It is essential for every shipper to carefully examine its bills of lading to insure that, when the shipment is f.o.b. (free-on-board) or the freight has already been paid, the shipper has a defense when a carrier demands payment of the freight bill.
Although examining a bill of lading is not high on anyone’s list, it should be. For example, the bill of lading—for produce shippers—should always state “For Exempt Commodities,” because fresh fruits and vegetables are exempt from standard motor carrier rules. Specifically, U.S. Code title 49 section 13506(a)(6)(B) exempts produce from the jurisdiction of the Secretary of the U.S. Department of Transportation and the Surface Transportation Board, which assumed some of the regulatory functions formerly administered by the Interstate Commerce Commission before its discontinuation in 1996.
In addition, some regulatory functions were either eliminated or transferred to the Federal Motor Carrier Safety Administration, or to the Bureau of Transportation Statistics. Regardless, the transportation by motor carrier of “agricultural or horticultural commodities” is exempt from usual motor carrier rules applying to other forms of cargo. For a full explanation of this exception, see Henslin v. Roaasti Trucking, Inc. (815 F. Supp. 1347, E.D. Cal. 1993), in which the Court describes the exemption and the history behind it at length, concluding federal courts would not have jurisdiction over the controversy because the shipment was exempt from federal law (aff. 69 F.3d 995, 9th Cir. 1995).
Although this may seem to be a minor point, carriers’ attorneys routinely rely on court decisions under the federal laws and regulations governing nonexempt shipments, which are not applicable to produce. In the past, shippers were required to sign the bill of lading to insure carriers had no recourse against them for payment of freight, including a trustee in a carrier’s bankruptcy proceeding who might try to demand payment.
Under the federal law for nonexempt shipments, a carrier is required to collect its tariffs. In some cases, the shipper has already paid the freight (but the broker never turned the money over to the carrier), so the shipper may be required to pay the freight invoice again. Consequently, like the signature, the ‘X’ makes it clear who is responsible for freight charges. This is particularly important, because the bill of lading is the basic contract between the carrier and the shipper.
It is also important to review the record of any carrier at the U.S. Department of Transportation’s SAFER (Safety and Fitness Electronic Records) website (http://safer.fmcsa.dot.gov). By clicking on “Company Snapsnot” and entering a name, shippers can discover whether the carrier is authorized for hire, what precisely it is authorized to carry (e.g., general freight, fresh produce, etc.), its safety rating, whether it is also a broker, and if the carrier has been involved in any accidents or crashes. In short, this website can be a goldmine of information to help determine if you should work with a particular carrier.
Filling in the Blanks
A good example of a bill of lading with contract terms and covering all the necessary bases is in current use by the Western Growers Association and its members (this document is reproduced later in the article). If you look to the right-hand side of the document near the middle of the page, it clearly provides that “This Shipment is Freight Collect” and an ‘X’ should be made in the “Receiver” box just below the “Charges to be paid by” language.