Interstate Transportation of Property by Motor Contract Carriers

Brevity isn’t always Better

Legislative Background

Prior to passage of the Interstate Commerce Commission Termination Act of 1995 (ICCTA), motor contract carriers were required to operate pursuant to written contracts with customers. [1] ICCTA made significant changes to the Interstate Commerce Act (ICA). Included in the changes are a few areas of significance to motor contract carriers:

1.  the previous statutory and common law distinctions between common and contract [2] carriage were eliminated. Now, by statute, both common and contract carriers are equally liable for cargo loss or damage claims unless both shipper and carrier agree to expressly waive specifically identified provisions of the ICA.

2.  written contracts are no longer required … “A carrier providing transportation or service … may enter into a contract with a shipper … to provide specified services under specified rates and conditions. If the shipper and carrier, in writing, expressly waive any or all of the rights and remedies under this part for the transportation covered by the contract …” [3]

3. both common and contract carriers must issue a receipt or bill of lading [4]

4. by statute liability is for the “… actual loss or injury to the property …” [5]

5.  any failure to issue a receipt or bill of lading “… does not affect the liability of a carrier.” [6]

6. “… a motor carrier [may] establish rates for the transportation of property … under which the liability of the carrier … is limited to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation.” [7]

7.  carriers must provide to shippers upon request “… a written or electronic copy of the rate, classification, rules and practices upon which any rate applicable to a shipment, or agreed to between the shipper and carrier is based.” [8]

NOTE:  The Trucking Industry Regulatory Reform Act of 1994 eliminated the requirement that motor carriers file their tariffs with the Interstate Commerce Commission.

8.  “A carrier may not provide … a period of less than 9 months for filing a claim … [nor] a period of less than two years for bringing a civil action against it …” [9]

NOTE: There is some confusion regarding this section of the ICA. The statute bans a carrier from setting a shorter period of time for filing claims or instituting suits. Were, for example, a carrier to limit the period of time for filing a claim to thirty (30) days after delivery, the requirement would be invalid and there would be no statutory maximum period for filing a claim. Similarly, the same applies to the period for instituting suit.

Case of the yarn stolen in Mexico

Titan Textile Company, Inc. shipped a load of synthetic yarn with Celadon Trucking Services, Inc. from South Carolina to Mexico under Celadon’s through bill of lading. [10] The yarn shipment, valued at $32,795.78, was stolen in Mexico. Celadon refused payment auguring Titan had expressly waived protection under the Carmack Amendment [49 USC §14706] and Celadon’s liability for loss or damage to cargo occurring in Mexico under contract section 19, was “0”. Clause 19 read:

“19. All Mexican trans-border shipments are treated as either originating or terminating at the border point in the U.S. CELADON is not responsible for loss or damage occurring in Mexico. Mexican cargo insurance is available from customs broker.”

Unfortunately, for Celadon, Section 19 was titled “Application of Rates.” The court ruled against Celadon. The court reasoned:

“We hold that under the plain meaning of the title 49, section 14101(b)(1) of the United States Code, for a waiver to be effective, the agreement between the shipper and the carrier must communicate clearly and unmistakably or directly state that the rights or remedies in question are waived.”

Additionally, Section 10 of the contract [title of Section 10 was not stated in the published opinion] established Carmack [49 USC § 14706] as controlling law regarding carrier liability for loss or damage to the cargo.

The next issue was Celadon’s economic liability for the stolen shipment. Section 10 addressed Carmack and Section 19 stated there was no liability for cargo loss or damage occurring in Mexico.

As previously covered, section 14706 hold the carrier liable for the “… actual loss or injury to the property …” commonly referred to as the beneficial owner’s “actual loss sustained.” Section 14706(c)(1)(A) also makes provision for the shipper to select transportation under which the carrier’s economic liability is limited [50¢ per pound, $5,000 per ton, etc.]. However, when Congress recodified the ICA they chose not to enact legislation overriding established case law addressing what steps carriers must take to lawfully limit their economic liability to amounts less than the “… actual loss or injury to the property …” While opinions vary slightly between the various federal courts of appeal, the following represents, as I understand it, the consensus of the various steps carrier’s must take to limit their economic liability under Carmack:

● they must have a written tariff or valid contract [49 USC 14101(b)(1)]

● the shipper must be given the option to choose between two or more levels of liability

● obtain the shipper’s agreement as to its choice of liability

● there must be a space on the front of the bill of lading for the shipper to declare a value. [11]

Conclusion

Congress amended the Interstate Commerce Act to protect both shippers and carriers. While “deregulation” is a fact of life, there are rules which all must follow. The penalty for failure to follow the rules is common carrier liability for the shipper’s actual loss or injury to the property!

Recommendations

1. Have an attorney specializing in transportation law [12] review all proposed customer contracts.

2. Have a tariff which applies to both common and contract carriage. The tariff provisions should apply where/when the contract is silent

3. Read your motor truck cargo policy to see if it dovetails with your operations and paperwork. It is usually easier to amend an insurance contract then change existing customer contracts.

As always you can leave us a comment below, follow us on Twitter, or head over to Wolpert.com for anything else.

From: Bob Milsop – Transportation Specialist

Advertisements
Published in: on February 17, 2010 at 7:01 pm  Leave a Comment  

The URI to TrackBack this entry is: https://wolpertinsurance.wordpress.com/2010/02/17/interstate-transportation-of-property-by-motor-contract-carriers/trackback/

RSS feed for comments on this post.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: