Version: 1.0.20.21 (2020-10-12 14:45)

Freight insurance

This section provides detailed information on insurance for different types of transport.

When trading goods internationally, insurance is an important aspect of the transport of goods. Goods are exposed to common and abnormal risks. Common risks relate to the handling, storing, loading or transporting of cargo, while rare risks can include riots, strikes, terrorism, etc.

You need to consider taking out insurance for your goods, which is usually offered by national export-import banks. Insurance documentation is important when it comes to customs clearance for your traded goods. The following section provides more detail on different types of insurance documentation depending on the type of transport that you use for trading.

 

Freight insurance is an agreement by which insured goods are underwritten (protected) in the event of damages caused by a risk covered in the policy. An insurance invoice is required for customs clearance only when the relevant data does not appear in the commercial invoice.

There is a difference between goods transport insurance and carrier's responsibility insurance. For transport insurance, the covered risks, fixed compensation and indemnity (protection) of the contract are up to the exporting company or individual.

By contrast, carrier's responsibility insurance is determined by different regulations. Depending on the means of transport, indemnity is limited by the weight and value of the goods. It is only given in case the transporter has been unable to evade responsibility.

The standard extent of the transporter's responsibility is laid down in the following international conventions.

Road freight

International transport of goods by road is governed by the Convention for the Contract of the International Carriage of Goods by Road (CMR Convention) signed in Geneva in 1956.

Under this Convention, the road hauler is not responsible for losses of, or damages to, the goods if he proves that they arise from

  • the merchandise's own defect(s)
  • force majeure (unforeseen circumstances)
  • a fault by the loader or consignee

There is no European Union regulation regarding indemnifications for road freight.

Rail carriers

International transport of goods by rail is regulated by the Convention concerning Intercarriage by Rail (CIM Convention), signed in Bern in 1980.

Rail carriers are not responsible for losses of or damage to goods if they can prove that it arose from

  • the merchandise's own defect(s)
  • force majeure
  • a fault by the loader or consignee

Currently there is no European Union regulation regarding compensation. Indemnification (compensation) is normally limited to a maximum amount per gross kilo lost or damaged. However, in the majority of cases, companies are unlikely to receive anything approaching the value of their goods.

The shipping company

The 1968 International Convention on Bill of Lading, better known as 'The Hague Rules' or the 'Brussels Convention', dictates marine carriers' responsibilities when transporting international goods.

The shipping company is not responsible for losses of, or damage to, goods if it proves that they arose from

  • the merchandise's own defects and loss in weight during transport
  • a nautical mistake by the crew
  • a fire
  • an unseaworthy ship
  • force majeure
  • strikes or lock-outs
  • a mistake by the loader
  • hidden defects on board the ship, which went unnoticed during rigorous inspection
  • attempts to save lives or goods at sea

Currently there is no harmonisation at European Union level regarding compensation, which is normally limited to a certain sum per kilogram of lost or damaged goods. This system causes the same problems as with rail accidents; the exporter is likely to lose much of the value of the goods.

The air carrier

The 1929 Warsaw Convention and the Montreal draft Treaty of 1975 establish that air carriers are not responsible for damages or loss of goods if it can be proved that

  • the carrier and associates took all the measures necessary to avoid the damage, or that it was impossible for precautions to be taken (force majeure)
  • the losses arose from a pilotage or navigation mistake
  • the injured party was the cause of the damage or contributed to it

There is no European Union standard concerning the injured party's indemnification. Compensation is normally limited to a set amount per gross kilogram of damaged or lost goods.

Air carriers can state specific reservations at the time of receiving the cargo. These reservations will be written on the air transport contract known as the air consignment note (ACN) and will be used as evidence. However, airlines will normally refuse dubious packages or those that do not correspond to the ACN.

Quick links