I remember when I first started sales, and in particularly, when I received my first bonus check. I mean to tell you that I was in hog heaven. I was receiving bonus checks on a monthly basis based on my customers past shipments- there’s nothing like residual income. I was walking on the clouds for quite awhile. Then one day it happened, I can still remember where I was when I got the news, my first customer complaint due to damages. I mean he really laid into me, yelling words that I had never thought somebody would say to a stranger- we had only spoken 2 times on the phone. He went on to say that he wanted to send me the pictures of the damage and to find out the process so that he could file his claim. The product was damaged beyond recognition. I was completely and totally in shock about the whole experience. I had to schedule a time to chat with my manager to try to understand what had just happened. We were able to take care of the customer’s claim and he continued shipping with us to my surprise. My manager’s words still rang clear to this very day- “Get use to it, it happens a lot in this business!”

Fast forward 15 years and to be honest I don’t think “damages” are ever something that you get used to, but definitely is a part of the FREIGHT business. Most customers would rather take a trip to the dentist rather than having to file a damage claim. I mean look at the consequences of damage claims.

1) The Consignee (person receiving goods) has to accept product that they were hoping to sell for a profit, or use to gain a profit, now have to sign it off as defective. That’s like a kid at Xmas cheerfully unwrapping their present only to discover that pieces of it had been damaged.

2) The Shipper now has to resend the product to their customer before the customer decides to go elsewhere to buy a new product.

3) The shipper loses inventory, and if they are building to order they now have to EXPEDITE materials from their manufacturers, costing them much more money.

4) In the meantime, the Consignee has to hold onto the damaged freight until the damage claim is filed. So everyday (up to 30-45 days) they go in their warehouse they are looking at the damage piece that reminds them of loss profit and frustrations of receiving damage goods. Talk about “damage” control- no pun intended. No one is happy with claims!

This article is geared towards providing some basic information for shippers who might have experienced damage and would like general guidelines to help them better understand what’s going on.

LIMIT OF CARRIERS LIABILITY:

All Carriers have a limit of liability. Limit of liability is the Carriers cap as to what they will pay per pound for a loss or damage. Most carriers’ limit of liability is based upon the class of the freight. Example; class 50 at $2.00/lb for some carriers it could be ($1.00/lb for others) and class 300($25.00 per lb.) This is the Carrier’s cap regardless of the value of goods. Carriers liability for anything used or refurbished has a maximum liability of $.10/lb. Some Carriers will pay $.50/lb. But always remember that as a shipper you have the option of taking extra insurance out either with you own Insurance Company, or through the Carriers.

RELEASED VALUE:

This is the value/lb at which a shipper releases the goods. Normally this references NMFC items where the shipper is required to declare a value because the rate (*class) of a shipment is determined by the released value not to EXCEED (RVNX) of the item. In laymen terms this refers to the fact that if a shipper sends out their product at a Class 50 to get a cheap rate(the lower the class the cheaper the rate), but they need a high release value($10,000) then they must raise their Class to coincide with their Released Value(RVNX). In freight claims a shipper “can’t have their cake and eat it to…” In other words you can’t show a lower class on your bill of lading, then use a high released value in case a damage does occur

FAK TARRIFF PROVISIONS:

This is where the limit of liability is based upon class, it is based upon the class at which the shipment is billed, NOT ACTUAL CLASS, so when a customer ships a class 100 and enjoys an FAK class 50 the limit of liability is based upon class 50 NOT actual class. The Carrier will not pay on ACTUAL class but will limit the liability at the class 50.

CONCEALED DAMAGE CLAIMS:

Concealed damage must be reported to the carrier within 15 days of delivery this varies depending on the Carrier. Carriers generally decline concealed damage claims or settle for 1/3 of the claimed amount. You must be able to prove Carrier neglect so additional information may be required when filing a concealed damage claim. Pictures, a complete description of the damage, packing list, how the freight was packaged and any additional information that would prove Carrier neglect. Freight charges are not recoverable on concealed damage claims. Another very important tip here is when you as a shipper sends freight to your customer and damage does occur in transit, it is very important that your customer notate this on the carrier Bill of Lading. Also remember the driver doesn’t have to wait for inspection of the freight. The consignee must check the outside of crates, packages, pallet etc for dents and signs of mishandling.

In conclusion, damages are a part of shipping freight. There’s really no way around it. However the best defense is a good offense. Make sure to make the necessary steps in packaging your product to the utmost. If need be consult with a packaging engineer, to ensure the product is braced and secured each time it is shipped. Lastly, understand what your liability is for your products and convey that information to your customer to keep them informed and knowledgeable in the event of damage.

Earl White is a National Account Manager, with One Stop Logistics a Third Party Logistics company based out of Watsonville, Ca. He has been in Sales for over 15 years and works with many sales reps to help them gain better footing when it comes to the elusive practice of working with clients. He enjoys being able to pass on many of the skills he has learned from Top Salesman in the Industry.