ASK AUGELLO

By William J. Augello, Esquire

Question: How do I, as a shipper, make a ?third party? liable for the payment of freight charges under the following scenario?

Answer: A buyer sends me a purchase order for shipping to his customer with instructions to bill the customer for freight charges. I mark the trucker?s bill of lading with the customer?s name as the ?bill to? party.
  1. Does that bill of lading make the customer [consignee] a party to the bill of lading and thus, liable for the freight charges?
  2. Does the trucker have a legal claim against the consignee for the freight charges?
  3. Is the shipper free of any legal liability for the freight charges under these circumstances?
  4. Would the results be the same if the customer requested delivery by a parcel express carrier?
Answer: The answers to these questions will differ when you use a trucker and when you use a parcel express carrier. Therefore, I will respond accordingly:

A. When Truckers Are Used:
Yes. When a trucker?s Uniform Straight Bill of Lading is used, the consignee is automatically bound by the terms of the bill of lading. The current Uniform Straight Bill of Lading makes the shipper primarily liable because it is stated to be ?Prepaid? unless the shipper changes it to ?Collect.? Prior to 1998, the Uniform Straight Bill of Lading made all shipments ?Collect? unless changed to ?Prepaid,? but the trucking industry unilaterally changed the form to ?Prepaid? without the knowledge or consent of shippers. Both the shipper and consignee are liable for payment of the freight charges.

Yes, the trucker has a legal claim against the consignee if he accepted the shipment showing him as the ?Bill To? party. However, a consignee who does not wish to be liable for freight charges on a shipment tendered for delivery may refuse to accept the shipment unless the charges are reversed to the shipper. Some shippers are known to ship goods to consignees without their knowledge and without a purchase order. To avoid liability in such cases, the goods should be rejected to the carrier on the ground that he did not order them.

No. When a shipper ships to a ?Bill To? party, the shipper remains liable for the freight charges. The only way that a shipper can protect itself against this liability is to sign ?Section 7? of the bill of lading. This is a non-recourse provision that tells the carrier not to deliver the goods unless it collects the freight charges or extends credit to the consignee. If a carrier does not wish to rely only on the consignee?s credit, it should not accept the shipment from the shipper.

B. When a Parcel Express Carrier Is Used
The rules are different, however, when shipping via a parcel express carrier as they have different terms and conditions in their tariffs, shipping documents and service guides. Express carriers generally stipulate that the shipper is obligated to pay all charges. UPS, for example, provides in Item 450, that ? . . . the shipper is ultimately liable for and agrees to pay all charges, including in the event of insolvency, bankruptcy or refusal to pay by the consignee or third party.? If a shipper wishes to change this provision, it would be necessary to negotiate that change in a contract with the carrier.

Mr. Augello is an attorney that has been practicing transportation law for the past 52 years. He also teaches transportation law at the University of Arizona. He founded and has served as executive director of the Transportation Consumer Protection Council, Inc. for the past 30 years. He may be reached at williamaugello@comcast.net or 520-531-0203.