Imagine the following scenario: “You have been buying one load a week from shipper “X” for the past couple of months. Payment terms with the shipper are 10 days. The last load you received is in deteriorated condition. After claiming damages and salvaging the product your losses are beyond the invoiced price. You decide to deduct your losses from a previous shipment that arrived without issues. The shipper is not happy with that situation and demands payment in full for the uncontested load. What should you do?
It is not an uncommon practice in our industry that a buyer who has received product in deteriorated condition holds payment on previous or future invoices if there is reason to believe the loss is going to be above and beyond the invoiced price. It is a convenient method of settling claims for buyers and sellers. However, the parties are not always in agreement with settling the claim in that manner.
Technically speaking, when a situation like this arises, unless you have an agreement with the shipper or the transportation company, offsets are not allowed. Each transaction is its own contract and each contract must be addressed separately, especially when there is a dispute.
If your losses are beyond the invoice price and the other party refuses to pay, you can initiate a claim through DRC provided that the other party (shipper, transportation company, etc.) is a DRC member.
