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Confiscation of cargoes by authorities

The Hong Kong Police seized over 20 boxes of arms and ammunition – the collection of a retired correctional staff member, which he was keeping in a public housing unit. The question arises whether the confiscated collection will be covered by property insurance. In fact, it is market practice for property insurance to exclude any loss or damage in consequence of permanent or temporary dispossession of property(ies) resulting from confiscation by any lawfully constituted authority.

This practice can also be applied to cargo insurance. According to Institute Cargo Clauses (A), any loss arising from “capture, seizure, arrest, restraint, or detainment (piracy excepted) and the consequences thereof or any attempt thereat” is excluded from the cargo insurance policy. For instance, if a cargo owner ships chewing gum, which is a banned import, to Singapore and such goods are confiscated by the Singapore authorities, then unfortunately a cargo policy does not cover such losses.

It is crucial for shippers to check carefully whether the cargoes are prohibited or restricted imports to the destination country. Otherwise, owners may suffer loss from confiscation of cargoes. If re-examination of the goods, or re-application for the import licence, are required, cargo owners will need to negotiate for an extension of the cargo insurance with their insurers since the cargoes were held up during the voyage.

All in all, it is recommended that cargo owners do sufficient preparation work to ensure that their goods are allowed to enter the import country. This is especially recommended for medicines, which are more strictly regulated.

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