Insuring a container properly.

Why the carrier's liability is not enough.

Shipping lines operate under conventions that cap their liability per package or per kilo. The cap was designed for a different era of cargo values and it is routinely a small fraction of what a container of Indonesian furniture or spice is worth.

Worse, the carrier is only liable where they are at fault, and the exclusions are broad. Heavy weather, inherent vice in the goods and insufficient packing all sit outside. A container of furniture that arrived damp because it was packed damp is nobody's liability but yours.

Insurance exists to make the difference somebody's problem other than yours. It is cheap relative to cargo value and it is the one line in a landed cost that buyers skip until the first time they need it.

Who buys it.

Under CIF and CIP the seller arranges insurance, and the level of cover differs between those two rules. Under FOB, FCA, EXW and the other rules the buyer arranges it, and under DDP the seller carries the risk to your door whether or not they insured it.

The gap that catches people is the moment of transfer. Under FOB, risk passes when the goods are loaded on the vessel, so a buyer who arranges cover from the port gate has a window uncovered. Under FCA it passes earlier and more cleanly, which is one of several reasons FCA suits containers better.

Where a seller insures, read what they bought. Minimum cover under CIF is a narrow set of named perils and it is not what most buyers assume they are getting.

What a claim needs.

Evidence collected before the damage, which sounds impossible and is not. A pre-shipment inspection report with photographs, a container loading record showing the seal, and a temperature trace on reefer cargo all establish the condition of goods when they left. Without them, a surveyor at destination cannot say when the damage occurred.

Then evidence at arrival, promptly. Note damage on the delivery receipt, photograph the container before unloading including the seal, and notify the carrier and the insurer within the time limits, which are short.

The most common reason a valid claim fails is delay. The second is unloading a damaged container completely before anybody photographed it.

Questions buyers ask.

Read next.

• Incoterms for Indonesian shipments

  Almost every quotation out of Indonesia says FOB. For a container that is the wrong rule, and the body that writes the rules says so.

• Getting it on a ship

  FCL, LCL, own consolidation or reefer, and the five costs that appear after the freight quote. Written for an archipelago.

• Container loading and what actually fits

  The cubic capacity figures in circulation disagree with each other. What really decides a load is weight, geometry and the carrier's own specification.

• Marine insurance certificate

  Whether the seller insures depends on the Incoterm, and the cover level is not what buyers assume. When you need to arrange your own.

• Bill of lading

  The bill of lading does three jobs at once, and the third one is why an original in the wrong hands can hold up a container that has already arrived.

• Packing for a tropical voyage

  Container sweat, mould, insects and crushing. Four failure modes that arrive as claims, and what stops each.

• When the shipment is wrong

  The first forty-eight hours decide what you can recover. What to do in order, and what destroys a claim.