Cargo Insurance Policy
1. Intro to Cargo Insurance
Take responsibility for your own Cargo Insurance and be in control when the unexpected happens. Insuring your Marine/Air Cargo locally can be safer, cheaper, and surprisingly hassle-free. This document explains the different types of cover, and how IronRock can work with you and your business to bring your costs down and improve your efficiency.
Insure with IronRock and enjoy:
Exporting Free on Board (“FOB”)?
If you export your goods without insuring them passed the port of export, this is known as Free on Board (“FOB”). Once the goods are loading onto a ship or plane the buyer (or foreign related entity of your company) now becomes responsible for them. For the benefit of your commercial relationship with international buyers, or for the protection of your goods travelling between two entities under the same parent, it may be worth the peace of mind of knowing you can always refund their upfront payments. You may also be able to source cheaper rates locally.
Importing Cost Insurance Freight (“CIF”)?
If a seller/carrier arranges insurance on your behalf, then your goods are said to be shipped CIF. While it seems an easy option, there is a risk that the goods are not adequately insured, or that the insurer chosen by the seller/carrier will not honour your claim. CIF insurers are also usually based outside of Jamaica, so if your claim is not honoured it is nearly impossible to recover any compensation – given how expensive and lengthy cross border litigation can be.
Importing without any Cargo Insurance?
Not only are you running the risk of losing some, or all, of your shipment without any compensation, but you may also be paying more at Customs than you would if you had insurance. How?
Jamaica Customs Agency charges Import Duties on the combined cost, insurance, and freight (CIF) value. Now if you do not insure your import, and it is not shipped CIF by the seller, then Customs applies a hypothetical insurance charge, to arrive at a CIF value (1.5% for Marine Cargo and 1% for Air Cargo). These rates are so high, they are reserved for shipments of glass and other easily breakable items. Although you are not required to pay this insurance charge, it inflates the CIF value, which means you ultimately pay more Duty, Customs fees and GCT on your shipment. Therefore, sometimes insuring your import can be cheaper than not insuring it.
Say your business imports car parts, and you are expecting a shipment of motor oil worth USD$100,000.00
IronRock would normally charge 0.55% of the value of this type of import. But if you don’t insure the import, Customs will apply a hypothetical 1.50% insurance charge, in order to arriving at a CIF value – the CIF value is then used to calculate Duty (estimated at 40%), the Standard Compliance Fee (“SCF” of 0.3%) and an Environmental Levy (“ENVL” of 0.5%). even though you do not pay the 1.50% hypothetical insurance charge applied by Customs, it increases the other fees you do have to pay (i.e. Duty, GCT, and other Customs Fees).
Cost + Freight
Variable Customs Fees
CAF* + Stamp Duty
CIF + Custom Fees
Commercial Import GCT (20%)
Less Insurance not actually paid
IronRock quotes 0.55%
Customs hypothetical charge of 1.50%
$ 1,500.00 (charge is not actually paid)
Savings from Insuring your cargo: $178,506.68 – $178,401.56 = USD$105.12
*CAF – Customs Administrative Fee
Once again, even though you do not pay the 1.50% hypothetical insurance charge applied by Customs, it increases the other fees you do have to pay (i.e. Duty, GCT etc.) and therefore it increases your overall import cost. The above example illustrates that sometimes not insuring can actually be more expensive than insuring. In other words, if you insure your cargo you could pay less and have less risk.
Did you know that even if your cargo arrives safely, you can still be legally made to pay for another party’s loss?
Imagine a ship stuck in a severe storm. Tall waves begin washing over the ship, so the crew decide to discard (or jettison) several containers overboard to lighten the ship which ultimately saves the ship and remaining cargo. It would be unfair to punish those who had their cargo thrown overboard, because their sacrifice benefited the ship owner and the owners of the remaining cargo. Therefore, the value of the cargo lost is shared by both the shipowner and the cargo-owners:
Value of Jettisoned Cargo x Value of Your Cargo = Your Contribution towards the Loss
Value of Ship & Remaining Cargo
This is the principle of international maritime law known as General Average. It provides a legal basis for your cargo to be withheld until your full contribution towards the loss is made. All of IronRock’s Cargo policies cover General Average.