One of the readers, Mahesh asked below question about compensation of damage claim in a CIF shipment..
Please advise as to who will get the claim amount in case of CIF shipment where the cargo was damaged in transit. The shipper or the buyer?
Alexander Robertson of Robertson’s Cargo Consultancy is an accredited trainer with ICC South Africa for Incoterms® 2010 rules and a TETA registered trainer and he opines as below :
When Incoterms® CIF is mentioned or used, it is presumed that the shipment would either be bulk or break-bulk.
Should the consignment have been containerised, the correct Incoterms® rule would be CIP.
Bearing this in mind, when considering any claim it is necessary to take into account at whose risk the goods were at the time of loss. Under CIF the risk in the goods passes from the seller to the buyer at the time the goods are loaded and stowed on board the vessel.
With CIP the risk in the cargo passes when the goods into the care of the main carrier. This can be at the warehouse, container terminal prior to loading on the vessel, seller’s premises if the container operator collects the goods from the seller’s premises/warehouse.
Therefore only the person at whose risk the goods are being moved can be reimbursed for any loss. Remember that the insurance taken out by the seller is insurance for the benefit of the buyer and not that of the seller, even though the insurance is in the name of the seller.
Whenever any claim is settled by any insurance company, the company will consider insurable interest and this is determined by the choice of which Incoterms rule is used in the sale agreement.
Any sale agreement has more than one contract, there is the actual sale, the payment, insurance and transit sections which all need to fall into place.