The cargo insurance imperative
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Many shippers mistakenly believe that carriers bear full responsibility for any loss or damage to their cargo. In reality, carrier liability is limited and often insufficient to cover the cargo’s actual value; it falls to shippers to insure themselves against their financial exposure to accidents, damages, or delays.
Multiple parties can be involved in a cargo shipment, especially in the container transport sector. It is therefore essential that shippers also understand the responsibilities of freight forwarders, other intermediaries and final recipients.
For example, while the shipper is typically responsible for selecting the appropriate container, under Ex Works terms the freight forwarder assumes this responsibility in the country of origin. In FOB or CIF agreements, meanwhile, the shipper and its road carrier are accountable for container selection.
At the same time, regardless of the shipping terms, the shipper has the right to reject a container that it deems unsuitable—whether due to damage or its failure to meet the cargo’s specific requirements.
Shipping lines typically do not compensate for cargo damage resulting from improper selection, while replacing a rejected container may result in extra transport charges.
In a case where a maritime incident leads to a General Average declaration, for example, damage recovery is shared between all cargo owners. Insurance not only provides cover for the shipper’s own cargo; it also protects the shipper of goods valued at below the average from the General Average pay out.
But the value of cargo insurance is also clear on a day-to-day basis, while its absence is likely to weaken the shipper’s negotiating position with respect to any ad hoc or arbitrated settlement.
Far from being optional, insurance should be seen as a fundamental requirement for the secure, uninterrupted completion of your maritime logistics operations.
