Understanding Liability, Insurance and Claims Carg lss r damage is everyne s nightmare and has becme a tab subject t discuss between a freight frwarder and their custmer. Let s face it, we want t be yur freight frwarder and discussing lss r damage is nt a ppular subject t bring up when we re trying t btain yur business. Hwever, DSV knws that lss and damage is a fact f internatinal shipping and althugh it ccurs t less than 1 percent f the shipments we handle, DSV believes it makes gd business sense t educate ur custmers abut ur liabilities, what they can d t prtect themselves against lss and damage and hw t prperly handle claims if an exceptin ccurs. The supply chain: Each supply chain is different. An accunt s ecnmic requirements may cause an even greater variance in the transprtatin slutins prvided. Fr instance, yur carg may riginate at a third party supplier, wh hands yur shipment ff t a trucker wh delivers it t a warehuse where it is either cnslidated r handed ff t anther trucker t bring it t a gateway where yur carg is cnslidated and then trucked t a railhead, pier r airprt where it may be handed ff t anther trucker befre it leaves the cuntry fr internatinal transprt. Once the carg arrives at the cuntry f imprt, the prcess begins again in reverse until it is delivered t yur final custmer. Nw t cmplicate matters, imagine each cuntry that yur carg travels thrugh has security interests that may select yur shipment fr a custm s inspectin. One advantage in using DSV is that we have ur wn peratin in ver 60 cuntries. This means DSV has its wn ffices and persnnel including DSV warehuses and DSV trucks in many cuntries. We have an IT netwrk t track yur shipments and maintain the integrity f yur carg. But remember, n matter hw much smene prmises yu that yur carg will arrive withut exceptin, it happens. Limited Liabilities: Carriers, frwarders, brkers, warehusemen, truckers and lgistic prviders have limited liabilities. Dn t let anyne tell yu therwise. Ocean Freight: A carrier s liability fr carg t and frm the United States is limited under the Carriage f Gds by Sea Act r COGSA. COGSA states that if liability is prven t be that f the carrier, the liability will be limited t $500 per package r custmary freight unit. Where COGSA des nt apply, (Carg nt lading r discharging at a US prt), The Hague/Visby Cnventin will apply, limiting a carrier s liability t tw Special Drawing Rights (SDR) per kil. The SDR is a fluctuating internatinal currency unit. It can be determined at the Internatinal Mnetary Fund (IMF) website at www.imf.rg. As a pint f reference n September 1, 2010, 1 SDR was equal t 1.514 USD. Air Freight: As an air freight frwarder, DSV s liability is 19 SDR per kil. Freight Frwarder r Custms Huse Brker: If DSV is nt issuing a Huse Air Waybill r a Huse Ocean Bill f Lading, we are acting in the capacity f a freight frwarder. In these instances, ur liability is limited t $50 per shipment. These terms and cnditins are established by the Natinal Custms Brker and Frwarder s Assciatin f America (NCBFAA). US Prperty Brker: As a prperty brker arranging US inland transprtatin, ur liability is limited t 50 cents per pund, subject t a minimum f $50.00. 1 f 5
In all instances, a carrier r service prvider s liability may be limited t nly a fractin f yur shipment s actual value. Cmplete Terms and Cnditins fr DSV Air & Sea Inc. can be fund n ur website www.dsv.cm/us under the categry Services Carrier s Defenses: In additin t limiting liabilities, a carrier by law is permitted certain defenses knwn as the 17 Hague Defenses. Neither carrier nr the vessel shall be held respnsible fr lss r damage resulting frm: 1. Act f neglect, r default f the master, mariner, pilt r the servants f the carrier in the navigatin r in the management f the ship. 2. Fire, unless caused by the actual fault f the carrier. 3. Perils, dangers and accidents f the sea r ther navigable waters. 4. Acts f Gd. 5. Acts f war. 6. Acts f public enemies. 7. Arrest r restraint f princes, rulers, r peple r seizure under legal prcess. 8. Quarantine restrictins. 9. Act r missin f the shipper r wner f the gds, his agent r representative. 10. Strikes, lckuts, stppage r restraint f labr frm whatever cause. 11. Rits r civil cmmtins. 12. Saving r attempting t save life r prperty at sea. 13. Inherent vice, defect r quality f the gds. 14. Insufficiency f packaging. 15. Insufficiency r inadequacy f marks. 16. Latent defects nt discverable by due diligence. 17. Any ther cause arising withut the actual fault and privity f the carrier, their agents and servants. Prtectin against lsses: S hw des a carg wner prtect themselves and their carg against physical and financial lss? Preventin: There are many ways t prevent and deter lss r damage t carg. Being savvy with knwing yur risks and taking steps t minimize them is a gd place t start. Here are sme ways t d this. Reliable cntractrs: Althugh carriers have limited liabilities, the bills f lading are nt wrth anything if the carrier des nt have the insurance cverage t back it up. Request a carrier s prf f insurance. Als cntractrs with cmprehensive wrldwide netwrks have additinal security measures and prcedures t keep carg safe and intact. DSV has prper liability insurance cverage. Cntact yur DSV representative fr a cpy f ur insurance certificate. Prepare shipments fr exprt: It is the respnsibility f the shipper t ensure that their carg is prepared fr the vigr f internatinal transprt. There are t many variables t list and each custmer s prduct is different but smetimes cmmn sense is enugh t prevent lss r damage. i.e. Use rigid crrugated packaging, use plystyrene fam inner packaging r ther fam r paper packaging prducts t prevent breakage; d nt ver stack pallets; use airbags r prper blcking and bracing fr full cntainers and, if yu re the imprter, ensure yu prvide written instructin t yur supplier t prperly pack, mark and label carg. 2 f 5
If yu have a name brand r high value carg subject t pilferage, d nt advertise yur prduct n the exterir packing. Use nn-descript exterir packaging s nt t draw any undue attentin t yur shipment. Additinally, make sure that all cartns are prperly marked and labeled t ensure that all cartns are identified if they are separated. Remember a prt s security prcedure may require cartns t be pen and inspected which may separate palletized cartns. It is nt sufficient t nly label the pallet; each cartn shuld be labeled with a shipping and a destinatin address. Knw yur cntract terms: Make sure yur Incterms r shipping terms are agreed t in writing prir t transprting yur carg. Knwing yur terms will dictate wh is respnsible fr what and can save a headache in the lng term. Inspectin f Carg: It is a cnsignee s respnsibility t make a visual inspectin f carg upn receipt t determine if there are any visible signs f lss, damage r tampering. Making the prper ntatin n carg receipts and getting a signature frm the delivering carrier is essential t prtect yur interests and t make claim under an insurance plicy. Have a digital camera available in the carg receiving area r if packing a cntainer, take phts f the lading r unlading prcess. As they say, a picture s wrth a thusand wrds. Insurance: Talk t yur insurance cmpany t see if they have the prper cverage fr transprting r string yur carg. Many times peple are unaware as t whether their plicies cver transprtatin and if s, whether deductibles apply. If carg lsses are nt cvered r available under yur existing plicy, speak t yur DSV representative and they can ffer yu a variety f insuring ptins. Hwever, this als ties int knwing yur cntract terms, as it may nt be yur respnsibility t prcure insurance. Issue written instructins: In all cases, make sure yu cnvey yur intentins, instructins and understandings in writing. Requests fr insurance must be in writing. There is nthing wrse than getting int a he said she said situatin because all instructins were verbal. Insurance: This tpic warrants its wn bullet pint as insuring terms can be cnfusing and misleading. An educated custmer will knw the risks and benefits f insurance and als understand that there are respnsibilities and steps that must be fllwed t ensure a plicy pays fr lss r damage. Custmers shuld be aware f the different insuring terms available and make a risk analysis t make sure the mst cst effective terms are prcured. All Risk Cverage: This is the bradest cverage yu can request but the term is als misleading. All Risk des nt entitle yu t uncntested payment. See belw Exceptins and Exclusins n when insurance may nt pay a claim. The terms and cnditins f all risk cverage are referred t as the Institute Carg Clause (ICC) A, a cpy f which is available upn request. Exceptins and Exclusins: Carg interest must be aware that any f the fllwing situatins may cnstitute a denial f a claim. Fllwing are exceptins and exclusins which may apply and prvided as a reasn nt t pay a claim. Imprper packing. Abandnment f carg. Rejectin f gds by custms. 3 f 5
Failure t pay cllect accunts. Inherent vice (lss due t the nature f the carg, i.e. steel will rust, fruit will spil, etc). Emplyee cnversin f dishnesty. Carg requiring an On-Deck Bill f Lading. Failure t place carrier n ntice fr lss r damage in a timely manner. In general: Ocean Freight Receipts must indicate damage r exceptin. And a written claim shuld fllw within three days. Air Freight: Visual Damage Receipts must indicate damage r exceptin (i.e. crushed bxes, rips, bent crners, etc), and a written claim must fllw in 7 days. Cncealed Damage 14 Days frm date f delivery. Again receipts shuld indicate any indicatin (i.e. bent crners, dents, etc), and preliminary ntice must be presented in 14 days. Nn-Delivery Within 120 days f ETA f carg. Free f Particular Average (FPA): FPA insurance is best fr articles that are prhibited under All Risk cverage, such as Used Gds r carg requiring On-Deck Strage. FPA perils that wuld be cvered fr ttal lss and in mst cases partial lss include: Heavy weather, lighting, etc. Fire r explsin. Vessel r craft being stranded r sunk r burnt. Cllisin f vessel, aircraft r prir r subsequent land carriage. FPA terms are available Withut Average r With Average (WA). When insured FPA with average the cverage will be extended t ttal lss due t theft, pilferage and nn-delivery. Anther primary benefit f purchasing any insurance, i.e. All Risk, FPA, with r withut average, is that yu will als be prtected frm the additinal csts that may be incurred by a carg interest due t General Average. The insurance wuld cver all csts fr General Average and pst the necessary bnds fr release f yur carg if it were salvageable. General Average ccurs when extrardinary lsses are incurred by the master f the vessel r aircraft. In a General Average situatin, all carg interests have t pay the master fr the lss f the vessel r aircraft. S in additin t lsing yur carg, yu wuld be respnsible t pay additinal expenses t the ship s master r aircraft wner. This is kind f like adding salt t the wund! S even in the case f All-Risk insurance which may nt actually cver all risks there are cnsiderable scenaris cvered that can save a carg wner hundreds f thusands f dllars. The fllwing chart is a cmparisn f insurance cverage Lss Caused By r Resulting Frm: FPA With Average All Risks Stranding YES YES YES Sinking YES YES YES Burning YES YES YES Cllisin YES YES YES Faults r errrs in the management f the vessel YES YES YES 4 f 5
Lss Caused By r Resulting Frm: FPA With Average All Risks Bursting f bilers YES YES YES Latent defects in hull r machinery YES YES YES Explsin YES YES YES Jettisn YES YES YES Heavy weather* * NO YES YES Seawater as a result f heavy weather* * NO YES YES Freshwater NO NO YES Imprper stwage by the carrier NO NO YES Hk damage, mud and grease NO NO YES Theft f an entire shipping package NO YES YES Nn-Delivery f an entire shipping package NO YES YES Pilferage NO YES YES Leakage NO NO YES Breakage NO NO YES * Refers t partial lsses. Ttal lss f carg frm these perils wuld be cvered. Althugh the abve perils are indicated as cvered under All Risks, depending upn cmmdity, see exclusins under all risk cverage which may apply. And remember, even if insured fr All Risk the shipper and cnsignee have respnsibilities t prperly pack the carg and t make ntatin f damage upn carg receipt. And finally review and discuss any restrictins r deductibles that may apply fr certain cmmdities. These are usually referenced n yur insurance qute and certificate. Restricted cmmdities include but are nt limited t Husehld Gds, Alchlic Beverages, Glassware, Perishables, etc. DSV Air & Sea ffers varius insuring ptins thrugh ur wn Insurance Divisin, DSV Insurance. Please submit a written request t yur lcal DSV representative fr a n bligatin qute. Prtecting yur interests S whether yu decide t insure yur shipment r nt; it is imprtant t understand the risks and recgnize yur bligatins and respnsibilities t minimize lss and r damage t yur shipment. This dcument prvides suggestins f steps t take t prtect yur interests. It is nly an verview f the mre universal bservatins f lss preventin and risk management. Cnsult yur Risk Manager r Shipping Manager fr mre tailred ideas f prper handling f yur carg. Create a Standard Operating Prcedure (SOP) that yu can distribute t yur staff utlining prper actins t take fr packing, shipping r receiving carg. Review yur supply chain and identify the weaknesses f when and where lss r damage has ccurred. Cnsider even the mst bvius and mundane items. Fr instance if yu are shipping perishable items, check the hliday calendar at rigin and destinatin t ensure yur shipment will be delivered withut delay f a natinal hliday. Create checklists that are custmized t yur prduct and peratin. If yur shipment is versized and valuable, engage a surveyr t prvide yu with suggestins n prper blcking, bracing r crating f carg. Evaluating risk and taking steps t prevent r deter lss r damage is ne f the mst prudent ways t maintain custmer satisfactin. 5 f 5