trade-terms Hague-Visby Rules Sea Freight Claims

Understanding Hague-Visby Rules for Maritime Cargo Claims

Published on May 5, 2025

When sea freight cargo is lost or damaged, how much compensation can the cargo owner actually receive? This question cannot be simply answered with “full compensation” or “no compensation.” Instead, it must be determined under the core international maritime legal framework — the Hague-Visby Rules. Today, I’ll explain the most relevant aspects of these rules for foreign trade professionals in the clearest way possible.

Background of the Rules

The Hague-Visby Rules, formally known as the “International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading,” is the most widely applicable carrier liability regime in international ocean shipping.

  • 1924: The original Hague Rules were adopted in Brussels
  • 1968: Amended through the Visby Protocol, which raised compensation limits
  • 1977: The Hague-Visby Rules officially entered into force
  • 2006: China formally acceded to the convention, while making 30 reservations

Currently, approximately 90% of global maritime trade is governed by these rules or their revised versions.

Carrier Liability Compensation Limits

This is the core question foreign trade professionals care about most — if cargo is damaged, what is the maximum the carrier will pay?

The Hague-Visby Rules stipulate that the carrier’s compensation limit per package or per unit is the higher of the following two standards:

  • Calculated by package: 666.67 SDR per package/unit (approximately $935 USD)
  • Calculated by gross weight: 2 SDR per kilogram (approximately $2.8 USD/kg)

Whichever standard is more favorable to you is the one that applies. For example, a shipment of 10 packages with a total weight of 500 kg and a value of $8,000 USD. By package: 666.67 x 10 = 6,666.7 SDR (approximately $9,350 USD); by weight: 2 x 500 = 1,000 SDR (approximately $1,400 USD). The higher amount applies, giving a compensation limit of 6,666.7 SDR.

What is SDR?

SDR (Special Drawing Rights) is a bookkeeping unit created by the International Monetary Fund (IMF). It is not a real currency, but rather an exchange rate conversion tool.

SDR exchange rates are floating and updated daily. You can check the current SDR-to-USD exchange rate on the IMF’s official website. Generally, 1 SDR is approximately equal to 1.3-1.4 USD, though the exact rate depends on the day.

In practice, the claim amount is converted to USD or RMB based on the SDR exchange rate on the date the incident occurred.

Carrier Exemption Clauses

Article 4 of the Hague-Visby Rules specifies 17 exemption grounds for carriers. Here are the key ones that foreign trade professionals should focus on:

  1. Force majeure: War, strikes, natural disasters, etc.
  2. Perils of the sea: Storms, tsunamis, and other dangers peculiar to the sea
  3. Inherent vice of the goods: Natural wastage, spoilage, etc. inherent to the goods themselves
  4. Insufficient packing: Damage caused by the shipper’s inadequate packing
  5. Shipper’s fault: Incorrect declaration, unclear markings, etc.
  6. Reasonable deviation: Deviating from the route to save life or property at sea

Note: When a carrier claims exemption, the burden of proof falls on the carrier. If the cargo owner can prove the carrier was at fault (e.g., improper stowage, failure to properly care for the cargo), the exemption clauses may not apply.

Claim Time Limits

The Hague-Visby Rules impose strict time limits on claims:

  • Written notice of claim: If damage is discovered upon receiving the goods, written notice must be given to the carrier within 3 working days of receipt
  • Statute of limitations: Legal action must be commenced within 1 year from the date the goods were delivered or should have been delivered

If legal action is not commenced within the time limit, the carrier may be legally exempted from liability.

Practical Claim Recommendations

Take Precautions Before Shipping

  • Declare the true value of the goods on the bill of lading; for high-value cargo, consider declaring a higher value
  • Purchase cargo insurance — this is the most effective way to transfer risk
  • Retain complete commercial invoices, packing lists, bills of lading, and other documentation

Act Immediately Upon Discovering Damage

  1. Take photos and document evidence immediately, recording the condition of the damaged goods
  2. Notify the carrier in writing, sending a claim letter within 3 working days
  3. Request a joint survey, engaging a third-party inspection agency to issue a damage report
  4. Calculate the claim amount, providing invoices, contracts, and other proof of value
  5. Negotiate or litigate — if negotiation fails, file a lawsuit within 1 year

Relationship with China’s Maritime Code

Article 56 of China’s Maritime Code sets carrier liability limits consistent with the Hague-Visby Rules: 666.67 SDR per package or 2 SDR per kilogram. However, China’s Maritime Code also includes some special provisions:

  • Coastal transport (between domestic ports) is subject to lower compensation standards
  • Delay in delivery: The carrier’s compensation limit for delayed delivery is the freight amount for the delayed goods
  • Validity of letters of indemnity: Good-faith letters of indemnity are valid between the carrier and the shipper

Real-World Cases

Case 1: A company imported a batch of precision instruments from Germany. Upon arrival, 3 devices were found to be severely damaged, with a total value of 450,000 RMB. The compensation limit calculated by weight was only about 38,000 RMB. Since no insurance had been purchased, the company could only be compensated up to the limit, suffering a heavy loss.

Case 2: An export company’s shipment of garments was damaged during ocean transit due to water ingress in the container, with a cargo value of 200,000 RMB. The company had purchased cargo insurance. The insurance company paid in full and then obtained the right of subrogation to pursue recovery from the carrier. The company suffered virtually no economic loss.

The Hague-Visby Rules establish a “ceiling” for carrier liability, but for high-value cargo, this limit falls far short. The most practical advice comes down to one thing: buy cargo insurance. Insurance payouts are not subject to SDR limits — they are based on actual loss and the insured amount. Rather than studying how to fight a legal battle with the shipping line, it’s better to spend a few hundred on an insurance policy for true peace of mind. The Vortrich team can provide professional insurance recommendations for every shipment — feel free to consult us.