When shipping to Mexico or from Mexico, what is the maximum liability of ocean carriers and ground carriers for cargo loss or damage on Mexican territory? Shippers should be well informed about carrier liability when shipping between the US or Canada and Mexico.
Unfortunately, cargo loss or damage are common problems when shipping freight. It is essential, as a shipper, to know how to protect all your shipments and how to get the best coverage. Shippers usually have a couple of options to do this; carrier liability and cargo insurance. It is important to note the key differences between each option.
Whether it’s a Mexico shipment, cross-border shipment or any other type of shipment, there is some form of limited liability coverage. This coverage is usually determined by the carrier and can vary depending on the freight class or commodity type of the goods being shipped. This carrier liability usually only covers up to a certain dollar amount per pound of freight and, usually, the included liability coverage is less than the actual value of the goods being shipped.
It’s also important to note that carrier liability has limitations in certain situations. When, for instance, the damage is due to a weather related incident (act of God), or negligence on the part of the shipper (improper packaging or loading). In these two cases, the carrier is not liable.
This is where the importance of cargo insurance becomes evident. As a shipper, having the right freight forwarder to help you navigate these options, especially when shipping to Mexico from the U.S. or from Canada, ensures that your cargo is protected.
Should U.S. and Canadian shippers doing business in Mexico question the liability of ground carriers for cargo loss or damage?
Although carriers in the U.S. and Canada are required by law to carry some type of cargo insurance, carriers in Mexico are not necessarily subject to the same rules. Motor transportation services in Mexico are regulated by the Law of Roads, Bridges and Federal Motor Transportation. This law came into effect in 1993 and allows for more freedom for shippers and carriers to contract on their own terms.
Article 66 of this Law states: “…When the user of the service does not declare the value of the goods, liability will be limited to an amount equivalent to 15 days of the minimum daily wage then current in the Federal District per ton, or the corresponding proportionate part of a metric ton that is damaged or lost…”
U.S. carriers offering door-to-door service have limited or no liability coverage for shipments once they cross the border into Mexico. Many of them issue through bills of lading for service from the U.S. to Mexican destinations, which limits their liability to $2.00 per pound or less for any loss, damage, or delay on Mexican soil. Shipments originating in Canada also have a maximum cargo loss or damage value of $2.00 CAD per pound.
U.S. motor carriers are also subject to the Carmack Amendment which outlines the rights, duties and liabilities of shippers and carriers for cargo loss or damage.
Ocean Carriers also have a very limited liability on the carriage of goods. What does that mean to you as a shipper?
In the event that an ocean carrier, or any of the vendors that the carrier uses, damages or drops your container while in transit or in the terminal, or causes any damage to your cargo in any way, the maximum they will be responsible for is $500 per package. That means that the carrier will never pay you the value of your cargo. This is the case with both FCL and LCL shipments. It is for this reason that shippers should always get cargo insurance.
There is also the matter that carriers are allowed to declare what is known as “general average”. This means that if the vessel you are shipping your goods on has grounded or any natural event or disaster has caused an irreversible incident, you as the shipper will be asked to contribute, along with all the other shippers, to save that vessel. Yet another great reason why shippers should always get cargo insurance!
Ocean carriers also have the right to unload your cargo anywhere they want, if the destination on the Bill of Lading poses any kind of risk, danger, or delay such as civil unrest or flooding, etc. In this scenario, the shipper is responsible to pick up the cargo and pay all charges due.
Also if any customs authority puts a hold on your container for any reason whatsoever, you as a shipper are again responsible to pay all charges, even if the hold is removed or the investigation leads the authorities to find nothing at fault with the container.
Every country has customs rules and regulations with regards to imported goods, and Mexico is no exception. It is your responsibility as a shipper to inform yourself accordingly so that your shipments move smoothly. Your best bet is always to have a freight forwarder who is skilled and knowledgeable in specific areas, like Mexico, for all your shipping needs.
If Ocean Carriers and Road Carriers have such limited liability, what can you do as a shipper to protect yourself?
As a shipper, you are responsible for your cargo. Whether you are dealing with ground shipments or ocean shipments, packing and securing your goods properly is your responsibility. If you do not take care and use proper measures, any kind of damages to your goods, and, in the case of ocean shipments, any damage to the container, vessel, or terminal infrastructure, as well as any possible fatal injuries, is your responsibility!
When you take all this into consideration, the importance of cargo insurance becomes very clear.
When looking at carrier liability and laws for cargo loss or damage with shipments to Mexico, is choosing the right freight forwarder the best thing you can do?
In short, the answer is yes. With such limited liability on the part of both ground carriers and ocean carriers, and the weight of your responsibility as a shipper, you should have a trusted freight forwarder, with extensive expertise in shipping to Mexico, on your side.
They can guide you in all matters from proper documentation and making sure you are correctly declaring what you loaded and communicating all the proper information to the carriers. They can also make sure you are loading and securing your cargo properly and, most importantly, they can ensure you have the right cargo insurance to cover your shipment all the way to its Mexican destination.
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