International shipping isn't just about delivery; it's about who's responsible if the goods are lost, damaged, or don't reach their destination. In many cases, what seems like a successful sale turns out to be the seller's own fault, simply because of a misunderstanding of the shipping terms from the outset. When such incidents occur, it's often not just about undelivered goods, but also includes financial losses, customer dissatisfaction, and unforeseen legal problems. This article from SME Shipping will help you understand who is responsible when goods are lost and how shippers should mitigate these risks from the outset.

How can goods go missing in transit?

Goods can be lost or damaged at various stages of transportation, such as:

• During transportation from the factory to the port.
• During loading and unloading onto a ship or aircraft.
• During international shipping.
• During customs clearance.
• During transit to the customer.

The crucial question is not just where it went missing, but who bore the risk under the contract during that period.

When goods go missing in transit, who is responsible? 

Determining who is responsible when goods are lost will primarily be based on agreed-upon Incoterms, namely:

1. In the case of FOB (Free on Board), the seller is responsible for all costs and risks of shipping the goods until they are loaded onto the ship at the port of origin. Once the goods are loaded, all risk is immediately transferred to the buyer. Therefore, if the goods are lost or damaged after loading, the buyer will be responsible for that damage.

2. In the case of CIF (Cost, Insurance & Freight), the seller is responsible for the transportation costs and insurance of the goods until they reach the destination port. However, the risk of damage or loss of the goods is transferred to the buyer immediately upon loading the goods onto the ship at the port of origin. Therefore, if the goods are lost or damaged during transit, the buyer will be responsible for claiming compensation from the insurance company, and the seller will not be required to bear any further compensation, provided that the export documents are correct and complete.

3. In the case of DDP (Delivered Duty Paid), the seller is responsible for the entire shipping process from the origin to the buyer's location, including transportation costs, export and import customs clearance, and import taxes. The risk of loss or damage to the goods remains with the seller throughout the transportation process. Therefore, if the goods are lost or damaged at any stage of the process, the seller will be fully responsible.

Is the transport company responsible?

Many people mistakenly believe that if goods are lost, the shipping company is fully responsible. However, in reality, shipping companies usually have limited liability under their terms and conditions, and the basic coverage may not cover the actual value of the goods. Furthermore, without additional insurance, the sender may not receive full compensation themselves.

What should the sender do to avoid financial loss if the item is lost?

1. Clearly state Incoterms in all documents. Don't rely on verbal agreements; ensure they are clearly specified in every document, including quotations, invoices, and sales contracts.

2. Choose shipping insurance that matches the value of your goods. Don't choose minimum insurance just because it's cheaper, because the value of the goods is the most important factor when making a claim.

3. Keep records of every step of the process, such as invoices, packing lists, bills of lading/airway bills, photos of the goods, etc., as these documents are crucial evidence if you need to claim insurance.

4. Choose a specialized shipping agent. Experienced agents can advise on the appropriate Incoterms for your business, review documents before shipment, and assist with coordination in case of problems.

In the world of international shipping, responsibility isn't based on feelings but on agreements. Understanding Incoterms, getting insurance, and having the necessary documentation ready is a far more cost-effective way to prevent damage than to try and fix things afterward. Because we believe that professional shipping isn't just about getting goods to their destination, but about ensuring safety and managing risks from the start.