A shipment of cornmeal was arranged on an ocean vessel from the Philippines to the United States. The cornmeal was susceptible to a certain pest, and the insurance provider advised the importer to require the shipper to bag and fumigate the cornmeal in a specific way. Photos were taken and fumigation certifications were provided, validating that the cargo was shipped properly. The cornmeal was valued at $17,500.

Upon arrival at the receiving warehouse, the container was opened, and a swarm of praying mantis flew out. The USDA was contacted, and the swarm was captured. The cornmeal was found to have praying mantis eggs in it and was deemed unusable.

The insurance provider was contacted, and because the shipper met the criteria of bagging and fumigating the cornmeal for the normal pest, the limitation of Inherent Vice was not applied. The importer was able to claim the full value of the loss.

What is “All-Risk” Cargo Coverage?

“All-Risk” cargo coverage is the broadest form of insurance coverage available for international cargo. “All-Risk” coverage covers “everything, except what is excluded.” Cargo insurance provides peace of mind for all types of cargo traveling hundreds or thousands of miles. Still, the shipper and the receiver need to be aware of limitations and expectations that will help them better handle a potential claim.

Typical Policy Limitations Include:

1. Improper packing and packaging materials
2. Inherent Vice (spoilage, infestation, failure of a product to perform to intended functions)
3. Used goods

Time and Policy Limits:

1. Losses occurring at a port city more than a determined set of days after discharge of cargo
2. Losses inland more than a determined set of days after discharge of cargo
3. Losses because of delay or loss of market
4. Losses in excess of the policy limit
5. Failure to notify the carrier of preliminary loss in a timely fashion

There are also statutes of limitation with the air, ocean or domestic carrier regarding the time frame to file a claim with them:

Ocean:

• Visible Loss/Damage – Immediate
• Non-Visible Loss/Damage – 3 days from delivery
• Limitation of Action – 1 year from the date of delivery

Air:

• Damage – 7 to 14 days from the date of delivery
• Delay – 14 days from the date of delivery
• Non-Delivery – 120 days from the date the airway bill was issued
• Limitation of Action – 2 years from the date of delivery

Domestic Truck:

• Damage – Immediately
• Limitation of Action – Varies by carrier per bill of lading

When an international shipment is being arranged, each party has responsibilities to ensure the cargo can travel as safely as possible. From the packing and packaging to the temperature to the stowage and risks associated with certain commodities, all factors play a part in the goal of getting cargo delivered to its destination in one piece and undamaged.

During the month of August, Ascent Global Logistics is conducting a Cargo Insurance Awareness campaign to encourage our current and potential clients to review their current cargo insurance policies to ensure they are adequate to cover the potential losses in today’s marketplace.

If you aren’t sure that your insurance is adequate, please reach out to your sales or operational team and let us provide a quote to you. Our team can help you minimize your financial loss and protect your assets with additional information about cargo insurance.

Who said logistics has to be complicated? We certainly didn’t. Contact our team to learn more about cargo insurance.