Why Carrier Liability Pays by the Kilo, Not by Invoice Value
Carrier liability is capped by convention per package or per kilo, so a damaged high-value consignment recovers a fraction of its worth without cargo insurance.
Representative scenario, not a specific client engagement. This page describes how a shipment of this kind is genuinely handled — the constraints, the approach, and where it commonly goes wrong. It does not name or describe a real Transeasy customer. Our two documented project moves are the Mexico container move and the India overweight cargo delivery.
The situation
A shipper moves high-value goods from China to a South Asian or Gulf destination, the consignment arrives damaged, and a claim is lodged against the carrier. The bill of lading incorporates the Hague-Visby Rules, which cap liability at 666.67 Special Drawing Rights per package or 2 SDR per kilogram of gross weight, whichever is the higher. Nothing in that calculation refers to what the goods are worth.
The result is arithmetic rather than argument. A four hundred kilogram pallet of instruments invoiced at a substantial sum recovers, at 2 SDR per kilogram, eight hundred SDR, a small fraction of its value. Air carriage under the Montreal Convention works on the same principle, with a per-kilogram cap expressed in SDR that is revised periodically and currently sits in the mid-twenties.
What made it difficult
- Convention liability limits are calculated per package or per kilogram of gross weight and bear no relationship to the commercial value of the goods.
- The carrier is liable only where fault is established, and can defend on excepted perils, insufficient packing or inherent vice.
- Notice periods are short: damage apparent at delivery must be noted at the time, and concealed damage within three days for sea carriage and fourteen days for air.
- Suit time bars run at one year under the Hague-Visby Rules and two years under the Montreal Convention, and are not usually extended by negotiation.
How it is approached
Cover has to be arranged on the value of the goods rather than the weight of them. Commercial practice is to insure at CIF value plus ten per cent, which picks up the freight and the lost margin, and to do so under Institute Cargo Clauses (A) unless the commodity or the route argues otherwise. The exclusions are the part to read: inadequate packing, inherent vice, delay and, unless separately added, war and strikes.
The policy also has to match the actual journey rather than the sea leg alone. Warehouse-to-warehouse cover running from the point of stuffing to final delivery picks up the inland legs, the transhipment handling at a hub port and any storage at destination, which is where a meaningful share of handling damage occurs on routes into South Asia and the Gulf.
Evidence decides claims. Photograph the cargo at stuffing and the container seal; specify packing and lashing against the route rather than the showroom; fit shock and tilt indicators to sensitive equipment; note damage on the delivery receipt at the time; keep the packaging until a surveyor has seen it. A claim file needs the bill of lading, invoice, packing list, survey report, written notice and a repair or replacement quotation.
Insurance also answers a problem that has nothing to do with fault. Where general average is declared after a casualty, every cargo interest contributes to the common expense regardless of blame, and the goods are not released until security is posted. An insured consignee obtains an average guarantee from the underwriter; an uninsured one posts a cash deposit before seeing the cargo.
Facing something similar?
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Takeaways
- Carrier liability is a weight calculation rather than a value calculation, and dense low-value cargo is the only kind it protects reasonably well.
- All-risks cover at CIF plus ten per cent costs a fraction of a per cent of cargo value and is the only mechanism that actually pays the loss.
- Claim rights are lost to missed notice periods and discarded packaging more often than they are lost to argument about fault.
- General average falls on cargo regardless of fault, and without insurance the release of the goods depends on posting a cash deposit.
Frequently asked
Under the Hague-Visby Rules the cap is 666.67 Special Drawing Rights per package or 2 SDR per kilogram of gross weight, whichever gives the higher figure, and only where the carrier's fault is established. For most manufactured goods that sits well below invoice value. Air carriage is capped per kilogram under the Montreal Convention on exactly the same principle.
Usually yes. CIF requires the seller to hold only minimum cover under Institute Cargo Clauses (C), a narrow named-perils policy that does not respond to most handling damage, and it is arranged by the seller with the seller's insurer. A buyer who wants all-risks cover, a sum insured they control and conduct of the claim should hold its own policy.
Visible damage should be noted on the delivery receipt at the moment of delivery. Concealed damage must be notified in writing within three days for sea carriage under the Hague-Visby Rules and fourteen days for air under the Montreal Convention. Proceedings must then be brought within one year for sea carriage and two years for air.