April 2007 | Commentary | Risks and Rewards

Filing Claims: Time Is Not on Your Side

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Q: My company imports ceramic products from around the world. One shipment arrived at our warehouse filled with crushed boxes - inside, the contents were completely shattered. It appeared that the container was mishandled and possibly dropped during transit. We took inventory of the damaged items and submitted a claim to the ocean carrier. We negotiated with the carrier on numerous occasions about the quantity and value of our claim, but never reached an agreement on the amount we should be paid.

The carrier claims the boxes were not properly packed for shipment, while we believe the damage was caused by mishandling during transit. Now, more than one year after the shipment first arrived, the carrier is declining our claim altogether, saying it is time-barred. What can we do?

A: Unfortunately, unless you requested an extension of time to file suit against the carrier, your claim probably is time-barred. In the world of international trade, filing claims and lawsuits against transportation carriers is often governed by laws or international conventions that possess extremely short limitation periods.

Your claim against the ocean carrier, for instance, is governed by the United States Carriage of Goods by Sea Act, which prescribes a one-year period from the date when goods are received - or should have been received - within which you must file suit.

Overcoming Time Limits

The limitation can easily be overcome with a request for an extension period. Ocean carriers typically grant extensions because it is more efficient to process claims outside of court than to become involved in lengthy legal proceedings.

It appears, however, that the ocean line in your case did not grant an extension, and is therefore declining your claim as time-barred. This is a common problem for global shippers in a variety of modes.

Claims against global airfreight carriers, for example, are governed by the Warsaw Convention or, in some jurisdictions, the Warsaw Convention as modified by the Montreal Protocol. This convention outlines a two-year time limit for filing suit against an air carrier for damages caused during transit.

Similarly, claims against U.S. rail carriers are governed by the Interstate Commerce Act and its successor statute, the Carmack Amendment. These statutes allow shippers to file claims against a rail carrier within nine months, and grant them one year to file suit.

Shippers can file claims with either the originating carrier or the delivering carrier, but in either event, the time condition must be satisfied before they can actually file.

Limitations on claims against intermediaries, such as freight forwarders and property brokers, are often more complicated.

Unless a contract provision specifically addresses claims against intermediaries, they are subject to the laws of the state that maintains jurisdiction over the transaction.

Limitation periods on contracts differ from state to state. They average from two to seven years, but some states allow parties to agree to a shorter limitation period.

When using more than one transport mode, shippers should also be aware that the limitation period for claims against each of the underlying carriers is likely to differ.

Take the Direct Route

The failure to observe time-bar provisions can be dangerous and costly. One way shippers can overcome this risk is to insure cargo directly against loss and damage. In these cases, upon payment of the claim, the cargo insurer proceeds on its own to recover against the carrier, and assumes the burden of tracking the time limitation.

Have a liability question or concern? I will try to help. Please send your questions to me via e-mail at dan.negron@thomasmiller.com.

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