by Tim Taylor, President

Most people look at the bill of lading simply as a document that tells the trucker where to deliver the load. That observation is actually only part of the picture.

A bill of lading is the “deal” between the shipper (and, by reference, the receiver) and the transportation company.

The bill of lading sets up important stipulations regarding the following: title (ownership) of the goods; where title passes; liability for loss; the amount of financial responsibility the carrier will assume; damage; payment of the freight bill; terms; and a host of other contractual obligations.

The following examines each part of the bill of lading and its obligations.

Abiding by the carrier’s rates, classifications, and rules

The first item on the bill of lading states, “Received subject to individually determined rates or contracts that have been agreed upon in writing between the carrier and the shipper, if applicable, otherwise to the rates, classifications and rules that have been established by the carrier and are available to the shipper, on request.”

The above statement is found at the beginning of every bill of lading contract issued in this country, and it’s imperative that you understand its meaning: In essence, it states that you agree to abide by the carrier’s rates, classifications, and rules.

The wording of that opening statement was recently amended as part of the new bill of lading, adopted by the carriers as a result of the new Interstate Commerce Act.

The new act changed the requirement of carriers to file rates with the Interstate Commerce Commission (ICC). The old bill of lading began with a reference to rates, etc., “on file with the ICC.” Since carriers no longer file rates with the ICC, the opening statement of the old bill of lading was rendered moot and required redrafting.

It’s important to note that even if your current bill of lading doesn’t include the newer language, you are still agreeing to the terms of the new bill of lading. Here’s why:

The National Motor Freight Traffic Association’s NMF 100-X, one of the only publicly filed and full-force law tariffs left, governs the carrier’s acceptance of your shipment. The new Interstate Commerce Act allows carriers to bond together, with antitrust immunity, not only for rates, but also for rules and classification tariffs.

Since the filed rate doctrine says that properly filed tariffs have the full force and weight of the law and NMF 100-X (and successive issues) is a legally filed and approved tariff, you are bound to its provisions. The new bill of lading is contained in item 360-A, and the old bill of lading was cancelled in item 362.

Tariffs established by the carrier

Under the new bill of lading provisions, a carrier can establish rules without any government agency validating the particulars of those rules.

For example, a carrier could say in his tariff that on Fridays that coincide with the close of a calendar quarter, rates and charges shall be increased by ten percent. You would be required to abide by that tariff.

Another more likely rate issue would be disallowing discounts to remote locations. The disallowance of discounts is common for a variety of reasons ranging from remote areas to late payments to inside deliveries.

It’s all in the rules, “available to the shipper upon request.”

Released value

Many customers have reported that carriers have published released value tariff items in their in-house rules tariffs. Most of those items release shipments to $1.00 per pound (to $0.10 per pound in the case of some used products).

Old court cases have always held that the shipper must specifically release a shipment’s value in writing for a released value to apply. Nobody has yet to come to court to validate the new bill of lading with its liability limitation clause.

If you ship commodities that exceed the $0.10 per pound valuation, check with your carrier’s rules tariffs to verify that they cover you to full value at the rate you paid.

Commodities requiring special or additional care

“Note 3” of the new bill of lading speaks to issues of commodities requiring special or additional care. Basically, Note 3 is a disclaimer which could negate any damage claim you may have with the carrier, assuming the carrier was not made aware in writing of any “special” care required.

In the absence of written instructions, problems arise when the courts decide what constitutes “special.” What is “normal” to you could be “special” to someone else. That’s why listing care requirements of your shipments on the bill of lading is generally a good business practice.

Additionally, you also need to list any temperature requirements on the bill of lading in UPPERCASE LETTERS, according to tariff requirement.

Terms and conditions: carrier liability

“Every service to be performed hereunder shall be subject to all the conditions not prohibited by law, whether printed or written, herein contained, including the conditions on the back hereof, which are hereby agreed to by the shipper and accepted for himself and his assigns.”

The above statement is part of the long bill of lading in the recitals. Many people don’t know the significance of this provision, but the back of the long form contains numerous terms and conditions you should be familiar with.

Exceptions, generally. The first of the terms and conditions refers to the carrier accepting full liability for the shipment with certain exceptions. The exceptions, approved by the FHWA, include acts of God, public enemy, authority of law, or acts of default of the shipper.

An example of an act of God is a tornado blowing the truck off the road, causing damage to the product. An example of authority of law is an inspector at a scale damaging freight during his inspection. An example of a public enemy would be a truck and its contents being destroyed by a terrorist act.

The last exception to liability, “act or default of the shipper,” is a sticky one. You can expect that in every claim the carrier is looking for a way out. In fact, the most common declination of carrier liability relates to the “act or default of the shipper” exception.

The most common claim declination. The problems that arise usually involve “improper packaging.” Packaging rules are outlined in great detail in NMF 100-X (the rules and classification tariff).

Generally, packaging should be sufficient to withstand the “rigors of transportation.” Bumpy roads, fast stopping, sharp curves, in the absence of negligence on the part of the carrier, are considered normal “rigors of transportation.”

Rollovers, crashes, and panic stops, however, are not normal “rigors of transportation,” but such events are difficult to prove. In a large claim trial, the carrier’s driver would likely testify that no such event occurred. The carrier will also offer into evidence the packaging material used in your shipment in an attempt to convince the court of its inadequacy.

Though improper packaging is an often-used declination on the part of many carriers, you can take precautions to defend yourself against such a claim. The National Motor Freight Classification tariff contains over 145 pages specifically defining packages. Freight classification items frequently define the packaging that must be used to constitute “proper packaging.” Boxes, which are allowed in most classifications, are described in item 222 of the NMFC, including minimum specifications for various sizes and weights.

If it is apparent to the trucker that the packaging is inadequate, then the carrier should refuse the shipment. Absent refusal, the carrier can no longer claim “improper packaging.” However, if the packaging is not apparent, the carrier will probably prevail in his declination.

For the customer to prevail in any claim, he must be able to show “freedom from negligence.” Carriers often keep records of handling and can produce witnesses, driver, dockmen, etc., to prove their case. Making certain that your packaging meets minimum standards will provide you with the superior position.

Timely delivery. Section two of the terms and conditions on the back of the long form bills of lading (remember the short form incorporates these provisions), says that unless agreed upon in writing, the carrier is not bound to deliver a shipment at any specific time. Carriers are only required to deliver with “reasonable dispatch.”

Delay or loss of market claims are a nemesis of every carrier. Problems do arise in shipping, and shipments are often delayed. (If Northwest Airlines delays your flight to the Super Bowl and you miss the game, are they liable?)

To prevail in any delay claim, you generally need to have a written agreement for pickup and delivery time, as well as a dollar value penalty for any delays.

Filing claims. Section three of the terms and conditions could encompass volumes of legal dictum (the caselaw and discussions do encompass volumes); however, the provisions of this item do contain a few major points you should keep in mind.

First, claims must be in writing. If you go to court and did not file a bona fide claim in writing, you’re probably out of luck.

Second, claims must be filed within nine months of the date of delivery. (In the case of no delivery, i.e., a total loss, claims must be filed within nine months of a reasonable delivery time.)

Third, lawsuits in the case of declined claims must begin within two years of the carrier’s first declination.

Miss any of the above-mentioned provisions and most likely you won’t get paid. Simple procedures should be set up to get a claim filed on any loss or damage immediately after delivery.

Shipment in storage. Section four of the terms and conditions deals with carrier liability should the shipment go into storage. Essentially, the carrier must arrange for a “reasonably safe” storage facility or a public warehouse. The carrier’s liability for the shipment decreases to warehousemen’s liability. Warehousemen’s liability is for “reasonable” care; it is essentially NO liability unless you can prove negligence.

Your best option is to prevent the shipment from going into storage in the first place. If that’s not possible, then get the shipment out of storage as soon as you can.

The carrier must give proper notice (two notices within two weeks) before it can offer any goods held in storage to public auction to recover its freight costs. The amount recovered at auction (absent gross negligence on the part of the carrier) is final, and if it is not enough to cover the freight and storage costs, you will still owe the difference.

No signed delivery receipt. The final part of section four deals with deliveries (per you instructions) to places where the carrier cannot get a signed delivery receipt. Essentially the carrier waives further responsibility.

Shipment value. Section five of the terms and conditions says that if you declare a value or release a shipment to value (per item or per pound), that amount (the amount you released the shipment to) plus paid freight charges is the maximum amount you can collect on a claim.

The section also says that the carrier will not be liable for items of “extraordinary value” (e.g., precious metals, currency, works of art, stock coupons, etc.).

My recommendation is that anytime you have an item of high value (over $0.10 per pound), you should verify the carrier’s acceptance of liability, understanding clearly the maximum amount they will cover. Many carriers will maintain a blanket $1.00 per pound liability limitation which, while possibly questionable in enforceability, may delay or confuse your claims recovery.

Dangerous items. Section six says that if you ship explosives or dangerous items without notice, you will be made to pay for the consequences and/or the carrier will put the goods in storage. The carrier may even dispose of the goods without your consent and without compensating you.

Disavowing further liability. The section most misunderstood in bills of lading is section seven, which provides a way for the shipper to disavow further liability for freight charges on a collect shipment. Additionally, section seven says that both the shipper and the consignee are liable for the freight charges.

The freight charges are a matter of contract between the shipper (presumably the seller) and the consignee, and carriers are not privy to those agreements.

Imagine the problem of being caught in the middle: That is why shippers “vouch” for customers (receivers).

Shippers cannot waive liability when the consignee is not the beneficial owner of the shipment (like when shipping to a warehouse) or when they have asked the carrier to bill the charges to a third party. Remember that the carrier does not have to make delivery of any shipment without full payment.

One final note: if the shipment description is erroneous, the charges for that shipment will be based upon what was actually shipped.