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12 things you need to know about Incoterm Freight On Board (F.O.B) and its relationship with Marine Cargo Insurance

Liga Asuransi – International trade allows countries to expand their markets and access goods and services that may not be available domestically. As a result of international trade, markets have become more competitive. This ultimately results in more competitive prices and cheaper products for consumers.

International trade is the key to the revival of the global economy. In the global economy, there is supply and demand, and therefore both impact and are influenced by global events.

Political changes in the European region, for example, can result in increases in the costs of industrial machinery and products. This could increase production costs for American industrial engineering companies based in India, which would then result in increased prices charged for the production of cars that consumers in Indonesia might purchase.

In the field of export and import trade, there are many terms and forms of agreement that must be known so that buyers and sellers are not disadvantaged due to lack of understanding. There are several forms of agreement

As a member insurance broker and insurance consultants who are experienced in the field of goods transport insurance or Marine Cargo Insurance, below we present an explanation of one of the clauses that is often attached to policies goods transportation insurance or marine cargo insurance:


F.O.B. Attachment Clause

Notwithstanding anything contained herein to the contrary, the risks covered hereunder shall not attach to the interest hereby insured prior to being on board the overseas vessel at the port of shipment.

In case, however, the assured have to bear the risks of the interest hereby insured, under their F.O.B. or C. & F. contract with the shipper, from the time when it has effectively passed the rail of the overseas vessel at the port of shipment, the risks covered hereunder shall attach from that time.



F.O.B. Clause Lampiran

Notwithstanding anything to the contrary herein, the risks covered hereunder shall not attach to the interest hereby insured prior to boarding the foreign vessel at the port of delivery.

However, in the event that the insured must bear the risk of the interests hereby insured, based on the F.O.B. or C. & F.’s contract with the shipper, from the moment the ship has effectively passed the ship’s rail overseas at the port of delivery, the risks covered below will attach from that point on.

EXPLANATION OF F.O.B. Attachment Clause

  1. Trading globally gives consumers and countries the opportunity to be exposed to goods and services that are not available in their own countries, or that would be more expensive at home.
  2. Free On Board (FOB) is a shipping term used to indicate whether the seller or buyer is responsible for goods damaged or destroyed during shipping. “FOB shipping point” or “FOB origin” means the buyer assumes ownership of the goods after the seller ships the product.
  3. For accounting records, suppliers must record sales at the point of departure from their shipping dock. “FOB origin” means the buyer pays shipping costs from the factory or warehouse and has title to the goods as soon as they leave the place of origin. “FOB destination” means the seller holds the risk of loss until the goods reach the buyer.
  4. Contracts involving international transportation often contain brief trade terms that describe such things as the time and place of delivery, payment, when the risk of loss shifts from the seller to the buyer, and who pays shipping and insurance costs.
  5. The most common international trade terms are Incoterms, published by the International Chamber of Commerce (ICC), but companies shipping goods within the United States must also comply with the Uniform Commercial Code (UCC). Because there is more than one set of rules, parties to a contract must clearly indicate which governing law they are using for delivery.
  6. International trade is the key to the revival of the global economy. In a global economy, supply and demand — and therefore prices — both impact and are influenced by global events.
  7. Some argue that international trade can actually be bad for small countries, putting them at a greater disadvantage on the world stage.
  8. Cargo insurance clauses are contained in insurance policies for shipping goods by sea which cover cargo in transit. This clause exists to determine what types of goods in the cargo are covered in case of loss or damage during shipment. Interesting to note; Institute cargo clauses can cover anything from cargo to containers that have their value along with the mode of transportation used to deliver the goods.
  9. There are three basic sets of institute cargo clauses; A, B, C. Your coverage is directly related to your insurance premium. This means that the higher the marine insurance premium you pay; the more coverage you get. Following are the three cargo clauses as detailed below:
  10. Institute Cargo Clause A: This is considered to be one of the most extensive marine insurance coverages and therefore, you should be prepared to pay a high premium for this as you will get extensive coverage.
  11. Institute Cargo Clause B: This is considered a slightly restrictive cover and therefore, the premium is moderate. Policyholders primarily request coverage for some of the more valuable items or only a portion of the cargo.
  12. Institute Cargo Clause C: This is the most restrictive coverage, and you should be prepared to pay a low premium. However, because the premiums are low, your coverage will also be reduced.

Each cargo clause mentioned above is limited to goods in transit. Shipped goods will be considered goods in transit only if they have left their original location and are still on their way to their destination.

In cases where goods are insured during transport, regardless of the fact whether it is by land, air or sea; in case the cargo is lost or damaged during transit; the amount will be returned or replaced to whoever holds ownership of it.

For example, a delivery recipient cannot submit a claim for their inventory until they receive the item. If the shipper retains title, and the insured cargo is damaged, the shipper will receive insurance benefits for the goods. In this way, purchasing marine insurance that insures cargo will benefit both parties.

For the insured, the benefits of additional clauses are to provide wider coverage, reduce limitations/exclusions, increase the amount of coverage, provide flexibility and simplify the provisions in the policy.

Usually the addition of the clause is at the initiative of insurance broker or insurance brokers used by the insured. Insurance brokers know exactly what coverage is best for their clients. Insurance brokers already have a lot of experience in handling insurance claims. Many were rejected, limited in replacements and several things were detrimental to their customers. To overcome this, on their initiative, based on their experience and knowledge, insurance brokers design special clauses and add them to the insurance policy. As a result, the insured gets maximum insurance coverage. That’s one of the important benefits of using an experienced insurance broker.

For all your insurance needs, contact L&G Insurance Broker Now!


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Asuransi Marine Cargo Lebih Untung Dengan MOP
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L&G Insurance Broker Registered by OJK KEP-667/KM.10/2012
Proses hanya 24jam
Asuransi Marine Cargo Lebih Untung Dengan MOP
(Marine Open Policy)
Chat kami di WhatsApp untuk info lengkap!