INTERNATIONAL TRADE LAW
Import Cargo Insurance: Why Carrier Limits Fall Short
The single most expensive misunderstanding in importing is assuming the carrier will cover your cargo if it is lost or damaged — it won’t. Ocean carrier liability is capped at $500 per package under the Carriage of Goods by Sea Act (COGSA), a figure unchanged since 1936. Air and surface carriers have their own low limits. Carrier liability is not insurance; it is the ceiling on what a carrier owes if it is found at fault, and it rarely comes close to the value of a real shipment. Import cargo insurance is the separate, all-risk coverage that actually protects the goods.
This guide explains the gap between carrier liability and cargo insurance, how Incoterms decide who insures, and the general-average rule that can hand you someone else’s bill.
Carrier liability is not cargo insurance
When goods are lost or damaged in transit, importers reach for the carrier — and discover how little carrier liability is worth. Each mode has its own statutory or contractual cap, and all of them are tied to package count or weight rather than the value of what was shipped.
| Mode | Liability framework | Typical cap |
|---|---|---|
| Ocean | COGSA | $500 per “package” — and “package” can mean an entire container |
| Air | Montreal Convention | A weight-based limit per kilogram, far below most cargo values |
| Truck / rail | Carmack / released-value | The released value declared, often a per-pound amount |
The ocean number is the starkest. $500 per package has not been adjusted for inflation in nearly 90 years, and carriers litigate hard over what counts as a “package” — sometimes arguing a fully loaded container is one. To recover the cap at all, you generally must prove the carrier was at fault, which the carrier will contest. Cargo insurance flips that: an all-risk marine policy pays the insured value of the goods for covered loss or damage, regardless of carrier fault.
Incoterms decide who is supposed to insure
Whether you need to arrange insurance depends on the Incoterms 2020 rule in your purchase contract, because Incoterms set when risk of loss passes from seller to buyer.
- Under terms like FOB or FCA, risk passes to the buyer early — at the origin port or when the goods are handed to the carrier. From that point the importer bears the risk and should carry its own cargo policy.
- Under CIF or CIP, the seller arranges insurance — but read the fine print. CIF obligates the seller to provide only minimum cover; CIP, under Incoterms 2020, requires more comprehensive cover. Seller-provided insurance is often the bare minimum, leaving the buyer exposed for the difference.
The recurring mistake is assuming “the seller is handling insurance” without checking what the Incoterm actually requires and what the certificate of insurance actually says. Match the coverage to where your risk begins.
General average: the bill you did not expect
General average is the rule importers least expect and feel the most. Rooted in centuries-old maritime law and applied through the York-Antwerp Rules, it provides that when cargo or expense is deliberately sacrificed to save the whole voyage — jettisoning containers, paying salvage after a fire or grounding — every cargo owner shares the loss in proportion to the value of their goods, even owners whose cargo arrived untouched.
The practical consequence: after a general-average event, the carrier can refuse to release your undamaged cargo until you post security for your share. An importer with cargo insurance hands that off to the insurer, who provides the general-average guarantee and releases the goods. An importer without it must put up cash or a bond, sometimes a substantial one, just to get its own property back. General average alone is reason enough to insure.
Buying coverage that actually fits
- Insure to landed value, not invoice value. A common convention is CIF value plus 10%, covering freight, duty, and a margin — so a total loss makes you whole, not merely refunded for the goods.
- Confirm the policy is all-risk and check the exclusions — packaging defects, inherent vice, and delay are common carve-outs.
- Mind the Incoterm. If you are buying CIF, decide whether the seller’s minimum cover is enough or whether you should buy a supplemental policy.
- Keep the documentation. Insurance claims and customs both run on the same paper trail — invoices, packing lists, the bill of lading — so good import records do double duty. (See how to prepare for a CBP import compliance audit.)
Frequently asked questions
Doesn’t the shipping line cover my goods? Only up to its liability cap — $500 per package by ocean under COGSA — and only if you prove fault. That is not coverage for your cargo’s value; it is a ceiling on the carrier’s exposure.
The seller sold me CIF — am I covered? You have some cover, but CIF requires only minimum insurance. Read the certificate; if the insured amount or scope is thin, buy supplemental coverage for the gap.
What is general average and why should I care? It is the maritime rule that makes all cargo owners share a loss incurred to save the voyage. Without cargo insurance, you may have to post security for your share before the carrier releases even your undamaged goods.
Is cargo insurance legally required to import? No, it is not a customs requirement. But given the carrier caps and general-average exposure, importing uninsured means self-funding any loss in transit.
Moving goods into the U.S. and want the risk mapped end to end? Reidel Law Firm delivers a flat-fee Import/Export Compliance Memo covering your Incoterms, contract terms, and import obligations — with direct attorney access. Get a flat-fee compliance memo →
