1) Bills of Lading – Declared Value

Question: Is it necessary to put the declared value on the bill of lading in order to insure the freight for total value?

If you leave the declared value section of the bill of lading blank but the value of the shipment is listed on the commercial invoice, is the shipment fully insured?

Answer: Since you are located in Ontario, I assume that you are shipping from a point in Canada using the standard Canadian motor carrier bill of lading. If so, there is a limitation of liability of $2.00 (Canadian) unless you declare a value and pay an additional charge.

If you have a written transportation agreement, you can, by contract, negotiate different provisions, including carrier liability for loss or damage. We always recommend that our clients enter into transportation agreements with the carriers that they use.

2) Bills of Lading – Freight Terms

Question: I am interested in the correct terminology with respect to Prepaid, Collect, Prepaid Bill 3^rd Party, Collect Bill 3^rd Party, etc., that should be used on a Bill of Lading. We are a retail logistics organization that contracts with a third party logistics company to pick up merchandise from our vendors for delivery to Flow Through Centers. Since we pay the carriers for the inbound transportation, is it appropriate to state the freight terms on the bill of lading as: Prepaid Bill 3^rd Party or Collect Bill 3^rd Party?

From a claim perspective of the receiving center, I believe this may have significant implications, but defer to your guidance.

Answer: The terms “prepaid” and “collect” establish the primary responsibility for payment of the freight charges (by the shipper or by the consignee, respectively).

The Uniform Straight Bill of Lading in the National Motor Freight Classification (NMFC) provides for charges to be “prepaid” unless the box is checked “collect”. There is no provision on the Uniform Straight Bill of Lading for “bill 3^rd party”; these instructions are generally entered somewhere in the description field.

Many shippers use bills of lading that differ in form from the Uniform Straight Bill of Lading, and these forms often provide spaces for billing instructions.

Now, to answer your specific question, if the freight is consigned to your Flow Through Centers, and you will be paying the freight bills, I would say the correct terminology would be “Freight Collect, Bill 3^rd Party”.

I would also note that the responsibility for payment of freight charges does not determine risk of loss in transit, or which party should file claims for loss or damage. This is determined by the terms of sale (“FOB terms”) as between vendor and purchaser.

3) Bills of Lading – Intra-Company Movements

Question: We manufacture product in one building (A) and transfer it to different buildings which can include: (B) another building we own about 10 miles from (A), or (C) a local warehouse company 15-19 miles from (A).

This transfer is handled by: 1) our own drivers and company owned equipment and, 2) local trucking company who uses their own drivers and equipment. The routes include town roads, state highways and federal highways depending on the transfer.

Currently, the only documentation we provide is a handwritten packing list that shows item numbers and internal description. Since we are just moving the product between our own or rented facilities do we still need to prepare a Bill of Lading?

Answer: It is not necessary to prepare a “bill of lading” - whether the shipments move in your own trucks or those of a for-hire carrier. However, it is always a good practice to at least obtain a receipt from the carrier for anything that you ship in the event there should be any loss or damage to the shipment. The receipt can be part of your packing list, but it should as a minimum identify the goods, the number of cartons or pieces, etc. and should be signed and dated by the driver.

4) Bills of Lading – Liability of Parties

Question: We are a cooperative that manufactures grape juice and jelly. We entered into an agreement with a co-manufacturer to produce and distribute some of our refrigerated juices.

It has come to my attention that we are listed as the shipper on bills of lading for shipments out of their facility, even though the carrier was selected by the co-manufacturer. The co-manufacturer’s reasoning for doing this it that they consider our product to be consigned, and therefore not owned by them, so therefore, they should not be the shipper of record.

I’ve tried to explain to them that the bill of lading is a contract between the shipper and the carrier for a specific shipment. Since the co-manufacturer is selecting the carrier, negotiating the rates, signing the necessary contracts and rate sheets with the carrier, and is responsible for loading the trucks at their facilities, my position is that they should be listed on the bill of lading as the shipper.

Should we be named as shipper on the bill of lading and what is our liability?

Answer: A good question.

You have an “apples & oranges” situation.

1. It would appear that you are the “owner” of the goods and that the co-manufacturer has no beneficial interest in the goods. Thus, you would most likely be the party to file a claim if there was loss or damage in transit. From a “legal” standpoint, the co-manufacturer could be considered as your agent with respect to the shipping arrangements with the motor carrier. Since you are shown as shipper on the bill of lading, you would also have primary liability for the payment of freight charges, unless the goods are shipped freight collect and Section 7 (non-recourse provision) is signed.

2. On the other hand, you apparently have no control over the shipping arrangements, including the negotiation of rates, terms and conditions with the motor carriers. Thus, you could be subject to excessive freight charges, late payment penalties, uncollectible loss & damage claims, or other problems with the carriers.

3. The real problem is with your co-manufacturer. It would seem that the best advice would be to impose some strict controls in your contractual agreement with the co-manufacturer. For example, you might want to require that they assume liability for loss or damage in transit, and that they indemnify you against any claims that may arise out of their arrangements with the carriers.

5) Bills of Lading – Required Information for Multiple Stops

Question: Is the full name and address of the consignee required on a bill of lading?

I have a shipper who wants to create a multi-stop load with three consignees, but does not want the consignees’ names on the bill of lading. The shipper does not want each consignee to know what the other is receiving.

Can the shipper leave the names off of the Bill of lading?

Answer: There is an FMCSA (formerly ICC) regulation that defines what a bill of lading must contain, namely 49 CFR PART 373 - RECEIPTS AND BILLS:

Subpart A-Motor Carrier Receipts and Bills

373.101 Motor Carrier bills of lading.

Every motor common carrier shall issue a receipt or bill of lading for property tendered for transportation in interstate or foreign commerce containing the following information:

(a) Names of consignor and consignee.

(b) Origin and destination points.

(d) Description of freight.

(e) Weight, volume, or measurement of freight (if applicable to the rating of the freight).

Note that this regulation is applicable to the motor carrier, and not to the shipper, who may often prepare the bill of lading.

The practice you describe could lead to problems if there should be a dispute between the shipper and one of the consignees as to responsibility for freight charges or a claim for loss or damage to the goods.

It would seem to me that a better practice would be to issue a master bill of lading and three separate bills of lading - one for each of the individual consignees.

6) Bills of Lading – Showing Owner of Goods

Question: I need to know what the proper “Ship From” address must be shown on a Bill of Lading if a company uses 3rd party distribution service other than their own company, etc.

Example: Is this the proper way?

ABC Co

C/O 3rd Party Dist. Services

123 American Way

Any Place USA, IN 47274

Or is it o.k. to just show the 3rd party address only, as follows:

3rd Party Dist. Services

123 American Way

Any Place USA, IN47274

What legal ramifications are there if the seller’s company name is not shown on the B/L? Does the warehouse or agent’s name have to be included in the shipper’s address anywhere?

Answer: I would say that it is a better practice to show the beneficial owner as the shipper of the goods (c/o the warehouse or other agent that is being used).

This establishes that the owner is a party to the contract of carriage and is a proper party in the event of a claim for loss or damages. Note, however, it also may have the consequence that the owner becomes liable to pay the freight charges if the agent or the consignee does not pay them.

It probably would be sufficient to show just the address of the physical location from which the goods are shipped, although it may be better to include the full name and address of the warehouse (“c/o ABC warehouse”). You could have situations where goods are refused, undeliverable, or where the carrier wants to send an on hand notice, etc. and needs that information.

7) Bills of Lading – Signing Clear

Question: I am looking for legal documentation that shows that once consignee signs bill of lading free and clear of shortage or damage, that the carrier’s obligation has been fulfilled and is no longer liable for either at a later date.

I do not know where to find this.

Answer: You can’t find it because it is not true.

Signing a “clear" delivery receipt only creates a rebuttable presumption that a shipment has been delivered in good order and condition. When loss or damage is discovered after delivery, it is usually because the loss or damage was concealed and not readily determinable at the time of delivery. Quite often, no one at the consignee’s dock actually inspected the shipment.

In such cases, there is an additional burden on the consignee to show, with competent evidence, that the loss or damage did in fact exist at the time of delivery and did not occur some time after delivery. If this burden can be met, the carrier would still remain liable. See the ICC’s Administrative Ruling 120 on Concealed Damage Claims, Appendix 85, page B-93 in Freight Claims in Plain English (3rd Ed. 1995), which contains valuable advice to claimants on how to maximize chances of obtaining prompt and satisfactory settlement of loss and damage claims.

8) Bumping Privilege

Question: Please clarify the term “Bumping Privilege”, I was told it was in the “NMFC Rules,” what exactly does it mean /cover?

Answer: It is in Item 171 of the Classification, and is used to provide shippers with a means to obtain lower freight charges in certain situations, which states in part:

ITEM 171 APPLICATION OF CLASSES—ARTIFICIAL CONSTRUCTION OF DENSITY TO OBTAIN A LOWER CLASS (BUMPING)

Where commodities are subject to Classification provisions which assign classes based upon density, a shipper may, at its option, increase the weight of the package(s) to artificially increase the density of the package(s) or piece(s) to artificially increase the density of the package(s) or piece(s) and apply the next lower class in the density scale to that increased weight, where the result would be a lower charge. THIS MAY ONLY BE DONE WHERE THE APPLICABLE PROVISIONS MAKE SPECIFIC REFERENCE TO THIS RULE AND MAY ONLY BE DONE AT THE TIME OF SHIPMENT.

Bumping is accomplished by determining the actual cubage of the particular package(s) or piece(s) and multiplying that cubage by the lowest density named in the density group which provides the next lower class.

9) Carrier Operations – Issues of Compliance

Question: What is the legal responsibility of a dispatcher for a commercial motor carrier in terms of compliance with Department of Transportation regulations? Ultimately, whose responsibility is it to make sure that a driver does not run illegally and how much liability is asserted to the carrier, safety department, dispatcher, customer service specialist, and of course the driver? Is the driver’s word that he/she is legal sufficient when accepting and dispatching a driver on a run; or as I believe, should it be everyone’s responsibility to ensure that your driver is legal?

Answer: The Federal Motor Carrier Safety Administration safety regulations, which are published in 49 CFR Part 350 et. seq. place specific responsibilities on the “carrier” and on drivers of commercial motor vehicles. Dispatchers are required to be familiar with these regulations and to observe the requirements. Otherwise, I don’t think there is anything in the regulations that specifies any particular requirements for a “dispatcher”.

Obviously, a dispatcher does have responsibilities, and should take them seriously, but the responsibility for observing hours of service rules, keeping logs, etc. is principally on the driver.

You should obtain a copy of the safety regulations and read them carefully, if you have not already done so.

10) Carrier Selection – Vendor Instructions

Question: I have established an account with UPS and have instructed our vendors to ship via UPS ground and bill our account #. Some of them have responded that they cannot do it for one reason or another (their own freight accounts, cannot bill “third party”, etc. Can they do this?

I am looking for text addressing that issue so I can supply it to them to enforce our request. I was told that if our purchase orders state to ship a particular way and that the vendor would be backcharged the difference between what they billed me and what we would have paid UPS, that I am within the law to do so. Is there a certain Tariff # that spells this out, or something else I can use and refer to?

We are not a large company, but would like to take full legal advantage of our UPS account.

Answer: The disputes you are having with your vendors are basically a matter of contract law, and have nothing to do with the carrier or any “tariffs”.

You can include provisions in your purchase orders to specify routing, etc. and penalties for failure to observe specified procedures. Of course, there is a risk of upsetting your vendors if you decide to enforce such terms and condition.

11) Carriers – Authority

Question: I am a carrier hauling freight for various brokers and shippers. Do I need a common carrier authority or a contract authority or both?

Answer: First, I would point out that the ICC Termination Act of 1995 eliminated the statutory distinction between “common” and “contract” carriers. Essentially all for-hire carriers are now common carriers with the right to enter into contracts, see 49 USC 14101.

I would note that, even though the law was changed, the FMCSA hasn’t yet gotten around to correcting its regulations and is still letting carriers register as “common” or “contract” carriers.

I would suggest that you register only as a “common carrier”. That way, you clearly have the best of all worlds, and you can enter into transportation agreements with your shipper and broker customers.

12) Carriers – Exempt Commodities

Question: We are a wholesale nursery classed as farm. We have farm tags on all trucks and have been doing the Department of Transportation (“DOT”) requirements with physicals, driver records, truck records etc. We travel out of state and more than 150 miles. I recently found a reference regarding “commodities that are not exempt . . . . under 49 U.S.C. 13506(a)(6).” I got a copy of 13506 from the local DOT. It looks like I should be exempt under 13506(a)(4)(A), (a)(6)(B) and possibly under (a)(6)(C) (which I don’t have a copy of). The local DOT now says that I am exempt under (a)(4)(A) for farms @150 miles. I was already familiar with the 150 mile farm exemptions scattered through the rest of the manual. Section 13506 doesn’t talk about 150 miles and I would like to know if it supercedes the rest of 49 U.S.C.?

Answer: Your reference to “exempt” commodities and certain types of movements is misplaced. The exemptions in 49 U.S.C. 13505 relate back to the days of ICC economic regulation of carrier's rates, rules and practices.

Today, they would only affect whether you need to “register” as a for-hire motor carrier with the FMCSA, as well as certain other legal consequences such as applicability of the Carmack Amendment (49 U.S.C. 14706) in the event of loss or damage to goods in transit.

These exemptions do not exempt a for-hire motor carrier from the federal safety regulations if you are operating vehicles with GVW in excess of 10,000 lb. or are carrying any hazardous materials.

13) Carriers – Operating Authority

Question: We are a start-up logistics company and want to know if we should apply for broker’s authority or freight forwarder authority. Our first potential project would include some intermodal transport and warehousing operations, both of which we would contract out to capable parties. Are there benefits to one type of authority over another?

Answer: The first thing you must do is to understand the legal differences between a broker, a freight forwarder and a motor carrier. These terms are defined in the “Interstate Commerce Act” at 49 U.S.C. Section 13102:

Sec. 13102. Definitions

* * * *

(2) BROKER- The term “broker” means 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.

* * * *

(8) FREIGHT FORWARDER- The term “freight forwarder” means a person holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and in the ordinary course of its business--

(A) assembles and consolidates, or provides for assembling and consolidating, shipments and performs or provides for break-bulk and distribution operations of the shipments;

(B) assumes responsibility for the transportation from the place of receipt to the place of destination; and

(C) uses for any part of the transportation a carrier subject to jurisdiction under this subtitle. The term does not include a person using transportation of an air carrier subject to part A of subtitle VII.

* * * *

(12) MOTOR CARRIER- The term “motor carrier” means a person providing motor vehicle transportation for compensation.

If you are providing the services of a broker, freight forwarder, or a motor carrier, you MUST register with the Federal Motor Carrier Safety Administration (FMCSA), and comply with all of the applicable regulations (in Title 49, Code of Federal Regulations).

There are no “benefits” of one type of authority over another, although the responsibilities and liabilities are significantly different.

I would suggest that you obtain a copy of the Transportation Consumer Protection Council, Inc.’s course text, “Contracting for Transportation & Logistics Services”, which explains these differences in detail, and which is available from the Council.

14) Contracts – Liability Issues

Question: I am in the process of negotiating the contract with the carrier and want to make sure I'm including all pertinent information on the assessment of the equipment prior to shipment. We move used, custom made production equipment from one location to another and want to make sure we have adequate liability limitations. While this equipment is “used”, how can we prove to the carrier that it was in good and operational condition prior to each move? What are the factual questions that need to be answered when preparing for a claim?

Answer: Without knowing all the details of the type of equipment or its condition, here are some suggestions:

1. Before an item is shipped, there should be an inspection and report that documents the fact that the machine is in good operating condition - you could call it a pre-shipment inspection.

2. Take either a Polaroid or digital photo of the machine and the way it is packaged or crated.

3. When the item is delivered, it should be carefully examined by the receiving department, and any visible damage should be immediately noted on the carrier's bill of lading or delivery receipt. Again, photos are recommended.

4. If there is damage, notify the carrier promptly and request a joint inspection. Save all packaging, crating, pallets, etc.

5. If it is deemed necessary to repair a damaged item, tell the carrier that you intend to do this. Keep accurate records of the labor and materials used for the repair.

6. If the item is damaged beyond repair, you will have to establish the fair market value. This can be the original cost, less a factor for depreciation or, if a used machine is available, the cost to replace the machine with one of similar age and condition. In some cases, it is appropriate to retain an independent appraiser that is familiar with the type of product or machine.

These are some general guidelines, but I hope they will be helpful. In addition, you should be warned that, regardless of the condition of a "used" item, there are many carriers that have liability limitations on used machinery and equipment, often as low as 10 cents per pound.

15) Contracts – Limitations on “Special Damages”

Question: A carrier wants to add the following wording to current and future transportation contracts, stating that it is company policy and must be added:

In no event shall carrier be liable for special, indirect or consequential damages (including lost profits) arising out of or related to carriers services under this agreement.

Are they attempting to contract away liability and is this possible or legal?

Answer: Yes, the carrier is attempting to avoid its legal liability. This is the “special damages” area (see Freight Claims in Plain English – 3^rd Ed. 1995 at Section 7.3).

Carriers can be liable for special damages if they are “foreseeable” at the time of the contract. Forseeability depends on whether the carrier has actual or constructive knowledge of the consequences of a breach of the contract of carriage. This generally means that if the carrier has notice that there will be specific consequences if goods are delayed or not delivered, and accepts the goods for transportation with that knowledge, you can collect the damages resulting there from.

I would not agree to such language if I were representing a client.

16) Damages – “Free Time” to Inspect

Question: We had a delivery of 6 mixed content pallets to a 3^rd party storage site. The 3^rd party wanted to take apart the pallets and inspect every item for damage. The driver refused saying he was only responsible for delivering 6 pallets as stated on the bill of lading and he would not wait around while they inspected the 100+ items. The 3^rd party claimed that we have “2 hours free time for delivery and check-in” in the services section of our contract, implying that we own 2 hours of the driver’s time for every delivery.

The 3^rd party is concerned that they will be responsible for damage - even though they have 96 hours to report concealed damage.

The carrier does not want to stay for 2 hours at every delivery.

I understand that we will not be charged extra until the whole delivery process takes longer than 2 hours.

My question is does the carrier have to stay on site any longer than the time it takes to verify the count on the bill of lading and check for visible damage?

Answer: You have some “apples & oranges” here.

First, without seeing the contract with the carrier I can’t tell you what the obligations are.

Second, “free time” usually refers to detention charges for the equipment; after the expiration of the free time, there will be extra charges, usually a certain $ amount per hour or portion thereof. Free time has nothing to do with whether or not the driver observes the receiving process.

Third, it is always best to document OS&D on the delivery receipt while the driver is present, to avoid disputes as to the actual condition of the shipment at the time of delivery. If a driver refuses to wait around until the consignee inspects the shipment, the consignee should take extra care to document any loss or damage that may be discovered.

17) Delivery Receipts – Notations Affecting Damage Claims

Question: Does signing a delivery “subject to inspection or count” have validity and give the consignee the right later to file a shortage or damage claim?

Answer: That sort of notation has no legal significance. The consignee would have the right to file a shortage or damage claim in any event. However, if there was no notation as to shortage or damage at the time of delivery (noted on the bill of lading or delivery receipt) the carrier will probably consider this concealed damage and decline the claim The claimant then would have an additional burden to establish that the loss or damage did not occur after the goods were delivered.

18) Freight Bills – Information Required

Question: Is there a federal law specifying what information is required to be shown on a freight bill?

Answer: There is a federal regulation that specifies the requirements for freight bills:

49 C.F.R. 373.103 Expense bills.

(a) Property. Every motor common carrier shall issue a freight or expense bill for each shipment transported containing the following information:

(1) Names of consignor and consignee (except on a reconsigned shipment, not the name of the original consignor).

(2) Date of shipment.

(3) Origin and destination points (except on a reconsigned shipment, not the original shipping point unless the final consignee pays the charges from that point).

(4) Number of packages.

(5) Description of freight.

(6) Weight, volume, or measurement of freight (if applicable to the rating of the freight).

(7) Exact rate(s) assessed.

(8) Total charges due, including the nature and amount of any charges for special service and the points at which such service was rendered.

(9) Route of movement and name of each carrier participating in the transportation.

(10) Transfer point(s) through which shipment moved.

(11) Address where remittance must be made or address of bill issuer's principal place of business.

The shipper or receiver owing the charges shall be given the original freight or expense bill and the carrier shall keep a copy as prescribed at 49 CFR Part 379. If the bill is electronically transmitted (when agreed to by the carrier and payor), a receipted copy shall be given to the payor upon payment.

19) Freight Brokers – Liability for Negligent Hiring of Carrier

Question: If you are a broker and you get a carrier to pickup a load, is that considered as hiring the driver and truck?

When you hire the driver and truck to pickup a load are you supposed to check license and insurance to make sure they are a valid carrier? And if you fail to check insurance can you be held liable for the driver since you were negligent in hiring him in the first place? I guess what I need to know is what is a broker’s responsibility when it comes to the safety of the public by giving loads to uninsured drivers?

Answer: I assume that you are a licensed motor carrier broker.

A broker normally does not have liability for loss, damage or delay to goods in transit. Nor would it ordinarily have liability to a third party injured by the negligence of the motor carrier resulting from a highway accident, or from loading or unloading the truck.

However, there are court decisions that say a broker can be liable for its own negligence, if that negligence causes or contributes to the loss, damage or injury.

As a broker, you should ALWAYS check out the carriers that you use before giving them any loads. You should make sure that they are properly registered with the Federal Motor Carrier Safety Administration (FMCSA) and that they have public liability and cargo insurance in effect. You can easily do this by accessing the FMCSA’s website at http://www.fmcsa.dot.gov/and accessing the pull-down menu for Licensing & Insurance.

You should also have written transportation agreements with both your shipper customers and the carriers that you use that clearly spell out the fact that you are a broker, and setting forth the legal duties and responsibilities of the parties.

20) Freight Charges – ‘Short Miles’ or ‘Practical Miles’

Question: A contract was signed with a customer in which the mileage basis was designated as “based on Household Goods Miles as defined in Rand McNally Milemaker System, computerized version in effect on the date of the shipment.” An ‘authorized representative’ of the customer was later asked to further clarify whether ‘short’ or ‘practical’ route, and he verbally indicated ‘practical’. Time passes, and we start to receive overcharge claims filed by an auditor on behalf of the customer stating freight bills were overpaid due to fact that ‘short’ route miles should have been paid. We asked for proof of the basis, and a copy of the same mileage item now reads as “based on Household Goods Miles as defined in the Rand McNally Milemaker System, computerized version in effect on date of shipment, short miles to apply.” There were no signatures or dates shown on the revised document. What recourse do we have as a carrier?

Note that since this incident, we require that the mileage basis be specifically spelled out in all contracts prior to signing.

Answer: As you have recognized, it is always best to make sure that such matters are covered in a properly drafted transportation contract.

As to whether the “short” or “practical” mileage should govern, it appears that the original contract was silent - or at least ambiguous.

Although laws vary in different states, for certain purposes oral modifications to written agreements can be enforceable. If you can prove that the shipper’s representative orally agreed to the use of “practical” mileage, it may well be binding on the parties.

You mention a “revised document”, but it is unclear who prepared the “revised document” or whether there was ever any meeting of the minds as to the alleged change in wording. I cannot give any opinion as to that document.

21) Freight Charges – “Section 7” Not Available

Question: The Shipper shipped goods “Freight Collect/Bill Consignee” to the consignee. Shipper routinely signs “Section 7/non-recourse” section on bill of lading on such shipments, but there is no such section on this particular carrier’s bill of lading. Consignee goes out of business without paying carrier’s freight bill. Carrier is now going after the shipper for payment. Is a “Section 7/non-recourse” section required on bill of lading? Any legitimate argument, in your opinion, that since the carrier deleted the standard “Section 7/non-recourse” section from its bill of lading that shipper may not be liable for the charges? Any legitimate argument, in your opinion, that shipper’s traffic person did not have authority to enter such a contract with the carrier on shipper’s behalf? Can you advise any other grounds for which the shipper may not be liable for payment?

Answer: You refer to “Section 7”, the “non-recourse” provision, which is a specific section of the terms and conditions of the “long form” version of the Uniform Straight Bill of Lading as set forth in National Motor Freight Classification.

If some short form bill of lading was used that did not have a “Section 7” box, I think that the only way a shipper could protect itself would be with some explicit language either written on the face of the bill or lading or in some separate contractual document.

The law is pretty clear that the shipper would remain liable for the freight charges, see Southern Pacific Transportation Co. v. Commercial Metals, 456 U.S. 336, 102 S.Ct. 1815 (1982).

22) Freight Charges – Accessorial Charges on Freight Collect

Question: This question is in regards to who is responsible for paying accessorial type charges from a truckload carrier when the terms are collect and the customer’s carrier is used for the shipment. We are a shipper with collect freight terms to many customers and are required to use the customer’s carrier. We have no pricing agreement with these carriers and do not know specific charges they assess until the freight bills are received. Detention charges are frequently assessed when a pick up time exceeds 2 hours. If the shipper causes the loading time to exceed the 2 hours “free” time, are they legally required to pay invoices from these carriers they have no prior agreements with? Also in turn, if the carriers do not adhere to the requirements of the shipper-i.e. not meeting specific appointment times and thereby causing delays in loading; can they invoice these type of charges at their discretion? Is this just a matter for vendor-customer relations since the customer will deduct from vendor invoices if their carriers invoice these charges directly to them? Any advice would be appreciated.

Answer: As I understand it, you are the shipper and these are outbound freight collect shipments going to your customer. The customer’s carrier is used and presumably the customer has some kind of transportation agreement with the carrier.

1. Detention charges must be based on the customer’s transportation agreement with the carrier (or the carrier’s bill of lading and tariff, if there is no contract). Ordinarily the detention charges will be billed to the party paying the freight charges. You should find out what the customer’s contract provides about detention.

2. If you (the shipper) are causing detention charges to accrue (under the contract or the tariff), it would not be unreasonable for the customer to charge these back to your account.

23) Freight Charges – Altering Time Limits

Question: A company is trying to manage out of period freight charges so, they have asked their third party transportation management provider to include carrier billing time limits in their contracts. (The contracts are between the third party transportation management provider and the carriers, on behalf of the company.) The billing time limits are for original invoices, balance due invoices, and invoices that are rejected back to the carrier for proof of delivery.

Basically, the agreement in the contract says that if the invoice is not submitted within a certain time period; from the ship date (original invoices), from the company close date (balance due invoices), from the company close date (invoices rejected for a POD), the company is not responsible for the freight charges. The time period is less than 180 days. Can they do this? Does this override the statue of limitations since the carrier agreed to these terms and signed the agreement? Are there any new laws regarding how long a carrier has to bill freight charges?

Answer: With regard to motor carrier billing, there are two relevant statutory time limits: the “180 day rule” in 49 USC 13710, and the 18-month statute of limitations in 49 USC 14705.

The statute also provides in 49 USC 14101 that parties may “in writing, expressly waive any or all rights and remedies under this part...”

Thus, shippers and carriers can, in a written agreement, provide for different time limits than would ordinarily be applicable.

24) Freight Charges – Amendments to Agreements

Question: We find ourselves in a somewhat questionable situation, being a relatively small company, we seem to take a beating from carriers.

Here is our “riddle/situation”: We have an agreement with a particular carrier, which references a specific tariff.

We also have a letter from the carrier’s account manager which 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 & brought new/additional charges, citing lineal feet & line-haul charges of certain shipments.

I guess 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?

Answer: 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. It is suggested that you contact someone experienced with transportation contracts for additional help.

25) Freight Charges – Backhauls

Question: Regarding customer pickups (backhauls), we know that under Robinson-Patman, we must offer the same allowance to different customers picking up from the same origin going to the same destination and we must allow customers to pickup if they have agreed to the allowance and any pickup rules we mutually agree upon. What we are not clear about is, are there any constraints in effect upon the shipper as to how the shipper derives the allowance offered to the customer? A rather demanding customer has stated that the shipper is obligated by law to offer an allowance equal to what the shipper would pay for-hire carriers. Is there any legal precedent that supports this customer's statement? Can you suggest any references for further research into the entire customer pickup issue?

Answer: The Robinson-Patman Act, 15 U.S.C. 13, allows “differentials which make only due allowance for differences in the cost of manufacture, sale or delivery resulting from the differing methods or quantities in which such commodities are to such puchasers sold or delivered...”

The subject of backhaul allowances came up a number of years ago and, as I recall, the Federal Trade Commission conducted an investigation and issued a ruling. There are also some older court decisions from the 1940-1960 period that deal with freight rates and allowances, including basing points and delivered prices. However, I don't believe there are any federal regulations that would be helpful with regard to this subject.

Obviously there could be a wide range of freight rates applicable to your shipments: LTL vs. truckload rates, full undiscounted common carrier class rates; discounted tariff rates, negotiated contract rates, etc. You may also have delivered prices using averages, zones, mileages or some other formula for the freight factor.

Clearly you should not discriminate between those customers that elect to pickup product at your facility - the same formula for backhaul allowance should be the same for all such customers.

Without researching the subject in depth, I can't really give you a more thorough opinion.

26) Freight Charges – Broker Holding Freight Hostage

Question: We are a transportation broker. We gave a shipment to another transportation broker to arrange pick up and delivery. They made the pick up but are now holding the load hostage and put the load in storage. They owe us for an invoice and we have held back that amount from what we owe them. Now they are telling me that unless we pay them in full, plus storage charges, they will sell this truckload of product. They have also contacted the consignee, which is also the owner of the load and made demands that they can pay him for the freight charges under CzarLite tariff, which is about 5 times the agreement made with us. Do they have the legal right to sell this product? Aren't they in violation of some law for not delivering the load as consigned?

Answer: As a general rule, a motor carrier has a carrier’s lien on a shipment in its possession for the freight charges that are due on that shipment. In other words; a motor carrier has the legal right to hold the shipment until its charges for that shipment are paid.

A broker is not a motor carrier and does not have a carrier’s lien. If a broker is holding a shipment “hostage” for payment of past due freight charges, it is exposing itself to a lawsuit for conversion and damages.

You should advise the owner of the goods to contact a qualified transportation attorney.

27) Freight Charges – Broker Payments to Carrier

Question: What is the legal time period for a broker to pay a carrier for services provided?

Answer: There is no “legal” time period for a broker to pay its carriers. However, most reputable brokers pay their carriers promptly (within 30 days) after the load has been delivered. If a broker is not paying you promptly, you should be very leery of handling more work since it may be an indicator that the broker is having financial problems. If you have a question about a particular broker or a complaint, you may try contacting the Transportation Intermediaries Association (TIA) in Washington, D.C. - phone (703) 329-1894.

Lastly, if you have a serious problem with getting paid by a broker, you may wish to consult a lawyer, and you may have to take legal action.

28) Freight Charges – Broker’s Obligation When Shipper Bankrupt

Question: One of my customers just told me yesterday, they filed Chapter 11 bankruptcy. I have $33,000.00 out with them since December 2002.

As a broker, isn’t there a new law that states I’m not responsible to pay the carrier in the event I don’t get paid from the shipper?

Answer: I am not aware of any statute (new or old) that says a broker does not have to pay a carrier if the broker has not been paid by the shipper.

This is a matter of the contractual agreement between the parties. If your broker-carrier contract conditions your obligation to pay the carrier on receipt of payment from the shipper, you would be protected against the situation you have described. Otherwise, the carrier will look to you for payment.

You should file a proof of claim in your customer’s bankruptcy proceeding in order to preserve your rights as against them.

NOTE: There is a court case asserting that under the “Conduit Theory” a broker might not be liable for freight charges it has not collected from the shipper/payor, depending on the specifics of the relationship between the parties. Transportation Revenue Management d/b/a TRM v. Freight Peddlers, Inc., 2000 WL 33399885, Fed. Carr.Cas. ¶ 84,141 (U.S.D.C. SC September 7, 2000).

29) Freight Charges – Bumping Rule

Question: How far is a carrier obligated to honor the bumping rule when charging a shipper for transportation costs? I had a bill for 13,522lbs, and it would have been cheaper for the carrier to bump it to 20,000lbs. The carrier said they are not obligated to do this all the time and the weight has to be very close to the next bump level before they will do it. I thought the carrier is always supposed to bump it if the price favors the shipper? Is there a tariff rule covering this and if so, where can I find it?

Answer: Where commodities are subject to provisions which assign classes based upon density, the “bumping rule” (Item 171 in the National Motor Freight Classification (NMFC)) allows a shipper to increase the weight to artificially increase the density of the shipment and apply the next lower class in the density scale to that increased weight. However, NMFC Item 171 states “THIS MAY ONLY BE DONE WHERE THE APPLICABLE PROVISIONS MAKE SPECIFIC REFERNCE TO THIS RULE AND MAY ONLY BE DONE AT THE TIME OF SHIPMENT.”

It isn’t clear from your question whether the commodities that you shipped would be subject this rule, but if so, the election would have to be made at the time of shipment.

I would suggest that you check NMFC Item 595, Maximum Charges - This is a more general provision and provides:

“In no case shall the charge for any shipment from and to the same points, via the same route of movement, be greater than the charge for a greater quantity of the same commodity in the same shipping form and subject to the same packing provisions at the rate and weight applicable to such greater quantity of freight.’

If applicable, this provision would entitle you to get the lower rate.

As far as we know, provisions of the National Motor Freight Classification are not available online. You have to purchase a copy of the Classification from the National Motor Freight Traffic Association, 2200 Mill Road, Alexandria, Virginia 22314. Their phone is (703) 838-1810 and website is http://www.nmfta.org/. The NMFC is available in hard copy (a large book about 2 inches thick) or on a CD version called “FastClass”.

You might get an opinion from one of the classification specialists at NMFTA (contacts listed inside the front cover of the NMFC) or on the website.

30) Freight Charges – Carrier Holds Goods Hostage

Question: What legal recourse do I have (as a broker) when a carrier I have contracted with decides that he is just not making enough on the freight, so he decides to hold it for ransom until I pay him triple what we had agreed upon originally?

The State police have been called and they said it was a civil matter. Assume that this is West Coast freight with the destination being East Coast and it is now stationary somewhere in the Midwest in the trucking company's parking lot.

Answer: A motor carrier does have a lien on goods in its possession for the freight charges due for that shipment. However, if the shipper tenders the freight charges, the carrier must deliver or release the shipment, or it can be held liable for conversion.

If you have some agreement in writing - an acknowledged rate quotation or other shipping instruction - where the carrier agreed to a certain price, you should offer (in writing) to pay that agreed price. If the carrier refuses to release the shipment, then your legal recourse is to sue for conversion.

I would note that you, as a broker, are neither the shipper, the consignee, nor the owner of the goods. Thus, you technically do not have standing to bring a lawsuit, and it really should be done by one of those parties. If you should undertake to sue the carrier, you should get an assignment of the claim from the owner of the goods.

31) Freight Charges – Carrier Seeking Payment from Shippers on Brokered Loads

Question: We are a third party logistics provider. One of our carriers recently canceled our pricing due to unpaid freight bills that were over 45 days old. They were a carrier of ours for years and this was never an issue before. In our contract with the carrier they refer to us as a broker and state we are responsible for all of our customer’s freight bills.

When they cancelled our pricing, they put all the remaining freight charges in a loan with monthly payments. They then went to all our client base and showed them all of our unpaid freight bills, offered them the same discount they were giving us and told all our clients we were not paying our bills and tried to collect for these bills. Is it legal for them to be showing our open invoices and discounts to our client base when we have an agreement to repay these bills by loan? This carrier has also collected freight charges from us in the past when our client has gone bankrupt and we never received the money from our client. In my opinion they are saying we are responsible for charges if client does not pay us, but the client is responsible if we do not pay them. Any information would help.

Answer: If I understand you correctly, you would like some legal information as to whether the carrier can collect directly from the shipper directly for its unpaid freight charges.

This question of liability for freight charges when a broker fails to pay the carrier comes up frequently.

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 “gray area”, but the general rule 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.

You mention a “contract” with the carrier, which provides that your company is “responsible for all of our customers freight bills”. It is not clear, however, whether the contract has any language that says the carrier will look ONLY to the broker for payment. If so, the carrier could be in breach of the contract.

I would note that a properly drafted transportation agreement should cover these subjects and preclude the kind of problem that you are experiencing.

You also mention a loan agreement with the carrier, but without seeing the agreement I can’t tell you whether the carrier’s actions are in violation of that agreement.

32) Freight Charges – Carrier’s Lien

Question: I had a interchange traffic agreement with a carrier in September thru November - the carrier is holding freight and will not release it to the customer as they want to be paid for delivery from California to Searcy, Arkansas and the return back to California. As far as anyone knows the freight really never left California. The carrier called the shipper and demanded payment of freight charges before they release the freight. After going on the SAFER System I found out that their Authority has been revoked since first notice 9/02 and 2nd 11/02. Their insurance company sent a statement claiming that there is no insurance coverage for said company 3 months after they sent me papers showing us as a certificate holder. I received a letter of authorization to retrieve the product from the carrier, however, all I get is threats of my life and family when I attempt to contact them. I have researched the local phone books and don't know what to do - Please see if there is anything that you can assist me with.

Answer: As explained in a previous "Q&A", a motor carrier has a carrier's lien on a shipment in its possession for the freight charges that are due on that shipment, and has the legal right to hold the shipment until its charges for that shipment are paid. It does not have the right to hold a shipment for other charges on previous shipments. If the shipper tenders the freight charges, the carrier must deliver or release the shipment, or it can be held liable for conversion.

If there is some agreement in writing - an acknowledged rate quotation or other shipping instruction - where the carrier agreed to a certain price, the shipper should offer (in writing) to pay that agreed price. If the carrier refuses to release the shipment, then the legal recourse is to sue for conversion.

I would note that you, as a connecting carrier, are neither the shipper, consignee or owner of the goods. Thus, unless you have paid the shipper's claim for the value of the goods, you technically do not have standing to bring a lawsuit, and it really should be done by one of those parties.

You should advise the owner of the goods to contact a qualified transportation attorney.

NOTE: Since this problem arose in California, the lien law is slightly different. Under the California Civil Code §§ 3051.5 and 5051.6 a carrier can have a lien to cover freight charges on past shipments if it follows the conditions set forth in the Code. More information is needed to determine whether the California law applies to this situation.

33) Freight Charges – Changing Notations on Delivery Receipt

Question: 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 PPD on a shipment we received. The original bill of lading shows a third party billing collect. They are 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 do 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?

Answer: 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.

34) Freight Charges – Collecting From Brokers

Question: What is the best way for a contract carrier to collect unpaid freight invoices from brokers? (Calling has gotten nowhere, not even return phone calls in one case) Is there a government agency that handles complaints regarding brokers not paying their freight bills? Can a claim be filed against a broker’s bond and if so, does a lawsuit have to be filed and/or judgment reached first, or can a letter be sent to the bond company prior to filing suit to collect the freight charges? Can a suit be filed in small claims court, or does it have to be filed in federal court because of diversity jurisdiction, etc. We are talking about very small claims here - all under $1000 each, so they are not really worth hiring an attorney to deal with them. Any guidance you can give in this area would be greatly appreciated - and if there is a book or website that would answer these questions and/or provide forms to use, that information would also be greatly appreciated.

Answer: It is a recurring problem that some brokers either fail to pay their carriers or are extremely slow in paying. Other than pressuring the broker for payment, your only remedy may be to (1) file a suit for collection of your freight charges or (2) file a claim against the broker’s surety bond.

You should be able to sue the broker in your local small claims court. An action for freight charges can be brought in any court (state or federal), and you should be able to get jurisdiction over the broker wherever he does business. I would also note that brokers are required to have registered agents for service of process (BOC-3 filing) and this information is available on the FMCSA website.

Brokers are also required to file a surety bond (BMC 84) and this information is also available on the FMCSA website. Most broker surety bond companies will respond to a written claim from the carrier and will not require that the carrier first obtain a judgment against the broker, but we have heard of one that did require the carrier to have a judgment.

The FMCSA website is www.fmcsa.dot.gov and the registered agent and surety bond information can be found by accessing the “licensing and insurance” section.

35) Freight Charges – Commercial Zones

Question: We are looking for information on the Apparel Vendors “Commercial Zone” shipping policy or law.

Generally this is that an apparel vendor shipping from a point located within a 50-mile radius of either NYC or LA must pay the freight cost to ship the goods to another point within this zone. It could either be the final destination or to the retailer’s consolidator. There is some confusion as to whether both parties need to be in a 50-mile radius of each other, or if it applies when both parties are located in the zone - even if the shipping and receiving locations are more than 50 miles apart.

The majority of the retailers’ Routing Guides contain reference to this policy. Even if our freight terms are collect with a particular retailer, the commercial zone policy overrides the collect terms. In that case we would pay to the consolidator and then the retailer would pay the freight to the final destination.

I have been checking online and calling anyplace that seemed related and can find nowhere that this policy is mandated by any official agency. I cannot even find a reference except in the retailers guides. There are references to commercial zones - but not in reference to apparel or the responsibility for freight payment. I spoke to someone with the DOT who referred me to your site for assistance.

So, to my question - Is there a law or published policy that defines this Commercial Zone policy and mandates our compliance? If so, could you direct me to a published version for specifics? Any assistance you could provide on this issue would be greatly appreciated!

Answer: In the field of transportation “Commercial Zones” are a relic of the old ICC economic regulation over the rates and charges of motor carriers, and were defined areas surrounding municipalities that were exempt from regulation, i.e., the requirements to publish and file tariffs, etc. with the ICC.

These exemptions were carried forward after the ICC Termination Act of 1995, and are now found in the FMCSA regulations at 49 CFR Part 372.

The retailer policies that you have described appear to be something entirely different - more a custom of the particular trade or industry. I am not aware of any “official” or governmental law or regulation that would define these or be applicable.

36) Freight Charges – Contract Rates

Question: We based our LTL contract rates on Consolidated Freightways (CF) tariff rates from several years back, and then negotiated discounts with the LTL carriers on top of that. Now that CF is out of business, should we use another standard to base our contract rates on?

Answer: In theory, you shouldn't have been using CF’s tariff with another carrier unless they were a participant in that tariff, but that is “water under the bridge” at this point.

Many parties are using the CzarLite tariffs for their base contract class rates and the CzarLite tariffs are generally accepted by most LTL carriers.

The CzarLite tariffs are a proprietary product available from SMC3 (Southern Motor Carrier Conference) and you can get info at www.smcsystems.com or call them at 800-845-8090.

37) Freight Charges – Discounts on Inbound Collect

Question: Isn’t there a rule of some kind that a carrier has to allow at least a 30% discount if they get a shipment charged to a customer who has no discount set up?

A vendor sent us a shipment on a collect basis via a carrier with whom neither they nor the manufacturer had a discount in place and we were charged an undiscounted rate.

Answer: Since “deregulation” there are no rules about what a motor carrier can charge for its services, and the Federal Motor Carrier Safety Administration does not have jurisdiction to determine the reasonableness of rates and charges (as the ICC did in the “good old days”).

Most LTL carriers automatically give some discount off the full tariff class rates, and shippers that contract with carriers generally negotiate discounts as part of their contracts.

I suppose you could challenge the bill as being unreasonable and see if you can negotiate a better deal. Other than that, “caveat emptor”.

38) Freight Charges – Fines for Improper Weight

Question: The shipper noted the total weight on bill of lading as 42,000 lbs.

When the driver was stopped by DOT, the actual weight was 47,000 lbs. The driver is fined, and detained. We had to get 5,000 lbs. off the truck, but the DOT will not let him return 100 miles to the shipper (origin). The shipper says the driver should have gotten weighed sooner. The driver says shipper should be accurate in weight on bills of lading. Who is responsible for paying fines and costs incurred in getting load legal?

Answer: The motor carrier has the primary legal liability for operating overweight. As a general rule, if there is any question whether the load was legal, the driver should have either refused to accept the load or had it weighed before venturing out on the public highways.

However, under the circumstances you have described, it is possible that the motor carrier might have some recourse against the shipper if the shipper intentionally or negligently mis-stated the weight.

39) Freight Charges – Fuel Surcharges, Tariffs & Contracts

Question: 1. Are handling charges subject to Fuel Surcharges? When invoicing what exactly does the Fuel Surcharge get attached to?

2. Can a shipper list a CZARLite tariff for use in a contract if we already have a filed tariff and the shipper is not authorized by SMC to use the CZARLite tariff? The CZARLite tariff is also over 5 years old and the shipper refuses to release a copy to the carrier.

3. We have several contracts with shippers but we also have a filed tariff. I have a shipper that keeps telling me their contract overrides our tariff and the attachment we submitted with their contract stating our handling charges, detention charges, etc. Which do I bill by, my tariff or their lower priced contract?

4. Several shippers interline with other contract carriers and they interline this freight with us. We in turn bill the carrier, not the shipper, but the carriers are not paying. Can we invoice the shippers?

Answer: Let me try to answer your questions in the order presented.

1. Fuel surcharges should be applied to the actual transportation charge only, and not to any accessorial charges. If you are using a discounted class rate for LTL shipments, the surcharge is applied to the discounted (net) charge, and not to the undiscounted charge.

2. Shippers and carriers can use any version of the CzarLite tariffs that they agree on in their transportation contract. SMC3 may have a requirement that the shipper or carrier purchase a copy of their proprietary tariff materials, but that doesn't affect the contract between the shipper and carrier.

3. If you have a binding transportation agreement between a shipper and carrier, the terms and conditions of the contract will govern. Whatever rates and charges, including accessorial charges, that are set forth in or attached to the contract will be applicable, and should be enforceable by either party to the agreement. If the contract expressly incorporates by reference a tariff (such as CzarLite) or some other schedule of rates and charges, then they become part of the contract.

4. The contract of carriage is between the shipper and the carrier that receives the goods and issues a bill of lading. When shipments are interlined, it is under a contractual arrangement between the receiving carrier and the delivering carrier. The delivering carrier only has a contract with the receiving carrier, and not with the shipper. Thus, once the goods are delivered and its carrier's lien is extinguished, the delivering carrier can only look to the receiving carrier for payment of its charges.

40) Freight Charges – Insulating 3PL

Question: We are a 3PL. We have a client that we no longer want to extend credit terms to and do not want to incur any freight liability. We do need to ship out the client’s product and would like to know what options we have for shipping the product out on the client’s freight account pre-paid to the client’s consignee and not putting our company at risk for the client not paying the freight carrier.

Will putting the Client as the shipper using one of our facility location addresses insulate us from the freight company coming to us asking for freight payment should the client not pay the freight carrier? Should we sign the out-bound bill of lading as an agent of the client?

We do not own the inventory and we get paid for providing fulfillment and storage services. We do not mark up freight. In this case, we will not allow the client to ship on our freight accounts. We will have to arrange a pick up time with the freight carrier.

Do you believe we have a freight liability issue with the freight carrier?

Answer: As a general rule, the bill of lading is considered the “contract of carriage” and the parties named on the bill of lading as the shipper and the consignee are the parties liable for the freight charges.

I would think that putting the customer’s name down as the shipper on the bill of lading, and having the freight bills sent directly to the customer should insulate your company from liability. In fact, it would probably be a good practice to follow this procedure for all of your accounts.

41) Freight Charges – Multiple Bills of Lading to Same Consignee.

Question: We manufacture product under various trade brands. It is possible for us to ship from one manufacturing location to one of our distributors, one order of one trade brand and another order of another trade brand on the same truck. We are required to generate a separate bill of lading (B/L) for each trade brand order because of marketing requirements (ours internally). The problem is the carrier is billing us for a stop-off even though the goods are being delivered to the same address, because of separate B/Ls. Can or should they be doing this?

Answer: From your description of the problem I would say that the carrier can bill for two separate LTL shipments, but not for a “stop-off”. Thus, for smaller shipments you might have to pay the minimum charge on each shipment. Also, note that some carriers have multiple shipment rates that apply from one shipper to one consignee - you might want to check this.

42) Freight Charges – No Payment from Broker

Question: We are a carrier that moved several loads arranged by a broker. The broker failed to pay us for two loads and we want to know whether a carrier can collect from the shipper or consignee if the broker that arranged the move goes out of business or fails to pay the carrier?

Answer: Unfortunately, this question of liability for freight charges when a broker goes out of business comes up too often. Liability for freight charges depends on the facts and the relationships among the parties. It is also important to note that the analysis changes if the broker files for bankruptcy protection in the court, rather than simply does not pay.

Regrettably, the “double payment” problem is very common when brokers go out of business or abscond with funds. This is a “gray area”, but the general rule 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; that the carrier has extended credit to the broker, and not to the shipper; and also that (assuming the shipper actually paid the broker for the service) the shipper should not have to pay twice.

If the broker was never paid for the move it is possible for the carrier to seek payment from the shipper or consignee on the basis that they benefited from the service provided. However, insofar as the payor of the freight charges has a primary obligation to pay the broker, you, as the carrier, may be asked to sign a release and indemnification agreement would protect the payor should the broker seek to collect its fees.

If the broker files for bankruptcy, the matter is complicated because the bankruptcy estate will demand that it be paid all monies due the broker, and it will seek to recover any monies paid by the broker within 90 days prior bankruptcy filing as preferences claims.

I would suggest that you see if the broker has a surety bond on file with the FMCSA, and submit your claim to the surety company.

43) Freight Charges – Off Bill Discounts

Question: I have been billed by a supplier $498.61 in freight charges on a shipment received. Their bill from the freight carrier was $158.93, which includes their discount. We had questioned the amount of $498.61 as being high and the freight carrier sent us a copy of the bill and after seeing that, we only paid the $158.93.

Can the supplier enforce the $498.61 bill to us? We have only paid them the $158.93. The supplier is telling me it's perfectly legal to bill us the $498.61 and expect the full payment. They also said it was illegal for the freight carrier to fax us a copy of the bill showing their discount.

Answer: The question is how did your vendor represent the freight charges on its invoice to you?

I would note that some vendors use terms such as “shipping and handling” or have disclaimers to the effect that the charges shown on their invoices do not reflect the carrier’s actual charges because of volume discounts or rebates. However, if there has been no such disclosure, and if the vendor represented that the charges reflected its actual transportation charges, I would say that this is a misrepresentation and possibly even a commercial fraud. At the very least, it is a dishonest business practice.

44) Freight Charges – Offsetting Claims

Question: Prior to the passage of the Interstate Commerce Commission Termination Act (ICCTA) the law prohibited offsetting payment of transportation charges. Did ICCTA alter this law in any way or can shippers now offset claims against freight charges?

Answer: Shippers can, and often do, offset unpaid loss or damages claims against the carrier’s freight charges.

The former provisions against discrimination were part of the old “Elkins Act”, 49 U.S.C. § 11902, et seq. and were eliminated by the ICC Termination Act of 1995. The only remaining provisions in the current law relate to rebates or offsets in noncontiguous domestic trade (AK, HI, etc.) and household goods, and are found in 49 U.S.C. § 14902.

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.

45) Freight Charges – Offsetting Claims by Bankrupt Broker

Question: In November 2001 we placed several shipments with Enron Freight Markets. Enron filed chapter 11 bankruptcy shortly thereafter and, because another Enron company owed us money - we did not pay these invoices. Enron’s attorneys contacted us and we have had several letters go back and forth. We claimed a right of offset, to which they said “no” since the cases were not consolidated. We asked for proofs of delivery and proof of payment to the sub-contracted rail and motor carriers since we believe that there could be claims against us for any unpaid freight charges, and I’m sure there are many.

Enron’s attorneys are telling us that since more than 18 months has elapsed without claims or civil suit that we cannot be held liable to any unpaid carriers.

Does the 18 month statute of limitations as per 49 USC section 14705 apply to my invoices from Enron Freight Markets? Can I simply tell them that the statute has expired? Does the bankruptcy filing change the situation?

Answer: The 18-month statute of limitations in 49 USC 14705 would govern an action by a motor carrier to collect its freight charges.

This would not necessarily apply to a claim against your company by Enron if it was acting as a broker. I would think that a broker’s claim against its shipper arises out of a separate contract and would be subject to the usual state-law contract statute of limitations. In addition, claims that were not time-barred as of the date of filing of the petition in bankruptcy are usually subject to a 2-year extension of time in which the debtor in possession or trustee may bring suit.

46) Freight Charges – Pallets

Question: When shipping LTL are we required to include the weight of the pallet on our Bill of Lading. Our products are Plastic Articles NOI NMFC 156600 (Freight Class range between 100-250). We feel like using the pallets is a convenience to the Carriers so why pay additional revenue to them? In addition we are absorbing the cost of the pallets as the shipper. If we are legally required to include the weight, should we have a clause in our contracts stating that pallet weight won't be added to the BOL?

Answer: If you are shipping under a Uniform Straight Bill of Lading and the carrier is a participant in the NMFC, there will be language that incorporates the various rules in the Classification. Item 995 of the NMFC provides that charges are to be computed on the actual gross weights including "a shipping carrier, container or package, or pallet, platform or skid..."

You can, of course, enter into a written transportation agreement with the carrier that supersedes the provisions of the bill of lading and/or the classification and tariffs. We often include a contract provision to the effect that pallet weights are not to be included in the chargeable weight.

47) Freight Charges – Payment to Factor

Question: A broker that factors its receivables to a bank booked a load for a shipper (cost $3,900) and has now ceased operations. The bank is now seeking payment for the load from the shipper. The carrier that took the load from the broker finances its receivables with a different bank, and that bank is also seeking payment for the same load in the amount of $3,200. The broker’s commission is about $700.00 but the broker’s bank is seeking payment for the entire shipment. At this point the carrier has not been paid, and the 2 factors have not been paid. The shipper does not know whom to pay. What should the shipper do and are there any rules that address this issue?

Answer: First, the shipper only has a contractual relationship with the broker, not the carrier. Thus, if the shipper were to pay the carrier, it would still be subject to a claim from the broker or its assignee (factor/bank).

I would suggest that the shipper write to both of the claimants and ask them to come to some agreement as to which one should be paid. And, before paying anyone, the shipper should demand a release and indemnity agreement.

48) Freight Charges – Proper Classification

Question: We are trying to classify an item. The product is an aluminum angle as shown on a blueprint and it has a density of about 4 to 6 pounds per cubic foot. It is used in several different applications. Our weighing and inspection people are trying to classify this item based on density and I maintain that since the aluminum angle classification is not based upon density and the article is clearly an angle, that classification should apply. I submit that if carriers wanted to qualify angles on density they would have done so in the Classification, therefore the description should determine the classification. What is your opinion?

Answer: For technical questions involving application and interpretation of the National Motor Freight Classification we generally recommend that you contact one of the senior classification specialists for the NMFC at the National Motor Freight Traffic Association in Alexandria, Virginia for an opinion:

George M. Beck (703) 838-1813

Daniel E. Horning (703) 838-1820

William F. Mascaro (703) 838-1834

A full staff listing for contact is available at http://www.nmfta.org/staff2.htm.

49) Freight Charges – Recovering Overcharges from Misclassification

Question: A post audit has discovered that a LTL carrier improperly classified a product resulting in a potential overcharge around $200,000. The contract with the carrier indicated that the shipper reserved the right to file overcharge claims within a two-year period. At the time the contract was to be executed, both shipper and carrier agreed to reduce the time to 6 months.

This agreement was endorsed by the previous manager, leaving me with little chance to recover the $200,000. Specifically, an item was charged and paid as class 400 when it should have been class 125.

Is there any possibility of recovery? If so, can you cite any examples I may use in my defense?

Answer: Without reviewing the contract, I would have to assume that you have correctly interpreted the relevant language, that the agreement was in effect at the time of the shipments in question, and that it is binding on the parties.

I would note that if the contract does not specifically address the time limit for filing an overcharge claim and/or does not specifically waive provisions of Title 49, Subtitle IV, Part B, as provided in 49 U.S.C. §14101(B), the 180 day time limit in section 13710 would apply along with the 18 month statute of limitations in section 14705(a).

Section 13710 provides:

(B) INITIATED BY SHIPPERS- If a shipper seeks to contest the charges originally billed or additional charges subsequently billed, the shipper may request that the 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.

This being said, while the carrier may have a complete defense to these overcharges, there is no longer any prohibition against the carrier acknowledging the claim and agreeing to make some payment if it so chooses. It never hurts to inquire.

Assuming there is an ongoing business relationship, it is not unheard of for parties to come to some sort of agreement for compensation in situations like this and creativity may help the process. Rather than seeking an outright reimbursement of the overcharge, perhaps an increased discount and/or waiver of accessorial charges until the balance is covered could be agreed upon.

50) Freight Charges – Refused COD Shipment

Question: We shipped an order freight collect and executed section 7 of the bill of lading. Before the carrier attempted to make delivery, they found they (the carrier) had the consignee on credit hold and insisted on payment of freight charges before delivery. The consignee refused. Now the carrier wants us to take back the product. The client has not paid for the merchandise, as they have not yet taken delivery. Our terms are FOB origin. If we direct the carrier to return the goods to us, will we be responsible for the initial freight charges which the carrier was to collect from the consignee as well as charges for returning the goods to us?

Answer: Ordinarily, if the shipper executes “Section 7” of the Uniform Straight Bill of Lading (the so-called “non-recourse” provision), the carrier can only