Cargo Insurance

Sometimes merchants not so familiar with shipping and shipping law think that under a Bill of Lading their cargo is automatically fully insured against damage or loss. This is not the case.

Port to Port shipments

The carrier's liability for loss or damage of goods carried under a Bill of Lading is regulated mainly by 2 international conventions, as far as the sea-voyage is concerned: The "Hague Rules" (1924) and the "Hague Visby Rules" (1968). These conventions have been ratified by most countries and apply almost universally. You can find reference to them on each and every Bill of Lading.

Without going into detail one can say that they limit a carrier's liability basically to the responsibility to provide a seaworthy vessel at the commencement of the voyage and to care properly for the goods during the voyage. Provided having complied with these requirements the carrier can still rely on a number of stated defences in case damage or loss of cargo incurs. The majority of these defenses elaborate on the principle that the carrier is only liable for loss or damage caused by his own negligence or that of his servants. However, in case of errors in navigation or negligence in the management of the vessel (as opposed to care for the cargo) the carrier is still protected.

Moreover carrier's financial liability (in case he cannot avoid responsibility completely) is limited to SDR (Special Drawing Rights) of SDR 666.67 per package or SDR 2 per kilo whatever is the greater. (SDR is a construct of various world currencies and in September 2009 1 SDR was appr. USD 1.56.)

Some countries having ratified the above conventions at the same time have amended above rules to some extent. And a few countries, esp. the USA (a country with a long tradition not to sign international conventions ) has enforced it's own law , the US Carriage of Goods by Sea Act (COGSA) which applies to all shipments to/from the USA. But as a thumb rule one can say that under any law carrier's liability is pretty much limited.

Combined Transports

When it comes to a Combined Transport (ie. not only covering a Port to Port shipment but a door to door transport also involving to some extent land transport) the situation becomes even more complicated as in that case the National Laws of the respective countries will come into the picture for the land transport leg. Also here, as a thumb rule, one can say that the tendency in all Combined Transport Bills of Ladings is to reduce carrier's liability as much as even possible.

Therefore our recommendation is to carefully check especially in case of shipment of high value containers (e.g. reefer containers or tank containers) what type of cargo insurance is in place resp. should be put into place. We are always therefore to guide you here.

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