November 10, 2014
Importing a car is a rather elaborate process that involves trading companies, various agencies, and government functionaries. Despite this, some people prefer to handle the entire process of importing a car personally because of the potential cost savings. One of the key factors that you must keep in mind while importing a car in kenya is that you will need to insure it while it is in transit in the high seas. This article explores the need for marine insurance when importing a car.
Cars imported from Japan (One of the leading sources of used cars) are procured either on Cost &Freight terms (C&F), or on Cost, Insurance and Freight (CIF) terms. The difference between these two potions is that C&F does not incorporate insurance during freight. CIF is the more popular mode of importation of cars to Kenya.
The cost is usually paid upfront alongside the cost of the car, and the cost of shipping. The CIF value is also used to calculate the imports duty imposed on the car (KRA is currently relying more on the local market value of the car to calculate this rate).
The fundamental question when making the decision between C&F and CIF during the importation process is, “Why do I need insurance in the open sea?” The fact of marine insurance is that it is very unlikely that the car will be lost or damaged while in transit. However some risks still exist when your new car is out in the open seas for about a month enroute to Kenya. First, the car may be damaged during handling while embarking or disembarking from the vessel.
During loading, the cars are at risk of collision with other cars just like in normal driving conditions. Secondly, the car may be lost during transit. Of course, no one can drive off with your car into the open sea unless it had amphibious features. However, it can be subject to theft during the loading and offloading process. If this happens within the confines of the ship, then the marine insurer will investigate and then settle the claim.
The third scenario is if the entire vessel is lost at sea. It is very uncommon for ships to be lost at sea today because of advances in technology. However, anything that can sink in water will sink as soon as soon as the opportunity arises. Marine insurance takes care of such losses.
The actual cost of insuring your car during freight is minimal. For instance, MHH International, a UK based exporter of Japanese vehicles charges 1.5% of the total vehicle cost-shipping premium. The risk of not including insurance in the cost of importing the vehicle is far much larger than this premium.
Finally, please note that the car insurance Kenya laws require all vehicles entering the country to be insured locally. Marine insurers only cover the vehicle during transit, in an arrangement termed, “Port to Port”. If you are importing a car in kenya, factor in the cost of insurance for the car as soon as it docks at the Mombasa Port. Otherwise, you may be exposed to other risks once the vehicle enters Kenyan soil and does not have a valid cover.