Transportation & Logistics
Council, Inc.
|
Transportation & Logistics Council, Inc. |
| About the Council | Educational Programs | Publications | Q & A | Transportation Links | TLC Home |
By George Carl Pezold, Esq.
Question:
I am the claims mitigator for a 3rd party logistics company. We are a
TLC member. We purchase your books
each year and they are a great help to me. I have a couple of questions I would
appreciate your help with.
We
had a situation where a shipper was loading his product into a trailer of an LTL
carrier. The one piece was a little top heavy and started to fall. The
driver of the carrier reached up to prevent it from falling and helped load it
into the trailer. He left without any problems.
Later,
the shipper died and now the driver is suing the company that the shipper worked
for saying he hurt his back and can’t work anymore.
First,
who assumes liability for a driver who gets hurt while helping to load a truck? Do we as the 3rd
party have any exposure there? Does
the shipper have liability to the driver? As a broker, is there something
we should include in our contracts with the carriers to protect us and the
shippers from having this happen to them?
We
appreciate your input in this matter and look forward to your response.
Answer:
If the driver was injured in the course of his employment he would be
covered by Worker’s Compensation (which means he can’t sue his employer).
However,
in the “loading/unloading” situation, he could have a separate cause of
action in negligence against the shipper, if the shipper was in some way
negligent and that negligence caused or contributed to his injury. That,
of course, is a factual issue to be determined at trial. Typically these
cases involve unsafe loading docks, faulty equipment such as forklifts, and
large items falling over during loading or unloading.
In the situation that you describe, I don't see how a 3rd party or broker could be considered negligent. The recent cases holding brokers liable generally involve highway accidents and claims of “negligent hiring”, e.g., where the broker fails to exercise due diligence in selecting and checking out the carrier’s safety record.
Question:
I have a situation on a claim that I’m not sure who would be liable.
The
shipper loaded a trailer which was said to have 32 pallets, the trailer was
sealed by the shipper, the trailer arrived with the seal intact, but the
consignee states that there were only 30 pallets of goods.
Who
is liable for the loss ?
Answer:
Shortages from sealed trailers are always a problem and you need to be
somewhat of a detective to investigate the facts and to determine
responsibility.
Obviously
there are three possible ways the shortage could occur: that the shipper
didn’t load the 32 pallets into the trailer, that the carrier somehow stole
the goods without breaking the seal, or the consignee or its employees either
miscounted at destination or stole the goods.
When
you have a shipper load & count (“SL&C”) shipment that is sealed by
the shipper and is delivered with the seal(s) intact, there is a strong
presumption that the shortage did not occur in transit, i.e., the carrier would
not be liable. Of course, each situation depends on the facts (if the
carrier sealed the trailer instead of the shipper, or there is any evidence of
tampering with the seals, locks, hinges, etc.)
Remember
that the claimant has the burden of proving the condition and quantity of the
goods tendered to the carrier and the condition and quantity of the goods
actually delivered at the destination.
I
would suggest that you ask the shipper and the consignee to provide written
statements and documents as to what was actually tendered to the carrier and
what was actually received.
Question:
We have a customer that has waived their right to allow a 3rd
party to track their shipments by contract.
They have also waived their rights to refunds for late deliveries.
Below
is the exact language in their contract.
9.
Customer agrees to waive the Money Back Guarantee (Guaranteed Service
Refund) provision as outlined in the UPS Service Guide for all UPS Ground
services during the life of the Agreement.
10.
Guaranteed Service Refunds (GSR): Customer
agrees to the tracking limitations described in the current UPS Rate and Service
Guide and Tariff/Terms and Conditions of Service in effect at the time of
shipping. Customer also agrees that the use of a Third Party to track UPS
shipments in strictly prohibited and constitutes a breach of the agreement.
This
language would appear to prevent us (a third party) from tracking shipments
under the Guaranteed Service Refunds (“GSR”) clause (wherein the company
waived the right to refunds for late deliveries).
I am not sure if they can say this language, even though it is under the
GSR clause, also prevents a third party from tracking any shipments period, no
matter the reason.
Can
the language the carrier included in their contract regarding guaranteed service
refunds prevent us from tracking the shipments so we know which ones need to be
filed for a loss or damage claim? Under
the Carmack Amendment, does our customer have the right to allow us to track
their shipments just for their lost or damaged shipments?
Answer:
I can’t see any reason why the “waivers” that you describe would
prevent filing a claim for loss or damage to shipments (other than delay claims)
I
would take the position that the restriction is limited to use for the purposes
of a “Guaranteed Service Refund”.
Question:
Our company has experienced difficulties with transportation brokers
filing bankruptcy, resulting in our dealing with the resulting legalities of the
bankruptcy estate in addition to subcontracted carriers looking for payment.
As we continue to grow our business, our percent of managed
transportation is growing and we are looking at ways to protect ourselves
against financial risk. Part
of this surrounds expanding our business with asset only agreements.
However, based on our growth, and current system limitations, the need
for brokerages will still exist.
In
support of this, our CFO has requested that we insert into our transportation
agreement the requirement of a “letter of credit” (“LOC”), up to an
agreed upon amount (around roughly 30 days agreed upon business - ie. $50K -
$100K). I anticipate a less than
favorable response to this. However as an alternative, I have had some general
conversations with various brokers specific to the concept of requesting them to
issue a “performance bond” in our company’s name
(again, around the amounts listed above)
The
feedback has been lukewarm. However, the bond concept seems to provide for more of a
negotiating opportunity than the LOC.
My questions are - (A) does the concept of a “performance bond” in
our company’s name seem like a reasonable strategy to protect our company’s
risk; and (B) are there any other strategies, or contractual language that may
accomplish the same?
Answer:
As you know, the Federal Motor Carrier Safety Administration (“FMCSA”)
requires brokers to have on file a surety bond in the amount of $10,000.
Unfortunately, this is usually insufficient when a broker goes out of
business or otherwise fails to pay the carriers.
We
often recommend to our clients that they require in their contracts that the
broker obtain a supplementary surety bond - at least $50,000 or $100,000.
These are available from various sources including:
Avalon
Risk Management, Inc.
84
Wharf Street
Salem,
MA 01970
Phone:
(978)740-5677
FAX:
(978)740-6627
www.avalonrisk.com
Transportation
Intermediaries Association (TIA)
3601
Eisenhower Ave., Ste. 110
Alexandria,
VA 22304
www.tianet.org
Question:
I am a driver for a local precast concrete company, as the company has
only 3 drivers of its own, and the rest of the work is subbed out to
owner-operators. It has recently been brought to our attention that our
dispatcher, who is a salaried employee of the company, may have obtained a
broker’s license, and is still acting as dispatcher.
The other drivers and myself feel this is a severe conflict of interest
and need to know is there any law against such practice, and if so, how may we
proceed to improve our situation?
Answer:
From your description of the facts is quite possible that this might be a
conflict of interest, and it may actually be illegal.
Federal Motor Carrier Safety Administration (“FMCSA”) regulations
governing brokers at 49 CFR Part 371 contain the following language:
Sec. 371.9
Rebating and compensation.
(a) A broker shall not charge or
receive compensation from a motor carrier for brokerage service where:
(1) The broker owns or has a material beneficial interest in the shipment
or
(2) The broker is able to exercise control over the shipment because the
broker owns the shipper, the shipper owns the broker, or there is common
ownership of the two.
(b) A broker shall not give or offer
to give anything of value to any shipper, consignor or consignee (or their
officers or employees) except inexpensive advertising items given for
promotional purposes.
Question:
I am a member of your organization and tried to find an answer to this
question from your previous Q&As and publications, but I could not.
We
are handling an interstate cargo claim for our insured, a carrier who
transported three used automobiles. They damaged one of the autos resulting in $7,000 in repairs.
We denied the claim because the claim was not made and received by our
insured within 9 months of delivery. The
claimant’s lawyers are threatening to sue.
The
autos were delivered to one consignee. There
was no bill of lading issued and though each auto had a condition page showing
the condition of each auto at pick up and then at delivery, there were no
contract terms of any sort on any of these three pages.
In addition, our insured has no tariff.
We
believe our position in denying this claim is correct concerning our application
of the 9-month filing limitation. It
is our position that the 9-month filing limit for cargo claims is the
“standard” in the industry and has been for some time.
Barring a written and agreed upon time limit greater than nine months,
this 9-month period is the standard time limit accepted in the industry by all
involved in the movement of freight ... whether they be carriers or shippers.
We further believe this time limitation to be the acceptable standard
whether or not a bill of lading is issued by the carrier or if the bill of
lading is silent about the time period in which to file a cargo claim.
We further believe our position is supported by L&S Bearing
Company v. Randex International, 913 F.Supp. 1544 (S.D. Fla. 1995).
Here, as we understand it, the judge accepted the 9-month time limitation
as the industry standard for filing a cargo claim even though there were no bill
of lading terms.
Of
course, the claimant’s lawyers do not believe our position to be adequate
enough to win in a court of law.
Please
advise of your thoughts.
Answer:
Time limits for filing claims and bringing lawsuits are contractual, i.e.
there must be a contract (bill of lading, etc.) for them to be enforceable.
The Carmack Amendment, 49 U.S.C. 14706 only says that a carrier may not
by contract or otherwise provide for LESS than 9 months for the filing of a
claim or 2 years for the commencement of a lawsuit.
To
the extent that there may be some authority for a court to apply a 9-month time
limit that is not explicitly set forth in a contract of carriage or bill of
lading, there would have to be other factors involved such as a course of
dealing over a period of time during which the claimant had received numerous
bills of lading with the time limit.
The
L&S Bearing case that you cite is distinguishable on its facts and
does not support your position.
Question:
I received a quote of $1,200 to haul some equipment.
I provided detailed weight and dimensions to the freight company;
however, they apparently did not quote the correct weight and size of the
equipment. Upon arrival of the
equipment, we were presented with a bill for $2,100.
The increase was based on the incorrect weight and size, thus the hauler
had higher costs. The problem is
that my bookkeeper paid the bill without obtaining authorization, so what
recourse do we have to recover the increased cost, which was nearly double what
was quoted?
Answer:
I really can’t tell who was responsible for the mis-communication about
the weights, etc. Did you get a
rate confirmation in writing? If you gave the carrier the proper weight and dimensions, and
they confirmed in writing, you might have a chance to recover the overcharge.
If
so, send a written claim for the overcharge, with supporting documents, to the
carrier. If that fails, your only
recourse would appear to be filing a claim in small claims court.
Question:
We tendered a shipment thru an online service and upon checking on the
shipment found out the carrier lost the shipment.
I received a claim form from the online service and sent it back with the
amount. In the meantime, we had to book a replacement order and
reorder the material from our vendors.
About
a month later the carrier found the “lost” shipment and delivered it to our
customer. The material was okay and
accepted by our customer. We now have the replacement order packed up, but our customer
no longer needs it. We don’t
stock this material and won’t resell it.
I can return the material to our vendors, but will have to pay restocking
fees and freight back. The online
service won’t pay the original claim because the material was eventually
delivered. I understand that. My question is do I have any recourse in revising the claim
or submitting a new one to recoup our costs for the return of the material we
had reordered and are sending back to our vendors (the return freight charges
and restocking fees)?
Answer:
From your description of the facts, you did incur certain expenses
(damages) because of the delay in delivering the shipment a month late.
A
motor carrier is liable for damages resulting from delay, just as it is liable
for loss or damage to the goods, New York & Norfolk R.R. v. Peninsula
Exchange, 240 U.S. 34 (1916).
The
question in delay cases is whether the damages were “foreseeable” at the
time the contract of carriage was made, see Freight Claims in Plain English
(4th Ed. 2009) at Section 7.2. If
the damages were foreseeable, they are “general damages”, but if not they
are “special damages”, which would require the carrier to have some actual
or constructive knowledge of the consequences of the delay.
I
think it would be reasonable for a carrier to know that a delay of a month in
delivering goods would involve the type of expenses that you describe, and would
suggest that you file a claim for delay itemizing the various expenses.
Question:
I have a question regarding the consignee’s responsibility to receive
damaged cases. We hired a broker to
ship frozen food product from OH with a delivery in NV and a second delivery in
CA. The receiver in NV refused 32 cartons due to damage and noted the damage on
the Bill of Lading (“B/L”). The
carrier then made the delivery in CA, switching 32 of the good cases with the
damaged cases. The customer in CA
accepted the damaged cases as part of their delivery, leaving the carrier with
32 good cases. The carrier could not take the 32 good cases back to NV because
the driver had to make another pick up in CA. The carrier then took the cases to
a redelivery service. We were able to resell the product the next day, and the
redelivery service delivered the product the following week, according to their
LTL schedule. (The customer could have accepted the shipment immediately.)
It
is my understanding that we fulfilled our obligation to mitigate damages by
reselling the product, and that the charges incurred with the redelivery service
would be the carrier’s responsibility, since there would have been no need if
the damage hadn’t occurred in the first place.
The
broker is charging us for the redelivery costs, stating that since our customer
in CA accepted the damaged cases, that “proves” there was nothing wrong with
the product in the first place. Is
he correct? I was, frankly, surprised that the customer in CA did accept
the damaged cases, as the majority of our customers would have refused them.
Answer:
I don’t see how your company could be at fault for trying to mitigate
the potential loss arising out of this mess.
As
to the consignee in Nevada, since this shipment was frozen food and intended for
human consumption, it would not be unreasonable to reject a shipment if the
cartons were damaged, see Freight Claims in Plain English (4th
Ed. 2009) at section 11.5.
It
would seem to me that, even if the second customer did inadvertently accept the
damaged cartons, the costs of mitigating the loss should be borne by the
carrier.
Question:
We shipped for a customer of ours a couple shipments that were not paid.
First they claimed a check was mailed and they gave a check number.
They promised to check with their bank if the bank cleared their check.
Now they are completely ignoring letters and are not returning phone
calls. The freight was picked up from a warehousing/distribution company that
stocks the product for our customer. In
other words, our customer is not the shipper.
They import products and a warehouse holds it for them, prepares the
shipments, etc.
We
prepared all the bills of lading for the customer.
Shipper never signed “Section 7”.
My question is do we have the option to demand payment from the shipper
(shipper ultimately responsible…) or from the receiver of the freight (our
customer’s customer) as the owner of the goods?
Answer:
Unless “Section 7” (the non-recourse section on the bill of lading)
is signed by the shipper, both the shipper and the consignee named on the bill
of lading are liable for freight charges. On
a “prepaid” shipment, the shipper is primarily liable; on a “collect”
shipment, the consignee is primarily liable.
There
is an exception to consignee liability. If
the bill of lading is “prepaid” and the consignee-purchaser pays the
shipper-seller for the goods (including the cost of transportation), the
consignee will have a defense against “double payment” of the freight
charges that were included in the price of the goods.
Question: A carrier picked up the load in the U.S. on 12/17 for delivery in Mexico. The U.S. carrier dropped the trailer at the border crossing, it was then picked by another carrier for crossing the border and delivered to final destination by that carrier. The bills we have when the U.S. carrier dropped the trailer at the customs broker are clean, but the final destination shows wet product. The wet product appears to have been caused by a tarp that was in poor condition, a tarp which was provided by the U.S. carrier. It has taken eight months, since the delivery in Mexico, to determine which product was able to be utilized and we are only now receiving the claim.
Which carrier is responsible
for the damages? There were notes
on the original bill of lading (“B/L”), signed by the carrier, stating
“..load must be fully tarped and I am responsible for any wet or damaged
material..”
Answer: The answer could depend on whether the shipment moved under a through B/L or under separate B/Ls (one to the border, and a new B/L from the border to destination).
After reviewing the documents, from what I see, the first carrier issued a B/L to Nogales, AZ with a stop at Tucson, AZ. From Nogales the shipment was carried by a Mexican carrier to the final destination. There was no through B/L from the U.S. to the destination in Mexico.
Under the “Carmack Amendment”, a receiving carrier is liable for loss or damage to goods while they are in its possession or in the possession of a connecting carrier. However, on a shipment to an adjacent foreign country (Mexico or Canada), the receiving carrier is only liable if there is a through B/L from the U.S. to the foreign destination.
If there was no through B/L, delivery to the Mexican carrier would end the liability of the receiving (U.S.) carrier. Since there is no evidence that the damage occurred before the shipment was delivered to the Mexican carrier, I don’t see how the receiving carrier would be liable.
I don’t think that you can sustain an argument that the notation on the B/L to tarp the load, and that “I am responsible for any wet or damaged material” can be extended to cover the loss if the damage actually occurred while the shipment was in the hands of the Mexican carrier.
You can file a claim with the Mexican carrier, but note that under Mexican law, a carrier’s liability is very limited.
Question: We are an insurance company, and in addition to providing cargo legal liability coverage to our insureds (mostly smaller truckload carriers), we also act as their cargo claim handling agent when cargo claims are filed against them. A great majority of our insureds have transportation contracts with freight brokers who in turn have contracts with their customers.
We need help in determining how we should approach a specific claim situation. You noted in your January 2009 issue of TransDigest (“Carrier Liability Limitation Upheld”) that the Supreme Court’s decision in Norfolk Southern Railway Co. v. Kirby established the carriers’ liability as that (when an intermediary/carrier contract is involved) to which the intermediary and carrier agreed. We have no problems with claims filed directly against our insureds by the brokers’ customers, as we use the liability noted above.
However, what is our insured’s cargo liability for any claim filed against our insured by the freight broker who proves in a subrogation action that he (the freight broker) has paid his customer and is now the party suffering the (monetary) loss? I must point out that our insureds have two types of contracts with their freight brokers. The first makes our insured liable to the freight broker for any cargo loss/damage claim. And the second makes our insured liable to either the freight broker or the freight broker’s customer.
The problem I have involves the situation where the freight broker wants payment from our insured. My concern is that without a copy of the freight broker/customer contract, which may contain a limit of liability on the part of the freight broker, we may pay more than that required by this contract. A freight broker may make a higher payment than is required in his contract with his customer because 1) the customer is a highly valued account and the freight broker wants to maintain the business or 2) the broker expects to get paid in full from the carrier (our insured) since the broker/carrier contract provides for full liability on the part of the carrier.
My question is, as I do not believe under the circumstances described above that our insured should be required to participate in such a “goodwill” payment, can we legally demand a copy of the broker/customer contract and, in the event there is a limit of liability, can we take advantage of this lower limit and legally pay this amount rather than the full liability required in the freight broker/carrier contract?
NOTE: Our insured’s contract with the freight broker provides the following paragraph under the contract heading “Carrier’s Cargo Liability and Claims” ---
Carrier shall be liable for the full, actual value of the shipments tendered by BROKER to CARRIER. No released value rates, or other limitation of cargo liability, shall be valid or enforceable against BROKER or its customers unless expressly agreed to by BROKER in a signed writing separate from any bill of lading or other delivery receipt issued by CARRIER.
Since the freight broker represents their customer, I contend that the agreed to “… writing separate from any bill of lading or other delivery receipt issued by CARRIER” portion of the sentence could be interpreted as a contract (in addition to one between the freight broker and the carrier) between the freight broker and their customer which may contain a limitation of liability and that this limit of liability should apply to the carrier (our insured).
Answer: Brokers sometimes assume liability for loss or damage in transit and voluntarily pay a claim to a shipper-customer (even though the broker may not be legally obligated to do so), and then subrogate to the shipper’s claim against the carrier. Such an assumption of liability may arise out of a formal broker-shipper contract in which the broker has assumed liability, or may just be done to retain a valuable customer relationship.
Although I have seen many broker-shipper contracts in which the broker has assumed liability for loss or damage, I have never seen or heard of one where the broker’s liability is subject to a liability limitation. In other words, the scenario that you have described is very unlikely.
In any event, you ask whether you would be entitled to a copy of the broker's contract with its shipper-customer.
The Federal Motor Carrier Safety Administration (“FMCSA”) does have regulations that are applicable to brokers. 49 CFR Section 371.3 states:
371.3 Records to be kept by brokers.
(a) A broker shall keep a record of each transaction. For purposes of this section, brokers may keep master lists of consignors and the address and registration number of the carrier, rather than repeating this information for each transaction. The record shall show:
(1) The name and address of the consignor;
(2) The name, address, and registration number of the originating motor carrier;
(3) The bill of lading or freight bill number;
(4) The amount of compensation received by the broker for the brokerage service performed and the name of the payer;
(5) A description of any non-brokerage service performed in connection with each shipment or other activity, the amount of compensation received for the service, and the name of the payer; and
(6) The amount of any freight charges collected by the broker and the date of payment to the carrier.
(b) Brokers shall keep the records required by this section for a period of three years.
(c) Each party to a brokered transaction has the right to review the record of the transaction required to be kept by these rules.
As you can see, under sub-section (c) the motor carrier (a party to the transaction) would have the right to information pertaining to the freight charges, the broker’s compensation, etc. However this section does not really address the handling of a loss or damage claim.
You can, of course, demand a copy of the broker’s contract with its shipper-customer, but I don’t think the regulations would require the broker to provide information about its liability for loss or damage that may be contained in its broker-shipper contract. I would note that in the event of litigation, you would probably be entitled to disclosure of any such documents.
I am only aware of one court decision that involved issues similar to the ones you have described, Covenant Transport, Inc. v. Liberty Mutual Insurance Company, No. 1:01-CV-224 (E.D. Tenn. March 20, 2003). However this case is distinguishable because the intermediary was a freight forwarder (not a broker), and the legal relationship between a freight forwarder and the motor carrier is different, namely the relationship of shipper to carrier.
Question: I have received a claim from a large customer for a shipment of asparagus that was rejected due to “out of temp”. The claim is for 384 cases of asparagus @ $53.20 per case. I felt it would be prudent to verify what their retail pricing is for a bundle of asparagus. According to the produce manager, I was told that bundles were being sold at $3.48. I confirmed that there were 12 bundles to a box, for a retail case price of $41.76. This left me questioning how we were being claimed for $53.20 a case when they are selling the product for less than what they are paying for it. I sent them a request for further documentation since their invoice was not supplied within the supporting documentation. I stated that “Under the Carmack Amendment, the shipper is only entitled to recover from the carrier ‘the actual loss or injury to the property’. A shipper’s recovery is limited to the replacement cost or wholesale cost of the damaged cargo.”
I insisted they provide an invoice from their supplier quoting the text of 49 CFR Part 370, Investigation of Cargo Claims subsection B. “The original invoice, a photographic copy of the original invoice, or an exact copy thereof of any extract made therefrom, certified by the claimant to be true and correct with the respect to the property and value involved in the claim; or a certification of prices or values, with trade or other discounts, allowance or deductions, of any nature whatsoever and the terms thereof, or depreciation reflected thereon.” I stated “Without a valid invoice, I am unable to process your claim. Upon receipt of the requested documentation, I will then be able to continue the investigation of your claim.”
They provided the following response: “Your declination is declined. All of the shipments are import freight. Import suppliers do not send invoices as their invoices are paid via bank draft through our direct imports department. You have been provided with a document that shows the item number and the cost of the product. All of our carriers receive this document on import loads in lieu of an invoice since the import suppliers do not submit payment via invoice. This claim will remain valid and open for payment.” The document they provided is a screen print titled “P O Maintenance - Item Review”.
I’ve been told I have to handle this claim with “kid gloves” because to be black balled by this customer would mean a loss of millions of dollars in revenue for the company. However, this claim, including their proportionate freight charges, is over $22,000. Even by paying “retail” for the cost of the asparagus, would mean a savings of around $10,000. Am I correct in believing they should provide a copy of the invoice to verify their costs? Is this a common practice to pay vendors based on no documentation? I’ve even offered a settlement in lieu of an invoice, which they have subsequently denied. What recourse do I have at this point?
By the way, when I discovered your website, with all of its questions and answers, I felt I had come across the “Holy Grail” of claims information. It made my day! Thank you!!
Answer: The measure of damages is a factual question that usually depends on the specific facts and circumstances of each situation. While the courts have often used the “destination market value” of the goods, it is also recognized that other measures can be used where appropriate.
I assume that this claim is from the importer that is the consignee of a shipment that originated in a foreign country. The consignee would normally be entitled to claim its actual landed cost (including freight, duty, etc.). Under certain situations, where the consignee has already re-sold the goods to its customer, it may be entitled to its invoice price to its customer.
It would seem to me that the claimant should be able to provide documentation that shows its landed cost since all goods imported into the United States are usually accompanied by a commercial invoice.
Question: We shipped a truckload to a customer on a freight collect basis and did not sign section 7. Customer assigned JBH to pick up, delivery was completed and we got paid for our products.
Three months later, we received a collection agency demand to pay for the freight charges. Apparently JBH assigned the shipment to a broker (ST), who assigned it to another company (JT).
Our customer paid JBH’s invoice, JBH paid ST’s invoice, but ST folded (out of business) and did not pay JT. ST’s phones are disconnected.
Answer: As a general rule, a shipper remains liable for freight charges even if the bill of lading is marked “collect”. The only exception is if the bill of lading contains a “non-recourse” clause - often referred to as a “Section 7” clause - and the shipper has executed the non-recourse provision. If so, then the carrier can only look to the consignee for payment of its charges.
Your fact pattern is a little different from the simple shipper-carrier situation since your customer apparently arranged with a carrier to pick up the shipment, the carrier assigned the shipment to a broker, and the broker made arrangements with the actual carrier that transported the shipment.
In the situation where the shipper has paid an intermediary, the courts are divided. Some adopt the theory that the shipper remains liable even if it has paid the intermediary, since the bill of lading creates a contract between the shipper and the carrier. Others say that the intermediary is an independent contractor, that there is no privity of contract between the shipper and the carrier, and that the carrier essentially agreed to look solely to the intermediary for payment.
I realize that in your case, the consignee paid the first carrier, who paid the broker, and the broker failed to pay the actual carrier. It appears that there was no privity of contract whatsoever between your company and the actual carrier.
However, the answer to your specific question could possibly turn on whether the bill of lading shows the name of the actual carrier that transported the shipment. If it does not, I think the carrier would have difficulty in collecting its charges from your company.
Question: I work for a logistics provider, “L”, that has its own tariffs with carriers and as a service provides and manages all outbound freight for customer “A” under our tariff. L handles all freight issues for customer A directly with carrier to include P/U call in, claims and invoice audit. As per our agreement with customer A, upon completion of each freight delivery L invoices A for freight charges and in turn L pays all freight charges directly to carrier. The bill of lading (“B/L”) lists L as third party pre-paid bill to and there is no mention on the B/L as to who is responsible for freight charges in case of default of payment by customer “A”.
The problem; customer A has run into financial difficulties and claims it cannot pay its freight charges totaling $18,500 nor can it pay any partial amount. They also claim they may file for bankruptcy any day now, yet they continue to move product with a different carrier. L has notified A that it will now concentrate on contacting consignee for payment in full. Customer A has threatened to sue L for defamation if consignee is contacted for payment. Customer A signed the original credit application that clearly states “All cost of collection or attempting to collect of any overdue charges, including reasonable attorney fees, shall be the responsibility of the applicant.” Does L have the legal right to contact the consignee without facing a lawsuit by customer A?
Answer: Without seeing your contracts, tariffs, application forms, etc. I can only give you a qualified opinion.
You state that the original credit application states “All cost of collection or attempting to collect of any overdue charges, including reasonable attorney fees, shall be the responsibility of the applicant.” I don’t think that this language prohibits your company from attempting to collect freight charges from the consignee.
However you should be aware of the following:
On a “prepaid” shipment, a consignee may be liable for freight charges on the theory that it has received the benefit of the transportation services. However, there is a well-established line of court decisions in which the principle of “estoppel” has been applied. Where goods are shipped on a “prepaid” bill of lading, and the consignee-purchaser has paid the shipper-seller for the goods (including the transportation charges), this principle protects the consignee against “double payment” liability for the freight charges.
Also, if your shipper-customer does file for bankruptcy, your only remedy may be to file a claim as an unsecured creditor. It can be a violation of the “automatic stay” to pursue the consignee under those circumstances.
Question: We provide trucking during the off-season. A broker/sometimes carrier/sometimes third party logistics provider (“3PL”) convinced a shipper to use our trucking services (since we were both cheap and dependable). In the beginning the shipper used our services, and usually called us (not the broker) to arrange pickups. We sent our bills directly to the broker and broker paid the bills. Now with $40,000 of trucking charges outstanding, the shipper files for Chapter 11 and what we thought was the broker tells us that it was not a broker but just a paying agent and therefore it will not pay unless it gets paid. This broker/3PLP says that the bill of lading (“B/L”) acts as the only contract and since it is not listed our only recourse is against the shipper (now in Chapter 11) or maybe the consignee. We have no written contract with broker. But we do have a history of working with the broker in a broker/carrier capacity. Two questions:
1. Is he a broker (i.e., negotiates a price on behalf of shipper and pays the trucking charges)?
2. If broker is not listed on B/L and if we don’t have written contract with broker is it true that the B/L is our contract?
Answer: It is possible that the intermediary you refer to is a broker or a freight payment agent, depending on the facts surrounding the arrangements and how it is holding itself out to the public.
In any event, the shipper’s liability for freight charges is usually based on the “contract of carriage” (the bill of lading), and the shipper is primarily liable for freight charges.
The relationship between a broker and the carrier is a separate contractual relationship and brokers can be liable to the carrier even if they are not paid by their shipper-customer. This relationship does not need to be reflected in a formal written contract -- rate confirmations or a course of dealing, etc. can be sufficient to establish a contract.
It is possible to determine from the Federal Motor Carrier Safety Administration website if the intermediary holds operating authority as a broker.
Question: A shipment moved from Michigan to Jacksonville to a freight forwarder and the delivery receipt (“DR”) was signed damaged; the cartons were torn, and the consignee wrote on the DR that 2 chairs has missing castors and 8 cartons were crushed and torn--damage unknown. The chairs went on to Puerto Rico. The claim is being settled by the land carrier and they want the salvage. Who is responsible for getting the salvage back to the mainland?
Answer: From your description it appears that the damage occurred on the inland movement from Michigan to Jacksonville, and the claim was filed with the domestic motor carrier, who now wants the damaged goods for salvage.
Frankly, it would seem to me unreasonable (more expensive) to return the goods from Puerto Rico, and that the proper solution would be to have the goods repaired and/or sold for salvage in Puerto Rico. Then the claim would be amended to show either the cost of repair or the invoice price less the salvage receipts.
Question: I previously worked for an inland motor carrier and currently handle claims for a marine transportation company; we move containers and vehicles on our barges to and from Puerto Rico. Are claims filed by U.S. government agencies subject to the same claim regulations as “normal” claims? The claims are primarily filed regarding military shipments and at both companies I have been told they are exempt from the normal requirements but the only explanation is that “it’s the government and they do what they want.” Your assistance is appreciated.
Answer: I wasn’t sure of the answer to your question, so I asked my colleague, Hy Hillenbrand. Here is his response:
“This is a complicated question without sufficient information to give a response. If the shipment moved was on a government bill of lading under a section 22 quote, then we would have to look at the contract to determine the answer. If the shipper is an ordinary shipper who was shipping government property under its own contract, bill of lading or contract, the shipment being governed by the Harter Act, unless the contact incorporates COSGA as many bills of lading to Puerto Rico do, then the fact that is government property does not make a difference and it’s an ordinary claim. However, here again, we do not have a copy of the contract.”
Question: After reading your Editorial from January I was reading through the Uniform Commercial Code (“UCC”) Article 7 for rules applicable to exempt motor carriers. I noticed that under 7-309(b) that carrier liability can be limited under the UCC if rates are dependent on the value of the goods shipped and the consignor has an opportunity (and notice of the opportunity) to declare a higher value. Curious as to why it would be the consignor rather than the shipper that is entitled to this notice and opportunity? Carmack counterpart provision refers to an agreement with the shipper. If I hire a carrier and send it to a pick up point, shouldn’t I be the one given the opportunity to declare a higher value?
Also, I’m wondering if the UCC would apply to the airfreight forwarders example you mention in the editorial?
Answer: First, I would note that the terms “shipper” and “consignor” are essentially the same.
Both the Carmack Amendment and UCC assume that the shipper would be the one to enter a released value (or a declared value) since the carrier is required to “issue” a bill of lading or receipt to the shipper -- the one tendering the goods for transportation.
This does not prevent someone other than the “shipper” that contracts with the carrier from making a binding contractual agreement as to the carrier’s liability. In other words the agreement as to the carrier’s liability can be in a separate writing, and doesn’t necessarily have to be on the face of the bill of lading.
As to air freight forwarders (for domestic shipments), I would think the UCC should apply since Secion 7-309 uses the word ‘carrier’ and is not limited to motor or rail carriers. Even if it does not apply, the common law requirements of notice, choice of rates, etc. are essentially the same.
First Follow-up Question: Thanks George, but I did want to point out that UCC 7-101 defines consignor as the party supplying the goods & the shipper as the party that contracts with the carrier.
I take it from what you are saying however that it’s the party that contracts for the carriage that must agree to any limit on liability, regardless of what a literal reading of the text of the UCC might suggest.
First Follow-up Answer: I don't want you to mis-construe my comments. The party that contracts with the carrier CAN make a binding contractual agreement as to carrier liability. However, if that party does not have a written agreement as to liability, the default liability provisions would normally be the bill of lading and any tariffs that are incorporated therein by reference.
By the way, the definitions in the New York version of Article 7 of the UCC (7-102) do not include a definition for “shipper”.
Second Follow-up Question: Sorry to pester you with this. But here's where I'm struggling:
If I hire a carrier, and we agree to a rate without any liability limitation, and it picks up from my consignor (and lets say we’re under UCC here), and the carrier issues a bill of lading limiting liability to $.50 a pound, this could prevent me from recovering the actual value of any damaged goods, even though I was never presented with this limitation?
I would assume that if I'm unaware of the limitation (and did not agree to it), then no limitation applies. This idea that if the consignor is made aware of a limitation it binds me is what I'm struggling with...
Second Follow-up Answer: If you have a proper written agreement with the carrier that spells out the liability, and says that it supersedes any provisions of the carrier’s bill of lading and/or tariffs, that should be sufficient.
Question: Question 1 - FedEx National picked up goods at our dock and the driver noted that there were freeze tags on some of the boxes. Driver left with our time sensitive shipment but returned four days later indicating that they do not handle freezable goods. FedEx National advised that the bill of lading (“B/L”) must indicate that the shipment included freezable goods. Who is liable for the cost incurred to get the shipment to our customer on time?
Question 2 - FedEx customer service advised that the only service they offer that would get the shipment to the customer the next day was FedEx Custom critical. Our warehouse assumed that the charges would be waived given the four day delay was caused by FedEx National. Who owes the charges for the FedEx Custom Critical service?
Answer: I understand why you feel that FedEx National should have some responsibility for the delay and the extra charges for expedited delivery -- and they might agree if you explain the situation to them.
However, most likely FedEx has provisions in its tariff or service guide that deal with protective services such as refrigeration or protection from freezing. Unfortunately, the law only requires carriers to provide copies of tariffs, service guides, etc. “on request of the shipper”, so the burden of knowing what is in the tariff or service guide generally falls on the shipper.
Question: We are researching a claim where product was damaged due to the load not being tarped. The rate confirmation received by the carrier definitely shows an “N” in the tarp question section. However, clearly marked on the bill of lading (“B/L”) it states “load must be fully tarped”. Do we have an argument against the carrier that the prevailing document in this situation is the B/L?
Answer: The bill of lading is usually considered the “contract of carriage” between the shipper and the carrier, and is therefore binding on the parties. Normally an instruction to tarp a load that is clearly stated on the face of the B/L would be binding on the carrier when it accepts the shipment and issues (signs) the B/L.
I don’t think the “rate confirmation” trumps the B/L. However, depending on the facts, it is possible that the broker may have some liability to the shipper if it was negligent because it failed to give proper instructions to the carrier.
Question:
I need help regarding a claim issue please.
We have contracted carriers that drop/swap on our distribution center (“DC”)
yard. Our contract states that we have 72 hours to notify the carrier of
any discrepancies. If we encounter damage, we reference the National Motor
Freight Classification (“NMFC”) for clarification regarding the exact number
of days for the carrier to inspect the damage and take or render possession.
The latest information I have is 15 days for compliance but can you verify or
give me the exact wording from regulations? Thank you.
Answer:
The National Motor Freight Classification (“NMFC”) contains
the following provisions about inspection of damaged goods and salvage
retention:
Item 300140 INSPECTION BY CARRIER
Inspection by carrier will be made as promptly as possible and practicable after receipt of request by consignee. Inspection will be made within five normal work days after receipt of request from consignee, excluding Saturdays, Sundays and holidays. A day will be considered as the passing of twenty four (24) hours from 9 A.M., local time from the date of receipt of request for inspection. Inspection of carrier will include examination of the damaged merchandise, the shipping container, and any other action necessary to establish all facts. If a shortage is involved, inspector will check contents of package with invoice, weigh the shipping container and contents, or conduct any other type of investigation necessary to establish that a loss has occurred. In either case inspection will be limited to factual report. Consignee must cooperate with carrier in every way possible to assist in the inspection. A written record of carrier's findings will be made at least in duplicate. The original of the report will be given the consignee for claim support. Any inspection report issued must be incorporated in claim file.
Item 300145 FAILURE TO INSPECT
In the event carrier does not make an inspection the consignee must make the inspection and record all information to the best of his ability pertinent to the cause. Consignee’s inspection, in such case, will be considered as the carrier’s inspection and will not jeopardize any recovery the consignee is due based on the facts contained in the report.
Item 300150 SALVAGE RETENTION
When visible or open damage to a shipment has been established by notation having been given at time of delivery or concealed damaged established by inspection report, it is the duty of the consignee to retain damaged merchandise and shipping container until carrier desires to take possession of merchandise as salvage. If record conclusively reflects carrier liability, carrier will take possession of the damaged merchandise as soon as possible and in any event, within thirty (30) days from date shipment was noted damaged on carrier delivery receipt or from date of inspection report, if damage was concealed. If carrier does not take possession of the damaged merchandise within the time prescribed above, consignee must contact delivering carrier and request removal of goods from his premises within fifteen (15) days from the date of such communication. The above applies only when the carrier and consignee agree that the carrier will handle disposition of the salvage, and does not in any manner affect the legal duty that the consignee, when there is substantial value in the salvage, must accept and handle it in such a manner as to mitigate the carrier's loss as much as possible. If there is doubt of carrier liability, the carrier will so advise consignee; in which even the consignee may hold the merchandise until liability of carrier is determined, or may dispose of it so as to mitigate the damage, and may file claim for such damage. Carrier will remove the damaged goods within the fifteen (15) day period or advise consignee that carrier liability is in doubt and that damaged merchandise is to be retained by the consignee until carrier has completed investigation of claim.
It should be noted that the federal claim regulations are found in 49 CFR Part 370, Principles and Practices for the Investigation and Voluntary Disposition of Loss and Damage Claims and Processing Salvge, and these regulations apply to all motor carriers and freight forwarders.
Items 300140, 300145 and 300150 in the NMFC are NOT part of the federal regulations, and therefore they only become applicable by contract (e.g., a bill of lading or a transportation contract), and when the motor carrier is a participant in the NMFC, see 49 U.S.C. 13703(G).
Question: I have a series of very basic questions about rail and intermodal transportation, which will show my ignorance on the subject. I apologize in advance.
1) Does the term “rail carrier” normally include entities other than the major railroads such as Union Pacific, CSX, Santa Fe, etc.? I’m reading Union Pacific’s Master Intermodal Transportation Agreement, and there are provisions that say things like, “UPRR or any rail carrier party to an agreement that is subject to this agreement...” and “cargo loss and damage claims presented to UPRR will be resolved for the account of all domestic US and Canadian rail carriers involved in the transportation of shipments moving under the authority of this agreement...” Who are the “rail carriers” being referred to here? Are they other railroads, companies who manufacture the containers, companies who arrange rail transportation such as ‘Intermodal Marketing Companies,’ or someone else?
2) When a shipper or intermediary tenders a shipment to, say, UP Railroad, for an intermodal movement that is to be transported to its final destination by a drayage motor carrier, is there normally a Bill of Lading (“B/L”) issued that would govern the entire trip, even the dray portion? Whether or not the entire trip is governed by one B/L, would there be a B/L pertaining to the rail portion that somehow incorporates the railroad’s Rules Circular? (I’m noticing that 49 USC 11706 reads almost exactly like 49 USC 14706 and says that bills of lading will be issued.)
3) Are all these railroads exempt from the federal regulations?
Would you agree that someone like JB Hunt whose containers and equipment are put on railroads qualifies as a rail carrier? 49 USC 10102 has the following definitions:
(5) “rail carrier” means a person providing common carrier railroad transportation for compensation...
(6) “railroad” includes-
(A) a bridge, car float, lighter, ferry, and intermodal equipment used by or in connection with a railroad;
So it seems to me that when a shipper tenders a continuous intermodal TOFC/COFC (trailer or container on flatcar) shipment to anyone who qualifies as a rail carrier, that shipment would be exempt but that the carrier would be required to offer Carmack protection to its customer, and if it doesn’t Carmack liability would apply (because of sec 10502(e) of 49 USC and interpretations of that). Is that generally right?
Answer: Let me try to answer your questions.
1. Unless there is some other relevant language in the UP’s Master Intermodal Transportation Agreement, I would think that the reference to “rail carriers” in the intermodal agreement means the actual railroads (receiving, interline and delivering carriers) that are parties to an intermodal movement that is covered by the contract.
Intermediaries such an “IMC” are not normally considered to be a rail carrier, although it is possible that a stack-train operator might be considered a carrier depending on how it holds itself out to the public.
2. Usually an IMC does not issue a bill of lading. The IMC is similar to a broker, and most of them essentially disavow any liability for loss or damage in their "terms and conditions". (There are some IMC’s that contractually agree to assume liability.)
Usually, separate arrangements are made with the drayage carriers and with the origin railroad, and there is no through bill of lading (contrary to the mandate of the Carmack Amendment). What this means is that the shipper must look to the responsible carrier in the event of loss or damage. This could be the receiving or delivering drayage carrier, or the receiving, interline or delivering railroad. Drayage carriers may or may not attempt to limit their liability through bills of lading and/or tariffs. The liability of a receiving, interline or delivering railroad will usually be governed by the origin railroad’s tariff or exempt circular.
Sometimes a receiving motor carrier (drayage carrier) will issue a through bill of lading (or sign one prepared by the shipper). While there is little case law on this, under the Carmack Amendment, both the receiving and delivering motor carriers would be liable - regardless of where the loss occurred.
3. Railroads are not “exempt” from federal laws and regulations, but a substantial class of commodities and movements are exempt, either by statute or regulation, e.g., TOFC/COFC and boxcar movements, fresh fruits and vegetables, etc.
TOFC/COFC transportation provided by a RAIL carrier is “exempt” under 49 CFR 1090.2. Thus, although the railroad’s liability is still subject to Carmack, see Tokio Marine and Fire Ins. Co., Ltd. v. Amato Motors, Inc., 996 F.2d 874 (7th Cir. 1993), rail carriers usually offer “alternative terms” in their exempt circulars as provided in 49 U.S.C. 10502(e).
The TOFC/COFC exemption is not applicable to services provided by a MOTOR carrier that uses “substituted service” by rail for a portion of the movement.
I believe that J.B. Hunt would be considered a motor carrier that uses “substituted service” by rail (TOFC) as provided in 49 CFR 1090.3. It would not be considered a rail carrier, and the freight would move under its motor carrier’s bill of lading.
Question: We are a shipper of bulk aggregates used in heavy highway construction projects. All shipments are T/L (truckload) divisible loads and shipped via common carrier. All shipments are weighed and the bill of lading (“B/L”) produced for each load at the shipping location.
Typical deliveries can range from 5 to 50 loads per day and are dumped into a stockpile located on the customer’s property. The carrier will obtain signatures and render a signed copy to the consignee and the shipper.
My questions are:
How long must a carrier hold records of signed delivery bill to provide proof of delivery (“POD”)?
How long after delivery can the consignee claim non-delivery of one or more loads?
Answer: The federal requirements governing record retention are found in the Federal Motor Carrier Safety Administration’s (“FMCSA”) regulations at 49 CFR Part 379 - Preservation of Records, and apply to all motor carriers and brokers. The regulations specify various time periods depending on the type of record, and permit preservation “by any technology that is immune to alteration, modification, or erasure of the underlying data and will enable production of an accurate and unaltered paper copy”. Thus, it is clear that originals may be copied, scanned, microfilmed, etc. for this purpose.
A bill of lading or proof of delivery would generally fall into the group of documents that have a minimum one-year retention period (or one year after settlement if there was a claim involved).
Obviously, the best practice is to file a claim promptly upon delivery or discovery of any loss or damage. However, the “Carmack Amendment” (49 USC 14706) states that a carrier may not provide for anything less than 9 months from the date of delivery for the filing of a loss or damage claim, so that any claim filed within that period would be valid.
Question: Where can I find (preferably online) the full text of the most recent revision of the Interstate Commerce Act?
Answer: The former Interstate Commerce Act was codified in 1978 in Title 49 of the U.S. Code, and re-codified again as a result of the ICC Termination Act of 1995.
The present provisions of the ICA are now found in Title 49, Subtitle IV - Interstate Transportation which covers Rail Carriers (Part A), Motor Carriers, Water Carriers, Brokers, and Freight Forwarders (Part B) and Pipeline Carriers (Part C).
You can get Title 49 at most good libraries, or on-line through commercial legal services such as WestLaw or Lexis. It is also available on-line at http://www.gpoaccess.gov/uscode/index.html or http://www2.law.cornell.edu/uscode/html/uscode49/usc_sup_01_49.html at no cost.
Question: A claim for damaged/refused product was filed and paid. Subsequently, within nine months, it was determined that a shortage noted on the delivery receipt was overlooked when the claim was filed. What are the limitations on filing or amending a claim after it has been paid?
Answer: The minimum time limit for filing a claim - or for amending a claim - is nine months under the Carmack Amendment, 49 U.S.C. Section 14706, so you can amend a claim at any time within that period.
However, there is another problem. You indicate that you were paid on this claim. If you have been paid, and have accepted and deposited the carrier’s check in payment of the claim, under the laws in most states, this would be an “accord and satisfaction” that would bar any further claims arising out of the same transaction.
Question: Can someone tell me what the general freight rate increase is nationwide for 2009?
Answer: There really are no collectively-made “general freight rate increases” any more for motor carriers since the rate bureaus lost their anti-trust immunity. Each of the major less-than-truckload carriers does publish its own rate increases from time to time and these are usually reflected in the carrier’s individually-published class rate tariff.
Question: I have a carrier who we contracted to haul 5 loads for us at a set price. After the carrier picked up the first load, they called us and asked if we would advance them a partial payment on the load. They asked for 40% at first and the next day they called in and said no, we need 90%.
This made us a little leery, so I put them off to do some checking. Then luckily a phone call came in about one of the loads we had posted on a load board. The carrier asked about the load and proceeded to tell us they had picked up a load for another brokerage from the same place going to the same place for a different amount. To be exact they were being paid $300.00 more than what I was paying the carrier who was now brokering the freight.
Now before you ask, yes we are the only ones moving the freight from this warehouse. They are closing it down and have contracted us to move all the loads. I have a rate agreement from the carrier who called me showing the load being brokered to them. Also, on the bill of ladings the carrier’s name is not the one I gave the load to originally. I have an idea of what they are doing but can’t prove it except from past experiences when I was working as a carrier.
Would you be able to advise me as to where I can find information on how to proceed? My contract does state if a carrier double brokers the freight to another carrier I am not responsible for paying them.
Answer: From your description of the facts, it appears that Carrier A “double-brokered” the load to Carrier B, which actually carried the shipment. It also appears that your rate agreement with Carrier A was some $300 less than it agreed to pay Carrier B. Obviously, no legitimate business would do this.
This sounds like a scam. We have heard of similar scenarios where Carrier A (or a broker) books a shipment at a very low price in order to get the work, double brokers the load to Carrier B at a higher price, and then collects from its customer and doesn’t pay Carrier B.
Be VERY careful! If you pay the wrong party, you could be liable for a double payment. If there is any question as to which carrier should be paid, get all the paperwork (bill of lading, delivery receipt, etc.) and verify which carrier actually handled the load. Get a written authorization from the carrier that double-brokered the load to pay the actual carrier; if they are not willing to do this, hold payment until it is clear that you won’t end up with liability for a double payment.