Duty Insurance Policy for Marine Cargo: Key Features

• A duty insurance policy covers the loss of customs duty paid before the insured cargo is lost or damaged due to an insured event.
• Duty insurance is a benefit or add-on for marine cargo insurance and can be bought separately.
• The duty insurance has the same insured risks and exclusions as the underlying marine insurance plan.
• Duty insurance covers different types of customs duty and other import taxes at actual rates paid to customs.
• It does not cover any duties or liability for general average contributions or salvage charges paid after the loss or damage of cargo.

Duty insurance is a type of benefit or add-on included in marine insurance policies. It covers the customs duty paid by importers on goods imported into India under a separate sum insured. If the imported goods are lost or damaged by an insured event before clearance, the insurance compensates the duty amount.

A marine insurance policy with a duty insurance cover protects both the imported goods and the customs duty paid on them. For importers who have to regularly cover the import duty on many shipments, this benefit is quite useful as it prevents a double financial burden. It compensates for the loss of goods and duty paid for unusable goods.

The duty cover can be included in the value of cargo insured under marine policies, or a separate policy can be issued with the duty insurance clause.

Read Also: How Does Marine Insurance Work

Duty insurance is typically an inbuilt cover or add-on bought alongside marine insurance coverage. You can get it before the goods-carrying vessel arrives at the destination port. It insures you from the loss of customs duty before your cargo is lost or damaged due to an insured peril, such as accidents, theft, fire, collisions and a sunk vessel.

Typically, the terms and conditions of duty coverage are the same as the cargo insurance. Both cover the same insured events and have the same exclusions. Duty cover is a separate sum insured over and above the basic CIF value of your insured cargo. Any claim under duty cover requires you to first file a claim under the marine insurance plan.

Example of Duty Insurance Cover

Suppose you import goods with a CIF (cost, insurance and freight) value of ₹50 lakhs. The goods have a customs duty of 20% chargeable as per current rates. To secure your shipment, you have bought a marine insurance policy with duty coverage.

Say your goods are damaged by an accidental collision with another ship at the port after customs clearance and payment of customs duty are completed. The duty insurance will cover the customs duty paid, i.e., ₹10 lakhs, after you have filed a claim.

Customs duty or import duty is a tax imposed on goods entering a country’s borders. Customs duties are charged based on the value of the imported goods, country of origin and the materials they are made from. In India, the customs duty regulations are set by the Customs Act, 1962 under the purview of the Central Board of Excise and Customs.

Customs duties are a major source of revenue for the government as well as a way to regulate foreign trade. It also benefits domestic goods and promotes foreign relations through preferential rates. Various goods from certain countries are exempt from duty under national and international agreements and treaties.

Read Also: Import Customs Duty and Taxes in India

Several types of customs and other import levies are chargeable for all imports entering India. Here are the different duties alongside their rates:

Depending on the policy and provider, marine cargo duty insurance has the following inclusions and exclusions:

What Does It Cover?

• Customs Duty and Other Levies: The duty insurance pays for customs duty, import tax, and other similar levies incurred before the loss of the insured goods.
• Actual Payment: This insurance only covers actual duty paid to the customs department and not an agreed value.
• Payable for Insured Events: Payment is made only for insured events where loss or damage to cargo is covered.
• Duty at Other Countries: If the insured cargo passes through another country where import duty is payable, the insurance covers it in the event of loss or damage.
• High Seas Sale: When a State Trading Corporation or other trading body conducts a high seas sale, the buyers are eligible for duty insurance coverage, provided they have an allotment letter or certificate.

What Does It Not Cover?

• Loss Before Duty Charge: Any partial loss or total loss that happens before duty or levy is charged is not covered.
• General Average/Salvage Charges: The duty insurance does not cover any liability for general average contributions or salvage charges for insured events happening before the duty is payable.
• Duty Charged After Ship Arrival: A duty insurance policy must be purchased before the shipment. No coverage is offered after the carrying ship arrives at the destination port.
• Full Duty in Case of Refunds: Any refund from carriers or other parties for duty already paid reduces the insurer’s liability.

The claim process for a duty insurance policy for marine cargo is as follows:

1. Inform the Relevant Authorities: As soon as you are notified of the damage, inform your insurer and lodge a claim with the customs authorities.

2. Gather Evidence: If you are on the ship or at the port when the damage or loss happens, conduct a survey with the port authorities to get evidence of damage.

3. File an Insurance Claim: Once you have the required details, file a claim with your insurer as per their established claim process.

4. Submit Documents: Submit the required documents, such as policy certificate, original invoices, bill of lading or air waybill, packing list and copy of notice served by your carrier.

5. Assist with the Surveyor’s Inspection: A surveyor will be appointed to assess the damage and ascertain the insurer’s liability.

Once all verification and processing is completed, the insurer will reimburse you the customs duty you had paid alongside the cost of damaged/lost goods.

A duty insurance policy is an inbuilt cover or an add-on that covers customs duty lost due to events like accidents, natural disasters, fire, and collisions. It’s a useful cover for businesses that regularly import high-value international goods with high duty. Since customs duty for certain goods can be substantial, this cover provides essential protection from liability and financial exposure.

TATA AIG’s Marine Cargo Policy provides comprehensive and tailored coverage for imports with features like advanced risk management and customs duty cover. Purchase our marine insurance online with instant issuance and seamless policy management. To find out how much your insurance costs, use our marine insurance calculator and make an informed decision.