Aviation Logistics Knowledge Lecture – Cargo Claims

Hello everyone, it’s time for a new lecture on aviation logistics knowledge. In this issue, we will briefly discuss some knowledge about cargo claims.

 

As we all know, in the process of air transportation, the goods may be damaged or even lost. And after the goods have been lost for more than 21 days, we can file a claim with the airline. But friends who have had similar experiences may think, why is the compensation amount so small? The customer who claims to me is based on the invoice amount, but the compensation given to me by the airline is not based on the invoice amount. Yes, today we will talk about this issue.

 

When we find that there is a situation that requires a claim, what is the first judgment? Is “whether a claim should be filed”. If the goods are lost, the claim can only be filed after more than 21 days, because within 21 days, the airlines are looking for the goods. Generally speaking, the owner of the lost goods does not want to compensate, but the most important thing is to find the goods and transport them to the destination smoothly. But more than 21 days, it is basically difficult to find the goods. Of course, in practice, there are also airline regulations that a claim can be filed before the 21-day period, as long as it is determined to be MSCA. This varies by airline. But the normal practice is to file a claim after 21 days. In addition, it should be noted that if the goods are lost for more than 21 days and then a claim is filed, then even if the goods are found later, the goods cannot be picked up. Because if the goods are lost, and then the goods arrive at the destination, in order to avoid huge warehouse rent, the goods should be picked up first, right? However, the number of pieces picked up is different from the number of pieces on the bill of lading. So what are we going to do? To do CCA, right? Click here to review previous articles that said CCA. After the modification, the number of pieces to be picked up matches the bill of lading, so it can be submitted for customs clearance smoothly. The problem is, at this time, your contract of carriage for this shipment ends. Customs, warehouses, and airlines all regard this shipment as a complete transportation process. So even if the lost goods are found again, it can only be FDCA. And these FDCAs are regarded as “excessive goods” and cannot be picked up. Imagine when a shipment has completed the customs clearance process and picked up the goods. All of a sudden you said that there are several such items that need to be picked up. Will customs be confused? Are these items of yours smuggled? Why is it not shown on the bill of lading? So it will be very troublesome. Plus, some destination customs prohibit partial pickup, such as RUH. So if these destinations have MSCA, and you are in a hurry to pick up the goods, you can only go to claim. You can also click here to review articles about MSCA and FDCA.

 

The second thing to judge is who is the claimant to? Maybe the friends here have questions. The airline lost my cargo, and I must want to make a claim for the airline. This idea is both right and wrong. Why do you say that? If it is a generation, sign a contract with the airline directly. That must be a claim to the airline. But if it is the second generation, or borrowed the bill, then you should make a claim through the first generation or the agent who lent you the bill. If it’s three generations or deeper, then file a claim up level by level. Why is this so? Do you remember the article on the bill of lading mentioned earlier? Click here to review it. Because the bill of lading is equivalent to the contract of carriage, Party A of the contract is the airline company, and Party B is the agent who has a contract with the airline company. The problem of damaged or lost goods is the problem between the airline company and the contracted agent. The airline is responsible for the contracting agent, but not directly responsible for the second or third generation or other people who have delivered it in the past. Because the transportation relationship is between Party A and Party B. Therefore, it is very important to understand the bill of lading and even the entire concept of air freight, not just knowing how to operate it. This is also one of the reasons why I wrote this official account, so that everyone can understand the industry knowledge more quickly.

 

After receiving the claim, the airline will ask for some documents, including but not limited to: bill of lading, packing list, invoice, etc. The specific document requirements also vary from airline to airline. Available here upon request. The airline’s claims department will make a judgment on compensation based on these documents. For example, whether to compensate, how much the compensation is, etc. Here is the part that everyone cares about the most. How much will the airline pay?

 

Some small partners may feel that compensation should be made according to the invoice amount. This idea is not necessarily correct. If it is ordinary cargo without commercial insurance, the airline will make its own decision on the amount of compensation based on the value of the cargo and the degree of damage to the cargo. But the amount of compensation will not be unreasonable. Because according to the Montreal Convention, there are regulations on the maximum amount of compensation. The key point here is the maximum value. What does that mean? It just won’t exceed this value! Make no mistake, it does not mean that the compensation must be based on this value, this is only the maximum compensation amount.

 

OK, so how is this “value” defined? We first need to understand a formula. Maximum compensation amount = cargo weight x 22SDR. What the hell is SDR? SDR is first of all a floating number set by the International Monetary Fund (IMF). This number will change according to exchange rate changes. The full name of SDR is: Special Drawing Right. It consists of a basket of currencies, including: US dollar, Euro, Japanese yen, Chinese yuan and British pound. Since October 3, 2016, the RMB has officially become one of the currencies in the IMF’s SDR statistics. The following is the official explanation of the IMF.

 

The exchange rate changes every day, so the SDR also changes every day.

 

The above formula mentioned that the compensation amount is not directly multiplied by the weight, but has a coefficient, which is currently 22. So where did this coefficient come from? In fact, the SDR is determined by the IMF, and the coefficient of 22 is determined by ICAO. Let’s see what ICAO has to say. For those of you who have forgotten what ICAO is, you can click here to review our previous article.

 

The first sentence above says “limits of liability conducted by ICAO under Article 24 of the Convention for the Unification of Certain Rules for International Carriage by Air, done at Montreal on 28 May 1999 (Doc 9740) (Montreal Convention of 1999)… “It is very clear here that in the Montreal Convention of 1999, ICAO stipulates the limit of liability for international air transport. Again, this is “Limites”, which is the maximum amount mentioned earlier. Of course, if you look closely, this coefficient has actually changed several times since the beginning. The coefficient was 17 at the beginning, and was revised to 19 in 2009, and was revised to 22 on December 28, 2019. So the current coefficient is 22. I have seen many freight forwarding websites, even global websites, and this coefficient has not been corrected. But don’t be misled, the coefficient of 22 is already being implemented. Regarding the improvement of the coefficient, ICAO has given clear and clear guidelines, we just need to follow the official guidelines.

 

 

Then, assuming that the airline company has accepted the claim application, then the airline company will make compensation according to its own judgment rules and then refer to this compensation limit. It is worth mentioning that a small partner said that compensation should be made according to the contract amount. This kind of compensation can only be in the case of purchasing commercial insurance in advance, and the insurance company will compensate according to the contract amount, which does not apply to the current example. Then we go back to what we said at the beginning of the article, the customer claims you according to the invoice amount. Should we be compensated according to the client’s request? I think this can be negotiated on a single ticket. Not necessarily according to the invoice amount to compensate, this must be discussed with the guests and then come to a reasonable solution. The freight forwarding company is not legally obliged to make compensation according to the invoice amount.

 

Then, if you want to know the value of the SDR corresponding to the day, you can directly go to the IMF official website to check the SDR exchange rate of the day.

 

If you can’t open the page, you can also let me know by private message, and I will help you check.

Well, at this point, all we can do is wait for the airline’s notification. And our lecture ends here. Thank you for your support, see you next time!