Many companies mistakenly believe the shipping line will reimburse them for the full value of their cargo in the event of damage. That’s incorrect on a couple of levels. For one, carrier liability only kicks in if it’s proven that the steamship line’s negligence caused the damage. Second, even if negligence can be proven the carrier’s liability is limited to $500 per package or Customary Freight Unit (CFU) under the Carriage of Goods By Sea Act (COGSA). So, if your CFU is a pallet worth $5,000 and it gets destroyed, the $500 liability limit means you’ll receive only 10% of that value. For an FCL shipment of 20 pallets worth $100,000, you’ll recoup $10,000 from the carrier. If the value of the goods is higher, you would obviously receive an even smaller percent of the true value.
Carrier liability also excludes acts of God, like weather-related disasters. If you purchase all risk marine cargo insurance, it covers acts of God and will reimburse you for the full declared value of your cargo.
