Even when cargo is handled with the utmost care, the Freight Forwarding Experts know that in ocean logistics, unexpected events can occur. Goods can be damaged, lost or stolen. With limited freight liability included in any contract of carriage, shippers and consignee wrongly assume that freight liability protects the value of their cargo - often ignoring its stark limitations. Find out why your next shipment needs shipment value protection.
How Much Can I Get Reimbursed With Freight Liability?
The three rules also share similar reimbursement values in case of a liability claim, as they are all based on weight.
Consider the following example: you are shipping goods worth US$ 70,000, weighting a total of 2,850 kg. The ship transporting your cargo sinks, and your goods are lost. Here are the approximate valuations you would be looking at if you managed to prove that the unfortunate accident was the ocean carrier’s fault:
- If your carriage contract was signed under the Hague-Visby rule: US$ 8,000
- Under the Hamburg rule: US$ 10,000
- Under the Rotterdam rule: US$ 12,000
While the Rotterdam rule is the most advantageous, it does not come anywhere near the actual value of your cargo.
Covering your sea shipment with additional coverage is vital because Ocean Freight’s liability terms feature the lowest weight-to-valuation ratio of all. A shipment valuated at US$ 8,000 under the Hague-Visby rule is valued at US$ 70,000 under Air Freight liability terms and US$ 30,000 under Road Freight.
How Do I Pick the Right Coverage?
Keep in mind that your shipment value protection is not designed to preserve your shipment – its purpose is to protect your bottom line. We have prepared the following checklist in consequence – and your coverage provider should be ticking all the boxes.
The right coverage:
- Covers the full value of your goods
- Covers the cost of freight in addition
- Covers your shipment on an all-risk basis
- Covers your high-risk commodities too
- Covers all locations of the shipment’s journey, door-to-door
- Features no deductibles and no excess, meaning that you do not have anything to pay towards a loss
- Provides claims settlement support in your own language
- Settles claims in your own currency
- Settles claims fast. While the classic freight liability process takes several months to settle, DHL Global Forwarding aims for the settlement of your claim within 30 days.
What About the Incoterms?
As you may have read in our Incoterms Basics Article Incoterms distribute costs, but also the risks inherent to sea transportation. While the Carriage and coverage Paid to terms oblige the seller to contract a coverage policy from origin to destination, The Cost, coverage and Freight terms only to oblige them to insure the sea leg – and the others do not stipulate anything at all.
As a shipper or a consignee, you may want to double-check exactly when the risks are transferred to you (it does not always happen at the same time as the shipping cost). Knowing your responsibilities – and that of your business partner – are crucial because the fact that one of the two parties ensures their part of the journey does not always mean that the entire shipment is covered.
Who Can Provide Coverage for My Cargo?
You will generally be able to ensure your goods through your freight forwarder or a separate coverage provider.
The benefit of booking your coverage with your freight forwarder is that they will already be in possession of most of the documentation you need to make a claim and submit it for you.
It is possible to book your coverage separately. However, it will then be your responsibility to collect all the necessary documentation from all providers that partook in your shipment (forwarder, customs broker, ocean carrier, etc.) prior to submitting your claim yourself.
When is the Right Time to Get Coverage?
It depends on how frequently you ship goods. If you ship a few cargo shipments per year, you can just book it at the same time as your shipment.
If you are a regular shipper (with more than 5 shipments a year for instance), you are likely to benefit from yearly coverage, covering all your shipments at a reduced rate.
Freight Liability Coverage Infographic
Freight Liability Shipment Value Protection Infographic