The vast majority of the trade in coffee today is on
FOB terms. In this regard the relevant ECC clause contains three extremely
important stipulations.
In the case of CFR and FOB
contracts the buyers have to cover the insurance ahead of the contractual
shipment period. Without this stipulation the coffee might be loaded
without any insurance cover in place, leaving the exporter at risk. In case of
doubt an exporter should insist on proof of insurance.
The insurance shall commence from the time the coffee
leaves the ultimate warehouse or other place of storage at the port of
shipment. This is because it can be extremely difficult to determine at
what point the marine insurer became liable for any damage or loss incurred once
the goods have left the ultimate place of storage. If after leaving the ultimate
place of storage but before crossing the ships rail the goods were destroyed by
fire, or fell into the water, then the seller might receive no bill of lading at
all and would be unable to submit shipping documents for the buyer to pay. This
is why ECC also states that the sellers have the right to the benefit of the
policy until the documents are paid for.
In the above example the
buyer would have to claim the loss or damage under their insurance cover on the
sellers behalf. But even if a vessel sinks immediately after loading the seller
will receive a bill of lading and the buyer will have to pay for it. Until
payment is made, the benefit of the insurance cover remains contractually vested
in the sellers.
GCA on
the other hand relies instead on the transfer of risk stipulation that applies
for each contract: shippers and buyers must cover insurance accordingly.
E.FCA.CC stipulates that
insurance shall be covered prior to the contractual delivery period, that
sellers shall have the right to the policy until the documents are paid for, and
that insurance shall extend from the time the coffee is delivered to the carrier
for an amount 5% above the contract price. (Prior to delivery insurance is of
course sellers' responsibility).
See also 05.05.00 and 05.06.00 - Logistics and
Insurance