk while the goods are being loaded and while they travel by road, rail, air, sea or a combination of transport methods.

Insurance Should Continue To

From the EXW delivery point through the entire remaining journey until the goods are unloaded at the Customer's final insured warehouse, factory or other destination.

If machinery is purchased EXW Munich for delivery to Cape Town, the Supplier's obligation ends at the agreed location in Munich. The Customer's risk can then continue through collection, inland transport, the international journey, customs and final delivery in South Africa.

FCA Free Carrier Any Mode

The Supplier delivers the goods to the carrier or other party nominated by the Customer at the agreed place. That carrier could be a road transporter, rail operator, airline, shipping line, freight forwarder or another transport provider. If delivery takes place at the Supplier's premises, the Supplier loads the goods onto the collecting transport; if delivery takes place elsewhere, the Supplier transports the goods to that agreed point.

Supplier's Obligation Ends

When the goods have been delivered to the Customer's nominated carrier or other nominated party at the agreed FCA point.

Customer's Risk Starts

At that delivery point.

Insurance Should Continue To

From the FCA delivery point through the remaining road, rail, air, sea or combined journey until the goods are unloaded at the Customer's final insured destination.

FCA is often more appropriate than FOB for containerised cargo, as containers are commonly handed to a carrier or terminal before they are physically loaded onto a vessel.

FAS Free Alongside Ship Sea Only

Specifically for sea or inland waterway transport. The Supplier delivers the goods alongside the vessel nominated by the Customer at the agreed port of shipment. The Customer normally arranges and pays for the main sea transport.

Supplier's Obligation Ends

When the goods are placed alongside the nominated vessel at the agreed port of shipment.

Customer's Risk Starts

At that point, before the goods are loaded onto the vessel.

Insurance Should Continue To

From alongside the vessel, through loading, the sea journey, discharge at the destination port and any onward road, rail or other transport until the goods are unloaded at the Customer's final insured destination.

FOB Free On Board Sea Only

Specifically for sea or inland waterway transport. The Supplier delivers the goods by placing them on board the vessel nominated by the Customer at the agreed port of shipment. The Customer normally arranges and pays for the main sea transport.

Supplier's Obligation Ends

Once the goods are on board the nominated vessel at the agreed port of shipment.

Customer's Risk Starts

Once the goods are on board the vessel.

Insurance Should Continue To

From the time the goods are on board, through the sea journey, discharge at the destination port and any onward road, rail or other transport until the goods are unloaded at the Customer's final insured destination.

FOB is commonly used for sea shipments, but FCA is often more appropriate for containerised cargo that is handed to a carrier before being loaded onto the vessel.

CFR Cost And Freight Sea Only

Specifically for sea or inland waterway transport. The Supplier arranges and pays for the sea transport to the named destination port, but paying for the freight does not mean the Supplier carries the risk all the way there.

Supplier's Obligation Ends

Once the goods are on board the vessel at the port of shipment.

Customer's Risk Starts

Once the goods are on board the vessel, even though the Supplier continues paying the sea freight to the named destination port.

Insurance Should Continue To

From the time the goods are on board at the shipment port, through the sea journey, discharge and any onward road, rail or other transport until the goods are unloaded at the Customer's final insured destination.

If the term is CFR Durban but the goods are ultimately going to a factory in Johannesburg, Durban is not the end of the Customer's risk. It is simply the destination port to which the Supplier has agreed to pay the freight. The Customer, not the Supplier, must ensure the goods are covered until delivered safely to the Johannesburg factory.

CIF Cost, Insurance And Freight Sea Only

Specifically for sea or inland waterway transport. The Supplier arranges and pays for the sea transport to the named destination port and must also arrange marine cargo insurance. Under Incoterms 2020, CIF generally requires ICC C or equivalent cover for at least 110% of the contract value unless broader insurance has been agreed.

Supplier's Obligation Ends

Once the goods are on board the vessel at the port of shipment.

Customer's Risk Starts

Once the goods are on board the vessel. The Customer carries the risk during the sea journey even though the Supplier arranged the freight and insurance.

Supplier's Arranged Insurance Must Reach

At least the named destination port.

Customer's Own Insurance Should Continue To

Until the goods are unloaded at the Customer's final insured warehouse, factory or other destination.

If the term is CIF Durban but the goods still need to travel by road or rail to Johannesburg, the Customer must check whether the Supplier's arranged insurance continues beyond Durban and whether the level of cover is adequate. If not, arrange their own cover from Durban to Johannesburg.

CPT Carriage Paid To Any Mode

Can be used for any mode of transport, including journeys involving several different transport methods. The Supplier arranges and pays for transport to the named destination, but the risk normally passes to the Customer much earlier, when the goods are handed to the agreed carrier. CPT does not require the Supplier to arrange cargo insurance.

Supplier's Obligation Ends

When the goods are handed to the agreed carrier at the agreed delivery point.

Customer's Risk Starts

At that point, even though the Supplier continues paying for transport to the named destination.

Insurance Should Continue To

From the point where the goods are handed to the carrier through the entire remaining road, rail, air, sea or combined journey until they are unloaded at the Customer's final insured destination.

Goods could be handed to a carrier in Milan under CPT Johannesburg. The Supplier pays the transport to Johannesburg, but the Customer's insurance risk has already started in Milan.

CIP Carriage And Insurance Paid To Any Mode

Can be used for any mode of transport, including multimodal journeys involving road, rail, air and sea. The Supplier arranges and pays for transport to the named destination and must also arrange cargo insurance. Under Incoterms 2020, CIP generally requires ICC A or equivalent cover for at least 110% of the contract value unless another level of cover has been agreed.

Supplier's Obligation Ends

When the goods are handed to the agreed carrier at the agreed delivery point.

Customer's Risk Starts

At that point, even though the Supplier continues paying for the transport and insurance to the named destination.

Supplier's Arranged Insurance Must Reach

At least the named destination.

Customer's Own Insurance Should Continue To

Until the goods are unloaded at the final insured warehouse, factory or other destination.

If the named CIP destination is the Customer's factory, the Supplier's arranged insurance should extend there. If the named destination is only an airport, port, terminal or other intermediate point, the Customer needs to make sure insurance continues for the remaining journey.

DAP Delivered At Place Any Mode

Can be used for any mode of transport. The Supplier arranges and carries the risk of transporting the goods to the named destination, arriving ready for unloading.

Supplier's Obligation Ends

When the goods arrive at the named destination and are placed at the Customer's disposal, ready for unloading.

Customer's Risk Starts

At that point, before unloading begins.

Insurance Should Continue To

If the named DAP destination is the Customer's final warehouse or factory, the Supplier carries the transit risk to that point, but the Customer carries the risk during unloading. Arrange cover for unloading, with normal stock or property cover taking over afterwards. If the DAP destination is only an intermediate point, the Customer also needs cargo insurance for the onward journey.

DPU Delivered At Place Unloaded Any Mode

Can be used for any mode of transport. The Supplier transports the goods to the named destination and is also responsible for unloading them there. It is the only Incoterm under which the Supplier's delivery obligation specifically includes unloading.

Supplier's Obligation Ends

Once the goods have been unloaded from the arriving means of transport and placed at the Customer's disposal at the named destination.

Customer's Risk Starts

After the goods have been unloaded and placed at the Customer's disposal.

Insurance Should Continue To

If the DPU destination is the Customer's final warehouse, factory or other destination, the Supplier carries the transit risk through unloading and the Customer's normal stock or property insurance should then take over. If the destination is only intermediate, the Customer needs cargo insurance for the remaining journey.

DDP Delivered Duty Paid Any Mode

Can be used for any mode of transport. The Supplier carries the broadest responsibility of all the Incoterms: transport to the named destination, the transit risk to that point and import clearance with the applicable duties and taxes. Goods are delivered ready for unloading.

Supplier's Obligation Ends

When the import cleared goods arrive at the named destination and are placed at the Customer's disposal, ready for unloading.

Customer's Risk Starts

At that point, before unloading begins.

Insurance Should Continue To

If the named DDP destination is the Customer's final warehouse or factory, the Supplier carries the transit risk all the way there, but the Customer carries the risk during unloading. Arrange cover for unloading, with normal cover taking over afterwards. If the named destination is intermediate and the goods travel further, the Customer needs cargo insurance for that onward movement.

Delivery Vs. Destination

Where Delivery Ends Isn't Where Risk Ends

The Incoterm tells you where the Supplier has completed delivery and where the risk passes to the Customer. It does not automatically tell you where the Customer's financial (insurable) risk ends.

If the Customer takes the risk in Munich and the goods are ultimately going to Cape Town, the Customer can carry that risk through road transport, the port, the sea journey, customs, inland transport in South Africa and final delivery.

01  Where does the Supplier's risk end and the Customer's risk start?

02  From that point, is the Customer insured all the way until the goods are safely unloaded at the final insured destination?

That is the journey that needs proper marine insurance.

Common Traps

Where This Goes Wrong

The CIF Trap

If you import goods on CIF terms, your supplier arranges the cargo insurance. That sounds reassuring. The problem is that the standard insurance required under CIF is only ICC C or equivalent cover unless a higher level has been agreed. It does not provide the broad theft, accidental damage, handling and non delivery protection normally associated with ICC A. Your supplier must normally arrange cover for at least 110% of the contract price, but that does not mean the policy is suitable for your particular cargo. You may also be dealing with an insurer in another country, unfamiliar claims procedures, different policy law and an insurance certificate that gives far less protection than you expected. Where practical, consider whether your own locally arranged cargo policy should protect your financial interest instead of relying entirely on your supplier's insurance.

The CPT & CFR Trap

Your supplier pays the freight, so it feels as though the shipment remains your supplier's problem. It often does not. Under both terms, the financial risk can pass to you near the start of the journey while your supplier continues paying the transport costs to the agreed destination. This is why freight responsibility and insurance responsibility should never be treated as the same thing.

Contingent Interest Cover

When The Other Party's Cover Fails You

Sometimes the Incoterm says that the other party should carry the risk or arrange the insurance, but you can still suffer a financial loss if something goes wrong.

If you export goods and the transit risk has passed to your overseas customer, the customer may be responsible for arranging insurance. The goods are then destroyed. Your customer refuses to pay you. Technically, the loss occurred after the risk had passed to your customer. Commercially, you are still sitting with an unpaid invoice.

Seller's Contingent Interest (or Seller's Interest) cover can protect an exporter in certain circumstances where insured physical loss or damage occurs and the overseas customer fails or refuses to pay.

The reverse exposure can arise when you import goods and your supplier was supposed to arrange insurance, but that insurance proves inadequate or ineffective. Buyer's Contingent Interest cover can provide protection in certain circumstances.

These covers vary considerably and should not be confused with trade credit insurance. Contingent cargo insurance is concerned with a financial interest arising from physical loss or damage to goods. Trade credit insurance is concerned with a customer failing to pay for credit reasons.

Special Situations

When Ordinary Cargo Cover Isn't Enough

Some journeys, and some shipments, sit outside what a standard cargo policy assumes. A foreign-to-foreign movement, a critical piece of plant, or a delay whose real cost is the project behind it rather than the item itself.

Cross Voyages

A cross voyage is a shipment between two foreign countries that does not start or end in South Africa for example, goods bought in China and delivered directly to a customer or warehouse in the United Kingdom. Do not assume a South African marine cargo policy automatically covers these movements simply because it provides worldwide cover. Cross voyages should be disclosed to the insurer and specifically included where required, as different territorial, regulatory, tax and insurance requirements may apply depending on where the goods start, travel and end.

Project Cargo

Some shipments are too important to treat as ordinary cargo. A R500,000 shipment of replaceable stock and a R20 million custom built turbine do not create the same business risk. Project cargo insurance is designed for critical machinery, plant, infrastructure components and other high value or specialist equipment, with underwriting that can involve route surveys, lifting plans, packing specifications, vessel requirements, heavy haulage arrangements, storage controls and specialist marine surveyors. The question is not simply whether the item can be replaced — it is what happens to the project if it cannot be replaced for nine months.

Delay In Start Up (DSU)

Ordinary cargo insurance pays for insured physical loss of or damage to the cargo, not the financial consequences of a project starting late. If a specialised production machine is damaged during the sea voyage and takes eight months to replace, the cargo policy may pay for the machine, the far larger loss can be eight months of delayed production, financing costs, fixed expenses and lost revenue. Marine Delay in Start Up (DSU) can insure specified financial consequences where insured physical loss or damage to critical project cargo delays the project's commercial start date. It is specialist cover requiring detailed risk information: a delay caused purely by congestion, late manufacturing or poor planning will not normally become an insured DSU claim on its own — there needs to be insured physical loss or damage to the project cargo that causes the delay.

Political & Sanctions Risk

War, Strikes And Where "Worldwide" Ends

Standard cargo cover does not treat every political or conflict related event in the same way. War risks normally require separate Institute War Clauses or equivalent protection. Strikes, riots, civil commotion, terrorism and politically motivated acts can also require separate Institute Strikes Clauses or other specialist arrangements.

Cover availability can change quickly when routes move through conflict zones or politically unstable regions. A journey that was routine when an annual policy began may become a restricted or higher risk voyage months later. High risk territories, ports and waterways should therefore be checked before shipment.

Piracy requires separate consideration. Under standard ICC A, piracy is generally covered, subject to the actual policy wording and any endorsements or geographical restrictions. ICC B and ICC C do not provide the same protection.

SASRIA

For South African businesses, political violence and transit insurance also require consideration of SASRIA. SASRIA provides special risk protection for qualifying property in transit within South African territorial limits, subject to its policy terms and the underlying transit insurance arrangements and can include qualifying marine cargo and goods in transit exposures within South Africa. The international portion of the journey will require different arrangements, including Institute Strikes, war or other political risk clauses. Do not assume that one arrangement automatically follows the cargo from a South African warehouse all the way to its final foreign destination. The local and international legs should be considered separately.

Sanctions & Restricted Territories

"Worldwide" does not necessarily mean every shipment to every country is automatically insured. Certain countries, ports, vessels, businesses, individuals or transactions may be excluded or may require prior approval and sanctions can change while a policy is in force. A shipment should be checked where there is any doubt about the country, vessel, ownership, trading party or route. The fact that the goods are physically capable of being shipped does not mean an insurer is legally able to insure or pay a claim arising from that transaction.

Specialist Cargo Risks

Goods That Need Their Own Thinking

Temperature Controlled

ICC A alone does not solve every cold chain problem. Goods can deteriorate after refrigeration machinery fails, power is interrupted or temperatures move outside permitted limits, so policies need specific temperature deviation or refrigeration breakdown cover, with conditions around cooling in advance, monitoring, alarms and approved carriers.

Rejection & Contamination

A customer can reject goods even where they appear physically intact: a temperature excursion, unverifiable storage, contamination, failed regulatory standards, wrong labels or a shortened shelf life. Cargo insurance seldom covers commercial rejection; these losses need specific extensions, product recall or product liability cover instead.

Theft & Pilferage

One of the reasons ICC A can be materially more valuable than narrower clauses. High value, easily resold goods such as electronics, branded goods, cosmetics, pharmaceuticals and metals are particularly attractive in transit. Insurers may require tracking, secure parking, approved hauliers, sealed containers or alarm systems.

Exhibition & Trade Show Cover

Goods on a display stand for a week are not necessarily still in ordinary transit. Consider the entire journey: outward transit, the exhibition itself, local movement, storage and the return leg, along with theft, unattended goods and customs arrangements.

Return Journeys

Do not assume the original policy automatically covers goods coming back. Rejected products, machinery sent for repairs, exhibition samples or components moving for testing all need the policy to cater for return transit where this forms part of normal activity.

Expediting Costs

After an insured loss, replacing the goods may not be enough. Emergency airfreight, sorting, repacking, redirecting or flying a replacement component to a project site all cost money. Expediting, extra expense or mitigation extensions cover this, without turning the policy into general business interruption insurance.

Debris Removal & Clean Up

Damage can create costs after the loss itself: destroying contaminated food, specialist disposal of chemicals, urgent removal of wet cargo, sorting or decontaminating goods. Marine policies can include or extend removal, disposal, repacking and mitigation cover, with limits set to the nature of the goods.

What's Not Covered

Key Exclusions To Understand

A policy is defined as much by what it excludes as by what it covers. These are the exclusions worth understanding before a shipment leaves, not after a claim.

Excluded

Inherent Vice

The problem comes from the natural characteristics of the goods rather than an external accidental event — fruit deteriorating, metals corroding, chemicals becoming unstable. Cargo insurance is for fortuitous external events, not a guarantee that a product naturally capable of deteriorating will survive any journey.

Excluded

Inadequate Packing

One of the most important exclusions. A R10 million machine still needs to be properly secured. Where your supplier packs the goods, understand the required standard — "the supplier packed it" may not be the end of the discussion if the packing was plainly unsuitable for the journey.

Excluded

Ordinary Leakage & Wear

Normal leakage, ordinary loss in weight, evaporation, shrinkage, wear and ordinary deterioration are generally not insured. Cargo insurance is for accidental loss, not the normal characteristics of transporting or storing the product.

Excluded

Delay

Even where an insured event caused the delay, the financial consequences of arriving late aren't automatically covered — a cancelled order, missed selling season, or a project starting late. Consider this alongside business interruption, supply chain risk and, for major projects, DSU cover.

Restricted

Insolvency & Financial Default

Cover can be restricted where a shipowner, carrier or charterer becomes insolvent or defaults, depending on the wording. Carrier selection is not purely a freight pricing decision — the cheapest quote can become expensive if the logistics chain collapses mid-voyage.

Restricted

Unseaworthiness & Unfitness

Cover can be affected where cargo is knowingly placed on an unseaworthy vessel or into an unsuitable container or vehicle. The simpler lesson: use suitable carriers, suitable equipment and containers fit for the cargo being transported.

Increasingly Restricted

Cyber Risks

A cyberattack can prevent containers from being released, redirect goods or stop a port operating. Marine policies increasingly carry cyber exclusions or specific clauses — a cyber event causing only delay may fall outside cargo cover; one leading to physical loss creates far more complicated questions.

Managing The Exposure

Accumulation & Seasonal Risk

Accumulation Risk

Do not only ask what one container is worth. Ask how much of your stock could be in one place at the same time. You may normally ship R1 million per container and comfortably insure a R1 million limit. Then five containers arrive at the same port during a delay and sit together in one warehouse: your R1 million shipment exposure has just become a R5 million accumulation exposure. Ports, terminals, airports, consolidation facilities, warehouses and vessels can all create accumulations. Policy limits must reflect credible peak values, not the value of an average shipment.

Seasonal Peaks

Stock levels rarely stay constant through the year. Retail businesses may build inventory before Christmas. Manufacturers may import larger quantities ahead of shutdown periods. Agricultural products move seasonally. A large project can create a temporary spike in cargo values. Annual policies should reflect maximum expected shipment and accumulation exposures, not simply last year's monthly average.

Overseas Warehouses & Fulfilment Centres

Stock You Own But Never See

A South African business can own stock in another country without having an office there. Your products may sit at a third party warehouse in Europe, an online fulfilment centre in the United Kingdom, a distributor in Africa or a contract manufacturer in Asia. That stock needs to be mapped.

  • Where is it?
  • Who owns it?
  • How much can be there?
  • Who is responsible if it is damaged?
  • Does the warehouse contract limit the operator's liability?
  • Does your marine cover continue while the goods are stored?
  • Does a local property policy exist?
  • Are there local insurance or regulatory requirements?

"Worldwide" written on a schedule does not automatically answer all of these questions. For material foreign stock exposures, multinational insurance arrangements will require a master policy supported by local insurance in relevant countries. This should be considered territory by territory.

International Offices & Group Companies

Whose Financial Interest, At Each Step

Group structures create another layer of complexity. A single shipment can pass through four different legal entities before it reaches the final customer.

01

Your South African company buys the goods.

02

A foreign subsidiary takes ownership while they are in transit.

03

Another group company stores them.

04

A distributor sells them to the final customer.

The insurance programme should identify which legal entity has the financial interest at each stage. The correct company also needs to fall within the definition of the insured. Insurance follows legal and financial (insurable) interests, not the organisation chart in somebody's PowerPoint presentation.

Claims

What To Do Immediately

  1. Tell your broker or insurer as soon as you become aware of loss or damage, even where the final amount is not yet known.
  2. Take reasonable steps to prevent further damage and protect any remaining goods.
  3. Do not dispose of damaged cargo, packaging, seals or containers until the insurer or surveyor has had a reasonable opportunity to inspect them, unless urgent action is required to prevent further loss or comply with safety requirements.
  4. Inspect goods before signing an unqualified delivery receipt wherever practical.
  5. If packaging is wet, seals are broken, cartons are crushed or goods are missing, record that on the delivery documentation.
  6. Take photographs of the cargo, container, packaging, seals, vehicle and surrounding conditions.
  7. Keep the commercial invoice, packing list, bill of lading or air waybill, customs documents, delivery documents, photographs, survey reports and relevant correspondence.
  8. Any carrier, freight forwarder, warehouse operator or other party that may be responsible should be placed on notice promptly.
  9. Do not sign a release or waive another party's liability without discussing it with your broker or insurer.
  10. Transport contracts and international conventions can impose strict notification periods and legal time bars. Those limits differ depending on the transport method, contract and applicable law.
  11. Protect recovery rights early rather than waiting until the insurance claim has been finalised.

What Your Broker Needs To Understand

Understanding What You Move

A proper cargo insurance programme starts with understanding what you move. Your broker needs to know:

  • The types of goods, their values, whether they are fragile, hazardous, perishable, temperature sensitive or attractive to thieves, and how they are packed
  • The annual value of imports and exports — but also the maximum value of any single shipment
  • The maximum amount that could accumulate on one vessel, aircraft, truck, port, terminal or warehouse, which can be even more important
  • Routes and countries
  • The transport method
  • Your Incoterms
  • Where the financial (insurable) risk transfers
  • Who arranges the freight, and who selects the carrier
  • Any shipment that does not start or end in South Africa
  • Storage during the journey, and overseas stock locations
  • Changing ship or conveyance
  • Seasonal peaks
  • Previous losses

Your marine insurance should be designed around those answers and other key information you disclose, rather than simply renewing last year's policy with last year's numbers.

Important South African Considerations

A Local Legal Context

Governing Law

Marine insurance in South Africa has its own legal context. South African marine insurance is generally governed by Roman Dutch law principles unless the insurance contract incorporates or selects another legal framework. The English Marine Insurance Act 1906 has had enormous influence on international marine insurance practice, but does not automatically govern every South African marine insurance policy merely as Institute Clauses or English marine terminology are being used. International contracts can also involve foreign law, foreign insurers, overseas carriers and different legal systems. The governing law and jurisdiction should therefore be understood where a large or complex shipment is involved.

Customs Value Vs. Insurable Value

South African importers should also distinguish between the customs value used by SARS, the calculation of import VAT and the amount that represents the business's true insurable financial exposure.

Before The Container Leaves

The Four Questions To Ask

01

When does the financial risk become yours?

02

What's the most you could lose in one shipment, or one location?

03

Is the level of insurance broad enough for what can realistically go wrong with these goods?

04

Where, exactly, does the insurance stop?

Those four questions will expose most of the serious gaps long before a claim does.

The Final Point

Protection For The Balance Sheet

International marine cargo insurance is not simply a certificate required by a bank, clearing agent or sales contract. It is protection for your balance sheet while goods are outside your direct control.

Your supplier, customer, shipping line, freight forwarder, warehouse operator and carrier can all play a role in the journey, but none of them has the same financial interest in your goods that you do.

The objective is not simply to establish that somebody arranged insurance. It is to establish that your financial (insurable) interest is insured, for the right amount, against the right risks, from the right starting point to the right destination.

General Information Only

Chadwicks provides general information about insurance. The cover suitable for you depends on your contractual responsibilities and specific risks and is determined by the policy wording, schedule and endorsements, including all relevant terms, conditions, exclusions and limits. Please review these documents with your broker or insurer before making any insurance decisions.

Before the container moves.