Freight insurance

When goods are traded internationally, insurance is an important aspect of the transport of goods. Goods are exposed to both ordinary and extraordinary risks. Ordinary risks relate to the handling, storage, loading or transportation of goods, while extraordinary risks can include riots, strikes, terrorism, etc.

Insurance documentation is important for customs clearance. The following section provides more detail on different types of insurance documentation depending on the type of transport.

 

Cargo insurance is an agreement to protect goods against loss or damage caused by a risk covered by the policy. An insurance invoice is usually only required for customs clearance if the relevant details do not appear on the commercial invoice.

There is a difference between cargo insurance and carrier's liability insurance. With cargo insurance, the risks covered and the fixed indemnity of the contract are up to the exporting company or individual.

Carrier's liability insurance, on the other hand, is governed by different rules. Depending on the means of transport, the compensation is limited by the weight and value of the goods.

The standard scope of the carrier’s liability is set out in the following international conventions.

Road transport

The international carriage 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, road haulers are not liable for loss of or damage to the goods if they can prove that the loss or damage was caused by:

• the goods’ own defect(s)
• force majeure (unforeseen circumstances)
• fault on the part of the loader or consignee.

There is no European Union regulation regarding compensation for road transport.

Rail carriers

International carriage of goods by rail is governed by the Convention concerning Intercarriage by Rail (CIM Convention), signed in Berne in 1980.

Railway companies are not liable for loss of or damage to the goods if they can prove that the loss or damage was caused by:

• the goods’ own defect(s)
• force majeure
• fault on the part of the consignor or consignee.

There are currently no European Union rules on compensation. It is usually limited to a maximum amount per gross kilo lost or damaged. In most cases, however, companies are unlikely to receive anything close to the value of their goods.

Shipping companies

The 1968 International Convention on Bill of Lading, better known as the ‘Hague Rules’ or the ‘Brussels Convention’, sets out the responsibilities of shipping companies when transporting goods internationally.

Shipping companies are not liable for loss of or damage to the goods if they can prove that the loss or damage was caused by:

• the goods’ own defects and loss of weight during transport
• a nautical error by the crew
• fire
• an unseaworthy vessel
• force majeure
• strike or lock-out
• an on the part of the loader
• hidden defects on board of the vessel, which could not be detected during a rigorous inspection
• attempts to save lives or goods at sea.

There is currently no harmonisation at European Union level of compensation, which is usually limited to a certain amount per kilogram of lost or damaged goods. This system creates the same problems as for rail accidents; the exporter is likely to lose much of the value of the goods.

Air carriers

The Warsaw Convention of 1929 and the Montreal Convention of 1975 provide that air carriers are not liable for loss of or damage to the goods if they can prove that:

• the carrier and its agents took all necessary measures to avoid the damage, or that it was impossible to take such measures (force majeure);
• the damage was caused by a pilotage or navigation error;
• the claimant caused or contributed to the damage.

There is no European Union standard for the compensation of the injured party. Compensation is usually limited to a fixed amount per gross kilogram of damaged or lost goods.

Air carriers may make specific reservations when accepting cargo. These reservations are recorded on the air waybill (AWB) and are used as evidence. However, airlines will usually reject suspicious packages or those that do not match the AWB.