QUESTIONS & ANSWERS

Transportation & Logistics

Q&A in Plain English

Books 7, 8 & 9 - A Compilation

George Carl Pezold

and

Raymond A. Selvaggio

Transportation & Logistics Council, Inc.

120 Main Street, Huntington, New York 11743

Library of Congress Catalog Card Number: 99-075736

system, or transmitted, in any form or by any means, electronic, mechanical, photocopying,

recording, or otherwise, without the prior written permission of the copyright owner.

Printed in the United States of America.

INTRODUCTION

"Transportation & Logistics - Q&A in Plain English -

Books 7, 8 & 9 is a compilation of the seventh, eighth and

ninth books in this series of the Council's popular texts that

were originally published in 2009 through 2013 .

Based on hundreds of actual questions submitted to the

Transportation & Logistics's “Q&A” forum on the Internet, to

the T&LC HotLine and to the TransDigest by shippers, carriers

and logistics professionals, the new text is loaded with

informative answers by George Carl Pezold and Raymond A.

Selvaggio, two leading transportation attorneys.

These are real questions, from business people with a

wide range of day-to-day transportation and logistics

problems, and the answers are clear, concise and to the point.

"Transportation & Logistics - Q&A in Plain English - Books

7, 8 & 9" is intended to be a useful deskbook, and a refresher

and handy reference for experienced transportation and

logistics professionals. It will also serve as an indispensable

teaching aid for students and newcomers to the transportation

and logistics field.

For those wishing to explore subjects in greater depth,

there are numerous references to T&LC texts and educational

materials, such as Freight Claims in Plain English (4th Ed.

2009), as well as to relevant statutes, regulations and court

decisions.

In addition, readers may continue to view timely Q&A's

as they are published in TransDigest, either by joining the

Council or by subscribing. Information on membership and

publications may be found by visiting the Council's web site at

www.tlcouncil.org.

ABOUT THE AUTHORS

GEORGE CARL PEZOLD

George Carl Pezold is admitted to practice as a member of the Bar of the State of New York, as

well as numerous federal district and appeals courts. He holds a J.D. from New York University

School of Law and an M.E. degree from Stevens Institute of Technology. He is the senior member

of the firm of Pezold, Smith, Hirschmann & Selvaggio, LLC in Huntington, New York, concentrating

in the areas of transportation and logistics.

Mr. Pezold is Executive Director of the Transportation & Logistics Council, Executive

Director/General Counsel of the Freight Users Association of New York, and former General

Counsel of the Long Island Import-Export Association. He is a member of The Maritime

Lawyers Association, the Association of Transportation Law Professionals, the Transportation

Lawyers Association, and the state and local Bar Associations.

In addition to his extensive litigation background during the last forty-five years, Mr. Pezold is

author of Freight Claims in Plain English (4th Ed. 2009), Shipping & Receiving in Plain English - A

Best Practices Guide (T&LC 2010) and many other publications, has written numerous papers and

articles, and is a frequent speaker at seminars and programs on transportation and logistics.

RAYMOND A. SELVAGGIO

Raymond A. Selvaggio is a member of the law firm of Pezold, Smith, Hirschmann &

Selvaggio, LLC. Mr. Selvaggio's practice concentrates in litigation and transactional matters

related to transportation and administrative law.

He holds a Juris Doctor degree from Brooklyn Law School and is a member of the

Transportation Lawyers Association, as well as the New York State, Suffolk County and

American Bar Associations. He is admitted to practice before the U.S. Supreme Court as well as

several Circuit Courts of Appeal and Federal District Courts.

He is also General Counsel to the Transportation & Logistics Council, Inc.

ACKNOWLEDGEMENTS

The authors wish to thank Stephen W. Beyer, Editor of the TransDigest, and Michael Bange,

of Champion Transportation Services, for their invaluable assistance in editing and proofreading

the text.

Table of Contents

TABLE OF CONTENTS

Bankrupt Carriers – Trustee Retention of Records ............................................................. 1

Bills of Lading – Blind Shipments ....................................................................................... 1

Bills of Lading – Compared to Delivery Receipts ................................................................ 2

Bills of Lading – Effect of Misdescription on Claim ............................................................. 2

Bills of Lading – Incorporating Non-Standard Terms .......................................................... 5

Bills of Lading – Is Weight Required? ................................................................................ 6

Bills of Lading – Multiple Parties and Shipments ................................................................ 6

Bills of Lading – Section 7 Non-Recourse Provision........................................................... 7

Bills of Lading – Signature Requirement ............................................................................ 7

Bills of Lading – Use of Proper Documentation .................................................................. 9

Bills of Lading – Use of VICS Bill of Lading and Digital Images .......................................... 9

Bills of Lading – VICS .......................................................................................................10

Bills of Lading – What Needs to Be Printed on Form .........................................................10

Bills of Lading – Whose Names Should Be Included .........................................................11

Brokerage – Documents for Importation ............................................................................11

Brokers – Collection Against Surety Bond on Intrastate Shipment ....................................11

Brokers – Does Factoring Receivables Impact Charges and Claims .................................12

Brokers – Filing Against Broker Surety Bond ....................................................................12

Brokers – Legal Liabilities .................................................................................................13

Brokers – Operating as a Dispatcher ................................................................................14

Brokers – Paying Carrier When Broker Disappears ..........................................................14

Brokers – Recovering Surety Bond ...................................................................................15

Brokers – Required Licensing ...........................................................................................15

Brokers – Shipper Paying Carrier Directly After Broker Default .........................................16

Brokers – Surety Bonds ....................................................................................................16

Brokers – Who Pays When Broker Defaults ......................................................................17

Carrier Re-Weighing – Reader Response .........................................................................17

Carriers – Air Freight Forwarder vs. Air Freight Broker .....................................................17

Carriers – Common or Contract ........................................................................................18

Carriers – Common versus Contract Carrier Authority ......................................................19

Carriers – Information on Canadian Carriers .....................................................................20

Carriers – Loading a Multiple Stop Shipment ....................................................................20

Carriers – Minimum Quantity Commitment With NVOCC ..................................................20

Carriers – Obtaining Surface or Air Freight Forwarder Authority .......................................21

Contracts – Broker Liability ...............................................................................................22

Contracts – Liability Limitations .........................................................................................22

Damages – Carrier Damage to Building ............................................................................23

Fleet Operations - Corporate Families ..............................................................................24

Freight Bills – What Information Is Required .....................................................................24

Freight Brokers – Who Can Go After Bond .......................................................................25

Freight Brokers and Shipper’s Agents ...............................................................................26

Freight Charges – “Bumping Rule” ....................................................................................27

Freight Charges – “Free Astray”........................................................................................27

Freight Charges – “Tare” Weight.......................................................................................28

Freight Charges – “Truck Ordered But Not Used” .............................................................28

Freight Charges – 3PL Contacting Consignee for Payment ..............................................28

Freight Charges – 3PL Seeks to Collect For Services .......................................................29

Freight Charges – Accessorial Charges ............................................................................29

Freight Charges – Addition of Fuel Surcharges .................................................................30

Freight Charges – Air Cargo Class Action Settlement .......................................................31

Freight Charges – Back Soliciting a Carrier ......................................................................31

Freight Charges – Bill Paid Short for Not Following Instructions........................................32

Freight Charges – Billing for Redelivery ............................................................................32

Freight Charges – Billing Through 3PL .............................................................................33

Freight Charges – Broker Collecting From Consignee ......................................................33

Freight Charges – Broker Fails to Pay ..............................................................................33

Freight Charges – Broker Obligations ...............................................................................34

Freight Charges – Broker Offsetting Claims ......................................................................34

Freight Charges – Broker Terms .......................................................................................35

Freight Charges – Broker/Carrier Agreements ..................................................................35

Freight Charges – Brokered Truckload .............................................................................36

Freight Charges – Brokers and Factors ............................................................................36

Freight Charges – Carrier Bills Accessorial Charges to Shipper........................................37

Freight Charges – Carrier Inspections & Reweighing ........................................................38

Freight Charges - Carrier Not Paid By Broker ...................................................................38

Freight Charges – Carrier Payments Garnished ...............................................................40

Freight Charges - Carrier Seeking Payment After 20 Months ............................................40

Freight Charges – Carrier Seeking to Collect on Brokered Load .......................................40

Freight Charges – Carrier Seeks to Collect on Double Broker Load ..................................41

Freight Charges – Carrier’s Lien for Freight Charges ........................................................42

Freight Charges - Carrier's Lien ........................................................................................42

Freight Charges – Claim for Payment on Brokered Load ..................................................43

Freight Charges – Class “0” Freight ..................................................................................43

Freight Charges – Classifying Reconditioned Items ..........................................................44

Freight Charges – Collect Shipment with Section 7 Signed ...............................................45

Freight Charges – Collecting from Broker Bond ................................................................46

Freight Charges – Collecting from Broker When Shipper Defaults ....................................46

Freight Charges – Collecting on Lufthansa Class Action ...................................................47

Freight Charges - Consignee Fails to Pay Freight on Air Waybill ......................................47

Freight Charges – Consignee Liability on Freight Prepaid Shipment .................................48

Freight Charges – Consignee Liability on Prepaid Shipment .............................................48

Freight Charges – Consignee’s Liabilities When Shipment Damaged ...............................49

Freight Charges – Danger of Double Brokered Loads .......................................................50

Freight Charges – Deducting Claims from Broker Fees ....................................................51

Freight Charges – Defaulting Broker .................................................................................51

Freight Charges – Demurrage Fees When Ship Sails Early ..............................................52

Freight Charges – Density and Cubes ..............................................................................52

Freight Charges – Detention Fees ....................................................................................53

Freight Charges – Disappearing Broker ............................................................................54

Freight Charges – Discounting Rates to Shippers .............................................................55

Freight Charges – Document Retention When Business is Taken Over ............................56

Freight Charges – Double Brokered Load .........................................................................57

Freight Charges – Double Brokered Loads .......................................................................57

Freight Charges – Duplicate Payments and Broker Records ............................................58

Freight Charges – Expedited Service on Replacement Shipment .....................................60

Freight Charges – Failing to Pay Factor and Carrier Now Bankrupt ..................................60

Freight Charges – Freight Held Hostage ...........................................................................60

Freight Charges – Freight Prepaid When Shipper Fails to Pay .........................................61

Freight Charges – General Rate Increase .........................................................................61

Freight Charges – How to Protect Against Broker Default .................................................62

Freight Charges – Including Pallet Charges and Unloading Charges ................................62

iii

Freight Charges – International Freight Forwarder ............................................................63

Freight Charges – Interpreting the NMFC When No Value Shown ....................................64

Freight Charges – Is an E-Mail Quote from a Carrier Binding? .........................................64

Freight Charges – Is Consignee Liable if Broker Fails to Pay Carrier? ..............................64

Freight Charges – Late Billing of Railroad Demurrage Charges ........................................65

Freight Charges – Late Submission of Supporting Documents .........................................65

Freight Charges – Liability for Overweight ........................................................................66

Freight Charges – Liability When Broker Provides Wrong Info ..........................................67

Freight Charges – Listing of Bill of Lading .........................................................................67

Freight Charges – Master Bill of Lading ............................................................................68

Freight Charges – Misdelivery of Blind Shipment ..............................................................68

Freight Charges – NAFTA Shipment .................................................................................68

Freight Charges – Need to Prove Service Performed .......................................................69

Freight Charges – Obligation for Demurrage Charges ......................................................70

Freight Charges – Obligation to Pay .................................................................................70

Freight Charges – Obligation to Pay When Shipment Stolen ............................................71

Freight Charges – Obligations of Consignee .....................................................................71

Freight Charges – Obligations When Broker Goes Bankrupt ............................................71

Freight Charges – Offsetting Overcharges Against Past Due Invoices ..............................72

Freight Charges – Old Freight Bills ...................................................................................73

Freight Charges – Owner Disappears ...............................................................................73

Freight Charges – Paying Carrier Rather Than Factor ......................................................74

Freight Charges – Payment of Freight Charges on Damaged Shipment ...........................75

Freight Charges – Proper Fees When Truck Re-routed ....................................................75

Freight Charges – Question of ‘Exclusive Use’ .................................................................76

Freight Charges – Quote Based Upon Erroneous Information ..........................................76

Freight Charges – Rebilling from Prepaid to Collect ..........................................................76

Freight Charges – Recovering Duplicate Payments ..........................................................76

Freight Charges – Recovering Duplicate Payments ..........................................................78

Freight Charges – Refrigerated Load Not Kept Cold Enough ............................................78

Freight Charges – Refused Collect Shipment ...................................................................78

Freight Charges – Returned Shipment ..............................................................................78

Freight Charges – Section 7 and Collection ......................................................................79

Freight Charges – Section 7 Non-Recourse Provision ......................................................79

Freight Charges – Shipper Liability If Consignee Fails to Pay ...........................................80

Freight Charges – Statute of Limitations ...........................................................................80

Freight Charges – Statute of Limitations ...........................................................................81

Freight Charges – Storage Fees on Abandoned Shipment ...............................................82

Freight Charges - Storage Liens .......................................................................................82

Freight Charges – Suit on Penalty for Late Delivery ..........................................................82

Freight Charges - Tariffs ...................................................................................................83

Freight Charges – Terms Covering Loading and Unloading ..............................................83

Freight Charges – Terms of Credit ....................................................................................84

Freight Charges – Terms of Sale and Risk of Loss ...........................................................85

Freight Charges - Time Limits ...........................................................................................85

Freight Charges – Time Limits ..........................................................................................86

Freight Charges – Time Limits for Freight Claims vs. Overcharges ...................................87

Freight Charges – Time-Barred Claims .............................................................................88

Freight Charges – To What Shipments Can Payments be Applied? .................................88

Freight Charges – Trying to Collect Old Freight Bills .........................................................89

Freight Charges – Use of Incentives to Generate Business ..............................................89

Freight Charges – Who Bears Cost of HazMat Cleanup? .................................................90

Freight Charges – Who Is Liable? .....................................................................................90

Freight Charges – Who Pays for Random Border Inspections? ........................................91

Freight Charges – Who Pays When Shipper Caused Damage and Consignee Rejects ....91

Freight Claims – Declination Due To Improper Securement .............................................92

Freight Claims – “Full and Final Payment” Short Payment ................................................92

Freight Claims – “Subject to Count” Notation ....................................................................93

Freight Claims – “Tip and Tell Device” Activated ...............................................................93

Freight Claims – A Question of Temperature and Concealed Damage .............................94

Freight Claims – Accepting Shipments and Mitigating Damages.......................................95

Freight Claims – Adjusting for Administrative Costs and Salvage .....................................95

Freight Claims – Allocation of Coverage Between Shippers ..............................................96

Freight Claims – Amending a Claim After Payment...........................................................97

Freight Claims – Amendments ..........................................................................................97

Freight Claims – Assignment of Claim to Broker ...............................................................98

Freight Claims - Averages.................................................................................................98

Freight Claims – Broken Seal on SL&C Food Shipment ...................................................99

Freight Claims – Broken Seal on Trailer of Food Product ............................................... 100

Freight Claims – Broker Engages Fraudulent Carrier ...................................................... 101

Freight Claims – Broker Liability...................................................................................... 102

Freight Claims – Broker Liability...................................................................................... 103

Freight Claims – Broker Records .................................................................................... 103

Freight Claims – Bugs on a Train .................................................................................... 104

Freight Claims – Canadian Insurance on U.S. Shipment ................................................ 105

Freight Claims – Carrier Demand’s Proof of Loss Statement .......................................... 106

Freight Claims – Carrier Demands “Proof of Deduction” ................................................. 106

Freight Claims – Carrier Fails to Follow Delivery Instructions .......................................... 107

Freight Claims – Carrier Inspections ............................................................................... 108

Freight Claims – Carrier Insurance Deductibles on Household Goods ............................ 108

Freight Claims – Carrier Liability for Failure to Refrigerate .............................................. 109

Freight Claims – Carrier Records and Concealed Damages ........................................... 109

Freight Claims – Carrier Refuses to Acknowledge Visible Damage ................................ 110

Freight Claims – Carrier Wants Testing on Damaged Printer .......................................... 111

Freight Claims – Carrier’s Right of Retention .................................................................. 112

Freight Claims – Carton Count of Shrink Wrapped Pallets .............................................. 113

Freight Claims – Charge for “Incomplete Shipment”........................................................ 113

Freight Claims – Claim for Damaged Toothpaste Tubes ................................................. 113

Freight Claims – Claim for Damages from Delay ............................................................ 114

Freight Claims – Claim for Late Delivery of Time Sensitive Shipment ............................. 115

Freight Claims – Claims Filing by 3PL............................................................................. 116

Freight Claims – Collecting Against Insurance Policies ................................................... 117

Freight Claims – Collecting Costs Incidental to Repair .................................................... 117

Freight Claims – Collecting In Small Claims Court .......................................................... 118

Freight Claims – Computing Salvage Value .................................................................... 119

Freight Claims - Concealed Damage and the "15-Day Rule" .......................................... 119

Freight Claims – Concealed Damage on Dropped Trailer ............................................... 120

Freight Claims – Concealed Damage on Shipper Load & Count ..................................... 121

Freight Claims – Concealed Damage with Clean Delivery .............................................. 122

Freight Claims – Concealed Damages ............................................................................ 122

Freight Claims – Concealed Damages Sealed Containers .............................................. 123

Freight Claims – Concealed Freeze Damage.................................................................. 124

Freight Claims – Cost of Delivery and Customs Duty ...................................................... 124

Freight Claims – Cost of Pallets ...................................................................................... 125

Freight Claims – Cost of Redelivery as Mitigation ........................................................... 126

Freight Claims – Cost of Returning Damaged Goods to Manufacturer ............................ 126

Freight Claims – Cost of Storage Until Carrier Picks Up ................................................. 127

Freight Claims – Cost to Clean Machine ......................................................................... 128

Freight Claims – Cross-Border Shipment to Mexico ........................................................ 128

Freight Claims – Damage by Lumper Service ................................................................. 129

Freight Claims – Damage Mitigation ............................................................................... 130

Freight Claims – Damage Notations ............................................................................... 130

Freight Claims – Damage to Goods in Dropped Trailer ................................................... 131

Freight Claims – Damage to Return Shipment ................................................................ 131

Freight Claims – Damage When Shipper Uses Leaky Trailers ........................................ 131

Freight Claims – Damages for Delivery a Day Late ......................................................... 132

Freight Claims – Damages on Inter-Company Move ....................................................... 133

Freight Claims – Damages to Food Products .................................................................. 133

Freight Claims – Declined Shipment Damaged on Return .............................................. 134

Freight Claims – Default Terms ...................................................................................... 135

Freight Claims – Defense of Public Authority .................................................................. 136

Freight Claims – Denial for Improper Packaging ............................................................. 137

Freight Claims – Determination of Risk of Loss ............................................................... 138

Freight Claims – Determining Liability ............................................................................. 138

Freight Claims – Determining Responsibility for Damages .............................................. 139

Freight Claims – Diminished Value ................................................................................. 141

Freight Claims – Disallowance for Improper Packaging .................................................. 141

Freight Claims – Do Limitations Apply When Trailer Catches Fire? ................................ 142

Freight Claims – Document Retention Periods ................................................................ 142

Freight Claims – Documentation of Piece Count ............................................................. 143

Freight Claims – Documentation of Value Altered ........................................................... 144

Freight Claims – Documenting Claims In SL&C Dropped Trailers ................................... 145

Freight Claims – Documenting Damage on Bill of Lading ............................................... 145

Freight Claims – Documenting Value on Imported Food ................................................. 146

Freight Claims – Does B/L or Rate Confirmation Control? .............................................. 147

Freight Claims – Does Damage to the Box Indicate Damaged Product? ......................... 147

Freight Claims – Does Preprinted Boilerplate Prevail Over Notation ............................... 148

Freight Claims – Driver Not Allowed to Verify Delivery Count ......................................... 149

Freight Claims – Driver Signing Delivery Receipts .......................................................... 149

Freight Claims – Excessively Late Delivery ..................................................................... 150

Freight Claims – Federal Regulation Of Household Goods Carriers ............................... 150

Freight Claims – Filing Against Both Carrier and Shipper ............................................... 151

Freight Claims – Filing on Exempt Products.................................................................... 151

Freight Claims – FOB Origin Risk of Loss ....................................................................... 152

Freight Claims – Foodstuffs and Possible Contamination ............................................... 152

Freight Claims – Forged Delivery Signature .................................................................... 153

Freight Claims – Free Astrays ......................................................................................... 154

Freight Claims – Freight Charges ................................................................................... 155

Freight Claims – Freight Charges on Damaged Goods ................................................... 155

Freight Claims – Freight Charges on Mis-Delivered Shipment ........................................ 156

Freight Claims – Freight Charges on Prepaid Shipment ................................................. 156

Freight Claims – General Damages or Special Damages ............................................... 157

Freight Claims – Government Shipments ........................................................................ 157

Freight Claims – Handling Claim on Damaged Returned Product ................................... 158

Freight Claims – Holding Payment to Broker for Freight Claim ....................................... 158

Freight Claims – Hourly Rate for Repairs ........................................................................ 159

Freight Claims – How Are Liability Limits Incorporated? ................................................. 159

Freight Claims – How Long Does a Carrier Have to Pay a Claim? .................................. 161

Freight Claims – Including Freight Charges .................................................................... 161

Freight Claims – Including Freight Charges .................................................................... 162

Freight Claims – Including Freight Charges for Repair Parts ........................................... 163

Freight Claims – Including Inspection, Testing or Sorting Costs ...................................... 163

Freight Claims – Including Pre-Paid Freight Charges ...................................................... 164

Freight Claims – Including Taxes In Damages ................................................................ 164

Freight Claims – Inclusion of Freight Charges................................................................. 164

Freight Claims – Inclusion of Freight Charges................................................................. 165

Freight Claims – Incorporating NMFC Package Rules by Reference .............................. 166

Freight Claims – Industry Statistics ................................................................................. 167

Freight Claims – Informing Carrier of Cargo Value .......................................................... 168

Freight Claims – Inspection and Salvage Requirements ................................................. 168

Freight Claims – Inspection of Damaged Goods ............................................................. 169

Freight Claims – Invoice Deductions on Transloaded Shipments .................................... 170

Freight Claims – Is 3PL Liable to Insurance Company For Claim.................................... 172

Freight Claims – Issue of Broker Failing to Provide Service ............................................ 174

Freight Claims – Jurisdiction in Federal Court ................................................................. 174

Freight Claims – Liabilities and Responsibilities Under EXWORKS ................................ 175

Freight Claims – Liability as Between Two Freight Forwarders ....................................... 177

Freight Claims – Liability for Bug Infested Food Ingredients ............................................ 177

Freight Claims – Liability for Damage When Various Parties Loading ............................. 178

Freight Claims – Liability for Disposition of Damaged Food Product ............................... 179

Freight Claims – Liability for Dropped Trailer After Unloaded .......................................... 180

Freight Claims – Liability for Failure to Seal Load ........................................................... 181

Freight Claims – Liability for Improper Loading ............................................................... 182

Freight Claims – Liability for Improper Securement ......................................................... 182

Freight Claims – Liability for Loss from Sealed Trailer .................................................... 183

Freight Claims – Liability for Loss from Sealed Trailers ................................................... 184

Freight Claims – Liability for Misdelivery ......................................................................... 184

Freight Claims – Liability for Returned Product ............................................................... 185

Freight Claims – Liability for Tarp Failure on Cross Border Shipment ............................. 186

Freight Claims – Liability for Wet Boxes .......................................................................... 186

Freight Claims – Liability Limit on Returns ...................................................................... 187

Freight Claims – Liability Limitation by Class .................................................................. 187

Freight Claims – Liability Limitations ............................................................................... 189

Freight Claims – Liability Limitations on Double Brokered Load ...................................... 189

Freight Claims – Liability Limits on International Shipments ............................................ 190

Freight Claims – Liability Limits With Through Bill to Mexico ........................................... 191

Freight Claims – Liability of Brokers ................................................................................ 192

Freight Claims – Liability on “Minimum Charge” Shipment .............................................. 192

Freight Claims – Liability on Interline Shipment ............................................................... 193

Freight Claims – Liability on Shipments Between U.S. and Mexico ................................. 193

Freight Claims – Liability Runaround .............................................................................. 195

Freight Claims – Liability When Shipper Loads Into Defective Reefer ............................. 195

Freight Claims – Limitations on International Airfreight ................................................... 196

Freight Claims – Loss of Time Sensitive Materials .......................................................... 196

Freight Claims – Loss on Return of Refused Product ...................................................... 197

Freight Claims – Market Decline on Late Delivery ........................................................... 198

vii

Freight Claims – Material Held in Warehouse ................................................................. 198

Freight Claims - Measure of Damages ............................................................................ 199

Freight Claims – Measure of Damages ........................................................................... 200

Freight Claims – Measure of Damages ........................................................................... 201

Freight Claims – Measure of Damages for Promotional Items ........................................ 202

Freight Claims – Measure of Damages on Returned Goods ........................................... 202

Freight Claims – Measure of Damages on Warehouse Shipment ................................... 203

Freight Claims – Measure of Damages When Goods Returned ...................................... 203

Freight Claims – Measure of Value of Goods Sold .......................................................... 204

Freight Claims – Mediation ............................................................................................. 204

Freight Claims – Minimum Filing Requirements for Rail .................................................. 205

Freight Claims – Mis-Delivered Food Shipment .............................................................. 205

Freight Claims – Misdelivery When Wrong Document Used ........................................... 206

Freight Claims – Misdescription on Bill of Lading ............................................................ 206

Freight Claims – Mitigating Damages ............................................................................. 207

Freight Claims – Mitigating the Loss and Measure of Damages ...................................... 207

Freight Claims – Mitigation of Damages .......................................................................... 208

Freight Claims – Mitigation of Damages and Foodstuffs ................................................. 209

Freight Claims – Mitigation on Damage to Beverages ..................................................... 211

Freight Claims – Must Broker Pay for Late Delivery? ...................................................... 212

Freight Claims – Notice of Damage on Delivery Receipt In 24 Hours .............................. 213

Freight Claims – Obligation of Carrier to Respond to Timely Filings ................................ 213

Freight Claims – Obligation to Pay Freight Charges........................................................ 213

Freight Claims – Ocean Carrier Time Limits.................................................................... 214

Freight Claims – Ocean Shipment Damaged on Dock .................................................... 215

Freight Claims – Offsetting Against Warehouse Charges................................................ 216

Freight Claims – Offsetting charges Against Broker ........................................................ 217

Freight Claims – Offsetting Claim Against Freight Charges ............................................. 217

Freight Claims – Offsetting Damage Claims Against Freight Charges............................. 218

Freight Claims – Offsetting Freight Charges Against Claims ........................................... 218

Freight Claims – Overages and Shortages ..................................................................... 219

Freight Claims – Partial Loss on International Shipment ................................................. 219

Freight Claims – Partial Rejection ................................................................................... 220

Freight Claims – Partially Damaged Shipments .............................................................. 221

Freight Claims – Pass-through of Goodwill Payment ...................................................... 222

Freight Claims – Payment Based Upon Gross Weight or Net Weight ............................. 223

Freight Claims – Poor Packaging Declination ................................................................. 224

Freight Claims – Product Damaged in Warehouse ......................................................... 224

Freight Claims – Product Destined for Destruction .......................................................... 225

Freight Claims – Product Frozen But Delivery Receipt Signed Clear .............................. 225

Freight Claims – Proper Forms for Filing ......................................................................... 226

Freight Claims – Proper Identification of Product ............................................................ 227

Freight Claims – Question of Damages After Clean Delivery .......................................... 228

Freight Claims – Question of Seal on SL&C ................................................................... 228

Freight Claims – Rail Carrier Statute of Limitations ......................................................... 229

Freight Claims – Reasonable Dispatch ........................................................................... 230

Freight Claims – Reasonable Dispatch ........................................................................... 231

Freight Claims – Record Retention by 3PLs ................................................................... 231

Freight Claims – Recovering Carrier Insurance Deductible ............................................. 231

Freight Claims – Recovering Freight Charges on Lost Pallet .......................................... 232

viii

Freight Claims – Recovering Portion of Freight Charges Paid to 3PL ............................. 232

Freight Claims – Recovering Prepaid Freight Charges ................................................... 233

Freight Claims – Recovering Special Damages .............................................................. 233

Freight Claims – Refusal of Contaminated Food Product ................................................ 234

Freight Claims – Rejecting Non-Conforming Goods ........................................................ 235

Freight Claims – Rejecting Part of a Shipment ................................................................ 235

Freight Claims – Released Value on Used Furnishing .................................................... 237

Freight Claims – Reopening Paid Claim .......................................................................... 237

Freight Claims – Repairs Resulting From Water Damage to Table Top .......................... 238

Freight Claims – Replacement Cost Has Increased ........................................................ 238

Freight Claims – Requesting Protective Services ............................................................ 239

Freight Claims – Required Notation on Delivery Receipt ................................................. 239

Freight Claims – Retention of Claims Records ................................................................ 240

Freight Claims – Risk of Loss ......................................................................................... 241

Freight Claims – Risk of Loss and FOB Terms ............................................................... 241

Freight Claims – Role of Broker ...................................................................................... 242

Freight Claims – Rule 11 Rail Shipments ........................................................................ 242

Freight Claims – Runaround on Temperature Sensitive Shipment .................................. 243

Freight Claims – Salvage Allowance ............................................................................... 244

Freight Claims – Salvage Allowance for Damaged Fruit ................................................. 244

Freight Claims – Salvage of Branded Goods .................................................................. 246

Freight Claims – Salvage Retention Rules ...................................................................... 247

Freight Claims – Salvaging Goods to Mitigate Damages ................................................ 248

Freight Claims – Seals on Multiple Stops ........................................................................ 248

Freight Claims – Setting Claims Off Against Broker ........................................................ 248

Freight Claims – Shipment Not Delivered to Named Party .............................................. 249

Freight Claims – Shipper Directs Carrier to Dispose ....................................................... 250

Freight Claims – Shipper Load and Count ...................................................................... 250

Freight Claims – Shipper Loads and Seal Intact Upon Delivery ...................................... 251

Freight Claims – Shipper’s Load & Count ....................................................................... 251

Freight Claims – Shipping Terms Determine Who Files .................................................. 252

Freight Claims – Short Time Limits in Rail Service Guide ............................................... 252

Freight Claims – Shortage After Clean Proof of Delivery ................................................. 253

Freight Claims – Shortage in Dropped Trailer ................................................................. 254

Freight Claims – Shortage on Shipper Load & Count ...................................................... 255

Freight Claims – Shortage on SL&C Shipment ............................................................... 255

Freight Claims – Shortage on Third Party Collect Shipment ............................................ 256

Freight Claims – Shortages From Dropped Trailer .......................................................... 256

Freight Claims – Shortages on Dropped Trailers ............................................................ 257

Freight Claims – Shortages on Shrink-wrapped Pallets .................................................. 258

Freight Claims – Should Carrier Pay Claim Prior to Receiving Salvage .......................... 259

Freight Claims – SL&C Issues ........................................................................................ 260

Freight Claims – Special Damages ................................................................................. 261

Freight Claims – Special Damages Against Broker Surety .............................................. 263

Freight Claims – Special Damages for Delay .................................................................. 264

Freight Claims – Special Damages for Late Delivery ...................................................... 265

Freight Claims – Special Damages on Custom Made Product ........................................ 265

Freight Claims – Standard Loss and Damage Claim Form.............................................. 266

Freight Claims – Subrogation of Claims .......................................................................... 266

Freight Claims – Supporting a Shortage Claim ............................................................... 266

Freight Claims – Supporting Documents ......................................................................... 267

Freight Claims – Tariff Limitation on Returned Freight .................................................... 267

Freight Claims – Temperature Requirements on Bill of Lading ....................................... 268

Freight Claims – Temperature Violations on Food Products ........................................... 269

Freight Claims – Third Party Claims and Terms of Sale .................................................. 269

Freight Claims – Time for Insurance to Pay .................................................................... 270

Freight Claims – Time Limit to File With Interline Carrier................................................. 270

Freight Claims – Time Limits ........................................................................................... 271

Freight Claims – Time Limits on International Shipments ................................................ 272

Freight Claims – Time Limits When Third Party Attempts Mitigation ............................... 272

Freight Claims – Times to File and Retaining Records .................................................... 273

Freight Claims – Transloading Ocean Containers ........................................................... 274

Freight Claims – Use of Scanned Documents ................................................................. 275

Freight Claims – Value for Portion of Unique Special Order Items .................................. 275

Freight Claims – Value of “Lemon” Vehicle ..................................................................... 276

Freight Claims – Value of Lost Business Files ................................................................ 277

Freight Claims – Value of Used Goods That Can Not Be Replaced ................................ 278

Freight Claims – Value on International Shipment .......................................................... 279

Freight Claims – Valuing Concealed Damage Claims ..................................................... 279

Freight Claims – Waiver of Right for 3

Party to Track Shipments .................................. 280

Freight Claims – Water Damage to Wood Veneer .......................................................... 281

Freight Claims – What Are Items of “Extraordinary Value”? ............................................ 281

Freight Claims – When Does 9-Month Limit to File Apply?.............................................. 282

Freight Claims – Which Liability Regime Applies on Multimodal Move ............................ 283

Freight Claims – Who Gets the Money............................................................................ 283

Freight Claims – Wrong Signature on POD ..................................................................... 284

Freight Claims –Liability Limitations ................................................................................ 284

Freight Claims –Limitations of Liability by Classification .................................................. 285

Freight Contracts – FAK Liability Limitations ................................................................... 286

Freight Contracts – Inconsistent Terms Regarding Liability ............................................. 288

Freight Contracts – Provision for Attorney’s Fees ........................................................... 289

Freight Contracts – Time Limitations ............................................................................... 289

Freight Terms – Payor of Freight .................................................................................... 290

HazMat – HazMat Security Plans .................................................................................... 290

Intermodal Carriers – Freight Securement ...................................................................... 292

International Terms of Sale ............................................................................................. 292

Interstate Commerce Act ................................................................................................ 293

Liability – Broker Liability for Proper Securement of Load ............................................... 293

Liability – Broker Obligations Under Recent Changes ..................................................... 294

Liability – Carrier Notification on Interline Shipment ........................................................ 295

Liability – Driver Injured While Loading Truck ................................................................. 295

Liability – Dropped Trailers ............................................................................................. 296

Liability – General Liability Coverage .............................................................................. 297

Liability – Interference from “Occupy” Protests ................................................................ 297

Liability – Limitations Under Carmack and UCC .............................................................. 298

Liability – Ocean Freight Forwarder ................................................................................ 299

Liability – Terms in Non-Contiguous Domestic Trade ...................................................... 299

Liability Limitations – Canadian Shipments ..................................................................... 300

Motor Carriers – Contract and Common Carriers and Insurance..................................... 301

Motor Carriers – Driver Liability for Overweight Ticket .................................................... 301

Motor Carriers – Interstate vs. Intrastate ......................................................................... 302

Motor Carriers – SCAC Codes ........................................................................................ 302

Ocean Freight – Difficulty Getting Goods Moved ............................................................ 303

Rail Carriers – How Extensive Is the Definition? ............................................................. 304

Security – Bioterrorism Act of 2002 ................................................................................. 305

Shipments to Mexico ....................................................................................................... 306

Tariffs – BNSF Statute of Limitations Item ...................................................................... 306

Tariffs – UPS Six Month Statute of Limitations ................................................................ 307

Transport Providers – Definition of Types ....................................................................... 308

When Can Shipment Be Booked as Revenue? ............................................................... 309

Transportation & Logistics - Q&A in Plain English

Books 7, 8 & 9

BANKRUPT CARRIERS – TRUSTEE RETENTION OF RECORDS

Question: In the case of a carrier bankruptcy, what becomes of the bankrupt carrier’s legal

documents, and in particular proof of delivery information? Put another way, does the trustee of

the bankrupt carrier’s estate have a legal obligation to maintain the carrier’s records and provide

information relating to delivery/non delivery?

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.

I would think that a debtor in possession or a trustee would have a duty to retain records at

least for the time specified in the FMCSA regulations, or until authorized by the bankruptcy court

to destroy the records.

BILLS OF LADING – BLIND SHIPMENTS

Question: We have a customer who wants their shipments in truckload form and they go

out “blind” showing their complete name and address. The bill of lading (“B/L”) is faxed to us.

They do not want any part of our name or address shown on the B/L and their B/L is not as

stringent as ours. I was under the impression the driver had to have a document that showed

his actual place of pick up, as far as city/state goes. They are in another city and state

altogether. Should the “exit” city/state and/or zip be shown on the original B/L and if that party

does not pay the freight, are we responsible? I have no idea what the terms of sale are

because we are not privy to same.

Our customer forwarded his B/L to use and I do not like using another B/L, for obvious

reasons. It is apparent the driver’s place of pick up, if stopped by the Department of

Transportation, would certainly not match his paperwork. I did not contract the carrier he is

using and was not sure if we could be held liable for payment of the freight charges should our

customer neglect to pay this carrier.

Answer: Remember that the bill of lading is a legal document - the “contract of carriage”.

The federal regulations at 49 CFR Part 373 specify the minimum requirements for a bill 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).

I would suggest that your bills of lading should show the correct (actual) shipping address

and delivery address. This would avoid any problems in rating the shipment, or if there should

be any reason for the carrier to return the goods (unable to deliver, refused or rejected by

consignee, transit damage, etc.).

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

You can show your customer’s name as the consignor if you are authorized to do so. If you

do this, and the bill of lading is “prepaid”, then the carrier will look to your customer as the

shipper for the payment of freight charges.

BILLS OF LADING – COMPARED TO DELIVERY RECEIPTS

Question: I purchased your book a few years ago and it has been very helpful. I am trying

to drill down on a particular issue when it comes to liability though. I am finding a gray area

between the Bill of Lading and a Delivery Receipt/Proof of Delivery.

As our understanding, the Bill of Lading is the legal document of the pack. Whenever we are

short or have damages, we notate the Bill of Lading next to where the goods are listed if

something is amiss with the load.

We have some of our carriers that are stating that their Delivery Receipt/Proof of Delivery is

what they go off of. Most of the time, these documents only state what a general load is -

number of pallets or just a container number. Our warehouses do not notate on these - they

notate on the bill of lading.

Is there something in the book that talks about which one is more accepted from a legal

standpoint?

Answer: Carriers are required by law to “issue” a bill of lading or receipt for goods, 49

U.S.C. §14706. In practice, bills of lading can be prepared by the shipper or by the carrier. The

bill of lading is often referred to as the “contract of carriage”, and most bills of lading contain

terms and conditions on the face and/or the reverse side, or they incorporate other documents

such as the National Motor Freight Classification and carrier’s tariffs.

The bill of lading is not the same as a delivery receipt, although it may serve that purpose.

Practices vary -- For most truckload shipments, the carrier’s copy of the bill of lading travels

with the shipment and is used as a delivery receipt, with over, short or damage (“OS&D”)

notations made on the bill of lading at the time of delivery. Many less-than-truckload carriers,

however, convert the information from the bill of lading and print out a “pro” that travels with the

shipment, and serves as a delivery receipt. In such cases the bill of lading may not accompany

the shipment to destination.

It really does not make any difference from a legal point of view which type of document is

used for a delivery receipt. The purpose of the delivery receipt is to show that the consignee

received the goods shown on the document, and that any OS&D conditions that were observed

at the time of delivery are noted and adequately documented.

I realize that some forms of delivery receipt (“pros”) do not have the same level of detail

regarding the quantity, description, weight, etc. of the goods that are shown on the bill of lading.

If this is the case, it is important that any OS&D notations are carefully made to describe exactly

what was over, short or damaged with an adequate description of the item and the problem.

Many shippers also create a separate OS&D report to support potential claims.

BILLS OF LADING – EFFECT OF MISDESCRIPTION ON CLAIM

Question: We had several trucks from one carrier go to a shipper and pick up loads. They

were loaded and given a bill of lading (“B/L”) instructing them to take the product to the receiver

(a recycling company) and the description of the product on the B/L was scrap. On the way to

delivery one of the trucks was broken into and product was stolen. Police report was made and

customer was notified. After arriving at the receiver the carrier was notified to have all trucks

return as the shipper had made a mistake and loaded new test product on the trailers instead of

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

scrap as indicated. This was very expensive electronics and so the carrier put team drivers on

the loads and sent them back to the receiver.

The customer has now filed a claim and they want the full value for the stolen electronics.

The carrier believes they should only be liable for what the customer would have gotten for

scrap for that material and that the warehouse that loaded the product should be liable for the

rest. I am not disagreeing with the carrier but I was wondering if there was any case law that

would have a similar situation to this that I might use to explain to the customer why this would

be true.

Answer: Your question raises a number of factual and legal questions.

1. Why would anyone steal a load from a trailer when the shipping documents describe the

contents as “scrap” - unless the person knew that there was a valuable shipment inside?

(Further investigation would be indicated.)

2. Was there any applicable and enforceable liability limitation in the carrier's bill of lading or

tariff? (Need to check the bill of lading and carrier's rules tariff, if any.)

3. Does the misdescription of the product on the bill of lading bind the shipper so as to limit

the carrier’s liability to the value of “scrap”? This is an interesting question and there are only a

few court decisions dealing with the subject. I realize that this may be a lengthy answer, but the

following is a memorandum on this subject.

* * * * *

The Carmack Amendment, 49 U.S.C. 14706, provides that the measure of damages for loss

or damage is the claimant’s “actual loss”. The question is whether there would be circumstances

where a shipper would not be entitled to its actual loss where the shipper has misdescribed the

commodity being shipped on the bill of lading. The following court decisions have dealt with this

issue.

1. Mass v. Braswell Motor Freight Lines, Inc., 577 F.2d 665 (9th Cir. 1978) involved the loss

of a part of a shipment of rare and valuable old movie posters and display stills. The question

was whether the shipper could recover the full value of the lost material (about $18,000)

because it was misdescribed on the bill of lading as “printed material”.

The carrier contended that the shipper deliberately failed to state the value of the shipment to

the rate-clerk in order to obtain a lower freight rate. The carrier pointed to the freight bill for

$102.66 for 48 cartons of “printed material” weighing 1342 pounds shipped from New Orleans to

Los Angeles. This bill was based on the freight rate for shipping printed material of “no specific

exchange value, premium value or redeemable value.”

The court referred to a common law rule that a shipper who intentionally fails to disclose the

high value of his shipment in order to get a lower freight rate is barred by his misconduct from

recovery for a loss the carrier did not anticipate and cited Semi Metals, Inc. v. Pinter Bros., 135

N.J. Super. 464, 343 A.2d 757 (App. Div. 1975); Allied Vans, Inc. v. Smith, 28 Colo. App. 85,

470 P.2d 926 (1970) (both construing the Carmack Amendment), and II Kent’s Commentaries

603-604 (990-991) (14

ed. 1896).

It should be observed that this principle requires that the rate is dependent on the value of

the commodity being shipped, that there are two or more rates in the carrier's tariff that could be

applied based on the value stated by the shipper, and that the shipper intentionally

misdescribes the commodity in order to get the lower rate.

The court noted that the shipper has shipped similar materials before that had incurred

damage and had not declared any value on the bill of lading, and remanded the case back to

the lower court, stating that it should have submitted the carrier's defense of fraudulent

misdescription to the jury.

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

2. A.I.G. Uruguay Compania v. AAA Cooper Transp., 334 F.3d 997 (11

Cir. 2003) involved

a shipment of cellular phones worth $126,000 from Motorola in Illinois to Miami, Florida, where

they would be shipped onward to Uruguay. The customer had engaged a freight forwarder,

Miami International Forwarders (“MIF”), which in turn contracted with Cooper to handle the

movement to Miami. The shipment mysteriously disappeared while in Cooper’s possession.

One of the issues in the case was whether the carrier was entitled to a limitation of liability,

because the commodity was misdescribed on the bill of lading.

The description of the commodity on the bill of the lading was “NMFC 61700, Class 100”,

which covers “Electrical Appliances or Instruments . . . in inner containers, in cloth bags, or in

boxes.” Cooper argued that the appropriate category for this shipment was actually NMFC

62850, which applies to “Radio-telephones, cellular (Cellular Telephones), . . . in boxes.”

According to NMFC 62851, NMFC 62850 applies to those phones “not specifically released

as to value in accordance with the provisions of item 62820 at time of shipment”. Because the

form bill of lading used by Motorola in this case had no space for a declaration of released

value, it would be impossible to comply with item 62820, which requires that any released value

“must be entered on shipping order and bill of lading in [a specific] form.”

Although the court did agree with Cooper that NMFC 62850 was the appropriate

classification, it did not agree that this would have limited its liability, stating:

However, the only effect of re-classification to NMFC 62850 would be that

Cooper would have charged more to transport the Motorola shipment. NMFC

62850, like the misrepresented category NMFC 61700, does not contain within its

terms a limitation of liability. At this point, re-classification to NMFC 62850 would

probably only allow Cooper, if it wished, to collect the difference between the

shipping charge, but, as Cooper refunded the entire shipping charge once the

shipment was lost, that avenue of recovery appears waived.

Cooper also argued that the court should re-classify the shipment as a punitive measure for

its misrepresentation of the commodity on the bill of lading, but the court rejected the argument,

stating “we have no reason to believe that the misdescription was fraudulent, rather than a

mistake.”

The court concluded:

So the only difference in this case if the shipper had correctly represented the

contents of the shipment is that Cooper may have charged a higher rate for the

transportation of those goods. The goods still would have disappeared, AIG would

still have paid the claim for loss to Abiatar, and AIG as subrogee would still sue

Cooper for the full value of the shipment. We find in this circumstance that

preserving the contract-based relationship between carrier and shipper would be

more prudent than reading in a limited liability provision for punitive purposes.

Therefore, we find that the district court did not err in determining that Cooper did

not limit its liability for the Motorola shipment.

3. The most recent case is Diane’s Trucking, LLC v. Holmes QST, Inc., Case No. 05-72635

(E.D.Mich. July 31, 2006). In this case, Sovereign Sales, a distributor of perfume products

requested Diane’s Trucking d/b/a Load One to transport a shipment from its contract packer,

Pak Rite in Michigan to its customer, Walgreens in Florida. Load One apparently brokered the

shipment to Holmes QST, which engaged an owner-operator, Robert E. Foster, d/b/a TAB

Transportation to handle the movement. En route, the truck was broken into and a quantity of

the product was stolen. Load One paid Sovereign’s claim in the amount of $71,745; Sovereign

assigned its claim to Load One, and Load One then sued Holmes and Foster, alleging

negligence, breach of contract and indemnification under the Carmack Amendment.

Holmes did not move for summary judgment on the merits of the underlying claim. Rather,

Holmes contended that the claim was barred because Load One intentionally misdescribed the

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

cargo as "toilet preparations" and, therefore, it should not be found liable for the resultant

damages. Holmes argued that under the Bills of Lading Act, 49 U.S.C. Section 80116, any

intentional misdescription serves as a bar to the recovery of damages. The court disagreed,

stating:

Defendant Holmes states that 49 U.S.C. Sec. 80116 provides criminal penalties

for intentionally misdescribing cargo. Title 49 U.S.C. Sec. 80016 is a criminal

statute, and Defendant Holmes has provided no authority for utilizing this particular

criminal statute as a bar to filing a civil suit. Further, the statute imposes criminal

penalties only upon a showing of a specific intent to defraud. In this civil action, this

Court does not find specific criminal intent to defraud Holmes based on the cargo

label "toilet preps full value." Thus, the Court finds that 49 U.S.C. Sec. 80016 does

not support Defendant Holmes' contention that Plaintiff's claim is barred.

Holmes also stated that it would not have accepted the cargo for shipment had

the value been known because its insurance policy coverage limit was $100,000.00,

and the cargo in question was valued at over $140,000.00. Holmes argued that the

failure to disclose the exact nature and value of the cargo established a situation

where there is no valid bailment of goods, and precluded a finding of liability.

The court noted that Holmes never requested an explanation of either the exact nature of the

goods, or the specific value of the cargo, and that in any event, the shipper would not have had

to pay higher shipping costs for more valuable cargo, i.e., the rate was not dependent on value.

The court found that Holmes failed to show that Load One or Sovereign had a duty to provide

any more detail on the bill of lading other than what was provided by Sovereign, and failed to

show that the description "toilet preps - full value" was an inaccurate manner of describing the

cargo. There was also no proof that the shipper was trying to fraudulently conceal the value of

the goods. The court concluded:

Consequently, even if the cargo did contain an inaccurate description, Defendant

Holmes has not met its burden of proving that the alleged misdescription caused or

contributed to the eventual loss.

Based on the facts as you have described them, there is apparently no evidence that the

shipper misdescribed the commodity in order to get a lower freight rate. It is most likely that the

rate was a spot truckload rate quoted by the carrier, and not a tariff rate that was “dependent on

value”. It is also unlikely that the carrier inquired about the value of the shipment, and the

shipper had no obligation to tell the carrier. Under the court decisions discussed above, it would

be my opinion that the shipper is entitled to its actual loss.

BILLS OF LADING – INCORPORATING NON-STANDARD TERMS

Question: I have a question relating to a sentence highlighted in yellow at the bottom of the

shipper’s Bill of Lading. This sentence reads, “The driver whose signature appears below,

acknowledges receipt, understanding, and compliance with the Driver Safety and Disclaimer

Sheet.” The second sheet within the attachment contains the Driver Safety and Disclaimer

Sheet. I was told that the signed Driver Safety and Disclaimer Sheet is not kept for future

reference.

I was under the impression that the shipper could not insert statements to the Bill of Lading

that specifically burdens the carrier with additional liability. Is that allowed?

Answer: Although the law requires the carrier to “issue a receipt or bill of lading”, 49 USC

14706, it is common for shippers to prepare bills of lading, which the driver signs to

acknowledge receipt of the goods.

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

I don’t think there is any “legal” reason why a shipper can’t include special instructions on a

bill of lading. After all, carriers include provisions that incorporate the terms and conditions of

the Uniform Straight Bill of Lading, classifications, tariffs, etc. by reference in their bills of lading

all the time.

It would be my opinion that if the carrier accepts a shipment pursuant to a bill of lading that is

prepared by the shipper, it would be bound by the provisions of that contract of carriage.

I would only note that the particular bill of lading you furnished does include some very old

(pre 1998) language at the top that incorporates the “classification and tariffs in effect on the

date of this Bill of Lading”. It is possible that there could be some conflict (or ambiguity) with the

shipper’s “Driver Safety & Disclaimer Sheet” that could be a problem.

BILLS OF LADING – IS WEIGHT REQUIRED?

Question: I have a simple question that I want to see what the correct answer is...I’m

second-guessing myself. Does a bill of lading/driver paperwork have to have the weight of the

load on it? I have a load out of California to Texas that has paperwork that says “transfer order”

with a list of the product and case count but not weights per item or total weight for the transfer?

And yes, of course, I have a problem with it.

Answer: The only legal requirement that I am aware of that relates to bills of lading and

weights is found in the Federal Motor Carrier Safety Administration (“FMCSA”) regulations at 49

CFR Part 373:

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).

Presumably, the carrier that picked up the freight at origin should have shown the weight on

the bill of lading it issued for the shipment. However, it is questionable whether this requirement

in the FMCSA regulations would apply to a “transfer” (on an interlined shipment).

BILLS OF LADING – MULTIPLE PARTIES AND SHIPMENTS

Question: I wanted your opinion on a direction one of our customers is taking with

purchased freight. They want to partner with another of our customers and have us consolidate

freight on same truck. Purchase terms are FOB Origin, Freight Terms are collect - their carrier

picks up.

They want their backhaul allowance to be based on the final ship to (in Maine) and the carrier

will cross-dock in Pennsylvania. My concern is the bill of lading will indicate Maine as the final

ship to and the carrier will be asked to off load in Pennsylvania. What is the shipper’s

responsibility in providing paper work accurately? I am also concerned with any damages along

the way, if product is damaged at cross-dock or in route from cross dock to final they may want

to come back and claim it was damaged at pickup.

Also, if customer A’s carrier takes possession - Customer B would not have the ability to

claim against customer A’s carrier if there were issues.

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

If our customer asks us to show the destination as Pennsylvania on both deliveries, would

there be legal implications, knowing the destination customer was actually in Maine. I guess

there could be some tax implications with sales tax if it were different or if the final was going to

a different country. What are your suggestions?

Answer: It seems to me that you really have two separate shipments: one to Customer B in

Pennsylvania and one to Customer A in Maine. It probably would be best to cut two bills of

lading showing you as shipper, with Customer A’s carrier as the carrier, and with the respective

customers (A&B) as the consignees with the actual origin and destination points.

I would think that your Customer A could work out the freight charges with their carrier, so

that it would be the same as a through movement from you to Customer A, with a stop-off en

route.

If Customer B loads additional product on the truck at its facility in Pennsylvania, for delivery

to Customer A, a separate bill of lading should be cut for that shipment.

It is always a best practice to show the actual parties (shipper, consignee, carrier) on the bill

of lading to avoid confusion and problems, since the bill of lading constitutes a “contract of

carriage”. In any event, since your terms of sale are “FOB Origin”, under the Uniform

Commercial Code the risk of loss in transit should pass to the consignee-buyer(s) when the

goods are tendered to the carrier at origin.

I don’t see how this would affect your liability as the shipper. However, for Customer A in

Maine, it could be construed as two separate shipments: one from your facility to Pennsylvania,

and one from Pennsylvania to Maine. If there was loss or damage, and the place of the loss could

not be determined, it could be difficult for Customer A to meet its burden of proof (good order &

condition at origin; loss or damage at destination).

BILLS OF LADING – SECTION 7 NON-RECOURSE PROVISION

Question: Does a “physical” signature of the consignee’s agent need to be in the Section 7

box and at the bottom of the Bill of Lading to have an executed contract or can a “pre-printed”

corporate name i.e. XYZ FOODS, INC., serve to execute the intent of the contract?

I’m not sure our shipping clerks have the authority to execute this document.

Answer: I assume you are using some version of the Uniform Straight Bill of Lading.

If so, “Section 7” (the non-recourse provision) can be pre-printed on the bill of lading with the

shipper’s name (not the name of the consignee).

As far as signatures at the bottom of the bill of lading, there is no legal requirement for the

shipper to sign the bill of lading. If the bill of lading is to be used as a delivery receipt, e.g., for

full truckload shipments, then the consignee should note any exceptions (damage, shortage,

etc.), sign and date the bill of lading (and retain a copy).

BILLS OF LADING – SIGNATURE REQUIREMENT

Question: We are changing our bill of lading (“B/L”) form from a dot matrix printer 4-part

form to a laser printer printed document that will give us 2, 3, or 4 printed separate B/L forms.

With this many forms for one shipment times the number of shipments/day, the question has

been asked, if the B/L signature line can be stamped by the shipping clerk or does it legally

need to be signed?

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

Answer: There is no legal requirement for a shipper to sign a bill of lading. (Obviously, it is

important for the carrier’s driver to sign the B/L, since it is your evidence that the carrier received

the goods.)

However, if you are shipping hazardous materials, the federal regulations do require a

certification:

49 CFR §177.817 Shipping papers.

(a) General requirements. A person may not accept a hazardous material

for transportation or transport a hazardous material by highway unless that person

has received a shipping paper prepared in accordance with part 172 of this

subchapter or the material is excepted from shipping paper requirements under this

subchapter. A subsequent carrier may not transport a hazardous material unless it

is accompanied by a shipping paper prepared in accordance with part 172 of this

subchapter, except for § 172.204, which is not required.

(b) Shipper certification. An initial carrier may not accept a hazardous

material offered for transportation unless the shipping paper describing the material

includes a shipper's certification which meets the requirements in §172.204 of this

subchapter. Except for a hazardous waste, the certification is not required for

shipments to be transported entirely by private carriage and for bulk shipments to be

transported in a cargo tank supplied by the carrier....

* * * *

§172.204 Shipper's certification.

(a) General. Except as provided in paragraphs (b) and (c) of this section,

each person who offers a hazardous material for transportation shall certify that the

material is offered for transportation in accordance with this subchapter by printing

(manually or mechanically) on the shipping paper containing the required shipping

description the certification contained in paragraph (a)(1) of this section or the

certification (declaration) containing the language contained in paragraph (a)(2) of

this section.

(1) ''This is to certify that the above-named materials are properly

classified, described, packaged, marked and labeled, and are in proper condition for

transportation according to the applicable regulations of the Department of

Transportation.''

Note: In line one of the certification the words ''herein-named'' may be substituted

for the words ''above-named''.

(2) ''I hereby declare that the contents of this consignment are fully

and accurately described above by the proper shipping name, and are classified,

packaged, marked and labeled/placarded, and are in all respects in proper condition

for transport according to applicable international and national governmental

regulations.''

* * * *

(d) Signature. The certifications required by paragraph (a) or (c) of this

section:

(1) Must be legibly signed by a principal, officer, partner, or

employee of the shipper or his agent; and

(2) May be legibly signed manually, by typewriter, or by other

mechanical means.

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

BILLS OF LADING – USE OF PROPER DOCUMENTATION

Question: I have a couple of shipping locations that give work orders or pick tickets to

carriers instead of bills of lading. What can I tell them to make them realize that this is not a

smart thing to do?

Answer: The Carmack Amendment, 49 USC §14706, and the Federal Motor Carrier Safety

Administration (“FMCSA”) regulations require that a motor carrier issue a “receipt or bill of

lading” for property that it receives.

Most shippers prepare some form of a bill of lading, which is provided to the carrier’s driver

for signature to acknowledge receipt of the goods by the carrier. Some accept the carrier’s bill

of lading, and some use other documents such as shipping orders or delivery orders to

document that the carrier has received the goods.

The federal regulations at 49 CFR Part 373 specify the minimum requirements for a bill 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).

Bills of lading usually contain additional information: freight payment terms (prepaid, collect,

bill to third party), special instructions (protective service, delivery appointments, COD

collection), agreed or declared value (liability limitations), carrier information (SCAC code, trailer

number, seal number), etc.

Formal bills of lading, such as the Uniform Straight Bill of Lading published in the National

Motor Freight Classification, are considered by the courts as “contracts of carriage” because

they usually contain terms and conditions that are either printed on the bill of lading or

incorporated by reference (such as classifications, tariffs, service guides, etc.)

Obviously, a shipper needs to obtain a receipt for any goods that it tenders to a carrier for a

number of reasons: to prove to its customer that it shipped the goods so it can get paid, to

establish receipt by the carrier in good order and condition in the event of any loss or damage in

transit, etc. - AND it should contain the basic required information.

This does not necessarily mean that shippers must use a “standard” form bill of lading such

as the Uniform Straight Bill of Lading. Many shippers do not want to use a carrier’s form bill of

lading because they don’t want to be subject to the terms and conditions, liability limitations, and

other tariff provisions that are incorporated in such bills of lading. We often recommend that

shippers develop their own bill of lading forms, with appropriate provisions that are more

“shipper-friendly”.

In conclusion, I would not recommend using “work orders or pick tickets” instead of a bill of

lading since it is very unlikely that they would contain basic essential information.

BILLS OF LADING – USE OF VICS BILL OF LADING AND DIGITAL IMAGES

Question: We have recently incorporated use of the VICS bill of lading (“B/L”) form and are

now printing the form on a laser printer instead of using a preprinted form. The one issue we

are having is that we have to have four copies signed to give two to the driver and to distribute

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

the other two internally. Currently, we are having the driver sign one copy and then making

photocopies for the other three.

Our IT department is looking into a solution where the driver can sign the B/L using a digital

device (similar to the type used when signing for credit card purchases.) That would allow us

the ability to capture a digital image of the entire document including the driver’s signature.

Also, it will prevent our clerks from having to make additional copies on a copier.

question is: Do you see any legal issues with this procedure?

Answer: Obviously it is always important to obtain the driver’s signature as evidence that

the carrier received the goods described on the bill of lading.

Digital images are becoming widely accepted for many purposes, and I don’t see any reason

why the procedure that you have described would create any legal problems, so long as the

name of the carrier and the driver, and the driver’s signature are clearly recorded.

Many shippers, as an additional precaution, are also scanning the driver’s license and

recording that information in the system.

I would note that it is also important to record the carrier’s USDOT number, and the tractor

and trailer license plate numbers.

BILLS OF LADING – VICS

Question: We are ready to implement the VICS Bill of Lading (“B/L”) in our company. I

have noticed the VICS B/L comes with some standard legal statements. I would like to know if

you recommend any other legal statements that can be included in the B/L to protect my

company for any future claim mitigations.

Answer: The VICS B/L essentially adopts some of the “legal statements” from the Uniform

Straight Bill of Lading as published in the National Motor Freight Classification. Typically, the

B/L incorporates the classification and tariffs in effect on the date of shipment, including the

carrier’s unfiled rules tariffs, which include liability limitations, late payment penalties, various

accessorial charges, and other provisions that shippers might want to avoid.

We usually advise clients to delete or modify these terms and conditions, or better yet, to

make sure that all transactions are covered by a properly drafted transportation contract.

BILLS OF LADING – WHAT NEEDS TO BE PRINTED ON FORM

Question: As a small third party logistics provider (“3PL”) we would like to know if it is

necessary to print the uniform straight bill of lading terms and conditions on the reverse side of

all of our bill of ladings; we use 3 part paper which is very expensive to print both sides.

Also is it necessary to print the standard contract terms and conditions for merchandise on

our inbound invoice for the same reasons?

Answer: As to your first question, I assume you are operating a warehousing and

distribution facility and are preparing bills of lading for your customers’ outbound shipments.

While you can use the Uniform Straight Bill of Lading that is published in the National Motor

Freight Classification, you do not need to do so, and can use any form that contains the

necessary information (name and address of the shipper & consignee, description of the goods,

etc.).

If you want to use a Uniform Straight Bill of Lading, you can use the “short form” version that

has no terms and conditions on the reverse side. The “short form” version incorporates the

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

terms and conditions on the reverse side of the “long form” version by reference with this

language:

. . . every service to be performed hereunder shall be subject to all of the terms

and conditions of the Uniform Bill of Lading set forth in the National Motor Freight

Classification 100-X and successive issues.

Regarding your second question, I am not sure what you are asking. If you are receiving

inbound shipments for your customers in the capacity of a warehouseman, you probably should

issue a warehouse receipt as provided in the Uniform Commercial Code. Your warehouse

receipt can incorporate a tariff or other document containing your rules and regulations.

BILLS OF LADING – WHOSE NAMES SHOULD BE INCLUDED

Question: We are a third party logistics provider (“3PL”) and a client of ours wants us to fill

out all of their bills of lading (“B/L”) for shipments they make from their facility as their previous

3PL did..

The shipper claims that they have never once filled out the B/Ls for their shipments and that

their previous 3PL did it for them.

I am uncomfortable doing so, as I think we could have some liability by filling B/Ls out for

them. Is my apprehension justifiable or am I missing something?

Answer: I don’t see a problem IF:

1. You show the customer as the shipper, and the actual carrier on the bill of lading. Do

NOT show your (3PL) name as the shipper or the carrier.

2. You should get specific written instructions from the shipper as to whether or not the

shipper wants you to declare a value or to ship under a released rate.

It is also recommended that brokers or other 3PLs have written transportation agreements

with both their shippers and the carriers that they use.

BROKERAGE – DOCUMENTS FOR IMPORTATION

Question: Can you provide me with a source for sample import brokerage contracts, terms

& conditions, and whatever other documents would be germane for contracting brokerages for

import customs clearance?

Answer: All licensed customs brokers use a fairly standard “Customs Power of Attorney”

form, which is required by the regulations. In addition, there are other forms such as a

corporate certification, etc. and most brokers use the “terms and conditions of service” that have

been promulgated by the National Customs Brokers and Forwarders Association of America.

You can access a typical set of these forms on the UPS website:

http://ups-scs.com/tools/forms/POA_SCS.pdf

BROKERS – COLLECTION AGAINST SURETY BOND ON INTRASTATE SHIPMENT

Question: I moved two loads for a freight broker who went out of business and left my

company holding the bag for about $1,000. They did have a surety bond and I called to make a

claim. I was told by the bond company that because the moves we made for the broker were

“intrastate” and not “interstate” that they were not liable to pay any claims for the work we did. I

don’t understand what the difference would be from intra to inter in payment of claim.

Is this correct and what explanation is there for this loophole?

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

Answer: The bonding company is probably correct. The Federal Motor Carrier Safety

Administration (“FMCSA”) broker surety bond applies to interstate transportation, since the

statutory basis is the Interstate Commerce Act. Thus, it would not apply to a purely intrastate

movement. (It would not also apply to an “exempt” movement such as fresh fruits or

vegetables.)

That, of course, raises another question: was this particular movement part of a continuous

movement in interstate or foreign commerce (even though the carrier may have only handled

the portion of the movement within a single state)? I note that this subject is covered in Freight

Claims in Plain English (4th Ed. 1995), which is available from the Council.

BROKERS – DOES FACTORING RECEIVABLES IMPACT CHARGES AND CLAIMS

Question: A shipper is dealing with a broker who finds carriers for its shipments. The

broker factors its receivables out to a 3

party (broker entity may be going under). Shipper has

outstanding freight charges due but also has a freight claim that it wants to setoff. Is the

shipper’s right to setoff extinguished by the factoring arrangement?

Answer: Yes, I'm aware of this situation. The first step is to look at the respective contracts

between the shipper and broker, broker and factor, and whether the shipper signed off on

anything with the factor. In my opinion, if the shipper has a right of setoff in its contract with the

broker, then that right should not be affected by the factoring agreement, because the factoring

agreement is between the broker and factor. In other words, there is no privity of contract vis-a-

vis the shipper under the factoring agreement.

If the shipper does not have the right to setoff under its contract with the broker, the shipper

may not automatically be entitled to assert a setoff. One of the things you should consider is

whether the carrier/broker admits it is liable for the claim. If the broker and/or carrier declined

liability for the claim, they will take the position that the shipper does not have a valid claim and

therefore can’t exercise a setoff.

BROKERS – FILING AGAINST BROKER SURETY BOND

Question: As a freight forwarder, we do a lot of business with brokers. The broker will

contract us to have a load moved from Point A to Point B.

If the broker does not pay for our services, we file on their surety bond to recapture as much

of the revenue as we can - we normally do not have any issues doing so.

However, during the filing process on one of the brokers, their surety bond company

responded and stated that on the bill of lading, it shows other companies moving the loads and

that only the company that actually moved the load may file on the bond - she further states that

“brokers cannot file against brokers”.

I could not locate any regulation or law regarding this situation.

Answer: The language of the broker surety bond (BMC-84) makes it quite clear that the

bond is for the protection of both motor carriers and shippers:

WHEREAS, this bond is written to assure compliance by the Principal as a

licensed Property Broker of Transportation by motor vehicle with 49 U.S.C.

13906(b), and the rules and regulations of the Federal Highway Administration,

relating to insurance or other security for the protection of motor carriers and

shippers, and shall insure to the benefit of any and all motor carriers or shippers to

whom the Principal may be legally liable for any of the damages herein described.

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

NOW, THEREFORE, the condition of this obligation is such that if the Principal

shall pay or cause to be paid to motor carriers or shippers by motor vehicle any sum

or sums for which the Principal may be held legally liable by reason of the

Principal's failure faithfully to perform, fulfill, and carry out all contracts, agreements,

and arrangements made by the Principal while this bond is in effect for the supplying

of transportation subject to the ICC Termination Act of 1995 under license issued to

the Principal by the Federal Highway Administration, then this obligation shall be

void, otherwise to remain in full force and effect.

Clearly the language does not limit coverage to claims by an unpaid motor carrier.

If you have a situation where the broker has defaulted, and you have paid the actual carrier,

you should be able to seek reimbursement under the surety bond. If the bonding company still

refuses to pay your claim, I would suggest that you get a letter from the motor carrier assigning

its claim for the freight charges to your company.

BROKERS – LEGAL LIABILITIES

Question: I am the owner and sole operator of a shipping business. I utilize 3

party logistic

companies to find the most cost efficient means to transport shipments for people. Basically, I

search UShip.com to find shipments and put the shipment details into carrierrate.com or

freightquote.com to see what it would cost to ship the item(s). Then, I post a bid on UShip.com

for the listing. I am basically the “middle man” and do not see or touch the item(s) being

shipped. So, I was wondering what legalities I would have to consider if a shipment was

damaged during shipment and a claim submitted to the trucking company used is

declined/dismissed.

I do mention in my bids that declared value insurance is available at an additional cost. Are

you able to offer any legal advice or information that I need to consider if this was to happen?

Thank you for taking your time to read and consider this email. Have a great day!

Answer: From your description of the services that you provide, it seems to me that you are

falling within the definition of a property broker, and that you should be registered with the

Federal Motor Carrier Safety Administration (“FMCSA”).

49 U.S.C. Section 13102 defines a “broker” as follows:

(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.

Brokers are required to register with the FMCSA. You can have this done by your

transportation attorney, and you can also do this yourself through the FMCSA website:

http://www.fmcsa.dot.gov/

As for your potential liability for cargo loss or damage, a broker (whether licensed or not) can

be liable under certain circumstances.

Brokers are generally not liable for loss and damage claims. However, brokers may become

liable to the shipper under the following situations:

A) Where the broker holds itself out to be a carrier. Many brokers represent themselves or

advertise in such a manner that the customer believes them to be a trucking company. Brokers

are often reluctant to let their customers know that they are brokering freight, and are not really

carriers.

B) Where the broker is negligent. Even though the broker does not physically handle or

transport the goods, its acts or omissions can constitute negligence, giving rise to a cause of

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

action by the shipper. Examples could include: failing to give proper instructions to the carrier for

protective service requirements; failure to ascertain if the carrier has proper operating authority,

insurance or a satisfactory safety rating, etc.

C) Where the broker has assumed liability by express or implied contract. Brokers and third

party logistics providers often agree, in order to sell their services or retain a good customer,

that they will be responsible for claims. Some brokers pay claims directly to their customers,

and then seek indemnification from the responsible carrier.

BROKERS – OPERATING AS A DISPATCHER

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

(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.

BROKERS – PAYING CARRIER WHEN BROKER DISAPPEARS

Question: We are a transportation broker who recently (November 2007 ) used a carrier

who in turn contracted (brokered) out the services to another carrier. The carrier we contracted

seems to have gone out of business. We have not received an invoice and there is no answer

when we call the carrier.

The carrier that actually did the work has contacted our customer (shipper) looking for

payment, and then us after the shipper told them to contact us for payment. I will gladly pay the

carrier that performed the service but I do not want to pay the carrier we contracted with as well

should they come after us directly or through a bankruptcy attorney. What are my rights and

what can I do to protect myself from double payments.

Answer: The best solution would be to get a written authorization and release from the

carrier with which you contracted. If you can’t find them (and they have not actually filed for

bankruptcy), then you can ask the actual carrier to give you an indemnity agreement before you

pay them, and to hold harmless and indemnify you against any claims for double payment of the

freight charges.

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

If the first carrier has filed for bankruptcy, I would not advise you to pay the actual carrier

unless you get the agreement of the debtor in possession or trustee, and approval of the

bankruptcy court.

BROKERS – RECOVERING SURETY BOND

Question: Recently, I changed surety companies for my broker bond for my auto transport

company. In the contract that I originally had with the original surety company, it stated:

10. Release of collateral: Subject to the foregoing, Trustee will return to

Indemnitor any balance of such collateral which may then be in its custody, upon

receipt of competent written evidence that the condition of each of the bonds written

by Trustee for the Principal has been fully satisfied and that Trustee has been

released and discharged from further liability or responsibility thereunder.

After the new surety was in force, I sent a letter informing the company as such and included

the following:

The conditions of your liability for which the bond was issued have been fully

satisfied. The surety bond with your company was discontinued on May 18, 2010,

and your company has been released from further responsibility or liability there

under.

It is sworn that there are and will be no claims on this surety bond from anytime

prior to the date of cancellation. (May 18, 2010). This letter confirms your release

from any responsibility or liabilities that you were subject to during the time the bond

was in force.

Now, regardless of informing them that they are no longer responsible for claims, they refuse to

release my $10,000 bond that is being held in a bank with them as the trustee, for 18 months. They are

ignoring my statement releasing them from liability.

I never signed anything agreeing with this delay. Is their anything I can do to get my bond

money released from the bank? I have never had a claim...nor never will.

Answer: I assume that you must have had some written agreement with the surety

company when you first obtained your bond. Without seeing the agreement, or their reasons for

not releasing your security, I really can’t give you an answer.

The only reason that I can think of is the 18-month statute of limitations for carriers to bring a

lawsuit for collection of freight charges (49 USC Section 14705).

Have you sent them a copy of your new bond? What does the Federal Motor Carrier Safety

Administration website (http://safersys.org/

) show as your compliance with the broker’s bond

regulations?

BROKERS – REQUIRED LICENSING

Question: Arranging interstate freight moves we know requires an Interstate Brokers

license. What about arranging intrastate freight moves? What kind of authority is required, if

any, and do you know specifically what the rules are for California and Texas?

Answer: To the best of my knowledge, there are few (if any) states that still require a freight

broker to be licensed. However, if you want to be sure, I would suggest that you contact the

state department of transportation.

I would note also that, even where a specific movement may appear to be “intrastate”, i.e.,

between two points in the same state, it can be considered “interstate” depending on the prior or

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

subsequent movement and the intent of the parties. This subject is discussed at length in

Freight Claims in Plain English (3

Ed. 1995) at Section 1.0, which is available from the

Transportation & Logistics Council.

BROKERS – SHIPPER PAYING CARRIER DIRECTLY AFTER BROKER DEFAULT

Question: A shipper only dealt with a broker on the load in question. Before the shipper

paid for the load in question, it learned that the broker was not paying its carriers. The shipper

therefore wants to pay the carrier directly. Is there a way to circumvent an unscrupulous broker

and pay the carrier? Perhaps with an indemnity agreement between shipper and carrier?

Answer: This is a recurring problem. The best advice would be to get written authorization

from the broker to pay the carrier directly. If you can’t get this, and really want to pay the carrier,

a release and agreement to hold harmless and indemnify you by the carrier will give some

protection against double payment liability. However, you can still expect the unpaid broker (or

its factor) to try to collect its charges from you.

BROKERS – SURETY BONDS

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 & Logistics - Q&A in Plain English - Books 7, 8 & 9

BROKERS – WHO PAYS WHEN BROKER DEFAULTS

Question: We recently moved two truckload deliveries for a freight broker. They did not pay

the bill and at year’s end (2008) their surety bond was canceled and their phone were turned off.

My question is whether the consignor or the consignee is responsible for the freight charges due

us. I contend to the consignee that they are responsible because they were the ones who

benefited from our transportation of their product. They contend that they paid the broker for the

transportation, which they did. Under Florida construction law if a contractor is paid and the

subs don’t get paid the owner is still liable for the monies owed to the subs. I know this is

apples and oranges but do the same principle ideas apply to transportation?

Answer: Unfortunately, the situation you describe is all too common.

If the shipments were “freight prepaid”, as to the liability of the consignor, the courts are

divided. Some adopt the theory that the shipper remains liable even if it has paid the broker,

since the bill of lading creates a contract between the shipper and the carrier. Others say that

the broker 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 broker for payment.

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.

I would note that if the shipment was “freight collect”, the consignee cannot assert the

estoppel defense. Then the same conflicting theories that I discussed above would be involved

and it could depend on what court decides the case.

CARRIER RE-WEIGHING – READER RESPONSE

One of the questions in the T

RANSDIGEST (#156) was about carriers inspecting and

reweighing shipments. When they do that the carrier should provide a copy of the reweigh

inspection or reclassification of the product. In the inspection report it will include

documentation showing the change in the weight. If they reclassify the product, they produce a

detailed inspection that would show the dimensions of the product or the detailed reason why

the class is being changed.

Often times we will find the report inaccurate. For example because the carrier says the

weight is inaccurate doesn't mean that is true. The carrier’s scales can be incorrect. We have

many customers who have very accurate scales that they use to weigh the product before

shipping the product. They have their scales tested often and so they can challenge these

reports. Also, they may know the weight of their product and can refute these charges on that

basis. So when you receive this type of notice you should check carefully to make sure these

charges are valid.

Thanks to Ron Williams of Williams & Associates, Inc. for the heads up.

CARRIERS – AIR FREIGHT FORWARDER VS. AIR FREIGHT BROKER

Question: What is the difference between an air freight forwarder and an air freight broker?

Answer: An air freight forwarder is a carrier, i.e., it issues a house airway bill (“HAWB”)

when it receives goods and assumes responsibility for the goods from the origin to the

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

destination shown on the HAWB, including liability for loss or damage in transit. An air freight

forwarder normally consolidates smaller shipments and tenders the consolidated load to an air

carrier for air portion of the movement.

There is really no “legal” definition of an “air freight broker”. It is just an intermediary that

arranges for transportation services with air freight forwarders or air carriers and presumably

receives compensation or commissions for its services.

CARRIERS – COMMON OR CONTRACT

Question: What is the difference between contract and common carrier authority and as a

party logistics provider (“3PL”) does it matter to us?

Answer: The statutory distinction between “common carriers” and “contract carriers” was

eliminated by the ICC Termination Act of 1995. The current statutory language in the Interstate

Commerce Act is found at 49 U.S.C. Sections 13102 and 14101. Essentially, any motor carrier

can enter into a contract “to provide specified services under specified rates and conditions”.

The relevant language is as follows:

Sec. 13102. Definitions

In this part, the following definitions shall apply:

(4) CONTRACT CARRIAGE- The term “contract carriage” means--

(B) for transportation provided on or after such date [January 1, 1996, the

effective date of the ICC Termination Act of 1995], service provided under an

agreement entered into under section 14101(b).

Sec. 14101. Providing transportation and service

(b) CONTRACTS WITH SHIPPERS-

(1) IN GENERAL- A carrier providing transportation or service subject to

jurisdiction under chapter 135 may enter into a contract with a shipper, other than

for the movement of household goods described in section 13102(10)(A), to provide

specified services under specified rates and conditions. If the shipper and carrier, in

writing, expressly waive any or all rights and remedies under this part for the

transportation covered by the contract, the transportation provided under the

contract shall not be subject to the waived rights and remedies and may not be

subsequently challenged on the ground that it violates the waived rights and

remedies. The parties may not waive the provisions governing registration,

insurance, or safety fitness.

(2) REMEDY FOR BREACH OF CONTRACT- The exclusive remedy for any

alleged breach of a contract entered into under this subsection shall be an action in

an appropriate State court or United States district court, unless the parties

otherwise agree.

I should note that the Federal Motor Carrier Safety Administration (“FMCSA”) still allows

carriers to register as a “common carrier” or a “contract carrier” -- some 14 years after the

distinction was eliminated!

As to your specific question, there are still occasional cases that distinguish between

“common” and “contract” carriers and apply different standards of liability. Also, the FMCSA

does not require “contract” carriers to have a BMC-32 minimum cargo liability endorsement.

It is always a better practice to have a formal Transportation Agreement with all your carriers

that contains both the rates and the rules applicable to the carrier’s services.

The FMCSA requirement for public liability (BI/PD) insurance does not depend on “contract”

v. “common” authority. The requirements for insurance are set forth in 49 CFR Part 387.

Transportation & Logistics - Q&A in Plain English - Books 7, 8 & 9

CARRIERS – COMMON VERSUS CONTRACT CARRIER AUTHORITY

Question: We are a small transportation and logistics firm. We are currently trying to

answer the question as to what the difference is between common carrier authority and contract

carrier authority. One of my partners believes that regardless if we have a signed rate

confirmation with a common carrier, the common carrier can come back and request us to pay

them their published, common rates. Is it possible for you to shed some light on the difference

between these two types of authority? Your help is greatly appreciated.

Answer: The statutory distinction between “common carriers” and “contract carriers” was

eliminated by the ICC Termination Act of 1995. The current statutory language in the Interstate

Commerce Act is found at 49 U.S.C. §§ 13102 and 14101. Essentially, any motor carrier can

enter into a contract “to provide specified services under specified rates and conditions”. The

relevant language is as follows: