You Sold FOB, the Buyer Demands ICC (A) Cover: When to Push Back and When to Insure Anyway

Under Incoterms 2020, FOB transfers risk to the buyer at the on-board moment at the named port of shipment, and obliges neither party to insure. Your buyer knows this. They are asking for ICC (A) cover terms in the sale contract anyway. This article is about why, and what to do.

The short answer is that the Incoterm is the default, not the contract. A sale contract can require anything the parties agree to, including insurance terms that go beyond what the Incoterm prescribes. The longer answer is that the seller's response should depend on which of three specific reasons is driving the buyer's request, because the right move differs in each case.

What FOB actually says under Incoterms 2020

Incoterms 2020 is published by the International Chamber of Commerce in Paris. The 11 rules in the 2020 edition are EXW, FCA, CPT, CIP, DAP, DPU, DDP (for any mode of transport) and FAS, FOB, CFR, CIF (for sea and inland waterway only). For the seller-buyer split on insurance specifically, see Incoterms 2020 and cargo insurance responsibility.

FOB obliges the seller to deliver the goods on board the vessel nominated by the buyer at the named port of shipment, cleared for export. Risk transfers at the on-board moment. Cost transfers at the same moment. Neither the seller nor the buyer is contractually obliged to insure under FOB. In practice, the buyer arranges insurance for the on-board voyage because they bear the risk from on-board to discharge, and many sale contracts default to that division.