Each year, around 1,390 shipping containers that are transported via container ship are lost, with an estimated total value greater than four trillion dollars. Though this number may seem unrealistic, recent events suggest otherwise. In December 2020, ONE Apus, a container ship registered in Japan, lost more than 1,900 containers following a storm in the mid-Pacific Ocean.
This goes to show that no matter the circumstances, every batch of goods that are shipped has the possibility of being damaged or lost. Depending on the value or quantity of goods that you’ve shipped, it can lead to great financial loss and/or strained relationships with your customers. With such loss, adequate reimbursement is essential.
This is why it’s important for cargo owners to be informed about making freight claims. In this article, we will tell you all the fundamentals you need to know, along with some helpful pointers.
Let’s get started!
1. The Term “Freight Claim” Is Interchangeable
A freight claim is also known as a cargo claim, shipping claim, or transportation claim. These claims are a kind of legal demand typically made by cargo owners against the carriers or transport companies because of damage or loss of shipment.
2. There Are Four Main Types of Freight Claims
You will be able to file a damage claim if physical damage to the shipment packaging is visible. This needs to be noted and documented by the consignee on the proof of delivery document.
A loss claim can be filed in the event that your shipped goods are lost in transit. To make this claim official, documentation (i.e. the original bill of lading) must indicate that the shipment was picked up but never arrived at the destination.
This kind of claim can be made if the packaging is not intact and if some cargo is clearly missing. On the documentation side, the amount specified on the bill of lading does not match the amount that is delivered.
Concealed Damage or Shortage Claim
There is no way to conceal lost goods – but there is a way to conceal damaged cargo or the shortage thereof. This is why this type of freight claim may be the trickiest of them all. Upon a surface inspection of the delivery by the consignee, everything may seem alright and the proof of delivery might be signed without questions asked. Signing the proof of delivery, however, can be detrimental to the concealed damage/concealed shortage claim.
This is why it’s crucial that consignees first inspect the freight and match it with the bill of lading to make sure that everything is okay before signing the proof of delivery. If a concealed shortage or damage is found, this should be documented on the proof of delivery – noting that the damage/shortage was evidently concealed.
3. Documentation Is Vital to Filing Freight Claims
In the previous section, we mentioned the role of documentation for each and every type of freight claim. This is because documentation is vital. It’s always advisable to inspect freight thoroughly before signing the proof of delivery – especially since the damage or shortage can be concealed.
The most important documents to have for filing freight claims include:
- A copy of the original bill of lading
- A copy of the invoice stating the value of the shipment
- Documentation on the proof of delivery regarding damage/shortage
- A written statement of loss, damage, or shortage
4. Time Is of the Essence When Filing Freight Claims
Another key element to be mindful of is the time frame. As we talked about before, concealed damage/shortage claims are the trickiest to prove. It is advisable to send such claims within 24 hours. Meanwhile, it is recommended that claims for damage or shortage be filed within the next 60 days. Lastly, claims for the loss of the entire shipment should typically be filed within 9 months. However, even with specified time frames in place, it’s highly recommended to file the claim as soon as possible.
5. Carrier Legal Liability is Limited – and So Is the Reimbursement Cargo Owners Will Get
Carrier legal liability only applies if there is sufficient proof and documentation that the damage, shortage, or loss was due to the carrier’s negligence. This means that loss, damage, or shortage in cargo due to other factors (accidents, heavy weather, and/or theft) are not considered as carrier’s liabilities.
Then there’s the matter of reimbursement. As a shipper or consignee, you may see freight-forwarder insurance as part of the quote from the carrier/transport company. You might then think that this is sufficient protection for any kind of damage, loss, or shortage. Though this does provide some protection, it may not always be sufficient. Freight-forwarder insurance is meant to protect carriers/transport companies from liability not factors like accidents, heavy weather, and/or theft.
Lastly, if the carrier is found to be negligent, even with freight-forwarder insurance in place, cargo owners will only be only reimbursed a fraction of the amount – typically based on the weight of the goods instead of the cargo’s full value.
6. Cargo Insurance Can Give You Better Reimbursement
For cargo owners, freight claims are a stressful process. The point of making claims is to get sufficient reimbursement for damaged or lost goods, however, without the right insurance in place, such claims will only, at best, yield a small fraction of the original value.
This is where cargo insurance comes in. Cargo insurance protects you for the full value of your goods in the event of cargo loss or damage. The best part is, this insurance does not need incidents of carrier negligence. Cargo insurance can provide coverage for various other causes, such as faulty loading/unloading, accidents, fire, theft, heavy weather, and other natural disasters.
Check out this article to learn more about the differences between freight-forwarder insurance and cargo insurance.
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