Watch Who Books
By Henry E. Seaton
Reprinted from etrucker.com
The word logistics
describes a variety of services - everything from warehousing to transportation
to freight payment. There is no statutory definition for a logistics
company. When dealing with one, it's important to know the company's
legal status because your own legal rights may vary depending on whether
you deal with a property broker or a freight forwarder.
A property broker is a company, other than a carrier, that for compensation
arranges for authorized motor carriers to provide transportation. Depending
on the situation, the broker can be the agent of either the shipper
or the carrier or it can be an independent contractor. In the absence
of a contractual obligation, a broker isn't ordinarily responsible for
cargo loss or damage or for paying a carrier's freight bills unless
the shipper has paid.
Brokers must file $10,000 bonds or bank trust agreements with the Federal
Highway Administration. Unless you sign away your collection rights
in a broker/carrier contract or otherwise lead the shipper into believing
it can pay the broker without recourse, you can use the bill of lading
and your tariff provisions to enforce payment from the shipper. There
are several steps you should take to protect yourself with brokers:
*make sure the bond is in place;
*read the contract closely to ensure proper claims-handling procedures
will be followed;
*make sure you don't surrender the right to obtain payment from the
shipper should the broker default; and
scrutinize the broker's indemnification provisions.
A freight forwarder is a company that assembles, break-bulks, consolidates
and distributes less-than-truckload shipments and accepts carrier duties
and responsibilities. The freight forwarder is both carrier and shipper.
To the "actual" shipper, the freight forwarder acts like a
carrier and should be so listed on the bill of lading. Under newly proposed
FHWA rules, a freight forwarder would be required to have both cargo
and liability insurance. To you, the freight forwarder acts as a shipper.
Case law suggests a carrier may seek payment from a freight forwarder's
shipper if necessary, although many freight forwarders insist that their
designation as carriers prevents this.
Increasingly, intermediaries claim freight-forwarder status on truckload
and stop-off truckload traffic. While freight forwarders can handle
such volume shipments, the company is not, under the law, a freight
forwarder unless it assembles and distributes LTL traffic in the ordinary
course of its business. In other words, a freight forwarder can handle
both LTL and truckload freight, but it can't handle truckload only.
Because freight forwarders are principals in both the payment and liability
chain, review their contracts very carefully.
Provisions allowing freight forwarders to offset unliquidated cargo
claims against freight charges can deprive you of proper claims adjustment.
As with broker contracts, broadly worded indemnity provisions should
statute and regulation, brokers must keep accounting records showing
receipt of freight charges and payment to the carrier. And they must
keep separate books so that these payments are segregated from their
other businesses. Legally, a broker should be an agent for passing the
shipper's money to the carrier, and there is a minimal bond to ensure
they do so. But the freight forwarder is not prevented by transportation
law from commingling freight charge payments, and the carrier with which
it contracts may be left without bill-of-lading recourse to the shipper
if the forwarder defaults.
things being equal, if an intermediary arranging truckload shipments
is not a property broker, examine its operations very closely.