The Law Office of Seaton & Husk, LP

Collection of Freight Charges

In accordance with federal statutes, freight charges must be fully billed within 180 days and suits to recover freight charges must be filed within 18 months. 49 U.S.C. §13710, 14705(a). The consignor (the named shipper) is primarily liable for freight charges unless it executes a nonrecourse provision or otherwise places the carrier on notice that it does not intend to accept payment responsibility. See Southern Pacific v. Commercial Metals, 456 U.S. 336 (1982). Making a bill of lading collect, or placing "Send freight bill to:" language in the document has been held insufficient to avoid recourse. See Missouri Pacific R.R. Co. v. Center Plains Industries, Inc, 720 F.2d 818 (5th Cir. 1983); Bestway Systems, Inc. v Gulf Forge et al., 100 F. 3d 31 (5th Cir. 1996)

The consignee becomes liable for freight charges upon acceptance unless it sends prior written notice to the carrier that it is acting as an agent only. 49 U.S.C. §13706(a); CN&W Transport v. Chrome Cartage, 255 N.W.2d 310; Western v. Underwood, 281 F. 891; L&N v. Central Loan, 256 U.S. 59.

In preserving recourse, carriers should exercise care to avoid misleading consignors and consignees into thinking that they have agreed to extend credit exclusively to some other party.

Importantly, the provisions of the federal statute, governs carrier rights and obligations apply unless specifically waived in writing. See 49 U.S.C. §14101(b). General rules of commerce should not be unintentionally forfeited by signing waiver provisions in contracts.

We recommend that carriers and intermediaries establish account aging reports and quickly escalate their collection efforts from inquiries to formal demands and from formal demands to notice of referral for collection. A 30 to 60 day cycle should be established depending upon your industry.

Use First Advantage or a similar credit service to determine if the debtor needs to be fast tracked. The federal lien provisions allow you to place any shipment in transit on C.O.D. if you lose confidence in your customer's ability or willingness to pay. 49 U.S.C. §80109. There are state lien laws which give carriers rights to hold shipments for payment of past freight charges but it is advisable to exercise this remedy only with competent legal assistance.

Once an account exceeds your credit terms, and you have exhausted your remedies, turn the account over for collection. Let the collector be the bad guy. Bad debts, unlike good wine, do not get better with age. Recourse to bonds or other bill of lading obligors rapidly deteriorates unless prompt and decisive actions commence.

Our firm works closely with Transportation Revenue Management, Inc., a commercial collection agency specializing in freight charge collection. TRM uses a nationwide network of transportation lawyers. Its contingency fee structure allows you to get expert help with bad debt, including judgment without throwing good money after bad.

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