Perishable Cargo Claims: Frequently Asked Questions

If you’ve been buying, selling, or transporting fresh fruits and vegetables for very long, you’ve probably heard different versions of these questions many times: Am I allowed to claim my lost profit? Can the carrier avoid responsibility for a claim if the product was loaded warm? Can I withhold payment of invoices to offset a cargo claim?

The short answer to all these questions is the same—it depends.

In this article, however, we’ll present typical scenarios with typical answers and then discuss how different facts and circumstances may lead to different answers.  

FAQ #1

We have a pending cargo claim with a carrier involving fresh plums. They acknowledge the cargo loss but claim they are only responsible for the grower’s cost to produce the product. We believe we should be able to base our claim on the price we sold the plums to the retailer for. The carrier states that we are not entitled to this based on the Carmack Amendment. Who’s right?  

Answer
You are entitled to be placed in the same position you would have been in, had there been no breach. In other words, you are entitled to be made whole (at least in theory).   

And the only way you can be made whole, is by recovering the price you sold the product for. The Carmack Amendment does not provide differently. 

Carmack provides that carriers are responsible for the full value of loss or damage to cargo. Incidentally, the Carmack Amendment (generally) does not apply to fresh produce which is exempt, but the result is the same under the common law of common carriage. 

The confusion stems from insurance policies only covering replacement value and also situations where replacement value would make you whole. 

If, for example, you ordered a car for your personal use to be shipped to your house and it was destroyed en route, you would be made whole by recovering the replacement value. 

But when the cargo is known to be for resale, you are only made whole when you recover the amount you would have realized had the carrier performed.

Nuance
Changing the scenario slightly, had you sold these plums to a wholesaler, the wholesaler could potentially support its claim against you for lost profit with reference to destination market price reports published by the USDA’s Market News Service. 

You would then have a corresponding claim against the carrier you hired based on this market price. 

If, however, no relevant report (same commodity, origin, pack, etc.) is available, then the wholesaler’s claim against you would be limited to the delivered cost (its purchase price).  

Attempts by wholesalers to apply a markup (e.g., 15 percent) to estimate their lost profit have been denied as overly speculative.  

FAQ #2

Upon delivery of a load of iced broccoli, the receiver advised us that the readings from the portable temperature recorder showed the carrier we hired transported the load at 42-52°F. This receiver can be especially strict because they cut and package product with expiration date stamps usually 7-10 days or more in the future. If the product is compromised before packaging, the product spoils prior to the date stamp. The carrier acknowledges the product was warm at destination, but believes the product was loaded warm. Here are the readings from the portable recorder—what do you think?

Answer
Based on the claim summary and temperature reports (portable- and reefer-based) you provide, the carrier would likely have a difficult time establishing freedom from negligence in this instance. 

We assume the driver signed the bill of lading “clean” for iced broccoli, without any objection to warm pulps or the inability to verify pulps.

We note first that the portable readings are warm and do not improve during the trip. If the product was very warm at loading, as the carrier suggests, then we’d expect to see this heat dissipate over time in a refrigerated trailer. 

The portable readings, however, show no signs of improvement.    

We also wonder just how warm the product would have to be at loading to outmuscle a properly functioning reefer system and cause air temperatures in the trailer to run between 42 to 52°F. 

Is the carrier saying the product was pulping at 70°F and that this warmed the cooled air in the trailer to 42 to 52°F? Particularly with iced product, this is difficult to imagine.  

What’s more, the readings from the portable recorder are very choppy. We would not expect heat from the product to drive air temperatures in this manner.   

The pattern is more consistent with a start-stop or cycle setting of the reefer unit than with heat coming from the product. The mode of operation (continuous vs. cycle) is not included in the reefer readings provided.

Nuance
It’s important to keep in mind that carriers are not, strictly speaking, responsible for pulp temperature control. Carriers are responsible for maintaining air temperature control in the trailer.

For example, strawberries treated for a modified atmosphere and covered with pallet bags may pulp warmer than air temperatures in the trailer. But as long as air temperatures are properly maintained, the carrier has done its job.      

It’s important to keep in mind that carriers are not, strictly speaking, responsible for pulp temperature control. Carriers are responsible for maintaining air temperature control in the trailer.

FAQ #3

We are a freight broker. Here’s a note we sent our customer who is withholding payment of freight invoices as a result of a claim:

Shippers may not lawfully withhold payment to a carrier on grounds related to cargo damage. According to established legal protocol, the appropriate course of action for the shipper is to remit payment for freight charges in full and subsequently file a claim for compensation related to damages or loss. Failure to adhere to these obligations breaches your contractual agreement with the carrier. We remain committed to diligently collaborating with both our insurance provider and the involved trucking companies to expedite resolution. However, please understand that resolutions of this nature inherently require time.

Do you agree that it’s inappropriate to set-off freight invoices against a carrier claim?

Answer
We understand that arguments can be made against set-offs, but our guidelines [see section (10.18) below] recognize a shipper’s right to good faith set-offs. 

We believe that in practice, forcing A to pay B, when B owes an equal amount, is not helpful, particularly given the possibility the cargo claim may never be paid.   

(10.18) Set-Offs. Set-offs may be justified as long as the deduction is claimed in good faith and fully supported. “Setting up” a follow-up transaction with a Carrier in order to recoup losses from a prior load is inconsistent with the good faith requirement (see Section 1.6) and therefore improper. If, on the other hand, in the normal course of business a produce vendor owes a Carrier $10,000.00 and the Carrier owes the vendor $5,000.00, a set-off in this amount ($5,000.00) against the Carrier’s invoice is not usually considered improper unless prohibited by a specific agreement between the parties.

Also, when the transportation service causes loss or damage, and the claim is fully supported, we feel the carrier (or freight broker as the case may be) is the more natural party to bear the loss during the time waiting for the claim to be processed.   

Nuance
Please note the last line of Section (10.18) above. If, in the future, you want to include an explicit bar against set-offs in your rate confirmations or transportation contracts, we would recognize the provision, flipping the script in these situations. 

Are these helpful?  Do you agree? Please send your feedback to dnelson@bluebookservices.com.