What is a Bill of Lading

What is a Bill of Lading

The bill of lading is the “deal” between the shipper (and, by reference, the receiver) and the transportation company.

Many people think that a bill of lading is only a document that describes a shipment and tells the trucker where to deliver the load. However, a bill of lading actually has many functions and sets up important stipulations regarding:

  • title (ownership) of the goods
  • where title passes from seller to buyer (yes, it’s important)
  • liability for loss
  • the amount of responsibility the carrier will assume
  • damage
  • payment of the freight bill
  • and other contractual obligations.

Abiding by the carrier’s rates, classifications, and rules

The first recital on the bill of lading states,

“Received subject to individually determined rates or contracts that have been agreed upon in writing between the carrier and the shipper, if applicable, otherwise to the rates, classifications and rules that have been established by the carrier and are available to the shipper, on request.”

The above statement is found at the beginning of virtually every bill of lading contract issued in this country or is incorporated by reference in carriers’ rules tariffs. It is imperative that you understand it’s meaning; in essence, it states that you agree to abide by the carrier’s rates, classifications, and rules.

The wording of that opening statement was amended as part of the new bill of lading, adopted by the carriers as a result of the ICC Termination Act.

The ICC Termination Act of 1995 is a United States federal law that changed the requirement of carriers to file rates with the Interstate Commerce Commission (ICC). It actually abolished the agency entirely and in turn created its successor agency, the Surface Transportation Board.

It’s important to note that even if your current bill of lading doesn’t include the new language, you are still agreeing to the terms of the new bill of lading.

Tariffs or rules established by the carrier

Under the new bill of lading provisions, a carrier can establish rules without any government agency validating the particulars of those rules. For example, a carrier could say in his tariff that on Fridays that coincide with the close of a calendar quarter, rates and charges shall be increased by ten percent. Without a contract to the contrary, you would be required to abide by that tariff provision.

Another more likely rate issue would be disallowing discounts to remote locations. The disallowance of discounts is common for a variety of reasons, such as remote areas, late payments, and inside deliveries.

Released value

Many shippers have reported that carriers have published released value tariff items in their in-house rules tariffs. Most of those items release shipments to $1.00 per pound or $100,000 per shipment, etc. Historically, court cases have always held that the shipper must specifically release a shipment’s value in writing for a released value to apply. Check with your carrier’s rules tariffs to verify that they cover you to full value at the rate you paid.

It’s important to understand these segments as they make up the whole document, strengthening the agreement between shipper and transportation company.

Commodities Requiring Special or Additional Care

“Note 3” of the new bill of lading speaks to issues of commodities requiring special or additional care. Basically, note 3 is a disclaimer which could negate any damage claim you may have with the carrier, assuming the carrier was not made aware in writing of any “special” care required.

In the absence of written instructions, problems arise when the courts decide what constitutes “special.” What is “normal” to you could be “special” to someone else. That’s why listing care requirements of your shipments on the bill of lading is generally a good business practice.

Additionally, you also need to list any temperature requirements on the bill of lading in uppercase letters, according to most carriers’ rules tariff requirements.

Terms and Conditions: Carrier Liability

“Every service to be performed hereunder shall be subject to all the conditions not prohibited by law, whether printed or written, herein contained, including the conditions on the back hereof, which are hereby agreed to by the shipper and accepted for himself and his assigns.”

This is where the receiver is brought into the contract.

The above statement is part of the “long form” bill of lading in the recitals (and incorporated by reference in the “short form” bill of lading). Many people don’t know the significance of this provision, but the back of the long form contains numerous terms and conditions you should be familiar with.

Exceptions, generally.

The first of the terms and conditions refers to the carrier accepting full liability for the shipment with certain exceptions. The exceptions, approved by Congress in the Carmack Amendment of 1906 as an amendment to the Interstate Commerce Act of 1887, include the following:

  • Acts of God; i.e. tornado blowing the truck off the road, causing damage to the product
  • Public enemy; i.e. a truck and its contents being destroyed by a terrorist act
  • Authority of law; an inspector at a scale damaging freight during his inspection.
  • Acts or default of the shipper; this is the most common reason a carrier deny a claim. Packaging is the single most applied act or default of the shipper.
  • Inherent vice of the product; most easily described by a statement that is on every box of cereal “some settling may occur during shipping and handling.”

Until August of 2016, to invoke an exception recited above a carrier had to prove freedom from negligence. The National Motor Freight Traffic Association {NMFTA] amended the bill of lading as published in National Motor Freight Classification Tariff [NMFC] to change the burden of proving negligence [or freedom from negligence] from the carrier to the shipper. This is contrary to the intent of congress as proscribed in the Carmack Amendment referenced above.

He is the specific language changing burden of proof:

Original: “…The burden to prove freedom from negligence is on the carrier or the party in possession.”

As amended: “…The burden to prove carrier negligence is on the shipper.”

There will probably be a test case to determine if the NMFTA can, by fiat, alter the terms of Carmack without Congress changing the law. The Surface Transportation Board allowed the change after shipper’s groups challenged the NMFTA prior to the adoption of the new language.

The language changes also added riots or strikes as defenses see below:

Original “No carrier shall be liable for any loss or damage or for any delay caused by an Act of God, the public enemy, the authority of law or the act or default of shipper.”

As amended “No carrier shall be liable for any loss or damage or for any delay caused by an Act of God, the public enemy, the authority of law, the act or default of the shipper, riots or strikes, or any related causes.”

Further language changes also subtlety altered language

Original: “…except that claims for failure to make delivery must be filed within nine months after a reasonable time for delivery has elapsed.”

As amended: “Claims for loss must be filed with the carrier not more than nine (9) months from the date of the bill of lading.”

Carmack had held and case law supported, a carrier may not set a time period of less than nine months and that the time bar did not begin to toll until a reasonable amount of time had passed for delivery. That has not changes to the date of the bill of lading and should be considered the date of pickup.

Common Claim Declinations

As stated above, the problems that arise usually involve “improper packaging.” Packaging rules are outlined in great detail in NMFC 100-X (the rules and classification tariff).

Generally speaking, packaging should be sufficient to withstand the “rigors of transportation.” Bumpy roads, fast stopping, sharp curves, in the absence of negligence on the part of the carrier, are considered normal “rigors of transportation.”

Rollovers, crashes, and panic stops, however, are not normal “rigors of transportation,” but such events are difficult to prove. In a large claim trial, the carrier’s driver would likely testify that no such event occurred. The carrier will also offer the packaging material used in your shipment into evidence in an attempt to convince the court of its inadequacy.

Though improper packaging is an often-used declination on the part of many carriers, you can take precautions to defend yourself against such a claim. The National Motor Freight Classification tariff contains over 145 pages specifically defining packages. Freight classification items frequently define the packaging that must be used to constitute “proper packaging.” Boxes, which are allowed in most classifications, are described in item 222 of the NMFC, including minimum specifications for various sizes and weights.

If it is apparent to the trucker that the packaging is inadequate, then the carrier should refuse the shipment. A carrier has a duty to have knowledge of the shipment he is transporting. Without refusal, the carriers can no longer claim “improper packaging.” However, if a defect in packaging is not apparent, the carrier will probably prevail in his declination.

Timely delivery

Section two of the terms and conditions on the back of the long form Bill of Lading (the short form incorporates these provisions directly into the bill) says that unless agreed upon in writing, the carrier is not bound to deliver a shipment at any specific time. Carriers are only required to transport the shipment in the regular course of its providing transportation services.

Delay or losses of market claims are a nemesis of every carrier. Problems do arise in shipping, and shipments are often delayed. Companies make sure to protect themselves against this. For example, if Delta Airlines delays your flight to the Super Bowl and you miss the game, are they liable? Not according to the law or their “terms and conditions.”

To prevail in any delay claim, you generally need to have a written agreement for pickup and delivery time, as well as an agreed dollar value for any delays.

Filing overcharge claims

Overcharges include duplicate payments, two or more payments for transporting the same shipment, and over-collections. A claim for overcharges accrues upon payment to the carrier of the overcharge amount. The law requires that the shipper contest the original bill or subsequent bill within 180 days of its receipt of the bill, and bring any civil action within 18 months.

Filing loss and damage claims

Section three of the terms and conditions contains a few key points one should keep in mind when filing loss and damage claims.

  • First, claims must be in writing. If you go to court and did not file a bona fide claim in writing with the actual carrier, you’re probably out of luck if the judge follows the law. That said, the law does not specify a standard form for filing a claim. Case law has precedent that at minimum a claim must be a demand for a specific monetary value and  contain information which identifies the shipment.
  • Second, claims must be filed within nine months of the date of the bill of lading.
  • Third, lawsuits in the case of declined claims must begin within two years and one day of the carrier’s first declination.

Miss any of the above-mentioned provisions and most likely you won’t get paid. Simple procedures should be set up to get a claim filed on any loss or damage immediately after delivery.

Shipment in storage

Section four of the terms and conditions deals with carrier liability should the shipment go into storage. Essentially, the carrier must arrange for a “reasonably safe” storage facility or a public warehouse. The carrier’s liability for the shipment decreases to warehousemen’s liability. Warehousemen’s liability is for “reasonable” care; it is essentially NO liability unless you can prove negligence.

The carrier must give proper notice as defined by the laws of the state where the goods are stored. The carrier must give said notice (two notices within two weeks) before it can offer any goods held in storage to public auction to recover its freight costs. The amount recovered at auction (absent gross negligence on the part of the carrier) is final, and if it is not enough to cover the freight and storage costs, you will still owe the difference.

No signed delivery receipt

The final part of section four deals with deliveries to places where the carrier cannot get a signed delivery receipt, such as a vacant job site as a for instance. Essentially, the carrier waives further responsibility.

While on the subject of delivery receipts, what happens when a delivery receipt is lost or damaged? You still would have to the pay the freight bill unless you’re claiming the shipment was lost or damaged. At that point, the best prima facie evidence of delivery is gone and other methods of fact determination will come into play.

On a final note, what happens if you sign a delivery receipt “subject to further inspection”? This is essentially the same thing as signing it off free and clear. Inspect your shipment upon delivery, otherwise the entire burden of proof in a freight loss or damage claim is on the claimant.