Protect your business with marine insurance in Kenya!

Kenya Revenue Authority (KRA) and Import Declaration Form (IDF)

The Kenya Revenue Authority (KRA) is responsible for regulating and overseeing customs procedures, including the compliance of marine insurance for imported goods. The Import Declaration Form (IDF) is a mandatory document for importers to clear goods through Kenyan customs. It is a way for the KRA to ensure that all imported goods are appropriately insured, and that importers pay the necessary taxes and duties.

Key Requirements for IDF Compliance:

1. Marine Insurance Policy from a Kenyan-registered Insurer:
   Importers must submit a valid marine insurance policy obtained from an insurer registered in Kenya. The insurer needs to be authorized by the Insurance Regulatory Authority (IRA) in Kenya. The policy should cover the goods being transported in accordance with the shipping terms.

2. Insurance Certificate with Cargo Value:
   The insurance certificate must detail the value of the cargo being covered. This value should match the commercial invoice value or customs declaration for the goods being imported. The insurance must cover the goods from departure until they reach the final destination in Kenya.

Non-compliance Consequences: Failure to comply with the marine insurance requirements can result in:

• Delays in Cargo Clearance: Without the proper marine insurance documentation, goods may be held in customs for further inspection, leading to delays in the importation process.
• Financial Losses: If goods are not insured, the importer is at risk of financial losses in case of damage or theft during transit.
• Penalties: The KRA may impose penalties on the importer for non-compliance with the IDF requirements.

Understanding Marine Insurance: Cargo vs. Hull Insurance

Marine insurance protects goods and vessels against the risks associated with international shipping. It can be broken down into two main categories: Marine Cargo Insurance and Marine Hull Insurance.

1. Marine Cargo Insurance

Marine Cargo Insurance covers the goods or cargo being transported, providing protection during transit by sea, air, road, or rail. This insurance ensures that the importer or owner of the goods is compensated if the cargo is lost, stolen, or damaged while in transit.

Key Features:

• Loss, Theft, and Damage Coverage: This insurance protects against risks such as theft, loss of cargo, or damage due to various factors like bad weather, accidents, or mishandling.
• Coverage from Departure to Destination: The policy covers the cargo from the moment it departs the origin port until it reaches its final destination.
• Customizable Policies: Policies can be customized based on shipping terms, the type of cargo, and the risk factors involved in the shipment (e.g., fragile goods, perishable items, high-value electronics).

2. Marine Hull Insurance

Marine Hull Insurance provides protection for the vessel itself, including its hull (the body of the ship) and its machinery and equipment. This policy is designed for vessel owners (such as commercial ships, oil tankers, and fishing boats) and protects against damages to the vessel during operations.

Key Features:

• Vessel Protection: Covers damage to the hull of the ship, machinery, and other essential equipment in case of accidents like collisions, fires, or sinking.
• Third-party Liability: It also provides coverage for third-party liability, which covers damages caused to other ships, ports, or infrastructure due to the operation of the insured vessel.
• Onboard Equipment: It may also cover the equipment used onboard the vessel, including navigation instruments and cargo handling machinery.

Key Marine Insurance Terms to Know

When it comes to marine insurance, there are several important terms that both the insured and insurer should understand:

1. Freight Insurance:
   Freight insurance covers the transportation costs for the goods in case they are lost, damaged, or destroyed. It helps the importer or exporter recover any costs incurred if the cargo is not delivered as intended.

2. Hull & Machinery (H&M) Insurance:
   This extends hull insurance to include machinery and essential ship components. It’s often used to cover damage to the ship’s machinery, which is crucial for the vessel’s operational capabilities.

3. Voyage Policy:
   A voyage policy is designed to cover a single shipment between two ports. This policy is useful for one-off shipments or cargo with specific transit routes, providing tailored protection during the journey.

4. Time Policy:
   A time policy provides coverage for a fixed period, such as six months or a year. This is ideal for frequent shipments over an extended period and ensures consistent coverage during the insured period.

Institute Cargo Clauses (ICC) – Understanding Coverage Options

The Institute Cargo Clauses (ICC) are the standard set of terms that define the coverage of marine cargo insurance policies. These clauses are critical because they specify the types of risks covered and outline the scope of protection for different kinds of shipments. The ICC includes three primary levels of coverage:

• ICC (A):
  This is the most comprehensive coverage, providing protection against almost all risks except for certain exclusions (such as war risks, strikes, etc.). ICC (A) is ideal for high-value goods that need a high level of protection.

• ICC (B):
  This offers limited coverage, covering fewer risks than ICC (A). It includes major perils such as fire, explosion, sinking, and earthquakes. It’s typically used for less expensive or lower-risk shipments.

• ICC (C):
  This is basic coverage, often referred to as “minimum cover.” It typically covers only a limited set of risks like fire, explosion, and sinking of the vessel. This is the most budget-friendly option, suitable for cargo that does not need as much protection.

Choosing the right ICC clause is important because it ensures that the insured goods are protected against the appropriate level of risk, based on their value, fragility, and the shipping route.

The Role of Incoterms in Marine Insurance

Incoterms (International Commercial Terms) are a set of internationally recognized rules used to define the responsibilities of buyers and sellers in international trade. These terms outline who is responsible for various costs, risks, and logistics, including insurance. Understanding the right Incoterm is critical because it determines which party is responsible for insuring the goods during transit.

Common Incoterms and Their Impact on Marine Insurance:

1. EXW (Ex-Works):
   Under EXW, the buyer assumes all costs and risks associated with the shipment, including insurance. The seller’s responsibility ends when the goods are made available for pickup, and the buyer is responsible for arranging insurance and bearing all transportation costs.

2. FOB (Free on Board):
   Under FOB, the seller’s responsibility ends once the goods are loaded onto the ship at the port of shipment. The seller is responsible for insurance until the goods are loaded, but after that, the buyer assumes responsibility, including insurance during transit.

3. CIF (Cost, Insurance, and Freight):
   Under CIF, the seller is responsible for providing insurance coverage for the goods being shipped. This insurance covers the goods until they reach the destination port. Once the goods arrive, the responsibility shifts to the buyer.

4. DAP (Delivered at Place):
   In DAP terms, the seller is responsible for all costs and risks until the goods are delivered to the buyer’s location. The seller must arrange for insurance to cover the goods during transit to the final destination.

Understanding the relationship between marine insurance and Incoterms is crucial for anyone involved in international trade and shipping. Proper marine insurance ensures that goods and vessels are adequately protected against the risks associated with transport, and Incoterms help define which party is responsible for these insurances. Importers must also ensure compliance with the Kenya Revenue Authority’s Import Declaration Form (IDF) to avoid penalties and delays in cargo clearance. By selecting the correct marine insurance policies and Incoterms, businesses can ensure the safe and efficient transportation of goods across borders.