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.
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.
Also, under the phrase “This Shipment is Freight Collect,” the bill of lading should explicitly state that “If the carrier named herein or its agent delivers this shipment to the consignee or its agent without payment of freight charges or other lawful charges, this carrier or its agent does so without recourse to the shipper or its agent.”
In the past, bills of lading required the signature of the shipper to make the freight collect, with no recourse language; however, it is far better to simply state, without the requirement of a signature, that there is no recourse against the shipper.
Also, “Contract Terms and Conditions” on the back of the bill of lading should include provisions binding the carrier to the bill of lading’s terms and conditions, noting that the shipment will be delivered in a timely manner, there will be the standard nine-month period for filing claims against the carrier or truck broker, and specifying that the truck broker is acting as the carrier’s agent and agrees to indemnify and hold harmless the shipper or consignee from any loss due to the carrier’s negligence or its failure to properly perform and comply with the terms of “this agreement.”
Finally, the declared value of the shipment should also be stated on the face of the bill of lading, so there is no doubt about any loss should the carrier not properly transport the load. If a carrier states it has insurance, the shipper should get a copy of the policy, as many times coverage is inadequate or tends to vanish.
Special Restrictions
In regard to any shipments traveling on California highways, the California Air Resources Board (CARB) has new regulations that apply to all affected vehicles and/or carriers regardless of where they may be registered.
Consequently, if a carrier is operating within California, the bill of lading should also include the following language: “Carrier or its agent certifies that the TRU [transport refrigeration units, i.e., reefer] equipment furnished for loading this shipment is in compliance with California regulations.”
The CARB regulations do make a few concessions for owner-operators and small fleets. The deadline for the installation of particulate matter filters for small fleets, such as owner-operators with only one vehicle, was January 1, 2014. For operators with two vehicles, both would require retrofits by the beginning of this year (or January 1, 2015), and for three vehicles, no later than January 1, 2016. Regulations also specify that by 2020, all vehicles with engines older than 1999 must be replaced,and by 2023, all vehicles must have 2010 model-year engines.
Contract Terms and Conditions
Below are the terms and conditions included on the back of the Western Growers Association’s standard bill of lading (see previous page for the front of the agreement).
1. Where used in this Bill of Lading, the term Carrier means the person, firm, or corporation operating the motor vehicle and in possession under this contract; and the execution of this contract by the Carrier shall bind jointly, and severally, the person, firm or corporation owning or operating the motor vehicle. The Carrier assumes full responsibility for any and all loss, damage or delay to the property while in its possession and until delivery to the consignee except when the loss, damage or delay is caused by an act of God, act of public enemy or by an act or omission of the shipper or consignee.
2. The Carrier agrees to transport the property under protective service, at the temperature specified, between the origin and destination shown in this contract and to deliver the property to the consignee in good condition at the delivery time specified, if any. In the event the Carrier fails to transport and deliver the property, then the Carrier agrees to pay the owner of the property for the actual loss or injury to the property resulting from such failure.
3. It is further agreed that if no specific delivery time is stated in this contract, then timely delivery of the property will be based on the Carrier’s usual and normal schedule for perishable shipments transported with reasonable dispatch between the points shown in this contract. The Carrier represents that the delivery can be performed without violating any local, state or federal traffic or safety laws and regulations, and that it has complied and will comply with all laws and regulations of local, state and federal authorities which could affect this transportation or agreement.
4. Claims against either or both the Carrier or Truck Broker, if any, must be filed within nine months of delivery, or in the case of failure to make delivery, then within nine months after a reasonable time for delivery has elapsed. Such claims may be filed either with the Carrier or Truck Broker, if any.
5. The Carrier warrants and represents to shipper and consignee, or other owner of the shipment, that the motor vehicle described in this contract, is covered by a valid effective insurance policy, in at least the amounts prescribed by the federal government. It is further represented that this shipment is covered by a presently effective cargo insurance policy in at least the amount of $250,000.00 and that additional coverage will be obtained to cover the actual value of the shipment if the shipper states the value on the face of this contract.
6. All parties acknowledge that the Truck Broker, for compensation received from the Carrier, has acted as the Carrier’s agent. It is acknowledged that the shipper or consignee has relied on the Truck Broker in securing adequate and satisfactory transportation services, and that the Truck Broker agrees to indemnify and hold harmless the shipper or consignee or other owners of the property transported from any loss due to the Carrier’s negligence, act of omission, or any failure to fully perform and comply with the terms of this agreement.
Of course, the bill of lading should also give refrigeration instructions and any temperature recorder serial identification numbers. And, there should be a place for the carrier to sign where it states “Received above perishable agricultural commodities in good order, except as noted.” Further, all parties should be identified by full name and address (e.g., shipper, motor carrier, driver, license number, etc.). In short, all of the blanks on the bill of lading should be complete and filled in to protect all parties involved.
