I have exactly the same problem too. It has been working ok the past few years but this last week or so it doesn't work any more. I don't know if its their latest updates that have messed it up. I go to select the product to exchange and Shopify can'...

I too desperately need to be able to create a report which shows product inventory items selected as 'damaged' but this data field data can't currently be accessed by the API.