By Jason Odgers, TRIP
SVP, World Insurance Services
When Tariffs Lead to Abandonment
Steep tariff increases are disrupting global trade and drastically inflating landed costs. Importers, faced with unexpected duty bills, are increasingly choosing to abandon shipments rather than absorb the cost. While this may seem like a financial shortcut for them, it often leaves freight forwarders, transportation intermediaries, and logistics providers to deal with the fallout.
In addition to the operational chaos and legal complications that follow, these situations also reveal gaps in insurance coverage—both for cargo owners and for those facilitating transport. Here’s what freight professionals need to know to avoid costly surprises.
1. Cargo Abandonment and Shipper’s Interest Insurance
Cargo abandonment is not covered under most shipper’s interest cargo insurance policies. If an insured party chooses to walk away from a shipment instead of paying the associated duties or fees, that decision voids their ability to file a claim under this coverage.
Key Considerations:
- Declared Valuation Matters: Policies often allow for the inclusion of duties in the insured value, especially if a loss occurs post-clearance and those duties are non-recoverable. However, undervaluing cargo to save on premiums can trigger co-insurance penalties or leave gaps in coverage.
- Verify Your Policy: As duties become a larger portion of landed cost, cargo owners must ensure these values are declared accurately at the time of shipment.
2. Cargo Liability Insurance and Third-Party Risk Exposure
When importers abandon cargo, intermediaries—such as freight forwarders or NVOCCs—can be held financially responsible for resulting demurrage and detention charges. This is because “master” bills of lading often include joint and several liability clauses, making everyone in the supply chain vulnerable to collection efforts by ocean carriers and other service providers.
What You Need to Know:
- Limited Coverage: Many cargo liability insurance policies either exclude these charges outright or cap the reimbursement amount or coverage window.
- Time-Sensitive Response: If you suspect a consignee will not retrieve cargo within the allowed free time, you should immediately initiate removal from port and/or container.
3. Best Practices to Mitigate Abandonment-Related Losses
To reduce your exposure, take action early and document your steps:
- Act Quickly: Expedite cargo removal and arrange for storage at a secure, bonded facility—especially if Customs clearance hasn’t occurred.
- Use “Sue and Labor” Provisions: Most insurance policies will reimburse reasonable expenses incurred to mitigate potential losses. Keep thorough records to support these claims.
- Collect Costs Before Release: If the consignee does come forward to claim cargo, ensure all additional storage and drayage fees are paid before releasing the goods.
- Review Contracts: Know what your liability looks like under each bill of lading and clarify terms with carriers when possible.
Be Proactive, Not Reactive
The impact of tariffs extends beyond higher prices at the register. For freight forwarders and logistics professionals, abandoned cargo creates a legal, financial, and operational burden that many insurance policies do not fully address.
Now is the time to review your existing coverage, understand your responsibilities, and work with insurance partners who understand the nuances of your business.
Need help reviewing your cargo liability and shipper’s interest policies?
World Insurance Services specializes in tailored risk management for the freight and logistics industry. Contact us today to ensure you’re protected against the rising risks of tariff-driven cargo abandonment.