Q & A: Superceding Section 7

Q & A: Superceding Section 7

Copyright 2003, Traffic World, Inc.

Q:

About 30 months ago our firm tendered shipments to a customer via a specific carrier and marked the bill of lading prepaid and billed to a third party named by the consignee on its purchase order, which I believe to be a freight payment service. Twenty-one months later we received a letter from the carrier stating that "in spite of our best efforts to collect the charges for the shipments made on your behalf by (the third party) we were unable to do so."

The carrier did not detail the extent of its collection efforts. I could not find a listing for the firm at the address we had, so I assume they went out of business. The carrier''s letter went on to erroneously presume that the third party acted as an agent on our behalf in arranging carriage. In response, I advised them that the third party was most likely a payment firm and that we had signed section 7 on the B/L. I suggested that they seek payment from the consignee.

Then, another eight months later the carrier wrote to us reiterating that they attempted to collect monies from the third party but were unsuccessful. They cited this provision in their rules tariff: "When a party other than the consignor or consignee is shown on the bill of lading and/or shipping order as the payer of the freight charges and such party is not a bank or freight payment plan, such party''s name and address must be clearly shown in the body of the bill of lading and shipping order at the time of original tender.

"Shipments subject to the provisions of this item will be accepted only when the consignor and/or third party has established credit with the carrier and consignor guarantees to pay all lawfully accrued charges if the third party fails to do so within the time allowed under the credit regulations of the Surface Transportation Board.

"Shipments made subject to the provisions of this item must be billed as ''Prepaid.'' The nonrecourse provisions of Section 7 of the bill of lading contract will be null and void on shipments tendered under the provisions of this item."

The reference to the consignor or third party establishing credit is interesting. I don''t believe our firm ever established credit with this carrier. In fact, its prior letter includes an offer for us to set up our own discount program in order to "avoid this type of unfortunate situation again."

Can a carrier''s rules tariff supersede the section 7 proviso of the bill of lading? If not, are there any time limits for collection that may absolve us from liability?

A:

Respecting your particular situation, you''ve hit the nail on the head with your last question. "A carrier ... must begin a civil action to recover charges for transportation or service provided by the carrier within 18 months after" the date of delivery; 49 U.S.C. ?14705(a) and (g). Even the carrier''s first demand to you was beyond this time limit, and you don''t indicate that the carrier has even yet filed suit. It therefore has no legal ability to make you pay.

But your broader question about whether a carrier may, by tariff provision, override execution of section 7 of the bill of lading warrants an answer anyway, and in this instance I have to say yes, in my opinion the tariff provision nullifying section 7 governs.

In contract law it''s ordinarily the "most recent writing" - the contractual term closest in time to implementation of the contract - that controls. Here that would be your execution of section 7, since the B/L in which section 7 is incorporated obviously postdates the tariff.

But an exception must be made when the earlier writing (here the carrier''s tariff) expressly disallows subsequent agreement on contradictory terms. In other words, if you and I make a basic agreement that one of us won''t subsequently make thus-and-such change in our contractual relationship, if one of us does attempt to make that change unilaterally, it isn''t valid unless there''s also an agreement between us to override our previous prohibition.

I presume that your B/L terms were such that they incorporated the carrier''s tariff "by reference." That is, the B/L (which is the contract of carriage between you and the carrier) named the tariff as a "governing" publication. That means the tariff terms are as much a part of the B/L contract as if they were included in the B/L itself. Which means you''re bound by those terms and, since they nullify your execution of section 7, that doesn''t excuse you from liability for the carrier''s freight charges.

The world is full of shippers who cry "unfair!" when told they''re bound by provisions of carriers'' individually maintained tariffs that they may never have seen. But the shipper''s choice is to either (a) adopt a B/L form that expressly disallows application of tariffs, such as the Transportation Consumer Protection Council''s "shippers'' bill of lading," or (b) take advantage of their opportunity to make carriers reveal their tariff terms, per 49 U.S.C. ?13710(a)(1), and pay attention. The law affords no other option.



-- Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at P.O. Box 76, Morganton, Ga. 30560; phone, (706) 374-7201; fax, (706) 374-7202; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.