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The Freight Claims Nightmare

The legal responsibility for who should file freight claims is designated by the freight terms.

Have you ever experienced the need to process a freight claim? Most of us involved in the accepting or shipping of material at one time or another have had to deal with damaged goods. The challenge is how to deal with the problem in the most painless and expedient way.

During a recent MHEDA seminar entitled, “How to Sell More Effectively through Material Handling Equipment Distributors,” the subject of freight claims and the difficulty of processing was discussed. This article points out some of the causes for damage, who is responsible for filing a claim, and the most effective way to handle these claims.

Most Frequent Causes for Damage
Most material damage occurs when material is shipped via “less than truckload” (LTL). This material is handled through freight terminals. Freight terminals receive less than truckload shipments, unload the material, consolidate and reload the material for delivery to the end-user. Shipment of material that does not fill the truck and ships as a full truckload or direct delivery to the customer also can have possible damage if the carrier has an occasion to make a sudden stop or travel rough roads. Another condition that will result in damage is poor packaging and/or loading of the truck.

Settling Claims
To expedite the handling of claims on damaged goods, one of two actions must be taken at the time the material arrives. The first choice is to accept the entire shipment noting the damage on all paperwork, especially the documents retained by the carrier’s driver. Make sure to keep a copy for the receiving and claims records. To expedite the handling of the problem, it is critical that the individual responsible for receiving the material notes enough information to begin the claims process immediately. Part number, description and count of the damaged material are the most critical.

The second option is to reject the load in its entirety. When this option is chosen, other decisions must be made immediately. The first decision is for the carrier driver to contact his office, who will in turn contact the manufacturer or party that arranged for shipment to determine where the load is to be delivered. When returning goods to the manufacturer, double freight is incurred, causing delays while alternate sights for delivery are investigated and studied to eliminate excess freight costs. If an alternate site is chosen, the material can be unloaded, sorted, repackaged and redelivered to the customer. In this case, there is a time delay for delivery and replacement of the damaged material. In either case, the pertinent information must be recorded on the shipping documents.

It is critical that time be given to the inspection of material when received. In most cases, it is very difficult to file a freight claim for damage after the fact. In the event that this does occur, the end-user should contact the distributor or manufacturer immediately, who in turn can contact the carrier and at the very least attempt to negotiate some kind of settlement. In this case, a strong supplier-carrier relationship is critical.

Who Files the Claim?
The legal responsibility for who should file freight claims is designated by the freight terms. The F.O.B. (free on board), along with the designated freight responsibility, determines who legally needs to file the freight claim.

The following freight terms detail responsibilities of the consignee and the vendor:

F.O.B. Origin, Freight Collect
Consignee: Vendor:
Receives title of goods at origin
Owns goods in transit
Selects and controls carrier
Pays freight charges *
Bears freight charges **
Files claims
* The company responsible for paying the carrier.
** The company responsible for the guarantee that the freight charges are paid.
 


F.O.B. Origin, Freight Prepay and Add
Consignee: Vendor:
Receives title to
goods at orgin


Owns goods in transit
Bears freight charges
Files claims

Selects and
controls carrier
Pays freight
charges
Collects freight
charges by
adding to invoice


F.O.B. Destination, Freight Collect and Allowed
Consignee: Vendor:
Selects and controls carrier
Pays freight charges
Deducts freight charges
from invoice when applicable
Retains title to goods
until destination
Owns goods in transit
Bears freight charges
Files claims


F.O.B. Destination, Freight Prepaid
Consignee: Vendor:
  Retains title to goods
until destination
Owns goods in transit
Selects and controls carrier
Pays freight charges
Bears freight charges
Files claims


F.O.B. Origin, Freight Prepaid
Consignee: Vendor:
Receives title to goods at origin
Owns goods in transit
Files claims
Selects and controls carrier
Pays freight charges
Bears freight charges


F.O.B. Destination, Freight Collect
Consignee: Vendor:
Selects and controls carrier
Pays freight charges
Bears freight charges
Retains title to goods
until destination
Owns goods in transit
Files claims

Customer-Vendor Relationship
Because of the variation in designating the freight terms, it is important to form strong relationships between customer and vendor. Regardless of the freight terms chosen, a good customer-vendor relationship will simplify the processing of claims. If proper notation of damage is done at the time of receiving, a good vendor will be in a position to assist his customer in settling the claim and replacing damaged material quickly.

Forming a relationship with a carrier is a critical key in solving problems of any kind that may arise with a shipment. This is most often done through a manufacturer because of their freight volume. The manufacturer should develop this relationship through repetitive shipping and personal daily contact. Notify Quickly

To expedite the replacement of damaged material and settlement of a claim, it is extremely important that the manufacturer and freight carrier be contacted as soon as possible. For best results, immediately means within hours, not days. Give early notice to a manufacturer and provide him with as much detail of the damage as possible, quantities, part numbers, descriptions, extent of the damage, customer’s expectations, required or estimated timing for replacement or repair, and potential options if a distributor is involved. Options may be repair on site or negotiation if the damage is minor and does not affect the function or purpose of the equipment. Notifying the carrier, which should be done by the individual or company with the strongest carrier relationship, will give them notice of the problem in advance of any paper work. Carriers are just as interested as manufacturers and distributors in keeping their customers happy.

Vendors should assist their distributor in resolving the problems regardless of the freight terms. Distributors are the victims of freight damage especially if they have no control of carrier selection. It is the distributor’s responsibility to instruct their customer or receiving party on the correct handling of the paper work. No one likes to be surprised when it comes to problems, and resolution will be established much quicker when everyone is in the loop from the start.

Explain The Options
To satisfy your customer, keep costs to a minimum and handle a freight claim most efficiently, it is suggested that an explanation of the options be given to the end-user. Point out that his or her project will be completed most effectively if the material is accepted, damage is noted on the shipping papers, and the distributor or manufacturer is called immediately. If the end-user is unwilling to handle the damage in this manner, the manufacturer and/or distributor must analyze or discuss alternatives and make a rapid decision for handling the problem.

Immediate action is in the best interest of all parties involved. In today’s competitive market, no one needs a customer dissatisfied over a freight claim.


Material Handling Equipment Distributors Association
Meet the Author
Daryl Clever is vice president of sales at Steel King Industries in Stevens Point, Wisconsin.


Material Handling Equipment Distributors Association

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