Here at the Export-Import Bank of the United States (EXIM) we are passionate about why Export Credit Insurance (ECI) is such an important tool to utilize. ECI allows you to:
- Be competitive with open account credit terms
- Protects your export invoices from the risk of non-payment from international buyers
- Use insured receivables from export sales to obtain working capital
It makes sense you would want to protect yourself and ensure you are covered in the event your international buyer doesn’t pay their invoice. However, ECI doesn’t protect your actual product while in transit from you to your buyer. This is where cargo insurance through a freight forwarder comes in handy.
Why do you need cargo insurance?
Shipping your product via air, ocean, or inland carrier is very safe and reliable. According to the World Shipping Council (WSC) Containers Lost at Sea Report covering 2020-2021, less than one-thousandth of one percent (.001%) represented cargo containers lost overboard. While the overall percentage of cargo containers lost is extremely small, between 2020-2021 the shipping industry saw the largest spike of lost cargo containers in the last seven years. Reasons include unpredictable weather and a surge in consumer demand leading to ships carrying more containers at capacity. Accidents are rare but taking the risk of losing just one shipment for a small business exporter could mean the difference between staying afloat or going under.
All Risk Intermodal Cargo Insurance
During a recent session of Export Readiness for the Underserved Business Community with EXIM’s MWOB Division, guest speaker Lisa Waller President of BDG International discussed All Risk Intermodal Cargo Insurance. Lisa explained the benefits of utilizing cargo insurance through a freight forwarder, how certain Incoterms (CIP & CIF) include cargo insurance, and what cargo insurance covers / doesn’t cover.
Lisa also provided one major reason why you should always purchase cargo insurance:
“Let’s say you choose not to insure, well you should always insure, the cost is super cheap it’s not that expensive. But if you choose not to, understand your liability. When you place a container on an ocean liner, you are sharing liability of the damage to actual ocean vessel itself. “- Lisa Waller
While exporting does come with certain risks, these risks can be greatly reduced by utilizing products such as Export Credit Insurance and All Risk Intermodal Cargo Insurance. EXIM’s export finance specialists are here to help you navigate these export issues and answer any questions you may have. Schedule your free consultation and start your exporting journey today!
