When is Fuel Surcharge Effective?

When is Fuel Surcharge Effective?

Copyright 2006, Traffic World, Inc.


Can you advise on your understanding of when a fuel surcharge is effective?

We''re an audit bureau. Our client has a contract with a carrier which has a fuel surcharge appendix incorporated. The appendix provides the usual sliding scale based on the national average diesel price. Unfortunately it does not specify a day on which this is to take effect.

The only appropriate wording says: "Important Note: The fuel price will be derived from the National Average Diesel Price in the area(s) of service by carrier from the (Department of Energy) Diesel Price Index. This weekly updated information can be retrieved from their Web site," etc.

Under "Rates and Charges" in the contract, the following is written: "Where a rule in this Agreement covers the same service as a rule in the National Motor Freight Classification, the Carrier''s individual Rules Tariff or the Bureau Rules Tariff that the Carrier participates in, the rule in this Agreement, to the extent of its application, will apply in lieu of the rule in the other tariffs."

Their rules tariff provides for a fuel surcharge. The appendix in the contract would overrule that. But does it also overrule the application of the effective date of the surcharge - i.e., Wednesday as shown in their rules tariff -- since the appendix does not specify a day on which it is to be effective? Does the "to the extent of the application" wording in the contract allow them to revert to the Wednesday application in their rules because of the absence of a specific day being cited in the fuel surcharge appendix?

I am applying it on Monday, the day the DOE''s national average is published. But we''re in kind of a nagging dispute about this.


Can''t you guys find something more important to argue about? Like maybe whether anchovies are or aren''t necessary to a good pizza, or if William Shakespeare did or didn''t write the plays attributed to him?

But if you must have an answer, mine is a very resounding, I don''t know. Nor, I think, would you get a lot of consistency anywhere in the legal profession, including the courts if anyone was silly enough to take this nonsense there.

There are some fairly solid legal arguments on both sides. Let''s take the carrier''s part first. The contract notation applies only "to the extent of its [the contract''s] application." Well, the contract doesn''t specify an application date, does it? Therefore the contract can''t override the rules tariff in this respect, can it? Q.E.D., the rules tariff governs, and Wednesday is "obviously" the right day.

I know you''re not convinced because you say so. So let''s now take your (and, presumably, your shipper/client''s) part. The contract provides for application of the DOE index, albeit with no application date specified. But this overrides the entire fuel surcharge provision of the rules tariff. Since the index comes out on Monday, it is therefore intended under the contract to be immediately applied. The contract says its terms apply overriding any tariffs. Q.E.D., Monday is (just as "obviously") the right day.

And that the contract was written badly -- quite clearly a date should have been spelled out -- doesn''t help us a jot. Tariffs are always construed strictly against their maker (the carrier), since the carrier drafted them unilaterally and if it messed up that''s its problem; Burrus Mill & Elevator Co. v. C., R. I. & P. Ry., 131 F.2d Lc 535, and St. L. Cooperage Co. v. N. Y. C. R. R. Co., 258 I.C.C. 532. But contracts, although normally written by one party and merely countersigned by the other, are considered in law to be joint creations of both parties so that in disputes there''s no presumption one way or the other.

That is, badly written contracts redound against both parties equally.

But where, in the final analysis, does it really matter a whole lot? The DOE diesel index bobs along like one of those plastic roosters that runs down a stick; one week up, next it''s down, bouncy, bouncy, bouncy. So this time out a Wednesday application will benefit the carrier and a Monday application will cost it a few bucks, next time around the shipper will get the advantage on Wednesday and will have to pay a couple dollars more if the application is on Monday. In the long haul it''ll more or less even out, to the point that if anybody''s out more than a sawbuck or two over the difference I''d be greatly surprised.

I know folks get their pride involved in these fusses.

I was once asked to settle a dispute in which the sum involved was a whole $28, and it seems to me that wasn''t even the record; I vaguely recall one that turned on even less. But this is quite foolish enough. If you can''t agree, how about flipping a coin? You''ll get about as good a result as if you''d fought it out in a court of law, with about the same practical consequences, and it''s going to cost everybody a whole lot less money -- even if the winner gets to keep the coin you flipped.

-- 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.