Freight Disposition: Options, Lien Rights, and Claims

Freight disposition is what happens to a shipment when it cannot be delivered as planned: the carrier holds the cargo, notifies whoever has authority over it, and waits for instructions to return, reconsign, salvage, auction, or destroy the goods. Every day that decision waits, storage charges accumulate and the carrier moves closer to selling the freight under its own lien rights. Handling the process quickly and correctly is how you protect your cargo, your claim, and your money.

When a Shipment Enters Disposition

Disposition gets triggered any time cargo can’t complete its journey. The usual reasons are a consignee refusing delivery over visible damage or contamination, a wrong address on the bill of lading, a closed or inaccessible receiving facility, or a shipment arriving so late the consignee no longer wants it. In federal freight contracts, when a shipment cannot be delivered through no fault of the carrier, the carrier contacts the shipper for instructions.¹

Once the carrier flags cargo as undeliverable, the shipment enters what the industry calls on-hand status. It sits in the carrier’s terminal or warehouse while the carrier waits for a decision. If nobody responds, on-hand freight eventually becomes abandoned freight, and the legal shift matters: once cargo is classified as abandoned, the carrier gains rights to dispose of it that don’t apply to ordinary shipments. Some carrier tariffs allow disposal after as few as 30 days of silence. Ignoring an on-hand notice is the fastest way to lose control of your goods.

Why You Usually Shouldn’t Refuse Damaged Freight

Shippers and consignees regularly get tripped up here. You generally cannot refuse a damaged shipment and walk away. The law places a duty on consignees to accept delivery of damaged goods unless the shipment is practically worthless. Refuse a partially damaged load and the entire shipment goes into disposition, storage charges start running, and the total loss grows far beyond the original damage.

The correct move is to accept the shipment, note all damage on the delivery receipt, and file a freight claim for the depreciation or repair cost. You’re expected to minimize the loss, which might mean keeping damaged goods at a reduced value or having them repaired. Any salvageable freight should be retained until the carrier settles the claim. Refusing to hold onto salvage can result in a claim denial.

The exception is cargo that truly has no remaining value. A refrigerated load of perishables that arrives warm and spoiled makes sense to refuse, because accepting only shifts the disposal problem to your facility. For partial damage to durable goods, accept delivery and document everything.

Sending Disposition Instructions

When freight goes undeliverable, the carrier sends a formal on-hand notice telling the shipper or consignee that cargo is sitting in the carrier’s possession and instructions are needed. Carrier tariffs give you a limited window to respond, and once it closes, the carrier can treat the goods as abandoned.

Your response has to be specific. Identify the shipment by its bill of lading number, and state clearly whether you want the goods returned to origin, forwarded to a new consignee, held for pickup, sold, or destroyed. Under the Uniform Commercial Code, a carrier can redirect or dispose of goods on instructions from the holder of a negotiable bill of lading, the consignor on a non-negotiable bill, or the consignee once goods have arrived at destination.² Carriers who take instructions from the wrong party can face misdelivery liability, so they will verify who is authorized.

Email and EDI are standard for transmitting instructions. The UCC requires sellers to “promptly notify” buyers of shipment details but doesn’t mandate a specific format.³ Most carriers accept email as long as the message clearly identifies the shipment and the requested action. Keep written records of every communication. If a dispute later turns on whether you authorized disposal, the paper trail is your protection.

The Four Disposition Options

Once the shipment isn’t reaching its original destination, the choices come down to four paths. The right one depends on the cargo’s value, condition, and sensitivity.

Return or Reconsignment

Sending freight back to the origin point or redirecting it to a new consignee is the standard option for high-value goods that can still be sold. For government shipments, if the delivery failure was not the carrier’s fault, the return trip is billed at the same rate as the original outbound shipment. If the carrier caused the problem, the return ships at no charge.¹ Commercial contracts vary, but expect to pay return freight plus any storage charges that accumulated while the cargo sat on-hand.

Salvage Sale

When cargo is damaged but not worthless, a salvage buyer purchases it at a steep discount. Recovery rates vary widely by commodity and extent of damage. A partially water-damaged load of electronics might fetch pennies on the dollar, while downgraded grain can sometimes recover around half its original value. The shipper or their insurance company typically arranges the salvage buyer, though carriers sometimes handle it once goods have been abandoned.

Auction

If no one claims the goods, the carrier or warehouse operator can sell them at public or private auction. Under the UCC, the sale must be “commercially reasonable,” meaning the carrier sells in the usual manner for that type of goods, at the going market price, or in a way consistent with standard dealer practices. Before selling, the carrier must notify everyone known to have an interest in the goods, including a statement of the amount owed, the nature of the sale, and the time and place of any public sale.² Selling far more goods than needed to cover the debt is not commercially reasonable.

Destruction

Physical destruction is the last resort, reserved for proprietary products the brand owner won’t allow on the secondary market, or cargo with no resale value. Whoever authorizes destruction should insist on a certificate of destruction. A proper certificate includes an inventory of what was destroyed, the method used, chain-of-custody documentation, and verification signatures. For branded or proprietary items, the certificate should reference specific part numbers or serial numbers. Without this documentation, the shipper has no proof the goods didn’t end up on a gray market.

Hazardous materials add federal regulation on top. Under RCRA, transporters must deliver hazardous waste to the next designated facility using a properly prepared manifest, and the recipient must sign for it.⁴ Hazardous cargo can’t be dropped at any disposal site. It must go to a permitted treatment, storage, or disposal facility, tracked by manifest from origin to final destruction.

What the Delay Costs You

The moment freight goes on-hand, the meter starts running. Three types of charges apply, and confusing them is a common source of billing disputes.

Demurrage is charged when a loaded container stays at a port terminal beyond its allotted free time. It’s essentially a parking fee for occupying terminal space.
Detention is charged when a carrier’s container is held at your facility beyond free time. It’s a rental fee for tying up the carrier’s equipment.
Storage is charged when cargo sits in a carrier’s terminal warehouse or a third-party facility. This is the charge most relevant to domestic disposition.

Free time, the grace period before charges begin, is typically around five working days at most U.S. ports, though high-volume ports such as New York/New Jersey, Los Angeles, and Long Beach allow only four days.⁵ After free time expires, charges accumulate daily and escalate the longer the cargo sits.

Rates vary significantly by carrier and facility. One LTL carrier’s published tariff lists storage charges ranging from roughly $22 per shipment per day at the low end to nearly $150 per day at the high end, calculated per hundredweight. Moving freight to a public storage facility adds separate handling charges. A shipment sitting unresolved for a month can easily accumulate storage that exceeds the cargo’s value, which is why responding quickly matters.

Carrier Lien Rights and Forced Sale

Carriers don’t just send bills and hope. Under the UCC, a carrier has a lien on goods covered by a bill of lading for all charges incurred after receiving the freight, including transportation, demurrage, terminal charges, and any expenses needed to preserve the goods.⁶ The carrier can hold your freight until you pay, and if you don’t pay, the lien lets the carrier sell it.

The enforcement process has protections built in. Before any sale, the carrier must notify everyone known to have a claim on the goods, stating the amount owed, describing the proposed sale, and giving the time and place of any public auction. Anyone with rights to the goods can stop the sale by paying the lien amount plus reasonable enforcement expenses before it happens.²

After a lien sale, the carrier takes what it’s owed from the proceeds and must hold any remaining balance for delivery to whoever would have been entitled to the goods. A good-faith buyer at a lien sale takes the goods free of prior claims, even if the carrier didn’t follow every procedural requirement perfectly. Carriers who willfully violate the sale requirements face liability for conversion.²

Filing the Freight Claim in Parallel

Disposition and claims run alongside each other. If your freight was damaged, lost, or delayed in transit, you likely have a claim against the carrier regardless of what happens to the goods themselves. Under the Carmack Amendment, any motor carrier or freight forwarder providing interstate transportation is liable for actual loss or injury to property it receives. The originating carrier, the delivering carrier, and any carrier in between can all be held liable.⁷

Federal law sets floor deadlines. A carrier cannot set a claim-filing deadline shorter than nine months, and the window for filing a lawsuit cannot be less than two years from the date the carrier issues a written denial.⁷ Your bill of lading may allow more time, but never less.

A valid claim must be in writing and filed with the receiving carrier, delivering carrier, or the carrier that issued the bill of lading. The claim needs to identify the shipment, assert that the carrier is liable, and request a specific dollar amount. Damage notations on freight bills or inspection reports don’t count as claims by themselves. You need a separate written communication that explicitly demands payment.⁸

Imported Cargo Follows a Different Timeline

Imported merchandise runs on a separate track, and the timeline is less forgiving. When goods arrive at a U.S. port and the importer doesn’t file an entry, the carrier or custodian must notify Customs and Border Protection within 20 calendar days of landing, and must also notify a bonded warehouse certified to receive general order merchandise in the same window. Failing to notify CBP can result in a penalty of up to $1,000 per bill of lading, or the value of the merchandise if it’s worth less than $1,000.⁹

Once transferred to a general order warehouse, the goods are held at the consignee’s risk and expense. The consignee can still enter the merchandise by paying all duties, taxes, fees, and accumulated storage. But the clock is ticking. The general order period lasts six months from the date of importation.¹⁰

After six months, unclaimed merchandise is considered abandoned to the U.S. government. CBP can then sell it at public auction, or provide notice that title will vest in the United States free of any liens on the 30th day after notice, unless the owner steps in and pays everything owed.¹¹ Before any auction, CBP sends notice to the importer, consignee, or shipper at least 30 days in advance and publishes advertisements for three consecutive weeks in a local newspaper. Explosives, dangerous articles, and perishable goods can be sold or destroyed on a shorter timeline.¹⁰

Duties and fees owed on merchandise that has gone through this process are calculated at the rate in effect when the goods became subject to sale, not the rate when they originally arrived.¹¹ If you’re trying to reclaim imported goods before auction, budget for accumulated storage, handling, duties, and any interest accrued during the general order period.

Recovering Value After Abandonment

When freight is abandoned or destroyed, the financial consequences run beyond the cargo’s value. If the cost of recovering or repairing damaged goods exceeds a substantial percentage of the insured value, the insurer may declare a constructive total loss, pay the full policy value, and take title to whatever remains. The threshold varies by policy, but insurers commonly treat a loss reaching 50 to 60 percent of insured value as crossing into total-loss territory.

On the tax side, businesses that lose goods through abandonment or disposition can generally deduct the cost as a business loss, subject to at-risk rules and passive activity limits before it reduces taxable income. If total business losses for the year exceed total business income by more than the annually adjusted threshold, the excess is treated as a net operating loss that carries forward. Businesses reporting these losses should track them on Form 4797 and Form 461.¹²

Between the freight claim, the insurance payout, and the tax deduction, there is real money to recover from a bad situation. The mistake is treating abandoned freight as a total write-off without working all three channels. Filing the freight claim preserves insurance subrogation rights, and the tax deduction covers whatever the other two don’t make whole.

1
Acquisition.GOV. 48 CFR 52.247-16 – Contractor Responsibility for Returning Undelivered Freight
2
Cornell Law Institute. Uniform Commercial Code 7-308 – Enforcement of Carriers Lien
3
Cornell Law Institute. Uniform Commercial Code 2-504 – Shipment by Seller
4
US EPA. Hazardous Waste Transportation
5
Federal Maritime Commission. Rules, Rates, and Practices Relating to Detention, Demurrage, and Free Time
6
Cornell Law Institute. Uniform Commercial Code 7-307 – Lien of Carrier
7
Office of the Law Revision Counsel. 49 USC 14706 – Liability of Carriers Under Receipts and Bills of Lading
8
eCFR. 49 CFR 370.3 – Filing of Claims
9
eCFR. 19 CFR 123.10 – General Order Merchandise
10
eCFR. 19 CFR Part 127 – General Order, Unclaimed, and Abandoned Merchandise
11
Office of the Law Revision Counsel. 19 USC 1491 – Unclaimed Merchandise
12
Internal Revenue Service. Excess Business Losses