Port Louis handles around ninety-nine per cent of Mauritius’s external trade in goods. Almost everything a Mauritian business imports or exports spends time at sea, and the question of who insures it during that time is decided by three letters in a contract that most people read as a price term rather than a risk term.
Incoterms decide who must insure — and usually the answer is nobody
Incoterms 2020 sets out eleven rules. Only two of them oblige anyone to buy insurance: CIF and CIP. The other nine — EXW, FCA, FAS, FOB, CFR, CPT, DAP, DPU and DDP — impose no insurance obligation on either party at all.
FOB and CFR are the terms Mauritian importers meet most often, and both work the same way: risk passes to the buyer when the goods are placed on board the vessel at the port of shipment. From that moment the cargo is at the buyer’s risk for the whole voyage, and neither party is required by the contract to insure it. If nobody thought about it, nobody is covered.
One drafting note worth correcting, because it still appears in circulation: risk under FOB, CFR and CIF has not passed at the ship’s rail since Incoterms 2010. It passes when the goods are on board.
Nine of the eleven Incoterms 2020 rules require nobody to insure the goods. Under FOB and CFR the risk is yours from the moment the cargo is loaded overseas — so the policy has to be yours too.
The CIF trap
CIF looks like the safe option because the word insurance is in the name. Read what the seller actually has to buy. Under Incoterms 2020, a CIF seller need only provide cover at the level of Institute Cargo Clauses (C) — a short list of named perils — for 110 per cent of the invoice value. Under CIP, by contrast, the 2020 revision raised the requirement to Institute Cargo Clauses (A), all risks. This was the headline change from Incoterms 2010, where both terms required only minimum cover.
So on CIF terms the seller is buying the cheapest compliant policy, choosing the insurer, the deductible and the jurisdiction in which you would have to claim. And Clauses (C) do not cover theft, pilferage, non-delivery, water damage or handling damage.
A, B and C, and why the difference decides claims
Clauses (C) are the narrowest: fire or explosion; the vessel stranded, grounded, sunk or capsized; overturning or derailment on land; collision; discharge at a port of distress; general average sacrifice and jettison.
Clauses (B) add earthquake, volcanic eruption and lightning; washing overboard; the entry of sea, lake or river water into the vessel, container or place of storage; and total loss of any package lost overboard or dropped during loading or discharge.
Clauses (A) cover all risks of loss or damage except what is expressly excluded, which brings in theft, pilferage, non-delivery, malicious damage and ordinary handling damage.
The distinction that matters most is not the peril list. It is the burden of proof. Under (B) and (C) you must prove your loss was caused by a listed peril. Under (A) the insurer must prove an exclusion applies. When a container arrives short or the contents are crushed and nobody can say exactly when it happened, that difference decides the claim.
When cover starts, and when it quietly ends
The transit clause attaches cover when the goods are first moved for immediate loading and carries it through the ordinary course of transit. It terminates on whichever of these happens first: delivery to the final warehouse named in the contract; delivery to any other warehouse you elect to use for storage or for allocation and distribution; your election to use a vehicle or container for storage outside the ordinary course of transit; or the expiry of sixty days after discharge from the vessel at the final port.
Both of the middle two catch importers regularly. Divert a container to your distribution warehouse instead of the named destination and cover ends there. And cargo left in a bonded warehouse in Port Louis for sixty-one days after discharge is no longer insured under the cargo policy at all.
General average — the exposure nobody expects
If a vessel suffers a casualty and the master sacrifices property or incurs extraordinary expenditure for the common safety, the shipowner declares general average. Every cargo interest saved by that act contributes to the cost in proportion to the value of their goods, under the York-Antwerp Rules. It applies whether or not your own cargo was touched.
Before your container is released you must provide a signed general average bond, plus security: either a cash deposit calculated as a percentage of the invoice value and held until the average adjuster completes their work, or a general average guarantee from your insurer. The shipowner has a lien over the cargo until that security is given. An insured importer sends the guarantee. An uninsured one finds the cash, immediately, for goods that may be in perfect condition.
If cargo arrives damaged
- Note the damage on the delivery receipt before you sign it. An unqualified clean receipt is difficult to argue with later.
- Photograph the container, the seal and the cargo before unpacking further, then in close-up.
- Keep everything — damaged goods, packaging, dunnage and the container seal. Disposing of the evidence reduces the settlement.
- Serve written notice on the carrier promptly, on letterhead, to preserve the right of recovery. The deadline depends on your bill of lading and the convention that applies to it, so check the terms rather than assuming.
- Call a surveyor before repairs or disposal, and assemble the invoice, the bill of lading front and back, the packing list and the claim statement.
The cheapest cargo policy on the file is often the seller’s. It was never bought with your interests in mind.
How we help
For most regular importers and exporters the answer is an annual open cover in your own name, on Clauses (A) terms, with war and strikes bought back — so every shipment is insured automatically on terms you control, whatever the Incoterm on the individual contract. We review your trading terms, set the basis of valuation, arrange survey and claims handling locally, and deal with general average security when it arises. Call us on 5256 5688 or email info@globalequity.mu.
