If You're Not a Carrier, Don't Act Like One
By Henry E. Seaton
May 2009
Reprinted from etrucker.com

Q As a broker, we often are asked by shippers to sign shipper-carrier contracts without drawing a distinction between being an “arranger” versus a “provider” of transportation. We resist doing this. Are we right?

A You sure are. Brokers and motor carriers are separate instrumentalities of transportation. Your statutory authority as a broker defines you as “a person other than a motor carrier or an employee or agent of a motor carrier” [49 U.S.C. §13102(2)]. The broker regulations make it a “misrepresentation” for a broker to “directly or indirectly represent its operations to be that of a carrier.” According to the D.C. Court of Appeals, “A principle test is whether there is a bona fide holding out [as a carrier] coupled with the ability to carry for hire” [Nevada v. Department of Energy, 457 F. 3d 78 (D.C. Cir. 2006)].

The U.S. Court of Appeals for the Second Circuit recently weighed in by stating that because transportation requires some direct involvement in the movement of property, an intermediary company that only makes arrangements for transportation would appear to be performing a function that is fundamentally different from that of the carrier that actually does the transporting [Rexroth Hydraudyne v. Ocean World Lines, 547 F. 3d 351 (2009)].

And in issuing its final rule last month requiring freight forwarders to issue receipts or bills of lading under Sect. 373, the Federal Motor Carrier Safety Administration made clear that the freight forwarder or the carrier is the party liable for the safe delivery of the cargo under the Carmack Amendment. The rule is still another implication that the practice of shippers issuing bills naming the broker as the receiving party is improper.

Accordingly, if you are not licensed, authorized and insured as a motor carrier, you should not be representing yourself as one or accepting carrier duties in a contract or on a bill of lading. The consequences of misrepresenting yourself as a carrier in a contract could be dire. Within the past month, C.H. Robinson has lost another vicarious liability suit in Will County, Ill.; the verdict was $23.75 million. Vicarious liability litigation is serious stuff, and if the series of bad C.H. Robinson cases teaches brokers anything, it is to not assume – by either contract or bill of lading – carrier duties and responsibilities beyond your statutory obligations to retain a carrier who is licensed, authorized and insured in accordance with federal regulations.

In this regard, the all-too-frequent occurrence of allowing your name as a broker to appear as the carrier on the bill of lading is to be avoided. The shipper should insist that the carrier’s name appear on the bill as the party in possession and control of its freight. After all, the bill of lading is a receipt for goods that the regulation requires the actual carrier, not the broker, to issue.

To avoid the nasty surprises of theft, double brokerage, vicarious liability and uninsured cargo losses, both you and your shipper should take great pains to identify your contracted carrier as the named party on the bill of lading and be sure that the logo on the truck matches that name before the freight leaves the dock, or that you know why it does not match.

At the end of the day, FMCSA is charged by Congress with determining if a carrier is fit to operate, and neither the shipper nor the broker should have to second-guess the government’s decision. The carrier that actually operates the equipment has nondelegable duties to ensure safe operations. Do not let sloppy language or sales puffery confuse the issue.