Take Care of Business in 2011

John Anderson Bills of Lading, Cargo Liability, Contracts, CSA 2010, Hours of Service, Tariffs, Transportation

Welcome to the New Year!  2011 promises to be challenging for the transportation industry with the implementation of CSA and proposed changes to the HOS regulations leading the way, compounded by an uncertain economy. However, with challenges come opportunities. The opportunities are dependent on taking care of the details of your business. Surely, you already have spent considerable time in learning the new CSA system and its requirements and are trying to digest the HOS proposal. You have to take care of these details because failure to do so can result in the government shutting down your business.

Unlike the “hard” details imposed by new laws and regulations, general business details are “soft” in that they are not government mandated. Nevertheless, ignoring general business details also can lead to the demise of your business by exposing it to liabilities that lead to a financial crisis. By general business details, we mean the practices and procedures that you follow in your day-to-day operations. As discussed previously, it is alarming to see how loosely many carriers, brokers and other transportation providers conduct business.

Every business operates on contracts, that is, the business agrees to provide a product or service to a customer in return for payment of (hopefully) an agreed upon amount. However, all too frequently the terms of these contracts are verbal and, even if written, do not cover critical issues. For example, a carrier may agree with a shipper to transport a shipment from point A to point B for X dollars. That is a contract, and it may suffice if everything goes as planned. However, what if things do not go as planned? What if the shipment is destroyed en route?  What if the carrier has $100,000 in cargo insurance but the shipper claims the shipment was worth $200,000? What if the carrier says in its rules tariff that its liability is limited to $100,000 but the shipper says that limitation of liability is invalid? The “what ifs” are numerous, but they are all details that a prudent business attempts to address in its contracts before the problem comes up.

Lawyers are trained to look for the “what ifs” and, because of that, are often labeled doomsayers. That is true, but the lawyers goal is identify where things might go wrong and to protect the client if that situation arises.

What are the terms and conditions under which you provide service?  The Interstate Commerce Act, U.S.C. Title 49, provides some default terms and conditions, but they may be unacceptable, and they do not cover everything.  However, you can cover everything with a comprehensive ongoing contract executed with your customer. Alternatively, you can set forth your terms and conditions of providing service in a “rules tariff” and then incorporate your rules tariff  by reference into your bill of lading or load confirmation. Alternatively, your bill of lading or load confirmation can spell out all of your terms and conditions on its face. Those are all possibilities for taking care of the details of conducting business. Unfortunately, these details frequently are ignored.

Recently we were involved in a situation where a shipper decided to take care of business details by preparing its own preprinted shipper’s bill of lading. Alas, the shipper “borrowed” a form it picked up somewhere and figured it would work for its operation. The shipper failed to read over the bill of lading in detail. If it had, it would have noticed that the bill of lading incorporated “the rates, classifications and rules that have been established by the carrier …” Because of this language, the shipper unwittingly incorporated the carrier’s rules tariff, which contained a proper limitation of liability. In this case, the carrier benefited since it had taken care of business by preparing a rules tariff, which set forth a valid limitation of liability. (A carrier cannot just declare a limitation of liability, but must meet four specific requirements in order for it to be valid, including offering the shipper a choice of rates with different levels of liability. We will discuss in our next newsletter.)

The goal of our newsletter is to respond to questions and issues that arise in your operations that are of interest to the  industry  in general so that you can better identify the details, the “what ifs,” that you need to deal to succeed.  Submit your questions and scenarios simply by replying.