For obvious reasons, no one wants to receive cargo claims. More so, carriers who carry the cargo from A to B. It could possibly be the reason why there is a lot of misunderstanding among BCOs and OTIs about which documents are really necessary to submit and which are completely irrelevant in the process of claims recovery.
Below are some simple guidelines for claims handling and submissions. I hope this will help to make the claim submission process as efficient and as simple as possible for you.
1) Be Aware of the Preliminary Notice of Claim
The Hague and Hague/Visby Rules art. 3(6), states
Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of
discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of
carriage, or, if the loss or damage be not apparent, within three days, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading.
Today it is almost impossible for cargo receivers within a period of 3 days to know if cargo inside of the container is damaged. That is the primary reason why shipping lines reject any claim submitted after this period. Claim defense, if submitted after the 3 day period, is more difficult and takes more time.
To overturn this current situation it has become industry practice for shippers to notify shipping line before cargo arrival or within 3 days after discharge about the potential damage and invite them to attend de-stuffing at the receiver’s warehouse (regardless if the receiver appoints the surveyor or not, regardless if the cargo has actually been damaged or not).
This notification legally puts the burden of proof on the shipping line to prove that cargo damage or loss was not caused by the carrier’s negligence, serves as a protest in due form, and acts as a timely survey invitation.
Feel free to use the below notification to the shipping line template for your shipments. Just by doing this, a receiver increases their chances to receive favorable compensation substantially in case cargo appears to be damaged or lost.
LETTER OF PROTEST
NOTIFICATION OF SURVEY
|Container reference number(s)|
|Seal number upon loading|
|Port of discharge /Final
We are contacting you as cargo receivers with regards to the above referred shipment. As a result of improper transit conditions and do hereby hold shipping line liable for damages and subsequent loss incurred.
In view of the above, we, as cargo receivers and without prejudice to the rights and recovery of interests involved, hereby hold you fully liable for all the damages and/or losses and financial consequences that may result from such damage.
Your failure to acknowledge and/or to confirm and/or to contest the above claim protest will be considered as consent and acceptation from your part.
In addition, in order to investigate the exact circumstances, nature, extent and cause of the reported damage to the above-mentioned shipment, we hereby invite you to attend the joint survey which will be held at the following address:
Address Line 1
Address Line 2
Address Line 3
Please consider this letter as a legal protest in due form.
2) On taking delivery of the cargo
- Check the container exterior ;
- Check if the original container seals are intact ;
- For reefer containers, check temperature and ventilation settings
3) Notification and survey
- Notify your insurance underwriter when the loss extent is above the deductible. Otherwise, you risk damaging your loss ratio and not being paid by insurer anyway.
- Ensure you are in the legal position to claim – you are as a receiver mentioned on BL or BL was duly endorsed to you.
- If the damage is excessive or cargo description, segregation, loss assessment require expert knowledge for example pharmaceuticals, foodstuff, invite surveyor. Make sure Surveyor attends a joint survey and inspects containers together with the cargo. There is little benefit from the inspection when Surveyor arrives after cargo is destuffed and the container is not available for inspection.
- Take photographs and document the extent and type of damage to the goods and container(s):
Action Step 1. To collect proper photographic evidence you or your team need only a smartphone these days.
Action Step 2. Take pictures of container: make sure that the container number is clearly visible on the door and side panel. Then take pictures evidencing that container was damaged (holed, bent, dropped, corner post damages, etc), poor condition (heavy rust, dents, old door gaskets, etc) or was submerged in water (visible water lines on a side panel, etc). Pictures should be taken from outside and inside the container.
Action Step 3. The next picture has to show how cargo was stuffed inside the container (you present evidence, that shipper/exporter fulfilled the obligation to pack and stuff cargo properly at the time of loading).
Action Step 4. Try to show the extent of damage when taking the picture. Was it only 1 bag of rice soaked in the water or half of the container?
Action Step 5. Take all the pictures before you return the empty containers to the container yard. If possible, put the time stamp on each picture and send it immediately to the carrier together with the claim!
4) Necessary documents
Documents that are required to be sent to the shipping line based on international conventions.
We assume that you already sent the notification to the shipping line described in the first paragraph. In addition, the Claimant has to provide:
- Copy of BL (proving the fact shipment took place and you are the cargo owner), if BL was To order, please send a recto-verso copy showing that cargo was duly endorsed to you. If you are claiming as a freight forwarder or third-party service provider, do not forget to submit a Letter of Assignment evidencing your legal right to claim.
- Packing list.
- Commercial invoice.
- Damaged cargo and damaged container pictures.
- Description of the damage: water damage (water ingress or flooding), physical damage ( container mishandled during loading or discharging operations), reefer damage, loss (cargo pilferage mainly).
- Loss breakdown. Legally, shipping lines have to reimburse sound market value (if you can prove) or commercial invoice value, freight, and cargo insurance if the cargo was insured. Please bear in mind that survey fees are not recoverable.
Below are the documents which might not immediately available to you, so you can submit it later:
- Survey report (if you have it. See above part 3)
- Proof that you mitigated loss (salvage invoice) or evidence that cargo is a total loss (destruction certificate).
5) Not so vital documents
Sometimes shipping lines can ask the claimant to provide more documents, which may not be really relevant to the claim investigation. Like the Gate out documents. Carriers collect these documents at their side, thus there is no need to ask you to provide the same. Unless you have a dirty interchange receipt, evidencing that container was discharged from vessel damaged.
6) Time limitations
All claims will be subject to limitations of time. It is your responsibility to review the BL terms and familiarise yourself with the applicable limitation of time. In the event that it is not possible for the claim to be resolved within the limitation of time, an extension of time may be requested. The countdown starts with the day of delivery at the receiver’s warehouse.
The steps shipping line will take afterwards include:
- Acknowledge receipt of your claim notification and provide a reference number for further correspondence;
- Engage a surveyor if necessary; if the damage is below $15,000 most of the time shipping lines do not appoint Surveyor.
- Initiate an investigation of the cause of damage;
- Awaiting your sufficient supported and quantified claim;
The steps you should be taking include:;
- Follow up on your claim weekly ;
- 85% of the claims submitted to shipping lines become time-barred and shippers get 0 compensation ;
- Make sure your cargo claim does not fall into this category
Improper handling of freight claims can be very expensive, time-consuming, and frustrating and should be avoided if possible. The more knowledgeable you are about the ins and outs of the claims process, the better equipped you will be to resolve the matter without entering litigation or absorbing losses in full.
I would like to hear your experience when you submitted a cargo claim for the compensation to the shipping line.
About the Author
Lina Jasutiene is an entrepreneur, international shipping lawyer, an expert in marine insurance, and cargo claims with strong business acumen.
Prior to founding Recoupex to fix the cargo claims refund experience in global trade, Lina worked with one of the biggest shipping lines, where she witnessed first hand the implications of unrecovered claims for cargo owners and insurers.
Lina is passionate about merging technology and industry expertise to create a radically better customer experience and to substantially reduce losses and increase cost savings for marine insurers and cargo owners.
Recoupex is a technology company helping customers globally to obtain the compensation they are entitled to when cargo is lost or damaged in transit.
Disclaimer : The opinions expressed in this article are that of the author and does not purport to reflect the opinions or views of Shipping and Freight Resource.. The intention of this article is to provide guidance, knowledge and information and is not offered as legal advice or legal opinion.. If you require legal advice or opinion, specialist advice should be sought about your specific circumstances..