Damaged cargo claim procedure explained

Individuals and businesses alike are usually worried when their package is damaged during delivery. As an exporter or importer, the item may be something they purchased online or a container they desire to properly deliver to a specific location. When goods are transported from one location to another, especially long-distance, they are bound to be damaged a little in transit. As a result, every logistics company has a defined process for obtaining reimbursement for damaged items. However, freight forwarders are frequently held accountable by the cargo transportation conditions they signed. We at Easy Move Kuwait are here to help in case you come across any shipping problems. We have put together this simplified damaged cargo claim procedure to help you understand the matter more.

A cargo freight container
Each company has its own procedure for obtaining reimbursement.

What is a cargo claim?

A cargo claim is simply a demand for monetary compensation for financial damage. Usually incurred as a result of a carrier’s breach of the carriage contract or failure to perform certain extra-contractual responsibilities. The carrier, on the other hand, shall not be obligated to reimburse the claimant if the loss is caused by conditions for which he is legally or contractually immune from obligation. Furthermore, even if the carrier is responsible, he might have the right to a liability restriction. If this is the case, the cargo claimant will get less than the entire value of his claim. It is very important to choose the right supplier as a shipper to avoid dealing with cargo claim procedures.

What are the basic obligations of the carrier?

It is critical to consider both the business and legal contexts in which cargo claims emerge. Almost every commercial cargo transported by sea on a vessel is subject to some type of contract outlining the parties’ rights and duties. There are various types of such contracts, each with its own distinct characteristics, including trip charter parties, bills of lading, waybills, and contracts of affreightment. However, regardless of the contract conditions, the carrier’s fundamental duties on each journey are nearly the same in the majority of nations. Generally, the carrier must:

  • load the agreed quantity of cargo at the agreed location and time;
  • provide the shipper with a receipt indicating that the carrier has taken custody of the cargo;
  • provide the shipper with evidence of the carriage contract, typically a bill of lading;
  • proceed to and reach the agreed place of discharge/delivery;
  • discharge the cargo in the same quantity and condition as received;
  • deliver the cargo only to the party legally entitled to receive it.

You can read these obligations in international treaties governing seaborne commerce. Most notably the Hague Rules, Hague-Visby Rules, and Hamburg Rules, which have been ratified by the majority of governments worldwide.

Depot Containers
Pre-shipment surveys can help a lot in some cases of damaged cargo.

Damaged cargo claim procedure

Typically, the cargo claims processing method begins before the filing of a claim. And occasionally even before an incident occurs, as in the case of a pre-shipment survey for steel cargo.

The Member, the port agent, or the local P&I correspondent usually notify the claims handler. Evidence of water infiltration in one or more holds requires a cargo survey. So, if not previously alerted by the Master or the Member, the claims handler will contact the local P&I correspondent and request a survey. A surveyor has to identify the type and extent of any loss or damage, gather evidence, and assess cargo interests’ efforts to offset damages. While the costs of these services might be substantial, most cargo surveys provide a favorable return when defending claims.

Hiring attorneys and lawyers

If there is obvious significant cargo damage involving big quantities of merchandise, such as a fire, one will likely quickly hire attorneys and specialists. Lawyers will gather statements from the Master and crew, copies of pertinent ship records, and aid in avoiding or securing the ship’s arrest or detention. Lawyers also assist the Master and crew when under pressure from cargo interests, local officials, the media, or other interested parties.

Then they will send the cargo survey report with photos, and also with the ship and cargo discharge documentation. The P&I correspondent or lawyer would generally address problems such as local laws, prior experience with cargo interests, and whether a Club letter of commitment will be recognized as security for claims. It will help the claims handler determine the anticipated exposure and create an interim financial reserve for the claim. Including future legal and other service costs.

The paperwork you’ll need

Agents of subrogated cargo underwriters frequently bring claims. The claims manager will often demand a letter of subrogation or assignment from the original claimant, as well as a letter of appointment from the cargo underwriter to the recovery agent. Moreover, the claims handler will want comprehensive documentation before engaging in substantial conversations or negotiations. The needed paperwork will depend on these three things:

  • the mode of transport, and
  • the location of the alleged loss or damage.
Damaged cargo claim procedure for containership
Every damaged cargo claim procedure is different.

However, proof that the alleged damage or loss happened while the cargo was in the carrier’s custody and proof of the pecuniary loss is the usual criteria. We highly suggest that you check out our article on how to prepare paperwork for cargo transportation.

What decides a claim’s outcome?

A claim is like a chess move. The game has its rules and the parties are familiar with them. So is the claim’s law. The outcome is more reliant on the facts than the rules. The chessmen and positions in the play represent factual evidence. Sometimes the claims manager only has a few chessmen. And he is already in a bad position. In such cases, the claims handler may propose an early settlement. And if the Member feels disappointed, the claims manager likely saw many circumstances similar to this one before. Therefore, he knows how to handle it. And knows that the defense arguments will not be successful. A hostile jurisdiction is one where political or commercial reasons trump judicial fairness, and where shipowners may face a “home town claimant”. Claims handling is not a precise science. They realize that out-of-court settlements are frequently cheaper than “Litigation Road”.

In this method, most cargo claims are handled out of court, generally through written letters. Nonetheless, claims managers engage with recovery agencies or attorneys on a regular basis. One advantage of such talks is that the parties generally know each other professionally from past dealings. This usually guarantees both parties take a fair attitude and quickly assess the claim’s merits. We hope that you now have a better understanding of how a damaged cargo claim procedure works. In case you need any additional information, our shipping companies in Kuwait are more than happy to help you.