Claims and Compensation: What to Do When a Shipment Arrives Defective

The container cleared Customs in Auckland, the cartons are stacked in your garage, and unit after unit comes out scratched, mis-wired or in the wrong colour. Every importer faces this day eventually. What separates the ones who recover their money from the ones who eat the loss is not luck — it's process. Here's the claims playbook we use.

First, establish whose fault it actually is

Before you fire off an angry email, be honest with yourself. Was the defect absolutely the manufacturer's fault, or was your order sheet ambiguous? If you never specified the cable length, the colour reference or the packaging spec in writing, you're in settlement territory, not claim territory. Go in mild, negotiate a goodwill fix, and tighten your purchase order for next time.

If the fault is clearly the factory's — wrong colours against an approved sample, faulty wiring, missing components — you can run a hard claim. New suppliers will wriggle. With solid proof they can't escape; they can only try to minimise the payout.

Build the file before you make the call

Documentation wins claims. Assemble:

• Photos and videos of the defects, including carton markings so the batch is identifiable
• Your purchase order, the pro-forma invoice, the approved sample sign-off and every relevant email
• Customer complaints or returns, if goods already went out via Trade Me or your own store
• The inspection report, if you had one done

Then calculate your actual loss: the value of unusable goods, rework costs, plus lost sales you can evidence. Now add roughly 20% on top. That padding matters, because a supplier's first offer will typically be about half of whatever you claim — the extra margin lets you "concede" your way down to your true 100%. Send one combined, factual report stating the amount you expect.

The leverage you should still be holding

If you followed our payment advice — never more than 30% deposit, 70% balance only after a passed inspection — a defect found before shipment costs the supplier, not you. He will always agree to rework, because he's still waiting for his money. This is exactly why we bang on about pre-shipment inspections and staged payments: once you've paid 100% and the goods are in New Zealand, your leverage shrinks to persistence and relationship.

Persistence still works, though. Daily calls and emails, always professional, never threatening, wear down a stubborn supplier. Stay factual. Threats cause loss of face and harden positions; a steady drumbeat of evidence does not.

What settlement usually looks like

The most common outcome is a discount off your next order rather than a bank transfer. That's perfectly acceptable if you intend to reorder and the supplier is otherwise reliable — it's real money against real future spend. If you have no intention of ordering again, say so and insist on direct compensation instead; a credit with a supplier you'll never use is worth nothing.

Two force multipliers worth knowing:

• Claim the inspection company too. If a third-party inspector passed goods that clearly carried the defect, you may have a negligence claim against the inspector on top of the factory claim. You'll need substantial proof, but it maximises total recovery.
• Show up in person. One importer we know chased a US$40,000 recall claim by email for weeks and got nowhere. A factory visit — opening with talk of "expanding the business", closing with "I'm not leaving until we have a solution" — produced a US$20,000 bank-transfer settlement within two days, four times what he'd privately have accepted. Face-to-face pressure is the single most effective claims tool there is.

Fixes that stop the sequel

Every claim should upgrade your process. Put a re-inspection clause in your purchase order ("costs of re-inspection, due to rejections, will be at supplier's cost"). Add delay penalties while you're at it. Ask for a Letter of Guarantee on any reworked goods. And remember your obligations run downstream too: under the Consumer Guarantees Act, when the manufacturer has no NZ presence, you as the importer carry the manufacturer's liability to your customers — you can't wave a Kiwi buyer off to a factory in Ningbo. Sorting your customers out promptly, then recovering from the supplier, is both the law and good business.

For larger volumes and private-label goods, this is also the moment to look at product liability insurance — some suppliers carry policies that can respond to serious defect losses, and you should hold your own cover as well.

Key takeaways

• Only run a hard claim when the fault is unambiguously the factory's; document everything and quantify your loss.
• Pad your claim by ~20% — first offers land around 50%, and the padding lets you settle at your real number.
• The unpaid 70% balance is your best leverage; a discount off the next order is the standard settlement.
• Persistence and face-to-face meetings recover multiples of what email achieves — and you can also claim a negligent inspection company.

Related: Third-Party Inspections and AQL: Quality Control Before Goods Ship, Product Liability Insurance: The Cover NZ Importers Forget

Figure: The claims playbook from establishing fault to settlement.