Lost or Damaged Cargo Can Cost You Millions: Are You Protected?
As a business owner who imports and exports a large amount of goods, you rely heavily on transportation and freight services. Furthermore, you place a great deal of trust in the companies that perform those services for you.
Understanding Liability for Lost or Damaged FreightLost or damaged cargo poses a serious hit to businesses. They have to cover the financial costs of the cargo, including supply interruption, higher insurance claims, expedited freight costs (to make up for the lost or damaged cargo), lost revenue from cancelled deliveries, and a host of other expenses. In the end, lost or damaged cargo can end up costing a company millions of dollars--money that they did not and should not have had to account for.
According to 49 U.S. Code ? 14706, Section (a) - General Liability,
"A carrier providing transportation or service subject to jurisdiction under subchapter I or III of chapter 135 shall issue a receipt or bill of lading for property it receives for transportation under this part. That carrier and any other carrier that delivers the property and is providing transportation or service subject to jurisdiction under subchapter I or III of chapter 135 or chapter 105 are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this paragraph is for the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) another carrier over whose line or route the property is transported in the United States or from a place in the United States to a place in an adjacent foreign country when transported under a through bill of lading and, except in the case of a freight forwarder, applies to property reconsigned or diverted under a tariff under section 13702. Failure to issue a receipt or bill of lading does not affect the liability of a carrier."
In essence, this law states that any freight carrier need provide a bill of lading - or a receipt of pickup - for any property that it picks up directly from a manufacturer, business entity, or another freight carrier, and it must deliver that property to the proper jurisdiction. Should the property be lost or damaged along the way, the freight carrier is liable, whether they have the bill of lading or not.
There are exceptions to this law, however. Under that same law, under Section(c), Special Rules, subsection 1.A Shipping Waiver, a carrier may establish rates for the transportation of property under which the liability of the carrier is limited to a value established by a written or electronic agreement or contract, and if that value would be reasonable under the given circumstances. Most freight carriers these days smartly include a waiver in their contracts to protect themselves from huge losses and damages. That is why it is extremely important to thoroughly understand your contract terms before engaging in business with any freight carriers.
Protection Against Lost or Damaged CargoDue to the protective measures often included in freight carrier contracts, it is oftentimes difficult for clients to file successful claims against the carrier. Because of this, we recommend taking preventative measures in order to protect your cargo from physical or financial loss. Some protective measures we regularly see businesses take include:
1. Hire reliable contractors. An insurance claim for lost or damaged goods is worthless if the contractor that you hired to transport your goods does not have insurance coverage to back up the claim.
2. Prepare the shipments yourself. Depending on what you sell and how many items you sell, it may be difficult for the carriers to properly package your cargo. Additionally, some packaging instructions may be unclear to the individuals that work in the shipping warehouses. In order to avoid any mishaps due to packaging, try to package the shipments yourself, that way you can ensure that each product is packaged safely and to your standards.
3. Know your contract terms. This was mentioned above, but we feel it warrants a second mention. Knowing your contract terms can save you a lot of headache in the long run, as a contract will typically state who is liable for lost or damaged cargo.
4. Inspect your cargo. It is your responsibility - or the recipient's responsibility - to make a visual inspection of the cargo upon delivery, and before signing off on the delivery. Note any signs of loss, damage, or tampering, and take pictures whenever possible.
5. Insurance. Talk to your insurance company to see if your coverage applies to the transportation and storing of cargo. If it does not, look into getting adequate coverage before scheduling any shipments or deliveries.
6. Issue written instructions. You do not want to get into a "he said, she said" battle with the carrier, so eliminate that potential headache by ensuring that every single one of your instructions is in writing somewhere. If you requested additional insurance from the carrier, make sure the request is documented in a receipt; if you requested that a particular product be packaged with extra padding, or stored a certain way, ensure that you have those instructions documented, along with the carrier's consent to abide by such instructions.