Shippers who skip cargo insurance usually say some version of: the carrier is responsible, so they will pay. Carriers are responsible. But their liability is capped by international convention, and the cap is calculated on the weight or the package count of your cargo, not on its value.
That single design decision is why the payout on a damaged shipment is so often a small fraction of the loss. Dense, cheap cargo does reasonably well. Light, valuable cargo does very badly.
The limits, and what they are worth
Almost all limits are expressed in Special Drawing Rights, the IMF's unit of account, because it is more stable than any single currency. One SDR has been worth around USD 1.37 through 2026, so the figures below use that. Check the IMF rate on the day for anything that matters.
- Sea, Hague-Visby Rules: 666.67 SDR per package or 2 SDR per kilo, whichever is higher. That is roughly USD 913 per package or USD 2.74 per kilo.
- Sea, US COGSA: USD 500 per package. Not indexed, not in SDR, and unchanged since 1936.
- Air, Montreal Convention: 26 SDR per kilo, about USD 35.62. This rose from 22 SDR on 28 December 2024 under the convention's five yearly review, so pre-2025 sources are out of date.
- Road in Europe, CMR: 8.33 SDR per kilo, about USD 11.41.
- Rail, CIM/COTIF: 17 SDR per kilo, about USD 23.29.
A worked example, sea freight
One 20ft container of consumer electronics. Gross weight 8,000 kg, commercial value USD 400,000. It goes overboard.
Under Hague-Visby the carrier owes the higher of the two calculations, and which one wins depends entirely on how the bill of lading is worded:
- By weight: 8,000 kg times 2 SDR is 16,000 SDR, about USD 21,900. That is 5 percent of the value.
- By package, if the bill of lading says "1 container": one package, 666.67 SDR, about USD 913. The weight calculation wins, so you are back to USD 21,900.
- By package, if the bill of lading enumerates "400 cartons": 400 times 666.67 SDR is 266,668 SDR, about USD 365,000.
Read those last two lines again. The difference is USD 344,000, and it turns entirely on whether the packages inside the container were enumerated on the bill of lading. Hague-Visby says that where the container's contents are enumerated as packages, each is a package for limitation purposes; where they are not, the container itself is the package. Check your bills of lading.
A worked example, air freight
500 kg of pharmaceuticals worth USD 200,000, destroyed in a warehouse fire at transit. Montreal Convention: 500 kg times 26 SDR is 13,000 SDR, about USD 17,800, or under 9 percent of value.
Air freight is the mode where the gap bites hardest, because air cargo is chosen precisely for goods with high value per kilo.
Declaring a higher value
Every one of these conventions lets you break the limit by declaring the value of the goods on the transport document and paying a supplementary charge, often called ad valorem freight. In principle this is the alternative to insurance.
In practice it is almost always the wrong choice. The ad valorem charge is usually more expensive than a marine cargo premium for the same cover, it protects you only against that carrier on that leg, and it still leaves you proving the carrier was at fault. Cargo insurance responds to loss however caused, subject to its exclusions. Compare the numbers with the cargo insurance calculator.
The defences that reduce it further
The limit is the ceiling, not the floor. Before you get there, the carrier has a list of defences. Under Hague-Visby these include error in navigation or management of the ship, perils of the sea, act of God, inherent vice, and insufficient packing. Nautical fault is the striking one: a carrier is not liable for cargo loss caused by its own crew's navigational error.
Add the practical hurdles: you must give notice of loss or damage promptly, usually in writing at delivery or within three days for non-apparent damage, and you must sue within one year under Hague-Visby, or two years under Montreal. Miss the time bar and the claim is gone regardless of merit.
What to do about it
- Work out your own exposure per kilo. Divide cargo value by gross weight. If it is much above USD 2.74 by sea or USD 35.62 by air, the convention limits will not make you whole.
- Enumerate packages on the bill of lading rather than accepting "1 container said to contain".
- Buy cargo insurance under ICC (A) for anything with real value per kilo.
- Diarise the time bar the day a loss is reported, and read how to file a cargo claim.
General guidance, not legal advice. Which convention applies depends on the mode, the route, the countries involved and the contract of carriage, and forwarders often contract on their own trading conditions with different limits again.
