Goods immobilized by an administrative decision sit exactly at the seam between two policies, and it is the one place in an exporter's program where two insurers can decline while pointing at each other without either being wrong. The cargo policy covers physical loss of or damage to the goods during transit. The political risk policy covers deprivation of use resulting from an act of public authority. Between the two runs a near-universal exclusion in transport policies, that of confiscation, requisition and seizure by a government, which exists precisely because that risk belongs to another market. The gap is therefore not a drafting oversight: it is a boundary, and it is crossed badly by those who do not know it is there.
The first thing to establish is mundane and turns out to be decisive: is the cargo cover even still running? A transport policy ends on delivery, and failing delivery, at the end of a period counted from discharge, often sixty days. Goods held in customs for four months are therefore frequently outside the cargo policy before the exclusion has even been argued, and the exporter who discovers this in the fifth month also discovers there is nothing left to argue. The expiry date is read at the time of the block, not at the time of notification.
The second difficulty lies in the nature of the event: immobilization is not a loss. In property insurance, the loss is the destruction or disappearance of the thing, and a container standing on a customs apron is intact. Political risk policies handle this through a deprivation that becomes total after a continuous period, often several months, at the end of which the insured is deemed to have lost the property. That construction is necessary, failing which every fussy customs inspection would become a claim, and it has a formidable effect: while the period runs, the goods deteriorate and nobody pays. On perishables, real value is nil long before deprivation is legally established.
One must then know which of buyer or seller holds the insurable interest at the time of the block, and the answer is not read in the policy but in the sale contract. Trade terms determine the precise instant at which risk passes, and that moment can sit far upstream of both ownership and payment. A seller may therefore have transferred risk at loading, insure nothing further on the goods, and remain unpaid: its loss is then a receivable and not a thing, and it is its credit policy that handles it. Confusing the two means notifying the right loss to the wrong insurer, which costs the notification period.
From this configuration follows a practical conclusion exporters find counterintuitive: on goods blocked by an administrative decision in a country where the buyer has stopped paying, the fastest route is almost never the transport policy. The decision blocking the goods is dated, written and public, and it is precisely the document that establishes the political cause of an unpaid receivable. The same sheet of paper therefore founds two very different files, and the receivable file advances while the goods file waits out a deprivation period.
That leaves the protective steps, which are the useful part here and which are taken early or not at all. An administrative decision almost always comes with an appeal procedure, a possibility of re-export or a conditional release, and these routes have short deadlines that the block itself makes one forget. Policies in any event require the insured to take mitigating measures, whose costs are frequently borne by the insurer, which makes inaction doubly expensive. Documenting the condition of the goods at the start of the block, by a joint survey where possible, later decides the whole argument about deterioration.
The overall reading is short and worth setting down before shipment rather than after. The transport policy ends on a date that can be computed; the political risk policy begins after a period that can be read; between the two lies an interval in which the goods are covered by nobody, and it is in that interval that most customs immobilizations fall. Knowing where that interval falls on a given shipment takes two clause readings, and that is the only moment when something can still be done with the information.
A French exporter ships 2.1 million euros of processed foodstuffs to an East African country, on sale terms under which risk passes at loading. The goods are discharged on March 4. On March 19, an administrative decision suspends imports in the sector and immobilizes the containers on the customs apron. The cargo policy ends sixty days after discharge and excludes confiscation by a government. The political risk policy deems deprivation total after six continuous months. The buyer, due to pay sixty days after delivery, does not pay. The goods lose their market value in eight to ten weeks. What does the exporter do?
Waiting out the six months is the only plan that guarantees receiving nothing for goods that will not commercially exist in ten weeks. Three findings come first, and two of them close doors. The cargo policy ends on May 3, that is, before deprivation is established, and it excludes the governmental measure in any event: this is not a position to defend, it is a door shut twice. Nor does the exporter still hold an interest in the thing, risk having passed at loading, so that its loss is not goods but an unpaid receivable of 2.1 million. The useful file is therefore the credit policy's, and the March 19 decision is its central document: it is dated, written and public, and it establishes the political cause of the non-payment without waiting for anything. Three steps follow, and they are urgent rather than important. Start the appeal or the re-export application the decision provides for, whose deadlines are short and which the block makes one forget. Have the condition of the foodstuffs jointly surveyed at the start of the block, failing which the argument about deterioration will later be held with no facts at all. And notify the unpaid receivable under the right characterization as soon as it falls due, putting the decision on file, rather than awaiting the outcome of the appeal.
- 01The governmental confiscation exclusion in transport policies is not an oversight: it marks the boundary with another market, and the gap sits on it.
- 02A cargo policy ends on a computable date after discharge, often before a customs immobilization becomes a loss anywhere else.
- 03Immobilization is not a loss: deprivation becomes total after a continuous period, during which the goods deteriorate and nobody pays.
- 04Trade terms, not the policy, say who holds the insurable interest at the time of the block: the seller may hold nothing but a receivable.
- 05The administrative decision blocking the goods is also the document proving the political cause of the non-payment, and that file waits out no period.