• When do I become liable? The attachment and termination of risk

    Chapter 3 - Cotton marketing - Insurance in an uncertain world 

    Depending on the terms of the contract of sale contract, the insurance may terminate at different stages of the shipping process. This has strong implications for who will be liable for compensation, and therefore who should arrange insurance protection for the goods.

    FCA or FOT (free on truck – can be either CY or CFS). The buyer or its agent nominates the place for the delivery of the goods, pre-cleared for export by the seller, to the carrier at an inland place, probably at the seller’s gin or warehouse, or on the carrier’s truck. No risk of physical damage or destruction attaches to the exporter after this point, but the exporter remains responsible for errors or omissions that occurred while the goods were under its care and responsibility.

    FOB and CFR. The buyer has responsibility for all costs and risk of loss or damage to the goods once they have been delivered by the seller to the named port and have passed the ship’s rail. The seller must pay freight costs, and under CFR, must also clear all goods for export.

    CIF. In addition to paying the ocean freight the shipper must also arrange and pay for insurance that must be in conformity with the current ICA stipulation: warehouse to warehouse, all risks including SRCC (strikes, riots, civil commotions commodity trade) risk and war risks at a value of CIF + 5%. The seller must contract the insurance and pay premium, but is obliged only to pay the minimum cover. If the buyer requires greater cover, it must either agree this with the seller, or arrange it itself. 
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    Cotton Exporter's Guide

    Brochure - African cotton promotion
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