Four Times the Brokerage Fun

 Q: We’re a broker, and we use another broker for one of our customers, who was an incumbent when we acquired the account. We gave this broker a shipment, they gave it to Carrier A, which brokered it to Carrier B using its brokerage authority under “Carrier A Logistics.”

Our customer paid us, we paid the first broker, and the first broker paid Carrier A Logistics. Carrier A (and Carrier A Logistics) is now out of business and didn’t pay Carrier B.

The bill of lading shows Carrier B as the carrier and the beneficial shipper (our client) as shipper; we are listed as the bill-to party.

I’ve read several of your articles regarding this situation, but I’m not sure of the shipper’s liability in this case.

A: This is a decidedly awkward situation because of some factors on the B/L you don’t mention.

You sent me a copy of the B/L, and I’m struck by one element of it. There is, as usual, a block labeled “Freight Charge Terms,” and it has, as is not entirely usual, multiple options that may be checked. The first such box is “Prepaid,” which is checked; the others are “SPP” (which I presume has to do with what’s called a “Strategic Partners Program,” under which somebody else involved in the transaction is to pay), “3rd Party” and “CPU/Collect” (the “CPU” presumably standing for customer pickup).

Following the header “Freight Charge Terms” is a further statement that “freight charges are 3rd Party unless marked otherwise.” But that’s not applicable here because something else — specifically, the “Prepaid” box — is indeed marked.

You are indeed named as the bill-to party, in a separate provision of the B/L headed “Freight Charges Bill To,” followed by your name, address and accounting phone numbers.

But strictly speaking, that just says to whom the freight bill is to be sent; it doesn’t explicitly say who’s supposed to pay it. And elsewhere in the document, your shipper is named (also complete with address and phone number), the carrier is correctly identified, and under terms of this box, your shipper has said it’s agreed to pay the carrier.

In many respects, this reminds me strongly of a case in which I got involved as a consultant where multiple carriers were pursuing a shipper who’d likewise relied on a broker to pay its freight bills. The B/L was strikingly similar, and I testified as expert witness for the carriers that the “Prepaid” indicator (also checked on those B/Ls) made the shipper liable.

In that case, the court simply ignored the “Prepaid” check-off and held the shipper not liable for the charges that its broker failed to forward to the carriers. But it was a very low-level court (too low for a useful citation), and I frankly disagreed with the ruling, which I found contrary to the plain meaning of the B/Ls.

If Carrier B sues your shipper, perhaps the shipper will get lucky and come before a court equally disdainful of what the B/L plainly says. Certainly there are (as there were in my case) sufficient indicia elsewhere in the B/L that somebody else was really supposed to pay the carrier’s charges, what with that “bill to” stuff and all.

But given you’re the named “bill to” party, that could bounce back on you if Carrier B includes you in its lawsuit — notwithstanding that, just like your shipper, you’ve also passed on the money to the party next in this convoluted linkage.

This is, in other words, a mess. The B/L is not only self-contradictory about who’s responsible to the carrier, but two of the parties in the chain — the broker to whom you passed on this shipment and Carrier A Logistics, to whom that broker in turn passed it on — aren’t even mentioned in the document.

Especially in light of the bizarre (to me, at least) decision in the similar case in which I participated, I wouldn’t even begin to try predicting how this would play out in court. The judge could find your shipper liable, could find you liable, or could send Carrier B packing with a bee in its bonnet. Any of these outcomes seems possible.

If you’re looking for a personal opinion, I’d say your shipper’s agreement to pay freight charges (by checking the “Prepaid” box) is trump and renders it liable to Carrier B. But what do I know? One court’s already overruled me, as I said. Lord knows how another might decide.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.

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