Incoterms and Marine Insurance – Who is Liable?

Exporting vehicles from Canada to China can be quite profitable with the right partners. With the right team handling your logistics, it really has never been easier to export cars smoothly, reliably and to minimize the risks involved. None the less, it is always important to consider protecting your assets with cargo and marine insurance. But when deciding what type of shipping insurance is right for you, you will want to consider the incoterms you have agreed to on your shipping.

The International Commercial Terms, aka Incoterms, are incredibly useful for simplifying the various responsibilities of sellers and buyers during international trade. If you are in the business of exporting cars overseas you are likely more than familiar with the 11 different incoterm rules laid out by the International Chamber of Commerce, but in case you find it useful we have provided a summary table for your review which outlines the basic responsibilities of the seller and buyer during car exporting. Please make note that some of the responsibilities are rather ambiguous and could be debatable, so this chart is just meant to be used as a general guideline and is not a replacement for reviewing the terms yourself.

The transfer of risk passes from seller to buyer at different times during shipment, depending on the incoterm agreed upon. For example, two very common Incoterms when exporting vehicles overseas are CFR and CIF. The key difference is that the risk of whether the ship delivers the goods safely changes from the buyer to the seller when changing to CIF. Many new purchasers or importers of vehicles are not aware of this and do not realize that they still need to pay for the goods even if the ship sinks.

In a recent post regarding the General Average which explored the mess that happened in the Suez Canal a few months ago (when the Ever Given found itself perpendicular to the waterway), the importance of marine insurance was highlighted. For any cargo on the Ever Given which was shipped with the incoterm of CFR, the buyer would be responsible for payment of a general average claim from the shipping line. None the less it is generally advised for the sellers to arrange cargo insurance and marine insurance as well to minimize their own risks in such an extreme event.

The insurance obligations under most incoterms are negotiable. Most commonly our customers choose to work with us under the incoterms of CFR, CIF, and Ex-Works and at Techlantic we work with you to determine what suits your needs. Contact your sales rep at Techlantic or e-mail sales@techlantic.com if you have any questions about your incoterms and insurance requirements for vehicle export.