Freight claim

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A Freight claim is a legal demand by a shipper or consignee to a carrier for financial reimbursement for a loss or damage of a shipment.[1] Freight claims are also known as shipping claims, cargo claims, transportation claims, or loss and damage claims.

The intention of a freight claim is for the carrier to make the shipper or consignee “whole” – that is to say, their position is as good as it would have been if the carrier had carried out their tasks according to the Bill of Lading.[2] For this reason, claimants are generally expected to file a claim to recover their costs, not including profits, although in some rare cases claiming profits may be considered acceptable. [3]

Claimants are also expected to take reasonable measures to mitigate the loss. For example, if the damaged product has retained some value, the carrier would only be required to pay for the difference between the original value and the damaged value. The claimant would then be free to salvage the damaged product by selling it at a reduced cost.[4]

Filing a Freight Claim[edit]

Each carrier typically provides a form specifically for filing freight claims. However, by law, no particular form is necessary, as long as the following four details are present:

  • The shipment must be specified
  • The loss or damage type must be specified
  • The total of the amount claimed must be specified
  • A clear demand for payment must be present

Information to identify the shipment may include the freight bill PRO #, the vehicle number, and the delivery date.

In addition to this basic information, the following documentation should also be provided:

  • Shipment invoice
  • Delivery receipt
  • Bill of lading
  • Invoice showing the value of the product being claimed
  • Invoices for costs incurred (i.e. repairs or replacements of the product)

Additional supporting documentation may also be included or required.[5]

Filing Deadlines[edit]

Different rules and filing deadlines will apply depending on the shipping mode. This is due to differences in how specific shipping modes are governed.

Rail and motor carriers are governed by the Carmack Amendment. The Carmack Amendment states that claimants have a minimum of 9 months from the date of delivery to file a freight claim.

Conversely, ocean carriers that service the US are governed by the Carriage of Goods by Sea Act (COGSA). This act requires that claimants file a claim within 3 days of delivery.[6]

Consignee and Shipper Responsibilities[edit]

At the time of delivery, the consignee should examine the shipment for loss or damage. If there is evidence of loss or damage, the consignee should note it on the delivery receipt; this will be used as evidence to back up the claim.[7] The consignee is still required to accept the shipment, even if there is evidence of loss or damage. If the consignee does not accept the shipment they can no longer be a claimant as they are no longer party to terms of the bill of lading

If the consignee signs off on the delivery receipt and discovers a claim later, then the burden of proof falls to the shipper or consignee to prove that the damage was in fact caused by the carrier as opposed to the shipper or consignee.[7] When damage is not immediately recognizable, this is known as a concealed damage claim.

The shipper is required to pay the shipment invoice in full, regardless of whether or not the shipment was lost or damaged. The appropriate course of action is for either the shipper or the consignee to then file a freight claim against the carrier for reimbursement.

Carrier Liability[edit]

How much the carrier is liable for also depends on the shipping mode and the governing bodies. The Carmack amendment states that motor or rail carriers are liable for the full loss. Conversely, COGSA states that the carrier is liable for no more than $500 per package.[8]

There are four scenarios in which a carrier is not deemed liable for damages to goods:[9]

  • Act of nature
  • Act of the public enemy
  • Fault of the shipper
  • A defect in the goods themselves

Further reading[edit]

Freight Claims in Plain English (4th ed. 2009) by William J. Augello & George Carl Pezold

References[edit]

  1. ^ Merriam Webster Dictionary - Online Edition. http://www.merriam-webster.com/dictionary/freight%20claim
  2. ^ TransportGistics. Over, Short and Damage Claims or Loss and Damage Claims http://www.insourceaudit.com/Whitepapers/ldclaims.asp
  3. ^ TranSolutions Inc. Question: Can You Profit From a Freight Claim? http://www.transolutionsinc.com/blog/question-can-you-profit-from-a-freight-claim/
  4. ^ LeanCor Supply Chain Group. Freight Claims: How Much Are They Really Costing You? 2013. http://leanlogisticsblog.leancor.com/2013/02/13/freight-claims-how-much-are-they-really-costing-you/
  5. ^ TranSolutions Inc. How To File A Freight Claim – The Beginner’s Guide http://www.transolutionsinc.com/blog/file-freight-claim-beginners-guide/
  6. ^ Logistics Management Logistics and the Law: Freight claims in plain English page 1 http://www.logisticsmgmt.com/article/logistics_and_the_law_freight_claims_in_plain_english/D1/
  7. ^ a b Broussard, Steve. Back to Basics: Receiving Procedures That Will Save You Money TRANSDIGEST-Volume XVII, Issue No. 175, September 2012
  8. ^ Logistics Management Logistics and the Law: Freight claims in plain English page 2 http://www.logisticsmgmt.com/article/logistics_and_the_law_freight_claims_in_plain_english/D2/
  9. ^ Gregory v Commonwealth Railways Cmr (1941) 66 CLR 50 at 74