| As a practicing transportation broker and ICC practitioner
for 21 years, I am appalled to hear some of the misconceptions about brokerage. The
misconceptions often come from people who are otherwise fairly well informed on some
aspects of the transportation industry, including opinions expressed in the Questions
& Answers column of this magazine. This will be an attempt to set some of the more
serious misconceptions in their proper perspective. MISCONCEPTION I - A bill of lading
is a contract of carriage. Clearly, many people in the transportation industry erroneously
believe the bill of lading makes up the entirety of a contract of carriage. A B/L is
certainly a receipt used in a contract of carriage, but there are many elements required
by that contract which generally are not stated on the bill of lading. Some examples: the
price agreed to in the contract, all of the services to be provided, rules to be used to
handle exceptions, and accessorial charges that may be applicable.
A contract of carriage between a common carrier and a shipper (with or without a broker
being involved) usually consists of some form of bill of lading, whether
"standard" or not, plus all the tariff provisions, pricing, rules and service
descriptions. Also part of the total contract is the intent of the parties; the regulatory
rules that must be followed, whether federal, state or local; and all the other
"usage of trade" and precedent within which this particular transaction has
occurred. In common carriage, a bill of lading is not a full contract.
Nor does the bill of lading make up an entire contract in contract carriage. Here too,
the usage of trade, intent of the parties, legal precedent, regulatory rules of various
authorities, exception services, accessorial pricing, all contribute in various ways to
make up the total contract.
MISCONCEPTION II - Inserting a broker's name in the carrier area of a bill of lading
compromises the document's validity and enforceability and/or misrepresents the broker to
be a carrier. Nonsense. For reasons stated above, inserting a broker's name in the carrier
area of a bill of lading does nothing to undermine the document's enforceability as a
contract, since that B/L is not a contract of carriage in and of itself anyway. Equally
nonsensical is the contention that this practice renders the document into something other
than a true bill of lading.
Most legal advice to brokers has been to fill in that line using the broker's name
first, then something like "broker for ABC carrier." This most clearly
identifies the various parties involved. But there is a much more important factor that is
too often overlooked. Under the law ~ no one but a carrier may "issue" a bill of
lading. The carrier does so by having the driver or an employee sign the B/L. Realizing
this, a number of things are immediately clarified.
The main function of the B/L is to commemorate the agreement between the party that
tenders the freight and the carrier. Those two parties may agree to put many different
things on the bill of lading, including arranging the broker's name in the carrier
position. Anyone who has been in the transportation industry has seen situations where
"ABC Carrier" was the name specified in the carrier section of the bill of
lading, but XYZ's driver signed for it, thus issuing the bill of lading in XYZ's name.
After just a little inquiry any court in the land would affix responsibility to XYZ as the
carrier who provided the service.
In the past 10 years, brokerage firms' names must have been entered in the carrier area
of millions of bills of lading with no serious confusion in the minds of anyone. |
Anything that has ever come to court that I am aware of is
quickly sorted out by the judge as to who the various parties are. On the other hand, a
broker may not sign and "issue" the bill of lading. I don't know that this
practice is ever done, but, if it is, certainly the carrier and broker should make it
quite explicit underneath the signature exactly what the relationship is. A carrier
employee or authorized agent must sign the bill of lading in order to issue it and have
all the parties bound by it. There are many excellent reasons why shippers, carriers
and brokers like to put the broker in the carrier section of the B/L. It is an internal
control document for the shipper as well as all the other parties involved in a
transportation contract. Bills of lading eventually become an important document for all
the parties' accounting and financial departments. So long as the contents of a bill of
lading are understood by and serve the interests of the various involved parties, it is
doing its job just fine.
MISCONCEPTION III - When dealing with a broker, shippers have exposure to having to pay
a freight bill a second time. Whatever artfully arguing lawyers may tell you, shippers
have no serious exposure to having to pay a freight bill a second time if the broker does
not pass the monies on to the carrier. The lawyers may argue anything they want. They
simply can't win the cases in court. When a shipper, carrier and broker agree to do
business, where the broker is billing the shipper and the carrier is billing the broker,
once the shipper has paid the broker, the shipper has paid the carrier. This is not a
question of 70 percent or 80 percent of the test cases coming out in the shipper's favor -
it's 100 percent. Anyone needing the case precedent on this issue may obtain it by sending
a letter to the author.
MISCONCEPTION IV - A broker's name should be shown in the shipper area of the bill of
lading. To suggest that a broker be shown as "shipper" on the B/L in order to
protect the true shipper in the event that the broker fails to pay the carrier is harmful
advice. This is solving a problem that really doesn't exist with advice that, if followed,
could create a real problem for the shipper.
The bill of lading is a receipt issued by the carrier to, among other things, protect
the interest of the shipper while the freight is in transit. The statutes and case
precedent having to do with the shipper's rights and recourse for loss and damage in
transit constitute some of the strongest protection in commercial contracts. For a shipper
to take its name off a bill of lading and substitute a broker's is to potentially forgo
all those protections that otherwise would be afforded to the shipper's goods in transit.
In conclusion, a shipper has no exposure to having to pay a freight bill a second time
if a legitimate intermediary does not pass his payment on to the carrier, once the parties
have begun doing business in that fashion. Don't change important bill of lading
procedures and structures to avoid exposure that doesn't exist.
Only a carrier can "issue" a bill of lading, no matter who makes it out and
no matter how. The carrier, by signing the bill of lading, has accepted its terms as its
receipt for the goods in transit. But the bill of lading is not a contract unto itself.
While all kinds of variations are used, most brokers, carriers and shippers agree that
the ideal way to fill out the carrier section of the bill of lading when a broker is
involved is by putting both the broker's name and carrier's name on the carrier line. This
best serves to define, for all the parties, the business relationship in a way that is
clearest for all parties to relate to and use. |
