| THE
CARMACK AMENDMENT, CONDUCTING BUSINESS
IN A FOREIGN COUNTRY, AND...
THE IMPORTANCE OF
GOOD WRITTEN CONTRACTS
By Wayne
Schooling
In this continuing
series, I am going to try to answer some of the questions that I have
seen come across my desk over the years. Hopefully, much of this knowledge
will be passed on to many of my readers.
Q: We utilize a 3PL (third-party
logistics) to manage the process of getting our merchandise from our
vendors into our distribution centers. From what I understand, the
3PL is merely acting as a broker on these loads and typically is not
liable for loss and damage outside of their own negligence or contractually
assumed liability. My question is, what if, on the Bill of Lading,
the shipper shows the 3PL as the carrier, when in reality the load
is actually brokered to another carrier, who signs the Bill of Lading
the aforementioned noted. By allowing the carriers to do this, has
the 3PL held itself out as a motor carrier, and thus liable as a motor
carrier under the Carmack Amendment?
A: There is no black and white
rule for determining whether an intermediary is acting as a broker
or a carrier. Each case turns on the individual facts: the representations
which were made, the relationship of the parties, the course of dealing,
etc – as well as the documents. I am not aware of any case that says
a broker becomes liable as a carrier merely because it was shown in
the “carrier” space on a Bill of Lading.
This question once again points out the importance of having carefully
drawn, written agreements between shippers, intermediaries and carriers.
For those of you that are not familiar with the Carmack Amendment,
did you ever wonder why the declared value of the shipment was on
the Bill of Lading?
The Carmack Amendment to the Interstate Commerce Act, 49 USC §
11707, passed in 1906 as part of the Hepburn Act, governs the liability
of carriers for lost or damaged goods. The most relevant portions
of the Amendment are: A common carrier... subject to the jurisdiction
of the Interstate Commerce Commission... shall issue a receipt or
a Bill of Lading for property it receives for transportation. That
carrier... and any other common carrier that delivers the property
and is providing transportation or service subject to the jurisdiction
of the Commission... are liable to the person entitled to recover
under the receipt or Bill of Lading. The liability imposed here is
for actual loss or damage to the property caused by 1) the receiving
carrier; 2) the delivering carrier; or 3) another carrier over whose
lines or route the property is transported into the United States.
In other words, punitive damages are not allowed, and you can not
get attorney’s fees. If $8,000 worth of goods were stolen and the
moving company refuses to make good on it, and it will take $20,000
in attorney fees to sue, well, you can see that you’re screwed. The
maximum damages allowed is the value of the goods that were damaged,
destroyed or lost in shipment. The courts have ruled that even in
cases of outright theft, negligence and misrepresentation, the most
you can get out of the motor carrier is the cost of the goods that
were stolen or allowed to be damaged through his own negligence.
Q: We are in the process of
revising our agreements with our 3PL provider. Am I to assume that
the legal status of an asset based 3PL could actually be any of the
following, depending on the transportation agreement: 1) motor carrier
– when they arrange for their affiliated motor carrier to pickup a
shipment; 2) broker – when they arrange for a carrier not affiliated
with them to pickup a full truckload; or 3) freight forwarder – when
they arrange for a LTL carrier to pickup and deliver a shipment?
A: You are correct. 3PL providers
may wear a number of different “hats” and often do. That is why it
is so critical to make sure that you have well-drafted contractual
agreements with 3PL’s and also that you check them out to make sure
they are properly licensed and registered as required by applicable
laws.
Q: I'm trying to start an air
freight company in Greece and I'm looking for International Law about
establishing that company. We would like to be informed about all
the regulations that are needed.
A: The basic requirements for
doing business will be governed by the local laws of the country where
your principal office is located. As for international laws, transportation
of passengers, baggage and airfreight is governed by international
treaties, namely the Warsaw Convention and the Montreal Protocol No
4 (which amends the Warsaw Convention, and has been ratified by most
major trading nations). Most of the airfreight carriers participate
in the International Air Transport Association (IATA) which has established
various rules and regulations governing transportation of air cargo.
Q: I have a question about
air waybills. On the international air waybill, there is a space called
“Declared Value for Customs.” Is this a mandatory field in which one
must always fill in with a declared value?
A: The destination country
uses the “Declared Value for Customs” if the goods are subject to
duty (import taxes). The requirements for entering a value in the
“customs” box vary depending on the destination country. There is
also a box for “Declared Value of Carriage” which is used when the
shipper wishes to declare a value of the goods that is in excess of
the carrier’s limitation of liability (approx. $9.07 per lb.) and
to obtain additional liability coverage.
Q: An airfreight forwarder
has declined our claim on the ground that it has no liability for
theft! Is this true?
A: Definitely not. Airfreight
forwarders that issue their own house air waybill are liable as common
carriers.
~ Next month I will delve into the world of bankrupt brokers and carriers.
Until then, remember to “Drive Safe – Drive Smart!”
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