A Deep Dive into the Intricacies of Bill of Lading: Shippers, Consignees, and Freight Charge Liabilities

1. Understanding the Bill of Lading's Section 7: A Caveat

The Bill of Lading, a critical document in the transportation industry, has various sections that define the terms of transport, with Section 7 holding particular importance. The Section 7 provision addresses the shipper’s potential exemption from liability. A significant stipulation allows the motor carrier to opt for a Non-Recourse Proviso, essentially waiving its right to collect freight charges from the shipper. However, for this waiver to be effective, it must be explicitly executed within the Section 7 box of the Bill of Lading. The absence of a distinctive signature within this section renders the Non-Recourse Provision null and void, and therefore, unenforceable.

Further complexity emerges when the Bill of Lading, despite being marked as 'Prepaid' (indicating the shipper's guarantee of payment), contains a duly executed Non-Recourse provision in Section 7. This scenario presents a conundrum: Can a shipper evade payment liabilities due to the Non-Recourse provision, even after designating the payment terms as Prepaid? The answer is a resounding 'no'. Both the terms 'Prepaid' and 'Non-Recourse' contradict each other in this context. Prioritizing the 'Prepaid' term ensures that shippers can't sidestep their liabilities by merely ticking off the Section 7 box on the Bill of Lading.

2. Shippers Modifying the Bill of Lading: A Strategy to Deflect Liability

With precedent cases, particularly Oak Harbor vs. Sears, underscoring the obligation of double payments by shippers, consignees, and brokers in situations where freight charges are settled with third parties rather than the delivery motor carrier, shippers have devised strategies to circumvent liabilities. One of these tactics involves altering the language on the Bill of Lading. For instance, a statement like “payment to an intermediary is payment to the motor carrier” may be appended at the document's bottom. Such a phrase, however, raises significant legal and ethical concerns.

Firstly, this statement flies in the face of established law and public policy. As reinforced by the Oak Harbor Vs. Sears judgment, the only entity entitled to the payment of freight charges is the delivering motor carrier. Secondly, the authority of a truck driver, on behalf of a trucking company, to accept and bind the company to this altered payment term diverges from what was initially agreed upon between the shipper and motor carrier. Thirdly, such appended language on the Bill of Lading, being material in nature, demands explicit acceptance by an entity of significant corporate authority. Without the endorsement from a company's upper echelons, this modified term holds no legal water and is rendered inconsequential.

3. The Liability of the Consignee: A Legal Perspective

Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co. stands as the seminal case that sets the benchmark for consignor and consignee liabilities in California since 2008. This ruling emphasizes that irrespective of a shipment's payment designation—be it 'Prepaid' or 'Collect'—all parties, including the consignee, shipper, and broker, are collectively accountable for any unpaid transportation dues.

The courts have unequivocally posited that shippers or receivers opting to route their freight charges through brokers, rather than settling directly with the carrier, assume inherent risks. The choice of broker does not dilute the shipper's or receiver's primary obligation to compensate the carrier for rendered services, as per the Bill of Lading's terms. This principle, commonly referred to as the "Bedrock Rule of Cartage", underscores the inalienable right of the motor carrier to payment. Simply put, compensating a third party does not absolve the primary debt directed at the motor carrier.

Supporting this stance is the extensive citation of the Oak Harbor ruling by various courts, as well as the decision in the Southern Pacific Transportation Co. v. Commercial Metals Co. case. But beyond these cases, numerous legal judgments emphasize the liabilities shouldered by the consignee based on the mere acceptance of a shipment. This act of receiving intrinsically implies that the consignee derived an economic advantage from the motor carrier's services, thereby establishing a payment obligation.

Reinforcing this is the federal statutory law, specifically 49 U.S.C. 13706(a). This statute imprints liability for shipping costs onto a consignee upon acceptance of an interstate shipment of goods. The United States Supreme Court has clarified this standpoint, confirming that a consignee, upon shipment receipt and acting as the owner, becomes legally liable for the entirety of freight charges, irrespective of when these charges are levied.

ISSUANCE OF THE BILL OF LADING

It's crucial, however, to differentiate between the "preparation" and the "issuance" of a bill of lading. Legally, the focus isn't on who drafts the B/L. In practice, a range of parties can undertake this task. More often than not, the shipper prepares the B/L, but sometimes it might be a third party, the carrier, or another entity.

No matter who crafts the initial document, the carrier fulfills its legal obligation by endorsing and distributing a copy to the shipper. This act of endorsement signifies the carrier's consent to the shipment details, such as its content, origin, and destination. While there's room for later amendments if inaccuracies are identified or changes are agreed upon, the endorsed B/L essentially captures the shared understanding at that moment, forming the basis of the contractual relationship.

Rest assured, as a shipper, you're on the right path. You possess firsthand knowledge about the shipment's specifics, a detail the carrier might be unfamiliar with unless informed. Whether the carrier jots down the details based on your verbal input or you present a pre-filled B/L form, the law sees no difference in these procedures.

It's worth noting that while the B/L can include pricing details, such information isn't legally binding. Although the B/L acts as a partial contract between the carrier and shipper, the actual price is determined by factors like rate quotes, tariffs, contracts, shipment details (e.g., weight, distance), and not solely based on the B/L's content.

 

Conclusion

In the complex domain of transportation and logistics, the Bill of Lading remains an indispensable document, outlining the terms, responsibilities, and liabilities of all involved parties. As industries evolve and commercial scenarios become more intricate, understanding these intricacies becomes paramount for shippers, carriers, and consignees. Proper interpretation, combined with an awareness of legal precedents and federal statutes, ensures transparency and fairness in transactions, fostering trust and smooth operations within the transportation ecosystem