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Cargo claims can be filled with misinformation and confusion. One key element often misunderstood is the Letter of Assignment (LOA). This article will clear the fog and guide you through the essential facts about LOAs and their role in cargo claims.
What is a Letter of Assignment (LOA)?
Think of an LOA as a legal permission slip. It’s a document where the rightful cargo owner (claimant) transfers ownership of their claim to a third party, typically a claims recovery expert such as Recoupex. This empowers the third party to act on the claimant’s behalf, pursuing compensation for lost or damaged cargo.
Who can issue an LOA?
Contrary to popular belief, only three parties initially have the right to claim damage:
- Exporter: The seller of the goods.
- Importer: The buyer of the goods.
- Freight Forwarder (FFW): The intermediary responsible for arranging transportation.
Common Scenarios and the LOA Chain
Here are some common scenarios and how the LOA chain plays out.
Scenario 1: Receiver pays upfront for damaged goods.
- Receiver issues LOA to Third Party: Since the receiver suffers the financial loss, they can directly appoint a third party to pursue the claim.
Scenario 2: Receiver pays remaining amount upon arrival of damaged goods.
- Receiver issues LOA to Shipper: The receiver assigns the claim to the shipper, who then appoints a third party if needed.
- Shipper issues LOA to Third Party: The shipper authorizes the third party to act on their behalf.
Scenario 3: FFW issues House Bill of Lading (HBL).
- Receiver issues LOA to Shipper: Similar to Scenario 2.
- Shipper issues LOA to FFW: The shipper authorizes the FFW (named as shipper on the HBL) to pursue the claim.
- FFW issues LOA to Third Party: The FFW empowers the third party to handle the claim.
This is just a simplified overview. Each scenario may have its own nuances and legal considerations.
Beyond the LOA
Cargo owners may also have a direct claim against the shipping line based on “tort” (non-contractual liability). In such cases, a LOA from the FFW might not be necessary.
Cargo claims can be complex, but understanding LOAs and who has the right to issue them is crucial. Remember, the chain of subrogation must be complete for the cargo owner to recover losses. With this knowledge, you can confidently navigate the claims process and ensure a smooth course to recovery.
Recoupex is a hub of transport lawyers – experts in cargo claims. We assess your case quickly. We have successfully recovered claims from Maersk, Sealand, Hapag-Lloyd, Mediterranean Shipping Company – MSC, CMA CGM, and other carriers.
