NVO's Word Is Not Its Bond

Q: We, as a motor carrier, handled a load of imported goods from a port to the final destination in the U.S. upper Midwest, for which we’ve been unable to collect our freight charges.

The goods moved under a through ocean bill of lading issued by a non-vessel-operating common carrier based in the Far East. Call them Third Party A. But the party that contacted us to move the load was somebody else, a U.S. company, Third Party B. Party B says it’s also an NVOCC, though that’s not entirely clear.

We’ve demanded payment from Party B, which is still operating so far as I know, but it simply says, “Sorry, we have no money to pay you.” We can sue, of course, and it probably won’t even defend, but we’re afraid we won’t be able to collect on any judgment because the company won’t be able to pay it.

So we’ve gone back to Party A, which issued the ocean B/L, and have tried to claim against its bond. But it says simply that it never authorized Party B to hire us, and told us to go to Party B for our money. In any case, there’s an agreement in the ocean bill that a lawsuit may be brought against Party A in its own country in Asia.

Can we take our claim against Party A’s bond to the Federal Maritime Commission? The amount of the unpaid charges is $12,000, which won’t support a full court action in another country. Is there anything else we can do to collect these charges?

A: I had to do some research on this after you posed the question to me on the phone. While your situation is a depressingly familiar one for domestic motor carrier operations, I hadn’t previously encountered it in connection with the domestic end of landbridge operations mediated by maritime third parties.

There’s some hope for you, I found, although perhaps not as you might wish and definitely not from the source you’ve been trying to tap.

First, I’d say forget about Party A, the NVOCC that set this whole thing up. The problem with Party A is establishing a clear chain linking it to you via Party B. You have to prove Party B was acting as Party A’s legal agent when it hired you. That may seem self-evident, but courts require a little more. Party A says Party B acted on its own in subcontracting to you, and proving otherwise will be an uphill struggle.

You may well be able to overcome the B/L restriction against suing Party A anywhere but in its homeland, but fighting this plus proving the agency linkage will cost you a lot more than $12,000. Even then, how do you collect from an Asian company with no (or few) U.S. assets?

It’s open season, however, on Party B, the third party that stiffed you. And Party B, if it also represents itself as an NVOCC, likewise is supposed to have an FMC-registered bond — a minimum of $75,000 ($10,000 more for each additional location it maintains in the United States).

Oops, Party B isn’t really an NVOCC; it just says it is? Well, then maybe instead it’s a motor carrier broker. A broker’s bond is only for $10,000, but that’s still something.

You must, however, claim against those putative bonds, which means simultaneously notifying the principal (Party B here) and the bonding agent of your demands. If they agree, well and good; if not, though, you must prevail in court against the principal to “perfect” your claim. So no, either way, you can’t just file your claim with the FMC; court is your only venue.

How will this go in the real world? I have no idea. If Party B is a bogus NVOCC, or a scofflaw, it won’t have a $75,000-plus bond; if it’s also not a registered motor carrier broker, it won’t even have $10,000. If it doesn’t, it doesn’t, and you’re hung.

And for the future, don’t deliver the goods without being assured of your freight charges. The law says you have a lien on the freight for those charges. When in doubt, don’t relinquish possession until you’re paid.

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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