1) 3PL's - Broker or Freight Forwarder?

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.

2) 3PL's - Broker's Licenses

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.

3) 3PL's - Carrier or Broker?

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.

4) 3PL's - Motor Carrier, Broker or Freight Forwarder?

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.

5) Air Freight Forwarding - Legal Requirements

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.

6) Air Waybills - Declared Value

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.

7) Bankrupt Broker - Payment to Carriers

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.

8) Bankrupt Carrier - Missing Freight

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.]

9) Bills of Lading - Alternate Forms

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."

10) Bills of Lading - Carrier v. Shipper

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?

Response:

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.

11) Bills of Lading - False Information

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

12) Bills of Lading - Import Shipments

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.

13) Bills of Lading - Proper Shipper's Name

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.

14) Bills of Lading:Rail v. Motor Carrier

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.

My questions:

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.

15) Bills of Lading - Required Content

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.

16) Bills of Lading - Seal Numbers

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.

17) Bills of Lading - Section 7 - "Non-recourse" Provision

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.

18) Bills of Lading - Shipper Load & Count

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.

19) Bills of Lading - Shipper's Signature

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.

20) Bills of Lading - Showing Number of Packages

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.

21) Bills of Lading - SL&C Notations

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.

22) Bills of Lading - Special Instructions

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.

23) Bills of Lading - Straight v. Order

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.

24) Brokers - Definition & Registration Requirements

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:

***

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”.

25) Brokers - Liability for Failure to Pick Up Shipment

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.

26) Brokers - Liability for Loss or Damage

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.

27) Brokers - Liability for Loss or Damage

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.

28) Brokers - Liability Under Carmack Amendment

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.

29) Brokers - Record Keeping Requirements - Confidentiality

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.

30) Brokers - Registration Requirements

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.

31) Brokers - Registration Requirements

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).

32) Carmack Amendment - Applicability

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)

33) Carrier Defenses - Act of God

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.

34) Carrier Liability - Damage Caused by Double Stacking

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.

35) Carrier Liability - Damage to SL&C Shipment

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.

36) Carrier Liability - Defenses - Improper Packaging

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".

37) Carrier Liability - Dropped Trailers

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.

38) Carrier Liability - Goods Refused by Customer

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.

39) Carrier Liability - Misdelivery

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.

40) Carrier Liability - Misdelivery

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 2^nd 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".

41) Carrier Liability - Misdelivery - Impostor Theft

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.

42) Carrier Liability - Multiple Carriers

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.

43) Carrier Liability – Parcel and Express Carriers

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 compa