The shippers (exporter or importer) ultimate winning guide to effective cargo damage claims handling or management process

Are you a fruit exporter or importer and the cargo you are shipping or expecting has arrived at the destination damaged? Are you frustrated, wallowing in anger, pain and confused on what to do next? We understand how you feel and have good news for you. All hope is not lost. Yes we said so!.Wipe off your tears and start taking action. This is the time for you to save money by taking all measures posssible to improve your bottom line.

Consider taking the following steps and you will be on your way to success:
  1. Identity the type or cause of damage
  2. Identify the liable party
  3. Notify your insurance underwriter
  4. Notify the liable party and invite them for a joint survey
  5. Mitigate cargo loss
  6. Collect evidence of the damage
  7. Engage a surveyor
  8. Submit a formal quantified cargo claim
  9. Protect the claim from the time bar 

Identify the type or cause of damage

What type of damage are you claiming for?  Is it physical damage? Reefer damage? water damage? Loss? Or some other unspecified type of damage. Whatever is the type of damage, you should be able to identify it and the causes of such damage. Some common causes of damage include but are not limited to; Poor handling during loading and  discharge phase, incorrect storage temperatures, water ingress, theft, delay in delivery etc. Properly identifying the type and cause of damage enables you to know what kind of evidence you should collect.

Identify the liable party

Can you claim from someone who is innocent and get paid for your claim? Of course No. That is why you must identify the liable party to claim from. Most often, the liable party will be the issuer of the bill of lading, house bill of lading, etc. Failing to identify the right party to claim from will cost you time and money. Thereby further worsening your plight which could have been easily avoided.

Notify your insurance underwriter

If damage to your cargo is immediately apparent upon discharge or delivery, and your cargo has been insured,  inform your cargo underwriters immediately. If the damage is not immediately apparent, inform of the damage as soon as it becomes apparent. This is very important and should not be ignored because failing to notify your cargo underwriter on time may prejudice your right to claim compensation. This will enable them to advise you on the steps you should take to protect your rights under the marine insurance policy.

Notify the liable party and invite them for a joint survey

At the same time, also notify the liable party and invite them for a joint survey. For sea freight claims, the period of notice will depend on a number of factors. The  first thing you must do is to check the reverse side of the applicable B/L. This is because some B/Ls contain paramount clauses which incorporate a particular convention or local law of a country that gives effect to a particular convention.

If the paramount clause incorporates the HVR and/or the law of a country that incorporates the HVR, then notice  must be given in writing to the carrier or his agent on the day of delivery or within 3 days where damage is not immediately apparent (art 3 (6) (i) (ii) HVR). If on the other hand it is the Hamburg rules that is incorporated by the paramount clause, then notice of loss or damage must be given in writing to the carrier by the working day following delivery, within 15 days of delivery where damage is not immediately apparent upon delivery and within 60 days of delivery in case of delay (art 19 (i) (ii)).

However, note that carriers will hardly incorporate the Hamburg rules on their B/L terms. 

Where there is no paramount clause on the B/L, the period of notice is governed by the law applicable to maritime transport in the country of the port of loading and/or that of the port of discharge in which case the applicable law will either be the HVR or the Hamburg rules or local law giving effect to these rules. Failing to notify the liable party within the aforementioned time frames, it becomes prima facie evidence that the liable party delivered cargo in good order thereby, shifting the burden for you to prove otherwise. You don’t want to be in this position. Therefore, make hay while the sun shines by notifying the liable party timeously. In your notification, mention the transport document number, container number, cargo description, nature of the cargo damage/loss, and the approximate value of loss/damage.

Mitigate cargo loss

As a matter of law, note that you have an obligation to take reasonable measures to mitigate your loss. Measures you should take include segregating sound cargo from damaged cargo, salvage sale in secondary markets, disposal or destruction of cargo with no residual value, and repairs where possible.

Collect evidence of the damage

You can only recoup your loss if you are able to show proof that cargo handed over to the liable party in good condition has been delivered damaged resulting in a specific amount of loss. Although it can be time consuming, collecting the right evidence facilitates the claim handling process and increases your chances of success. The type of evidence you collect will depend on the type and cause of damage. You should take good pictures of sound and damaged cargo for the carrier to compare.

The pictures should not only show the external packaging, but should also show the damaged cargo. Also take pictures of the container (s) particularly if the container has some defects like holes, dents, bents, cracks from improper previous repairs, torn door gaskets/rubbers etc. For reefer shipments, download the temperature records of the data logger.

Engage a surveyor

You are not obliged to engage a surveyor as hiring a  surveyor is very costly. However, there are benefits in having one especially when your value of loss is very high. Surveyors are well versed in examining damaged cargo and surrounding circumstances. They may spot issues, facts, and conditions which an untrained eye may not see and can equally assist you mitigate your loss.

Submit a formal quantified cargo claim

Submit a formal claim to the liable party. The claim should clearly state the quantity and value of the cargo damaged/loss and should be supported by documentation. Reasonable costs  incurred in mitigating loss should be included in your claim. Documentation generally includes but is not limited to bill of lading, commercial invoice, packing list, pictures of good condition and damaged cargo etc.

Protect the claim from the time bar.

Make sure after you submit your claim, you protect it from being time bar. Claims time bar depending on the applicable convention to the carriage contract. Under the HVR, a case time bar after one year of delivery or date delivery should have taken place.

However, indemnity actions may be brought after one year within 3 months commencing from the day when the person instituting the claim has settled the claim or has been served with process in the action against himself provided the law of the court seized of the case allows the time extension (art 3 (6bis)). Where the Hamburg rules apply, a claim will time bar if the claim is not filed within 2 years from the date of delivery of goods or the last day upon which goods should have been delivered.

Indemnity actions can nevertheless be commenced after this period within 90 days commencing from the day when the person instituting such action for indemnity has settled the claim or has been served with process in the action against himself (art 20).  If the claim is approaching the time bar date, make sure you obtain a time extension in writing from the liable party or better off commence legal proceedings to interrupt the time bar.