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Freight claim laws: The various laws you need to know

Freight claim loss is almost a taboo subject in modern shipping. No one wants to touch it, but it’s important to know which freight claim laws govern certain modes of transportation, allowing everyone to understand when and if a claim is appropriate. Let’s look at some of these freight claim laws and what they mean for freight transportation liability.

The Carmack Amendment

The Carmack Amendment is among the top governing legislation of freight claims laws. It protects buyers and sellers against undue damage on the part of the carrier. However, an Act of God, a public enemy, a shipper’s negligence, government-issued policies and inherent vice of goods can exempt carriers from carrying the responsibility of liability if a freight loss occurs, putting the pressure on for shippers to follow best practices in shipping. The mode of transportation dictates additional stipulations. Yet, it also means that carriers have a duty to disprove allegations of negligence, so shippers need to understand their own responsibilities with respect to proper packaging and selection of transit modes. Some commodities, such as livestock, can also fall under the inherent vice or nature of shipped goods

Carriage of Goods by Sea Act (COGSA)

The COGSA dictates international ocean shipping liability, comparable to the Carmack Amendment. However, an ocean carrier has up to 17 possible defenses, but a given carrier must also show that the carrier is free from any negligence that could have resulted in damage. Under the Carmack Amendment, as explained in Part II of the Carmack Amendment post, buyers have up to nine months to file a claim. But, the COGSA only allows three days from delivery, reports Brend WM. Primus, J.D., to file.

This means goods transported by ocean must be inspected at the earliest possible time upon delivery, if not immediately upon delivery, to identify possible damage and begin the claims’ process. If the claim is valid, COGSA only allows for one year to file a legal suit for damages, depending on the scope of damages, unlike two years allotted under Carmack. Furthermore, the COGSA limits liability to $500 per package, so larger, more expensive items may be riskier to ship via ocean-vessel.

Air Cargo

Air cargo liability laws are broken into international and domestic categories. Depending on the air carrier used, the carrier’s specific tariff classification for a shipment sets the limits of liability. Thus, limitations may be seven days or less, and the financial liability may be less than $50 per package. This means that shippers must take on the responsibility of actively preventing damage from occurring through proper packing, packaging and stacking of air shipments.

Concerning international air shipments, the limitation sits at $12.95 per kilogram, which converts to approximately $5.87 per pound, and a claim’s filing window of 14 days from delivery. If a shipment is delayed, the filing window may be extended up to 21 days. Since both air and ocean shipments have specific cargo limits of liability, how does a seller protect himself if damage occurs that is outside of the carrier’s liability?

Insurance and Carrier’s Limit of Liability

Insurance is the answer. But, it is important to differentiate between cargo insurance and cargo liability insurance. The latter refers to the insurance purchased to cover a carrier’s defined liabilities with its respective laws. However, high-value shipments, such as electronics and heavyweight items, need to be protected against damage. Therefore, carriers often offer cargo insurance to provide added peace of mind to shippers. Of course, shippers must pay for cargo insurance as part of the freight bill, but the protections it provides can go a long way if damage does occur, even if it is the fault of the carrier, when a shipment’s value exceeds the specified limits of liability.

What Does It All Mean?

In general, the Carmack Amendment governs domestic, on-ground shipments, and other freight claim laws govern ocean and air transport limits of liability. Since a typical shipment in modernity could easily involve a combination of modes of transportation, an intermodal shipment, it is important that you understand how these laws translate into the value covered by the carrier without purchasing cargo insurance.

If you do have to file a claim for carrier-related damage, remember to include the original invoice, the original receipt for the paid freight bill and a repair or replacement invoice when filling freight claims. This will speed the claims’ approval process and help to prevent further delays or setbacks. Thus, many sellers opt to work with third-party logistics providers to handle all claims and freight loss issues. But how do freight loss laws affect intermediaries and third-party entities? Work with a company who can help you navigate these laws, such as Cerasis, and can offer turn-key freight claims management.

Filed Under: Regulation