Transportation Law Retailer Perspective

1. Transportation Law Retailer Perspective Presented by Gerard F. Smith, Esq.

2. The Parties

3. What are the differences between…… • Brokers, • Freight Forwarders • Third and Fourth Party Logistic Providers • Carriers

4. THE CARMACK AMENDMENT • Edward Ward Carmack was an attorney, newspaperman, and political figure who served as a U.S. Senator from Tennessee from 1901 to 1907. • The federal law governing surface carriers’ liability for loss, damage and delay to interstate movements of goods in the United States is commonly referred to as the “Carmack Amendment”. • The name is derived from Senator who was responsible for having this law enacted in 1906.

5. Liability of a Motor Carrier • Carmack Amendment • 49 U.S.C § 14706 (united states code) • Carrier responsible for “full actual loss” caused by the carrier by reason of loss, damage or delay • Carriers are “virtual insurers” of goods in their possession.

6. THE CARMACK AMENDMENT • 1) a uniform standard of liability • 2) end to the conflict in state courts over the extent of liability • 3) joint and several liability for originating and delivering • 4) Require the carrier to issue a receipt or bill of lading

7. THE CARMACK AMENDMENT • 5) Codify the common law liability of common carriers; • 6) uniform time limits for the filing of claims and suits; • 7) place where carriers may be sued (venue); • 8) Apply the laws governing water carriers

8. THE CARMACK AMENDMENT • 9) liability applies provisions to reconsigned shipments • 10) use of freight forwarder bills of lading and delivery receipts • 11) originating and/or delivering carrier required to pay for a loss

9. BEGINNING and ENDINGof CARRIER LIABILITY • WHEN LIABILITY BEGINS Common carrier liability begins only after acceptance of the bailment agreement by the carrier. Such acceptance takes effect when the goods are placed in a position to be cared for, and under the control of the carrier or his agent, with his knowledge and consent. Bailment = where physical possession of personal property, or chattel, is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently holds possession of the property.

10. BEGINNING and ENDINGof CARRIER LIABILITY • WHEN LIABILITY BEGINS • For liability as a common carrier to commence, a shipper must complete delivery to the carrier, and the shipment must be accepted by the carrier

11. BEGINNING and ENDINGof CARRIER LIABILITY • WHEN LIABILITY ENDS • Common carrier liability does not end until transportation of a shipment is completed. Transportation is not completed until a shipment has both arrived at its destination and has been delivered

13. Claims against Motor Carriers • 49 USC 14706 • Minimum period for filing claims.— • (1) In general.--A carrier may not provide by rule, contract, or otherwise, a period of less than 9 months for filing a claim against it under this section and a period of less than 2 years for bringing a civil action against it under this section. The period for bringing a civil action is computed from the date the carrier gives a person written notice that the carrier has disallowed any part of the claim specified in the notice.

14. Claims against Motor Carriers • Who can File the Claim: • Consignor? • Consignee? • Broker? or • Insurance Company? • A CLAIM IS A WRITTEN DEMAND BY A CLAIMANT TO A CARRIER FOR DAMAGES DUE TO THE CARRIER'S BREACH OF THE CONTRACT OF CARRIAGE RESULTING IN LOSS, DAMAGE OR DELAY TO SHIPMENT.

15. THE ESSENTIAL ELEMENTS OF A CLAIM ARE: • (1) NOTICE THAT A LOSS OCCURRED; • (2) THE IDENTITY OF THE SHIPMENT; • (3) THE NATURE OF THAT LOSS (DAMAGE, SHORTAGE, NON-DELIVERY, PILFERAGE, ETC.; • (4) THE AMOUNT OF THE LOSS, IF KNOWN, OR IF NOT, THE AMOUNT OF THE POTENTIAL LOSS; AND • (5) A DEMAND FOR PAYMENT.

16. CLAIMS PROCEDURES & ADMINISTRATION • WHO MAY FILE A CLAIM OR SUIT • RISK OF LOSS • FILING CLAIMS • BRINGING SUITS • The first step in any claim case is to ascertain who has risk of lossin transit. This concept is significant because it determines who has the legal right or obligation to file the claim, and who is the proper “party in interest” in the event of litigation.

17. CLAIM LETTER FORMAT

18. DOCUMENTS THAT SHOULD BE SUBMITTED WITH CLAIM • Paid freight bill; • Original bill of lading; • Certified copy of the invoice • Copy of inspection report, correspondence from carriers acknowledging the loss or damage, delivery receipt with exception notation; • explanation of repair costs,.

19. Proof required against Motor Carrier • 1.Good order and condition • a. loading tallies • b. actual testimony of person who observed loading • c. packing lists • d. the bill of lading (except shippers load and count - SL&C) • e. invoice

20. Proof continued… • 2nd element of proof… • Non-delivery • Damages to goods • Delay

21. Proof continued… • 3. Damages • “Actual Value” of the goods = Destination market value (not Manufactures cost) • A. Invoice amount • B. replacement costs • C. customs declaration • Duty to mitigate damages

22. CARRIER DEFENSES TO LIABILITY • ‘(a) the act of God • (b) the public enemy; • (c) the act of the shipper himself • (d) public authority • (e) or the inherent vice or the nature of the goods. ..

23. CLAIMS PROCEDURES & ADMINISTRATION • REJECTION vs. ACCEPTANCE OF DAMAGED SHIPMENTS • THE “PRACTICALLY WORTHLESS” SHIPMENTS • WRONGFUL REJECTIONS • INSPECTIONS

24. SPECIFIC CLAIM PROBLEMS • CONCEALED DAMAGE • If damage to cargo is not apparent at the time of delivery, a shipper or consignee must give prompt notice to the carrier upon later discovery of damage. Failure to give prompt notice places the burden on the shipper to rebut the presumption that the cargo was delivered in good condition

25. LIMITATIONS OF LIABILITY • RELEASED, AGREED, ACTUAL, AND DECLARED VALUES • In a “released rate” situation, the carrier is liable for the full actual loss unless the shipment is “released” to the carrier at a lower stated value. If the shipper enters a released value on the bill of lading, it will be entitled to a lower or reduced rate; if it fails to do so it will be charged the higher, full-value rate

26. Hughes Aircraft Co. v. North American Van Lines, Inc., 970 F.2d 609, 613 (9th Cir.1992) • TO LIMIT ITS LIABILITY A CARRIER MUST: 1. MAINTAIN AN APPROVED TARIFF; 2. OBTAIN AN AGREEMENT WITH THE SHIPPER BASED ON A CHOICE OF LIABILITY; 3. GIVE THE SHIPPER AN OPPORTUNITY TO CHOOSE BETWEEN LEVELS OF LIABILITY; AND 4. ISSUE A BILL OF LADING PRIOR TO THE SHIPMENT.

27. LIMITATIONS OF LIABILITY • SPECIFIC PROBLEMS • NOTICE – ACTUAL OR CONSTRUCTIVE • “SOPHISTICATED SHIPPER” • PARTIAL LOSSES • FORM OF BILL OF LADING • AUTOMATIC RELEASES & “INADVERTENT” RULES • “HIGH VALUE” SHIPMENTS • THE NMFC AND RATES DEPENDENT ON VALUE • Released Value Items • Actual Value Items • Item 172 – Limitation Where Value Is Not Declared by Shipper • Item 60000-Class 70 – Drugs, Chemicals, Medicines, Toilet Preparations and Other Articles

28. SPECIFIC CLAIM PROBLEMS • DELAY CLAIMS (REASONABLE DISPATCH) • PERISHABLES • NON-PERISHABLES • PUBLISHED SCHEDULES • “GUARANTEED” DELIVERY • MECHANICAL BREAKDOWNS

29. SPECIFIC CLAIM PROBLEMS • NON-DELIVERIES • SHORTAGES AND PILFERAGE • ROBBERIES, THEFTS, HIJACKINGS AND IMPOSTER THEFTS • UDELIVERABLE FREIGHT AND MISDELIVERIES

30. AUTOMATIC” RELEASES & “INADVERTENCE” RULES An automatic release is a limitation of liability which comes into effect when the shipper fails to take some affirmative action to obtain full liability coverage. Automatic releases may be found in exempt contracts such as those which incorporate the railroad’s TOFC/COFC circulars, and in motor carrier tariff rules, which require the shipper to enter a value on the bill of lading or make a notation that full (or higher) liability coverage is desired.

31. AUTOMATIC” RELEASES & “INADVERTENCE” RULES • Beware of tariff provisions such as in Item 62822 of N.M.F.C. 100, applying on radio, radio-telephone or television transmitting or transmitting and receiving sets, etc. which state: • NOTE: The released value must be entered on shipping order and bill of lading in the following form: “The agreed or declared value of the property is hereby specifically stated by the shipper to be not exceeding $_____ per pound.” • If the shipper fails or declines to execute the above statement or designates a value exceeding $5.00 per pound, shipment will not be accepted, but if shipment is inadvertently accepted, charges will be assessed initially on the basis of the class for the highest value provided. Upon proof of lower actual value, the freight charges will be adjusted to those that would apply if the shipment had been released to the amount of its actual value.

32. LIMITATIONS OF LIABILITY • DEREGULATION CHANGES • MOTOR CARRIER ACT OF 1980 • No Requirement for Prior I.C.C. Approval • Collectively-Made Released Rates • Choice of Rates • TRUCKING INDUSTRY REGULATORY REFORM ACT OF 1994 • FEDERAL AVIATION ADMINISTRATION AUTHORIZATION ACT OF 1994 • I.C.C. TERMINATION ACT OF 1995 • STAGGERS RAIL ACT OF 1980 • Limited Value Rates • Deductibles

33. Freight Charges: Prepaid and Collect • Prepaid means that the shipper owns the freight payment responsibility. • Collect means that the consignee owns the freight payment responsibility. • Prepaid/Collect Beyond means that the shipper or consignor owns the prepayment portion with the balance of the freight charge being the responsibility of the consignee.

34. Freight Charges: Prepaid and Collect • Third Party establishes that a party neither the consignor nor consignee owns the payment processing function. The legal payment obligation may or may not belong to the third party and the assignment of the legal responsibility is  determined from the parties identified on the Bill of Lading Contract.  Simply put, unless the payment party is a party to the Bill of Lading contract, they have no legal obligation for payment.  “Third Party” is typically invoked when there is an outsourced payment service to handle the freight payment function. • Pre-pay and Add typically means that the shipper advances the freight charges to the carrier and then bills the beneficial owner of the freight for an amount approximating or equal to the actual freight charges.

35. The Uniform Commercial Code • The Uniform Commercial Code (UCC or the Code) is one of a number of uniform acts harmonizing the law of sales and other commercial transactions in all 50 states within the United States of America.

36. Uniform Commercial Code • There are certain presumptions, based on the “terms of sale” used: • F.O.B. Place of Shipment- U.C.C. 2-319 provides that where F.O.B. place of shipment is specified, the seller is bound to ship the goods at that place and bears the risk and expense of putting the goods in possession of the carrier. Thereafter, the risk of loss is on the buyer. • F.O.B. Place of Destination - When the term is F.O.B. place of destination, the seller must transport the goods to that place at his own risk and expense and tender proper delivery. Thus, the risk of loss is on the seller during transit. • F.A.S. means “free along side” and requires the seller to deliver the goods to the pier or dock. Risk of loss remains on the seller until such delivery is completed.

37. FOB (Freight on board) • FOB Origin means the responsibility of the Seller stops when the 'goods' are delivered to the Carrier at seller’s factory. • It also means if something gets lost or is damaged in transit, it is between the Buyer and the carrier. • FOB Destinationmeans that the risk of loss to the merchandise passes at time and place of delivery to the consignee (Retailer). • Simply stated…FOB origin means the risk of loss or damage in transit is on the buyer, and FOB destination means risk of loss or damage in transit is on the seller (vendor).

38. Make a distinction • Title to the Goods (sales terms) • Risk of Loss (goods in transit) • Prepaid and collect (freight charges)

39. INCOTERMS • Incoterms or international commerce terms are a series of international sales terms, published by International Chamber of Commerce (ICC) and widely used in international commercial transactions. • EXW – Ex Works (named place) • The seller makes the goods available at his premises. The buyer is responsible for all charges. • EXW means that a seller has the goods ready for collection at his premises (Works, factory, warehouse, plant) on the date agreed upon. • The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination

40. “shippers load and count” • This notation is generally used when, for the shipper’s convenience, the carrier “drops” a trailer to be loaded and sealed by the shipper, and returns at a later time to pick up the trailer without inspecting or counting the contents.

41. BILL OF LADING ACT • § 80113. Liability for nonreceipt, misdescription, and improper loading • (a) Liability for nonreceipt and misdescription. – • Except as provided in this section, a common carrier issuing a bill of lading is liable for damages caused by nonreceipt by the carrier of any part of the goods. • (b) Nonliability of carriers. - • A common carrier issuing a bill of lading is not liable under subsection (a) of this section (1) when the goods are loaded by the shipper; • (2) when the bill - • (A) describes the goods in terms of marks or labels, or in a statement about kind, quantity, or condition; or • (B) is qualified by “contents or condition of contents of packages unknown”, “said to contain”, “shipper’s weight, load, and count”, or words of the same meaning; and • (3) to the extent the carrier does not know whether any part of the goods were received or conform to the description. • (c) Liability for improper loading. - • A common carrier issuing a bill of lading is not liable for damages caused by improper loading if • (1) the shipper loads the goods; and • (2) the bill contains the words “shipper’s weight, load, and count”, or words of the same meaning indicating the shipper loaded the goods

42. “shippers load and count” • The Bills of Lading Act addresses the effect of loading by the carrier or the shipper. • When bulk freight is loaded by a shipper that makes available to the common carrier adequate facilities for weighing the freight, the carrier must determine the kind and quantity of the freight within a reasonable time after receiving the written request of the shipper to make the determination. In that situation, inserting the words “shipper’s weight” or words of the same meaning in the bill of lading has no effect. • When goods are loaded by a common carrier, the carrier must count the packages of goods, if package freight, and determine the kind and quantity, if bulk freight. In that situation, inserting in the bill of lading or in a notice, receipt, contract, rule, or tariff, the words “shipper’s weight, load, and count” or words indicating that the shipper described and loaded the goods, has no effect except for freight concealed by packages.

43. “shippers load and count” • The Bills of Lading Act addresses the effect of loading by the carrier or the shipper. • When bulk freight is loaded by a shipper that makes available to the common carrier adequate facilities for weighing the freight, the carrier must determine the kind and quantity of the freight within a reasonable time after receiving the written request of the shipper to make the determination. In that situation, inserting the words “shipper’s weight” or words of the same meaning in the bill of lading has no effect. • When goods are loaded by a common carrier, the carrier must count the packages of goods, if package freight, and determine the kind and quantity, if bulk freight. In that situation, inserting in the bill of lading or in a notice, receipt, contract, rule, or tariff, the words “shipper’s weight, load, and count” or words indicating that the shipper described and loaded the goods, has no effect except for freight concealed by packages.

44. “sh shippers load and count ippers load and count” • the courts have long held that, if the improper loading is apparent and could have been detected by the carrier’s employee, the carrier cannot raise the shipper’s act as a defense. • Thomson v. Chicago, Milwaukee & St. Paul Ry. Co., 217 N.W. 927 (Sup.Ct. Wis. 1928); Robinson v. New York Cent. R. Co., 282 N.Y.S. 877 (App.Div. 2nd Dept. 1935); David E. Kennedy, Inc. v. O’Brien, 175 A. 882 (Sup.Ct. Pa. 1934); Lewis Machine Co. v. Aztec Lines, Inc., 172 F.2d 746 (7th Cir. 1949); Modern Tool Corp. v. Pennsylvania R.R. Co., 100 F.Supp. 595 (D. N.J. 1951); Central of Georgia Ry. Co. v. Griner and Rustin, 127 S.E. 878 (Ct.App. Ga. 1925); Perkel v. Pennsylvania R.R. Co., 265 N.Y.S. 597 at 604 (1933); United States v. Savage Truck Line, Inc., 209 F.2d 442 (4th Cir. 1954); Symington v. Great Western Trucking Co., 668 F.Supp. 1278 (S.D. Iowa 1987). See also Smart v. American Welding and Tank Co., Inc., 826 A.2d 570 (N.H. 2003).

45. “shippers load and count shippers load and count” • If a shipper is not willing to accept the consequences of a “Shippers Load and Count” notation, sealed trailers should be accompanied by another notation on the bill of lading requesting inspection by the driver of the cargo after loading. • TIP: Shippers should request drivers to check loads before acceptance. If a driver refuses to do so and had the opportunity to do so, record on your records what the driver was doing when you loaded the shipment. • TIP: Do not permit a driver to insert “SL&C” on a bill of lading when he has been given the opportunity to inspect and/or count the load during loading. In such cases, insert an affirmative statement that the shipment is not a “SL&C” shipment, and that the driver is to inspect and count the load.

46. “shippers load and count” • TIP: When a “SL&C” defense is raised, determine whether the specific cause of the damage can be attributable to the shipper’s loading. If not, the “SL&C” defense is not relevant. • TIP: Where goods are palletized and the driver cannot count the cartons on the pallet, it is acceptable to state the number of pallets and the total number of cartons, in which event the driver signs for the pallets only. • TIP: Do not confuse “SL&C” with commodity rates published to apply when a shipper loads and/or consignee unloads. These rate provisions do not necessarily preclude the carrier’s driver from counting and inspecting the load during the loading and unloading, as they merely provide for the substitution of shipper labor for carrier labor, and are unrelated to carrier liability for damage. However, some rate items specifically exclude the service of loading and counting the product in the shipment.

47. Live Unload • On LTL shipments and TL shipments where the driver unloads the trailer (or is present during the unloading) it is important to count and inspect the goods as they are unloaded from the vehicle. • "Best Practices" recommendation:If there is any visible evidence of damage, or the count does not match quantity shown on the bill of lading (or the purchase order), a notation should immediately be made on the bill of lading or delivery receipt, and it should be signed and dated by both the driver and the receiver. • Note that on LTL shipments, carriers often use a "Pro" for a delivery receipt that is generated by the carrier and contains information copied from the bill of lading. Truckload shipments more commonly move with a copy of the bill of lading that is carried with the load and is used as the delivery receipt. • "Best Practices" recommendation:All damage, even if only slight markings on the exterior of a package, should be noted, because it may offer a clue to damage to the contents discovered later. On palletized shipments, if banding, shrink or stretch wrapping is broken on receipt, inspect and count the contents in the driver’s presence.

48. Dropped Trailer • "Best Practices" recommendation: As noted above, before opening a dropped trailer, it is important to verify the integrity of the seals, locks, hinges, etc. to make sure that there has been no access after the time the carrier delivered the trailer. If there is any such evidence, extra attention is in order. • As with a "live unload", goods should be carefully counted and inspected as the trailer is being unloaded. Any discrepancies should be accurately recorded. Most companies use an Over, Short or Damage ("OS&D") form for this purpose. Again, the use of digital cameras is highly recommended to document damage or shortage during the unloading. • When damage or shortage is discovered, it is important to call the carrier immediately and request an inspection. Confirm your request for inspection in writing! A telephone call is fast and simple, but provides no record of notification.

49. Dropped Trailer • “Best Practices" recommendation: One of the most important steps to take in cases of dropped trailer shipments (or any concealed damage) is to set aside the damaged goods awaiting the carrier’s inspection and RETAIN THE ORIGINAL PACKAGE AND PACKING. • Leave all straps, wood, or wrappings intact and try not to move item unless necessary. Failure to comply with this provision deprives the carrier of the opportunity to inspect the goods and the packaging, which will, in turn, severely hinder your chances to recover damages (unless, of course, you have preserved the evidence by taking photographs, obtained a written statement from the person having actual knowledge of its condition, etc.).

50. Concealed Damages • Many carriers refuse to pay a concealed damage claim that is not reported within 15 days, citing a "15 day rule". There is no such rule, but loss or damage reported after a reasonable time makes it more difficult to prove that the condition existed at the time of delivery, and not afterwards. • Item 300155 of the NMFC addresses this problem as follows: • PRIOR TRANSPORTATION-REGULATIONS GOVERNING THE INSPECTION OF FREIGHT BEFORE OR AFTER DELIVERY TO CONSIGNEE AND ADJUSTMENT OF CLAIMS FOR LOSS OR DAMAGE • If a concealed damage inspection report covers merchandise which has had prior transportation movement, consignee is required to assist carrier in determining if shipment was opened and inspected by shipper prior to reshipment, and if not, shall then assist carrier in every way possible to establish record of prior transportation