Q: We’re a third-party distribution center operator, and often provide cross-dock services to our customers — giving them a facility for interlining freight that is transferred from one carrier to another.
A while back, we were approached by a motor carrier we didn’t know, but that had been referred to us by another of our customers. We agreed to provide (for a fee, of course) cross-dock services on freight originated by that carrier, to be forwarded to destination by another carrier.
Actually, the destination carrier was selected by a major 3PL (broker), who billed for the service. The 3PL’s bills were sent to us and we paid them, rebilling the originating carrier. This is a common arrangement we have with many of our customers, although our other customers also use us for other services, mostly storage of their goods.
To make a long story short, the carrier that approached us has vanished, leaving a lot of unpaid bills behind — not only ours for the cross-docking, but also the rebills of the 3PL’s charges.
Do we have any recourse against the consignee for these bills? Against the shipper, assuming we can determine the shipper’s identity? Against anybody?
A: I can make a long story even shorter: No. You have no recourse against the consignee, the shipper or anybody else except the carrier that stiffed you and that you now can’t find.
Look, I really don’t want to rub it in, but I imagine the conversation between the owners of this now-vanished carrier once you agreed to this arrangement went something like this: “Matilda, we got us a live one here!”
How many times have I said in this space, don’t do business with strangers? I urge you and all of my readers to repeat that mantra to yourselves at least once a day, write it on your chalkboards, type it out on your computers, or have it tattooed in a prominent place on your bodies if necessary.
Did you get references for this carrier? Check its credit standing and financials? Visit its headquarters? Get, and verify, a credit application? Obtain a security deposit? Don’t bother to answer.
Sure, you do business with lots of other folks on the same basis, but you tell me you’re holding significant quantities of their goods in storage. If they do a disappearing act, you’ve got valuable merchandise against which you can enforce your lien for unpaid charges.
What’s more, those other customers know this, which means they’re unlikely to do that disappearing act in the first place.
Now, I have to admit that I not infrequently violate my own rule by doing business with strangers; and they, in turn, do business with me, a stranger to them. For example, I buy a fair amount of stuff online from people who don’t know me from Adam’s off ox.
But we do it the intelligent way. I first give them my credit card information, so they’re assured of payment, and only then do they ship me my purchase. If they fail in this, I have the recourse of reversing the transaction with my credit card provider. Thus, we’re both protected against the defaults, intentional or otherwise, of the other.
You took no such precautions. You gave your service on no more than the promise of future payment, without any security that this promise would be honored. Worse yet, you gave your own money to pay your customer’s bills to somebody else on only the same fragile basis.
Is it so astonishing that in the end your customer didn’t keep its promises? Seems to me the greater surprise would be if it had.
As to your recourse against some other party, on what possible basis would you suggest this is supported? There was, presumably, a contract of carriage between your customer and the shipper; you weren’t party to it. The consignee presumably accepted that contract by taking delivery of the goods, but, again, the contract wasn’t with you.
From whom else might you hope to recoup your losses? The 3PL you paid? You didn’t do that on your own behalf, but rather that of your now-vanished customer, so that’s no help. And there’s no one else in view, is there?
If you ever find your vanished customer, you can try to extract the money from him, her or it. I doubt you’ll succeed; and you still have to do the finding first. Otherwise, your only recompense will be a lesson I hope you’ll not forget.
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.