The carrier is not liable for the value of your goods. A sea carrier's liability, for example, is limited by international convention to an amount per package or per kilo, far below the value of a typical cargo. Anyone who wants protection against loss or damage needs their own cargo insurance.
The three covers
The most widely used terms are the Institute Cargo Clauses (ICC), 2009 version:
- Clause A. Covers all risks of physical loss or damage except those the clause itself excludes. It is the broadest cover and the usual one for valuable goods.
- Clause B. Covers only listed risks, such as fire, explosion, stranding, sinking, overturning of the vehicle, entry of seawater and loss overboard during loading or unloading.
- Clause C. The most restricted. It covers the major casualties (fire, explosion, stranding, sinking, collision) but not, for example, entry of seawater or handling damage.
What is usually excluded
Even Clause A has exclusions. The main ones are the goods' inherent vice, ordinary wear, delay (even when it causes loss), carrier insolvency and damage from insufficient packing or stowage. War and strikes risks are covered by separate clauses that should be requested expressly.
Packing is the commonest ground for rejection. In a case reviewed by a Spanish court, the outcome turned on who had palletised the cargo and when. Where packing is done or altered by third parties during transit, the result may differ, but nobody wants to go to court to find out.
Who should insure
It depends on the agreed Incoterm. Under CIF the seller must arrange insurance, and the rule requires only the minimum cover, Clause C. Under CIP the required cover is Clause A. Under the other terms, such as EXW, FCA, FOB and CFR, insurance is not obligatory for either party, and whoever bears the risk in transit should insure on their own account. By convention, goods are insured for 110% of the invoice value, to cover expected profit and related costs.
General average
If the master sacrifices part of the cargo to save the ship, or salvage costs arise, all cargo owners contribute proportionately. This is «general average». Without insurance the cargo owner may have to post a guarantee before receiving the goods. With insurance, the insurer provides it.
If something goes wrong
- Record the damage on receipt, in writing, on the delivery document, before accepting the cargo. Reservations made later carry far less weight.
- Photograph the goods, the container, the seals and the packing.
- Notify the carrier and the insurer immediately and keep the original documents.
- Request a survey before moving or disposing of the cargo.
Cover photo: NASA Goddard Space Flight Center from Greenbelt, MD, USA, Public domain, Wikimedia Commons.