Label Clause — Label Damage to Canned/Bottled Goods and Claim Calculation

What Is the Label Clause

The Label Clause is a special clause that defines the method for calculating insurance compensation when only the labels, capsules, packaging, or brand markings are damaged on cargo such as canned goods, bottled products, beverages, food, cosmetics, quasi-drugs, or other items where these display elements significantly affect the product’s value or marketability.

Even if the contents or containers themselves are undamaged, issues such as label water damage, bleeding, peeling, tearing, abrasion, soiling, or illegibility can render the product unsellable in its current condition.

On the other hand, when relabeling or repacking can reasonably restore the product to a saleable condition prior to the loss, treating the entire product’s sales value as the damage amount may overstate the loss.

The Label Clause is used in such cases to limit the insurer’s liability to the reasonable costs required for producing new labels, capsules, or packaging; removing damaged markings; relabeling; repacking; or reasonably adjusting the cargo.

However, there is no single, global Institute standard clause called the Label Clause or Labels Clause that is universally used.

In practice, wording varies by insurer, insurance program, or cargo insurance policy under names such as Labels Clause, Brands and Labels Clause, or Brands/Labels Clause.

Since some wordings cover reasonable adjustment costs only when the label alone is damaged, some provide for the removal of brand marks and disposal of residue, while others include packaging damage, the scope should not be judged by the clause name alone.

This article assumes verification of the actual wording of the Label Clause attached and organizes the relationship among label damage, relabeling costs, ICC 2009 Clause 4.3, Clause 13, Clause 16, and Clause 17.

Scope Covered in This Article

Item	Content Covered in This Article	Content Covered in Related or Separate Articles
Nature of the Label Clause	Organizes the multiple wordings used in the market such as Labels Clause and Brands and Labels Clause.	Latest clauses and underwriting conditions of specific insurance companies should be confirmed through actual insurance policies and inquiries to underwriters.
Damage Only to Labels	Organizes costs related to relabeling, repacking, inspection, and readjustment when the container and contents are intact.	Damage to containers, leakage, decay, deterioration, and foreign matter contamination are covered in the articles on damage to the cargo itself.
ICC 2009 Clause 4.3	Clarifies label damage due to defective packing, preparation, or container stowage and the corresponding exclusion requirements.	General defective packing and details of container stowage are handled in dedicated articles.
Duty of Assured	Organizes the relationship between reasonable damage prevention and mitigation measures under Clause 16 and relabeling costs.	Comprehensive discussion of Sue and Labour under MIA 1906 and preservation of subrogation rights is covered in dedicated articles.
Waiver and Abandonment	Clarifies that preservation measures under Clause 17 do not constitute a waiver or acceptance of abandonment.	Details of abandonment, total loss, and recovery of residual value by the insurer are covered in the total loss article.
Partial Loss and Total Loss	Organizes the general treatment of label damage as partial loss and the strict conditions for constructive total loss.	Details on Actual Total Loss, Constructive Total Loss, and Notice of Abandonment under MIA 1906 are handled in the total loss article.
Food Labeling and Legal Compliance	Organizes readability of ingredients, expiration dates, importer, country of origin, allergens, and lot labels.	Final judgments on compliance with the Food Labeling Act, Pharmaceuticals and Medical Devices Act (PMD Act), and other laws are made by importers and specialists.
Damage Amount Calculation	Organizes damaged quantity, unit price for relabeling, inspection, sorting, repacking, inland transportation, and residual value.	Final insurance amounts are determined by the official clauses, deductible amounts, insured value, and insurer assessment.
Freight Forwarder Involvement	Organizes the Standard Five Classifications for accident notification, quantity confirmation, surveys, warehouse operations, and subrogation response.	Final liability for compensation is decided individually depending on the scope of engagement, contracts, fault, causation, and liability limitations.

Legal and Contractual Nature of the Label Clause

The Label Clause is not a standard Institute clause embedded in the text of ICC(A), ICC(B), or ICC(C).

It is used as an individual provision added to marine cargo insurance policies or as additional coverage in blanket agreements, with the title and wording varying by insurer.

Typical forms used in the market include the following.

Type of Clause	Main Content	Focus of Claim Calculation	Points to Confirm
Labels Clause	Limits the insurer’s liability when only labels, capsules, packaging, or similar items are damaged.	Costs necessary for creating new labels, replacing them, and reconditioning the cargo	Confirm whether the scope covers only labels or also capsules and packaging.
Brands and Labels Clause	Defines disposal methods for branded goods and costs when only labels or packaging are damaged.	Brand removal, reconditioning, relabeling, repacking, and residual value	Some wordings may prohibit disposal of branded goods without the insured’s consent.
Brands/Labels Clause	Addresses permanent markings indicating the manufacturer or supplier and the disposal of damaged goods.	Residual value after brand removal or reconditioning costs	Confirm how containers from which brands cannot be fully removed are handled.
Specific Label Cost Endorsement	Sets the scope of coverage for specific products, countries, or markings.	Agreed label unit price, labor costs, and maximum payment limit	May be narrower or broader than general Label Clauses.

Therefore, it cannot be assumed that all costs related to labels are covered simply because a Label Clause is included.

At a minimum, confirm the following points in the formal policy wording.

• The exact scope, including whether labels, capsules, wrappers, packaging, or brands are covered
• Whether the damage must have been caused by an insured peril
• Whether coverage is limited to the cost of creating new labels or also includes removal, reconditioning, and repacking
• Whether inspection, sorting, warehouse work, and inland delivery costs are included
• Whether prior approval from the insurer is required
• Whether the payment limit is based on the insured value or the value of the damaged goods
• How disposal of residue, removal of brand markings, and residual value are treated
• How cases involving damage to both the contents and containers are handled

Why the Label Clause Is Necessary

For canned goods, bottled products, beverages, food, cosmetics, and similar items, not only the quality of the contents but also the completeness of the labeling affects marketability.

Labels include information such as the product name, brand, ingredients, expiration date, importer, country of origin, allergens, usage instructions, warnings, lot number, and traceability details.

Therefore, even if the contents remain intact, an unreadable, detached, contaminated, or otherwise defective label may prevent the product from being sold as a genuine branded product.

However, if relabeling can restore the product to a legally and commercially saleable condition, the reasonable amount of loss may not be the entire sales value of the product but rather the cost required to restore it to its pre-incident condition.

The Label Clause clarifies this method of loss assessment in advance, thereby avoiding both excessive total-loss valuation and underestimation of necessary relabeling costs.

Cargo Prone to Issues

Cargo	Main Role of Label	Common Damage Issues	Key Points to Check
Canned Foods	Product name, ingredients, best-before date, lot number, and brand	Water damage, peeling, rust stains, and abrasion	Distinguish dents or rust on the can body from label damage.
Bottled Foods and Beverages	Product description, volume, importer, country of origin, and brand	Smudging, tearing, peeling, and adhesive failure	Check for broken bottles, cap condition, and damage to the contents.
Seasonings and Sauces	Ingredients, allergens, storage method, and expiration date	Contamination of labels on other products due to leakage	Separate the leakage source from the affected products and confirm the impact on the contents.
Cosmetics and Daily Goods	Brand, ingredients, usage instructions, and precautions	Surface abrasion, soiling, and peeling of printed material	Separate appearance standards from regulatory labeling requirements.
Quasi-Drugs and Health Foods	Ingredients, efficacy claims, use-by date, and manufacturing number	Unreadable text, missing lot information, and seal damage	Confirm whether replacement of the label is legally permitted.
Imported Processed Foods	Local-language labeling, importer, country of origin, and allergens	Peeling, water damage, and loss of printed information on supplementary labels	Confirm whether lawful relabeling by the importer is possible.
Branded Products	Authenticity markings, manufacturer warranty, and distribution control	Soiling of brand labels and damage to anti-counterfeiting marks	Check disposal conditions under brand-control requirements and confirm residual value.

Whether the Label Damage Results from Insured Perils

Cause of Damage	Typical Examples	Insurance Confirmation	Main References	Key Considerations
Accidental Moisture or Contamination	Rain exposure, container damage, leakage from other cargo, or contamination during handling	Confirm the applicable ICC insured perils, insurance period, and causation.	Photographs, container records, rainfall records, and survey reports	Did the accidental event directly cause the label damage?
Cargo Shift, Contact, or Abrasion	Movement inside cases, pallet collapse, or contact with adjacent cargo	Check for an external accident, stowage condition, packing condition, and handling circumstances.	Stowage photographs, packing specifications, cargo-shift reports, and CCTV footage	Was the protection adequate to withstand the ordinary course of transit?
Packing or Preparation Defects	Insufficient internal protection, lack of waterproofing, gaps inside cases, or abrasion between label surfaces	Confirm the requirements for application of ICC 2009 Clause 4.3.	Packing photographs, identification of workers, timing of packing, attachment of insurance, and specifications	Who performed the packing, when was it performed, and did the defect cause the damage?
Label Material or Adhesive Failure	Material vulnerable to moisture, poor print quality, adhesive failure, or improper application	Confirm inherent characteristics under Clause 4.4, manufacturing issues, and the pre-incident condition.	Label specifications, same-batch data, manufacturing records, and pre-shipment photographs	Could similar damage have occurred without a transport accident?
Normal Deterioration or Aging	Long-term storage, normal humidity, wear, or discoloration	Check Clause 4.2 on ordinary wear and tear, Clause 4.4, and the insurance period.	Storage duration, temperature and humidity records, inventory records, and pre-shipment condition	Was the change caused by an accidental event or by a normally progressing condition?
Errors in Label Content	Incorrect ingredients, expiration date, importer, or country-of-origin information	Treat the issue as a manufacturing, labeling-preparation, or regulatory-compliance matter rather than transport damage.	Label drafts, approval records, and pre-shipment inspection records	Was a correct label damaged by the accident, or was the label already incorrect?

ICC 2009 Clause 4.3 and Label Damage Due to Inadequate Packing

ICC 2009 Clause 4.3 is an exclusion that applies to loss, damage, or expense caused by insufficient or unsuitable packing or preparation of the subject matter insured where the relevant requirements of the Clause are satisfied.

If labels are rubbed off, peeled, or wetted because of insufficient surface protection, lack of internal spacing, inadequate waterproofing, unsuitable inner packing materials, missing partitions, or insufficient securing of the goods, the relationship with Clause 4.3 should be examined.

However, the mere existence of inadequate packing does not automatically establish that Clause 4.3 applies.

In practice, the following points should be checked:

• Whether the packing or preparation was insufficient or unsuitable for the ordinary course of the insured transit
• Whether that insufficiency or unsuitability caused the label damage
• Whether the packing or preparation was carried out by the insured or their employees
• Whether the packing or preparation was carried out before the attachment of insurance
• If the work was carried out by an independent contractor, the contractual relationship and timing of the work

Under ICC 2009 Clause 4.3, independent contractors are not treated as employees.

Therefore, if an independent external packing contractor performed the work after attachment of insurance, the contractor is not treated in the same manner as an employee of the insured. The official Clause wording, policy conditions, timing, and facts must be reviewed carefully.

Work Situation	Main Confirmations under Clause 4.3	Notes	Main Documents
The insured personally performed the packing	Verify the causal connection between insufficient packing and label damage.	Confirm whether the packing was designed to withstand the ordinary course of transit.	Work photographs, specifications, and responsible-person records
The packing was performed by employees of the insured	Confirm the relevant requirements under Clause 4.3.	Check the actual employment, direction, and control relationship.	Work instructions, employee records, and photographs
An external contractor packed the cargo before attachment of insurance	Confirm the relationship with Clause 4.3 as preparation carried out before attachment of insurance.	Compare the packing-completion time with the attachment of insurance.	Packing records, handover records, and the insurance policy
An independent contractor packed the cargo after attachment of insurance	Because independent contractors are not employees, carefully verify whether the Clause requirements are satisfied.	Also examine other exclusions, special conditions, and the contractor’s liability separately.	Engagement contract, work times, and work reports

Distinguishing Label Damage, Container Damage, Content Damage, and Incomplete Labeling

Category	Main Condition	Practical Classification	Main Documentation
Label Damage Only	Peeling, smearing, abrasion, tearing, or contamination of the label while the container and contents remain intact	Under the Label Clause, confirm reasonable costs for relabeling, inspection, and repacking.	Damage photographs, container inspection, content inspection, and work quotation
Container Also Damaged	Broken bottles, dented or rusted cans, broken caps, or leakage	Confirm the matter as physical damage to the cargo itself rather than label damage alone.	Container photographs, quantity list, leakage records, and survey report
Contents Damaged	Decay, deterioration, foreign-matter contamination, odor transfer, quality degradation, or liquid leakage	Treat the matter as quality change or physical cargo damage beyond label damage alone.	Quality inspection, component analysis, temperature records, and test reports
Illegible Regulatory Labeling	Ingredients, expiration date, importer, allergens, or lot information are unreadable	Even if the contents are intact, confirm whether lawful relabeling is feasible and calculate its cost.	Regulatory labeling requirements, damage photographs, relabeling drafts, and importer confirmation
Original Labeling Deficiencies	Errors or omissions in labeling existed before transport	Classify the matter as a preparation issue involving the manufacturer, shipper, or importer rather than as transport damage.	Drafts, approval records, pre-shipment photographs, and inspection records
Sales Refusal Due to Brand Management	The product is physically saleable, but internal standards prohibit regular distribution	Distinguish physical damage from commercial policy, brand protection, and residual-value considerations.	Brand policy, sales criteria, disposal plans, and residual-value assessment

Costs Considered for Coverage

Cost Item	Description	Typical Conditions for Consideration	Main Documentation	Notes
New Label Creation Costs	Printing and creating new markings to replace damaged labels	When relabeling can restore the product to a legally compliant and saleable condition	Printing quotations, unit price, quantity, and original drafts	Confirm that the quantity corresponds to the number of damaged product units.
Damaged Label Removal Costs	Peeling, cleaning, or removing old labels	When removal is necessary for rework without damaging the product or container	Work-process details, time records, unit price, and test results	Verify whether removal could cause secondary damage.
Relabeling Costs	Applying new labels and adjusting their position	When rework enables the product to meet legal and commercial sales standards	Work estimates, process schedules, and work location	Compare the reasonableness of manual and machine labeling methods.
Inspection and Sorting Costs	Separating damaged items from intact items and confirming quantities	When necessary to identify the quantity of damaged goods	Inspection sheets, photographs, work reports, and quantity summaries	Do not confuse the number of damaged cartons with the number of damaged product units.
Repacking Costs	Case packing, sealing, and pallet rearrangement after relabeling	When required to restore the sales or transportation condition that existed before the incident	Material costs, labor costs, and applicable quantities	Separate restoration costs from packing improvements or promotional work.
Necessary Warehouse Handling Costs	Inbound and outbound handling, internal transfers, designated work areas, and equipment use	When directly required for inspection, relabeling, or reconditioning	Warehouse statements, work orders, and time records	Distinguish these expenses from ordinary storage charges.
Necessary Inland Transportation Costs	Transportation to and from the relabeling facility	When transportation is required as part of a reasonable rework method	Freight quotations, delivery records, and distance information	Confirm that the selected work location and transportation method are reasonable.
Quality and Regulatory Confirmation Costs	Inspection, verification, and compliance checks after relabeling	When required before sales can resume and accepted by the insurer	Inspection quotations, reports, and applicable regulatory requirements	Distinguish these expenses from routine quality-control costs.

Relabeling Costs and ICC 2009 Clause 16 and Clause 17

When the Label Clause expressly covers the cost of new labels, relabeling, or reconditioning following label damage, these costs should first be considered as direct loss-adjustment items under the relevant Label Clause.

Not all relabeling costs are automatically treated as Sue and Labour expenses.

ICC 2009 Clause 16 requires the insured, their employees, and agents to take reasonable measures to avert or minimize recoverable loss and to ensure that rights against carriers, bailees, and other third parties are properly preserved and exercised.

Expenses reasonably and properly incurred under Clause 16 may be recoverable from the insurer in addition to otherwise recoverable loss, subject to the applicable wording and circumstances.

Measures taken after an incident to prevent further label damage, separate intact goods from damaged goods, prevent the spread of contamination, or preserve the value of damaged goods through relabeling may involve Clause 16, provided that the following conditions are satisfied:

• The underlying damage is recoverable under the insurance
• The measures are intended to avert or minimize recoverable loss
• The measures and expenses are necessary, appropriate, and reasonable
• The expenses do not include ordinary business expenses, marketing expenses, or product-improvement costs
• Rights against responsible third parties are properly preserved

ICC 2009 Clause 17 specifies that measures taken by the insured or insurer to save, protect, or recover the cargo shall not be considered a waiver or acceptance of abandonment, or otherwise prejudice the rights of either party.

Clause 17 is not an independent cost-indemnity provision for relabeling expenses.

Clause	Main Role	Relevance in Label Clause Incidents	Points to Note
Label Clause	Defines how indemnity is calculated when only labels, packaging, or related markings are damaged.	May directly cover costs for new labels, relabeling, repacking, and reconditioning.	Confirm the official wording and payment limits.
Clause 16.1	Requires reasonable measures to avert or minimize recoverable loss.	May relate to sorting, drying, isolation, relabeling, or reconditioning.	Verify that the underlying damage is recoverable.
Clause 16.2	Requires the preservation and exercise of rights against third parties.	May involve notification and subrogation rights against shipping lines, warehouses, delivery companies, or packing contractors.	Manage notification deadlines, claim deadlines, and evidence preservation.
Clause 17	Provides that preservation measures do not constitute a waiver or acceptance of abandonment.	Reconditioning or salvage measures do not automatically alter the legal position of either party.	Clause 17 is not an independent basis for reimbursement of expenses.
Clause 18	Requires the insured to act with reasonable dispatch in circumstances within their control.	Prompt inspection, drying, sorting, relabeling, and notification may be important.	Avoid an increase in loss caused by preventable delay.

Relationship with Partial Loss, Total Loss, and Constructive Total Loss

When only the label is damaged by an insured peril and the contents and container remain intact, the matter will generally be treated as a partial loss of the damaged goods rather than as a total loss.

Particular average under MIA 1906 concerns partial loss of the insured property caused by an insured peril, other than general average loss.

The Label Clause determines the amount payable for this type of partial damage by focusing on reasonable relabeling or reconditioning costs rather than automatically treating the entire value of the damaged goods as lost.

The mere difficulty or impossibility of relabeling does not immediately establish an Actual Total Loss or Constructive Total Loss.

ICC 2009 Clause 13 imposes strict requirements for a Constructive Total Loss claim. The subject matter insured must be reasonably abandoned because an Actual Total Loss appears unavoidable or because the cost of recovery, reconditioning, and forwarding to the destination would exceed its value on arrival.

The following matters should therefore be examined comprehensively:

• Whether relabeling or repacking is technically and legally feasible
• The combined cost of recovery, reconditioning, and forwarding the cargo to the destination
• The value of the cargo after reconditioning and its market value on arrival
• The salvage value of the damaged goods and the possibility of discounted sale or alternative use
• The possibility of disposal or resale after removal of brand markings
• The Constructive Total Loss provisions under the applicable insurance wording
• Whether and when a Notice of Abandonment is required

Damage Type	Typical Condition	Main Verification Points	Notes
Partial Loss / Particular Average	Label damage exists, but relabeling or reconditioning is possible	Damaged quantity, reasonable costs, salvage value, and applicable clauses	This is the principal situation addressed by the Label Clause.
Partial Damage to the Cargo Itself	The container or contents are also damaged	Separate label-related costs from damage to the cargo itself.	Multiple causes and categories of damage may be involved.
Possible Actual Total Loss	The insured goods have been destroyed or no longer exist as goods of the insured kind	Physical condition, legal requirements, salvage value, and insurance wording	Refusal to sell alone does not necessarily establish an Actual Total Loss.
Possible Constructive Total Loss	Recovery, reconditioning, and forwarding costs exceed the market value on arrival	Clause 13, cost comparison, reasonable abandonment, and Notice of Abandonment	Inability to relabel alone does not establish a Constructive Total Loss.
Commercial Non-Saleability	Normal sale is avoided because of brand policy or customer standards	Physical damage, legal saleability, alternative sales, and salvage value	Distinguish commercial policy from an insured total loss.

Points to Confirm When Calculating the Amount of Loss

Item to Confirm	Details to Confirm	Main Documents	Notes
Total Quantity	Total number of units, cans, cases, and pallets	Invoice, Packing List, and Warehouse Receipt	Compare the declared quantity with the actual quantity.
Damaged Quantity	Number of individual products whose labels are damaged to the extent that the goods are not saleable in their current condition	Inspection report, photographs, and survey records	Do not automatically treat all products in wet cartons as damaged.
Severity of Damage	Minor waviness, partial peeling, readable information, or complete illegibility	Comparison with intact goods, close-up photographs, and sales standards	Distinguish cosmetic defects from regulatory-labeling deficiencies.
Rework Unit Cost	Unit costs for label production, removal, application, inspection, and repacking	Multiple quotations, process charts, and time records	Check whether unnecessary or excessive manual-work costs are included.
Resale Feasibility	Whether regular sale, discounted sale, or alternative use is possible after relabeling	Importer confirmation, buyer responses, and quality confirmation	Do not base the determination solely on rejection by one buyer.
Residual Value	Value before and after damage, removal of brand markings, or reconditioning	Purchase quotations, disposal proposals, and market data	Residual value may be taken into account when calculating the indemnity.
Payment Limit	Insured value of the damaged goods, policy limits, and deductible	Insurance certificate, Label Clause, and policy details	Check whether the proposed rework costs exceed the value of the damaged goods.

If Relabeling Is Not Possible

For special labels, molded-in markings, tamper-evident labels, sealing labels, or markings integrated with expiration dates or lot information, simple replacement of the label may not be possible.

Manufacturers or brand owners may also prohibit relabeling by third parties for quality-assurance, anti-counterfeiting, or distribution-control reasons.

Even in these circumstances, the entire value of the goods should not immediately be treated as an insured loss. The following steps should be followed:

1. Determine whether relabeling is technically impossible or prohibited solely by internal commercial policy.
2. Confirm whether lawful relabeling by the importer or manufacturer is permitted under the applicable laws and regulations.
3. Examine repacking, transfer to different containers, bulk sale, discounted sale, or alternative uses.
4. Confirm the residual value after removal of brand markings.
5. Calculate the costs of recovery, reconditioning, storage, transportation, and inspection.
6. Compare these costs with the market value on arrival and determine whether the Constructive Total Loss requirements of Clause 13 may become relevant.
7. If a total-loss claim is contemplated, confirm notification to the insurer and the handling of salvage, abandonment, and any required Notice of Abandonment.

Inability to relabel, rejection by a buyer, or brand policy alone does not automatically establish a Constructive Total Loss.

Standard Five Classifications of Freight Forwarder Involvement

The five classifications used in this article are not established by law or industry-wide consensus. They serve as an analytical framework within this series to clarify the scope of freight forwarder involvement.

Standard Five Classifications	Main Involvement in Label Damage Incidents	Central Focus of Liability Assessment	Main Documents
Simple Intermediary	Acts as an intermediary connecting the cargo owner with the shipping line, warehouse operator, insurance company, label supplier, or surveyor.	Whether the freight forwarder went beyond simple intermediation by assessing or guaranteeing the amount of loss, relabeling outcome, or saleability	Referral records, quotations, and emails
Cargo Transportation Service Provider	Provides cargo transportation services covering the transport segment in which the label damage occurred.	Contracted transport segment, packing conditions, handling instructions, incident notification, and obligations under the transport contract	Transport contract, booking documents, and work instructions
NVOCC / House B/L Issuer	Acts as the House B/L issuer and contractual party for the international transport.	House B/L terms, liability limits, notification deadlines, and claims handling	House B/L, Master B/L, and transport terms
Door-to-Door Single Contractor	Undertakes pickup, international transport, warehousing, delivery, inspection, and rework as an integrated service.	Scope of the integrated contract, subcontractor management, communication between operations, and evidence preservation	Comprehensive quotation, specifications, and subcontractor records
Agent/Coordinator for Specific Operations	Coordinates surveys, inspections, relabeling, quality checks, or claims adjustment within the specifically delegated scope.	Delegated confirmation items, scope of coordination, and final decision-making authority	Delegation records, confirmation requests, and work reports

Contracting Carrier and Actual Carrier are legal or contractual status concepts and do not replace the Standard Five Classifications used in this article.

Practical operations such as packing, storage, inspection, sorting, relabeling, repacking, and quality inspection do not by themselves constitute a sixth classification.

Example 1: Damage to Bottle Labels Due to Condensation Inside a Container

Imported bottled beverages were transported in a container in which condensation occurred. Some cartons became wet, and the bottle labels wrinkled, peeled, or became illegible.

The bottles, caps, and contents remained intact, and lawful replacement labels could restore the products to a saleable condition.

After confirming the insured perils and exclusions under the applicable ICC wording, the Label Clause may apply to reasonable costs attributable to the damaged quantity, including label printing, removal of damaged labels, relabeling, inspection, and repacking.

The number of wet cartons does not necessarily correspond to the number of bottles with damaged labels. Inspection must therefore be conducted at the individual-product level.

Where the contents are unharmed and relabeling is feasible, the assessment should focus on reasonable restoration costs rather than the total value of the products.

Example 2: Label Damage Caused by Packing Defects Before Attachment of Insurance

Canned goods were packed into cases without adequate dividers before the attachment of insurance. The products were able to move within the cases during transport.

Ordinary transport vibration caused the cans to contact one another, resulting in abrasion and damage to many brand labels.

In this situation, payment should not be determined solely by reference to the Label Clause. The possible application of the inadequate-packing or preparation exclusion under ICC 2009 Clause 4.3 must also be examined.

The key issues are whether packing was completed before attachment of insurance, whether it was sufficient for the ordinary course of transit, and whether the inadequate packing caused the label damage.

The Label Clause determines how covered label damage may be valued. It does not necessarily create coverage where the underlying damage is excluded.

Example 3: Dispute over Inability to Relabel and Constructive Total Loss

A tamper-evident label and manufacturing lot number were integrally applied to a product container. Water damage during transport made the markings illegible.

The manufacturer prohibited replacement of the label by a third party, making it difficult to return the product to its ordinary distribution channel.

The contents nevertheless remained intact, and the goods retained some residual value for alternative use after removal of the brand markings.

Total loss should not be determined solely by the inability to relabel. Repacking, alternative use, residual value, reconditioning costs, forwarding costs, and market value on arrival must also be considered.

When a Constructive Total Loss is contemplated, the cost comparison and reasonable-abandonment requirements under ICC 2009 Clause 13 must be confirmed.

Inability to sell through the ordinary distribution channel does not necessarily establish an Actual Total Loss or Constructive Total Loss for insurance purposes.

Cases Commonly Problematic in Practice

Case	Main Points	Key Reference Documents	Initial Response
The outer cartons became wet, but only some product labels inside were damaged	Difference between affected cartons and damaged product units	Unpacking photographs, product-level inspection sheets, and survey records	Do not declare the entire shipment a total loss; determine damage at the product-unit level.
The label was abraded, but all mandatory information remained readable	Degree of impairment, appearance standards, and reasonable relabeling cost	Comparison with intact products, buyer standards, and photographs	Classify the severity of damage and confirm whether relabeling or discounted sale is necessary.
Only the locally required expiration-date label became unreadable	Regulatory labeling requirements, possibility of relabeling, and affected quantity	Label draft, importer confirmation, and damage photographs	Confirm a lawful method of relabeling before disposal or rework.
Labels and contents were contaminated by leakage from other cargo	Separation of Label Clause damage from damage to the cargo itself and claims against the leakage source	Laboratory analysis, photographs, stowage records, and incident reports	Inspect the contents immediately and notify potentially responsible third parties.
Labels detached throughout the lot because of poor adhesion	Manufacturing defect, inherent characteristics, and whether any transport accident occurred	Same-batch records, manufacturing records, and pre-shipment photographs	Compare the affected goods with products from the same batch outside the insured transit.
Relabeling is prohibited by brand policy	Physical damage, commercial policy, residual value, and disposal method	Brand policy, disposal plan, and purchase quotations	Do not assume total loss; investigate alternative sale, alternative use, and residual value.
The insurer was notified after relabeling work had started	Pre-work condition, reasonableness of expenses, preservation of evidence, and prior approval	Pre-work photographs, work records, quotations, and notification records	Preserve the remaining evidence and coordinate with the insurer before further work.
Relabeling costs exceeded the market value of the damaged goods on arrival	Residual value, alternative disposal, Clause 13, and payment limits	Cost-comparison schedules, market value on arrival, and disposal quotations	Present alternative proposals to the insurer before continuing reconditioning.

Judgment Checklist for Freight Forwarder Practice

Confirmation Stage	Party to Confirm With	Points to Confirm	Actions If Problems Are Found
At Discovery of Damage	Cargo Owner, Warehouse Operator, Delivery Company	Condition of the labels, packaging, containers, contents, water damage, and contamination	Photograph individual products, cases, and pallets before any rework.
During Cause Investigation	Warehouse Operator, Shipping Line, Delivery Company, Surveyor	Water damage, condensation, leakage, abrasion, pressure, packing, and normal deterioration	Compare the damage with the documented pre-shipment condition.
When Confirming Clause 4.3	Cargo Owner, Packaging Contractor, Insurance Company	Responsible party, timing of work, attachment of insurance, and packing specifications	Distinguish independent contractors from employees and confirm causation.
When Confirming Quantity	Cargo Owner, Warehouse Operator, Surveyor	Total quantity, damaged quantity, unsaleable quantity, and quantity requiring rework	Prepare a product-level inspection sheet.
When Confirming Contents	Cargo Owner, Quality Control, Inspection Agency	Leakage, spoilage, deterioration, foreign-matter contamination, and container damage	Separate damage to the cargo itself from label damage.
When Confirming Legal Labeling	Cargo Owner, Importer, Quality Control	Ingredients, expiration date, importer, country of origin, allergens, and lot number	Confirm a lawful relabeling method.
When Mitigating Damage	Insurance Company, Surveyor, Warehouse Operator	Isolation, drying, sorting, relabeling, and notification to third parties	Record reasonable measures and expenses in accordance with Clause 16.
When Calculating Expenses	Label Vendor, Warehouse Operator, Insurance Company	Label production, removal, replacement, inspection, repacking, and inland delivery costs	Specify the affected quantity, unit price, work method, and necessity of each expense.
When Considering Total Loss	Insurance Company, Adjuster, Marine Lawyer	Recovery and reconditioning costs, market value on arrival, salvage value, and Clause 13	Do not determine total loss solely on the basis of buyer rejection or brand policy.
When Making Subrogation Claims	Shipping Line, Warehouse Operator, Delivery Company, Packaging Contractor	Responsible party, notification deadline, liability limits, and supporting evidence	Preserve subrogation rights in accordance with Clause 16.2.

Documents Important as Evidence

Document Type	Main Documents	Purpose of Confirmation	Notes
Insurance Documents	Insurance policy, ICC wording, Label Clause, and Brands and Labels Clause	Confirm coverage, exclusions, calculation method, and payment limits.	Review the official wording rather than relying on the clause title alone.
Damage Photographs	Photographs of products, labels, containers, cases, pallets, and the transport container	Confirm the extent, cause, and quantity of damage.	Retain comparison photographs of undamaged products.
Quantity Documents	Invoice, Packing List, inspection sheets, and quantity summaries	Determine total quantity and damaged quantity.	Record damage by individual product unit.
Label Documents	Label drafts, material specifications, adhesive specifications, printing records, and same-batch samples	Confirm label content, possible material defects, and whether replacement labels can be produced.	Preserve the pre-incident specifications.
Packing Documents	Packing specifications, internal photographs, worker identification, and work times	Confirm the requirements relevant to Clause 4.3.	Compare the packing time with the attachment of insurance.
Content-Condition Documents	Quality inspections, composition tests, container checks, and temperature records	Confirm whether the damage is limited to labels.	Verify whether the sampling method is representative.
Cost Documents	Quotations for relabeling, removal, inspection, repacking, and transportation	Confirm the necessity, unit price, and reasonableness of costs.	Separate loss-mitigation costs from ordinary operating expenses.
Residual-Value Documents	Buyback quotations, discounted-sale proposals, alternative-use proposals, and disposal costs	Confirm the partial-loss amount and whether total-loss requirements could be relevant.	Also confirm the value after removal of brand markings.
Notification and Claim Documents	Accident notices, claim letters, survey attendance notices, and deadline-management records	Preserve rights against third parties under Clause 16.2.	Distinguish an accident notice from a formal claim.

Items to Confirm with the Insurance Company or Insurance Agent

• The exact wording of the Label Clause, Labels Clause, or Brands and Labels Clause
• The scope of coverage for labels, capsules, packaging, brands, and containers
• Whether the damage must have resulted from an insured peril
• The relationship with ICC 2009 Clause 4.2, Clause 4.3, and Clause 4.4
• The treatment of costs for producing, removing, and replacing labels, inspection, and repacking
• The scope of reasonable loss-mitigation expenses under Clause 16
• The fact that Clause 17 preserves rights and is not an independent cost-indemnity clause
• Whether insurer approval is required before inspection or rework
• The method for determining the damaged quantity and whether a survey is required
• The handling of residue, brand removal, discounted sale, alternative use, and disposal
• Payment limits, deductible amounts, and the insured value of the damaged goods
• The treatment of Constructive Total Loss under Clause 13
• Accident-notification deadlines, formal-claim deadlines, limitation periods, and suit time limits

When to Consult a Maritime Lawyer or Insurance Law Specialist

• When the official wording or payment scope of the Label Clause is disputed
• When the responsible party, timing of work, or causation under Clause 4.3 is disputed
• When it is disputed whether relabeling costs are direct loss under the Label Clause or mitigation expenses under Clause 16
• When the boundary between brand policy and physical damage is disputed
• When an Actual Total Loss or Constructive Total Loss is claimed because relabeling is impossible
• When cost comparisons under Clause 13 or reasonable abandonment are disputed
• When damage to the contents, statutory-labeling issues, or product recall arises at the same time
• When pursuing high-value subrogation claims against shipping lines, warehouses, carriers, or packing contractors
• When food-labeling laws, import regulations, or the laws of multiple jurisdictions are involved
• When notification deadlines, claim deadlines, limitation periods, or suit time limits are approaching

Common Misunderstandings

Misunderstanding	Actual Consideration	Practical Point to Confirm
The Label Clause is a single, globally uniform clause.	Multiple wordings, including Labels Clause and Brands and Labels Clause, are used in the market.	Check the actual insurance policy and official wording.
If the outer carton is wet, all products inside have label damage.	Wet outer cartons do not necessarily correspond to the number of damaged product labels.	Inspect the goods at the individual-product level.
If the label is damaged, the entire sales value of the product is lost.	If the contents are intact and relabeling is possible, reasonable restoration costs will generally be the principal measure of loss.	Confirm rework costs, saleability, and residual value.
If the buyer rejects the goods, the loss is automatically a total loss.	Buyer rejection alone does not necessarily establish an Actual Total Loss or Constructive Total Loss.	Check alternative sales, residual value, and Clause 13.
All label damage is caused by a transport accident.	Damage may result from label materials, adhesive failure, manufacturing defects, normal aging, or inadequate packing.	Confirm the pre-incident condition, same-batch condition, packing, and accident evidence.
If there is a Label Clause, Clause 4.3 is irrelevant.	Even if the Label Clause defines the method of assessing damage, it does not necessarily displace the inadequate-packing exclusion under Clause 4.3.	Check the interaction between the clauses and all Clause 4.3 requirements.
All relabeling costs are paid under Clause 16.	First confirm direct compensation under the Label Clause. Clause 16 should be considered separately for reasonable expenses incurred to avert or minimize recoverable loss.	Confirm the purpose, necessity, and reasonableness of each cost.
Clause 17 covers relabeling costs.	Clause 17 provides that preservation measures do not constitute a waiver or acceptance of abandonment.	Confirm the basis for cost recovery under the Label Clause or Clause 16.
If relabeling cannot be carried out, the goods automatically constitute a Constructive Total Loss.	Clause 13 requirements must be satisfied, including the applicable cost comparison and reasonable abandonment.	Check recovery and reconditioning costs, residual value, market value on arrival, and abandonment.
If the contents are intact, there cannot be an insured loss.	If a label required for lawful or commercial sale is damaged by an insured peril, the Label Clause may become relevant.	Confirm the cause, extent of damage, and official policy wording.
If mandatory local labeling is unreadable, the goods must always be destroyed.	Lawful relabeling or repacking by the importer or manufacturer may be possible.	Confirm legal requirements, available rework methods, and saleability.
Photographs taken after rework begins are sufficient.	If the pre-rework condition is lost, proving the cause, quantity, and severity of damage becomes difficult.	Obtain photographs, survey records, and insurer instructions before rework.

Practical Points

• The Label Clause is not a single Institute standard clause included in the ICC wording.
• Names and wording vary, including Labels Clause and Brands and Labels Clause, so the official clause must be reviewed.
• If only the labels are damaged while the contents and containers remain intact, reasonable relabeling and restoration costs are the principal issue.
• Even where a Label Clause applies, confirm whether the underlying damage was caused by an insured peril.
• If inadequate packing or preparation is suspected, verify the responsible parties, timing, and causation under ICC 2009 Clause 4.3.
• Independent contractors are not included within the meaning of employees under Clause 4.3.
• Relabeling costs should first be examined as direct compensation under the Label Clause.
• Reasonable measures to avert or minimize recoverable loss may involve Clause 16.
• Clause 17 is not a cost-indemnity provision; preservation measures do not constitute a waiver or acceptance of abandonment.
• Damage limited to labels will generally be adjusted as a partial loss.
• Inability to relabel or refusal to sell does not automatically establish a Constructive Total Loss.
• Constructive Total Loss requires confirmation of the cost comparison, reasonable abandonment, and applicable insurance wording under Clause 13.
• The damaged quantity should be determined by individual product unit rather than by the number of affected outer cartons.
• Damage to the contents, containers, regulatory markings, commercial brand policy, and residual value must be assessed separately.
• Photographs, inspection reports, cost breakdowns, quality data, and notifications to third parties should be preserved promptly.

Summary

The Label Clause is a special clause that establishes a method for calculating indemnity when only labels, capsules, packaging, or brand markings are damaged on cargo whose labeling materially affects its marketability or value.

There is no single worldwide Institute standard wording called the Label Clause. Different wordings, including Labels Clause, Brands and Labels Clause, and Brands/Labels Clause, are used in the market.

The applicable markings, relabeling, repacking, reconditioning, brand-removal requirements, salvage value, and payment limits must therefore be confirmed from the actual insurance policy and official clause wording.

When only the label is damaged, the container and contents remain intact, and lawful and reasonable relabeling can restore the product to its pre-incident saleable condition, the amount of loss will generally be based on reasonable costs for new labels, removal of damaged labels, relabeling, inspection, repacking, and necessary transportation rather than the entire value of the product.

If the label damage was caused by inadequate packing or preparation, the relationship with ICC 2009 Clause 4.3 must also be examined.

Clause 4.3 requires confirmation of the packing condition, the person who performed the work, the timing of the work, whether the work occurred before attachment of insurance, and whether the inadequate packing caused the damage.

Sorting, segregation, drying, relabeling, and notification to third parties after the accident may involve ICC 2009 Clause 16 from the perspectives of averting or minimizing recoverable loss and preserving subrogation rights.

However, relabeling costs should first be examined as direct compensation under the Label Clause and should not all be classified automatically as Sue and Labour expenses.

Clause 17 provides that measures taken to save, protect, or recover the cargo do not constitute a waiver or acceptance of abandonment, or otherwise prejudice the rights of either party. It does not provide an independent basis for reimbursement of relabeling costs.

Where only the labels are damaged, the loss will generally be adjusted as a partial loss of the affected goods.

An Actual Total Loss or Constructive Total Loss does not arise automatically merely because relabeling is difficult or a buyer refuses to accept the goods.

When considering Constructive Total Loss under ICC 2009 Clause 13, the costs of recovery, reconditioning, and forwarding the cargo to the destination must be compared with its market value on arrival. Salvage value, alternative disposal or sale, reasonable abandonment of the insured property, and any required Notice of Abandonment must also be confirmed.

Freight forwarders and NVOCCs should neither dismiss label damage as insignificant exterior damage nor automatically treat it as a loss of the entire product value. The cause, responsible party, damaged quantity, condition of the contents, regulatory markings, cost breakdown, and salvage value should be recorded separately.

Final insurance coverage and liability are determined individually according to the actual Label Clause, applicable ICC clauses, insurance policy, cause of damage, damaged quantity, feasibility of reconditioning, salvage value, and available evidence.