INSURANCE COVER REQUIRED FOR IMPORTS UNDER FOB TERMS

SYED IBRAHIM'S QUERY
FOB LC

Dear Sir,

We are entereed in to agreement with direct mine owners at indonesia for purchase of coal. As per agreement we have to open Letter of Credit. We have given all the documents to our bank along with Lc application. Bankers asking Insurance cover.Bankes saying without insurance cover Lc will not open. Particular cargo is not our control. That cargo is on our seller stock pile at indonesia. How can i get the insurance cover for particular cargo. That cargo is not our possession. In this situation request you to kindly send your opinion according to Letter of credit Act.

With regards
Syed Ibrahim.S

—————————————-

MR OLD MAN'S COMMENT
Insurance Cover Required for Import under FOB Terms

Dear Syed Ibrahim,

For import transactions under the terms without “I” (insurance) like FOB, CFR, CPT…, the issuing bank/financing bank would request the L/C applicant to hand in a copy of an application for insurance cover certified by the insurance company that an insurance policy/certificate will be issued when particulars of shipment (name and quantity of goods, B/L No., port of loading, port of discharge, ETD, ETA…) are provided. The importer/applicant will only pay insurance premium when the insurance cover is issued. In case the L/C is not realized for some reason, no insurance policy/certificate is issued.

The purpose of this requirement is to protect the importer’s benefit directly and the issuing/financing bank’s benefit indirectly in case the goods insured are damaged or lost in transit.

Insurance companies are willing to issue such a certification.

Best regards,
Nguyen Huu Duc …