Marine Insurance Incoterms: Explained

Incoterms or International commercial terms are some standard terms published by the ICC (International Chamber of Commerce). These terms are used in international trade. It is an integral part of the sales contract. Incoterms pave the way for international trade and eliminate any sort of confusion. In marine policy, the buyers and sellers are the parties to a sales agreement, which is based on the Incoterms. Hence, Incoterms in marine insurance is a rule book that is expected to be obliged by the buyer and sellers.

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Objective behind Incoterms in Marine Insurance

There are several rules and regulations enshrined in the Incoterms by the government and legal experts. Incoterms in marine insurance are the trade rules which remove every ambiguity with regard to international trade. It has put further light on the attributes of the marine policy.

Incoterms in Marine Insurance

Let us discuss these terms in detail.

Mode of Transport

The following rules apply to every mode of transport.

EXW (Ex Works)

In the context of a sales agreement, when the stipulation is EXW (Ex Works), it signifies that the seller's obligation involves making the goods accessible at a designated location. This location could encompass the seller's factory, industrial facility, or any mutually agreed upon venue. Within this arrangement, the predominant weight of responsibility rests upon the buyer, with the seller's role being relatively diminished.

The seller assumes the duty of loading the goods onto transport, an action funded and assumed at the buyer's risk. Of paramount importance, however, is the explicit articulation of these terms within the contract.

Within the framework of EXW terms, the buyer also shoulders the responsibility of securing customs clearance and meticulously fulfilling all export-related documentation requisites.

FCA (Free Carrier)

The FCA terms specify that the seller must deliver goods for export at an agreed destination, usually their own premises. The responsibility for loading and unloading goods depends on the delivery location, a crucial aspect of marine insurance. If delivery occurs at the seller's premises or a controlled location, they load the buyer's carrier. But if delivery is elsewhere and the seller loads, the buyer handles loading onto their own carrier.

CPT (Carriage Paid To)

"Carriage Paid To" means the seller delivers and covers the cost of transporting goods to an agreed destination. The seller also pays for the carriage expenses. Goods delivery is confirmed only when the buyer receives them at the specified shipment address.

CIP (Carriage and Insurance Paid to)

CIP is much like CPT. The seller must deliver and cover the carriage expenses. Additionally, the seller needs to get insurance for the goods during transit. The insurance for CIP should be 110% of the contract value with minimum coverage.

DAT (Delivered at Terminal)

The seller must bring the goods to the agreed terminal, port, or destination in line with the DAT agreement. They cover transport expenses and handle risks until the goods reach the destination or port.

DAP (Delivered at Place)

The seller hands over the goods to the buyer on the arriving transport, ready for unloading at the named destination. Now, the risk is on the buyer, not the seller.

DDP (Delivered Duty Paid)

In a DDP agreement, the seller is in charge of delivering goods to the buyer's chosen destination within the buyer's country. The seller covers transport, customs, duties, and taxes. Unloading isn't their responsibility. Once the buyer gets the goods at the destination, the risk and responsibility shift to them.

The following rules apply to the sea transport.

FAS (Free Alongside Ship)

In simple words, the seller delivers the goods next to the buyer's ship at the designated port stated in the contract. Under this agreement, the buyer takes on the expenses and potential losses or damages for the goods from the moment of delivery by the seller.

FOB (Free on Board)

In this arrangement, the seller covers the expenses and risks until the goods are loaded onto the ship. The seller is responsible for handling all export clearances.

CFR (Cost and freight)

According to the Cost and Freight rule, the seller pays for shipping the goods to the named destination port. Then, they load the goods onto the departing ship. After this, the buyer takes on the risks.

CIF (Cost, Insurance & Freight)

CIF is much like CFR, but the difference is that the seller must also insure the goods during transit to the designated port. This insurance, required in CIF, covers the goods for at least 110% of their value under specific clauses.

Comprehending Incoterms in marine insurance is crucial when seeking coverage. These terms clarify roles and risks, leading to smoother transactions and better coverage for both buyers and sellers.

Learn more about Marine Insurance

Conclusion

Incomterms are the essential rules and regulations framed by legal experts. The sellers and buyers who deal in the international market must understand the Incomterms of the marine insurance policy.

Written By: PolicyBazaar - Updated: 22 August 2023

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3.8 April 20, 2023
Anas
Great Experience
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4.3 April 03, 2023
Vaishnav
Provides Comprehensive Protection
When it comes to coverage, Marine insurance that i bought from PolicyBazaar has exceeded my expectations. It provides comprehensive protection for my cargo and vessels during transit, ensuring I can focus on my business operations with peace of mind. Thankyou.
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4.3 March 17, 2023
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4.3 February 28, 2023
Vishal
User Friendly Interface
The website's user-friendly interface made it easy to compare different plans and find the perfect fit for my business needs.Thanks
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4.3 February 11, 2023
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Prompt Services
I appreciate the transparency and honesty with which Policybazaar handled my claims. They were prompt in processing my claim and their claim settlement process was hassle-free.Thanks PolicyBazaar.
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Rishabh
Exceeds Expectations
I recently had the pleasure of purchsing marine insurance from Policy bazaar website and I must say it has been an outstnding experience from start to finish. I am thrilled to share my positive customer review, as this truly exceeded my expectations. Thanks PB.
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3.8 January 31, 2023
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Excellent Support
The customer service provided by Policy bazaar was decent. Their team was responsive, knowledgeable and went above and beyond to assist me at every step. Their professionalism and commitment to customer satisfaction were truly commendable.Thankyou.
Mumbai
4.3 January 11, 2023
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Efficient Process
When it came to claims processing, Policy bazaar demonstrated remarkable eficiency and effectivenes. I had an unfortunate incident during the coverage period and filing a claim was a breeze. The entire process was streamlined and their team guided me throuugh every necssary step, making it hassle-free. The promptness with which my claim was setled reflected their commitment to their customers' well-being and peace of mind. Thankyou.
Pune
3.8 January 01, 2023
Kunal
Comprehensive Coverage
I must mention the comprehensive coverage provided by the marine insurance policy I purchasd through Policy bazaar. It offered me the necesary protection and peace of mind. Thankyou PolicyBazaar.
Indore