In the shipping industry, with over 15 million trucks operating in the U.S. alone, it is inevitable that freight will be lost or damaged every once in a while. When this happens, people go through a process known as freight claims.
Freight claims are the industry-standard method for a shipper or consignor to claim the value of a lost or damaged shipment. Learn how freight claims work and the steps you should take to protect yourself in the event of a lost, damaged, or missing freight shipment.
What Are Freight Claims?
Freight claims are filed by a shipper or consignee if goods are damaged in transport, contaminated, lost, or delayed. Carriers are responsible under the law to cover for valid freight claims. Freight claims can also be made for the transport of goods in which the carrier overcharges the shipper.
Freight claims are something that every carrier may face in their carrier. Damage is possible due to uncontrolled circumstances like weather, an accident, or driver errors.
Understanding your legal obligations and rights ahead of time will help prevent problems down the road. The best carriers handle freight claims efficiently to maintain customer trust and high standards of reliability.
How Do Freight Claims Work?
Freight claims can be filed whenever goods are damaged or delayed in transport. In the case of damaged freight, the rights and responsibilities of shippers and consignees are laid out in the Carmack Amendment.
To file a claim, the burden of proof lies with the shipper or consignee. To prove a claim, the shipper must demonstrate:
- The shipment was received by the carrier in good condition and without damages.
- The delivery when it arrived was damaged, contaminated (such as with rodents or water), delayed, or lost.
- The amount or value of the goods damaged, delayed, or contaminated.
The standard business practice is to file the claim within 9 months. This is usually stated in most U.S. carrier contracts.
What Are the Types of Freight Claims?
There are a variety of freight claims, based on the specific issue. These include:
- Damage: Damage can be due to improper packing, loading, or unloading. For damage claims, the damage should be visible and is best noted on receipt. Be sure to document the damage on receipt and file the claim within 9 months. The consignee should pay the freight charges, and they should be included in the claim total reimbursement.
- Loss: Loss claims can be filed whenever the goods or shipment does not arrive. Loss claims are more challenging to file because the shipper will need to prove that the package was given to the carrier yet never delivered to the destination.
- Shortage: A shortage claim is the result of insufficient delivery. This can be part of a shipment or less than the projected total amount. Shortage claims can happen if the packaging is not intact or part of the freight is missing. In case of shortage, be sure to have the driver sign the order document acknowledging the shortage.
- Concealed damage or shortage: Concealed damage or shortage is just like it sounds. When the damage or shortage is not immediately evident at delivery, due to packaging or other reasons, a concealed damage or shortage claim can be filed. Take photos of the damage or shortage. Also, make note of the fact that most carriers require these claims to be made within five days.
- Carrier Accident: If the carrier is in an accident during transport and the freight is damaged, you can file a claim. The same industry standards of filing within nine months apply. This is one of the simplest claims to prove as the carrier will have a record of the accident.
- Contamination: In case the freight is contaminated during transport, you can also file a claim. Common contamination issues include mice, insects, water, or other environmental contamination. Document these claims on delivery and have the driver sign to confirm the contamination.
How to Handle Freight Claims in 8 Steps
If you’re faced with damaged or lost freight, be sure to follow these steps to get the full claim value.
Step 1: Inspect Freight Upon Arrival
It is important to inspect freight on arrival and not to assume everything is intact. Check for damage or shortages. Compare the bill of lading with the delivery. Take pictures if possible to document any issues.
Step 2: Keep the Freight
Even if the freight is damaged or there is a shortage, you should keep the freight and pay the delivery charges. Never discard any freight until the claim has been resolved to satisfaction. Not only is the freight evidence of the claim, but the claim settlement may require you to return the freight, so it is important to keep it until a settlement is reached.
Step 3: Mitigate the Losses and Minimize the Claims
The Carmack Amendment stipulates that all parties involved are to claim mitigation in good faith. This means that both the carrier and the shipper must do everything in their power to mitigate the loss and reduce the impact of the claim. In case of claims regarding contamination or damage, this can include reporting the part of the shipment that is unharmed.
Step 4: Pay the Freight Charges
Even when you receive damaged goods it is important not to reject the freight. Pay the freight regardless of damages or shortages. This is part of the good faith agreement and will help you in your final claim. You can add the freight charges to the claim amount. If you do not pay the freight charges it can end up working against you.
Step 5: Understand Your Bill of Lading
A bill of lading is an agreement between the shipper and the carrier. This legal document details the type and quantity of the freight, as well as the delivery destination and any other agreed upon terms. The bill of lading is essential in any claims, especially loss or shortage claims. If you see damage, shortage, or contamination of delivery, ask the driver to sign the bill of lading to confirm the issue. This will facilitate the final claim.
Step 6: Take Immediate Action
If there is any issue with the freight, take immediate action to file a claim. In the case of shortage, the claim should be filed within 5 days. For damage, claims must be submitted within 9 months. Some carrier contracts will stipulate a shorter time to file a claim.
Step 7: Know the Maximum Freight Claims Liability Amount
Each country has its own max freight claim liability amount. In the United States, the maximum claim is $25 per pound of goods, while in Canada, it is CAN $2 per pound of goods. However, the maximum will be affected by the type of goods being transported, the carrier, and even the freight volume.
Step 8: You Cannot Profit From Freight Claims
Freight claims are disputed in good faith. You cannot profit from freight claims. The value rewarded is dependent upon a number of variables, including the value of the goods and expected cost to replace the goods.
That means if the freight is purchased at wholesale prices, you cannot expect to be reimbursed at the retail value, even if that is the price you would sell the goods.
Freight Claims Summary
Lost, damaged, or contaminated freight is a part of the shipping industry. It benefits both the carrier and the shipper to handle these claims in good faith and to mitigate damage or loss. Freight claims laws like the Carmack Amendment outline how these freight claims can be settled.
With prompt action, including careful inspection of freight on delivery and documentation of any issues, freight claims and cargo claims can be handled efficiently. To get the maximum value from your claim, be sure to follow the steps outlined here.
FAQ
Yes, you can refuse a damaged shipment. However, in many cases it is better to accept the shipment so the goods are in your control while the claim is processed and the situation can be resolved.
According to the Carmack Amendment, the carrier has liability for damaged cargo. Keep in mind that the claimant needs to meet a burden of proof. This includes a merchandise invoice noting the value of the damaged commodity, a replacement invoice or repair bill, and a photo of the damaged freight.
Carriers must acknowledge receipt of freight claims within 30 days. They have 120 days to either accept and pay or reject a freight claim.
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