How Tariffs Affect Your Marine Cargo Insurance
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This document discusses how rising tariffs are affecting marine cargo insurance policies. It notes that duty rates have increased under Section 232 and 301 tariffs. This means the typical 10% uplift to valuation in policies may no longer be enough to cover incurred duties. The provider is preparing policies that include CIF + 10% + duty to increase coverage and avoid under-insurance claims. Adjusting policies in this way may result in higher premiums due to increased valuations.
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How Tariffs Affect Your Marine Cargo Insurance
- 1. And How One Provider is Preparing for the Changes HOW TARIFFS AFFECT YOUR MARINE CARGO INSURANCE
- 2. Nick Esposito Marketing Executive Bozeman, Montana Trade Risk Guaranty Brokerage Services, LLC nick.esposito@traderiskguaranty.com 1st
- 3. Felicia Donohoue Marine Insurance Manager Bozeman, Montana Trade Risk Guaranty Brokerage Services, LLC Felicia.donohoue@traderiskguaranty.com 1st
- 4. • Located in Beautiful Bozeman Montana • Established in 1991 • Direct-to-Importer Business Model • Over 10,000 U.S. Customs Bond & Marine Cargo Insurance Clients TRADE RISK GUARANTY BROKERAGE SERVICES, LLC
- 5. ON YOUTUBE TRADE RISK GUARANTY - TRG
- 6. TARIFFS AFFECT ON MARINE CARGO INSURANCE POLICIES
- 7. WHY THIS TOPIC? Duty rates are on the rise: • Section 232 - Steel & Aluminum • 25% Tariff on Steel • 10% Tariff on Aluminum • Section 301 – Products from China • 25% on Products on List 1 – Currently in Effect • 25% on Products on List 2 – Currently Under Review • 10% - 25% on Products on List 3 – Currently Under Review TRADE RISK GUARANTY traderiskguaranty.com
- 8. WHAT IS VALUATION? In terms of Marine Cargo Insurance, valuation is an estimation of the cargo’s worth which informs the amount of coverage needed. • Historically, duty is not written into the valuation. • However, Duty can be included as a clause on your specific policy. TRADE RISK GUARANTY traderiskguaranty.com
- 9. WHAT IS VALUATION? For a Marine Cargo Insurance policy, valuation is calculated at a rate of CIF + 10% • The 10% uplift is intended to cover incidentals such as: • Incurred Duty • Port Fees • Broker Fees • Etc. TRADE RISK GUARANTY traderiskguaranty.com
- 10. TARIFFS AFFECT ON VALUATION The increase in duty rates as a result of Section 232 and Section 301, means that the typical 10% uplift factored into Marine Cargo Insurance Policies may not be enough. TRADE RISK GUARANTY traderiskguaranty.com
- 11. WHO IS AFFECTED? Importers and Exporters will be affected by these changes. • In retaliation to the Section 232 and Section 301 tariffs when importing into the United States, other countries have begun to raise duties on goods exported from the U.S. TRADE RISK GUARANTY traderiskguaranty.com
- 12. EXAMPLE OF A CLAIM ADJUSTMENT
- 13. WHAT INCURRED DUTY? Duty is considered incurred when the legal obligation to pay arises. • Therefore, not only were the duties paid, but the goods have been entered into the country. • Duty can only be included in a claim if the duty paid to Customs and Border Protection is considered incurred duty. TRADE RISK GUARANTY traderiskguaranty.com
- 14. A SAMPLE EXAMPLE CLAIM TRADE RISK GUARANTY traderiskguaranty.com CIF + 10% Total CIF Value $100,000.00 Uplift + $10,000.00 Total CIF + 10 Value $110,000.00 Deductible ($1,000.00) POLICY PAYS $109,000.00 Assuming the following: • Total CIF value of $100,000 • 25% duty rate • $1,000 deductible • No enhancement clauses apply and no carrier compensation to consider.
- 15. A SAMPLE EXAMPLE CLAIM TRADE RISK GUARANTY traderiskguaranty.com Processing A Claim Total Cost & Freight $100,000.00 Incurred Duty + $25,000.00 Total Loss Amount $125,000.00 Total Amount Recoverable $109,000.00 Under-Insured ($16,000)
- 16. HOW TRG IS PREPARING FOR THIS CHANGE
- 17. HOW TRG IS PREPARING TRG is working on writing Marine Cargo Insurance Policies with: CIF + 10% + Duty This change will increase the amount of coverage our policies offer, but may result in an increase in premium since the overall valuation is increasing. TRADE RISK GUARANTY traderiskguaranty.com
- 18. A SAMPLE EXAMPLE CLAIM TRADE RISK GUARANTY traderiskguaranty.com CIF + 10% + Duty Total CIF Value $100,000.00 Uplift + $10,000.00 Total CIF + 10 Value $110,000.00 Duty + $25,000.00 Total CIF + 10% + Duty $135,000.00 Deductible ($1,000.00) POLICY PAYS $134,000.00 Assuming the following: • Total CIF value of $100,000 • 25% duty rate • $1,000 deductible • No enhancement clauses apply and no carrier compensation to consider.
- 19. A SAMPLE EXAMPLE CLAIM TRADE RISK GUARANTY traderiskguaranty.com Processing A Claim Total Cost & Freight $100,000.00 Incurred Duty + $25,000.00 Total Loss Amount $125,000.00 Total Amount Recoverable (up to) $134,000.00 Fully Covered
- 20. SHOULD I INCLUDE DUTY IN MY VOLUME ESTIMATE?
- 22. Alt Email: FB Group: Web: Blog: Facebook: Twitter: YouTube: Felicia.donohoue@traderiskguaranty.com International Trade Professionals - TRG www.traderiskguaranty.com www.traderiskguaranty.com/trgpeak/ @traderiskguaranty @trg_bond Trade Risk Guaranty