Cargo Insurance Protection: Why You Should Consider It
What Are My Responsibilities Regarding Insurance?
It is crucial for both the buyer and seller to grasp the responsibilities fully outlined in the sales contract. It should explicitly state when the seller's obligations are fulfilled during transit, resulting in the transfer of title (and the associated risk of loss) to the buyer. Additionally, both parties should clearly understand who is responsible for the carriage between the various points.
While Juno Logistics arranges for the transportation of your goods, by law, the carrier is responsible for any loss or damage to your freight.
While not mandatory, it's highly recommended to protect your merchandise from potential losses. Consider the insurance costs in comparison to the potential expenses of unforeseen damages or losses.
Even if a carrier's liability for the loss or damage to goods is established, their compensation might be capped. For instance, the liability limit for ocean carriers often stands at $500USD per container unit or the actual goods' value, whichever is less. The definition of a "container unit" is open to interpretation; it could mean the lost lone shipping container or the 250 distinct boxes within it. The implications of such variations could be financially significant, highlighting the importance of ample insurance.
Won't the Carriers Cover Any Accidental Losses?
Air carriers have limited liability when transporting goods. The Warsaw Convention regulates liability for international carriage of people, luggage, or goods performed by aircraft for a fee. Air carriers' liabilities are currently limited to $9.07USD per pound for international shipments and $0.50USD per pound for domestic shipments. Shippers often declare value with air carriers to recover the actual value of lost or damaged goods; however, some provisions can still make recovering losses from air carriers difficult and time-consuming.
At sea, vessel owners are protected by the Carriage of Goods by Sea Act (COGSA/Hague Rules), which limits their liability to $500USD per shipping unit. It was conceived during World War I, when ship owners had little authority over their vessels once they left port. Today, there is some confusion about what constitutes a "shipping unit." Ship owners often count a closed container as one unit. At the same time, the importer or exporter may claim many more units within the single closed container. Again, recovery can be time-consuming and costly.
Common Risks
There are several common risks faced by international traders today. Risks include:
Earthquakes (Average 18 per year that are over 7 on a Richter scale)
Hook Damage
General Average
Faulty Equipment
Cargo Theft (Over $3 billion USD impact to US economy)
Piracy
Ships Sinking (Average 200 cargo ships sink each year)
Spills
Inclement Weather
Rough Handling
Terrorism
War
Acts Not Covered by Carrier’s Liability
The scope of a carrier’s liability does not extend to all situations; certain acts are specifically excluded:
Acts of God, such as an unanticipated storm or other natural event
Acts of the public enemy, which includes warlike acts or political strife against the country
Acts of a public authority, such as a drug bust by police who confiscate or quarantine a truckload of goods because they suspect the cargo to be contaminated.
Perils
With the risks of international shipping in mind, it is essential to note that carriers and other parties in the supply chain are not legally obligated to pay for losses occurring outside their control.
Examples of perils for which carriers may not have responsibility include:
Any fortuitous event often classified as an act of God
Examples include extreme weather, rough seas, flooding, tsunamis, earthquakes, levee breaks, lightning strikes, etc.
Other losses for which carriers may not be liable include:
Acts of Public Enemy (War and terrorism)
Acts of Public Authority (Government seizure, rejection or destruction)
Inherent Vice of Goods (Self-deterioration inherent in nature of goods)
Acts/Faults of Shippers
Incidences where it is proven that reasonable care was taken to safeguard the cargo
Understanding these limitations is essential for both the service provider and the client to manage expectations and mitigate risks effectively.
Carrier Limited Financial Liability Overview
Monetary responsibility is often limited to an amount less than the total value of the at-risk cargo.
Delving Deeper Into Liability
Presuming the party transporting your goods insures them could be a costly mistake. The International Chamber of Commerce saw the need for clarity in this arena, leading to the launch of Incoterms® 2020. Under this framework, the default insurance cover for CIP (Carriage and Insurance Paid To) was elevated from the basic coverage to the more comprehensive "All Risk" level.
Furthermore, shippers should be wary of the General Average risk. A carrier might invoke the General Average principle in a maritime emergency, like fires or significant equipment breakdowns. If declared, every party with cargo on board would be obliged to contribute to the expense incurred. Before one can access their goods, this can be a protracted and costly affair.
Ensuring thorough comprehension of policies and explicit liabilities is paramount to guaranteeing sufficient cargo coverage.
Points to Ponder for Optimal Cargo Insurance
In an era where shipping demands often eclipse capacity, with trade route disruptions (recall the Suez Canal blockade in March 2021) and mounting delays due to climate change, shippers' attention might gravitate more toward delivery schedules than inherent risks. Yet, prioritizing swift delivery without accounting for potential property damage or loss is shortsighted. Equally critical is ensuring the goods arrive in salable condition. Here are factors to consider for cargo protection:
Incoterms®: Grasping the agreed terms for your shipment demarcates the responsibility spectrum between seller and buyer.
Liability: Scour through contracts to discern liability for the goods at every transportation phase. As shipments are endorsed at various transit points, the onus of insurance may transition, too.
Transport Route: Handling standards can differ vastly across countries. Those with infrastructural deficiencies might pose added risks.
Inspection: For instance, receivers in haste might sign off on cargo without a thorough examination, which could lead to issues when unnoticed damages are discovered later.
What is My Best Option for Coverage?
Importers and exporters are exposed to countless financial risks when they don't insure their international and domestic shipments. Trying to recover losses from carriers is difficult and time-consuming. The best way to protect your financial interests is with Juno's "All Risk" Insurance Coverage, which relieves you of your financial exposure from physical loss or damage to your goods from external causes while in transit since carriers have limited liability.
The Bottom Line: Do You Need Cargo Protection Insurance? Unequivocally, YES!
If your cargo's value exceeds the set liabilities, cargo insurance is your robust shield against unexpected incidents. With it, sellers can avoid payment defaults if buyers receive the ordered goods.
Opting for cargo insurance ensures peace of mind. Be it due to damage, theft, or loss, your financial exposure is minimized, saving you the hassle and time of seeking redress. Given that the value of cargo typically exceeds the stipulated liabilities of carriers or forwarders, insurance is the logical choice.
Juno's Value-Added Service That Brings Piece of Mind
As we wrap up this comprehensive look at the complexities and risks involved in cargo shipping, it's essential to focus on a solution that can mitigate these concerns. Juno's All-Risk Insurance Coverage provides a robust safety net for your shipments. Here are the key benefits:
Comprehensive Coverage
Our All-Risk Insurance Coverage provides you with comprehensive protection against a broad range of risks, including natural disasters, equipment malfunctions, theft, and more. Unlike limited liability through carriers, this coverage is designed to cover the full value of your goods.
Streamlined Claims Process
In the unfortunate event of a loss or damage, Juno Logistics manages and processes your claims, ensuring a smoother, quicker reimbursement process. This hands-on approach minimizes the hassle and time-consuming nature of dealing with cargo losses or damages.
Financial Security
Our All-Risk Coverage is a safeguard against unexpected financial setbacks that could otherwise significantly impact your business. By covering the actual value of the goods, it provides financial security that far exceeds the limitations set by carrier liabilities.
Regulatory Compliance
Stay abreast of changing international laws and regulations with coverage that is compliant with global standards. This not only protects you legally but also streamlines operations when shipping across international borders.
Peace of Mind
Perhaps the most significant benefit is the peace of mind you gain. Knowing that your cargo is well protected allows you to focus on other essential aspects of your business, trusting that you're safeguarded against unforeseen shipping calamities.
Juno's All-Risk Insurance Coverage serves as a cornerstone in a strategic approach to cargo shipping and management. Coupled with our commitment to excellent service, it’s more than just a policy; it’s a partnership for your business success.