Amid the volatility of fuel prices, the unpredictability of supply chain issues, and an uneasy labor climate, today’s shippers face a logistics environment that puts them under greater pressure to do more with less. These days, resources can often be stretched thin, which can regularly lead to oversights in all areas of the supply chain. The complexity of freight claims is a perfect example.
A shipper files a freight claim if goods are damaged, contaminated, lost, or delayed during transport. Carriers must legally cover the cost of valid freight claims. Shippers can also submit a freight claim if they believe the carrier has overcharged them.
There are four types of freight claims: damage, loss, shortage, and concealed damage or concealed shortage. This blog delves deeper into concealed shortages, how they often fall through the cracks, and how they impact a shipper’s profit margin.
What is Concealed Shortage?
A concealed shortage occurs when goods are missing from delivered shipments, but it’s not outwardly evident at final delivery due to packaging or other reasons. Freight claims related to concealed shortages or damages are the trickiest to file because the problem goes undetected until the shipment gets unpacked.
The ideal policy would be to inspect the freight thoroughly at the time of delivery and, if there is a problem, have the driver acknowledge and note the loss on the proof of delivery document. However, shipments often arrive with no visible damage or shortage detected. It’s not until later, well after the consignee or receiver signs off on the delivery, that the concealed shortage becomes apparent. Getting the entire value or even a partial amount repaid is much more challenging at that point. Also, most carriers require these claims to be made within five days, which means a quick turnaround to file a claim if the shortage goes unnoticed on the day it was delivered.
With a concealed shortage claim, the claimant must also prove that the shortage existed at final delivery and could not have occurred afterward. A “clear” delivery receipt signed by the consignee is usually considered solid evidence that the delivered shipment was in good order and condition. However, a “clear” delivery is not a sound basis for declining a claim. It is a common practice for some carriers to offer a one-third settlement on concealed claims where it is difficult to determine the cause of the damage or where the loss occurred. The theory is that it could equally be the fault of the shipper, carrier, or consignee.
The Carmack Amendment
The Carmack Amendment, a key piece of freight claims law, pertains to interstate carrier liability and has been around for over a century. Despite many changes through the years, the amendment’s intent still holds true: It limits carrier liability to the loss or damage of the freight itself.
Before the amendment, those transporting goods across state lines were subject to state laws regulating liabilities. The Carmack Amendment standardized regulations and halted claims asking for more than the value of the goods. The amendment does not require the shipper to provide proof of negligence, only that the goods were damaged.
However, a carrier can be exempt from damage claims but only under exceptional circumstances, such as:
- An act of God
- An act of war
- Government-controlled inconveniences
- Burglary or theft
- Inherent vice
Also, don’t be confused by what many think is a Carmack Amendment statute of limitations; the 9-month and 2-year benchmarks are the minimum amounts of time a carrier must allow for filing a claim and initiating a legal action in court.
A Possible Concealed Shortage Situation
Let’s look at a hypothetical instance that shows how complex concealed shortage claims can be for consignees. A consignee accepts delivery of a shipment with multiple items in numerous boxes that are all shrink-wrapped together. An employee signs the proof of delivery after a cursory freight inspection reveals no red flags. The shipment is put off to the side and looked at later (maybe that same day or soon after).
However, upon taking inventory after unwrapping the shipment and opening the boxes, the consignee discovers that the total number of items falls short of the number reflected on the proof of delivery.
When filling out claim documents, shippers or consignees must detail how they handled the shipment at delivery and when they discovered the concealed shortage. Photographic evidence can also prove to be especially helpful.
What Are the Costs Associated with Concealed Shortage?
Freight claims management can sometimes be easy when it’s clear an entire shipment is missing. As the situation mentioned above shows, concealed shortages are a different story. And those concealed shortage claims can also be costly in more ways than one. Here are some potential costs that shippers can incur.
Relationships with customers can turn acrimonious.
More than ever, customers expect shippers to be able to deliver items quickly. In a survey by Avionos, a digital consultancy company, fast shipping speed was the No. 1 response by U.S. digital shoppers when asked what defined a positive experience. With a whopping 62%, it outdistanced easy return policy, friendly customer service reps, or buy online, pick up in-store (BOPUS) options. Concealed shortages can also cause shippers to have unexpected stock deficiencies, making it impossible to deliver the fast, effective services that customers demand. Failing to meet customer expectations, like speedy delivery and having the items in stock, are likely to rapidly sour customer relationships.
Missing and damaged items can be costly and hard to replace.
It can be quite challenging for shippers to get reimbursed for shortages/damages after they have signed for the receipt of the items. As a result, shippers are often responsible for costs associated with lost items and subsequent replacement goods as well as the freight charges.
Claims can take away valuable employee time from other tasks.
Freight claims, especially drawn-out concealed shortage claims, can bog down operations by requiring staff to search through old paperwork to locate bills of lading (BOLs) and receipts while contending with complicated manual processes. Time must also be spent untangling the legal nightmare and adhering to the strict deadlines in the Carmack Amendment. Shippers can easily find themselves on the wrong side of one of those deadlines without an expert to translate complex legal jargon.
In a bustling, big-money logistics marketplace where fast-shipping giants like Amazon, UPS, and FedEx are always looming, shippers can’t afford the sometimes inevitable inefficiencies and costs associated with concealed shortages.
Concealed Shortages Hurt; FreightClaims.com Can Help
There is a light at the end of the concealed shortages tunnel, and it’s the chance to partner with FreightClaims.com. By streamlining costly freight claims processes, the FreightClaims.com experts can help shippers ensure that concealed shortages don’t show up without warning and doom their bottom lines.
- Rapid submissions that follow the rules: FreightClaims.com can help you quickly submit claims and ensure shippers stay in line with the Carmack Amendment’s strict guidelines.
- Up-to-the-minute information: With concealed shortages, more details can emerge weeks after delivery. FreightClaims.com helps shippers track and update existing claims with the latest information using robust freight claims management software to ensure they get compensated for the full scope of a concealed shortage.
- No more lost documents: Freight claims rely on detail and accuracy. By integrating document storage into an easy-to-use technology platform, FreightClaims.com assists shippers in avoiding inefficient and costly manual processes. One lost BOL can end a shipper’s chances of reimbursement. No need for an old filing cabinet; trust FreightClaims.com instead.
- Freeing up your staff to get on to other things: It can be easy for employees to get caught up in a freight claim, but FreightClaims.com’s dedicated team of experts can relieve them of that burden by handling the claims and leaving the in-house logistics staff to focus on what counts: delivering on time, every time.
- Securing streamlined communications: By integrating all communications into a single, cloud-based freight claims platform, FreightClaims.com helps shippers access the latest expert advice and analytics from wherever their logistics take them.
It’s impossible to conceal the positive impact FreightClaims.com can make for your company. Put yourself front and center in the world of freight claims management to protect your profitability, specifically when dealing with concealed shortages, by requesting a demo with FreightClaims.com today.
