What are the seller’s liabilities for shipping damage?

Damage to your product during shipping or transit is something that can happen regardless of precautions taken.   Minimizing the risk of damage occurrence and ensuring that your product cost is 100% covered by the carrier or added insurance are probably the best safeguards for a seller.

Who is liable for shipping damage?

From the simplest standpoint,   the carrier has responsibility and liability when they take control of cargo from the seller. The buyer takes responsibility when it signs off on the shipment after delivery by essentially stating the cargo was in good condition when they received it.

To what degree a carrier accepts liability has a lot of qualifiers:

If the contract is FOB (Freight on Board) then the seller loads the goods at its own risk and can be held responsible for negligence in loading.

After loading, the carrier has accepted liability for damage, but under most standard contracts and laws, the carrier is not liable for damage due to the following:

• Acts of nature
• Acts of enemies of the public
• Inadequate packaging
• And a host of other possibities that may be summarized from the saiasecure.com website section titled “Carrier Liability For Cargo Loss and Damage Claims and Limitations of Liability”   Source: “Saia shall not be liable for any loss or damage to a shipment or for any delay caused by an act of God, the public enemy, the authority of law, the inherent vice of the goods or the act or default of the shipper. The burden to prove freedom from negligence is on the Carrier or the party in possession.”
• In cases of ocean cargo, there are a few more provisos that come into play. The following is part of a contract provision of DSV entitled: “Understanding Liability, Insurance and Claims” – https://www.us.dsv.com/~/media/US/Files/pdf/airfreight/Understanding-Liability.pdf.   Damage caused by the following are considered out of carriers control, thereby excusing liability:

“1. Act of neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship.

2. Fire, unless caused by the actual fault of the carrier.
3. Perils, dangers and accidents of the sea or other navigable waters.
4. Acts of God.
5. Acts of war.
6. Acts of public enemies.
7. Arrest or restraint of princes, rulers, or people or seizure under legal process.
8. Quarantine restrictions.
9. Act or omission of the shipper or owner of the goods, his agent or representative.
10. Strikes, lockouts, stoppage or restraint of labor from whatever cause.
11. Riots or civil commotions.
12. Saving or attempting to save life or property at sea.
13. Inherent vice, defect or quality of the goods.
14. Insufficiency of packaging.
15. Insufficiency or inadequacy of marks.
16. Latent defects not discoverable by due diligence.
17. Any other cause arising without the actual fault and privity of the carrier, their agents and servants. “

Addressing full liability in every situation would require added insurance.   The other tidbit is that in general, liability is limited to the direct value of the shipment as it cannot include loss of future profit, losses incurred because of delays or most other types of losses suffered not directly related to the value of the cargo.   For shipments within the US, the carrier is liable for the cost of the product as stated on the Bill of Lading. For international shipments, there may be liability limits unless specifically stated in the shipping contract.

When the product arrives at the buyers dock, the buyer has the option to reject the shipment if they see damage. In this case they inform the seller immediately and then it normally becomes an issue between the seller and the carrier.   For most damage, the carrier is responsible, unless the carrier claims that the packaging was inadequate.

Filing a claim

The transportation and Logistics Council has a fairly comprehensive document on filing claims for shipping damage: https://www.tlcouncil.org/sites/default/files/how_to_file_a_claim.pdf.   Some highlights of this document:

• Claims need to be filed in writing (or electronic) – a phone call is not a legal claim
• Understand the timeframe requirements for filing a claim- claims should be filed immediately
• Claims should be detailed, factual and have supporting documentation
• There are US and international laws that govern filing a claim in absence of a specific contract

When product is damaged during shipment, the claim approval process can drag on for months. If there is no other contract provision, FMCSA claim regulations require a carrier to acknowledge receipt of the claim within 30 days.   The carrier must the pay the claim, offer a compromise or disallow the claim within 120 days. The less evidence of carrier liability, the longer it could take to resolve and the less likely that the carrier will agree to a full payment. There are a number of ways that a seller can reduce its odds of an unfavorable outcome:

• Make sure that the provisions and liability exemptions of the shipping contract are fully understood, different laws can apply in different situations. International shipments are subject to different laws; destination countries may also have different regulations that come into play. If you are shipping high value product, you may want to negotiate a separate contract and or get special insurance.
• Make sure that you are using a reputable carrier with adequate insurance coverage.
• Make sure that the product is adequately packaged. Side walls should be rugged enough to handle foreseeable conditions.   Special cushioning may be required to protect the product from possible shock and vibration. Product may need to be secured with added support.
• Make sure that cargo is clearly marked and labeled.
• Use corrosion protection if needed, especially for overseas shipments.
• Use handing indicators and or monitors for high value product.   Shock and vibration data can provide valuable support documentation for any damage claim.
• Keep your customer in mind, if the product is damaged beyond use, how soon can a replacement be implemented?   What could be done to mitigate or recover their loss?

Packnet can customer engineer packaging that will minimize the risk of damage during transit, we also provide packing and crating services. We can provide corrosion protection as well as implementing the proper monitoring devices. Our next article will focus on some of the questions and issues surrounding what exactly is damage.