Law Offices of Seaton & Husk, LP

Don't Let Your Freight Bills Deceive
Other Parties' Terms Can Lead You into False and Misleading Billing
By Henry E. Seaton
September 2000
Reprinted from etrucker.com

You might not know it, but your invoices may form the basis for transactions in which you aren't a contracting party. The shipper or consignor may be passing your freight charges through to the consignee on a "prepay and add" basis. Or, the consignee may be arranging the freight but taking from the consignor a freight allowance equal to your invoiced price. A transportation intermediary may be paying your invoices while billing the shipper a fixed cost for processing the invoice.

Under any of the three scenarios described above, invoices that fail to show rebates or concessions may be used -- without your knowledge -- to conceal the actual amounts ultimately paid for the freight. The party you bill may be passing your invoice on to the actual shipper and may not be disclosing the off-bill discount it is keeping. As an ethical business owner, you should be wary when any party asks for a discount or concession that isn't to be reflected on your rated freight bill.

But there's more than just good and ethical business practices at stake. Even though the "filed rate doctrine" is gone and some of the language about rebates has been stripped from the statute, the law still requires full disclosure and prohibits false and misleading information.

A provision in the Interstate Commerce Commission Termination Act of 1995 addresses situations in which consignees took secret unloading allowances and volume discounts from carriers in return for letterhead routings on prepaid shipments. That measure has even broader applications, however. It should serve as a warning to all parties against off-bill discounts and concessions.

Subsection A of that legislation (Section 13708) requires a motor carrier to disclose in its invoice the actual rates, charges and allowances, as well as whether and to whom any allowance or reduction in charges is made.

The statute clearly applies whether you bill the actual shipper or the shipper's agent. There may be nothing wrong with paying a shipper's disclosed agent a commission or giving a shipper's customer an unloading allowance -- provided that you ensure the arrangement is disclosed and reflected when you submit your invoice.

It's also illegal under the statute for someone to cause you to present false or misleading information on a document about the actual rate, charges or allowance to any party to a transaction. Because you aren't always privy to the seller's and buyer's shipping terms and conditions, the best policy is to include full disclosure about charges or allowances on the actual invoice for freight charges.

The statute even covers the use of volume allowances and other concessions over a stated period, which can't be outlined on a single bill. The statute requires carriers to indicate on each document presented for payment that a reduction allowance or other adjustment may apply.

The rules governing discounts, allowances, concessions and similar terms are quite clear. Even if a reduction in the base rate is otherwise lawful, you should note the rate concession and show your net freight charges and any third-party concessions that aren't otherwise fully disclosed to the payer of the charges. Do not unwittingly convey false or misleading information by failing to fully and accurately identify the true cost of your services on your invoice.

Only by presenting complete and truthful billing information on your invoices can you comply with the law and avoid becoming unwittingly involved in possibly fraudulent schemes to misrepresent the actual shipper's transportation cost. Carriers have been named as conspirators in schemes to defraud shippers. Avoid this potential problem by correct invoicing and full disclosure.