When there is no point in raising the limit of liability

The carriage conventions set limits of liability per kilogram, not per shipment. From that follows a calculation that is rarely done and that, for some cargo, closes the whole declared value subject.

The limits

In carriage by road the CMR Convention sets 8.33 SDR per kilogram of gross weight short. The SDR is the International Monetary Fund's unit of account, and its rate changes daily; in practice 8.33 SDR is around ten euros.

The word “around” is not caution about rate movements. Article 23(7) of the CMR Convention says the amount is converted on the date of the judgment or the date agreed by the parties, not on the date of the shipment or the invoice; on rail, Article 37(1) of the CIM points to the day and place of payment of the compensation. So a limit expressed in euros is always a reference figure, never the sum that would actually apply.

In carriage by air the Montreal Convention limit is considerably higher — it is reviewed periodically, so the figure in force has to be checked in the current text.

In carriage by sea the Hague-Visby Rules set 666.67 SDR per package or 2 SDR per kilogram, whichever is the higher. That is about a couple of euros per kilogram — well below the road figure.

The calculation

Take the value of the goods and the gross weight from the same shipment. Divide.

If you get, say, EUR 1.80/kg while the road limit is around EUR 10/kg, then the limit of liability will never come into play for your cargo. The carrier, if it is liable, will compensate the whole loss and will not come close to the limit.

So raising the limit can have no effect, and the charge for it is an expense without a function.

Why you divide instead of comparing totals

Here is a mistake that is easy to make.

It is intuitive to compare the total limit with the total value: twenty tonnes × ten euros is a EUR 200,000 limit, and the cargo is worth EUR 36,000, so the limit is higher.

That calculation gives the right answer only in the case of total loss. But the limit applies to the weight of the cargo lost: if a hundred kilograms are damaged, the limit for those hundred kilograms is about a thousand euros. If those hundred kilograms were worth five thousand, the limit does come into play — even though the totals suggested otherwise.

So the correct comparison is always value per kilogram against limit per kilogram. It does not depend on which part of the cargo is affected.

Who this matters to

To heavy, inexpensive cargo carried by road: building materials, timber, metal, packaging, fertiliser, grain.

And almost not at all at sea: there the limit is low, so it can come into play even for inexpensive cargo, and a declared value charge has a real function.

What this calculation does not say

It does not say whether you need cargo insurance. That is an entirely separate question: insurance also pays in cases where the carrier is not liable, so a low value-to-weight ratio does not make cover unnecessary.

It says one thing only: that for this particular cargo, raising the limit of liability can have no effect. Whether some other protection is needed, and which — a question for your insurance broker.

And one more exception that matters in practice: this calculation applies to a declared value charge, not to a special interest in delivery (CMR Art. 26, CIM Art. 35). The latter also covers delay, and the convention's limit per kilogram does not cap it, so there is nothing to compare it against.