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Bills of Lading on the web|Freight tracing and freight tracking on the web|web based freight bill audit-freight bill management - freight bill payment|Generates Return Authorizations, routes returns via least cost carriers, generates bar coded return Bills of Lading and facilitates the receiving and accounts payable/receivable processes.|Routing guide improves vendor compliance and communications|TGI Consulting Partners

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Solutions should not be more complicated than the problems they are trying to solve!

 

Generate, Distribute and Manage Bills of Lading on the Web

 

Tracing and Tracking information in a central location to all authorized users

 

Freight Bill Management, Shipment Information, Cost Control Portal

 

Generate Return Authorizations via least cost carriers, generate bar coded return Bills of Lading and facilitate the receiving and accounts payable/receivable processes

 

Communicate routing guides rules of engagement and carrier selection

 

Extend visibility & gain accountability to the desktop by tracking shipments & goods

Over, Short and Damage Claims or Loss and Damage Claims

 

Freight claims occur for various reasons, some are real, some are contrived, some can be prevented, but they all can be controlled, understood and kept to acceptable, understandable and reconcilable levels. 

 

Accepting loss and damage claims (L&D claims) as a cost and part of doing business, demands that we must be very careful when establishing standards; because the established standards will become the metrics by which we measure this aspect of carrier performance, packaging, consignee receipt of freight and the ability of the freight to withstand the normal hazards of transportation.  Of equal importance is the ability to measure the success of the process model that manages claims.

 

There are several areas of concern and sets of decision criteria that must also be established in order to identify and distinguish between real and contrived claims.  Once achieved, claims evaluation can be addressed effectively and efficiently.  Understanding these issues is critical as the need to effectively articulate them across the supply an demand chain should become more apparent throughout this paper.

 

Many companies have established departments to manage their claims.  Unfortunately, many of these departments have been relegated to processing centers that are essentially the “butt end of someone else’s foul-up”.  In addition, as a “processing center” they function at the task level only and fail to develop an appreciation and understanding of claims…how they relate to shipping, sales, packaging, carrier performance, customers and attitudes throughout the chain.

 

Lastly, unless there is an understanding of the claims issues, it is impossible to handle L&D claims efficiently and effectively.

 

The traditional claims process model is ineffective; its perspective is based upon yesterday’s practices and its tools are herds of people on the shipper, carrier and consignee sides.  Their purposes are” get the claim paid, deny the claim or to negotiate away as much of the claim as possible.  The amount of time consumed in this posture is, for the most part, counterproductive especially when more useful and automated process models are available.

 

What is most interesting is that many of the claims departments were set up to believe that the Interstate Commerce Commission and the various state regulatory agencies were the forum.  This of course is not true as the claims law has its base in the common law.   So, it is time to change the process model and to adopt and embrace new technologies, especially those that capture information in the transaction stream, establish the rules of engagement, define the relationship and work within the agreed to and acceptable methods.  As this occurs, claims get resolved in a timely fashion, the volume gets reduced, and contrived claims disappear and problems are identified rapidly.  The inherent cost savings and rapid settlement, when the process is automated, is significant and dramatic.   

 

Legal Antecedents of L&D Claims

 

Loss and damage claims are the result of an alleged failure of one or more of the terms and conditions of the Bill of Lading Contract.  The operative word being, “contract”, consequently, claims are handled under common law as opposed to statutory law.  Essentially, there are two, high level, categories of L&D claims:  regular damages and special damages.  Regular damages are typically those for shortage or damage to the freight and may also address late delivery.  Special damages are those that have been reasonably contemplated and occur as a result of regular damages and are consequential thereto. 

 

Regular Damages

L&D claims for regular damages appeared, perhaps with the first freight shipment made via a common carrier.  Formalization of the entire claims process has its roots in the creation of the legal instrument known as the Bill of Lading Contract.  This instrument is both a contract for carriage and a receipt for the merchandise.

 

Special Damages

The landmark case for special damages was decided in 1854 and is still cited today.  The doctrine of Hadley v. Baxendale established the rules under which compensatory damages, direct or consequential, are paid.   The fact pattern of this landmark case concerned itself with a shipment of equipment that was to be refurbished and returned; the absence of the equipment caused downtime and loss of revenue.  Because the equipment was mission critical, the consignor included a condition on  the Bill of Lading Contract  essentially stating that, “time is of the essence” and therefore the shipment must be delivered with due dispatch.  Because of this condition, mutually agreed upon, by and between the shipper and the carrier, both parties were deemed to reasonably have known that failure to meet this condition could result in consequential damages.  Simpson on Contracts states, “They (the rules) have since been uniformly adopted by our courts”.  Continuing, “Where a party has broken his contract, the damages (either consequential or direct) that the other party may recover under are:

 

  1. such as may fairly and reasonably be considered to arise naturally

  2. if the damages arose out of special circumstances, communicated and so known to both parties when the contract was made, the damages that the parties would reasonably contemplate would be the amount of injury…

  3. if the special circumstances were wholly unknown to the party breaking the contract, he at the most could only be supposed to have had in his contemplation the amount of injury which would arise generally”…(regular damages)

 

Formula of Damages

The method through which the claimant establishes the damages sustained because of the failed contract provision(s).  The basis in establishing the damages is that, “the claimant must be rendered whole, that is, put in as good a position as he would have been in had the Bill of Lading Contract been fully complied with.  Additionally, there is a rebuttable presumption that the claimant will replace and reship the damaged freight, securing his profit from the replacement and therefore including profit in the claim against the carrier is unacceptable.  The premise is that if the claim includes profit a double profit would occur, because of the replacement and that the carrier would be unreasonably burdened.

 

Mitigation of Damages

It is a well respected position in law that damages must be mitigated.  As an example, if a claim occurs because the shipment was received, “wet and damaged”, the costs of repair and refurbishing (when acceptable to the claimant) must be compared with replacement of a new product.  The lower cost alternative meets the mitigation requirement.

 

What Constitutes a Valid L&D CLAIM?

Unless a demand for money is made, supporting documents will not be considered a valid claim.  Having said that, it is necessary and appropriate to support all claims with the following minimum documentation:

 

  1. Freight Bill

  2. Bill of Lading

  3. Invoice demonstrating the value of the freight

  4. Delivery receipt evidencing the condition of the freight at the time of receipt

  5. Other supporting particulars

 

If the originals of the above documents are unavailable, it is acceptable to certify the documents to be true and correct copies of the originals, however, astute claims personnel should require an indemnification.  The purpose is that,  the best evidence” (the originals) could be used subsequent to the original claim being paid and thereby causing the carrier to make payment on an identical claim.  The indemnity agreement, indemnifies the carrier from second identical claims.

 

Who Should File the L&D Claim and What are the Damages? Should Freight Charges Be Included?

The proper party to file a claim is typically the “beneficial owner” of the freight.  You might recall from our Freight Terms white paper that the beneficial owner is determined by the passage of title.  Clearly the claim could be filed by the consignor, consignee or a third party.  Each of these parties potentially represents different claim values.  It is also possible for the beneficial owner to assign all of his right, title and interest in the freight, transferring same to his party of choice.  In this regard, the “assigned” claimant stands in the stead of the original claimant.  Given that the claimant must be rendered whole coupled with the profit constraint, the definition of “whole” is the material issue.  As an example, if the terms of sale are FOB Origin, Freight Prepaid, and a clear receipt is issued at the time and place of pickup, the beneficial owner is the consignee and the claim value would be the invoice value plus the freight charges.  The theory being that the merchandise value was increased to the extent of the freight charges.  On the other hand if the terms of sale were FOB Destination, and damages were noted at the time of delivery,  freight collect, the value would be cost and freight would not be included.  We can all appreciate the fact that each claim is different and when you factor in multi-modal and broker freight, the variations grow dramatically. 

 

With the increased use of transportation brokers or freight brokers, it has become apparent from our claims practice that appropriate contractual conditions are missing from many agreements, thereby leaving the claimants in an intolerable position.   The general industrial public is unaware of the fact that liabilities do not shift when using a broker.  The broker essentially, “arranges for transportation” and does not assume shippers, claimants or carrier liabilities and responsibilities.   Contaminating this deficiency is the fact that many brokers will co-load multiple shippers’ freight and create a master Bill of Lading to move the aggregated quantity.  Each individual shipper in such co-load can lose identity with the carrier and as such may lose their standing as a claimant.

 

An Efficient L&D Claims Processing Model

 

From the outset, efficient and effective data collection and the ability to rapidly convert such data to information is probably the most significant part of the process model.  The key elements in such an automated process model are:

 

1.      claims structure

2.      on-line notification

3.      data and information retrieval

4.      claims filing

5.      claims tracing

6.      pattern recognition

7.      decision tree

 

An ASP model that contains the following applications would be best suited for maximum efficiency, effectiveness and economy:

 

  1. Automated Transportation sourcing, contracting and execution

  2. Automated Bill of Lading Generation

  3. Automated pre-rating, audit, payment and reporting

  4. Automated Routing control and compliance

  5. Automated Freight Tracing and Tracking

 

Such an automated ASP model easily allows you to create a highly coherent L&D claims database from which claims can be timely identified through the automated tracing and tracking function, original documentation can be retrieved for filing purposes, routings and the rules of engagement would immediately identify respective issues and coordinate the filing, Bill of Lading terms and conditions are immediately made available to facilitate the formula of damages as they relate to the inclusion of freight costs.  Once the claim is filed it can be automatically traced through conclusion simultaneously building a “claims report card” thereby analyzing performance.  Pattern recognition from the database would assist in identifying real from contrived claims and shed light on misquoted delivery dates while subsequent analysis would establish recognizable patterns that could be used to drive fictitious and voidable claims down to an acceptable level.

 

Educating Your Partners

One of the results of the automated process should be the ability to effectively communicate your shipping requirements, we call it a “transportation purchasing profile” to all of your partners including your carriers.  This information is best communicated through an on-line routing guide. These guides, amongst many aspects, cover the “rules of engagement”.  These business rules alert the parties to their respective responsibilities, such as how to receive freight, who and how to notify the proper parties, etc.

 

Conclusion

In conclusion, knowing the legal obligations, the contractual obligations and using an automated system that gathers data in the transaction stream and utilizes the base information collected at the beginning and throughout the supply and demand chains will position you to achieve best practices.

 

 

Continuation

Please consider this white paper as a beginning in this subject area, succeeding white papers will address common issues and address them with common solutions.  We encourage our readers to direct any specific questions or comments to papers@transportgistics.com .

 

Disclaimer

The information presented above represents the opinion of the author and not necessarily the opinion of TransportGistics, Inc. nor is it presented as a legal position.

 

All content copyright by TransportGistics, Inc. All rights are reserved. The authors of the articles retain the copyright to their articles. No material may be reproduced electronically or in print without the express written permission from TransportGistics, Inc. or the individual authors (papers@transportgistics.com)

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