How Current Tariffs Impact Your Cargo Insurance

In an increasingly complex global trade environment, U.S. businesses are feeling the impact of rising tariffs. Whether you're a manufacturer, distributor, or importer/exporter, understanding how these tariffs influence your insurance coverage is essential to protecting your bottom line.

At Hylant, we’ve seen firsthand how clients are adjusting their operations in response to tariff policies—and how their cargo insurance programs must adapt in kind. Here's what you need to know.

What Are Tariffs—and Why Are They Imposed?

Tariffs are taxes levied on imported goods. The U.S. first implemented tariffs in 1789 to raise revenue and protect domestic industries. Today, tariffs serve similar purposes—protecting American manufacturing and reducing trade deficits.

In recent years, tariff policies have expanded, especially on goods from countries like China, Canada, and Mexico (excluding those covered under the U.S.-Mexico-Canada Agreement). A 10% tariff, for example, raises the cost of a $100 product to $110 before it ever reaches your inventory.

Who Pays the Tariffs?

Whether the buyer or seller pays the tariff depends on your contract's International Commercial Terms (Incoterms). These standardized terms dictate how responsibilities, risks, and costs are divided.

• Under Delivered Duty Paid (DDP) Incoterms, the seller assumes all duties and tariffs.
• Under Cost, Insurance, and Freight (CIF) or Free on Board (FOB) terms, the buyer/importer is typically responsible for paying tariffs once goods arrive at customs.

If you're uncertain how your current contracts handle tariff obligations, it's worth reviewing with legal or risk management professionals.

Are Tariffs Covered Under Your Cargo Insurance Policy?

In many cases, yes—but only if your cargo policy is properly structured. Most marine cargo insurance policies include a valuation clause such as “CIF + 10%.” This means the policy will pay the cost of the goods, insurance, and freight, plus an additional 10% for incidentals like import duties and tariffs.

Some policies go further by valuing goods at selling price, providing broader protection that includes lost margin and additional fees. Additionally, a “duty and/or collect freight” clause can provide coverage for duty losses caused by insured perils.

It’s essential to review how your policy values goods and whether any tariff-related costs are explicitly covered.

Real-World Scenarios: How Tariffs Are Affecting Our Clients

Here’s how tariffs are playing out in real time—and what your business should be watching for:

Pre-Tariff Importing

Many companies are accelerating imports before new tariffs take effect. These goods are often stored under stock throughput programs, which combine transit and warehouse coverage. If you’re bringing in additional inventory, make sure your storage limits are adequate.

Canceled Orders Before Shipment

We’ve seen clients cancel overseas purchase orders due to unexpected tariff increases. While these cancellations create financial losses, they do not involve physical loss or damage, so they are not covered under a traditional cargo policy.

Refused Shipments at Destination

In some cases, goods arrive at the port, but buyers refuse delivery due to the added cost of tariffs. While standard cargo coverage ends upon delivery, many policies include a "Refused/Returned Shipments" clause, which:

• extends “All Risks” coverage to goods being returned and
• covers the shipment while awaiting reshipment or storage.

What Should You Do Now?

Take the following steps to strengthen your cargo insurance program:

• Review your Incoterms to determine who bears tariff responsibility.
• Reassess your cargo policy's valuation terms to make sure tariffs are accounted for.
• Confirm warehouse/storage limits if you're increasing inventory in anticipation of tariff changes.
• Ask about “Refused Shipments” clauses if you’re concerned about buyer non-acceptance.

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Partner with Experts Who Understand the Full Picture

Hylant’s Marine Practice comprises seasoned industry professionals who specialize in designing insurance and risk management programs for importers, exporters, freight forwarders, manufacturers, and marine logistics providers. We understand the real-world impact of shifting global trade policies—including tariffs—and how those pressures affect your operations and bottom line.

If you’d like a policy review or guidance on structuring a marine cargo or stock throughput program that accounts for these changes, our team is ready to help. Contact Hylant’s Marine Practice today to speak with one of our marine specialists.

Related Reading: What Is Marine Insurance?

The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.