Waynes World - January 2005

THE LEGAL ASPECTS OF DEALING WITH BROKERS,
BAD WEATHER ISSUES, AND...

DEFINING THE OLD
CARMACK AMENDMENT
By Wayne Schooling

Q: What is the “Carmack Amendment” and which carriers are currently subject to this? Don A., Gulfport, MS

A: The “Carmack Amendment” was an amendment in 1906 to the Interstate Commerce Act. Over the years, the original language was changed a number of times and appears at 49 U.S.C. Section 14706 (for motor carriers). The Carmack Amendment governs the liability of motor carriers and freight forwarders for loss, damage or delay to shipments in interstate and foreign commerce. It has no application to brokers. As a general rule, brokers do not have liability for loss, damage or delay to shipments. All carriers are subject to this, however, some of their claim policies are in violation of government regulations.

Q: We have recently obtained our common carrier authority and are hauling for a man who says he is a broker. When I went into the FMCSA data bank, I found out that he has Common and Contract authority, but no Broker authority. He pays with a check, but there is no statement or anything that goes with it. We have not signed any lease with this man of any kind. Is he, as a carrier, authorized to broker freight to other trucks. And if he isn’t, what are the legal aspects that we should be aware of? Any help you can provide would be greatly appreciated. Mike E., Penn Valley, CA

A: There are a lot of companies today that are wearing multiple “hats” and offering services as a common carrier, a contract carrier, a freight forwarder, a broker, etc. Many of them are also ignoring the legal requirements. The Interstate Commerce Act defines carriers and brokers differently (49 U.S.C. Section 13102) and imposes separate requirements for registration (Sections 13902 and 13904). The Federal Motor Carrier Safety Administration has also established different requirements for carriers and brokers. The bottom line is, if a carrier also wants to act as a broker, it needs to register as a broker, file a surety bond, and comply with the regulations governing brokers. One obvious problem, aside from operating illegally, is that it may be difficult to tell who the carrier is and which party is liable to the shipper in the event of loss or damage to the shipment. Other potential problems might involve disputes over the collection or payment of freight charges. It is important to know who you are dealing with, and in what capacity. I would advise against doing business with someone who is operating illegally or without the required operating authority.

Q: In general, would a person who has provided leads or contracts to freight forwarders or moving companies be considered a broker? Would there be any federal or state regulation regarding such activity? Glen W., Mechanicsburg, PA

A: The term “broker” is defined in the Interstate Commerce Act as, “a person, other than a motor carrier or an employee agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement or otherwise as selling, providing or arranging for, transportation by motor carrier for compensation” 49 U.S.C. Section 13102(2). If you are acting as an agent of a carrier or forwarder and are paid a fee or commission by the carrier or forwarder, you would not be considered a broker. If you arrange for the transportation as a middleman, and are compensated by the difference paid by the shipper and the amount paid to the carrier or forwarder, you would be considered a broker. Brokers are required to register with the FMCSA.

Q: What is the legal responsibility of the carrier in the event of freight damage from a tornado or other sudden, violent weather conditions? Arnold P., Springfield, MO
A: Both under the common law and under the Uniform Straight Bill of Lading, which is in common use, a carrier has a defense against liability if it can establish that the cause of the loss or damage was an “Act of God,” and that it (the carrier) was free of any other negligence. The case law defines an “Act of God” as, “An occurrence without intervention of man or which could not have been prevented by human prudence. It must be such that reasonable skill or watchfulness could not have prevented the loss”. Generally, only extraordinary events such as tornadoes or hurricanes would qualify, and ordinary bad weather (rain, snow, etc.) would not apply.

Q: What kind of liability is the shipper subject to when the carrier’s driver uses the shipper’s forklifts to load shipments into or onto the carrier’s trailer?

A: This falls into the general area of liability for negligence for anyone on your premises for normal business purposes. In theory, the shipper could be liable to a truck driver if it provided an unsuitable or defective piece of equipment, which resulted in injury to the truck driver. While the driver would be subject to Worker’s Compensation or Occupational Accident Insurance, he/she could also have a cause of action for negligence against the shipper.

~ Do you have any transportation-related questions you would like me to address? If so, send them care of Wayne Schooling at NorthAmerican Transportation Association, 2533 N. Carson St, Suite 346, Carson City, NV 89706-0147. Or, if you prefer, you can e-mail them to wayne@ntassoc.com. Until next month, “Drive Safe - Drive Smart!”