The starting point for rail and motor carriers are two federal statutes, one for rail and one for motor that are colloquially known as the Carmack Amendment. This can be very challenging for international movements involving multiple carriers and various modes. For instance, UPS is licensed as a motor carrier, air carrier, and a non-vessel operating common carrier (NVOCC).Īccordingly, an important initial step in analyzing any claim is to determine which mode the carrier was operating in at the time of the loss and thus which liability regime would apply. Now, many entities operate in more than one mode. Motor, rail, domestic water, international ocean, domestic air, or international air all have different time limits for filing claims and different deadlines for initiating lawsuits if a claim is denied.Īt one time the majority of carriers only operated in one particular mode. After establishing these three elements, the burden of defense shifts to the carrier.ĭifferent rules apply depending upon modeĪnother very basic principle that must be kept in mind when dealing with a claim is that different legal principles and rules will apply depending upon the mode of transportation. The claimant must prove good condition at origin, damaged condition at destination, and the amount of its damages. Generally speaking, in order to prevail on a claim, the claimant has the initial burden of proving its claim. The term “incorporate by reference” simply means that the contents of one document are incorporated into the document at hand for example a bill of lading, simply by referring to the other document such as the carrier’s tariff. These bills will typically incorporate, by reference, the terms of the carrier’s tariff or service guide or otherwise titled terms and conditions. The contract for carriage can either be an individually negotiated contract between the shipper and the carrier or, if none, the bill of lading, waybill, ocean bill, or other document issued by the carrier. When the cargo is lost or damaged, the basic contract for carriage has been breached, giving rise to the shipper’s claim. Implicit in this arrangement is that the cargo will indeed arrive at destination in an undamaged condition. In return, the shipper agrees to pay the carrier. This arises out of the fact that the essence of a transportation contract is that the carrier agrees to move a piece of cargo from point A to point B. The starting point in understanding cargo claims is to understand that a claim is based upon a breach of contract by the carrier, not whether the carrier was negligent. George Pezold, co-author with Bill of Freight Claims in Plain English, emphasizes that: “Knowledge of the basic legal distinctions and the applicable laws and regulations is critical in dealing with cargo claims.” My goal over the next few pages is to provide transportation professionals with a refresher course in the basic legal principles relating to claims for cargo loss and damage. However, just because something is difficult does not mean that it can be ignored. For most retailers, manufacturers, and distributors, the transportation function is an unwanted headache-and claims represent a migraine. For carriers, whose core business is transportation, the processing of claims is an integral part of their business, and all but the smallest of carriers are quite knowledgeable and very competent when it comes to defending against claims. Second, Bill believed that this knowledge is vital for shippers because they’re on their own when it comes to claims. As depicted in the accompanying chart, if your company operates at a 5 percent profit margin, to recoup the net revenues that would be lost by failing to recover a $1,000 cargo claim, it would have to generate $20,000 in sales! Unrecovered claims have a direct impact upon the bottom line of a company-and the tougher the economic times and thinner the margins the greater the impact. I believe that there are at least two reasons why Bill felt so strongly about the importance of understanding claims. Augello, co-author of Freight Claims in Plain English, had a passion about this topic as few others have. However, this does not mean that an understanding of claims isn’t vital to running an efficient transportation and logistics department. It’s been said that the one area that most shippers are the least knowledgeable in is that of claims for cargo loss and damage.
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