Institute Cargo Clauses explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Institute Cargo Clauses (A) provide all-risks cover subject to exclusions. Clauses (B) and (C) are named-perils covers: (B) adds water damage, earthquake and washing overboard to the core casualty list, while (C) covers only major casualty events. Theft, pilferage and non-delivery are covered under (A) alone.
The Three Clause Sets
Marine cargo insurance worldwide is written on standard clause sets originally issued by the Institute of London Underwriters and now maintained by the International Underwriting Association and the Lloyd's Market Association. Indian insurers use the same wordings for international cargo. There are three, and the difference between them is the difference between a claim paid and a claim declined.
- Clause (A) — all risks of loss or damage, except what the policy excludes.
- Clause (B) — a defined list of perils, materially wider than (C).
- Clause (C) — the narrowest defined list, essentially major casualties only.
The structural point is about burden of proof. Under (A), you show the loss occurred during the insured transit and the insurer must establish an exclusion. Under (B) and (C), you must prove the loss was proximately caused by one of the listed perils. That difference decides claims where the cause is unclear — and in cargo losses the cause is very often unclear.
Peril-by-Peril Comparison
| Proximate cause | (A) | (B) | (C) |
|---|---|---|---|
| Stranding, grounding, sinking or capsizing | Yes | Yes | Yes |
| Overturning or derailment of land conveyance | Yes | Yes | Yes |
| Collision of ship or craft with another ship or craft | Yes | Yes | Yes |
| Contact of ship or conveyance with anything other than water | Yes | Yes | Yes |
| Discharge of cargo at a port of distress | Yes | Yes | Yes |
| Fire or explosion | Yes | Yes | Yes |
| General average sacrifice | Yes | Yes | Yes |
| Jettison | Yes | Yes | Yes |
| Washing overboard | Yes | Yes | No |
| Entry of sea, lake or river water into vessel, container or place of storage | Yes | Yes | No |
| Earthquake, volcanic eruption or lightning | Yes | Yes | No |
| Total loss of a package lost overboard or dropped during loading or unloading | Yes | Yes | No |
| Theft and pilferage | Yes | No | No |
| Non-delivery of an entire package | Yes | No | No |
| Malicious damage by third parties | Yes | No | No |
| Rainwater or fresh water damage | Yes | No | No |
| Breakage, denting, bending, scratching, chipping | Yes | No | No |
| Shortage in weight or volume from an unexplained cause | Yes | No | No |
Where Clause C Runs Out
Clause (C) covers the shipwreck scenario and very little else. It does not cover the container that arrives with a broken seal and three cartons missing, the pallet soaked because the container roof leaked in a monsoon, or the machine dented in handling. Those are the losses that actually happen on most trades.
It is nonetheless the minimum an Incoterms 2020 CIF seller must buy. Buyers who accept CIF and assume they are fully insured are frequently wrong, and the discovery happens at the worst moment. Under CIP, the 2020 revision moved the default up to Clause (A) — one of the more consequential changes in that edition.
Exclusions Common to All Three
Choosing Clause (A) does not switch off the standard exclusions. Under every clause set the policy will not pay for:
- Wilful misconduct of the insured
- Ordinary leakage, ordinary loss in weight or volume, ordinary wear and tear
- Insufficient or unsuitable packing or preparation, including improper container stuffing by the insured
- Inherent vice or the nature of the subject matter
- Loss caused by delay, even where the delay is caused by an insured peril
- Insolvency or financial default of the carrier
- Unseaworthiness or unfitness of vessel or container where the insured was aware of it
- Deliberate damage by a wrongful act — this specific exclusion is switched off under (A), which is why (A) covers malicious damage
- Nuclear, radioactive or similar weapons
- War, strikes, riots and civil commotion — unless the Institute War Clauses and Institute Strikes Clauses are added
Choosing the Right Clause
| Cargo profile | Sensible cover | Reason |
|---|---|---|
| Manufactured goods, electronics, pharma, garments, engineering items | Clause (A) + war & strikes | Realistic losses are theft, wetting and handling damage — none covered by (B) or (C) |
| Packaged food, spices, agri-produce in containers | Clause (A) + war & strikes, plus temperature cover if reefer | Wetting, contamination and condensation dominate |
| Project cargo, machinery, over-dimensional consignments | Clause (A), individually declared and rated | Handling and lifting risks; standard rating does not fit |
| Bulk ores, scrap, low unit value commodities | Clause (B) or (C) may be defensible | Pilferage is economically irrelevant; casualty is the real exposure |
Practical Tips
- The premium difference between (C) and (A) is usually small in absolute terms on a per-shipment basis. Compare it to the value of one lost pallet before economising.
- If you sell CIF and your buyer expects wide cover, agree Clause (A) in the sale contract expressly — the Incoterm default will not give it to them.
- If you buy CIF, check what the seller actually insured before you assume you are protected on the inbound leg.
- Add war and strikes cover by default. It is cheap, and route risk changes faster than policies get reviewed.
- Record container seal numbers at stuffing and check them at destination. Seal integrity evidence is what converts a suspected theft into a paid claim.