Letter of Credit Forum

Under Sight L/C and FOB terms and in case, where as per UCP (funds to be remitted within 5 days from receipt of docs at L/C Issruance bank) I will get the payment before receipt of goods at POD (because of lengthy transit time), if L/C says insurance is to be covered by Applicant, should I being exporter ensure that insurance cover has been bought by the applicant or not?

phill doran replies:

Hello aamirhatif

(for technical reasons I cannot reply to your post in the normal manner)

I am assuming here that there is a bill of lading and as you shipped “FOB” the credit called for the on-board bill. In the process of obtaining this, you have (inadvertently) become the shipper on the document. I say “inadvertently” as it was never the Seller’s intention to be the shipper in an F-prefixed sale: that is what an F-prefix sale is all about.

If so, then “yes”, I would say it is definitely in your interests to find out how and through whom your applicant had insured. You will do this not as the beneficiary or as the exporter but as the SHIPPER.

If you have taken the role of shipper and should the vessel go into distress (a General Average situation for example) you will be exposed if your consignee either abandons the cargo and/or has no cover for the General Average claim. As shipper, you will be held accountable.

As a general proposition, it is NEVER in the seller’s interest to be the shipper on any document where the seller does NOT pay the freight. The above risk is just one risk in many, but finding out if the buyer is properly insured is a good place to start in an endeavour to correct your mistake and manage your exposure.
I wish you well with this

Cheers

phill