When considering the sheer volume of goods moved globally, incidents of damage or theft are mercifully rare, but they do happen. When they do, it’s important to understand where responsibility lies and what is, or isn’t, covered.
A common misconception is that all shipments are automatically insured for their full value in transit. In reality, most cargo is only covered to a limited extent, depending on the mode of transport and the contractual terms in place.
For example, goods moved by road across Europe are typically subject to the Carriage of Goods by Road Act (CMR convention). In the United Kingdom, domestic transport is governed by the Road Haulage Association (RHA) terms. While these frameworks provide a clear process for handling claims, they also limit the compensation available, largely because transport operators don’t own the goods and are protected by limited liability rules.
Where liability is unclear, due to disputes about what happened, who was responsible, or where the incident occurred, claims usually fall under the British International Freight Association (BIFA) Standard Trading Conditions, which cap compensation at 2 Special Drawing Rights (SDRs) per kilogram.
Here is a breakdown of the Limits of Liability for cargo claims, whether under international or national conventions:
Mode of transport / Governing Rules / Limit of liability
By Sea – Hague Visby – 2.00 SDR’s per kg
By Road – CMR – 8.33 SDR’s per kg
By STC – BIFA – 2.00 SDR’s per kg
What is an SDR?
SDRs (Special Drawing Rights) are an internationally recognised reserve currency set by the International Monetary Fund and are based on five major world currencies: the U.S dollar, Euro, Chinese renminbi, Japanese yen and British pound (USD, EUR, CNY, JPY, GBP). At present, 1 SDR = £1.04 (approx.).
To put this into perspective, under CMR, a full pallet of wine from the EU to the UK weighing an average of 1000kgs would attract a maximum settlement of £8663.20 (which should be measured against the commercial invoice value issued by the seller on the buyer, plus excise duty of around £1500).
It is not uncommon for claims to be settled at BIFA’s level of liability, and in this example, £2080.00, which barely covers any Excise liability demanded by HMRC.
It’s also worth noting that freight liability claims can take time. Insurers typically need to establish facts, confirm liability and negotiate the final settlement, which can be a drawn-out process.
To reduce exposure, many importers and distributors choose to arrange their own Marine Cargo Insurance, which can offer broader coverage and a more streamlined claims process, usually based on the full invoice value plus any applicable duties and taxes.
If required, Kukla can offer UK-based customers All Risks Marine Insurance as part of our transport service. If this is of interest, please reach out to a member of our team who will be able to advise further.
Erin Harvey
HR & Claims Manager Kukla UK