By Luis Lopez, AI transportation consultant, CEO of Go Hub.io Holdings Corp and subsidiaries, and host of the Freight Guru Podcast
When freight arrives damaged, most of the attention goes to the claim amount. Less attention goes to a question that often decides how much is actually paid: what happens to the damaged goods themselves? They still exist, they usually still have some value, and somebody is going to end up owning them. That is the subject of salvage.
The mistakes here are made in the first few days after a loss, and they are expensive. A shipper who throws away damaged product too quickly, or refuses a shipment that still has value, can turn a strong claim into a reduced one.
What salvage means in a cargo claim
Salvage is whatever value remains in freight after it has been damaged. A pallet of crushed cartons may contain mostly sound product, and a dented appliance may sell at a discount. Even goods that cannot be sold for their intended purpose may have scrap or recycling value.
The basic principle of a cargo claim is that the claimant should be made whole for its actual loss, not placed in a better position than if the freight had arrived intact. If you are paid the full value of the goods and you also keep goods that are still worth something, you have recovered more than you lost. Salvage is the mechanism that prevents that.
The duty to mitigate
A party that suffers a loss is generally expected to take reasonable steps to keep the loss from growing. In cargo claims this is called the duty to mitigate damages, and it has practical consequences at the receiving dock.
- Accept freight that has value. As a general rule, a consignee should accept a damaged shipment unless the goods are essentially worthless. Refusing freight that could be repaired, sorted or sold at a discount can be used against the claim, and it adds storage and return costs to the dispute.
- Note the damage on the delivery receipt. Accepting the freight does not mean accepting its condition. Write specific exceptions on the receipt before signing.
- Protect the goods. Move them out of the weather, separate damaged from sound units, and prevent further deterioration.
- Do not dispose of anything yet. Keep the product and the packaging until the carrier or insurer has had a chance to inspect or has waived inspection in writing.
Who gets the damaged freight
There are two common outcomes, and the claim amount depends on which one applies.
The claimant keeps the goods
The owner of the freight retains the damaged product and sells it, repairs it or uses it. The claim is then reduced by the salvage value, sometimes called a salvage allowance. The claimant recovers the difference between what the goods were worth undamaged and what they are worth in their damaged state, plus reasonable costs of sorting, repair or resale where those are recoverable.
This is the usual result for partial damage, because the owner knows the product and its market best.
The paying party takes the goods
If a carrier or insurer pays the full value of the shipment, it is generally entitled to take the damaged goods and recover what it can by selling them. The owner cannot collect full value and also keep the product, unless the two sides agree that the goods have no value at all.
A related point: when a cargo insurer pays a claim, it typically takes over the insured’s rights against the carrier or other responsible party. That process is called subrogation, and I explain it in cargo claims subrogation explained. Read the policy before making promises about the goods to anyone.
How salvage value is established
Salvage value should be supported by evidence, not by a round number on a claim form. Reasonable ways to establish it include:
- An actual sale. Selling the damaged goods to a discount buyer or secondary market and documenting the price is the strongest evidence.
- Competitive bids. Written offers from more than one salvage buyer show that the price was tested.
- An inspection report. An independent surveyor or the carrier’s inspector can assess the extent of the damage and estimate what the goods are worth.
- Repair cost. If the goods can be restored to sellable condition, the documented cost of repair may be the right measure of the loss instead of a salvage calculation.
When salvage is not an option
Some goods cannot responsibly go back into commerce once their integrity is in question. Food, pharmaceuticals, medical products, infant products and safety-critical components are the usual examples. A shipment may look fine and still be unsellable because nobody can verify that it is safe.
Carriers and insurers do not have to accept a bare statement that damaged goods must be destroyed. A claimant taking that position should be ready to show:
- A legal or regulatory reason the goods cannot be sold, or a written quality policy that existed before the loss and is applied consistently.
- Evidence of the actual condition of the goods, such as inspection results, test results or temperature records.
- Notice to the carrier or insurer and an opportunity to inspect before destruction.
- A certificate of destruction or similar proof that the goods were actually destroyed and not sold.
Brand protection
Owners of branded goods often object to damaged product being sold through discount channels with their name on it. That concern is not automatically the carrier’s cost. If a brand owner insists on destroying goods that have real salvage value, the claim may be reduced by that value anyway. The better approach is to address it in advance. A transportation contract can state that the carrier may not sell damaged goods without consent, that labels and markings must be removed before any sale, or that certain products are to be destroyed and paid at full value.
Common mistakes that shrink the payout
- Disposing of goods before inspection. This removes the evidence and gives the other side grounds to reduce or deny the claim.
- Refusing a shipment with partial damage. The sound portion still has full value, and refusal can be treated as a failure to mitigate.
- Ignoring the liability limit. Salvage is calculated within whatever limit applies to the shipment. If liability is capped, the cap still controls. See cargo insurance versus carrier liability for how those limits work.
A practical sequence to follow
As an AI transportation consultant, the first thing I look at in a damaged-freight file is the timeline of what happened to the goods. A clean file usually follows the same order:
- Accept the freight if it has any value, with clear written exceptions.
- Photograph the goods, the packaging and the trailer.
- Segregate and protect the damaged units.
- Notify the carrier, and your insurer if you have cargo coverage, in writing and request an inspection.
- Hold the goods until the inspection is done or waived.
- Agree in writing on what happens next: repair, sale, return to the carrier or destruction.
- File the claim with the salvage calculation and supporting documents attached.
Salvage sits inside the wider framework of carrier liability, which I cover in my explainer on the Carmack Amendment, and it should be part of any plan for filing a freight claim that gets paid. Decide what happens to the damaged goods early, put the agreement in writing, and the rest of the claim becomes much easier to resolve.
For more practical discussion of cargo claims and freight risk, subscribe to the Freight Guru Podcast.
About the author: Luis Lopez is a Miami-based AI transportation consultant and logistics entrepreneur, the CEO of Go Hub.io Holdings Corp and subsidiaries, and host of the Freight Guru Podcast.
This article is general information for the freight community, not legal advice. Talk to a transportation attorney about your specific situation.
