The carrier’s liability is not marine cargo insurance
The most common thing we have to correct on a customer’s first shipment is the belief that the shipping line is covering the goods. It isn’t. What a carrier owes you is liability, and liability is capped by international convention at a figure that has nothing to do with what you paid your supplier. Marine cargo insurance is a separate contract, bought on purpose, and it pays against the value of your cargo rather than against a per-package formula fixed by treaty decades ago.
That distinction decides everything else here. Once you can see what the carrier would actually pay, the question stops being “should I insure” and turns into something you can answer with a calculator: how big is the gap, and whose job is it to close it.
Work out what the carrier would actually pay
You can do this yourself in about five minutes with the bill of lading and the commercial invoice side by side.
Start by finding which liability regime your bill of lading is subject to. It’s in the clause paramount on the reverse, and it varies by trade and by carrier. Then apply the cap:
- US ocean carriage under COGSA: liability is limited to USD 500 per package, unless a higher value is declared on the bill of lading and higher freight is paid for it.
- Hague-Visby Rules: 666.67 SDR per package, or 2 SDR per kilogram of gross weight, whichever is higher.
- Air carriage under the Montreal Convention: 22 SDR per kilogram. These limits are reviewed periodically, so confirm the figure currently in force before you rely on it.
SDR is the IMF’s Special Drawing Right, a basket currency. Its value in US dollars moves daily and the IMF publishes it, so convert on the date that matters rather than reusing a number you wrote down last year.
The part that catches people is the word package. It is not your carton count. It’s what the bill of lading says it is. If the document reads “10 pallets said to contain 800 cartons,” a carrier will argue there are ten packages, and ten times USD 500 is a very different ceiling from eight hundred times USD 500. Same cargo, same voyage, two orders of magnitude apart, decided by how somebody typed the description. (Those figures are just arithmetic on the statutory cap, not a quoted settlement.)
How the goods get described is a live commercial decision, which is one reason the shipping documents deserve a read before the vessel sails instead of after something goes wrong.
Two more things flatten the number further. The cap is a ceiling, not a promise: you still have to establish the carrier was at fault, and the carrier has defences available to it, including insufficient packing. And declaring a higher value, the ad valorem route, lifts the ceiling but doesn’t convert liability into insurance. It still only responds where the carrier is liable in the first place. If you want to compare properly, ask your carrier for its ad valorem freight rate on your specific booking and put it next to a cargo policy quote for the same shipment.
General Average: the bill that arrives when your cargo is fine
This is the exposure almost nobody prices in. Under the York-Antwerp Rules, when a sacrifice or an extraordinary expenditure is made deliberately for the common safety in a maritime peril, General Average is declared and every cargo interest on that ship contributes in proportion to value.
Your container can come off the vessel dry, sealed and undamaged, and you still owe money. Worse, you don’t get the box until you’ve paid. An uninsured cargo owner has to post a cash deposit or an acceptable guarantee before release, and that money sits in someone else’s account for as long as the average adjustment takes, which can run to years. A cargo policy responds to a General Average contribution: the underwriter issues the guarantee and your container moves.
General Average is rare per shipment and brutal per event. It’s also the argument that changes minds among importers who think a modest shipment value doesn’t justify cover, because the demand lands on your desk whether or not anything happened to your goods.
Your Incoterm decides who buys the freight insurance
Under Incoterms 2020, exactly two rules oblige the seller to insure. CIF requires cover of at least ICC (C), the narrowest set there is. CIP requires ICC (A). Under EXW, FOB, DAP and DDP there is no contractual insurance obligation on anybody. Whoever carries the risk at that point in the journey is the one who should be arranging cover, and if neither party thinks about it, nobody does.
Two consequences that come up constantly on cargo insurance for imports from China.
Buy FOB, which most importers do, and you carry the risk across the ocean leg with nothing in the sale contract telling you to insure it. That’s yours to arrange, and the freight forwarder quoting your rate is not automatically doing it for you unless you asked.
Buy CIF and assume you’re covered, and you should read what was actually purchased. Minimum-compliant CIF cover is ICC (C), which will not respond to most of what realistically goes wrong inside a container. It’s also the seller’s policy, in the seller’s name, placed by the seller’s broker, and you’ll be pursuing it through a party who has already been paid in full. That’s why a fair number of buyers on CIF terms still take out their own cover. If you’re unsure where the risk actually transfers on your terms of sale, our breakdown of Incoterms 2020 walks through it rule by rule.
ICC (A), (B) and (C): what you’re actually buying
The Institute Cargo Clauses set the scope. ICC (A) is the broadest, written as all risks subject to a list of exclusions. ICC (B) sits in the middle. ICC (C) covers only a short list of named major casualties. The table below is an orientation, not policy wording. Before you bind anything, read the clause set your underwriter is actually using and the schedule attached to it.
| What happened | ICC (C) | ICC (B) | ICC (A) |
|---|---|---|---|
| Vessel stranded, grounded, sunk or capsized | Covered | Covered | Covered |
| Fire or explosion | Covered | Covered | Covered |
| Collision of the vessel with an external object | Covered | Covered | Covered |
| General Average sacrifice and jettison | Covered | Covered | Covered |
| Cargo washed overboard | Not covered | Covered | Covered |
| Sea, lake or river water entering the vessel or container | Not covered | Covered | Covered |
| Earthquake, volcanic eruption or lightning | Not covered | Covered | Covered |
| Total loss of a package dropped overboard during loading or discharge | Not covered | Covered | Covered |
| Theft, pilferage or non-delivery of part of the shipment | Not covered | Not covered | Covered |
| Handling or stowage damage with no named casualty behind it | Not covered | Not covered | Covered |
| Freshwater or condensation damage not caused by a listed event | Not covered | Not covered | Covered, subject to the inherent vice exclusion |
| War, strikes, riot, terrorism | Excluded from all three unless war and strikes clauses are specifically added | ||
| Insufficient packing, inherent vice, ordinary leakage, delay | Excluded from all three | ||
For most manufactured goods leaving China, ICC (A) with war and strikes added is the sensible starting point, and the premium difference against (C) is usually smaller than importers expect. LCL deserves a specific mention: consolidated cargo gets handled more times, stuffed next to freight you didn’t pack and can’t inspect, and stripped at a destination CFS. If you’re choosing between FCL and LCL ocean freight, let the handling exposure feed into the clause set, not just the freight rate.
Cargo insurance cost: how the rate is built and how to get a real number
Any article that hands you a flat percentage is guessing. Rates are underwritten per commodity and per route, and a number that fits electronics out of Shenzhen tells you nothing about steel fittings out of Tianjin. Here’s how to get a figure you can act on.
Fix the insured value first. Market convention is CIF value plus 10%, the extra 10% standing in for expected profit and incidental costs. So: cost of goods, plus freight, plus the costs to the named destination, gives you CIF. Multiply by 1.1. That’s your sum insured, and every rate you’re quoted will be applied against it.
Then ask for the quote in writing, and insist on these five items, because a headline rate without them is meaningless:
- The rate per USD 100 of insured value, and the minimum premium. On smaller shipments the minimum is usually what you actually pay.
- The deductible or excess, and whether it applies per package, per container or per shipment.
- Which clause set, and the year of the wording.
- Whether war and strikes are included or quoted separately.
- Whether cover is warehouse to warehouse, and exactly where it attaches and terminates. This is where a lot of “we were insured” conversations fall apart.
What actually moves the rate: the commodity and how attractive it is to thieves, the packing, the mode, the route and transhipment count, container versus breakbulk, whether temperature control is involved, your own loss record, and the deductible you accept. Importers shipping regularly usually end up on an open cover, declaring each shipment against an annual policy. It prices better per shipment and it removes the risk of somebody forgetting. Put the premium next to the rest of your landed cost using our guide to shipping costs from China and you’ll see quickly whether it’s material.
The exclusions that bite on China imports
Insufficient or unsuitable packing. This is the big one, and it’s the exclusion most often invoked. The test is whether the packing was fit to withstand ordinary handling for the transit contemplated. Cartons that survive a domestic truck run don’t necessarily survive forty days at the bottom of a stack. Specify carton grade, pallet spec, edge protection, wrap and stuffing pattern in the purchase order, and make the supplier photograph the packed goods and the loaded container before the doors close. Those photos become your evidence later.
Inherent vice. Loss caused by the nature of the goods rather than by an external event. Container condensation on moisture-sensitive cargo, MDF, leather, food, anything shipped straight out of a wet process, sits right on the boundary between water damage and inherent vice, and it will be argued. Desiccant and liner bags cost less than the argument does.
Ordinary leakage, ordinary loss in weight or volume, ordinary wear and tear. Shrinkage that a surveyor would call normal isn’t a claim.
Delay. Loss caused by delay is excluded even when the delay itself was caused by an insured peril. Miss a season because a sailing rolled and that’s a commercial loss, not a cargo claim.
War and strikes, unless specifically added. On some routings that add-on is not optional in any practical sense.
Cargo arrived damaged. Do this first.
- Note the damage on the delivery receipt before you sign it. Be specific. “Two cartons crushed, one water-stained” is worth far more than “subject to inspection.”
- Photograph before you unpack any further. Seal number intact, doors open with the cargo still stowed, then the stow pattern, then each damaged package. Keep the packaging material.
- Notify your insurer or broker promptly. They appoint a surveyor. Don’t repair, dispose of or sell damaged goods before the survey unless the surveyor releases them.
- Put the carrier on notice in writing, even if you intend to claim on the policy. That preserves the recovery right your underwriter will subrogate into.
- Build the file: commercial invoice, packing list, bill of lading, the delivery receipt with the exception noted, survey report, photographs, repair or replacement costings, claim bill.
- Watch the clock. Time bars apply both under the policy and against the carrier, and they are short. Check the exact period in your own policy wording and in the carrier’s bill of lading terms rather than relying on a general figure you read somewhere.
How we’d make the call
Do the package-cap arithmetic against your invoice value. It’s rarely a close call. Then add General Average, which arrives regardless of whether your goods were touched and which you cannot avoid by shipping something cheap. Then check your Incoterm, because on FOB nobody has been instructed to insure anything. For most importers moving containers out of China the answer lands in the same place: ICC (A) terms, insured at CIF plus 10%, war and strikes added, on an open cover if you ship more than a handful of times a year.
We arrange marine cargo insurance alongside the freight on shipments we handle, which keeps the sum insured, the clause set and the transit definition consistent with what’s actually on the booking rather than approximately consistent. Send us the commodity, the packing, the route and the invoice value, and we’ll come back with a rate and the wording it sits on. Get a quote and we’ll price the freight and the cover together.