CARM: What all importers need to know about CARM

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Route Article

Why cargo insurance is a good investment​

Changes to import requirements for pet supplements effective June 24, 2024 - Route Newsletter: March 2024

A typical shipment passes through many different modes of transport before arriving at its final destination, which adds the potential for damages or losses. Cargo insurance offers protection when encountering these situations. When the unexpected happens, without insurance, your only recourse is to claim against the carrier’s limited liability, ranging from approximately USD 20.00 per kg for air freight, roughly USD 3.00 per kg for ocean freight, to less than CAD 4.40 per kg for truck freight. When you purchase cargo insurance coverage, you ensure quick processing of claims and prompt restitution, plus protection against carriers’ “General Average” declarations, all of which reduce your exposure to financial loss.

In today’s rapidly changing geopolitical climate, it is vital to check with us to determine whether there are any exclusions or limitations of coverage based on the routing of your shipment. We are currently seeing increased violence against vessels who continue to take the risk to travel through the Red Sea and Suez Canal, as opposed to diverting via the safer route around the Cape of Good Hope. If your shipment is routing through an area currently in conflict, you should understand your coverage options. Most insurers will exclude war and strike insurance if cargo is routed via these areas of high risk. In some instances, you may be able to obtain war and strike coverage for additional costs. Working with a trusted partner such as Universal Logistics, who can arrange specific cargo insurance coverage for you, is the best way to ensure your interests are protected and that you know exactly where you stand regarding specific cargo insurance coverage.

Regarding “General Average” declarations, these can occur at any time, i.e. whenever a vessel encounters distress and, in turn, financial loss. If an incident such as fire, loss of cargo or vessel peril occurs and the carrier declares “General Average,” all parties with cargo on the vessel will be deemed liable for a portion of the costs incurred due to the incident. It does not take much for these costs to reach very high levels, and, as such, the amount borne by each party will be excessive. With cargo insurance in place, you will protect your financial interests from being affected, and simply by presenting a valid certificate of cargo insurance to the carrier that declares “General Average,” your cargo will be released promptly. The alternative, namely not having cargo insurance in place, will mean the carrier will typically insist on payment for your deemed share of the loss before the release of the shipment, and, as noted, these amounts can be excessive.

Please contact Debbie McGuire, Director—Freight Solutions, or David Lychek, Director—Ocean & Air Services, if you have questions about your insurance coverage through Universal or wish to discuss your options.

Quick Tip #57
When Incoterms are incomplete

The shipping term FOB (Free on Board) is incomplete when the port of shipment and country are omitted. Moreover, you could end up paying extra if an incorrect assumption (guess) is made about your port of shipment (many countries have multiple ports of shipment).

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