Transportation & Logistics Council, Inc.
Q&A – Archive II
Q: We are primarily a warehousing company, however, we have a transportation program where we act, we believe, as a broker, in arranging the consolidation of LTL orders from various shippers into TL routes via contract and commercial carriers, on a published "sailing" schedule, in order to reduce the cost of transportation for our customers. We want to be in the business of transportation, so we are looking toward providing more complete services.
First, I need your confirmation that in the performance of the services described above, we are legally acting as a freight broker. We do have a brokerage license.
Second, if we are paying the carriers and billing our customers (the shippers) for freight (at guaranteed, all‑inclusive rates), can our customer withhold payment or deduct from future freight bills for a loss or damage shipment? Can we do the same to the carrier? I do not believe either practice is legal, but I cannot find the code.
Assuming this is not legal, is it therefore our responsibility to file the claim with the carrier since we arranged the transportation? If we do not have to file the claim, but if we do want to offer the service of handling the claims for our customers, what is the "right and professional" way to handle the customer's credit for loss or damage received?
A: Is sounds as though you are providing services that fall into the category of a "freight forwarder". The fact that you are consolidating shipments for one or more shippers, and using the services of a motor carrier, fits more within the definition of a freight forwarder, see Section 13.0, Liability of Freight Forwarders and Intermediaries in "Freight Claims in Plain English" (3rd Ed. 1995).
As a forwarder, you would be assuming liability for loss or damage in the same way as if you were a carrier. In the freight forwarder relationship there are really two contracts of carriage: between the shipper and the forwarder, and between the forwarder and the carrier. Thus, you would be liable to the shipper for the loss or damage, and would have to file your own claim against the motor carrier.
As far as setting off freight charges against loss and damage claims, this is a common practice and is not "illegal". If you want to avoid this problem, the best way is to cover it in a written transportation agreement with your customers.
Q: I'm a 3PL who is using common carriers and household goods carriers to deliver large items to residences. Do I need a broker’s license? If I do, where can I get one?
A: The definition of a "broker" is found in the FMCSA (formerly ICC or FHWA) regulations at 49 CFR Part 371, and provides:
(a) "Broker" means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.
* * *
(c) "Brokerage" or "brokerage service" is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor or consignee.
If your activities fall within the definition of a "broker", the Interstate Commerce Act requires that you must "register" with the Department of Transportation (FMCSA), 49 U.S.C. Sections 13901 and 13904. This registration requirement replaces the former statutory requirement to obtain a "license" from the ICC. Brokers holding licenses from the ICC as of December 31, 1995 were "grandfathered" and deemed to be registered under the new law, 49 U.S.C. 13905.
The FMCSA has established regulations governing applications for broker registration that are published at 49 CFR Part 365. Application forms (Form OP-1) are available from the FMCSA, 400 Virginia Ave. SW, Washington, DC, 20590, phone (202) 358-7000, and are now available through the FMCSA web site at www.fmcsa.dot.gov (select “Licensing Forms”). I would suggest, though, that you consult an experienced transportation attorney.
Q: We utilize a 3PL to manage the process of getting our merchandise from our vendors into our DC's. From what I understand the 3PL is merely acting as broker on these loads and typically is not liable for loss and damage outside of their negligence or contractually assumed liability. My question is, what if, on the Bill of Lading, the shipper shows the 3PL as the carrier, when in reality the load is actually brokered to another carrier, who signs the BOL with aforementioned noted. By allowing the carriers to do this, has the 3PL held itself out as a motor carrier, and thus liable as a motor carrier under the Carmack Amendment?
A: There is no black and white rule for determining whether an intermediary is acting as a broker or a carrier. Each case turns on the individual facts: the representations, which were made, the relationship of the parties, the course of dealing, etc. ‑ as well as the documents. I am not aware of any case that says that a broker becomes liable as a carrier merely because it was shown in the "carrier" space on a bill of lading.
Your question once again points out the importance of having carefully drawn, written agreements between shippers, intermediaries and carriers.
Q: We are in the process of revisiting our agreement with our 3rd party logistics provider. In referencing one of your manuals, Protecting Shippers Interests, am I to assume that the legal status of an asset based 3PL, could actually be any of the following depending on the transportation arrangement:
1. Motor carrier‑ when they arrange for their affiliated motor carrier to pickup a shipment
2. Broker‑ when they arrange for a carrier not affiliated with them to pickup a full truckload
3. Freight Forwarder‑ when they arrange for a LTL carrier, such as CF, to pickup and deliver a shipment
A: You are correct. Third party logistics providers may wear a number of different "hats" and often do. That is why it is so critical to make sure that you have well-drafted contractual agreements with 3PL's and also that you check them out to make sure they are properly licensed and registered as required by applicable laws and regulations.
Q: We are trying to build an airfreight company in Greece and we are looking for International Law about establishing that company. We would like to be informed about all the regulations are needed.
A: The basic requirements for doing business will be governed by the local laws of the country where your principal office is located.
As for international laws, transportation of passengers, baggage and air freight is governed by international treaties, namely the Warsaw Convention and the Montreal Protocol No. 4 (which amends the Warsaw Convention, and has been ratified by most major trading nations).
Most air carriers participate in the International Air Transport Association (IATA), which establishes various rules and regulations governing transportation of air cargo.
Q: I have a question about the air waybill. On the international air waybill and international house air waybill, there is a space called "Declared Value for Customs". Is this a mandatory field that one must fill in with the value? Which FAA or IATA rules and/or regulations refer to this subject?
A: The International Air Transport Association (IATA) air waybill used in international air freight contains two boxes for entering a value.
The "Declared Value of Carriage" is used when the shipper wishes to declare a value of the goods which is in excess of the carrier's limitation of liability ($9.07 per lb. under the Warsaw Convention, and slightly higher under Montreal Protocol #4) and to obtain additional liability coverage.
The "Declared Value for Customs" is used if the goods are subject to duty (import taxes) by the destination country. The requirements for entering a value in the "customs" box vary depending on the destination country.
IATA publishes the "Cargo Services Conference Resolutions Manual" which contains the air waybill forms, explanations, rules, etc. It is available from IATA, 800 Place Victoria, P.O. Box 119, Montreal, Quebec, Canada H4Z 1M1.
Q: We have a situation where a truck broker that we use has gone out of business. I understand from the previous Q&A's that you have published that the credit for these services was extended by the trucker to the broker. As a result, we are not obligated to pay twice for the same shipment. On shipments where we have not paid as yet, the question has come up if it would be permissible to pay the trucker what he negotiated with the broker. Then also pay the broker for the difference between what we were originally charged to cover his commission.
I'm worried that if we did that, the broker or their bank could still come after us for the full price because the original contract (Bill of Lading) was with them. Would there be an appropriate document that could be created to relieve us from that risk?
A: In the situations where you have not yet paid the defunct broker, you may pay the carrier directly, but you must be extremely careful to avoid having the broker (or its assignee or trustee, etc.) come after you for the freight charges. I would not recommend that you pay the carrier unless you get a written authorization from the broker to pay the carrier directly or a "hold harmless" and indemnity agreement from the carrier. It would also be advisable to get a signed release from both parties.
Q: A furniture company gave a carrier a sofa which was to be shipped to a receiving warehouse in my town for me. I requested that they use this carrier on my purchase order to the furniture company. The carrier filed bankruptcy and it is unknown where my sofa is. If this sofa is lost who is responsible for it?
A: I have the following suggestions:
1. Try to contact the attorney for the bankrupt carrier (either the debtor in possession or for the trustee) and explain the problem to them. See if they can direct you to someone who can help trace your shipment.
2. File a claim with the bankruptcy court as soon as possible (you can usually get forms from either the attorney or from the court clerk).
3. If you can't find your shipment, and your claim is not paid within some reasonable time, you may be able to collect from the carrier's "BMC 32" cargo insurance, which covers shipments up to $5,000. This is a federal cargo insurance coverage requirement for motor common carriers, and you can get information from the Federal Motor Carrier Safety Administration (formerly the Federal Highway Administration) in Washington, D.C. [See "Freight Claims in Plain English" (3rd Ed. 1995) at Section 12.1.]
Q1: Would current law support a different bill of lading form layout than described in the National Motor Freight Classification? This BOL will have the same information with an area for Bar Coding and a supplemental page or continuation page.
Q2: Could someone describe the Voluntary Interindustry Commerce Standards (VICS) bill of lading?
A: At one time, most motor carriers were participants in the National Motor Freight Classification and thus were required to use the Uniform Straight Bill of Lading published in the NMFC. With deregulation, the abolition of the "filed rate doctrine", and the elimination of the ICC, there really is no law or regulation that mandates any particular form of the bill of lading. Today, many shippers have adopted their own forms, and there are many different versions of the "bill of lading" in current use. Carriers generally favor use of the Uniform Straight Bill of Lading as set forth in the NMFC. However, the NMFC bill of lading contains "incorporation by reference" language that makes the Classification and the carrier's (unfiled) tariffs part of the contract of carriage. These tariffs usually contain liability limitations, accessorial charges, late payment penalties and other rules that are unfavorable to the shipper.
One shipper‑friendly bill of lading is the "Shipper's Domestic Truck Bill of Lading" which was developed by the Transportation Consumer Protection Council. This is available in a "kit" from the Council, which includes an explanatory booklet, and a form that can be modified or tailored to the needs of the shipper. For further information, contact the Council at (631) 549-8984.
The VICS bill of lading has been adopted by some of the large retailers and is principally intended to establish a uniform format and to facilitate EDI transmittal of the BOL data. However, the authors of this BOL adopted what they call the "legal statements" from the Uniform Straight Bill of Lading in the National Motor Freight Classification. Thus the VICS BOL incorporates the NMFC and the carrier's (unfiled) tariffs - an unfavorable result from the shipper's standpoint. Obviously, if all of your shipments move under a properly drafted transportation contract, the form and language of the bill of lading is not critical, because the contract provisions will prevail. On the other hand, there may be situations where some shipments are not covered by your contract, so the VICS BOL language would govern. Also, use of the VICS form could create ambiguity and/or disputes, which you don't need.
If your customers should require you to use the VICS format, my suggestion is to delete the "legal statements" on the face of the BOL. You may also want to replace the language with your own text such as: "RECEIVED, SUBJECT TO THE TERMS AND CONDITIONS OF THE SHIPPER'S TRANSPORTATION CONTRACT IN EFFECT ON THE DATE OF SHIPMENT, WHICH IS AVAILABLE TO THE CARRIER ON REQUEST. THIS SHIPMENT IS NOT SUBJECT TO ANY CLASSIFICATIONS OR TARIFFS WHICH MAY BE ESTABLISHED BY THE CARRIER."
Q: When our drivers pick up back-hauls, we have them put a sticker on the shippers paperwork (BOL). Sticker: "Receipt subject to inspection, correction, and tariffs or note agreements. Driver is not authorized to waive rules or adjust charges"
We are additionally sending a quote to the broker/shipper that states $2.50 / lb. limit of liability, dentention information, shipper, consignor, consignee, rate information and wording "subject to terms and condition of the Uniform Straight Bill of Lading on file in carriers office".
If the shippers BOL has terms that we do not agree with are we bound by any of these rules?
Since we formally did not issue a BOL can we enforce the $2.50 / lb. limit of liability?
If we do issue a BOL and the shipper will not sign it or accept it, what is the governing contract or document?
A: Before I can properly answer your questions, please give me some more information:
1. Are you an authorized common or contract carrier (with ICC/FMCSA operating authority), or a private carrier, or what?
2. Are you a participating carrier in the National Motor Freight Classification?
3. Do you have published tariffs?
4. Are you dealing with shippers or with brokers?
5. Are these LTL or truckload shipments?
1. We are a common and contract carrier.
2. We do not participate in the NMFC
3. We have published tariffs. Most of the shipments we are talking about are loads received via brokers. The tariffs we have published are not sent to the brokers or shippers. We use the quotes to settle on a price.
4. We deal with both shippers and brokers. Majority are loads from brokers.
5. Most of the shipments are LTL.
My boss is saying that even if you have a signed contract with a shipper the judge will not look at the contract if you did not issue a BOL. In my mind, the contracts or quotes as we call them, have most of the same information as the BOL. The shipper or broker by signing this quote is creating a contract for transportation. When we apply the sticker to the shippers BOL we are alerting them to our contract and to apply the standard terms and conditions of the Uniform straight bill of lading. We are only using their paperwork as a pickup receipt. I see no problems.
Hopefully this will fill in the missing pieces.
A: The question of "which bill of lading governs" is a controversial subject. Shippers generally don't want to use a carrier bill of lading or the Uniform Straight Bill of Lading from the National Motor Freight Classification because it incorporates provisions of carrier's unfiled tariffs which usually contain liability limitations, accessorial charges, late payment penalties, etc. Unless the shipper demands (and the carrier provides) a complete copy of its tariffs, the shipper has no way to determine what is in the tariffs and the carrier can unilaterally modify its tariffs without any obligation to notify the shipper. Conversely, most carriers want to use a bill of lading that incorporates their tariff rates, rules, terms and conditions, etc. and don't want their drivers to accept shipper versions.
A bill of lading can be merely a receipt for the goods, or it can be a contract - IF it contains contractual language governing the obligations of the parties. Regardless of who prepares the bill of lading, if it has the typical language from the Uniform Straight Bill of Lading, the carrier's tariffs are usually "incorporated by reference" and would be binding on the parties.
If the shipper prepares a bill of lading and it does not incorporate any tariffs, and the carrier accepts the shipment, I would say that the carrier cannot rely on its tariff provisions. And, I don't think that any stickers or subsequent notations placed on the bill of lading "after the fact" would be enforceable.
If the carrier gives a written rate quotation which contains all of the important terms and conditions, and the shipper accepts and signs the quotation, it should be an enforceable contract (regardless of what bill of lading form is used). Note that the provisions of the Interstate Commerce Act, such as the "Carmack Amendment", time limits and statutes of limitation would still govern the transportation unless the contract contains an express waiver.
My suggestion would be to use a formal written transportation contract whenever possible. You may want to have different contracts when dealing with a shipper vs. a broker. A properly drafted contract is the best way to avoid problems and disputes. I suggest that you consult with a qualified transportation attorney.
Q: Is it illegal for a shipper to falsify the weight on a bill of lading?
A: Yes, if it is done "knowingly or with intent to defraud". The statutory provision is found in the Bills of Lading Act, 49 U.S.C. Section 80116, which applies to bills of lading in interstate commerce and provides:
§ 80116. Criminal penalty
A person shall be fined under title 18, imprisoned for not more than 5 years, or both, if the person...
(2) knowingly or with intent to defraud
(A) falsely makes, alters, or copies a bill of lading subject to this chapter;
(B) utters, publishes, or issues a falsely made, altered, or copied bill subject to this chapter; or
(C) negotiates or transfers for value a bill containing a false statement.
Q: We are consolidating products from Singapore to US port‑of‑entry via a single flight. Once the goods have reached the port, the forwarder will break bulk and truck to various parts of the States. Some of the trucking destinations will be shipped in truckload quantities. Is there legislation in the US that states a requirement to have individual bill of lading for EACH truckload? Can we use 1 BOL for multiple truckloads?
A: If the goods are moving from origin (Singapore) to their ultimate destination(s) in the U.S. under a through air waybill issued by a foreign air freight forwarder, they would be covered by the forwarder's air waybill for the entire movement. If the forwarder contracts with one or more motor carriers for completion of the delivery, the motor carriers would normally issue bills of lading to the forwarder. However, this is not the shipper's concern, since it contracts only with the forwarder for the entire door‑to‑door movement.
Q: Company A has a tolling arrangement with Company B. Once the product is made and drummed. Company A sells the made product to a customer. The product will be shipped from Company B's warehouse to a customer using Company A's bill of lading.
My question is: What company needs to show on the Bill of Lading as the shipper? (My belief is that Company A is the shipper.)
A: I would assume from the arrangement you describe that "Company A" is the actual owner of the goods which are being shipped, and that "Company B" is essentially acting as its agent as far as shipping to the customer. Under such circumstances, I think it would be proper to show "Company A" as the shipper on the bill of lading. Thus, "Company A" would be responsible for payment of the freight charges, and would be the proper party to file a claim in the event of loss or damage to the goods, etc.
Q: I am updating a BOL form (printed by the shipper) that currently uses the Uniform Straight Bill of Lading - Short Form, which references both the uniform freight classifications if it is a rail or rail-water shipment and the applicable motor carrier classification if it is a motor carrier shipment.
I understand that with deregulation, tariffs are no longer filed and motor carriers (for domestic shipments of commercial goods) are no longer regulated, at least with respect to BOLs and rates. I also understand that if a carrier uses the NMFC, the uniform BOL published by the American Trucking Association governs, absent a written contract.
a. Can a short form uniform bill of lading that references both rail and motor carrier still be used?
b. With all of the changes to the motor carrier uniform bill of lading, would one form for both rail and motor carrier be problematic? (no longer file tariffs, changes in prepaid/collect, etc.?)
c. Is there any reason to use the Uniform Bill of Lading for motor carriers as opposed to having a shipper-friendly BOL?
d. There is a Uniform BOL for rail and water shipments, at 49 CFR § 1035, that apparently must be used for shipments subject to the Interstate Commerce Act. Only a long form is referenced. Could a short-form be used? Also, when would an interstate rail shipment not be subject to the Interstate Commerce Act and thus not require this BOL?
e. The CFR for the Uniform BOL referenced in number 4 above also indicates that modifications to the front of the form are permitted so long as they conform to "national standards for the electronic data interchange or other commercial requirements for bill of lading information." How does one know if changes made to the front of the Uniform BOL conform to these national standards?
1. Motor carriers:
The use of the Uniform Straight Bill of Lading (either the "short" or "long" forms) in the NMFC is becoming a controversial subject. Clearly, it is not in the best interests of the shipper to use the NMFC bill of lading. However, many carriers are very tenacious about requiring the NMFC form and incorporating the provisions of the Classification and their unfiled tariffs, and resist the use of other bills of lading.
The best advice to a shipper is to enter into a well-drafted formal transportation contract with each of its carriers. Rates, terms and conditions are all covered by the contract, so you don't have to be concerned about the form of the bill of lading or incorporation of the carrier's unfiled tariffs.
If you must ship via common-carrier and use bills of lading, we recommend the Shipper's Domestic Truck Bill of Lading form which is available in "kit" form (explanatory booklet plus floppy disk) from the Transportation Consumer Protection Council. This is a "shipper friendly" bill of lading and the form can be easily tailored for the shipper's requirements.
2. Rail carriers:
You are correct in noting that 49 CFR § 1035 does prescribe the terms and conditions for the RAIL version of the uniform straight bill of lading. However, the great majority of rail movements today are "exempt", either because of the commodity, the equipment (boxcars, etc.) or the type of service (TOFC, COFC, etc.).
"Exempt" rail traffic generally moves under rail contracts or under rate quotations which refer to or incorporate by reference the railroad's exempt rail "circulars" (which are similar to tariffs). Thus, the form of the bill of lading is usually unimportant, and any form which serves to transmit the shipping information can be used.
3. EDI standards:
Most major motor carriers and railroads now have the facility to transmit bill of lading and waybill information via EDI, and many of the large retailers are now adopting the VICS bill of lading. My suggestion would be to contact the carrier information systems group if you plan to transmit data via EDI.
Q: On the Bill of Lading, is it legally essential to disclose the NMFC classification based on 1) number of containers, 2) part numbers that apply, 3) weight, 4) all three, or 5) some combination?
We are trying to streamline our Bills of Lading for a new system we are implementing and any advice (short summary) that you might pass along on the current legal requirements of the Bill of Lading would be a big help. I have not had a chance to keep up on the latest requirements, so your advice would be appreciated.
A: If you are shipping with a motor carrier that is a participant in the National Motor Freight Classification, and you do not have a transportation contract, it would be the usual practice to use the Uniform Straight Bill of Lading. The Uniform Straight Bill of Lading has spaces for setting forth the number of packages, the description of the goods, the weight and the NMFC class. Freight charges are usually determined by the rate base (a function of the distance between origin and destination), the weight and the class.
Part numbers, purchase order numbers, etc. are often included in the description column on the bill of lading if useful to the shipper or the consignee, but they don't affect the freight charges.
The NMFC class is determined by reference to the Articles in the Classification, and determining what is the Article which most closely describes the commodity being shipped.
Q: I have a question regarding your "Explanation of Face of Bill of Lading" that we received with your Shippers Domestic Truck Bill of Lading package. My question has to do with your comments regarding the sealing of a trailer. You state "Seal numbers should not be recorded on the bill of lading as it facilitates a consignee's copying those numbers on delivery records instead of personally inspecting the condition of the seals on delivery to determine whether or not they are intact or have been tampered with."
My response to this is: If you do not note the seal number on the bill of lading or somehow communicate this information to the consignee, how is the consignee to know whether the seal he receives under is the seal that was placed on the truck at the time of shipment? Someone with a little smarts could break the original seal, help himself to whatever he desired, then put a new seal on the trailer. It seems to me that if you were going to seal a trailer and not note the number on the bill of lading, that there would need to be some clear communication between shipper and consignee, especially if the shipment came up short.
Maybe I'm thinking like the thief, but the trust I used to place in my fellow man is eroding. I would like to hear from you on this if you have the time.
A: I suppose that there are two schools of thought on this subject, but I agree with you.
It does seem logical to put the shipper's seal number on the bill of lading. This notifies the consignee that the trailer or container was sealed at origin, and implies that the seal should be inspected and the number checked upon delivery.
Q: I have two questions: 1. If Section 7 is signed, but bill of lading is marked "prepaid", who owes the freight? 2. If Section 7 is signed, but bill of lading is not marked "prepaid" OR "collect", who owes the freight? Can you share a legal authority for these responses?
A: In order to answer your questions, we should first get all the facts straightened out. Let's start by looking at the current version of the Uniform Straight Bill of Lading.
Section 7 ‑ "Non‑Recourse" Provision The face of the current Uniform Straight Bill of Lading as set forth in the National Motor Freight Classification, and which became effective December 27, 1997, contains a box that states:
FOR FREIGHT COLLECT SHIPMENTS:
If this shipment is to be delivered to the consignee, without recourse on the consignor, the consignor shall sign the following statement:
The carrier may decline to make delivery of this shipment without payment of freight and all other lawful charges.
(Signature of Consignor)
The reverse side (Terms and Conditions) contains the following language:
Sec. 7. (a) The consignor or consignee shall be liable for the freight and other lawful charges accruing on the shipment, as billed or corrected, except that collect shipments may move without recourse to the consignor when the consignor so stipulates by signature or endorsement in the space provided on the face of the bill of lading. Nevertheless, the consignor shall remain liable for transportation charges where there has been an erroneous determination of the freight charges assessed, based upon incomplete or incorrect information provided by the consignor.
(b) Notwithstanding the provisions of subsection (a) above, the consignee's liability for payment of additional charges that may be found to be due after delivery shall be as specified by 49 U.S.C. § 13706, except that the consignee need not provide the specified written notice to the delivering carrier if the consignee is a for‑hire carrier.
(c) Nothing in this bill of lading shall limit the right of the carrier to require the prepayment or guarantee of the charges at the time of shipment or prior to delivery. If the description of articles or other information on this bill of lading is found to be incorrect or incomplete, the freight charges must be paid based upon the articles actually shipped.
It should be noted that the word "Freight Collect" in the box on the face of the bill of lading, and the limitation to "collect shipments" in the Terms and Conditions on the reverse side, were not present in earlier versions of the Uniform Straight Bill of Lading and were added in the version which became effective December 27, 1997.
Prepaid vs. Collect It should also be observed that the face of the current version of the Uniform Straight Bill of Lading, effective December 27, 1997, contains another box that states:
Freight Charges are PREPAID
unless marked collect.
CHECK BOX IF COLLECT |__|
This was also changed when the NMFC bill of lading was revised in 1997. The previous language stated: "If charges are to be prepaid, write or stamp here 'To Be Prepaid'". Thus, in the new bill of lading, if nothing is done, the presumption is that the charges are "prepaid", instead of "collect".
Question 1 - Section 7 Signed, Bill of Lading Marked "Prepaid" If Section 7 is signed, but bill of lading is marked "prepaid", who owes the freight?
Answer to Question 1 Bills of lading are not marked "prepaid"; they are prepaid unless marked "collect". The current NMFC bill of lading does not permit the use of Section 7 for a prepaid shipment.
Under the court decisions interpreting the old (pre 1997) bill of lading, a shipper could sign Section 7 on a prepaid bill of lading. Usually this meant that the shipper would pay the freight charges agreed at the time of shipment, but would not be liable for charges accruing afterwards, such as detention or redelivery charges. There was some authority that the shipper could avoid all liability, even for the agreed prepaid charges. In other words, if the shipper did not pay the agreed prepaid charges, the carrier could collect only from the consignee.
Note: As of publication date there appear to be no reported federal or state court decisions construing the subject language in the current NMFC bill of lading.
Question 2 - Section 7 Signed, Bill of Lading Not Marked Either "Prepaid" or "Collect" If Section 7 is signed, but bill of lading is not marked "prepaid" or "collect", who owes the freight?
Answer to Question 2 As noted above, if the bill of lading is not marked at all, the shipment will automatically be considered prepaid, and the answer to Question 1 will apply.
Q: Can a shipment still be considered a true "shipper load, & count" if the carrier has broken the shipper's seal to verify carton count? Does a "shipper load & count" shipment lose its integrity if a shipment is processed through a consolidation hub where it is removed from the original trailer and reloaded before delivery? Can the carrier be held liable for a shortage if one occurs? Where can we find more information on "shipper, load & count" regulations?
A: A "Shipper Load & Count" notation of a bill of lading means exactly that: the shipper loads and counts (usually a full trailer load, and sealed upon completion of loading). So long as the trailer remains closed and the seal intact, there is a presumption that any shortage found upon delivery did not occur in transit.
If the carrier opens the trailer at an intermediate point for consolidation or transfer to another truck, it should count the contents and report any discrepancy. Unless a shortage is noted at this point, the carrier is no longer entitled to any presumption arising out of the original "Shipper Load & Count" notation on the bill of lading.
The subject of "Shipper Load & Count" is covered in greater detail in "Freight Claims in Plain English" (3rd Ed. 1995) at Sections 4.8.3 and 5.2.2.
Q: I've been asked if our plants need to have their shipping clerk's(or anyone representing the consignor) signature on the BOL. They would like to have it replaced with a system generated printed name. Does the lack of a signature limit our legal recourse if we were to end up in some sort of transportation related litigation.
A: There is no legal requirement for a shipper to sign the bill of lading, and I generally recommend that shippers do NOT sign bills of lading, especially if they are provided by the carrier.
On the other hand, it is imperative that the carrier's driver sign the bill of lading to confirm that the carrier has received the goods, and that they were in good order and condition when received by the carrier.
Q: My questions are in regard to putting the piece count on bills of lading. Many of our locations feel that there is no need to do this. I disagree. I think that it is important so that our carriers are aware in case there is a question regarding the shipment. For our customer, it enables them to know at time of delivery how many pieces they are signing for short of having to find the packing slip. One of my concerns is if there is no piece count on the Bill of Lading then the carrier has reason to deny a claim based on a shortage. Please give me your views. Thanks!
A: You are absolutely correct. It is always a good practice to show the number of packages or cartons on the bill of lading, and to have the driver acknowledge receipt by signing for the actual count.
The bill of lading (together with any classifications or tariffs of the carrier that may be validly incorporated by reference therein) is a legal document. Unless you have some other formal transportation agreement, the bill of lading will be considered the "contract of carriage" and will determine the rights and liabilities of the parties in the event of loss, damage or delay to shipments.
I suppose you could ship on a document such as a "packing slip", but you would still want some language indicating that the goods were received in good order and condition by the carrier, and a signature of the driver.
Q: We have a "Customer/Carrier Loading Requirements Policy" that requires drivers to count on live loads. It also states: "Drivers who sign bills of lading should not attempt to write in "SLSC when signing their bills. Our bills clearly read "SLDC" and any attempts to change this by writing it on the bill of lading will be nullified.”
However, drivers have written in "SLC" on live loaded trailers and carriers are refusing to pay claims for discprepancies.
We are currently reprinting bills and having the drivers to sign them again without writing in "SLC" next to their signature. Our bills are clearly marked "SLDC" and should leave no room for doubt
What recourse do we have with those claims where the driver has signed a "live loaded" trailer as "SLC", but the bill is clearly marked "SLDC"? The drivers have had access to the trailer, but the carriers are refusing to accept responsibility for delivery discrepancies.
I'm rather new at this and thought the "Customer/Carrier Loading Requirements" would help resolve claims for shortages, but it's almost like some carriers act like they don't know what we're talking about. Any help you could give me in this area would be greatly appreciated.
A: Whether a shipment is actually "SL&C" (shipper load and count) is basically a simple factual question. If the driver is present at the time of loading and has an opportunity to count the cartons at that time, a "SL&C" notation has no legal effect. This subject is discussed in "Freight Claims in Plain English" (3rd Ed. 1995) at Sections 4.8.3 and 5.2.2.
It is quite understandable that carriers would not want to accept responsibility for a particular count if their driver does not have reasonable access and an opportunity to verify the count during the actual loading by the shipper. Likewise, if the goods are palletized or shrink-wrapped before the driver arrives, so that the individual cartons are not visible or cannot be counted, the carrier cannot be expected to sign for a carton count.
Preprinting your bills of lading "SLDC" (shipper's load, driver's count) is probably a good procedure and should help to minimise problems. However, the most important thing is to request the driver to actually count the cartons as they are being loaded, and have your shipping supervisor make a notation or record of that fact so there can be no question later.
I would also note that we always recommend that our clients enter into written transportation agreements with their carriers. Liability provisions covering this kind of problem can be included in a properly-drafted contract so they become binding and enforceable.
Q: What is the carrier’s liability under the following circumstances:
Shipper issues a bill of lading to Carrier for orders going to various customer stores. On the bill of lading is the following instruction: “SPECIAL INSTRUCTION TO CARRIER: Ensure that [Customer] Receiving places Store Stamp on your delivery receipt. DO NOT DELIVER WITHOUT STORE STAMP.”
Carrier picks up shipment and puts the following notation on their Freight Bill. "[CUSTOMER] STORE STAMP MUST BE ON DR" The customer now claims they never received the order and are requesting a POD with store stamp. Carrier cannot provide.
We file a claim with the carrier and they decline, stating: Our investigation of the above referenced claim has revealed that this shipment was delivered without exception. We are enclosing a copy of our Clear Delivery Receipt. Carrier provides a DR with a signature (but with no Store Stamp).
We have 27 shipments for over $46,000 worth of invoices that fall into this category. Let me know your thoughts.
A: I am not sure whether your real problem is with the carrier or with your customer.
The first and most obvious question is: were the goods delivered or not? Have you checked with your customer to see if the signatures on the delivery receipts are genuine? The lack of a store stamp on the delivery receipt is not conclusive one way or another. In other words, do some sleuthing and see if you can find out what really happened.
Your observation about notations on the bill of lading is substantially correct. Notations are not generally binding unless there is some tariff provision allowing or requiring a specific notation, such as "protective service required", etc. On the other hand, notations do give the carrier information, and the carrier was obviously aware of the requirement to obtain a store stamp because it carried the notation forward on its freight bills. It seems that, under these circumstances, you could argue that the carrier accepted this requirement as a part of the contract of carriage.
The best way to avoid this type of problem is to enter into a written transportation agreement with your carriers, and include specific provisions in the contract as to your special requirements. Then there can be no dispute.
Q: I just read Section 4.1 "Bills of Lading " in your publication Freight Claims in Plain English. Since an "order" bill of lading is negotiable does this mean that the "title" to the goods passes to the consignee when the bill is signed and freight is picked up at the shippers warehouse? Does this type of bill legally have anything to do with title to the goods and if so at what point is it passed to the consignee? Therefore, since the straight bill is not negotiable I would suspect this kind of bill has nothing to do with title to the goods. When shipping on FCA or FOB origin terms it is not the "straight" bill that passes title or the actual Incoterm but rather title is passed thru some other document such as a Purchase Order clause or contract between buyer and seller. Is this correct?
A: "Title" to goods and risk of loss in transit are generally determined by the "terms of sale", e.g., FOB Origin, FOB Destination, FCA, etc. Usually the terms of sale are set forth in the purchase order or contract of sale. For domestic shipments, terms of sale are defined in the Uniform Commercial Code, and for most international shipments, the Incoterms are used. The use of these terms in a purchase order results in a legal presumption as to where "title" (the right to possession) passes from the seller to the buyer. This is a presumption which the parties may change by contract, i.e., agree to a different place or event for the passing of title.
When an order bill of lading is used, the original document itself is evidence of title or the right to possession. Order bills can be transferred (indorsed) from one party to another, similar to a check.
Order bills of lading are frequently used in international commerce as security for payment for the goods. The reason is that, with an order bill of lading, the carrier may not lawfully deliver the goods unless the original order bill of lading is presented. See 49 U.S.C. Section 80101, et. seq. (the Bills of Lading Act).
In a typical international transaction, the original order bill of lading is sent to an agent or a bank at destination and is released to the consignee only upon payment for the goods. The consignee then takes the original bill of lading, indorses and presents it to the carrier, and receives the goods.
Q: What is the definition of a licensed property broker, and how does one become licensed?
A: The definition of a "broker" is found in the FMCSA regulations at 49 CFR § 371, and provides:
(a) "Broker" means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.
(c) "Brokerage" or "brokerage service" is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor or consignee.
Registration: The Interstate Commerce Act requires that brokers for the transportation of property must "register" with the Department of Transportation (FMCSA), 49 U.S.C. §§ 13901 and 13904. This registration requirement replaces the former statutory requirement to obtain a "license" from the ICC. Brokers holding licenses from the ICC as of December 31, 1995 were "grandfathered" and deemed to be registered under the new law, 49 U.S.C. 13905.
The FMCSA has established regulations governing applications for broker registration which are published at 49 CFR Part 365. Application forms (Form OP-1) are available from the FMCSA, 400 Virginia Ave SW, Washington, DC, 20590, phone (202) 358 7000 or through the FMCSA web site at www.fmcsa.dot.gov (Select “Licensing Forms”.
Q: Our company is a licensed transportation broker. We were arranging transportation for a shipper to ship a perishable product from NC to NJ. The original truck we had schedule for the load was put out of service by the DOT, at that time we immediately notified the shipper that we would miss the pick up and would continue to look for a truck, but he should look as well. Through the next day and half we searched for a truck, still in communication with the shipper, and finally found one. During that day and half period we spoke with the shipper several times, so he was well aware of the problem. When the shipment got to NJ the next day it had spoiled, as a result of sitting in the shipper’s cooler. The shipper is filing claim with us because we did not pick it up on time. What is our liability? The shipper was well aware of the problem and had plenty of time to arrange other transportation.
A: As a general rule, a broker is not liable for loss or damage to shipments, since it does not physically handle or transport the goods and merely makes arrangements for the transportation. (This subject is covered in detail in "Freight Claims in Plain English" (3rd Ed. 1995) at Section 13.2.) However, a broker may have liability if it is negligent in some way, for example, if the broker selects a "fly by night" carrier that has no operating authority or insurance, or an unsatisfactory safety rating from the Federal Motor Carrier Safety Administration.
Unless you had given the shipper some affirmative representation or guarantee that the shipment would be picked up and delivered according to a particular schedule, and from the facts you have described, I don't see how the shipper could establish that your company was liable for its loss.
Q: We are a transportation broker in Phoenix. Recently we arranged for the shipment of a chair for a client. The client claimed a value of $1,200 for the retail value of the item. We utilized a company called Intercargo Insurance to insure the chair. The carrier we selected for this move damaged the chair and the receiver refused the shipment resulting in the loss of a sale for our client.
Intercargo Insurance claims that: A) the chair is only worth what it cost to make it-not what it would have sold for, and B) or if it can be repaired, the cost of the repairs. Our Client feels they should be reimbursed for the full amount of the item at retail value or the full $1,200.00. My questions are:
1. Who is right, our client, or the insurance company?
2. As a broker of transportation services, what is our liablility? If our client is not reimubursed for the full amount of their claim, are WE obligated to honor their claim?
A: I am assuming that your client is a distributor or retail store that sold the chair to a customer, and if the chair had been delivered to the customer the seller would have been paid $1200. Under those circumstances, the shipper-seller is entitled to his invoice price for the goods.
As a broker you do not ordinarily have liability for loss or damage since you are not a "carrier" and do not ever have physical possession of the goods. You could become liable if you assumed liability (represented to your shippers that you are responsible or will pay claims), or if you were negligent in some way which caused or contributed to the loss or damage.
Note: The subject of damages is extensively covered in Section 7.0, and liability of freight forwarders and intermediaries is covered in Section 13.0 of "Freight Claims in Plain English" (3rd Ed. 1995). You might wish to purchase a copy from TCPC.
Q: The company I work for is a transportation broker. A customer of mine had some damage on a load that we handled for them. The customer did not file a claim, but instead deducted the amount of the claim from our invoice on the load. What are the laws regarding this issue? Can the customer legally do this w/o a claim being filed?
A: First of all, as a broker you should not get yourself caught in the middle on claims. Brokers are not generally liable for loss or damage (unless it is caused by their own negligence). You should make it clear to your shipper customers that you are a broker and that you are NOT a motor carrier. If you want to assist your shippers in filing or processing their claims against the carriers, that is o.k., but you should not hold yourself out to be responsible for the payment of claims. We recommend to our broker clients that they enter into written agreements with their shippers so that this kind of problem is minimized.
Second, there is no law or regulation which would prevent a shipper from offsetting claims against freight charges, and it is done frequently.
I would note there are some risks to the shipper. If the shipper fails to file a written loss or damage claim within the 9-month time limit provided in the uniform bill of lading, it could end up having to pay the freight charges and not be able to collect its loss or damage claim because it is time-barred. In addition, the carrier might have a loss of discount or late payment penalty which would be added on top of the freight charges due.
Q: What is the "Carmack Amendment" and where can I find the exact ruling online? Does this protect brokers from liability of loss/damage claims? If not, where can I find a ruling that does protect brokers in this situation?
A: The "Carmack Amendment" was an amendment in 1906 to the Interstate Commerce Act. Over the years the original language was changed a number of times and now appears at 49 U.S.C. Section 14706 (for motor carriers).
The Carmack Amendment governs the liability of motor carriers and freight forwarders for loss, damage or delay to shipments in interstate and foreign commerce. It has no application to brokers, see Custom Cartage, Inc. v. Motorola, Inc., No. 98 C 5182, 1999 WL 965686 (N.D. Ill. 1999).
As a general rule, brokers do not have liability for loss, damage or delay to shipments. This subject is discussed in detail in Chapter 13.0 of "Freight Claims in Plain English" (3rd Ed. 1995), which is available from TCPC.
Q: Title 49, chapter III, Sec. 371.3 indicates a broker’s requirement to maintain records of each transaction and that "Each party to a brokered transaction has the right review the record". I am considering a start‑up "broker" service. My intentions are to be completely honest with my clients on all subjects, including this requirement. My question is in regard to service providers I choose, and their potential to use this information to my company's detriment. Do I have any protections, or legal recourse in this event?
I don’t think many shippers are aware of this right, and have never heard of carriers taking advantage of it either. Have you
A: You are correct in observing that there are FMCSA (formerly ICC) regulations governing the requirements for property brokers, which include record‑keeping requirements.
If one of your concerns is "back solicitation" by your carriers, the best way to deal with this is to include proper restrictions in a written broker‑carrier agreement.
We generally recommend to broker clients that they have written agreements with all of their shippers and carriers. You should consult an experienced transportation attorney If you need assistance in this regard.
Q: We have recently obtained our common carrier authority and are hauling for a man who says he is a broker. When I went into the FMCSA data bank I found that he has his Common authority and Contract authority, but no broker authority. He pays with a check but there is no statement or anything that goes with it. We have not signed any lease with this man of any kind. Is he, as a carrier, authorized to broker freight to other trucks. And if he isn't what are the legal aspects that we need to be aware of? Any information you can provide would be greatly appreciated.
A: There are a lot of companies today that are wearing multiple "hats", and offering services as a common carrier, a contract carrier, a freight forwarder, a broker, etc. and many of them ignore the legal requirements.
The Interstate Commerce Act defines carriers and brokers differently (49 U.S.C. Section 13102) and imposes separate requirements for registration (Sections 13902 and 13904). The regulations of the Federal Motor Carrier Safety Administration (formerly the FHWA and the ICC) establish different requirements for carriers and brokers (see, e.g., 49 CFR Parts 365, 366, 371, 387).
The bottom line is, if a carrier also wants to act as a broker, it needs to register as a broker, file a surety bond, and comply with the regulations governing brokers.
One obvious problem, aside from operating illegally, is that it may be difficult to tell who is the carrier and which party is liable to the shipper in the event of loss or damage to the shipment. Other potential problems might involve disputes over the collection or payment of freight charges.
It is important to know who you are dealing with, and in what capacity. I would advise against doing business with someone who is operating illegally or without the required operating authority.
Q: In general, would a person who provided leads or contracts to freight forwarders or moving companies be considered a broker? Would there be any federal/ state regulation regarding such activity?
A: The term "broker" is defined in the Interstate Commerce Act as "a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement or otherwise as selling, providing or arranging for, transportation by motor carrier for compensation." 49 U.S.C. Section 13102(2).
If you are acting as an agent of a carrier or forwarder and are paid a fee or commission by the carrier or forwarder, you would not be considered a broker. If you arrange for transportation as a middleman, and are compensated by the difference paid by the shipper and the amount paid to the carrier or forwarder, you would be considered a broker. Brokers are required to be registered with the FMCSA (formerly the ICC and/or FHWA).
Q: Assuming the subject is either not addressed in and/or there is no contract of carriage (only the carrier's rules and/or tariff) when would or would not Carmack apply with regard to claims? Stated another way, would you briefly clarify, list, identify when Carmack applies and when it doesn't.
A: The "Carmack Amendment" applies to interstate transportation or service provided by rail carriers (49 U.S.C. 11706, formerly 11707) and by motor carriers and freight forwarders (49 U.S.C. 14706, formerly 11707). A thorough discussion of the Carmack Amendment may be found in Section 1.1.1 of "Freight Claims in Plain English" (3rd Ed. 1995).
Basically, Carmack applies to all interstate U.S. surface transportation, and to transportation from the U.S. to contiguous foreign countries (Canada and Mexico). There are a number of statutory and administrative exemptions, the most significant of which are: private carriage (Section 13505); transportation of agricultural commodities, transportation incidental to an air movement, and transportation within a commercial zone (Section 13506)
Q: What is the responsibility of the carrier in the event of freight damage from a tornado or sudden violent weather conditions?
A: Both under the common law and under the Uniform Straight Bill of Lading, which is in common use, a carrier has a defense against liability if it can establish that the cause of the loss or damage was an "Act of God", and that it was free of any negligence.
The case law defines an "Act of God" as "an occurrence without intervention of man or which could not have been prevented by human prudence. It must be such that reasonable skill or watchfulness could not have prevented the loss..." Generally, only extraordinary events such as tornadoes or hurricanes would qualify, and ordinary bad weather, rain, snow, etc. would not be considered an "Act of God".
This subject is discussed in detail in "Freight Claims in Plain English" (3rd Ed. 1995) at Section 6.3, Act of God.
Q: We received a denial letter where a carrier has denied the claim because they allege "the material was not properly packaged to withstand the normal rigors of transportation." They go on to state, "please keep in mind that double stacking freight unless specified per the shipping instructions is a common procedure in the industry."
We are in possession of pictures of the double-stacking that caused the damage. Apparently after picking up our material the carrier picked-up, and placed on our goods, large pallets weighing approximately 950-1100 lbs. each.
My question is this: Does the requirement for OUR packaging to withstand the normal rigors of transportation also include the requirement to withstand the weight of a 1000 lbs. pallet that is placed on top of it? Note: Our packages don't have symbols which prohibit double-stacking.
A: As a general rule, yes, the shipper is supposed to package goods in a manner "to withstand the normal rigors of transportation..."
However, getting back to basics, a carrier can only escape liability if he can prove two things: (1) that the "act or default of the shipper" (improper packaging) caused the damage, AND (2) that the carrier itself was free from negligence.
These principles are discussed in detail in "Freight Claims in Plain English" (3rd Ed. 1995) at Section 5.0, Burdens of Proof.
I don't see how a carrier can refuse to pay a claim if they placed some other heavy freight on top of your shipment, which caused the damage.
Q: On a full truckload shipment from our DC, the truck was sealed and the driver did not have the opportunity to inspect the load. When the truck arrives at our store for delivery, the driver breaks the seal and opens the trailer door, and the load appears to be properly secured. The driver then begins to back into the dock, and the load then shifts and packages fall out of the back of the trailer and are damaged. Would the carrier at this point be liable for the damage?
A: This appears to be a Shippers Load & Count ("SL&C") situation, where the trailer was loaded and sealed by the shipper, and the driver had no opportunity to observe or participated in the loading. Under these circumstances, the shipper assumes a greater responsibility than if the driver is present and can supervise the loading.
The question is whether the carrier/driver was negligent in any way. You say that the driver broke the seal, opened the door, and then started to back up the trailer. If the driver could not see any obvious problem with the loading, and was careful in operating the truck while backing up, I think it would be difficult to hold the carrier liable for the damage. On the other hand, if he backed up very rapidly, bumped the loading dock, etc., you could argue that the driver's negligence was a contributing cause of the damage, in which case, the carrier would be liable.
I would refer you to "Freight Claims in Plain English" (3rd Ed. 1995), Section 5.0 Burdens of Proof, for a discussion of carrier liability.
Q: We had a shipment that was damaged in transit. The freight company is refusing to pay the claim, quoting N.M.F.C. classification 100 series and referencing item 23320 – “such articles will be accepted for transportation in any container or in any other form tendered to carrier which will permit handling into or out of vehicles as units, providing such containers or tendered forms will render the transportation of freight reasonably safe and practicable." If they accepted the freight for shipment are they responsible for any damages which occur?
A: Common carriers are liable for loss or damage unless they can prove that the loss was due to one of the basic defenses such as act of God, act or default of the shipper, etc. AND that they were free from negligence. See "Freight Claims in Plain English" (3rd Ed. 1995) at Section 5.0 for a detailed discussion of carrier liability.
Item 23320 of the Classification refers to "belts or belting, elevator, conveyor or transmission, etc...", but there is no reference to "containers". I don't see how it could affect your shipment.
I am assuming that this carrier is saying that you did not properly prepare or package your goods for transportation ("act or default of shipper"). If so, the carrier still has to prove that the improper packaging is the sole and proximate cause of the damage and that it was not negligent in handling your goods. In other words, the answer to your question is "Yes".
Q: I have an issue I would like you to review and give me your opinion. We currently employ the use of drop trailers for our short haul dedicated fleet used to deliver from our Distribution Centers to our stores. Most stores within a 125 mile radius of a DC are delivered by the dedicated fleet. The driver drops the loaded and sealed trailer at the store dock and takes yesterday's empty trailer back to the DC.
Each store has a storage box on the rear wall near the dock containing three trailer kingpin locks. Once the driver unhooks from the loaded trailer he is required to install a kingpin lock prior to departing the store. The store takes the kingpin lock off the trailer once the trailer is unloaded so the next day's driver can pick up the empty trailer.
This has worked well for us in recent years. We have experienced zero theft of trailers from our locations. In the past many of our stores have been in semi-rural markets or are in markets with populations of from 50k to 200k people with generally less organized theft than is seen in major population centers.
I am concerned with trailer/product theft as we move into major metro markets such as New York City, Los Angeles, Chicago and the like. I need your opinion regarding trailer theft from our site. If a dropped trailer with a kingpin lock installed is stolen from our dock who has liability for the loss? Does the liability for the loss change if the carrier does not install the pin lock as our policy dictates? How clear is the legal precedent on this topic? Do you have any recommendations either within the language of our contract or regarding the physical trailer that may help us?
A: As a general rule, the carrier's liability ends upon "delivery", and delivery has been defined by the courts to mean physical delivery in a manner that nothing further needs to be done by the carrier. (I can give you case citations if needed, and you may wish to read Section 3.0 in Freight Claims in Plain English.)
I am not aware of any cases dealing with the specific situation where the consignee provides and/or requires the driver to install a pin lock on the trailer. I suppose we could write some specific language into your transportation contract with this requirement, and stating that the carrier would remain liable for loss or theft if the pin lock is not installed.
I would note that I am aware of some trailer thefts even when there were pin locks installed, so it is not 100% protection. Perhaps you should look at your overall facility security measures: fences, lighting, guards, etc. if you think this may be a serious potential problem.
Q: I recently shipped goods to my customer, and they have chosen to refuse part of the shipment based upon our noncompliance with the their packaging standards. Incidentally the issue at hand is loose on skids vs. shipped in cartons, which their packaging standards do not stipulate either way.
1. Is the carrier liable for damages/shortages incurred as a result of breaking apart the shipment integrity?
2. Is the consignee liable for shortages or storage charges incurred by the carrier resulting from this action (refusal of goods)?
3. Is there a governing NMFC rule stipulating that the carrier cannot deliver partials regardless of consignees concerns, meaning take all of the cargo or none of it?
A: I'm not sure whether your problems are with your customer or with your carrier.
Obviously, carriers are responsible if they damage your freight, regardless of how it is packaged, unless they can establish that the damage results solely from your improper packaging without any negligence on their part.
However, the consignee should not refuse shipments to the carrier because of some disagreement with the shipper as to packaging, but only if the carrier has damaged the shipment so badly that it is "practically worthless", see Section 10.9 of "Freight Claims in Plain English" (3rd Ed. 1995). If they abandon the freight to the carrier, the carrier becomes a "warehouseman" and, although it does have a duty to protect the freight, it has a lesser standard of care.
I am not aware of any provision of the NMFC that prevents a carrier from delivering a partial shipment.
Q: Would a common carrier have any liability under the following circumstances?
Carrier picks up 1 pallet of calendars going to a bookstore in a shopping mall. Carrier makes the delivery the next day. Unknown to the shipper, the consignee moved three months earlier. A different company, which is also a bookstore had moved into the location. This new store accepted the order from the trucking company. The error was not discovered until 4 months after the delivery was made. The new store has since moved and no one can locate the merchandise. Sign on the delivery door at the mall still reads the original consignee's name.
Carrier did the following: Delivered the goods to the address on the B/L. Had delivered to this location in the past. The delivery door was marked with the name that was on the B/L. The company that accepted the freight was also a bookstore.
Original consignee claims that they notified shipper of the fact they were moving, although shipper has no record of it. Company that accepted the merchandise has also not been cooperative.
Is the carrier liable for the merchandise?
A: The general rule is that the carrier has a duty to ascertain the proper party named as consignee in the bill of lading and to deliver only to that party. Failure to do so is a "misdelivery" for which the carrier is liable. See Section 11.3.3 in "Freight Claims in Plain English" (3rd Ed. 1995) for a discussion of the court decisions.
The company that wrongfully accepted the merchandise is, of course, also liable and should not have accepted goods that were the property of someone else.
My recommendation would be to pursue your claim against the carrier, and let them try to collect from the company that accepted the merchandise.
Q: Our terms of sale are F. O. B. Shipping Point, but we regularly file claim for loss and damage as a courtesy to our customers. We made a shipment of two skids of 303 wrapped boxes on November 10th with a certain regional carrier. 1 of the 2 skids delivered on November 16th on a clearance bill, but the remaining skid was missing in action. Our customer (Customer A) notified us of the shortage on December 2nd and we filed claim with the carrier on December 6th for $6683.59. The carrier notified us on January 5th that they misdelivered the skid to another one of our customers (Customer B), who had taken it into their warehouse and put in stock. Customer B confirms that he was in possession of the merchandise and would pull the items from stock and return them to us. However, this has never happened. Now Customer B says he has sold most of the merchandise and wants us to invoice him for the items he regularly stocks. This would be difficult due to the length of time that has elapsed. Carrier would also like for us to handle in this manner, but we feel that Customer B and the carrier should settle between themselves. To add another little twist, we no longer do business with the carrier. Should we stick to our guns and insist that the carrier pay the claim in full?
A: Clearly, the carrier failed to deliver the goods in accordance with the contract of carriage (bill of lading), and is liable to you for the misdelivery. The carrier has a claim (possibly legal action for conversion) against "Customer B", who wrongfully kept the goods that it should have known belonged to someone else. You have no legal obligation to get involved as between the carrier and "Customer B".
Q: I work for a carrier that recently delivered a shipment for which a signed delivery receipt was obtained. This is a repeating type move that has occurred almost daily, for almost two years. The consignee claims this particular shipment was never received. After furnishing them with a P.O.D., the consignee claims the signature is a forgery. All internal records indicate there was nothing unusual about it (it was checked by different employees at different cities along its route). The P.O.D. includes a time of delivery (12:15 p.m.). The merchandise is job specific; hence, no "street value". The claim was denied, and the shipper accepted the declination without litigation. My employer is still handling this move almost daily.
I would like your opinion on the potential results of litigation had it been pursued. Everyday millions of shipments are delivered to unknown employees. Drivers simply find someone at the prescribed address willing to accept delivery. I have worked for trucking companies over twenty years, and am surprised I have not come across issue. Some shippers require drivers to offer identification when tendering a shipment. Should drivers require the same of consignees? I would appreciate your opinion on this subject.
PS. I suspect the time of delivery (lunch) may have something to do with the shipments mystery. Driver is a 22-year veteran with same employer and has a clean file.
A: As a general rule, the carrier has a duty to ascertain the identity of the consignee before giving up custody of the shipment. Failure to do so would expose the carrier to liability for misdelivery if the shipment should be stolen by an impostor.
In most situations it is pretty obvious that the person signing for the freight is an employee or person authorized to do so, but if there is any doubt, the driver should not release the freight until some appropriate proof is received.
I should point out that in the "impostor theft" cases there are often disputed questions of fact, and it may be necessary to have a court determine the credibility of the witnesses.
Q: I have a question concerning a claim on a shipment with multiple carriers. We are a 3PL and contracted with a long haul contract carrier to move a consolidation shipment from California to several points in the southeast. The shipment was brought into Atlanta and received by a short haul carrier. We contracted with the local carrier to cross dock the pallets for each customer, then deliver them.
When the original carrier picked up in California it was the driver’s responsibility to count the load on the pallets, and it was then shrink wrapped. The driver for this company signed that the correct number of pieces were loaded on his truck. When this carrier’s driver delivered the load to our short haul carrier in Atlanta he allowed the short haul carrier to sign for the load so many pallets "said to contain" so many pieces. This carrier then delivered the pallets to our customers. The pallets were not reworked in Atlanta; they remained shrink wrapped. When the pallets were delivered they were broken down and the pieces were counted. At this time a shortage was discovered.
We take taken the position that the original carrier would have to assume the responsibility for the shortage due to the fact they signed for the load whole and did not require the short haul carrier to sign for the pieces on each pallet. They have denied our claim because they have a clear bill of lading and no shortage was noted. We feel by not getting the short haul carrier to sign for the correct piece count, this is not correct. Is this the correct assumption on our part? Do you feel with the facts I have given you our position would be defensible if we pursued legal proceedings against the original carrier.
A: Do these shipments move under a through bill of lading issued by the origin carrier, or did you enter into two separate arrangements?
It sounds to me as though there are two separate movements and two separate contracts of carriage. This is not a situation where the origin carrier has issued a through bill of lading and assumed liability for its connecting carriers (Carmack Amendment).
Regardless of how the second carrier signs the delivery receipt, you basically have a mystery on your hands - where did the loss occur: in the first movement or the second movement. Note also the possibility that the shipment was short when tendered to the first carrier, or that the shortage occurred after delivery by the second carrier, ie., the shipper or consignee could be at fault.
If you decide to pursue legal proceedings, I would suggest bring suit against both carriers. If this is a recurring problem, you should change your receiving procedures at the Atlanta "cross dock" facility. Require them to break down and count the pallets at that point, so you can determine who is responsible. You may also consider recommending to the shipper that they use a distinctive shrink wrap or color coded tape to signal any tampering or pilferage from palletized shipments.
Q: How are carriers such as UPS,RPS, and Federal Express able to get away with liablity limitations of $100 per package, and have maximum liability limitations?
A: UPS, RPS and Federal Express are common carriers and generally subject to the same laws and regulations that govern all motor carriers. However, "express companies" and small package carriers have traditionally had a different liability regime.
For rail and motor carriers we start with the presumption that the carrier is liable for full actual loss unless there is an agreement to limit liability, in consideration for a lower rate. Freight rates are usually based on the classification which takes into account the nature of the commodity - its weight, density, value, susceptibility to damage, etc.
With express companies, the base rate is traditionally tied to a limited liability ($100 per package, etc.), unless the shipper declares a higher value and pays an additional charge. This difference goes back to the days of Pony Express, and is based on the fact that rates are not dependent on the commodity - you can ship a letter, a pair of gloves, a package of diamonds, or a lock of hair - and the carrier doesn't know or care what is in the package.
In theory, you can negotiate the any kind of contract with a package carrier that you would with an LTL or TL carrier. In practice, unless you have substantial bargaining power and are a large shipper, UPS and Federal Express will usually insist on their own contracts, or if they use your form contract, will require that the provisions of their Service Guide or tariff be incorporated into the contract. It essentially boils down to how much "clout" you have.
Q: I have a problem with a claim of ice cream. We are a broker that hired an outside contract carrier to haul this load. This carrier was faxed a rate confirmation with shipper and consignee information and told what temperature to use (‑20 degrees). The carrier picked up the load and at the consignee he found out the load of ice cream went soft in the middle. The middle of the trailer was pulped at +18 degrees; the product at the end of the trailer was pulped at ‑10 degrees and then shot by a freezer gun at ‑3 degrees. This caused the refusal of the whole load. None of it was salvageable.
The carrier said to me that they are denying the claim because it was the shipper's fault that the product wasn't frozen properly for shipment. They went and had the reefer refrigeration unit checked afterwards, and that was tested as fine.
I know that it is the carrier's responsibility to inspect the product when loaded and if they find any problems they should not accept the product until the problem has been corrected. The carrier said also that they were not told of what temperature to use, so it would not be there fault that it wasn't cold enough when delivered. Wouldn't you think that if a carrier is accepting a load of ice cream they would make sure of the temperature before loading it? Regardless if they were told or not?
This carrier doesn't plan to let his insurance to investigate the claim. I did send the claim certified to the carrier and their insurance agency for review. By law aren't they required to do a reasonable inspection of the situation? This claim is $47K. Our customer wants to know when they will get paid for this large claim. I'm not sure what to tell them other than we have 120 days legally to accept or deny. Can you help me?
A: First of all, I would hope that you have a contract with your shipper that makes it clear that you are acting as a broker, not a carrier, and that you are not liable for loss, damage or delay to shipments. If all you are doing is attempting to assist your customer with the filing or processing of the claim, that is fine, but you should not be assuming responsibility for transit loss or damage.
As to the specific claim, there are some basic principles:
The shipper would be responsible for ensuring that the product was at the proper temperature when tendered to the carrier. A refrigerated truck is designed to maintain the temperature of the product, but may not be able to bring down the temperature if the product is warm.
Normally the shipper will note on the bill of lading or shipping document that protective service is required, and the proper temperature or temperature range that must be maintained during transit.
However, even if the carrier was not told what temperature to use, any carrier that operates reefer trucks should be experienced and familiar enough with refrigerated transportation to know the proper temperature for a product like ice cream.
Whether the carrier is able to determine that the product is at the correct temperature upon loading depends on the physical circumstances, e.g., whether the shipper loads the truck, whether the product is on pallets, etc. Most likely, the carrier would not check product temperature as it was being loaded.
There are obviously a number of factual issues and disputes, and it is likely that the claimant and the carrier may need to engage experts and/or attorneys if the claim cannot be resolved.
Q: We were using a carrier (Carrier 1) that was bought by another company (Carrier 2). We continue to use Carrier 2. From my past experiences with this situation, Carrier 2 would have also taken on the debt (claims) of Carrier 1. Not in this instance. The original owner is still responsible for the debt even though the new owners are researching the claims. Supposedly, once the old owner approves, we will get paid. I have my doubts, however, since these claims are nearing their first birthday.
My question is: Do we have any recourse against the new owners? My guess is "no", but I would prefer that the old and new owners of the company resolve this without us in the middle.
A: I really can't answer your question without more information. There are a number of ways one company can acquire another; for example, it can purchase only the assets, it can purchase assets and liabilities, it can acquire the stock of the other, etc. Usually, if only the assets are purchased, the buyer will insist that the seller remain responsible for outstanding debts and obligations.
The best recommendation is to act as quickly as possible to collect your claims. You may have legal remedies against the seller or against the buyer, but enforcement is usually costly.
One point to remember: if the seller is out of business and won't pay your claims, you may still have recourse under the BMC 32 mandatory cargo insurance endorsement. See Section 126.96.36.199 of "Freight Claims in Plain English" (3rd Ed. 1995).
Q: We are a freight broker. One of our customers tendered a shipment to a local carrier for a delivery that was approximately 50 miles distance. The carrier "lost" this shipment for 60 days. During this time a loss claim was filed. The shipper had to repurchase this special order (at an even higher cost due to expedited production costs) for a construction job. The original freight has very little value due to the customized nature of the product. The carrier refused the claim as they feel they have returned the freight in good order. Is there any recourse for our customer due to this unreasonable delay? The original purchase price is around $850.00, which is the amount of the claim.
A: A carrier has a duty to deliver with "reasonable dispatch". Clearly this shipment was not delivered within a reasonable period of time, and the consignee was entitled to consider that it had been lost, and to purchase a replacement.
The fact that the shipment was found 60 days later is not a defense to the claim. However, there is a duty to mitigate damages. Even if the "found" shipment cannot be used by the original consignee, it may still have some value - either to another purchaser or for salvage. Thus, the claimant should take reasonable measures to find another buyer or to salvage the shipment, and give an appropriate credit against the claim.
Q: Recently we have been inundated with customer deductions on backcharges for late delivery, especially to job sites. From past experience I understand the carrier liability is limited by reason of reasonable dispatch and carriers knowledge and acceptance of financial consequences of late delivery. Have there been any recent court cases upholding these principles? If not what references could I seek to reinforce my position that carrier is limited in his liability for late delivery?
A: Unfortunately, the practice of "backcharging" for missed delivery appointments seems to be a prevalent practice.
There are two basic issues - and two different contractual relationships involved.
First, there is the contract of carriage - often a uniform bill of lading - with the motor carrier. Ordinarily, a motor carrier is only required to deliver with "reasonable dispatch", which means to transport the goods within the usual and customary time period, see "Freight Claims in Plain English" (3rd Ed. 1995) at Section 11.2, et seq.
Carriers can and do AGREE to deliver by appointment or at a particular "window" specified by the shipper or the consignee. However, unless such an agreement is in writing, it may be unenforceable. Most shippers that require delivery by appointment or at specific times include such provisions in their transportation contracts.
We always advise our clients to enter into formal transportation contracts with their carriers, and our contracts usually contain a provision that the carrier will be responsible for customer chargebacks resulting from late deliveries or missed appointments.
The second part of the problem is your customer. I assume that there must be some provision in the purchase order or the contract of sale which addresses delivery requirements and penalties for missing appointments or delivery windows. IF NOT, your customer probably has no legal right to assess chargebacks, and you should refuse to pay them. On the other hand, if your sales or marketing people have accepted an order containing penalty provisions for late delivery or missed appointments, you would be bound by that agreement. I would suggest that your company legal department or a qualified transportation attorney should be consulted on your terms and conditions of sale.
Q: Does NMFC's Item's 300125‑300150 still apply when filing for concealed damage claims? I do not have a current copy of the NMFC and I did not know if the wording had changed since 1987. We do not have any signed contracts with any of the carriers. I had a shipment that delivered to my customer and the delivery receipt was signed for clear. To my knowledge, the carrier was not contacted, nor, did the carrier make an inspection of the product. The consignee filed a damage claim, not a concealed damage claim, with the carrier and the claim was denied because of clear delivery. I spoke with the claims representative and was informed that they would not pay the claim (even 1/3) because the burden of proof was to prove the carrier caused the damage. I do not know if the original packaging is available for inspection on this shipment. The claim was filed eight days after the shipment was delivered. Does the consignee have any recourse?
A: In 1972, following an extensive investigation in Ex Parte No. 263, Rules, Regulations, and Practices of Regulated Carriers with Respect to the Processing of Loss and Damage Claims, the ICC issued a set of regulations which were served February 24, 1972. These regulations were originally published in 49 CFR Part 1005 and, after the demise of the ICC, were transferred first to the FHWA and then to the FMCSA. The regulations ‑ virtually unchanged ‑ are now found at 49 CFR Part 370.
The National Motor Freight Classification (NMFC) contains two sections pertaining to loss and damage claims: (1) Items 300100‑300122, Principles and Practices for the Investigation and Disposition of Freight Claims, and (2) Items 300125‑300155, Regulations Governing the Inspection of Freight Before or After Delivery to Consignee and Adjustment of Claims for Loss or Damage
The first of these two sections is essentially drawn from the FMCSA (formerly ICC/FHWA) regulations, 49 CFR Part 370, Principles and Practices for the Investigation and Voluntary Disposition of Loss and Damage Claims and Processing Salvage. To the extent these provisions reflect the federal regulations, they are binding on all motor carriers and freight forwarders.
The second of these two sections is not found in the federal regulations. These rules would only be binding on motor carriers that are participants in the National Motor Freight Classification. Provisions of the NMFC become binding on a shipper if they are "incorporated by reference" into the contract of carriage ‑ either through the use of a Uniform Straight Bill of Lading or by language in a transportation contract.
Now, with respect to concealed damage, the basic issue is always a question of fact. Did the loss occur while the goods were in the possession of the carrier, or after delivery to the consignee had been made? A clear delivery receipt is only presumptive evidence that the goods were delivered in good order and condition. The presumption can be rebutted by evidence that the damage could not have occurred subsequent to delivery. Usually this is in the form of testimony or affidavits from the receiving people who have actual knowledge of how the goods were handled after delivery.
Obviously it is good practice to notify the carrier promptly upon the discovery of concealed damage, to request an inspection, and to retain all packaging materials. The more time that passes between delivery and notification of damage, the more difficult it is to convince the carrier that the loss occurred in transit.
Regardless of the clear delivery receipt, or how many days have passed before notification of the damage, the carrier does have a duty to "promptly and thoroughly" investigate the claim. If the consignee can meet its burden of proving, with reasonable evidence, that the damage did not occur after delivery of the shipment, the carrier should pay the claim.
Q: We are a broker, and we broker loads to our contract carriers. We have a clause in the contract that we are to be held harmless of any claims that arise for any loads that were under the care of the carrier.
We submit claims to the carrier if we are unable to deduct it from any settlements, a good portion of the carriers don't care, ignore the claim filed. I try calling them and don't always get a response.
In your book, Freight Claims in Plain English under “claim processing rules”, section 12.1.3, it states that if a carrier fails to acknowledge claims that we can report them to the I.C.C. Is that correct? If so, what address is this and is there anything else we can do other than filing them with a collection agency for help? I would like to report all the carriers that I can that refuse to follow the rules for claims. Can I still report them if I have to turn them over to a collection agency, and they are able to discuss the situation with them?
A: Motor carriers are subject to the federal regulations governing the processing of claims at 49 CFR Part 370. These are the former ICC regulations which were in 49 CFR Part 1005, and are now under the jurisdiction of the Federal Motor Carrier Safety Administration. You might try writing to the General Counsel's office at the FMCSA in Washington, DC. Unfortunately, the FMCSA does not have the resources to do much in the way of enforcing these regulations.
Obviously, if you are not getting anywhere with the carriers you have the option of turning the claims over to a claims collection company or law firm.
Q: Is there any particular form that must be used to submit a claim to a carrier? Are there standard claim forms available? If so, where would I be able to find these?
A: There is no legal requirement for any specific form to be used in submitting a claim for loss, damage or delay. A letter or form which provides the essential information is sufficient to constitute a valid claim. See Section 10 of "Freight Claims in Plain English" (3rd Ed. 1995) for a thorough discussion of claim filing requirements.
Most shippers use the "Standard Form for Presentation of Loss and Damage Claim", a copy of which is reproduced at Appendix 129 of "Freight Claims in Plain English". These forms may be obtained from many commercial stationers or from ATA (American Trucking Associations), 2200 Mill Road, Alexandria, VA 22314‑4677, phone 1‑800‑225‑8382. In addition, motor carriers often make the forms available to their customers on request.
Q: 1.Is it legal for a shipper to file claims for shortages or damages if the terms are FOB Origin Freight Collect?
2. The claim is declined, 9 months have passed since the incident and the owner of the goods, the consignee, elects to open up new issues with the carrier. Is the new filing considered part of the 1st claim?
3. Is it a norm or an exception for the shipper to file short and damage claims for shipments that have terms FOB Origin Freight Collect?
4. What’s the feeling of the carriers when a 2nd claim is filed for the same shipment?
5. We would be deducting the cost of the short or damage from the vendor’s invoice as a matter of information.
A: Let me try to answer your questions.
1. Either the shipper or the consignee may file a claim (regardless of the terms of sale).
2. As a general rule, once a claim has been timely filed, it may be amended or supplemented. However a new claim may not be filed after the expiration of the 9‑month time period in the Uniform Bill of Lading.
3. When the terms of sale are "FOB Origin" or equivalent, the presumption under the Uniform Commercial Code is that the risk of loss passes to the buyer at the time the goods are tendered to the carrier at the point of shipment. However, in many situations, the seller still files claims for loss or damage.
4. Carriers generally will reject a "second claim" on the same shipment. If this situation should arise, the carrier may require an indemnity agreement or a letter assigning the claim.
5. Since you are apparently the consignee on the subject shipments, if they are in fact sold "FOB Origin", you would have risk of loss in transit and should be the party to file the claims.
I would note that these subjects are covered in greater depth in "Freight Claims in Plain English" (3rd Ed. 1995), which is available from TCPC.
Q: Where can I download or view NMFC Descriptions? Looking for area rugs, rolled and baled in plastic. I would like to see what my options are. 71000 or 70680 etc.
A: As you probably know, the NMFC (National Motor Freight Classification) is, ostensibly, a pricing tool that provides a comparison of commodities moving in interstate and intrastate transport. Based on an evaluation of density, stowability, ease of handling and liability, the commodities are grouped into one of 18 classes. The NMFC provides both carriers and shippers with a standard by which to begin pricing negotiations and greatly simplifies the comparative evaluation of the many thousands of products moving in today's marketplace.
It is, though, also a copyrighted publication, published by the National Motor Freight Traffic Association in Alexandria, Virginia (see the contact information below).
Short of subscribing to the publication, I know of no way to access the information online. For your convenience, I have attached a copy of the NMFC pages covering the pertinent items.
The contact information for the NMFTA follows:
National Motor Freight Traffic Association
2200 Mill Road
Alexandria VA, 22314
Fax: (703) 683-1094
Q: We recently had one of our carriers request us to discontinue doing business with them. The reason for this request was due to the lack of revenue our product generated due to the average pound per cubic foot. The carrier cited that the PCF averages around 6.2 pcf. Our rates are based on a FAK 77.5. They also stated that the average pcf is 13.5 for 77.5 class per National Classification Committee which of course was developed by their members (carriers). (see www.erols.com/nmfta/)
Is there anyway to argue this point with our carrier? Are there any other industry standards in this area developed by the shipping public that we could use?
This carrier handles freight out of other locations, sister companies, however they only site our location and one other as being low revenue producing.
A: I assume that you now have a discount off the full tariff rates, and that your FAK rating of Class 77.5 is probably less than the actual weighted average of your shipments, so you are, in effect, getting a double discount.
I can't tell how this carrier determines what traffic is profitable. Density of freight is only one consideration in determining profitability. The volume and frequency of shipments, loading (shipper vs. driver), packaging (loose cartons vs. palletized loads), number going to a particular destination or area at one time, location of terminals, etc. all affect the carrier's efficiency in handling your shipments. Also, there are other traditional factors which are built into the classification system such as value, susceptibility to damage, etc.
My suggestion is to sit down with the carrier and analyze your volume, shipping patterns, claims history, etc. See if there is anything you can do to improve efficiency and make the traffic more profitable for the carrier. If this fails, put out a request for proposals to other competing carriers and go with the carrier that offers the best combination of good service and price.
Q: Can you provide information on college programs for a career in transportation?
A: I admire your interest in continuing your education in the field that you have selected. The various universities name their programs in a variety of ways: transportation, distribution, logistics and the latest is "Supply Chain Management". This e‑mail is also directed to Dr. Zinszer at Syracuse University and I am asking him to get your mailing address to send you details of their program. Syracuse has an excellent program in Supply Chain Management and last year its graduating students received the highest starting salaries in their whole School of Management! I know of several other schools, such as the Universities of Tennessee, Ohio State and Michigan State (packaging school). This will give you a start in your search, but there are not many schools that have majors in traffic, transportation, distribution, logistics or supply chain management, etc. Please feel free to contact me for any information and support. My telephone number is (607) 562‑3373. Thank you for your interest. I am the Director of Education for TCPC. John T. Harvey
Q: I represent a transportation broker. My question is this: the broker(s) that I represent do not have a set of standard contracts or documents which they use to contract with (1) the shipper and (2) the carrier. I wanted to know whether any standard documents or forms exist.
A: There are no "standard" contracts for use by brokers in contracting with shippers and with carriers. Our law firm frequently prepares agreements for shippers, brokers, motor carriers and freight forwarders, but they usually must be tailored to fit the needs and requirements of the client.
You may want to obtain a copy of my new seminar manual "Contracting for Transportation and Logistics Services" which is published by the Council, and contains information on the legal and regulatory requirements, together with extensive discussion of contract provisions. If you are interested, please contact TCPC at (631) 549-8984.
Q: As the Corporate Transportation Manager, I was recently asked by my company to release some of our current freight rates to a customer so the customer could compare their rates with ours and see if "we were getting the best deal". I've resisted this mainly because the contracts we have with our carriers specifically mention that the rates given are confidential between us and will not be shared with anyone else. My question is, are there any other legal issues I should be aware of?
A: The confidentiality clause in your contract is critical, but not having a copy, I cannot advise you. I have seen some that contain liquidated damages in the event of a breach. Offhand, I am not aware of any other legal problems in sharing rate info with a customer. I suppose it may have an influence on the terms of sale, as to whether the buyer or seller will pay the freight charges, or prepay and add. For a more formal answer, we would need to be retained to review your dealings and terms of sale, etc.
Q: While working for a previous company, we had a LTL carrier contract which required the LTL carriers to maintain their rates for a specific length of time and provided a base tarriff (Roadway 507A) for them to quote rates against. In my current situation, I have many LTL carriers who change their rates all the time and we want to bring some order to the situation. Someone suggested that we draft a contract with the ususal "boiler plate" and reference the CZAR-Lite Nationwide Baseline Pricing System.
A: Many of our clients are now using proprietary tariffs such as Czar-Lite as their basis for LTL rates in their transportation contracts. Usually they specify Czar-Lite in their request for proposal to the carriers, and most major carriers are agreeable to using these as the base rates. The obvious advantage is that you can compare discounted rates "apples to apples"; it also simplifies your freight bill audit and payment procedures. You can specify a tariff in effect as of a particular issue date, such as January 1, 2001, and provide that the rates will not change for a specified period of time, such as a year. Our firm can prepare a tailor-made contract to fit your company's specific requirements.
Q: If you have established rates on truck loads, with contract carriers, and with the fuel surcharges being added now, are we obligated to pay these surcharges?
A: Many carriers have instituted fuel surcharges as a result of the recent increase in diesel prices, and shippers are being billed for these surcharges.
If you have a properly drafted, written transportation contract, and it does not provide for escalation or fuel surcharges, you should be able to enforce the rates and charges specified in the contract. Of course, there may also be a cancellation provision in the contract that allows the carrier to cancel on specified notice, such as 30 or 60 days, so beware.
Q: Why would you want to have a "waiver" clause in a transportation contract? What is the statute or law where this is found?
A: The ICC Termination Act of 1995 was specific legislation (like the NRA or TIRRA) that amended the Interstate Commerce Act. Under the amended Act, 49 U.S.C. 14101 provides that if the parties waive the provisions of the Act, "the transportation provided under the contract shall not be subject to the waived rights and remedies and may not be subsequently challenged on the ground that it violates the waived rights and remedies..." If the parties intend to include any provisions that differ from the statutory requirements such as time limits for claims or suits, the "180 day rule", etc. this language should be included. Of course, the contract should then properly cover all of the subjects that are relevant to the transportation services.
Q: I am currently in negotiations with a motor carrier. I am making every effort to explicity exclude the Uniform Bill of Lading reference from the contract, however the carrier insists it must stay. He sites the following cases as examples of contracts that have been ignored by the courts and the uniform bill of lading became the controlling document. (I think I just answered my own question). Cases he refers to are: Jackson v. Brookledge, Hollingsworth v APA Transport and Toledo Ticket v Roadway Express.
Are you aware of any good reason why I should accept the Uniform Bill of Lading as a part of my contract with the carrier? My wording already states that the bill of lading is to be used for a receipt of goods only. It would appear to me to create a conflict between the documents.
A: The carrier is all wet. None of the cases you mentioned say that a written transportation contract will be ignored by a court.
Most properly drafted transportation agreements provide that the terms and conditions of the contract will govern all transportation. Some contracts say that the bill of lading will serve "only as a receipt"; others say that, in the event of any conflict, the contract provisions will prevail over the terms and conditions of the bill of lading.
Q: If I have a contract with a carrier with this clause, do I have to accept a price increase? My contract provides:
16. TERM OF AGREEMENT
The term of this contract shall be for a period of one (1) year commencing the date first above written and shall automatically renew for additional one (1) year periods unless written notice of non‑renewal is given by either party at least thirty (30) days prior to the end of any term.
A: Without reviewing the complete agreement, it is not possible to give you a definitive answer to your question.
However, it would appear from the language quoted, that the contract should be binding on both parties for the entire one‑year period, or for any additional one‑year renewal periods. So long as the contract is in effect, it would be my opinion that the rates agreed to in the contract would be enforceable.
I would point out that there may be some other provision in the contract that allows a party to terminate the contract on shorter notice, such as 30 or 60 days.
Q: A carrier did not deliver to the shipper true copies of the rates (Fuel Surcharge and Base Rate increase) prior to the commencement of transportation services. The Contract stipulates the following "Should any of the schedules attached as an appendix to this contract make reference to any printed rules, rates or discount tariffs of the Carrier, true copies of such tariffs shell be delivered to Shipper prior to the commencement of transportation services under this contract. Failure to furnish such true copies will be a material breach of this Contract".
The Appendix to the Contract has a “Waiver of Increase” signed by both carrier and shipper. Which takes precedence, the Contract or the Appendix? Also, can the shipper file overcharge claims against the carrier?
A: Without seeing and reading the entire contract, it does sound as though the carrier has failed to comply with a material condition, although the consequences are not clear. Breach of a material provision would usually give the other party the right to terminate the agreement.
As to the "waiver of increase", it sounds as though the carrier agreed that during the term of the agreement it would not increase its rates. Thus, if the carrier has unilaterally imposed a fuel surcharge or other rate increase, you may have a claim for overcharges.
Again, it would be necessary to review the entire agreement to give you a more definitive answer.
I would note that your questions illustrate the importance of having a properly drawn transportation contract. Incorporation of a carrier's tariffs by reference in a contract is usually not a good practice, and if you should do this, the reference should be to a specific tariff, item(s) and effective date.
Q: A truckload carrier, who we did not have any type of transportation agreement with, was utilized by one of our DC's for over a year. We did about $200,000 with this carrier during that time. The facility manager terminated their services, without any warning, due to a lost trailer load, and now the carrier is going to sue us stating that there was an oral agreement with the manager to haul our freight, which the manager denies, and that the termination of our business caused the carrier financial hardships. Absent any written agreement to the contrary, what legal basis would a carrier have to sue a shipper for termination of services?
A: This not a simple question. Basically, you are asking about the enforceability of an oral agreement for trucking services. This would be governed by state law, and I cannot give you a definitive legal opinion without a full investigation of the facts and some research of the laws of the state in which the alleged contract was made.
I suggest that you engage the services of a qualified transportation attorney.
Q: I understand that, since the ICC deregulation of 1996, the parties to a trucking contract can waive the provisions of the Carmack Amendment entirely. My question is: "what forms a valid waiver"? By this I mean - what terms in the waiver form are required, and what must it say (or how must it be executed . . .) for it to be valid. Have courts invalidated or upheld waivers for some reason since 1996? If so, what was right or wrong with the waiver? I'm nervous that the validity of waivers might be some type of legal issue to worry about. Am I right?
A: 49 U.S.C. 14101 provides as follows:
(b) CONTRACTS WITH SHIPPERS-
(1) IN GENERAL- A carrier providing transportation or service subject to jurisdiction under chapter 135 may enter into a contract with a shipper, other than for the movement of household goods described in section 13102(10)(A), to provide specified services under specified rates and conditions. If the shipper and carrier, in writing, expressly waive any or all rights and remedies under this part for the transportation covered by the contract, the transportation provided under the contract shall not be subject to the waived rights and remedies and may not be subsequently challenged on the ground that it violates the waived rights and remedies. The parties may not waive the provisions governing registration, insurance, or safety fitness.
Waiver under this section is usually done by express language in a written transportation agreement between the shipper and the carrier. If the parties waive "rights and remedies", they are then free to insert provisions which would otherwise be limited or governed by the statute, such as minimum time limits for filing loss and damage claims or bringing suits (49 U.S.C. 14706). Note: I have not yet seen any court decisions which deal with the "waiver" issue.
Q: If in a motor carrier agreement, persuant to 49 U.S.C., we have the motor carrier waive all rights under the ICA. Does this automatically waive the regulations in 49 CFR, such as the rules and regulations for processing claims,etc?
A: If the parties expressly waive the "rights and remedies under this part" as is provided in 40 U.S.C. Section 14101(b)(1), I would say that they have also waived the corresponding federal regulations of the Federal Motor Carrier Safety Administration (formerly FHWA and ICC regulations). The reason is that the regulations were promulgated by the agency to carry out the requirements of the statute, ie., without the statute there can be no regulations.
I should note that, in the contracts which we prepare for clients, we specifically refer to and incorporate selected regulations which are beneficial to the client such as the claim regulations.
Q: After reading several of your texts, one area I am still somewhat uncertain is when you have a written agreement with a motor carrier. If liability for loss and damage is not specifically addressed in the contract, do the terms of the ICA and 49 CFR govern, or would the carrier be held to a lessor standard of liability?
A: Normally, a well-drafted transportation agreement will cover liability for loss and damage, and the contract provisions will govern the transactions.
Under the Interstate Commerce Act, all motor carriers are able to enter into contracts. The statute also provides that the parties to a contract may "waive" provisions of the Act (except for registration, safety requirements, etc.). If you expressly "waive" provisions of the Act in your contract, then you are free to include contract language which is different from the statutory requirements such as the "Carmack Amendment" (49 U.S.C. § 14706), the time limits for overcharges & undercharges, the statute of limitations for suits, etc.
However, if the parties do NOT expressly waive these provisions in their contract, then the terms of the Act (and the corresponding regulations) would continue to apply.
Q: Our company offers handcarry service. This is a 'courier for hire' service and is occasionally referred to as “On Board Courier Service”. A board member recently mentioned the issue of utilizing bonded couriers for this service. Are there any laws that govern the type of courier we use. I need to find out if it requires the use of bonded couriers and if so, what type of bonds should they possess. Any information on bonded carriers would be much appreciated.
A: I believe that you are referring to what is known as a "fidelity bond". This is a bond obtained from an insurance or surety company that is intended to provide security in the event of "employee infideity" - such as theft of valuable items being carried by the courier.
I am not aware of any law that requires the use of bonded couriers. However, many courier services do have bonds covering their employees, and many customers feel more secure in dealing with a courier service that has bonded couriers.
I would suggest talking to the person who handles your company's insurance (Risk Manager, etc.) and have them check with the insurance companies that handle your corporate insurance program.
Q: I have four claims on my desk now that follow a similar scenario. We ship something, the LTL delays the shipment and to satisfy our customer we must expedite, usually by air, a shipment at additional costs. The carriers refuse to reimburse for the additional costs incurred, i.e. the air/expedited charge. The common defense is they were not advised prior to receipt of the shipment. Are you aware of a way around this defense?
A: Air freight or other express charges to ship a replacement shipment, when the original shipment is delayed in trancit, usually fall into the category of "special damages". Special damages are generally not recoverable unless the carrier has actual or constructive notice as to the consequences of failing to deliver with reasonable dispatch.
Special damages are covered in "Freight Claims in Plain English" (3rd Ed. 1995) at Section 7.3, and a number of cases involving substitute transportation are discussed in Sections 7.3.2 - 7.3.4, and 7.4.9. In most of the decisions, the claimant was not able to recover because the carrier had not been given adequate notice at the time of shipment, although there are cases going in favor of the shipper, see, e.g., Franklin Mfg. Co. v. Union Pacific R.R. Co., 311 Minn. 296, 248 N.W.2d 326 (1976).
Q: I would like to see the definition and application of the term: "Shippers Load & Count" as it relates to loading trucks, and more specifically, ocean going containers.
A: The notation "shippers load and count" ("SL&C") on a bill of lading is generally used when, for the shipper's convenience, the carrier "drops" a trailer or container to be loaded and sealed by the shipper, and returns at a later time to pick up the trailer or container without inspecting or counting the contents. The Bills of Lading Act (49 U.S.C. §80113) addresses the effect of loading by the carrier or the shipper. The relevant language reads as follows:
§80113 Liability for nonreceipt, misdescription, and improper loading
(a) Liability for nonreceipt and misdescription. ‑ Except as provided in this section, a common carrier issuing a bill of lading is liable for damages caused by nonreceipt by the carrier of any part of the goods by the date shown in the bill or by failure of the goods to correspond with the description contained in the bill. The carrier is liable to the owner of goods transported under a nonnegotiable bill (subject to the right of stoppage in transit) or to the holder of a negotiable bill if the owner or holder gave value in good faith relying on the description of the goods in the bill or on the shipment being made on the date shown in the bill.
(b) Nonliability of carriers. ‑ A common carrier issuing a bill of lading is not liable under subsection (a) of this section ‑
(1) when the goods are loaded by the shipper;
(2) when the bill ‑
(A) describes the goods in terms of marks or labels, or in a statement about kind, quantity, or condition; or
(B) is qualified by "contents or condition of contents of packages unknown", "said to contain", "shipper's weight, load, and count", or words of the same meaning; and
(3) to the extent the carrier does not know whether any part of the goods were received or conform to the description.
(c) Liability for improper loading. ‑ A common carrier issuing a bill of lading is not liable for damages caused by improper loading if ‑
(1) the shipper loads the goods; and
(2) the bill contains the words "shipper's weight, load, and count", or words of the same meaning indicating the shipper loaded the goods.
(d) Carrier's duty to determine kind, quantity, and number ‑
(1) When bulk freight is loaded by a shipper that makes available to the common carrier adequate facilities for weighing the freight, the carrier must determine the kind and quantity of the freight within a reasonable time after receiving the written request of the shipper to make the determination. In that situation, inserting the words "shipper's weight" or words of the same meaning in the bill of lading has no effect.
(2) When goods are loaded by a common carrier, the carrier must count the packages of goods, if package freight, and determine the kind and quantity, if bulk freight. In that situation, inserting in the bill of lading or in a notice, receipt, contract, rule, or tariff, the words "shipper's weight, load, and count" or words indicating that the shipper described and loaded the goods, has no effect except for freight concealed by packages.
When "SL&C" is inserted on a bill of lading, it is essentially creates a rebuttable presumption that the shipper has loaded and counted the shipment, and that the carrier has no knowledge of the condition of the goods or the number of packages or items in the shipment. It can have significant legal effect upon the carrier's liability, especially in the case of shortages, which may be discovered, at destination. For a discussion of the shipper's burden of proof in cases involving "SL&C" notations, see Section 5.2 in "Freight Claims in Plain English" (3rd Ed. 1995).
Q: I would like a formal definition of the term "Common Carrier" and the difference between the terms "Common Carrier" and "Contract Carrier".
A: For the purposes of interstate transportation, these terms are defined in the Interstate Commerce Act at 49 U.S.C. Section 13102. The ICC Termination Act of 1995 eliminated the distinction between "common carriers" and "contract carriers" - all for-hire carriers are now considered "motor carriers", and motor carriers may enter into contracts for "specified services under specified rates and conditions". Relevant definitions from Section 13102 are as follows:
(3) CARRIER- The term ‘carrier’ means a motor carrier, a water carrier, and a freight forwarder.
(4) CONTRACT CARRIAGE- The term ‘contract carriage’ means--
(A) for transportation provided before the effective date of this section, service provided pursuant to a permit issued under section 10923, as in effect on the day before the effective date of this section; and
(B) for transportation provided on or after such date, service provided under an agreement entered into under section 14101(b).
(12) MOTOR CARRIER- The term ‘motor carrier’ means a person providing motor vehicle transportation for compensation.
I would also refer you to some of the recent publications of the Transportation Consumer Protection Council that discuss the changes resulting from the ICC Termination Act of 1995, and are available through the web site.
Q: We have a customer that files delay claims, but refuses to supply supporting documentation. When a delay occurs, they send us an incident report and ask us to respond. If we affirm that we were late and at fault, although we may disagree with the length of time of the delay, then an invoice is sent to us and payment is expected. The invoice will state total charges due, but may show only that the truck was two hours late or a more 'detailed' invoice will show number of men, hourly wages and length of delay time. No other supporting documentation is provided. (time cards, etc) If we deny being late, but the consignee charges back our customer for a delay, we are invoiced anyway. Many times the B/L will not indicate a late delivery or show a specific delivery time. Our customer refuses to provide additional documentation and will offset our freight charges after 60 days. The contract allows this, but it also requires that they provide documentation. They are telling us to pay the claims, without negotiations or compromise or lose all their business. How can we resolve for a win‑win?
A: You mention a "contract" with this customer, so my answer is qualified to the extent that the contract has not been furnished.
I am assuming that you have contractually agreed to deliver in accordance with specified delivery schedules or by appointment with the consignees, and that the contract provides for the late delivery penalties which are being assessed by your customer.
My first suggestion to instruct your dispatchers and drivers to be aware of the problem, and to keep accurate records of all appointments, due dates, actual pickup and delivery times, etc. That way, you will be in a better position to deal with any disputed claims. Secondly, you should discuss the problem with your customer to clarify the proper procedures, and improve communications.
Q: I am trying to ascertain what exactly is regulated at the federal level and what is regulated at the state level in the trucking industry. Ever since the destruction of the ICC and the creation of the Surface Transportation Board, there does not seem to be much literature out there informing one on this issue. I am aware that this is a very broad question, but any help you can provide (including telling me where to look!) would be greatly appreciated.
A: I would suggest that you start with one of TCPC's seminar texts such as "A Guide to Transportation After the Sunsetting of the ICC" which explain the legislation starting with the Trucking Industry Regulatory Reform Act of 1994, the Federal Aviation Administration Authorization Act of 1994 and the ICC Termination Act of 1995. This can be ordered through the TCPC web page (www.tcpcinc.com) or by calling (516) 549 8984.
You may also find articles in some of the transportation journals:
The Transportation Lawyer (TLA)
Journal of Transportation Law, Logistics & Policy (ATLL&P)
Q: On our inbound loads, 50% of the volume is delivered to us on a collect basis. With the carriers I use, there are contracts in place concerning detention time charges, i.e., allotted free time, costs, etc. On the other 50% of the loads, the shipper prepays the freight, and obviously uses carriers of their own. On the loads that are prepaid by the shipper, what are the obligations on the consignee to pay extra charges such as detention? The carriers are billing the shipper for the prepaid freight charges, and billing us collect for detention charges.
A: The first question is whether the inbound "prepaid" shipment is moving under a transportation contract that governs the allocation of the charges, or whether it is a common carrier movement governed by the bill of lading and carrier's tariffs.
If it is a common carrier movement, and the bill of lading is marked "prepaid", the shipper would ordinarily be billed for the transportation charges AND any additional charges accruing on the shipment. If the shipper executes "Section 7" (the non‑recourse provision) on the Uniform Straight Bill of Lading, any additional charges such as detention must be billed to the consignee.
Q: We negotiate four hours of free time before detention begins to accrue with those core carriers who insist on unloading detention charges in our contract. Some of the carriers our vendors choose to ship to our company on a prepaid basis have in their tariff or contract detention beginning after only two hours free time. As a result we routinely get detention charges from carriers moving goods on a prepaid basis for labor intense loads that take over two hours to unload.
My desire is not to pay these charges but instead to refer the carrier back to the vendor to collect these charges. Since the vendor negotiates and ships prepaid are we legally bound to pay the charges or are we on firm ground to refer the carrier back to the vendor for payment of any detention that is incurred at our receiving docks?
A: First, you have to realize that there are three different contractual relationships: Vendor‑Purchaser, Vendor‑Carrier and Purchaser‑Carrier.
Assuming that the shipment moves under the vendor's contract (or a common carrier bill of lading), the carrier will be entitled to charge whatever accessorial charges (such as detention charges) that are provided for in the contract (or tariff). Whether these should be charged to the shipper or the consignee depends on the contract (or tariff). For example, if there is a non‑recourse ("Section 7") provision, the carrier would have to look to the consignee for payment of any detention charges at the point of delivery.
Your relationship with the vendor is governed by the terms and conditions of your contract or purchase order. Unless the contract specifically covers matters such as detention, you probably do not have the right to require the vendor to pay the detention charges. If you want to fix the problem, this is where you should start.
Q: Being a truckload carrier, we are constantly being approached by these new entities wanting do business under contract. We've also been approached by existing logistics providers (with whom we have contracts) who have now developed dot.com facilities, wanting to assign the provisions/terms of the existing contract to the name & address of the new dot.com (sometimes the new dot.com consists of more than one party doing business in the motor carrier industry.) Lots of confusion on application of transportation law. Would appreciate comments.
A: There are all too many "logistics providers" and intermediaries running around that are ignorant of the laws and regulations that may be applicable to their activities, and the Internet is making the situation worse.
We advise both our shipper and our carrier clients to carefully investigate the intermediaries they deal with and to make sure they are properly licensed, bonded, etc. For your information, the following is an excerpt from my seminar text "Contracting for Transportation and Logistics Services", available from the Transportation Consumer Protection Council, which summarizes the legal status and requirements for a broker.
DEFINITION OF BROKER
The definition of a "broker" is found in the FMCSA regulations at 49 CFR § 371, and provides:
(a) "Broker" means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.
* * *
(c) "Brokerage" or "brokerage service" is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor or consignee.
The ICA requires that brokers for the transportation of property must "register" with the Department of Transportation (FMCSA), 49 U.S.C. § 13901 and 13904. This registration requirement replaces the former statutory requirement to obtain a "license" from the ICC. Brokers holding licenses from the ICC as of December 31, 1995 were "grandfathered" and deemed to be registered under the new law, 49 U.S.C. 13905.
The FMCSA has established regulations governing applications for broker registration that are published at 49 CFR Part 365. Application forms (Form OP‑1) are available from the FMCSA, 400 Virginia Ave. SW, Washington, DC, 20590, phone (202) 358‑7000.
FMCSA regulations provide that brokers must file a surety bond in the amount of $10,000, 49 CFR 387.307.
AGENTS FOR SERVICE OF PROCESS
Brokers must also designate agents for service of process for each state in which offices are located or in which contracts are written, 49 CFR § 366.
49 CFR Part 371 sets forth requirements for brokers such as record keeping, misrepresentation, rebating and compensation, accounting, etc.
If the "dot.com" companies you are dealing with fit within the above definition of a "broker", they must be registered with the FMCSA. I would strongly suggest that you do not do business with any company or "dot.com" that does not comply with the law.
Q: I recently transitioned from the Marine Corp. I worked in supply and logistics for many years. I understand the logistical concepts. I have learned a lot in the few months working at Bakery Chef. Are there any publications or another means that gives a well-rounded understanding of basic procedures and terms dealing with transportation, shipping and receiving?
A: The best recommendation I can give you is to join the Transportation Consumer Protection Council. The Council publishes an excellent newsletter called the "TransDigest" which is full of current news, practical information and tips; it also holds an annual conference with round tables and seminar programs on a variety of transportation and logistics subjects There are seminars from time to time in various parts of the country on loss and damage claims, contracting for transportation and logistics services, etc. As a member, you also have access to the "hot line" for your questions and advice, and the "Q&A" column. For membership information visit the web page: www.tcpcinc.com or contact TCPC headquarters at (631) 549‑8984.
Q: Fresh fruits and vegetables have always been considered exempt product. With their exempt status in mind.... What guidelines do you follow with regard to:
1. time frame to file a claim
2. normal transit time for perishables like strawberries
3. responsibility of "brokers"- agent or principal?
A: You are correct in observing that most fresh fruits and vegetables are "exempt" under 49 U.S.C. § 13506. This exemption has been construed to mean that the provisions of the "Carmack Amendment" (49 U.S.C. Section 14706) are not applicable, such as the minimum time periods for filing claims and bringing suits for loss or damage.
Although such commodities are "exempt" from regulation, there are still laws which are applicable, such as the Uniform Commercial Code, which contains provisions about bills of lading, etc. and requirements that time limits and liability limitations must be commercially reasonable.
As a practical matter, many exempt shipments move under a Uniform Straight Bill of Lading, so the terms and conditions are the same as non-exempt shipments.
For loss or damage claims the time limits would be nine months to file a claim and two years and a day from declination to file a suit. With respect to delay, the basic criterion is still "reasonable dispatch", which is measured by the usual and customary transit time. I would refer you to "Freight Claims in Plain English" (3rd Ed. 1995) for a thorough discussion of these subjects.
In theory, "Brokers" in the produce business are not subject to the registration requirements for property (truck) brokers in 49 U.S.C. Section 13901 & 13904. In addition to arranging for transportation (as an independent contractor), they may also perform other functions. For example, they often act as a commission agent for the grower, in which case they may be subject to the Perishable Agricultural Commodities Act ("PACA").
Q: What type of legalization is required to transport cargo for shippers with a 1/2 ton cargo van? Load capacity is up to 1,000 lbs. Am I allowed to put any advertising or markings on sides of vehicle?
A: If you are transporting property of others for hire in interstate commerce (between two states), you will need to register with the Federal Motor Carrier Safety Administration (formerly the I.C.C. or the FHWA). If you are only operating in intrastate commerce (within one state) you will probably have to register with the state Department of Transportation or Public Service Commission.
State and federal regulations require that you show the number of your operating authority, name of the operator and address on the truck (usually on the driver's door). Generally you can also put advertising and/or other markings on the side of the vehicle.
Q: I had some articles shipped from Kansas City to Boston by a shipping/packaging company. I paid the required charges by cheque and got the boxes in Boston. I did not know how or by whom they would be shipping the boxes. I received the boxes and as I had prepaid, there were no more charges.
Recently I got a letter from the collection agency saying that I was liable for charges to the freight company under the Interstate Commerce Act as the Consignor had not paid the freight company (on many occasions).
The bill specifically states the “BILL TO” as the consignor and the discounted rate charged by the freight company. Since the bill is between the consignor and the freight company, am I liable to pay any charges to the freight company or their collection agency ?
A: Without seeing any of the shipping documents or other correspondence it is difficult to give you a definitive reply.
The "pack & ship" outfit that you dealt with could be considered as a "freight forwarder", a "broker" or as your agent. Essentially, it boils down to what kind of contract existed between the different parties. For example, did the "pack & ship" company issue you any kind of receipt or bill of lading? If so, it would be evidence that they were acting as a freight forwarder (probably illegally, because they never registered with the Federal Motor Carrier Safety Administration) and your contract of carriage is with the forwarder, not the trucking company.
Q: We are a manufacturer of disposable medical devices and ship all orders from one Midwestern facility. Roughly 80% of customer orders ship LTL, about 8% parcel and the remaining orders are FTL. We do not have any long‑term FTL contracts; we use a few different carriers and current lane quotations from each to determine who will get the load.
Early in 1999, we made an agreement with one such carrier to include in their quoted price the added unload/driver assist charges we were regularly getting on our West Coast intermodal moves. From that point on, their invoices no longer listed those accessorial charges separately, they were rolled into the base rate. Recently, the carrier rep indicated that they had a negative balance in their accrual account and that we owed them nearly $10,000 as the result of their underestimating the amount of accessorial charges for over 100 loads. We have updated quotations for these lanes throughout that time period and have paid each invoice on time without dispute. Is there any possibility that we could be liable for these back charges? Any insight you can provide would help.
A: You indicate that you do not have any formal transportation contracts, but have "quotations" from various carriers. The question is whether it can be determined from the "quotation" whether the accessorial charges are included in the rate; if so, then the "quotation" would be evidence of the contractual agreement between the parties. On the other hand, if the "quotation" is silent ‑ or worse, if it incorporates the carrier's rules tariff by reference ‑ you may be liable for the accessorial charges.
I should note that some of the claims you refer to are time‑barred under the "180 day rule" in 49 U.S.C. Section 13710(3)(A) which provides: "A carrier must issue any bill for charges in addition to those originally billed within 180 days of the receipt of the original bill in order to have the right to collect such charges."
My best advice to avoid this type of problem in the future is to enter into a properly drafted transportation agreement with each of your carriers.
Q: One of our truckers filed for Chapter 11 bankruptcy about eight months ago, at which time we owed them for some freight charges. We assumed that we would hear something from the attorneys or the court about paying the charges which were due, but didn't receive anything until a few days ago. This was a notice from the trucking company which demanded payment. Is it all right to pay the trucking company directly?
A: If the carrier is in reorganization under Chapter 11, it is probably considered a "debtor in possession" and may be continuing to conduct operations. Thus, if you agree on the amount owed, you should pay the freight charges.
Payment should be made to "(name of carrier), Debtor in Possession". You should also ask for a release before making payment. This is because there may be a loss of discount or other penalty for late payment in the carrier's tariffs, and it is quite possible that the carrier may retain auditors or collection agents to try to collect late payment penalties from its shippers.
Q: We are a broker as well as a carrier, here in Iowa. We have a former customer who is filing for bankruptcy protection. They have left us owing carriers monies for loads hauled, and we have been advised that a broker is not liable to these bills, unless we are paid by the shipper.
I am hearing many different opinions on this subject. I just thought that I would see what your take on this subject is since I bumped into you on the Internet.
A: Unless you have some written agreement to the contrary with your motor carriers, you may be liable, even if the shipper doesn't pay you. The reason is that there are separate contractual arrangements: shipper‑broker and broker‑carrier. In most situations there is no "privity" or contractual relationship between the shipper and the carrier; the shipper doesn't select the carrier or pay the carrier. Thus, the carrier has extended credit to the broker, can only look to the broker for payment, and can't collect from the shipper (whether solvent or bankrupt).
If your shipper customer is bankrupt, I would recommend that you contact the attorneys for the debtor in possession or the trustee, and promptly file a claim with the bankruptcy court.
Q: We are a transportation broker. A frequent customer of ours was a poultry trader based in PA. They hired us to find a truck to haul a load of fresh chicken from AL to MA. They requested the load to be picked up on 1/31 and delivered on 2/2. The closest truck we could find did not arrive at the shipper until past their loading cutoff and had to be loaded the next day. The truck was not loaded and on its way until after noon on 2/1 (the consignee is 1286 miles from the shipper). We communicated all of this information as it occurred, to our customer, the trader. The truck was not able legally or physically to make delivery on 2/2, our customer informed us then that their might be a problem because the market had dropped on chicken .10 cents per lb. and their receiver was looking for a reason to reject the load and buy at the lower price. The truck arrived at the receiver at 5:00 am on 2/3 and was unloaded and the bills of lading signed without any notation. On 2/7 we received a fax from our customer saying they were charging us .11 cents per lb. ($4400.00) because we delivered late plus $150.00 for late pick up. The freight rate on this load was only $1650.00 they withheld the balance of this "deduction" from monies due us on previous loads we hauled for them. My question is what can I do to recover this money?
A: There are a number of legal issues here.
First, you are entitled to be paid the agreed freight charges since you performed the contract for transporting the shipment.
Second, the customer is asserting a claim for delay. Claims for loss, damage or delay are subject to different legal principles. In this situation, your legal obligation is to transport with "reasonable dispatch", unless there is some other special agreement. Normally, from the limited facts you have given, a carrier would not be liable for the market decline and the damages sought by the shipper would be considered "special damages". On the other hand, if you had agreed to deliver by a certain date or time, and the shipper had given you actual notice that there would be damages if the shipment were delayed, you could be liable. (I would note that these subjects are discussed in depth in "Freight Claims in Plain English" (3rd Ed. 1995), and suggest that you get a copy.)
If you cannot resolve this dispute, your recourse is to bring a suit against the shipper to recover your freight charges. You can either hire an attorney or try to handle the matter yourself in a small claims court. Be aware, however, that the shipper will interpose a counterclaim for its delay claim; whether the counterclaim will be sustained depends on the factors discussed above.
As an observation, I note that your agreement with the customer appears to be entirely verbal. If you want to avoid this kind of problem in the future, you should enter into written transportation contracts with your shippers.
Q: I ship to my customer via a freight consolidator in Los Angeles and I pay freght charges to the consolidator for the pick up. I must allow for a four hour pick up window, however the consolidator will not wait more than 5 minutes for the load. Are there any laws concerning the time allowed to load for consolidator pick up?
A: There are no "laws or regulations" governing the time allowed to load for a consolidator pick up. Sometimes motor carriers will include provisions in their tariffs governing detention time or or other accessorial charges for loading or unloading, but I don't think that is your problem.
My suggestion would be to talk to the consolidator and try to come to a reasonable agreement. If they won't cooperate, take your business elsewhere.
By the way, you should have written contracts with carriers or consolidators. Then, you can spell out all of the obligations, terms and conditions which have been agreed to by the parties.
Q: What law was it that said a freight invoice dispute must be settled within 9 months of the transaction or there is no longer any legal grounds to dispute the claim.
A: I am not aware of the "law" you are referring to. The only nine-month time limit with which I am familiar is the time limit for filing loss and damage claims which is found in Section 2(b) of the Uniform Bill of Lading.
If you are asking about the time limits for filing overcharges with motor carriers, I would refer you to 49 U.S.C. § 13710 which provides:
"If a shipper seeks to contest the charges originally billed or additional charges subsequently billed, the shipper may request that the [Surface Transportation] Board determine whether the charges billed must be paid. A shipper must contest the original bill or subsequent bill within 180 days of receipt of the bill in order to have the right to contest such charges."
Most motor carriers interpret this section to mean that overcharge claims must be submitted within 180 days or they will be time-barred.
Q: I have recently read an article that someone had sent me regarding "double payment" in which you stated that this is a "gray area". My question is how does a shipper get the collection agencies to stop bugging them? Let me take a minute and describe the situtation. A shipper who had been doing business with a broker for well over 4 years has recently been notified by carriers that the broker has not paid them for freight due to the fact the broker has gone out of business. The broker was well established and had been in business for over 10 years and all of his authority and bond was in compliance at the time the freight was shipped. Now the shipper obsviously paid the broker as they have always did and the collection agencies are contacting the shipper for the money, and these collections people are down right rude and harrassing. Thank you for taking the time to answer my question.
A: Liability for freight charges depends on the facts and the relationships among the parties. Unfortunately, the "double payment" problem is very common when brokers go out of business or abscond with funds. This is a "grey area", and collection agencies and lawyers for the carriers will probably tell you that you are liable even though you have paid the broker.
However, the general rule, as supported by a number of court decisions, is that if the shipper has dealt only with the broker, and has paid the broker, the carrier cannot come back to the shipper to collect its freight charges. The legal rationale is that there is no privity of contract between the shipper and the carrier; also, that the carrier has extended credit to the broker, and not to the shipper.
There is not much you can do when being harrassed by collection agencies or lawyers, other than to tell them - very firmly - that you have no intention of paying them, because you have already paid the broker.
Q: What federal laws allow a carrier to attempt to collect transportation charges from a receiver even if the bill of lading indicates to bill the sender ‑ vis a vis 1) surface transportation and 2) air transportation? Doesn't Title 49 § 13707 of the US Code allow this, at least for surface transportation? My wish is to bill receivers when the senders (my customers) are out of money or simply are being "deadbeats" and not paying their bills.
When it is a bill third party situation, does the carrier have any more room to attempt to collect from the receiver?
A: As to your first question, the Interstate Commerce Act (Title 49, U.S. Code Sections 10101 et. seq.) does not prescribe who shall be liable for freight charges.
There are some specific provisions that are applicable to a limited number of situations. One such provision is 49 U.S.C. § 13706 (formerly 10744), Liability for payment of rates. This section recognizes that there may be persons named as consignees on a bill of lading that are really not principals to the contract of carriage, but are merely acting in an agency capacity for the real party in interest. This section typically would apply to a warehouseman or port facility that receives goods on behalf of the shipper, and then diverts or reconsigns the goods as agent for the shipper, and does not wish to be liable for the additional freight charges accruing on the shipment. By giving the carrier proper written notice, the agent can avoid liability and shift the responsibility to the shipper, consignee or beneficial owner of the goods. This section is generally misunderstood, rarely invoked, and there are few court decisions dealing with its application.
As to your second question, a consignee may be liable for freight charges on the theory that it has received the benefit of the transportation services.
However, you should be aware of a line of court decisions in which the principle of "estoppel" has been applied. Where goods are shipped on a "prepaid" bill of lading, and the consignee‑purchaser has paid the shipper‑seller for the goods (including the transportation charges), this principle protects the consignee against "double payment" liability for the freight charges. The "estoppel" defense has been applied in both surface and air freight cases.
As a practical suggestion, if you want to avoid this type of problem in the future, check the credit of the companies that you deal with. If you fail to do this, you are assuming a risk that the "bill to" party may default in paying its freight bills.
Q: I currently have a contract with the LTL carriers I do business with. In the body of the contract it is clearly specified under a section entitled "Interlining" that "if a shipment is handled by the carrier and a connecting carrier, it will be considered "convenience" interlining and such shipments will transported at the rates and discounts set forth in the contract."
My question is, "if the carrier signed the contract, is the carrier legally bound to honor the standard rates and discounts for the interline shipment or do they have the right to change the rate and discount for interline shipments"?
A: If you have a fomal written transportation agreement, and it contains the provisions you have described, it should be enforceable. The only question I would have is whether you may have incorporated the carrier's tariffs into your contract by reference. If you did, it is possible that the carrier's rules tariff may have some provisions governing interline shipments.
If you need a more definitive answer, I would have to review your actual contract.
Q: If a delivery is made outside of the NOR time given by a fuel supplier to the purchaser, and as a result, demurrage is incurred by the purchaser of the fuel (e.g., because there were other vessels at the port when the vessel actually arrived and so the vessel delivering the fuel had to wait), who is responsible for demurrage expenses if it's not addressed in the contract?
A: Obviously the carrier wants to collect its demurrage from someone ‑ either the shipper or the consignee ‑ and doesn't really care about the contractual relationship between seller and purchaser.
This really is something that should be covered in the terms and conditions of sale as between seller and purchaser. However, if the contract is silent, the normal rule is to look to the custom and usage of the particular trade, or the prior course of dealings between the parties. Without knowing the custom of your particular trade, I would assume that the party responsible for paying the freight charges would also be responsible for the additional demurrage.
Q: I would like to know how we can be held responsible for the payment of the freight bills for the following.
The delivery receipt was marked “prepaid” on a shipment we received. The original bill of lading shows a third party billing collect. The carrier is now coming to us for payment since the third party will not pay and the original bill of lading was also marked collect.
We also had a shipment come in collect that we were refusing. The driver got off the phone with his dispatcher and said it was changed to prepaid. He crossed out collect on the DR and wrote prepaid. Both parties signed. Again they are coming to us for payment saying "they" were not authorized to change the terms.
In both cases the documents we signed does not show that we accepted the freight charges but rather that the charges were prepaid. How can the trucking companies hold us responsible for payment? What happens if we don't pay?
A: As a basic rule, the bill of lading (not the delivery receipt) determines which party will be billed for the freight charges and would have primary liability. This is because the bill of lading is a contractual document. Notations on the delivery receipt are legally irrelevant.
The fact that you refused the second shipment does not relieve you of the obligation to pay the charges, unless your refusal was due to damage to the goods which made them substantially worthless, see "Freight Claims in Plain English) (3rd Ed. 1995) at Section 10.9.
Q: I provide a collection service for a large airfreight forwarder. My client recently forwarded a claim against a shipper that is experiencing severe financial problems. The shipper is refusing to pay, so I explained that as stated on the air waybill, the shipper, consignee and bill to party are all jointly and severely liable. I have seen that this is true, however, what case law is there that I may contact the consignee or bill to party (which is separate from the shipper) to revert liability. The shipments were all marked prepaid.
A: There are court decisions that say a consignee is liable for freight charges on the theory that the consignee has received the benefit of the transportation services. However, where the consignee/buyer has paid the shipper/seller for the goods, and there is a prepaid bill of lading, the law protects the consignee from a "double payment" of the freight charges.
Q: I work for a small company based out of Atlanta. We ship goods to South America. Recently we discovered that our freight forwarders were not paying the air carrier for service we had paid the forwarder for. The collections department keeps telling us that if the freight forwarder does not pay them by law we will be responsible to pay for it. My question is, is this a true law? We have the checks for all payments we made to the freight forwarder. If this is or is not true how may I obtain a copy of this law?
A: I am assuming that you are dealing with an air freight forwarder, that the forwarder has issued its own "house air waybill" to you, has invoiced you directly for the air freight charges, and that you have paid the invoices in full.
If this is the case, you should not be liable to the air carrier, because there is no "privity of contract". In other words, you have one contract with the air freight forwarder, and the forwarder has a different contract with the air carrier. (The forwarder ordinarily consolidates a number of small shipments and tenders a full container to the air carrier under a separate air waybill issued by the air carrier.)
Note that an exception to the above could be where the forwarder is acting as an agent (IATA agent), and not issuing its own HAWB, in which case the shipper might still be liable, although I am not aware of any court decisions directly addressing this fact pattern.
Q: We are a third party logistics company. We had a customer that presented his shipment as miscellaneous auto parts and it turned out to be an entire assembled front end of a car in a crate. That changed the class and the item number and therefore the charges were increased. The customer paid in advance what we billed him based on the orginal information and when we re-billed him for the additional charges, he refused to pay. What can we do? Our court date is coming up soon. Thanks in advance for all your help.
A: IF you were the motor carrier that transported the shipment, and IF you were a participant in the National Motor Freight Classification, and IF the rate charged was in an applicable published tariff, and IF you complied with the applicable federal regulations regarding rebilling, and IF you filed suit within the applicable statute of limitations...
Then, the answer would be simple. (Yes, you can collect based on the actual commodity shipped.)
However, you say you acted as a third party logistics provider, which means that ordinary common law principles of the law of contracts apply. In other words, you have to prove what your contract was. If it was not in writing, or did not cover this situation, you may have a problem.
Q: Our customer contracted with Carrier A to come pick up the product from our facility and to deliver to their facility. Carrier A contracted with Carrier B to do the actual pick up and delivery. Our customer paid Carrier A, however, Carrier A did not pay Carrier B, and now Carrier B is billing us. Are we liable?
A: Without seeing the shipping documents (bill of lading) and knowing more about the "carriers" involved, I can't give you a definitive answer. For example:
1. Did "Carrier B" issue a bill of lading when it picked up the shipment? Who is shown as the carrier on the bill of lading? Was "Section 7" (the non-recourse provision) signed?
2. Was "Carrier A" only a broker, and brokered the load to "Carrier B"? Did "Carrier B" originally send its freight bill to "Carrier A" for payment? Is "Carrier A" still in business?
As a practical matter, I would suggest that you contact your customer, who made the arrangements with "Carrier A", and demand that they straighten out the matter. You should also explain the situation to "Carrier B" and ask them to pursue collection from "Carrier A".
Q: One of our warehouse managers wants to withhold payment for a freight bill as "leverage" over the carrier to get them to pay a claim. I told him he could not do that and he insists on doing it anyway. I know I used to be right--but things have changed so much that I'm not as sure. Who is right?
A: At one time carriers were prohibited from offsetting claims against freight charges on the grounds that it could result in discrimination among their customers. However, the anti-discrimination statute was repealed in ICCTA.
However, before offsetting claims, a shipper should check the carrier's tariff rules for penalties, such as a loss-of-discount, for failure to pay freight charges within a specific time. Some carriers prohibit offsetting in their rules tariff. Shippers can negotiate to waive these rules, and contract shippers can insert appropriate provisions in their contracts.
This subject is covered in greater depth in "Freight Claims in Plain English" (3rd Ed. 1995) at section 12.3.6, Counterclaims and Setoffs.
Q: I am dealing with a hostage trailer situation and would like to know what my company can do to recover product damages.
The freight was brokered in Sepember. The companies involved say each owes the other money and they wil hold our freight until they get their money. The owners of the companies involved tell me there is nothing I can do about it. The company I orginally brokered to did not show up for the freight and therefore brokered to someone else. I am not familar with the company that has our freight.
I have contacted many agencies including, local law enforcement, FBI, ODOT, and Dept. of Service & Transportation. None can assist me. I have filed a damage claim the week of 3/13 and sent it certified, however I have not received a response.
I will appreciate any assistance you can give me.
A: First of all, you have to find out who is holding your freight and how much the freight charges are for your shipment. A motor carrier has a "lien" for freight charges and does not have to deliver the shipment until the charges on the shipment have been paid. The carrier's lien applies only to the shipment in its possession and the freight charges on that particular shipment. If you tender payment of the freight charges and the carrier does not release the shipment you have a legal action against the carrier for "conversion" and can sue for the value of the goods and any other damages you may have incurred.
Brokers do not have a lien and there is no legal basis for a "broker" to hold freight. I can't understand why you have waited some 7 months to get legal advice on this, but you should immediately retain a qualified attorney to handle this for you.
Q: My company ordered several containers of bowling equipments from a Texas company to be shipped to our customer in China. The contract between us and the Texas seller provides for CIF price. In other words the price included the shipping charge. Unbeknownst to us, the seller asked its forwarder to put our company on the Bill of Lading as the "shipper." But in the "Marks and Numbers" box on the B/L appears the words "Freight Prepaid." The B/L is "To Order" in the consignee box. After we paid the seller the full amount for the purchase price and after the goods arrived in China, the seller gave me the original B/L and asked me to endorse it so that our customer in China could pick up the goods. I wrote my name on the back of the B/L. However, now the carrier is suing our company saying that we owe them the unpaid freight.
If we have never authorized anyone to put our name on the B/L as the shipper, but the seller did it without our knowledge, should we be liable for the freight?
Also, the carrier admits that the Export Declaration puts the seller as the exporter. Should the carrier be on notice that the seller, not us, is the shipper?
Shouldn't the carrier issue some kind of receipt when it receives the cargo?
A: This is not a simple case for which I can give you a definitive answer without seeing all the documents and possibly doing some research.
This sounds typical of situations where goods are shipped by a manufacturer to a customer of another party (seller). In such cases, it is common for the manufacturer to put the seller's name on the shipping documents, so the buyer does not know the actual source of the goods.
The carrier, of course, does not know about the details of the transaction between the seller, buyer and actual manufacturer. You may be liable to the carrier, but you may also have some kind of recourse against the manufacturer in Texas.
Q: A non‑contracted carrier is sending us a corrected freight bill that dates back to 1997 for fuel surcharge and s/s charges. Do we have to pay this?
A: The statute of limitations for a carrier to bring a lawsuit to collect its freight charges is 18 months from the date of delivery, see 49 U.S.C. Section 14705. Thus, you have no legal obligation to pay the bill that you have described.
Q: We have an agreement with a particular carrier, which references a specific tariff. We also have a letter from the carrier’s account manager that specifically addresses a particular issue (basically the letter states that there will be no charges based on lineal feet). Now this carrier has "gone‑back" and reviewed paid freight invoices and brought new and/or additional charges, citing lineal feet and line‑haul charges of certain shipments.
My question is: does the carrier have the legal right to void the letter, and use the tariff to charge us? Can you point us in the right direction on this?
A: Without seeing your "agreement" (is it a formal written transportation contract?), I can't give you a definitive answer. Assuming you have a written contract, it sounds as though the letter from the carrier's account representative could be a modification or amendment to the contract. If so, the contract, as modified, would be binding on the carrier and the carrier cannot unilaterally revert to the tariff rule.
As a general comment, I would note that this problem could have been avoided by a properly drafted transportation contract. Also, it is generally not a good practice to refer to carrier's tariffs or incorporate them by reference into a contract.
Q: Many of our consignees place their order as customer pick up and then contact either through a 3rd party logistics firm, or by their own distribution department a carrier to come in and pick up their order. Carrier calls our DC and makes an appointment based on PO number given to them by consignee. We issue a bill of lading with Customer Pick up in the routing section.
If a consignee would default in paying their carrier, would that carrier have recourse against the shpper.
A: If you are shipping by a common carrier and using some version of the Uniform Straight Bill of Lading, there is usually a box on the right side of the BOL which refers to " Section 7" or the "non recourse" provision.
As a general rule, if the shipper signs in the space provided in the non-recourse box on the bill of lading, the carrier can only look to the consignee for payment of its charges. In other words, if this is signed, you should be protected in the event the customer doesn't pay, goes out of business, etc.
Q: When is the shipper responsible for the freight bill if it is a collect load and the consignee declines to pay for financial reasons?
Our problem: The shipper sent this load collect and signed off on the section 7 part. The consignee refuses to pay due to financial difficulty. They have not filed for bankruptcy yet. The shipper states also that they have been told by the consignee that they won't get paid for the product, which the shipper states to us is a second reason why they won't pay for the freight.
We have reason to believe that the consignee ordered this product with the intention of not paying for the product or the freight charges, but we haven't any proof, this was through word of mouth. Is there any recourse at all?
A: I assume that your company is a motor carrier, and you are attempting to collect your freight charges.
The general rule is that when the shipper signs "Section 7" (the "non-recourse" provision on the face of the Uniform Straight Bill of Lading), the carrier must collect its freight charges from the consignee.
Unfortunately, it would appear that your only recourse is against the consignee. You may have to retain counsel and bring a lawsuit if you have trouble collecting your freight charges.
Q: When shipping with a standard bill of lading, does the Section 7 "non‑recourse" provision also apply when the carrier is instructed to bill the freight charges to a "third‑party?"
A: The language of Section 7 of the Uniform Straight Bill of Lading says "without recourse on the consignor..." To my knowledge, there are no court decisions which discuss your question, but I don't see why the "non‑recourse" provision would not apply if the charges were billed to a "third party" (a party other than the consignee).
I would qualify my answer by suggesting that if the "third party" were an agent of the shipper (such as the shipper's freight bill audit and payment company), the carrier could still come after the shipper to collect unpaid charges.
Q: What is the statute of limitations for freight bills? Is there a difference between UCC and CFR 49 during normal trade? We have a carrier that has altered our load confirmations after dispatch, and is now trying to collect unauthorized additional charges not outlined on our original load confirmations.
I was under the impression that there is an 18-month statute of limitations. Are there restrictions associated with this?
A: In answer to your first question regarding the statute of limitations for a carrier to recover its freight charges you are correct; the statute of limitations is 18 months. This time period runs from the date of delivery. 49 U.S.C. § 14705.
Please note, however, with respect to any charges in addition to the original freight charges, the carrier must bill these additional charges "within 180 days of receipt of the original freight bill in order to have the right to collect such charges." 49 U.S.C. Section 13710(a)(3)(A).
I'm not sure what your question is regarding the difference between UCC and CFR 49. The UCC stands for the Uniform Commercial Code. Virtually all states have enacted their own version of the UCC. The only section of the UCC that would apply to motor carrier operations is Article 7, which covers the contents of Warehouse Receipts and Bills of Lading; there are not provisions on statute of limitations.
Please note, however, that all state laws governing prices, routes and services of a motor carrier are preempted by federal statute, 49 U.S.C. 14501(c), and this preemption has been interpreted broadly by the U.S. Supreme Court. Therefore, to the extent any UCC provision is deemed to regulate a carrier's prices, routes or services, the UCC would be preempted and unenforceable.
On the other hand, title 49 of the CFR (Code of Federal Regulations), which is entitled "Transportation" and does apply to motor carrier operations. Although there is no statute of limitations section in the CFR since it is covered in the U.S. Code, the CFR does have a provision governing the payment of transportation charges ‑‑ 49 CFR Part 377. Part 377 establishes such things as the maximum credit period a carrier may extend to its customer (30 days) and rules governing the assessment of late payment charges by carriers.
Q: We are a third party provider of freight payment services and other services. One of our shippers received a freight bill from a motor carrier (apparently not the popular undercharge issue) from three years ago. We have two questions:
1. What are the specific time limitations for a motor carrier to bill a shipper on a shipment, albeit that the charges were legitimate in the first place?
2. Is there a quick and easy web site that spells out time limitations/requirements for filing loss, damage and overcharge claims all modes, or do you have a handy cheat sheet that would be easy to use as a quick reference?
I need to clarify a technical point on my question. According to what we know from the shipper, the carrier never billed them for carrying the freight until now. So, this is the first bill they received rather than an additional bill. Does the same 18 months and 180 days still apply?
A: "Freight Claims in Plain English" (3rd Ed. 1995) contains a handy reference chart that summarizes time limitations for different modes; the text can be purchased through the Transportation Consumer Protection Council.
With regard to your question, the statute of limitations for a carrier to begin an action to recover charges for transportation services is 18 months. If a carrier seeks to collect charges in addition to those originally billed, it must issue a new bill within 180 days of the original bill in order to be able to collect any charges in addition to those originally billed.
Q: When an LTL commercial carrier tendered a shipment of 19 swing sets to one of our distribution centers 3 of the 19 were damaged. Note that the damage was to the outside cardboard packaging and not the swing set. We are a wholesale company that sells to retail stores. We know from past experiences that store owners will not accept orders if the exterior cartons are damaged because they are unappealling to the regular every day shopper and won't sell.
Does the distribution center have to, by law, accept the damaged goods or can we accept only the 16 good sets and refuse to accept the 3 damaged sets?
A: As a general rule, a consignee should accept partially damaged shipments and mitigate the loss to the best of its ability, see "Freight Claims in Plain English" (3rd Ed. 1995) at Section 10.9, Rejection vs. Acceptance of Damaged Shipments. If a shipment is damaged and is "practically worthless" (considering the cost of repair, repackaging, salvaging, etc.), the consignee is justified in rejecting the shipment.
As a practical matter, damage to the exterior packaging can often make merchandise virtually unsaleable in a retail store. This leaves the consignee with a choice of repackaging the goods, selling them as distressed merchandise, or rejecting the goods to the carrier - which may or may not attempt to sell them as salvage.
If you are not in a position to repackage the merchandise, and do not have access to buyers of distressed merchandise, I see no reason why you would not be justified in accepting the "good" sets, rejecting the damaged ones to the carrier, and filing a claim for their full value. Then, if the carrier pays your claim, it would be entitled to sell the goods and retain the salvage proceeds.
Q: We manufacture executive office furniture that is custom made to order. Our terms of sell are FOB origin freight prepaid. We will on occasion ship direct to the job sites for installation. When product is damaged a claim is filed and a replacement order entered. My question is once the replacement is ready for shipment is there any recourse on the carrier for additional installation charges to have the crew go back to the site to install the replacement product? Also, could the carrier be held liable for any expedited freight charges in order to get the replacement shipment to the install site?
A: First, since you ship FOB origin, it is your customer that has the "risk of loss" in transit and should be filing the claim. See Section 10.5.1 of "Freight Claims in Plain English" (3rd Ed. 1995).
Ordinarily the carrier is liable for damage to the shipment, and not consequential or "special damages". The fact that you may be obligated to ship a replacement is a matter of a separate agreement or understanding between the seller and the buyer; the carrier is not a party to that agreement.
If you give the carrier notice at the time of shipment as to the consequences of damaging the goods ‑ namely that you will have to send a replacement and have the crew go back to install the replacement ‑ you may then be able to recover special damages. The subject of special damages is discussed extensively in FCIPE at Section 7.3.
Q: We are having a dispute with a motor carrier as to whether administrative expenses in connection with a claim are proper. Attached are two letters where I returned a claims payment check to a motor carrier and referred to the case of Vacco v Navajo Freight Lines. Could you please comment. Also as a footnote, our contract holds the carrier liable as a common carrier for all loss and damage.
A: The carrier did not correctly read the Vacco decision. The case does not say that there was a contract with the carrier; it says that Vacco had various contracts with the government in which it charged overhead and G&A on direct labor costs, see Appendix 114 in "Freight Claims in Plain English" (3rd Ed. 1995) for text of decision.
Unfortunately, Vacco does not really say anything about administrative costs in connection with the filing or processing of freight claims, and I am not aware of any decisions which explicitly deal with this subject and I don't think it has actually been litigated.
On the other hand, it is quite forseeable that there will be costs associated with investigating, preparing and filing a claim when a shipment is lost or damaged. Thus, such expenses should be legitimate "general damages" (not "special damages) and the carrier should be liable. See discussion of general v. special damages in FCIPE at Section 7.3.1 et seq.
Q: I would like to know what expenses that occur in a freight claim can be filed. Only the cost of the product, and freight charges incurred? What about administrative costs incurred?
A: It is generally permissible to include in your freight claim any reasonable expense incurred in the mitigation of the loss such as sorting, segregating, repackaging, inspection, etc. See "Freight Claims in Plain English" (3rd Ed. 1995) at Section 7.0 for a comprehensive discussion of "damages".
Administrative expenses, in theory, should be legitimate damages and includable in a claim. However, most carriers refuse to pay the claimant's administrative expenses incurred in processing or filing claims.
I would note that, if you have a written transportation contract, you could include express provisions allowing the recovery of such expenses.
Q: I have a claim that was filed against a carrier for a shortage. We have a BOL signed by the customer (consignee), however, the BOL was not signed by the carrier's driver. I am trying to determine who can be held legally responsible for the shorted cases.
Can the carrier be held responsible for the load even though the driver did not sign for the load?
Should we file the claim with our warehouse who released the product to the carrier without the driver's signature.
A: Normally, the truck driver will sign the bill of lading at the time the shipment is picked up and this will constitute "prima facie evidence" of the receipt of the goods as described on the bill of lading. There are some exceptions: for example, if the packages are palletized and stretch-wrapped, many carriers will only sign for the number of pallets and not the carton count because there is no opportunity to verify the number of cartons on each pallet.
If the driver does not sign the bill of lading, the shipper has an additional burden of proving what was actually tendered to the carrier. This can be done with appropriate shipping records and/or actual testimony of the person who prepared the shipment for transportation, such as the shipping clerk or supervisor.
In your situation you should conduct an investigation to determine what was actually shipped, and get a statement from someone in the warehouse or shipping department who has actual knowledge of the facts. If you are reasonably certain that the shortage occurred in transit, then file your claim with the carrier.
As far as the warehouse is concerned, you should establish procedures and rules in your contract with the warehouse that they will not ship any goods without obtaining a signed bill of lading or receipt. Then, if there is a question as to where a shortage arises, you can hold the warehouse responsible.
Q: Our company is a air and surface freight forwarder. We tendered 2 skids with 93 pieces as being annotated on the bill of lading that were banded with seals. A comment was made "If bands or seals is tampered with, inspection at carrier is required."
Upon receiving the freight from LAX to ORD, our driver picked up the freight from the carrier and visually noticed something wrong with the shipment. He then counted the freight individually, and made the following comment, "I busted down 1 skid found 1 empty box, bands were intact." KC. He also made comment "1 empty box 3 totally gone."
We had a declared value of $10,000 on the shipment. The carrier denied the claim on the following basis:
"According to the Bill of Lading it states "If the band or seals is tampered with inspection at carrier is required". Your employee R. Calihan states "I busted down one skid found 11 empty box - Bands were intact.” Since there was absolutely no tampering with the bands/seals, the shortage must have occurred prior to us handling the freight.
I replied to them indicating that the bands were still on the freight, however; they were loose. After reviewing with the local manager, we found that the reason that the driver checked further was due to the cardboard wrapping on top and on the sides were missing when received and that the bands were loose and that the seals were on the straps but not where they were originally placed. We inspected the shipment at the carriers dock and they are still refusing the claim because of not having more detailed information put onto the delivery receipt.
Are we within our rights, and exactly what is necessary when we determined loss upon termination of the shipment at destination?
A: Clearly, if the loss occured while the shipment was in the possession of the carrier, they would be liable.
However, your question really involves factual issues more than legal issues. Your burden of proof is to establish that the shipment was in good order and condition when you gave it to the carrier in LAX, and that there was shortage when the carrier delivered it at ORD. In order to do this, you need a statement or affidavit from someone with personal knowledge, who actually saw or inspected the shipment, at both the origin and the destination.
Whether or not the full particulars were noted on the delivery receipt is not controlling, so long as you can reasonably establish that the shortage could not have occurred either before or after the carrier was in possession of the shipment.
I would recommend that you pursue this claim and, if necessary, take legal action.
Q: Can a carrier claim they were not given an opportunity to inspect damage even if the material remains in their possession for a period after the discovery of the damage?
I have a claim involving a "Protect From Freeze" that wasn't, and for this reason the consignee refused the shipment. The damage was noted on the delivery receipt and the material was returned to the shipper. A damage notation was also printed, by the carrier, on the return delivery receipt.
Upon return to the shipper, the material was determined to have been frozen, deemed worthless and was disposed. The carrier is now claiming they did not have an opportunity to inspect. I believe they were informed of the damage when it was first refused and had ample opportunity to inspect the damage when it came back across their dock(s) en route to the ship point. Your thoughts?
A: It is always good practice to request the carrier to make an inspection (joint inspections are recommended), and you should always make such requests in writing, so you have a record.
However, the failure or inability of the carrier to make an inspection does not affect the carrier's liability.
The claimant has the obligation to prove that the material was in good order and condition when tendered to the carrier at origin and was damaged at the time of delivery. If you have adequate documentation that the material was damaged by freezing, such as a laboratory report or a quality control inspection, the carrier should accept this as sufficient evidence of the damage.
Q: I am an Account Manager with a 3PL in Kansas. We have a client here that participates in our Freight Management Program. We have negotiated pricing on their behalf, established contracts between this client and their carriers, and provide numerous other services relating to their inbound and outbound transportation needs.
They recently purchased a new $15520 labeling machine from a vendor in Southern California. Weighing 700 lbs., the machine was completely crated. The machine, which was to go into immediate production once it was delivered, was in an "all short ‑ bill/no freight" status for a number of days and ultimately delivered well beyond the expected delivery date. Unaware of any damage at delivery the crate was accepted and signed for without any noted exceptions. Warehousemen began uncrating the machine and discovered a cross brace/support had broken under the bowing of the slatted wood top panel. The broken brace in turn impacted a component of the machine. Within 30 minutes of the driver's departure, the local terminal was notified of the concealed damage. Our client was advised that an inspection service would be contacted to assess and document the damages. The machine remained untouched and the inspection service documented specifics concerning markings, packaging and materials, etc. The report noted that the "top of the crate has a cracked area and visible hole.... removing the top panel of crate shows that top crossing slat was crushed downward and broken.... top of the machine is visibly impacted along the same area. The head unit along the damaged area is crimped, bent, and out of alignment." The noted "visible hole" is the size of a large coin and resembles a knot in the lumber used to construct the crate.
A claim was filed for the cost of the machine and later revised for the cost of replacing the damaged component. This reduced the original $15,520 claim to $6,143.
The carrier contends the damage was concealed. As there were no notations on the delivery receipt, the carrier has offered 1/3 of the mitigated amount or approximately $2050.
Given the damages were identified and reported with 30 minutes of the delivery, is there a justified basis for the concealed damage settlement offer? The contract we have in place between this client and carriers allows for arbitration if necessary although it is an option we prefer to avoid.
A: If damage is not noted on the delivery receipt at the time of delivery, the claimant has a greater burden, namely to show that the damage did not occur after delivery. In other words, the clear delivery receipt creates a rebuttable presumption that the shipment was in good order and condition at the time of delivery.
There is no legal basis for the 1/3 settlement offer. The carrier either is liable or it is not liable. The only justification for a compromise settlement is when it is uncertain where the loss occurred, or, in disputed cases, the potential expense of litigation.
The claimant always has the basic burden of proof: that the shipment was in good order and condition when tendered to the carrier at origin, and that the shipment was damaged at the time of delivery. See "Freight Claims in Plain English" (3rd Ed. 1995) at Section 5.0, Burdens of Proof.
Q: Thank you so much for your quick response, but if I may request just a bit more clarification:
1. Is it correct in saying that damages, whether documented at the time of delivery or reported shortly thereafter once they are discovered, bear equal liability on the part of the carrier?
2. There is no legal basis for the 1/3 settlement offered by the carrier? Can this can be construed as a "goodwill gesture" (their term, not mine) or initial settlement offer?
3. No doubt the damage took place while in transit. Given the circumstance outlined, are you saying the carrier needs to produce evidence contrary to this?
A: Whether or not the damage was "concealed" only creates an evidentiary issue as to where the damage occurred. Under the circumstances you describe, it is apparent that the damage occurred in transit and not after delivery by the carrier. (It sounds as though the carrier top‑loaded other freight on the crate.)
Unless there is some reason to believe that the damage occurred either before tender to the carrier (at the shipper's facility) or after delivery (at the consignee's facility), the carrier should pay the claim in full.
Q: One of our carriers delivered a large shipment (~2000 cartons) to a customer, who in turn, signed the delivery receipt with no exception(s)noted. The consignee then sent an Inspection Report to the shipper noting a shortage. My questions are: (1) Should the consignee have contacted the carrier directly requesting an inspection? Since the "15 day rule" was found unlawful, what would be considered reasonable? (2) If there is, in fact, a shortage, is the carrier liable even though he has a clear POD signed by the consignee? All of the reference material I've read relates only to concealed damage.
A: There is really no difference between "concealed damage" and "concealed shortage". In both cases the claimant has a more difficult burden of proving that the damage or shortage occured during transit, and not before or after the shipment was in the possession of the carrier. A clear delivery receipt is prima facie evidence of delivery in good order in condition. However it merely establishes a presumption which may be rebutted by appropriate factual evidence.
It is not clear from your question as to whether this was a full truckload, whether it was "SL&C" (Shipper's Load & Count), whether the trailer was sealed, etc. or whether it was an LTL shipment, and whether the cartons were palletized, shrink wrapped, etc. You also have not indicated the magnitude of the shortage, i.e., how many cartons out of the 2000 were missing. This is critical, because the question of carrier liability turns on the specific facts of each case.
If this was a normal LTL situation, the consignee should have counted the cartons as they were being unloaded from the trailer and noted the shortage at time of delivery. If this was not done, and the shortage was discovered after the truck left, the consignee should have immediately notified the carrier, requested an inspection, and retained all packaging materials.
There is no absolute rule as to the consequence of failure to notify the carrier in a timely manner. However, the longer the consignee waits, the more difficult it is to prove that the damage or shortage actually occured in transit.
Q: A carrier delivered an entire shipment (27 cartons) to the custom with visible damage to each carton. The consignee signed the freight bill "most boxes damaged‑interior condition of damage unknown‑will advise." In fact, the driver for the carrier signed the freight bill a "cartons not in usable condition, some cartons torn." It turned out that there was no damage to the product itself, but all the cartons had to be replaced and there was labor incurred for repackaging and inspecting the items. A claim was filed for the cost of the replacement cartons and for the labor involved. The carrier denied the claim saying, "In the absence of actual product damage, we have no alternative but to decline your claim and close our file." Shouldn't the carrier be responsible for the cost of the damaged cartons and cost of repackaging?
A: The answer is "Yes". Whenever there is damage, the parties have an obligation to "mitigate the loss", see "Freight Claims in Plain English" (3rd Ed. 1995) at Section 7.1.4.
I assume that these are goods that would not be saleable at full price to the consumer or purchaser if the exterior packaging were damaged as you have described. Most customers will not accept merchandise if the package indicates possible damage. If saleable at all, such goods usually have to be sold as distressed merchandise or at a reduced price.
Also, it is apparent that damage to the contents of the package could not be ascertained unless the packaging was opened and the contents inspected.
If my assumptions are correct, these expenses would appear to be reasonable expenses incurred in mitigation of the loss, and are properly claimed. See FCIPE at Section 7.2.4.
Q: A carrier has refused liability on one of my claims by citing insufficient packaging. I plan on rebutting with a "time to refuse because of packaging is at pickup" letter. Will my intended letter be sufficient in light of the fact that the carrier has cited a 3rd party inspector's opinion that "the crate employed in this movement was of too light weight construction to contain the items in the shipment"? My contention is: the inspector's opinion, by itself, is not sufficient evidence to substantiate the carrier's claim of insufficient packaging. Is this inspector's opinion enough evidence to prove "special damages"? It should be noted: the 3rd party inspector was contracted, by the carrier, to do this inspection.
A: First, I don't see any "special damages" issue. The term "special damages" refers to damages which result from, or are a consequence of, loss, damage or delay to the shipment. An example would be shutting down an assembly line because critical parts were delayed in transit.
Insufficient packaging is a defense to a claim for damage to goods. In order to avoid liability, the carrier has the burden of proving that the sole cause of the damage was the improper packaging, and that the carrier itself was not negligent in any way. See "Freight Claims in Plain English" (3rd Ed. 1995) at Section 5.0. In other words, the opinion of an independent inspector as to the adequacy of the packaging is not enough to avoid liability, if there was any negligent handling which could have caused or contributed to the damage.
If the improper packaging is evident and visible at the time the goods are tendered to the carrier, the driver should refuse to accept the shipment. If the driver does accept the shipment, and there is obvious inadequate packaging, the carrier will be deemed to assumed the risk.
Q: My company recently suffered a considerable loss when a piece of manufacturing equipment was damaged by the carrier called to return the equipment to our factory after repair.
The machine being shipped was part of an integrated manufacturing line. While the machine was under repair we were unable to produce goods for delivery to our customer. The potential penalty for causing a shutdown to our customer would have been approximately $4,000,000 per hour!
After sending the machine to the manufacturer by dedicated truck and having repairs done overnight, we contacted a major airfreight company to return the machine, by air, to our site. At the same time, the manufacturer had dispatched service people to uncrate and install the machine upon arrival.
The expediter picked up the freight by truck and carried it to the airport for loading onto the plane. At the airport, the carrier was unable to load the freight onto the plane due to its weight. The weight had been over‑estimated by the shipper, but even after weighing the freight and finding out it was in fact half of the weight on the bill of lading, the carrier still was unable to load the freight on the plane. Upon taking the load back to the expediter's warehouse for repackaging, the truck was involved in a traffic accident and the freight was overturned, causing the damage.
The cost to repair damages to the machine was over $5000.00, which I am confident we will be able to recover. The major loss, however, was due to the delay in return of the machine due to having to send it back to the manufacturer to repair the freight damage.
When after determining that they would be unable to load the machine onto their aircraft, we called another carrier that was able to get a plane that could carry the machine. However, once the machine was damaged the second carrier was asked to wait until it could be determined if the damages could be immediately repaired. At that point, the service people dispatched for installation were at our facility waiting for the machine to arrive. When it was learned that the repair would take twelve to eighteen hours, the plane was released and the service people were told to go check in to a hotel and stay by the phone.
The carrier that caused the damage has since submitted an invoice for $7,000 for a load, which they returned to the original, pick up location. In addition, we were forced to use alternative manufacturing methods that caused us over $20,000 in additional scrap.
My question is, what in addition to the $5,000 damage to the machine can I recover? What about the $10,000 it cost to get the second plane, which we ended up not being able to use? How about the $7,000 in additional labor for having service people waiting for almost twenty‑four hours? What about the $20,000 in scrap incurred due to the delay in getting the machine repaired a second time? What about travel expenses for sending someone to inspect the damage and coordinate the second expedited delivery? What about the $7,000 that the damaging carrier wants to charge me for a delivery they never completed?
A: You have a classic case of the "special damages" problem, see Section 7.3 in "Freight Claims in Plain English" (3rd Ed. 1995).
The basic issue in determining what monetary damages are recoverable is whether the consequences of the carrier's acts (damage or delay to the shipment) are FORESEEABLE at the time of the contract of carriage. Thus, some consequences may be obvious due to the nature of the shipment, but others would not be known to the carrier unless there was some actual notice. Unless you clearly spelled out the potential impact of damage to your machine, or a delay in returning it to service, the first air freight carrier probably would not be liable for the most of the costs and expenses that you incurred. On the other hand, if the carrier had been fully apprised of the consequences of damage or delay, it could be liable for at least some of the expenses. I would suggest that you read the Marjan case, which is reproduced in Appendix 115 of FCIPE, and which illustrates when special damages can be recovered.
There is no question that you should recover the $5000 cost of repairing the machine that was damaged when the truck was in the accident. And, I don't think you should have to pay the carrier's $7000 invoice for its freight charges, since it clearly never performed its contract. As to any additional costs or expenses, we would have to know exactly what notice was given to the carrier at the time you contracted for their services.
Q: An air freight carrier lost a sensitive package going overseas to a company affiliate. After the carrier could not find the package for several weeks, the affiliate hired the services of a private detective. The detective was able to locate the package. Would the cost of the detective's services to our company be a claimable expense?
A: This is a novel question.
I suppose you could file a claim for the cost of the detective's services on the theory that this was necessary to mitigate the loss, i.e., if the package had not been found, you would have filed a claim for its full value (see "Freight Claims in Plain English" (3rd Ed. 1995) at Section 7.1.4). This, of course, assumes that the expense was reasonable under the circumstances and did not exceed the value of the "lost" package.
Note that if this was an international air shipment the carrier will probably assert the $9.07 per pound limitation of liability provided in the Warsaw Convention.
Q: I have had a number of freight claims denied by LTL carrier due to a drop trailer agreement our consignee has entered into with this carrier. This agreement states if an exception (shortage, overage, damage) is not reported in a specific number of days of unloading the trailer it will be invalid. The consignee agrees all claims for delivery exceptions are waived if notification of shortage is returned late. The consignee is not paying the exceptions and deducting from their invoice. Are these carriers still liable for the shortage under the Bill of Lading contract and the shipper had nothing to do with this agreement? We are the only one suffering a loss.
A: The contract of carriage (bill of lading) is between the shipper and the carrier, and the rights and obligations of the parties are governed by that contract. If the carrier chooses to drop its trailer at the consignee's facility, it is doing so either for its own convenience or for the convenience of the consignee, and it is essentially waiving its right to have the driver present at the time of unloading. I don't see how any "agreement" with the consignee can be a defense to your claim for loss or damage.
I would note that you indicate that these are LTL shipments. LTL freight generally moves through the carrier's terminal(s) and other freight is picked up or dropped off en route, so there is greater opportunity for shortage, overage or damage. If this was a full truckload "shipper's load and count" situation, or there was a sealed trailer, there could be other factors to consider.
Q: Please tell me where I can find the rule/regulation that a shipper has the obligation to mitigate a claim to the lowest possible amount.
I have a roll of carpeting that was damaged by an interline carrier we hand off to (we don't deliver to this particular area) the roll was refused due to damage. We called the shipper and they refused to issue authorization to return the roll to them because it was damaged and too small to restock after cutting the damage off. We can't make them take it back. We paid the claim and transmitted the claim to the interline carrier. They declined our claim stating the shipper is obligated to take the roll back and mitigate the claim. They still have possession of the carpet. Please advise or let me know where this is written.
A: There is no "rule/regulation" per se that establishes an obligation to mitigate a claim to the lowest possible amount. The principle of mitigation of loss has evolved from court decisions over the years, see "Freight Claims in Plain English" (3rd Ed. 1995) at Sections 7.1.4 and 10.9.
In applying this principle, each case must be evaluated on its own facts to determine whether it is reasonable under the circumstances for the shipper to repair, salvage, repackage, etc.
As a practical matter, your shipper may or may not have any buyers for a short roll of carpet, and it may be essentially "worthless" from a commercial standpoint. If so, your connecting carrier should pay the full value of the claim. As an alternative, either your company or the connecting carrier may want to try to sell the carpet for salvage, in order to reduce the loss.
Q: Is UPS a common carrier and subject to the terms of the Carmack Amendment for freight claims purposes? How do they get away with dragging their feet settling claims? Any tips for dealing with them on claims settlement matters?
A: You are correct: for any shipments which move "surface" (by truck), UPS is considered a motor carrier and is subject to the "Carmack Amendment" (49 U.S.C. 14706) and the FMCSA (formerly ICC and FHWA) claims regulations. They are required by law to investigate claims and to respond in a timely manner - just as any other motor carrier.
I would observe that UPS does have a liability limitation ($100 per package, unless the shipper declares a higher value and pays a valuation charge). This liability limitation is usually enforceable, according to most of the recent court decisions.
The only suggestion I can give you - if you are getting the "brush off" - is to file a suit in your local small claims court. That usually gets their attention.
Q: We recently received in a Rockwell Hardness Tester. After the trucking company had left in our inspection of the equipment it was revealed that the piece was damaged rendering it unusable. On contacting the shipper it was discovered that the piece had originally been put on a skid but arrived at our dock not on a skid. We contacted the freight company that same day. The next day they sent out an inspector. The shipment was sent collect freight class 185. We have filed a claim against the freight company, which they denied because we accepted the shipment, and they have claimed that if they were liable it would only be for 10 cents per pound. This is unacceptable to us. The claim is for $2,668.00, which is for the cost of the equipment and the original shipping charges. It would seem to me that we acted in a timely and responsible manner. It would also seem to me that the freight company should step up to the plate and do the right thing. What actions can we take against the freight company to receive a fair settlement?
A: First of all, the fact that the damage was discovered after delivery only means that you have an additional burden of proving that the damage did not occur while the tester was in your possession.
As to the 10 cents per pound, it would appear that the carrier has a limitation of liability in its (unfiled) tariff. Many carriers do have such limitations for USED equipment or machinery. The enforceability of such limitations depends on a number of factors including the form and language of the bill of lading, the rate that was charged, whether the carrier actually published and maintained applicable rate and rules tariffs, etc.
At the very least, you should demand full and complete copies of the tariffs (both the rate tariff and the rules tariff) which the carrier claims entitle it to a limited liability.
I should note that your experience is not uncommon: many shippers are surprised by liability limitations lurking somewhere in a carrier's tariff, of which they have no knowledge. One way to protect against this kind of problem is to enter into written transportation contracts with any carriers that you deal with.
Q: We have been dealing with a motor carrier who is in the process of selling out to another carrier. There are several claims which are still open against the original carrier, and I was wondering if, in a sell out, the new buyer must purchase all assets and liabilities, or does he only buy the assets?
A: There is no "hard and fast rule" in these matters. If the successor company acquires the stock of the first company and it is merged into the successor, then it is likely that the successor will acquire both assets and liabilities, unless there is some agreement to the contrary.
If the successor company is buying only assets (trucks, customer lists, etc.), then it is likely that it will not be assuming the liabilities. However, you have to actually look at the agreement between the parties to know what is assumed and what is not.
Q: We are a manufacturer in the Midwest area. One of our contracted LTL carriers had damaged one of our shipments. The shipment was notated as damaged upon receipt and an inspector was sent to the consignee to provide a written report of his findings.
Upon filing of the claim, we, the shipper, had filed for the delivery invoice and not the manufacturers cost of that shipment. The carrier stated that they were only obligated to pay for the manufacturing cost (no overhead or lost sales). (Freight charges would be deducted).
My boss would not allow me to divulge our manufacturing cost as this is confidential information that may be leaked out to the customer. How can I convince my boss that this is/is not within federal regulations?
A: Where goods have been sold to a customer, and are lost of destroyed in transit, the proper measure of damages is the invoice price to the customer, and not the "manufacturing cost" or "replacement cost". This subject is discussed in "Freight Claims in Plain English" (3rd Ed. 1995) at Section 7.2.3.
Think of it this way: Assume that the consignee had risk of loss in transit (FOB origin). If so, the consignee-purchaser would still be obligated to pay for the goods at the invoice price, even though they were lost or destroyed in transit. Why would the measure of damages be any different just because the shipper files the claim?
Q: I received the following response from a motor carrier regarding my claim for $13,679.15 on 1 lost pallet. This is our invoice price to the consignee. They are asking us to reduce the value to our manufacturing cost for the following reasons: "...Please be advised that it is legal and customary for the carrier to request that the Shipper or Manufacturer amend a claim to their cost rather than invoice value. The basis for doing so is that in many instances, the shipper replaces the shipment that has been lost or damaged. Therefore, the sale was not lost. If and when the ultimate customer reorders from another source or chooses not to replace the shipment, the sale is then considered to be lost and the Shipper and or Manufacturer is entitled to recover the invoiced value. The carrier's responsibility is to cover your loss. This does not include profit unless the loss or damage resulted in a lost sale".
We replaced the product after flying the replacements in from overseas which air freight cost we did not include in the claim. What is your opinion? What is a good response to their theory?
A: The carrier is wrong. If these goods had been sold to a customer and were lost during transit, the proper measure of damages is the invoice price to the customer. The fact that you may have obtained other goods and shipped them to your customer is irrelevant.
Q: When a trucking company damages freight, they pay the claim filed. If it is noted on the bill of lading, is the trucking company also legally responsible for the replacement cost of the damaged product including the cost to expedite the manufacturing of the replacement product?
We ship to construction sites. We had a shipment that was totally damaged. The consignee was compensated for the cost of the freight that was damaged. But it cost them almost $4,000 more to replace the product. They had to pay a premium to expedite the manufacturing. Also their cost per unit was higher as their total order was smaller than the original. My question is, how can we hold the trucking company liable for the added cost of replacement?
A: There are some situations where "replacement cost" is a proper measure of damages, see generally Section 7.0, Damages, in "Freight Claims in Plain English" (3rd Ed. 1995).
Where a consignee must purchase another item to replace an item that has been damaged or destroyed in transit, the "destination market value" of the replacement item (what it costs to buy another one) may be a proper measure of damages. This could be more than the original invoice price paid for the item that was damaged.
Q: We filed a freight claim against a motor carrier for an interstate shipment of steel pipe that was involved in an accident. The motor carrier has taken full responsibility for the loss. However, the motor carrier is refusing to pay additional cost, over and above the invoice amount, of the steel pipe that was damaged beyond repair. For us to replace the material, we were forced to pay a higher price for the material from the mill. The carrier has refused to pay the additional $5,000.00 to replace this shipment because he is under the assumption all he needs to do is pay for what he has damaged. According to my research, the carrier is obligated to pay the replacement cost, which will put us in the position we would have enjoyed had there been no loss. Can you review and advise me your thoughts.
A: The usual measure of damages, as prescribed in the court decisions, is the "destination market value" of the goods, see "Freight Claims in Plain English" (3rd Ed. 1995) at Section 7.2.1 et seq. Other measures of damages are sometimes applied if it is more appropriate under the circumstances.
I am assuming that you are the consignee of the shipment, that you had risk of loss in transit, i.e., that the shipment was "FOB Origin", and that you had to pay more than the original invoice price in order to replace the portion of the shipment which was damaged in transit.
This situation is one of the circumstances where "replacement cost" is a proper measure of damages. See International Barges, Inc. v. Kerr-McGee Corp., 579 F.2d 1204 (10th Cir. 1978)
Q: A shipment of tempered glass, special order for a job site was damaged by a carrier. The shipment appears to have just the top layers of glass broken. The job site refused the shipment and reordered another shipment, which they received and used. The shipper refuses to accept the undamaged portion of the glass for credit due to the fact that it is tempered and a special order for that job, which means they can not resale it or melt it down to recycle it. The purchaser of the glass does not need it due to the fact that the job the glass was ordered for is done and they do not need that for another job nor can they recycle tempered glass. A claim was filed for the whole shipment of glass. The carrier involved is declining the claim due to the fact that not all pieces of the shipment appear to be damaged (claim amount not mitigated). The claim amount cannot be mitigated due to the facts above. The material is of no value to either shipper, consignee or the company that purchased the product. Are carriers liable for the entire shipment even though not all the shipment is damaged when there are these special circumstances involved?
A: As you point out, there is generally a duty to "mitigate damages", see Section 7.1.4 in "Freight Claims in Plain English" (3rd Ed. 1995).
It is not clear from your description whether it would have been possible for the manufacturer to have replaced only the damaged portion of the shipment, instead of replacing the entire order.
Assuming that this was not practical, my advice would be to have the shipper attempt to find a buyer for the undamaged portion of the shipment. This will establish whether the material has any salvage value or whether it is in fact worthless. If, after a good faith attempt, no buyer can be found, then the carrier should pay for the full value of the shipment. Note: The shipper should carefully document its efforts to find a buyer for the material and the details of any offers or sales!
Alternatively, the undamaged material can be turned over to the carrier, and the carrier can pay the claim and recover what it can from a salvage sale.
Q: Our Terms of Sale are FOB origin with our customers. Though we sometimes file claims on behalf of our customers, we do enforce our terms often and have the customer file with the carrier. We also prepay the freight invoices and for motor carrier movements, we do not pass this cost on to our customer on our invoices. Liability in our contracts with our motor carriers reads invoice value plus prorated freight paid to the carrier(s). When we file, we usually have no problem collecting the freight amount, too. But when our customers file, they do not include freight since they did not pay the freight bill.
Our questions is this: If we file a claim, and the carrier advises us our claim is a duplicate of a paid customer claim, and on that basis our claim is denied, do we have the right to ask the carrier to reimburse the freight amount only to us, though they may have already paid the loss or damage portion of the claim to our customer?
A: While it might sound reasonable that you should be able to claim for your prepaid freight charges, I doubt that any carrier will accept two claims for the same shipment.
Furthermore, if the consignee is filing a claim for the invoice value of the goods, it would seem that the cost of delivery is somehow "built in" to that price, even though it may not be separately stated or identified in your invoice. This is, in effect the "destination market value" of the goods, which is generally recognized in the court decisions as a proper measure of damages. Thus, the carrier would argue that it should not have to pay twice for the freight charges.
Q: On full truckload inbound shipments from our vendors to our DC's (FOB origin freight collect), our present guidelines require the carrier's driver to verify the piece count at origin and seal the trailer. Once the trailer arrives at our DC's, the majority of the time the carriers drop the trailers on our yard. Our guidelines also state that our security guard verifies the seal number, that the seal is intact, and notes on the delivery receipt "piece count subject to verification". My question is, do notations like the above on the delivery receipt have any legal significance?
A: From a legal standpoint, your notation on the delivery receipt really doesn't mean much. If, upon opening the sealed trailer, there should be a shortage, you would still have the burden of proving what was actually loaded into the trailer, and what was actually in the trailer at the time it was delivered. If you can't do this, the carrier will inevitably decline the claim.
In essence, when there is a sealed container or trailer, and the seal is intact upon delivery by the carrier, there is a strong presumption that the loss (shortage) could not have occurred in transit. (This would not, of course, apply to damage to the shipment.)
I should note that there are reported situations where seals are intact, but there is still a shortage or pilferage in transit. This can happen if someone tampers with the seal, or enters the trailer without breaking the seal (by removing door hinges or panels on the trailer, etc.)
Q: My vendor shipped the following: “3 pallets, 76 Ctns- Synthetic Fiber blankets 1 envelope”. The driver signed for “3 pallets and 1 envelope”. I received the shipment two cartons short and the claim has been declined. Driver did not indicate STC [“said to contain”]. I would think the carrier failed to protect itself in this case by not indicating STC and should honor the claim. What is your opinion?
A: This is essentially a "concealed shortage" problem.
The carrier will probably contend that the driver was prevented from counting the contents of the pallets because of the palletization and stretch wrap. If this is true, you have the additional burden of proving what was actually loaded on the pallet and you will probably need a written statement or affidavit of the shipping person or supervisor who had actual knowledge of what was shipped. See Section 5.0 of "Freight Claims in Plain English" (3rd Ed. 1995) for a discussion of "Burdens of Proof".
You should also investigate whether there was any sign of tampering with the stretch wrap (cuts, tape, etc.) or if it had been removed and replaced during transit.
Q: I brought a claim against UPS for $30,000 due to their losing a shipment of computers. When the boxes arrived at the customer they were torn and pretty much empty. UPS has sent to me their standard forms limiting their liability to $100.00 unless the customer declared a greater value for his goods, which my insured didn't.
Is this limitation of liability valid and enforceable?
A: Most all parcel and express carriers (UPS, FedEx, etc.) have limitations of liability in their bills of lading and service guides, and these limitations are usually upheld by the courts. As with any "general rule", there may be exceptions based on the specific facts of the case.
For a discussion of parcel and express carrier liability limitations, I would recommend that you see Section 8 (particularly 8.2.7) of "Freight Claims in Plain English" (3rd Ed. 1995), which discusses the issues and court decisions.
Q: Are freight charges added to a freight claim for a damage claim also payable besides the amount of the damage to goods shipped?
A: Where freight charges have been paid to the carrier, and the goods have not been delivered or have been damaged so they are substantially worthless, the claimant may recover them on the theory that the carrier has not performed the contract.
Where the claim is based on the destination value of the goods, that value presumably includes the delivery charges, and thus the freight charges may not be separately claimed. For example, if freight costs are prepaid and included in the invoice price, the invoice value to the purchaser represents the full value of the goods. This subject is covered in detail in "Freight Claims in Plain English" (3rd Ed. 1995) at Section 7.4.9.
Q: We are 3rd party & logistics management company.(and a member of TCPC) One of our clients had a damaged and refused shipment on American Freightways. (our client is the consignee) The shipper, for whatever reason, is not planning on filing a claim but American is still expecting us to pay the freight charges on what we see as a shipment that really didn't happen. I do understand that you have to pay freight charges in order to have a claim processed, but there is no claim being submitted here! Now, we can submit a claim but in this instance it's really not our place. AF recognizes this but says the only way for us to handle the freight charges is to file a claim and include the freight charges and wait for reimbursement. Isn't this silly? They are willing to accept the liability on a claim they would not otherwise have to honor just to have paper to reimburse us for these freight charges??
Do you have anything we can use to further our argument? The money is not a big deal but the issue matters to us.
A: As I understand your question, the carrier wants you to pay the freight charges first, and then file a loss and damage claim where the only amount claimed is the freight charges for the shipment which was damaged and refused by the consignee (no claim is being made for the damage to the goods).
At one time carriers were prohibited from offsetting claims against freight charges, due to possible discrimination among customers. Many carriers still require payment of freight charges even if the shipper is entitled to recover some or all of the freight charges as part of its loss or damage claim.
The problem may have something to do with the carrier's accounting system or its internal procedures, but you would think they could just cancel or issue a credit memo against the freight bill. Maybe you should just talk to them again and point out that their procedure will cost both parties unnecessary administrative expense. You might also suggest that if they do require you to file a loss and damage claim, you will make claim for the value of the goods as well as the freight charges.
Q: My company sells spare parts to support semiconductor production equipment to the major SPC's here in the US. Our standard terms of sale are "FOB Origin". The predicament we find ourselves in more and more often is that our customer's purchase terms are "FOB Destination" or have some variation of an “acceptance of goods” clause stating they won't accept title and risk of loss of the goods until the goods have passed their incoming inspection process.
This has placed us in an awkward position on more than one occasion where we have tried to force the customer to comply with our rights as a seller under FOB Origin terms.
Our business is based on serving the customer so this tactic is not necessarily the best for developing long-term relations with our customers.
My question is when the seller's and buyer's terms are at opposite ends of the FOB terms, whose term takes precedent? It seems the UCC usually takes the side of the buyer.
A: The Uniform Commercial Code establishes certain presumptions about "risk of loss" based on the terms of sale specified in the sales contract. UCC 2-319 provides that where FOB place of shipment is specified, risk of loss passes to the buyer once goods are put in possession of the carrier at origin; where FOB place of destination is specified, risk of loss is on the seller during transit. These presumptions can be varied by the parties in their contract. The UCC doesn't take "sides" with either the buyer or the seller; it merely establishes uniform commercial rules for buyers and sellers.
Your problem appears to be more with your customers. Many customers just want to have undamaged, conforming goods delivered to them and don't want to be bothered with loss and damage claims or other problems with carriers. Some don't understand the significance of the terms of sale, or they don't care, and simply refuse to accept goods damaged in transit. It is really a business decision as to what terms you insist on in your sales contract and whether you enforce your rights at the risk of losing a customer.
Q: Freight is refused due to possible damage. It was then returned to shipper for credit and inspection. The shipper is filing claim for full value, but refuses to relinquish freight because it is considered a "safety item" as it is used in the manufacture of new automobiles.
What are the carrier's rights in this situation? Is the carrier required to pay full value and relinquish any salvage from this shipment?
A: Salvage of damaged goods is one of those "gray" areas that depends on the facts, see generally Section10.10 of "Freight Claims in Plain English" (3rd Ed. 1995).
Where there is damage or possible contamination to food or drug items the answer is fairly clear that there can be no salvage because of the strict government regulations. In your case, the concern of the shipper is that the damaged items should not be salvaged or allowed to enter the stream of commerce because of product liability exposure. In other words, if the damaged item were installed or used, it could result in injury to a third party. If this is a legitimate concern, the item may in fact be considered "worthless", and the shipper may be able to recover the full value.
Q: We picked up a roll of carpet to go to a consignee in MI. Our company contracts interline carriers to go to this particular city. When the roll of carpet arrived at the consignee, they signed for it damaged. The consignee contacted our office regarding the damage and informed me that he would need approximately 17 feet to complete his job. He reordered the 17 feet and we assured him it would be put on a "HOT" rush. This did not get done. Therefore, the replacement roll was delayed and the other interline carrier we contracted to deliver this roll did not go to that particular area for another week. This delayed the delivery even more. The consignee does not want the entire shipment now because it has taken too long to deliver and this was to be installed for a grand opening. The shipper will not take the rolls back.
I have spoken with the carrier who damaged the original roll and I am told they will only be responsible for the damaged area and the customer is basically stuck with the damaged roll that he cannot use.
My question is: should the interline carrier be responsible for the entire roll due to the fact that the consignee has decided not to install the carpet due to all the delays? Or is the consignee responsible to keep the damaged roll and file claim for the damaged 17 feet only.
A: I assume that your company is the receiving carrier and that you issued a bill of lading to the shipper; you picked up the goods and then interlined them to another carrier for delivery.
1. The shipper or consignee has a claim against either the receiving or delivering carrier under the "Carmack Amendment", 49 U.S.C. 14706.
2. Whether the claimant can collect the value of the entire roll or only the damaged portion depends on the facts. Essentially this falls into the category of "special damages", see Section 7.0 of "Freight Claims in Plain English" (3rd Ed. 1995), particularly Section 7.3.1 et. seq. The court decisions usually turn on the issue of whether the damages (full roll vs. only the damaged portion) are "foreseeable". I would say, that under the circumstances you have described, it would be foreseeable that damage to a portion of a roll of carpet would make it unusable for the intended purpose. Thus, the carrier(s) would be liable for the value of the full roll of carpet.
3. There is one additional consideration: the roll of carpet may have some salvage value. If a buyer can be found, the carpet should be sold and the proceeds applied against the claim.
4. If the shipper or consignee files a claim against your company (the receiving carrier), and you pay the claim, you have a right of indemnification over against the carrier that actually caused the damage.
Q: We shipped 6 pallets of go-karts to a major customer on September 9th from our outside warehouse in Las Vegas, NV. This was shipped "FOB Origin Collect" via an LTL carrier who signed the "DLDC" bill of lading as SLC. The shipment was never delivered to the consignee so they refused payment on the invoice.
We made several attempts to obtain a proof of delivery from the carrier, but never received it. A claim was filed with the carrier on October 29th. The carrier responded on December 20th stating that the shipment was loaded on a trailer destined for the delivering terminal. It remained there until the trailer was returned to their terminal on December 22nd. They indicated the merchandise was in good condition and is being held in a "Refused On Hand" status awaiting dispostion.
In my reply to them I stated that, due to their negligence, we had lost the sale of the five pallets of go-karts and asked that they pay the claim in full. There was no replacement order shipped to this store. Not only did we lose the sale, but we forfeited any profit we would have made from the sale of these units.
Their Claims Dept. states that "We wish to apologize for our portion of this problem. However, this merchandise remains "On-Hand-Refused" awaiting your disposition. If disposition is not received within 15 days, we will have no choice but to dispose of this merchandise in accordance with the bill of lading contract."
It wasn't until after we filed a claim that the carrier even attempted to locate this shipment. We have lost the sale due to their negligence and I don't see how they can get by without paying the claim in full. Do you have any suggestions?
A: I appreciate the situation, but you do have to realize one thing. There is an obligation to "mitigate the loss", see "Freight Claims in Plain English" (3rd Ed. 1995) at 7.1.4.
Even though the go-karts were missing for over 3 months, they have now been found and have some value. If you just abandon the shipment to the carrier, then the carrier will auction it off, deduct its freight charges, storage, expenses, etc. and you may get little or nothing. Since this is a product that you manufacture, it would be better to have them return the shipment (at their expense) and try to find another buyer.
Then, I think you would be entitled to collect the difference between your original invoice price to the customer, and the amount realized from the sale.
Q: We tendered a shipment to an interline carrier on December 6th and they lost the freight. It was never located until February 9th when they advised that the piece had been found. In the meantime, the shipper had filed claim as a replacement had to be shipped and delivered to their customer. Neither the shipper nor the manufacturer wanted the piece back as it was a custom made item.
We pursued with the interline for settlement of the claim based on the fact that they did not fulfill their contractual duty to transport this freight with "reasonable dispatch" as the freight remained "lost" for two months. They have totally denied our claim based on the fact that the missing item was found.
Wouldn't two months be considered to be well beyond the time for "reasonable dispatch", making them responsible for settlement of this claim?
A: Where a shipment has been missing and has not been delivered for such a long time ‑ in your case, over two months ‑ it is totally reasonable to assume it has been lost in transit, and for the shipper to file a claim for the full invoice value.
The only caveat is that there may be some duty to "mitigate the loss". If the item can be salvaged, or a buyer can be found (even though it is a custom‑made item), the net proceeds should be applied to reduce the claim.
Q: I am strictly an inbound account and pay the freight charges. My vendor has a “shipper load and count” agreement with the trucking company. On many occasions a shortage arises, I file a claim with the trucking company. The claim is denied based on the SL&C agreement with my vendor. Is the trucking company legally responsible to pay the claim? I thought the contract of carriage is between the trucking company and the payer of the freight charges. How do they manage to wiggle out of paying these type of claims? Generally, all vendors adjust the invoice after we forward them a copy of the declination letter.
A: I hate to answer a question with more questions, but:
1. What are your terms of sale with the vendor? If they are "FOB Origin" the consignee (you) will normally have risk of loss in transit, but if they are "FOB Destination", the shipper/seller has risk of loss and should be the one filing the claim. Note that freight payment terms (prepaid, collect) have nothing to do with the terms of sale.
2. Are these shipments really "SL&C"? Are they full truckload shipments which have been loaded by the shipper, without the driver being present or having an opportunity to count the cartons as they are being loaded? If not, the shipment is not properly described as SL&C.
3. What kind of contract does your vendor have with the trucking company? What does it say about loss & damage, claims liabiilty, etc.?
4. Are the trailers sealed at origin? Are the seals intact at destination? Who breaks the seal at destination - the driver or your receiving department employee?
4. If these really are SL&C shipments, and there is a shortage at destination, the burden is on the vendor/shipper to establish what was actually loaded into the trailer. Uusally such proof requires shipping documents and witness testimony or affidavits from someone who has actual knowledge of what was loaded and shipped.
I realize that this is not an "answer" to your question, but I think you can see that there are a number of issues and considerations in determining carrier liability.
Q: We have filed a claim for a noted shortage against a motor carrier. The carrier is denying the claim based on the BOL, which states 9 pallets in the number of pieces. In the body of the BOL this statement appears: “434 boxes 9 p”. The consignee signed the delivery receipt “4 ctn. Short”. The carrier is denying the claim claiming that the shipment was tendered to them as 9 skids and the driver is not responsible for carton count.
I have twice rebutted this declination with the reasoning that the driver signed the BOL with the number of cartons stated on it and the delivering driver signed for the shortage. The carrier says that the carton count in the body of the BOL is merely a description of the freight and that drivers are not expect to verify the container count just as they are not expect to verify the commodity (if shipped in an enclosed container). Please help me to find some back up documentation that will back my position. Thanks.
A: I am assuming that the boxes were placed on the pallet and stretch‑wrapped before the driver arrived and that the driver did not have the opportunity to count what was actually on the pallet. If so, your problem is similar to a "shipper's load & count" situation, and you have the burden of establishing that the pallet actually did contain the specified number of boxes when it was tendered to the carrier. You may be able to do this through your records, together with a statement or affidavit from someone in shipping that has actual personal knowledge of the preparation of the shipment. If so, the carrier should reconsider its declination of your claim.
A question: was there any evidence of tampering with the stretch‑wrap, re‑coopering, etc. at the time of delivery? You should check this out.
To avoid this problem in the future, you may want to have the driver present when you stack the boxes on the pallet so he can verify the count, and sign for the number of boxes instead of pallets.
Q: We are a broker that hires outside carriers to haul loads for us. We hired a carrier to pick up 1594 cases in one city and deliver them in another. At the delivery place the consignee made a notation that there was 33 cases short on the proof of delivery. It was marked precisely 33 short of #32122. The numbers we have listed for all the different products are UPC numbers; this number was not listed there. But the exact description of the product short was listed on the claim we received. The carrier is denying the claim saying they did not haul that UPC number. The fact is they picked up 1594 cases and delivered 1561 cases, and the delivery receipt was marked 33 cases short. We feel this is a straightforward claim stating he delivered short. No arguments about it. The carrier still denies the claim. What do you suggest we can do to further our stand?
A: From what you say, the carrier admits that there were 33 cases (of something) that were short on delivery.
Were the missing items of particularly high value ‑ as compared to other items in the shipment? Maybe the carrier is suspicious that there was some "hanky panky" ‑ either on the shipping end or the receiving end.
Obviously, the carrier is liable for the shortage, but there may be some legitimate question as to the value of the short delivery items. I would suggest retracing your steps and trying to determine exactly what items were shipped but not received.
Q: A carrier picked up a trailer loaded with shipments to the "same name" consignee but with different addresses. One order going to Florida delivered 39 cartons short while another order going to Texas delivered 40 cartons over. Is the carrier correct in declining the shortage because of the overage?
A: I assume that the misdelivery was the fault of the carrier and not due to improper marking of the shipment or erroneous paperwork by the shipper.
There is no question that the carrier is liable for the shortage. The "overage" to another consignee does not relieve the carrier of its liability for failing to deliver in accordance with the bill of lading contract.
A little common sense is in order here, and the carrier should make an effort to "mitigate the damage" if possible. If the goods that were in the "short" shipment are the same as the goods in the "over" shipment, it seems to me the carrier has a duty to retrieve them and deliver them to the proper consignee.
Q: An LTL carrier declined payment of our freight claim. Our bill of lading stated “6 cases, 114 pounds” with a description of GM GFC UL KB and was signed by the driver. The carrier delivery receipt shows “6 pieces 114 pounds”, with a note “6 pcs product code 2498 over, 6 pcs of product code 2541 short” and signed by the driver. We filed a claim for the six cases short ($2,977). It is my understanding that our contract holds the carrier liable for the items the driver signed for.The carrier declined the claim based on the following: "Per the original bill of lading, the shipment was tendered as six pieces. Per the original delivery receipt six pieces delivered." Is the carrier liable?
A: Sure, as a general rule, the carrier is liable if it doesn't deliver what it picked up and signed for on the bill of lading. And delivering the wrong shipment to the consignee doesn't "cancel" a failure to deliver the right shipment.
However, it seems there is a basic question of fact: what product was actually shipped - product code 2948 or product code 2541. Were there other similar shipments made at the same time? Perhaps the shipments were mis-labeled or improperly marked. It seems unlikely that a driver would substitute one kind of product in place of another. Maybe the mix-up occurred in your shipping department.
I would suggest further investigation.
Q: A truckload carrier that we use picks up sealed loads at our distribution center and makes three stopoffs along the way. This carrier has taken the position that as the loads are sealed at origin, they have no liability for shortages at any of the stops. However, the issue I have with this position is the fact that their drivers do not participate in the verification of freight being unloaded. They simply open the trailer and advise the consignee to take whatever freight is theirs. Consequently, we have experienced numerous shortages for which I am holding this carrier responsible for in the absence of a delivery receipt that indicates the number of pieces delivered at each stop. I would appreciate your thoughts on this matter.
A: I can understand the carrier's position, but I think the carrier still has a duty to make proper delivery in accordance with the bill(s) of lading or delivery instructions. In other words, if 150 cartons of a certain description are to be delivered at the first stop-off, the driver has a duty to verify what is actually delivered and to make sure the consignee only receives what he is supposed to under the shipping documents. If he fails to do this and/or does not get a signed delivery receipt, he is inviting a claim. I would point out that with an "SL&C" shipment, the shipper has a greater burden of proof as to the quantity and condition of the goods actually loaded into the trailer, since the driver is not present and does not have opportunity to count or view the goods during loading. This normally requires appropriate testimony, picking records, stroke tallies or other documentation as evidence what was actually shipped.
Q: Our company tendered 2 stretch wrapped pallets (STC 106 pcs) to one of our carriers in accordance with our shipper load and count agreement. Per our contract, the carrier has 24 hours to submit an exception notice if there is a discrepancy with the shipment at its first break point. No exception was reported. The shipment arrived at destination showing 2 shrink-wrapped pallets intact but the consignee noted that the piece count received was 54 (1 pallet) and short 52 pieces (the second pallet). We filed a claim with the carrier assuming that the specific notation of a case shortage would take precedence over the notation that two intact pallets were delivered. But, alas, our claim has been declined. We have no way of determining if the carrier broke our pallets, lost one, and then recoopered by building two pallets at the destination terminal before delivery.
Our questions are: Is there an order of precedence when the notations on a delivery receipt are in conflict with each other? What recourse to do you suggest? What "tips" can you offer for avoiding this situation in the future?
A: I don't have a copy of your "shipper load and count agreement", but tendering stretch wrapped pallets is not normally the same as tending an "SL&C" shipment. The term "SL&C" is generally applicable only where the shipper loads (and often, seals) a full trailer or container, without the carrier's driver being present.
In any event, as with all shortage claims, the claimant has the burden of proving what quantity was shipped and what quantity was received. The description on the bill of lading (e.g., "2 pallets") has evidentiary value, but such presumptions are rebuttable with proper proof.
What you need is statements or affidavits from the persons who had actual knowledge of the carton count that was shipped at origin, and the carton count that was received at destination.
You may also have picking lists, stroke tallies or other documents kept in the ordinary course of business. Get these and re‑submit your claim to the carrier.
One inexpensive suggestion for stretch or shrink wrapped shipments is to use a distinctive wrap or tape with color-coded markings. This makes it easier to determine if the pallet has been broken down and re‑wrapped by the carrier.
Q: My company manufacturers portable generators. We shipped a generator from WI to MO on December 3rd, freight prepaid, FOB destination. The carrier lost the shipment. We filed a freight claim in January and were paid in March. The consignee lost the sale because the generator needed to be installed before Y2K. The consignee filed a claim with the carrier for his lost mark up and labor. The carrier has denied based on special damages were not noted on the bill of lading. Does the consignee have an arguement?
A: Since the shipment was "FOB destination", the presumption is that you (the seller) had risk of loss in transit and should be the proper party to file the claim. Apparently, you did this and the carrier paid the claim, and can properly consider the matter concluded.
Even if the buyer/consignee had risk of loss and had filed the claim, it is unlikely that it could have recovered any more than the invoice amount it actually paid for the goods. The only exception which comes to mind is if the consignee had gone out and purchased a replacement unit (in order to meet its customer's requirement) and the replacement cost more than the original unit which was lost.
The carrier is correct in stating that "special damages" are not usually recoverable unless there is notice at the time of shipment, see "Freight Claims in Plain English" (3rd Ed. 1995) at Section 7.3. In other words, unless the consignee's potential loss of sale was clearly communicated to the carrier at the time of shipment, it would not be liable.
Q: What is the standard salvage amount to deduct for damage on claims?
A: There is no "standard salvage amount" to deduct for damage claims. Each claim should be evaluated on its own merits to determine if salvage is possible, and the actual amount that may be realized from the salvage process.
I would suggest that you read Section 10.10, Salvage Procedures in "Freight Claims in Plain English" (3rd Ed. 1995) for a full discussion of the rules, regulations and proper procedures to follow.
Q: Do you have any information as to the percentage of claims that are filed, either by number of claims, or percentage of claims paid. We are interested in the industry average of claims filed in order to compare it to our claim history.
A: At one time the I.C.C. collected and published freight claim statistics, but that function was discontinued a number of years ago. To my knowledge there is no agency that now maintains this kind of information.
Many of the major carriers do have detailed statistics on their own claim processing. You might contact Tom Rotunda at Roadway and see if he would share some info with you. His e‑mail address is: firstname.lastname@example.org
Q: As of late, when requesting signed proof of delivery from UPS, we've been receiving what they consider clear, but consignees will not accept:
Left @: Dock
Received by: Dock
Receiver's signature: Dock
They are refusing to issue us an LDI# in order for us to file a claim. When we file a claim without the LDI#, they automatically reject it. They contend that the signature "Dock" is perfectly legal and they will not pursue the issue any further. Aren't they responsible for obtaining either a legitimate receiver's name or signature?
A: From what you describe, these delivery receipts are probably completed by the driver and not the consignee. As such, they are worthless and would not constitute proof that the consignee received the goods.
If you are actually experiencing problems with non‑deliveries, you should pursue this matter further with the carrier and, if necessary, take legal action.
Q: The terms of our sales are FOB Origin, freight prepaid. As a service to our customers, our Traffic department files freight claims with the carriers. We have always required the consignees to sign two forms, Proof of Loss and Assignment of Claim. Lately, our customers have been refusing to sign either document stating that the automatic deductions that they take from their invoice(s)are proof of loss Should we discontinue our futile attempts at trying to "require" that these forms be signed? There are two schools of thought on the matter here and we anxiously await your reply.
A: As you
apparently recognize, the term "FOB Origin" creates a presumption
under the Uniform Commercial Code that the risk of loss in transit shifts to
the buyer when the goods are tendered to the carrier at origin. In theory, a carrier might raise the
argument that you, as the shipper, are not the proper party in interest to file
the claim. However, there is ample case
law that permits either the shipper or the consignee to file claims. See discussion at Section 10.5 of
"Freight Claims in Plain English" (3rd Ed. 1995)