Transport insurance protects your cargo during shipment by air, sea, or road. While carriers can be held responsible for lost or damaged goods, their liability is capped by international conventions. Each convention has predefined limits that reduce the carrier’s financial responsibility in case of damage or cargo loss.

For sea (ocean) transport, liability limits originate from the Hague Rules, as updated by the Visby Rules. The compensation ceiling under the current SDR protocol is either 2 SDR per kg or 666.67 SDR per package/unit, whichever is higher.

For air freight, cargo liability was established under the Warsaw Convention and is today most commonly applied via the Montreal Convention. The maximum carrier compensation under Montreal is 19 SDR per kg of lost or damaged cargo.

For road freight, liability caps are governed by the CMR Convention. Under this regime, the maximum carrier compensation is 8.33 SDR per kg of cargo weight affected.

What is an SDR?

The Special Drawing Right (SDR) is an international reserve currency unit created and managed by the International Monetary Fund. It is not a physical currency, but a basket-based monetary unit used worldwide to calculate compensation limits, especially in transport law. Its value is stable because it is based on several major currencies (USD, EUR, CNY, JPY, GBP).

This legal system ensures carriers only pay up to the SDR ceilings, even if your cargo value is much higher — which is why transport insurance exists to cover the real value beyond liability limits.

Keep in mind that the carrier’s liability cap can be substantially lower than the real value of your goods.

For instance, 1 × 40’ container loaded with 20,000 kg of cargo, with a goods value of 100,000 USD, would be compensated at the carrier’s maximum liability only, calculated in SDR, with two possible legal ceilings depending on the convention terms applied as “per-package/unit” or “per-kg”:

• Option 1 — Per unit (1 container considered as the shipping unit): capped at 666.67 SDR total
• Option 2 — Per kg (20,000 kg × 2 SDR/kg): capped at 40,000 SDR total

According to recent exchange data, 1 SDR ≈ 1.37 USD today.

For example, if you ship 1 × 40′ container with 20,000 kg of goods valued at 100,000 USD, and the liability under the relevant convention is calculated in SDR, the maximum compensation in favor of the shipper would be:

• Option 1 — Per unit (1 container = 1 unit): 666.67 SDR →
  666.67 × 1.37 ≈ 915 USD
• Option 2 — Per kg (20,000 kg × 2 SDR/kg): 40,000 SDR →
  40,000 × 1.37 ≈ 54,800 USD

👉 Since Option 2 yields the higher amount, the carrier’s liability would be capped at approximately 54,800 USD.

As you can see, even if the carrier pays the maximum under the law, the compensation may still be far below the real value of the cargo (100,000 USD in this example) — which illustrates why cargo insurance remains crucial.

Part 5 The common average

Another major principle to be aware of in ocean transport is General Average, also known as Avarie Commune. This is a rule of maritime law where extraordinary costs or sacrifices intentionally made to save the vessel, the crew, or the cargo during a voyage are shared proportionally between all parties benefiting from the rescue.

⚓ What triggers a General Average event?

A decision must be voluntarily taken by the ship’s master to protect a common interest — for example:

• casting container(s) or cargo overboard in a storm to stabilize the ship,
• deploying emergency rescue equipment,
• hiring tug assistance to avoid grounding or sinking.

These actions may activate the General Average mechanism under the authority of the vessel operator (e.g., the shipowner or charterer).

💰 What charges are involved?

The goal is to protect:

• the crew and passengers (safety and rescue operations),
• the ship itself (preventing total loss),
• the cargo carried on board (yours and others’).

The emergency costs or lost goods used to save the voyage can include:

• tug or salvage services — example: rescue coordinated by a company like Smit Salvage (hypothetical example of a salvage operator),
• port of refuge entry and handling charges at the nearest safe harbor — example: a diversion ordered toward a port such as Algeciras, Spain (hypothetical safe port),
• fuel surcharges and ship repositioning costs,
• potential loss of a container or part of the cargo sacrificed at sea.

Once declared, these charges are calculated based on a stable accounting unit — the Special Drawing Right (SDR) issued by the International Monetary Fund (IMF).

🔢 How are the costs shared?

The costs are allocated between ship and cargo owners pro rata, meaning:

• if the ship value is €5M and total cargo value is €10M, the ship covers 1/3 and all cargo owners share 2/3 between them based on each shipment’s value,
• a freight forwarder or cargo owner with 2% of the total value rescued would pay 2% of the total shareable cost.

⚠️ Why this matters to the shipper

Even if your cargo:

✔ arrives on time,
✔ and arrives in perfect condition,

you can still be invoiced for General Average charges, because the cost was incurred for the collective rescue of the voyage.

This means that a risk exposure remains even without physical damage to your goods.

🔒 Key takeaway

You may receive your cargo intact, but still remain financially liable for emergency voyage rescue costs — shared by General Average — which can represent an unexpected post-delivery charge.

This is an often overlooked but very real risk in maritime shipments. It further reinforces the value of taking out cargo insurance that explicitly covers:

• transport damage/loss liability ceilings (Hague-Visby, Montreal, CMR),
• and General Average contributions,
• and salvage/security costs not tied to physical cargo damage.

Besides all this, the carrier may rely on conditions within international transport conventions to legally escape liability, even when a cargo is lost or damaged. This is particularly common in ocean freight, where regimes such as the Hague‑Visby Rules include multiple defenses that can fully exonerate the carrier. In such cases, the goods owner would receive no compensation.

Even when liability is eventually confirmed, a separate difficulty remains: recovering compensation often turns into a long, complex, and exhausting administrative process.

Drawing from over 25 years of hands-on operational experience in maritime and multimodal freight, we know that:

⚠ Engaged liability does not mean fast payment.
Even when the carrier formally accepts responsibility, the road to obtaining indemnification can take months or years, frequently involving repetitive document submissions, legal interpretation disputes, survey negotiations, and administrative blockages — often perceived by goods owners as a costly and frustrating battle.

✅ Final conclusion

We strongly recommend that every goods owner secures comprehensive cargo insurance for all shipments — by ocean, air, or road.

This risk-mitigation step ensures:

• coverage based on the real value of the goods, far beyond convention liability caps (e.g., Special Drawing Right limits),
• protection when a carrier escapes liability,
• and elimination of administrative deadlock and unpredictable payment timelines.

For all these reasons, we highly recommend taking out a cargo insurance policy for every transportation mode, without exception.

If this topic matters to you, our team remains at your disposal to assist with your cargo-insurance and liability risk management needs. Contact us today — we’re here to help.