Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Month: February, 2017

Legal Implications of a Bill of Lading

by G. Spencer Mynko, Esq.

The bill of lading is a document used by carriers and shippers regarding the transportation of freight. It is a contract determining the rights, duties and liabilities of the parties. It is a receipt for the goods containing the description, quantity and condition of the property to be transported. A Bill of Lading is an important document with significant legal consequences

The Interstate Commerce Act (ICA) requires motor carriers to “issue a receipt or bill of lading” for property received for transportation, 49 USC § 14706. (In practice, the shipper usually prepares a bill of lading on its own form and presents it to the driver for signature.)
Theoretically, this requirement can be waived, if the parties expressly agree in writing, 49 USC § 14101, but it is always a good practice to have a written receipt for shipments. While various forms of Bills of Lading exist, the function served by a bill of lading is even more significant when attempting to resolve a dispute. Bills of lading can serve as contracts of carriage, receipts for goods, documents of title, or any combination of the foregoing. Thus, the significance of any particular bill of lading is context-dependent, and not every bill of lading serves all of the aforementioned functions.

The Law

The ICA does not specify any particular form of the receipt or bill of lading, but the Federal Motor Carrier Safety Administration regulations prescribe the minimum requirements, 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:
* Names of consignor and consignee.
* Origin and destination points.
* Number of packages.
* Description of freight.
* Weight, volume, or measurement of freight (if applicable to the rating of the freight).
In the U.S., the multi-part, non-negotiable UNIFORM DOMESTIC STRAIGHT BILL OF LADING is the most commonly used form. Shippers often use preprinted forms which often contain not only a description of their commodities and applicable class(es) but, in addition, make a reference to the carrier’s filed tariff.  Since the filing of tariffs is no longer mandated by law, Shippers and carriers have since had the opportunity to negotiate the terms and conditions of the bill of lading contracts since this deregulation took place. Individual shippers and carriers as well as shipper and carrier trade organizations hire lawyers to draft Bills of Lading that protect their interests first. While the “filed rate doctrine” has been abolished with deregulation, compliance with the carrier’s tariff and the terms and conditions of the bill of lading can still be required under ordinary principles of contract law. This is why it is so important for shippers and carriers to understand the terms of the their agreement regarding hauling freight.

Carmack Amendment and Other Laws Affecting BOLs

The governing statutes are the Carmack Amendment of 1906 (“Carmack Amendment”), the Motor Carrier Act of 1980, the Trucking Industry Regulatory Reform Act of 1994, and the Interstate Commerce Commission Termination Act of 1995 (“ICCTA”).  Carriers can provide either Section 14706 (common carrier) carriage or Section 14101(b) (contract) carriage within the United States.
a. Section 14706 (Common Carrier) Carriage
A carrier in today’s period of deregulation need not file tariffs with DOT’s Surface Transportation Board.  Under Section 14706, carriers are liable to the person entitled to recover under a motor carrier bill of lading or a receipt for the goods. The liability regime is a Carmack Amendment liability regime. Under this liability regime, a carrier is liable for the actual loss or damage to the cargo caused by the receiving carrier, the delivering carrier, or an intermediate carrier over whose route the cargo is transported either (1) in interstate transportation within the United States or (2) from a place in the United States to a place in Canada or Mexico, provided the transportation takes place under a through bill of lading.
The Carmack Amendment prohibits a carrier from limiting or exempting itself from liability, except under certain specified circumstances prescribed by the Motor Carrier Act of 1980. A carrier may limit its liability if that limit would be reasonable under the circumstances surrounding the transportation. The ICCTA is not specific as to who determines reasonableness. Consequently, this issue has been left to the courts to determine.
A civil action can be brought either in a federal or a state court against the delivering carrier or the carrier that caused the loss, damage or delay. Claims must be filed within 9 months, and the law suit must be brought within 2 years.

The General Rule of Bills of Lading

Regarding bills of lading, 49 U.S. Code § 80107 applies a general rule. Under the general rule of bills of lading the person who negotiates or transfers a bill warrants that the bill is genuine; that the holder has the right to transfer the bill and title to the goods described in the bill; the holder doesn’t know of anything that would adversely affect the value of the goods; that the goods are fit for their purpose when merchantability and fitness would have been implied in an agreement for transfer of the goods without a bill of lading.
“The mere delivery of the goods to a carrier for transportation does not necessarily import an absolute promise by the shipper to pay the freight charges. To ascertain the contract, the bill of lading must be looked to primarily, as this serves both as a receipt and a contract. Ordinarily the person from whom the goods are received for shipment assumes the obligation to pay the charges, and this obligation is ordinarily a primary one. The shipper is presumably the consignor, and the transportation ordered by him is presumably on his own behalf, and a promise to pay may be inferred therefrom. This inference may, however, be rebutted, and it may be shown by the bill of lading or otherwise that the shipper was not acting in his own behalf, that this fact was known to the carrier, and that the parties intended not only that the consignee should assume an obligation to pay but that the shipper should not assume any liability whatsoever, or that he should assume only a secondary liability.” New York C. R. Co. v. Frank H. Buck Co., 2 Cal. 2d 384.

Why every Motor Carrier, Broker, and anyone else involved in transportation needs to understand BOLs

A major concern these days is that there is no uniform or standard form of bill of lading used throughout the industry. Every carrier, shipper, broker, freight forwarder and other party involved in transportation often will use their own form of bill of lading. Many of these bills of lading are deficient because they do not contain a nonrecourse provision (or any terms and conditions for that matter), a Section 7 box, or places to mark if the shipment is “prepaid” or “collect.” Transportation contracts generally avoid these problems by demoting bills of lading to receipts. Parties also must take care in preparing their own form of bill of lading and using it whenever there is no contract. Finally, parties must know how to protect themselves if a different, deficient bill of lading is used. If a nonnegotiable bill of lading is not conspicuously marked “nonnegotiable,” a holder who purchased the bill of lading for value supposing it to be negotiable may treat the bill of lading as imposing upon the bailee the same liabilities it would have incurred had the document been negotiable. As you can see, this simple and commonly used document can be a source of traps for the unwary.
Contact today to discuss tariffs, bills of lading and contracts today.

Motor Carriers Still Need To Use Tariffs

by gspencermynko

When I recently mentioned the word “Tariff” to a motor carrier client of mine, the company representative said “Why would I need a tariff? I thought tariffs went out with deregulation in the 1980s”. These responses are typical: “Motor Carrier Tariff? They got rid of those right?”; “Those have been abolished, you don’t need to file them, so why bother?”; “The courts don’t pay attention to those things, right?”

While it is true that Tariffs are no longer filed since Congress abolished the ICC, Congress only said that Tariffs were not required to be filed. It did not say they were eliminated. Congress in fact has allowed carriers to rely on tariffs to limit their liability for freight damage, establish rates and rules, and avoid showing shippers there Tariffs unless asked. Therefore, motor carriers still have the ability to draft and post tariffs, and doing so provides great benefits when freight claims arise. This is why I say that a carrier that operates without a Tariff is missing out on a great opportunity to protect itself in a dispute with a shipper or broker.

Today’s Tariffs: Under 49 USC Section 13,710, all motor carriers are required to have a written or electronic copy of the “rates, classifications, rules and practices” upon which any rate applicable to a shipment is based. A standard bill of lading, which almost every shipper issues, also stipulates that the shipment is subject to the “rates, classifications and rules that have been established by the carrier”. Because of the elimination of agency filing requirements, standard numbering, appearance and contents of tariffs have disappeared. A modern tariff is a series of paragraphs describing the rules that a carrier has decided to enforce on all of its shipments, coupled with a fallback rate schedule.  Because of the great benefits associated with tariffs, I say that every motor carrier needs a tariff.
Contents. The contents of a tariff will vary with the carrier. Specialized carriers have specialized tariff items. Almost all tariffs, however, have the same basic items in common:
  • Limitation of Liability. Federal law specifically allows carriers to limit their liability with tariff language. Carriers typically limit their liability to a specific dollar value per pound. Courts remain divided on whether carriers must keep a “full value” option available in their tariffs for a higher price.
  • High Value Shipments. Most tariffs also contain provisions requiring the shipper to state the value of the goods on the bill of lading and indicating that goods valued at higher than a stated amount will not be accepted for transportation.
  • Consequential Damages. Tariffs usually contain language stating that the carrier will not be liable for “incidental or consequential damages”. Such language protects carriers from liability for unexpected factors such as plant closing costs.
  • Payment Protection. Carrier tariffs often contain language which enlarges the carrier’s right to withhold delivery and states that freight may be held to satisfy all outstanding unpaid claims.
  • Late Payment Charges. Most carrier tariffs assess charges for late payment. LTL carriers often use ‘loss of discount’ provisions which offer service to customers at percentage “discounts” but then cancel the discounts if freight charges are not paid on time. ICC and Surface Transportation Board rules limit such provisions.
  • Detention. Particularly with changes in hours of service rules, tariffs also should have provisions which charge shippers for unnecessary detention of equipment after specified “free time”.
A Recent Case: A fairly recent Federal Court of Appeals case made it absolutely clear that every carrier should have a tariff. In 5K Logistics, Inc. v. Daily Express, Inc., 659 F.3d 331, the carrier’s tariff was the critical factor in the court’s decision which enabled the carrier to escape liability for damaged cargo.  In this particular case, the shipper, Dominion Resources Services, Inc. (“DRS”) contracted with 5K Logistics (the broker) for the transportation of two tube bundles from a warehouse in Chambersburg, Pennsylvania to DRS’s facility in Lusby, Maryland.  5K Logistics, in turn, contracted with Daily Express, Inc. (the carrier) to transport the cargo. Two bills of lading were issued to govern the shipment, which incorporated the terms and conditions set forth in the carriers published tariff. That tariff contained requirements that any claim for damage to cargo had to be filed within nine months of delivery, and that any lawsuit for cargo damage be filed within two years of the written denial of the claim.
During transport, one of the two bundles fell onto the roadway and was damaged. The consignee refused to accept delivery of the bundle, and cargo claim was filed. The cargo claim was initiated when DRS presented 5K with a claim for $192,072.50 for damage to the bundle. 5K, in turn, placed Daily Express on notice that it would seek to recover any amounts paid on the claim to DRS. In response, on November 27, 2006, Daily Express informed 5K that any claim submitted “will be denied.” On May 14, 2009, approximately two years and nine months after the accident, DRS filed suit against 5K in Federal Court in Virginia.
Defendant 5K (the broker) claimed breach of contract and indemnity and contribution from 3rd party defendant Daily Express (the carrier) for damages it had to pay a consignee.  In other words, the broker cross-claimed against the carrier for indemnification. After a bench trial, judgment was entered against the carrier on Carmack Amendment, 49 U.S.C.S. § 14706, indemnity and contribution (I&C) claims. The carrier appealed.
On appeal, the Fourth Circuit first noted that the Carmack Amendment governs the liability of Daily Express for the shipment. The Court then noted that under the Carmack Amendment, carriers are permitted to impose contractual time limits for bringing suit, subject only to the statutory minimum of “nine months for filing a claim” and “two years for bringing a civil action.” 49 USC §14706(e)(1). This serves to “ensure that the carrier may promptly investigate claims,” S and H Hardware and Supply Company v. Yellow Transport, Inc., 432 F.3d 550, 554 (3rd Cir 2005), while still preserving an adequate minimum time for shippers to seek recompense for damaged cargo. As the Court noted, “the Carmack Amendment thus contemplates that limitation periods are terms to be bargained over between the shipper and carrier.” Shao v. Link Cargo (Taiwan) Limited, 986 F.2d. 700, 707-708 (4th Cir 1993).
The Court noted that the carrier’s tariff contained the § 14706(e)(1) permissible, contractually negotiable time limits for damage claims: 9 months to file a claim; 2 years from denial to sue. No claim was filed. The broker’s letter was only a notice of intent to claim, not a claim. The broker knew the damage amount and was contractually obligated to timely file a claim. Even construing the letter as a claim, the carrier’s response was a denial. Suit was not filed within 2 years. Suit against the carrier under the bill of lading was time-barred. Thus, Daily Express argued that no claim had been filed by 5K within nine months of the date of loss. The argument that the tariff’s time limits should be ignored because the contract did not limit the consignee would violate § 14706‘s protection of carriers from stale claims.
In order to escape its failure to file a claim with Daily Express within nine months of the date of loss, 5K argued that it could not have filed a claim within the time period because it could not identify its loss with specificity until it had been found liable to DRS. The Court rejected this argument, holding that 5K was well aware of the dollar amount of the damage to the cargo and could have filed a claim for that amount prior to the time that it was held liable to DRS. The Court further held that even if the letter sent by 5K to Daily Express constituted a claim, 5K would nonetheless be barred from recovery. Daily Express’ prompt denial of any claims presented by 5K triggered the two-year limitation on the filing of suit. Because 5K did not comply with the two-year limitation period, its suit was likewise time barred.
Court went on to make clear that the claim for which the broker, 5K, sought indemnification was not a Carmack amendment claim under the bill of lading issued by the carrier, Daily Express. The court noted that the contract between the shipper and the broker was a separate agreement to which the carrier was not a party. Again, the carrier’s Tariff governed the cargo claim. Because the carriers Tariff made it clear that a claim had to be filed within nine months, and that a lawsuit had to be filed within two years, and because neither the broker nor the shipper sued the carrier within that time-frame, the carrier was able to escape liability based on their Tariff.
The Take Home Message: This case demonstrates the importance of having good written contracts, bills of lading, and tariffs. On the one hand, 5K could have drafted strong contracts with both the shipper and the carrier to protect itself from being caught in the middle and exposed to liability with no recourse against the carrier. On the other hand, the carrier, Daily Express, had a tariff that took advantage of the Carmack Amendment’s provisions allowing the carrier to restrict the period for filing claims to nine months and the period for filing suit to two years from the date of denial of the claim. The bill of lading also included crucial language incorporating the tariff provisions into the agreement between the parties. This case makes clear that tariffs can serve as important tools in protecting carriers when freight claims occur.  In the present case, where the ultimate liability of the carrier could be far higher than its limit of cargo insurance, the tariff can serve as an important document that either eliminates liability for the freight claim entirely or provides for a limitation of liability. For these reasons, I say: EVERY MOTOR CARRIER NEEDS A TARIFF!
Contact today to discuss tariffs, bills of lading and contracts today.