In relation to the total amount of product moved by freight forwarders on behalf of their clients, incidents of damage and/or theft are mercifully rare.
When it does occur, though, it is, at best, a massive hassle and inconvenience and, at worst, will lead to loss of profits and, worse still, irreplaceable stocks.
Whilst you may think that all your orders are “automatically” covered under your freight agent’s policy, this is not the case. It’s only at these rare times that the devil in the detail of your insurance cover really takes centre stage and is brought sharply into focus. What of those “grey areas” that could still lead to potential losses? Your orders are “in the care of the carrier”, but that does not necessarily mean that the value of your orders and the duty incurred on them are “fully insured”.
Trusting to luck is a risky business, as is also assuming that it is the forwarder’s responsibility “whatever” and that you, as the client have no need to trouble your own insurance is a popular misconception.
Relying on the forwarder to hold a carrier partner responsible and applying a claim on a haulier under CMR (Convention on the Contract for the International Carriage of Goods by Road) terms is possible and usually undertaken as a matter of course by your forwarder following damage or theft.
It is important to understand why any importer should establish separate insurance marine and duty transit policies (either with us as your forwarders or with a separate insurance company).
However, usually, this offers very limited cover, which is why this course of action is risky for any of our clients. Under BIFA 2021 T&Cs, you can opt to “leave it to chance”, but be aware!
– In the event of an incident, there can be confusion about where liability lies, especially where multiple parties are involved and the misconception that the other party will pay compensation if damage occurs.
– Freight forwarders make arrangements to enable cargo to travel using one or a combination of modes of transport, sometimes over thousands of miles. The Law, along with the firms trading terms, restricts their legal liability for damage caused to goods whilst in their control. Strict limits can often be stipulated by trade associations, such as the time after delivery within which a claim can be made
– damage limits set by The UK Road Haulage Association and British International Freight Association (BIFA 2021, under which Kukla operates) are calculated per tonne, regardless of the value of the cargo.
– by way of example, the Road Haulage Association limits compensation to £1,300 per tonne – so even if the haulage firm is at fault, the amount of compensation available may be insufficient.
– Where cargo is damaged or lost and if there has been negligence, the demand for compensation is usually calculated in Special Drawing Rights (SDRs). These were created by the International Monetary Fund (IMF) to resolve the issue around currency fluctuations between countries so that currency performance would not distort individual exchange rates.
– In the event of a loss – by not having insurance on goods and relying solely on being compensated by the forwarders could lead to a shortfall in the amount you receive. For example, at today’s rate, an importer will only receive £10.38 per kg2 in compensation for road cargo regardless of its value to the insured.
This explanation is specifically detailed in points 23-27 in our (BIFA 2021) T&Cs relating to insurance and liability.
Whilst importers can leave it to chance using the BIFA T&Cs, the potential risks and pitfalls involved.
We strongly recommend taking out separate insurance to cover your cargo, from cellar door departure to the final delivery point, especially where high-value cargo is involved. It is also wise to obtain a specific quote for insurance for such shipmentsto include cover for any “loss-of-profit” from expected future sales will also be covered.
It is the only fail-safe way to ensure your cover for your peace of mind and that your cargo and its taxes are truly fully covered.
Case study – General Average and its impact on cargo owners
Ever Given, general average and why shippers will share the costs of a ship’s rescue
Shippers are in for a lengthy and complicated process to collect cargo and provide documentation to adjusters.
Sharing the cost of major expenses is at the heart of what a general average declaration means for shippers, according to Sean Pribyl, a senior counsel at Holland & Knight who focuses on maritime law. Pribyl is not involved in the Ever Given case and spoke broadly about general average.
“It’s this idea of equitable sharing between a shipowner and cargo interest of certain losses, and that includes expenses that occurred during the voyage,” Pribyl said.
Read the full article here https://www.supplychaindive.com/news/ever-given-general-average-shipper-cost/597994/
What is General Average?
General Average is a long-established principle of Maritime Law which requires contribution from all whose goods were saved to the losses of those whose goods were sacrificed at a time of common peril
General Average (GA) exists independently of the contract. Still, it is now incorporated not only in the bill of lading but also in the Marine Insurance Act 1906, which defines a General Average as:
“There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure”.