International Transportation insurance is the type of insurance used in foreign trade operations, but do you know what happens when you need to place insurance for goods to be transported to a country with embargo? We will explain this below.

What is an embargo?

Before you know how Transport insurance operates for countries in the said situation, let’s understand what an embargo is. Insofar as international trade and politics are concerned, it means the prohibition to trade with a given country.  It is an extreme measure, which is also used as a form of punishment for politicians and the government policy of the embargoed country, and casts doubt about the country’s real interest.    

The United States impose punishments on other countries, like economic, commercial and financial embargoes. Such embargoes drastically affect the economy of a nation, and often produce results totally different from those expected, and end up by further strengthening  the government of the country penalized.  That occurred with Cuba and North Korea, which, in spite of the drastic measures adopted against them, adapted themselves to the embargo and survive isolated in their political regimes.

Global Insurance Market

The global insurance market adopted the position of not accepting Internal Transportation insurance where countries embargoed by the USA are involved.   According to compliance rules of some international insurance groups, their subsidiaries are prohibited from providing Transportation insurance where the “origin” or “destination” is a country listed by the Office of Foreign Asset Control – OFAC, the U.S. Government department responsible for enforcing economic and commercial sanctions, and periodically establishing and updating the list of embargoed countries. 

The current OFAC list contains embargoes against the following countries: Belarus, Congo, Côte d'Ivoire, North Korea, Cuba, Iran, Iraq, Liberia, Libya, Myanmar, Syria, Sudan, Zimbabwe and Western Balkans (previously called  Federal Republic of Yugoslavia, Yugoslav Republic of Macedonia, Montenegro and Servia).

Brazilian Insurance Market

International insurance companies, with operations in Brazil, follow the decision of not accepting insurance, where the “origin” or “destination” is a country with embargo. However, local insurers are free to accept or refuse International Transport Insurance involving embargoed countries.   

Brazilian exporters and importers that do business with OFAC listed countries have to be careful when drafting their purchase and sales contracts to prevent losses caused by damage or accidents that may occur during transportation.  For exporters, an option is to sell on the following basis:

The importer has the obligation to collect the merchandise from their warehouse.

Another person, designated by the buyer, has the obligation to collect the merchandise from the specified location in Brazil or from the port or airport of shipment.     

For importers, an alternative is to buy on a CIF/CIP basis, as in this case, the seller contracts the insurance and the importer is the insurance beneficiary.      

Insurance, regardless of the situation, has no relationship whatsoever with political games. It is a purely commercial activity, whose objective is to insure property and liabilities at a cost established in accordance with risks involved in the operation. 

Do you want to know how much you will be paying for your International Transportation insurance? Do a simulation now using our free calculator: