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June 22 2020

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52 The Journal of Commerce | June 22 2020 By Colin Barrett Q&A Q A Hand-me-down charges Last week, we had a question arise over several collection notices which my employer received. The question that I have is this: Is the consignee of a prepaid shipment liable for the freight charges on the shipment when the carrier who actually hauled it is unable to collect a settlement from the carrier which brokered the shipment to them? Two years ago, orders were shipped weekly from a vendor in one state to several of our warehouses in another state. The shipments were made prepaid by the vendor, and all pricing was on a delivered basis. Our vendor assigned the loads to a large refrigerated carrier that has since declared bankruptcy and closed its doors. This carrier brokered the load to the carrier that actu- ally performed the service. The brokering carrier didn't pay the transporting carrier. The transporting carrier approached the shipper regard- ing his charges. The shipper offered to make good on the charges, but apparently this didn't happen. Faced with a bad debt, the transporting carrier sold the receivables to a factor, who is now attempting to collect the funds from our company. The factor has taken the position that a consignee can be considered to be the shipper under 49 C.F.R. § 376.2(k), and therefore can be held responsible for the freight charges. I believe their claim for payment is invalid under 49 U.S.C. § 14705, which provides that any action to recover charges for transportation must be initiated within 18 months of the date of the charge. The invoices we received are all dated more than two years aer the shipments moved. The factor contends that the statute of limitations doesn't apply since these shipments were "not tariff moves." Are we correct in refusing to pay these invoices, or does the factoring firm have a case? I CAN COUNT three reasons why you should tell this fac- tor to go climb a tree, and any one of them is sufficient. You've pointed to the first one yourself: the statute of limitations of § 14705(a). Who cares whether this was or wasn't a "tariff move"? (And if it wasn't, I wonder on what basis the carrier is assessing charges.) The statute says nothing about "tar- iff moves," simply applying the time limit to all carriers providing regulated service. If the service was regula- tion-exempt, of course this law doesn't apply, but you don't indicate such was the case, and in any event, you have two more strings to your bow that cover you regardless of whether the service was subject to regulation. The first is that, according to your recital, the bill of lading contract was with the carrier you booked — i.e., the "brokering carrier." Thus you incurred no contrac- tual obligation to the carrier that actually hauled the goods; that obligation was incurred only by the brokering carrier. The fact that this carrier failed to discharge its obligation and is now bankrupt is the problem of its cred- itors and can't be passed along via hand-me-down to you. Finally, you say you purchased the goods on a delivered-price basis. This means that when you paid your supplier's invoice the amount included a built-in element reimbursing the supplier for the prepaid trans- portation charges. By accepting delivery of a shipment, a consignee "thereby binds himself to pay the freight charges" (Cor- pus Juris Secundum, 13 C.J.S. Carriers § 478(a)). To that extent, you did undertake this responsibility, notwith- standing that the shipment was billed as prepaid. But the prepaid billing persuaded you to pay the shipper's full "delivered price" invoice, including the reimbursement for transportation charges. And in such a case, the law is that carriers are equitably estopped (barred) from asserting their claim against you, since this would have the effect of making you pay twice for the transportation service — once to the shipper and a second time to the carrier (See, e.g., Griffin Grocery Co. v. Penn. R. Co., 92 S.E.2d 854; C. F. Arrowhead Services, Inc. v. AMCEC Corp., 614 F.Supp. 1384; Inman Freight Systems, Inc. v. Olin Corp., 807 F.2d 117 (U.S.C.A.8, 1986); Southern Auto Sound, Inc. v. Consolidated Freightways, Inc., 510 So.2d 1085; and In re Penn-Dixie Steel Corp., 6 B.R. 817, aff 'd 10 B.R. 878, among many others). The factor has no more rights against you than it can inherit from the carrier on whose behalf it's making its claim. Tell it to enjoy the view from the uppermost branches of the tree you've invited it to climb. JOC 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 For compiled past columns and other transportation-related publications visit That this carrier failed to discharge its obligation and is now bankrupt is the problem of its creditors and can't be passed to you.

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