Transportation & Logistics Council, Inc....TranSolutions Wooster Brush A special thanks to Logistics & Distribution Services, LLC for generously donating this year’s Grand Prize:

TRANSDIGEST Transportation & Logistics Council, Inc.

Published by the TRANSPORTATION & LOGISTICS COUNCIL, INC.

120 Main Street ● Huntington, NY 11743-8001 ● Phone (631) 549-8984 ● Fax (631) 549-8962

Website: www.TLCouncil.org ● email: [email protected]

George Carl Pezold, Executive Director

William J. Augello (1926 – 2006), Founding Director

Raymond A. Selvaggio, General Counsel Stephen W. Beyer, Editor

VOLUME XXII, ISSUE NO. 229, MARCH 2017

Report from 43rd Annual Conference!

• FMCSA Withdraws SFD Rulemaking

• Freight Bill Auditing

• DOT Releases HOS Restart Report

• FMC Eases Regulatory Burden

• UPS to Make Saturday Ground Deliveries

• Court Rules Downstream Party Bound by Liability Limitation

• Plan Ahead For Next Year’s Conference in Charleston, SC

• More Q&A’s

AVAILABLE ON DISK!

Q & A IN PLAIN ENGLISH – BOOKS 7, 8 & 9 - A COMPILATION

TRANSDIGEST-Volume XXII, Issue No. 229, March 2017

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Table of Contents

PRESIDENT’S REPORT ...................................... 2

GUEST EDITORIAL ............................................ 3

ASSOCIATION NEWS ......................................... 4

CLASSIFICATION ............................................. 10

MOTOR ............................................................ 10

OCEAN ............................................................. 13

PARCEL EXPRESS ............................................ 14

QUESTIONS & ANSWERS ................................ 14

RECENT COURT CASE .................................... 16

CCPAC NEWS ................................................. 17

ADVERTISE IN THE TRANSDIGEST ................ 17

PRESIDENT’S REPORT

T&LC President, Curtis Hart, GEODIS

The Transportation & Logistics Council, Inc.’s (“TLC”) 43rd Annual Conference was another well attended “Education for Transportation Professionals” event. Our goal each year is to provide relevant and usable information for all in the transportation and logistics community. I believe we met this goal again this year.

New and seasoned professionals from shippers, carriers, legal experts and other logistics functions were in attendance. Updates on subjects affecting our industry like the economy, regulation, contracting, cargo claims, insurance, cross border trade and logistics outsourcing were among the topics during the three day annual event.

Sunday’s optional seminars kicked off the pre-conference program. This year’s first day had a very busy schedule with four seminars including Contracting for Transportation & Logistics Services, Freight Claims in Plain English, and Transportation, Logistics and the Law. The day would not have been complete without the CCP Primer Class put on by the Certified Claims Professional Accreditation Council (“CCPAC”) for claims professionals preparing for Wednesday’s CCP exam. Seven CCP exam participants attended this year’s conference and completed their exam on Wednesday afternoon. We wish you all success when you receive your exam results in the coming weeks.

Monday began with an industry discussion moderated by TIA President & CEO, Bob Voltman, John Larkin, and Kevin Burch provided their expert opinions regarding economic forecasts, regulatory initiatives, merger and acquisition activity, and comments on pending government actions that may affect our industry.

Brian Alexander, Executive Vice President of Unyson, spoke to a well-attended luncheon between the morning and afternoon sessions.

Monday afternoon’s general session brought the always lively “Law of the Land, Law of the Jungle” moderated by Gerald F. Smith. Mr. Smith engaged the attendees directly, creating a very interactive and memorable session….again. Further sessions on international multimodal transportation, food and drug transportation, new laws and regulation, and insurance risk finished out the remainder of Monday. On both Sunday and Monday evenings, attendees gathered at the Hospitality Reception for light fare and drinks. We wish to thank the many sponsors for their support.

Tuesday’s general session on supply chain security provided best practices to avoid or minimize exposure to theft and hijacking and great examples of what to do and who to contact for help when thieves strike. Mid-morning sessions provided attendees the opportunity to hear expert panelists discuss laws, regulation and practices when trading with cross-border partners. Our luncheon speaker, John Fevolo, COO of Metro One LPSG, discussed what to consider when outsourcing transportation and logistics functions.


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George Pezold, TLC’s Executive Director, started off the afternoon as he led the transportation attorney’s panel addressing current issues, court decisions dealing with cargo claims, independent contractors, and recent laws and regulations impacting shippers, carriers and intermediaries. We brought Tuesday afternoon to a finish with a panel overview of ever expanding online shopping and fulfillment needs of today’s consumer. The “Meet the Experts” workshop gave attendees the opportunity to meet with legal, transportation, insurance and other experts for free, 10-15 minute one-on-one sessions. The President’s Reception Tuesday night was another opportunity for all in attendance to spend time networking, and enjoying the sights and sounds of Las Vegas.

Our final day on Wednesday was filled with panelists discussing loss prevention and mitigation of damages. Freight Claims Q&A, the final session, gave all a chance to bring questions to panelists for answers from a shipper, carrier, and legal point of view; providing suggestions on how to resolve difficult situations.

Thank you to the TLC board members for their commitment to preparing for this annual event; our speakers and panelists for volunteering their time and expertise. Special thanks to Diane Smid for her tireless efforts to make all of our wishes come true and on time. We hope the conference was another example of the value the council strives to provide year round.

We have selected the Francis Marion Hotel in Charleston, SC for next year’s annual conference on March 19 – March 21, 2018. See you all there!

GUEST EDITORIAL

CLAIMS PREVENTION AND CLAIMS NETWORKING

By: David Nordt .CCP Director of Claims

The Gilbert Company

What does “Claims Prevention” mean in the transportation industry? Well, it requires knowledge of the claims regulations that govern the claims process. Many organizations will create their own “Standard Operation Procedure for Claims”. The caveat of using this singular reference tool is the possible absence of extremely valuable information. For this reason, every mode of transportation should house a copy of Freight Claims in Plain English, Fourth Edition. It is an essential tool in this industry and is considered the “Bible” in freight claims. The text has been updated to cover many new subjects including recent developments and court decisions affecting transportation in general, as well as claims for loss and damages to cargo. Claims Prevention is just that, learning what it takes to avoid loss in all areas of the transportation industry.

A gift to this industry is the Transportation & Logistics Council (www.TLCouncil.org) that schedules annual conferences to educate members of the transportation trade. They graciously host the Certified Claims Professional Accreditation Council (www.ccpac.com) (“CCPAC”) at their annual meeting, affording members the opportunity to become board certified after passing the rigorous CCPAC exam. CCPAC’s mission is to raise the professional standards of individuals who specialize in the administration and negotiation of cargo claims.

Claims networking is critical for all parties in the transportation industry. The value of networking should not be minimized. It provides the opportunity for many to connect with the very best in the business


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of transportation. These connections offer the exchange of valuable information, as well as moments to ask questions that can help your organization with potential problems. Consider your regional transportation organizations as a great source for networking. Also, consider attending the above mentioned conference for an abundance of networking opportunities.

Finally, our transportation family welcomes new members on an ongoing basis and we all share a responsibility in providing them with the knowledge needed to be successful in the adjudication of claims. The quality of their education is paramount. Claims prevention is the goal!

ASSOCIATION NEWS

43RD ANNUAL CONFERENCE – PRESENTATIONS AVAILABLE

The Transportation & Logistics Council, Inc. (“TLC”) held its 43rd Annual Conference at the Green Valley Ranch Resort, Henderson, Nevada on March 20th-22nd, 2017 and it was a great success.

Visit the TLC website at http://www.tlcouncil.org/2017%20Annual%20Conference to access presentation materials.

WELCOME TO THE NEW OFFICERS & DIRECTORS

2017 TLC Officers & Board of Directors


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TRANSPORTATION & LOGISTICS COUNCIL, INC.

2017 OFFICERS AND BOARD MEMBERS

CHAIRPERSON

Nadia Martin, CCP

Blakeman Transportation [email protected]

PRESIDENT VICE PRESIDENT SECRETARY/TREASURER

Curtis Hart Brandon Arnold Angie Sutton

GEODIS Intelligent Logistics Logistics & Distribution Services Corp. [email protected] [email protected] [email protected]

Region Regional Directors Assistant Regional Directors

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Wally Dammann, CCP

Mitsui Sumitomo Marine Mgmnt (USA) [email protected]

2

David Nordt, CCP

The Gilbert Company [email protected]

Grant Ashe

L&L Freight Services [email protected]

3

David Broering

NFI Industries [email protected]

Daniel Bohlman

Butterball [email protected]

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Brian Kiel

Nestle [email protected]

Askia Shaheer

Big Lots [email protected]

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Douglas L. Arents

Rite Hite Corporation [email protected]

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Vikki Van Vliet Trans Audit [email protected]

Brian Looft

TBEI, Inc. [email protected]

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Jerrod Slaughter

Columbia Sportswear [email protected]

Brian Whitson Mars [email protected]

OUR GRATITUDE The Transportation & Logistics Council, Inc. would like to thank the following for helping to make this

year’s event special:


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HOSPITALITY SUITE SPONSORS Thanks to the following for their generous donations and sponsorship of the Hospitality Suites on Sunday

and Monday evenings: GOLD SPONSORS

American Truck & Rail Audits Perez & Morris LLC

SILVER SPONSORS

ABF Freight System, Inc. Benesch, Friedlander, Coplan & Aronoff Coyote Logistics MTI Inspection Services NFI Industries Pezold, Smith, Hirschmann & Selvaggio, LLC Pioneer Transfer, LLC Transportation Intermediaries Association Willaims & Associates, Inc.

BRONZE SPONSORS

7PSolutions Booth LLP Broussard LLC Logistic Concepts Marwedel, Minichello & Reeb, P.C. transportlawtexts, inc. TranSolutions, Inc.

DOOR PRIZE DONORS Thanks also to the following companies that generously donated door prizes for the Conference: AFN CH Robinson Carr Allison Columbia Sportswear Johanson Transportation Marten NFI Industries

Odd Lots Pacific Logistics Group Rite Hite Seven Seas Insurance TranSolutions Wooster Brush

A special thanks to Logistics & Distribution Services, LLC for generously donating this year’s

Grand Prize:

Apple 9.7 inch iPad Pro Wi-Fi 128GB

along with a Special Thank you to Trans Audit for donating the Lanyards.


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EXHIBITORS:

7PSolutions

136 N Van Buren St. #1274 Nashville, IN 47448 Dereck Middleton [email protected] www.7pgps.com

Tel (812) 988-4430 Cell (317) 654-4401

American Truck & Rail

Audits

18 Remount Rd North Little Rock, AR 72118 Karen Lafferty [email protected] www.amtr.com

Tel (501) 771-1944 Cell (501) 940-7777

Cargo Salvage Claims

3215 S. Pennsylvania St. Indianapolis, IN 46227 Donna Wyss [email protected] www.cscsalesnet.com

Tel (800) 654-7629

Central Analysis Bureau, Inc.

150 Airport Road, Suite 1100 Lakewood, NJ 08701 Tiana Schowe [email protected] www.thecabadvantage.com

Tel (212) 244-6575

MacroPoint 6050 Oak Tree Blvd., Ste 150 Independence, OH 44131 Dave Halsema [email protected] www.macropoint.com Tel (216) 369-0144

MGM Marketing

12732 S. Pflumm Road Olathe, KS 66062 Michael Bear [email protected] www.mgmbusinesspartners.com

Tel (913) 451-0023 Cell (319) 360-4311

RDI – Regiscope Digital Imaging

2906 William Penn Hwy. Suite 202 Easton, PA 18045 John Adams [email protected] www.regiscope.com

Tel (908) 686-5533 Cell (908) 403-2050

Transportation Data Source

PO Box 27567 Salt Lake City, UT 84127 Lyn Simon [email protected] www.tdsource.com Tel (801) 441-5820

TranSolutions, Inc.

22015 N. Calle Royle Scottsdale, AZ 82555 Pete Celestina [email protected] www.transolultionsinc.com

Tel (480) 473-2453 Cell (602) 723-0200

Veraction

3400 Players Club Pkwy Suite 300 Memphis, TN 38125 Jonathan Wildman [email protected] www.veraction.com

Cell (510) 710-7177


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NEW MEMBERS

The Transportation & Logistics Council would like to welcome the following new members:

Regular Members

Josh Watney

Ascension 7673 N Ingram Ave Auite 103 Fresno, CA 93711 [email protected]

Dennis Minichello

Marwedel Minichello & Reeb P.C. 303 West Madison Street, Suite 1100 Chicago, IL 60606 [email protected]

Harry Vosganian

Uline Shipping Supplies 12575 Uline Drive Pleasant Prairie, WI 53158 [email protected]

Non-Member Introductory Subscriber

Dave Wittwer

Hays Companies 201 S. Main Street Salt Lake City, UT 84111 [email protected]

Associate Member

Raul Casso

Raul Casso IV Law PLLC 11411 Granados Street Laredo, TX 78045 [email protected]


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CLASSIFICATION

FUTURE COMMODITY CLASSIFICATION STANDARDS BOARD (“CCSB”) DOCKETS

Docket 2017-2 Docket 2017-3

Docket Closing Date March 23, 2017 July 13, 2017

Docket Issue Date April 20, 2017 August 10, 2017

Deadline for Written Submissions and to Become a Party of Record

May 12, 2017 August 31, 2017

CCSB Meeting Date May 23, 2017 September 12, 2017

Dates are as currently scheduled and subject to change. For up-to-date information, go to

http://www.nmfta.org.

MOTOR

WHEN AUDITING ISN’T ENOUGH

by Tony Nuzio, CEO ICC Logistics Services, Inc.

–What a Comprehensive Audit Looks Like and the Profit Leaks You’re Likely Missing–

Whether a company ships small packages via parcel carriers, larger items in less-than-truckload (“LTL”) or Truckload quantities, or imports and exports products via ocean and air carriers, creating a comprehensive invoice audit function is critical to ensure the company only pays what it should pay. Sounds logical enough-but there is much more to auditing a company’s transportation and logistics expenses that very often is overlooked.

First and foremost, transportation and logistics invoice auditing requires specialized skills that many companies do not possess within their own organizations. The accounts payable department usually has the responsibility to ensure the invoices are correct before processing those invoices for payment. However, they usually do not have access to the service provider’s base rates, discounts and incentives and the technical expertise to know when various accessorial fees apply and when they are not applicable.

Verifying the charges to be paid on transportation and logistics bills is only part of the audit process companies must consider before paying any invoice. The first step in the invoice audit process is to make sure the company is actually responsible for paying an invoice in the first place. A complete understanding of the terms of sale, or terms of purchase is most critical. It doesn’t matter what charges the carrier or service provider assesses, if the invoice is not the company’s responsibility to pay in the first place. And yet, we are amazed at how often companies actually pay invoices they are not responsible for paying in the first place.

Comprehensive transportation and logistics invoice auditing should actually be a multi-step process. The first step is to ensure the invoice being audited should in fact be paid. The second step in the audit process is to ensure the charges are 100% accurate. The third and final step in the invoice audit process


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is to make sure the company is not experiencing any “profit leaks” which can increase a company’s transportation and logistics costs by as much as 30%.

What do we mean by profit leaks? Here are some examples:

• Sometimes, corporate purchasing departments will purchase goods on a delivered basis with the inbound freight costs included in the actual merchandise cost. In these cases, unless a comprehensive analysis has been performed that guarantees the portion of the product cost which represents the freight cost is actually less than the company would be able to negotiate on their own, a company could be losing significant dollars.

• In some cases inbound freight costs are detailed as a separate line item on the merchandise invoice. Often times in these cases it is impossible for the accounts payable department to discern if the freight charges included on the supplier invoice are in fact as competitive as they should be. In many cases the supplier will add a “little extra” to the invoice to cover their costs of prepaying the freight costs and waiting for their customer to pay the merchandise invoice.

• Some companies have waived their right to file claims for refunds for late delivered packages with their parcel carriers. Sometimes parcel carriers will put this waiver into a recently negotiated contract without ever pointing it out to their shipper customer. In these cases, the parcel shipper could lose tens of thousands of dollars in missed refunds annually they were previously receiving when no waiver was in place.

• In some instances parcel carriers will offer an additional incentive to the shipper for agreeing to the late delivery refund waiver. The real question for shippers receiving this additional incentive is the need to absolutely be assured the additional incentive meets and hopefully exceeds the refunds the parcel shipper previously received.

• Profit leaks also come about when shippers fail to properly describe their freight on a bill of lading, especially when the freight classifications are dependent on value or density ratings. Oftentimes when the proper density or value of the goods are not stated properly on the bill of lading, the shipper will be charged the highest rate for that freight classification category.

• Shippers also suffer profit leaks when they fail to negotiate increased discounts and incentives on a fairly regular basis, especially since almost all freight carriers increase their rates annually. Profit leaks also occur when shippers fail to benchmark the rates they are paying against other shippers with like shipping characteristics. And, if the shipper does not have the resources in house to perform those benchmark studies, Third Party Logistics Consultants can provide those resources.

• Shippers also endure profit leaks when they double insure their shipments by paying the carriers for added insurance while at the same time carrying a corporate transportation liability policy. You would be amazed at how often this actually occurs.

• Shippers that fail to “test the market” through the use of Competitive Bid Processes are also subject to significant profit leaks. And, very often those profit leaks represent substantial lost freight dollars.

Finally, shippers should always entertain outsourcing their transportation and logistics invoice auditing to Third Parties that specialize in providing these services. Both Pre-Audit and Post-Payment audits are available. Pre-Audit fees are typically based on a small transaction charge per invoice, while Post-Payment audit fees are almost always provided on a shared contingency basis, so there are no fees if no refunds are received. It’s a great way to ensure a company never overpays for shipping again.


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COMMENT PERIOD REOPENED ON CARRIERS’ HAIR TESTING PETITION

In TRANSDIGEST #228 we reported on the petition by six trucking companies that sought to utilize hair analysis instead of urine testing for pre-employment controlled substances testing of commercial driver’s license (“CDL”) holders. On February 24, 2017 the Federal Motor Carrier Safety Administration (“FMCSA”) reopened and extended the comment period (originally ended 2/19/17) with comments now due by April 25, 2017.

Visit https://www.federalregister.gov/d/2017-03720 to view the notice reopening the comment period and visit https://www.fmcsa.dot.gov/regulations/notices/2017-01278 to view the Federal Register Notice regarding the underlying petition.

DOT RELEASES HOS RESTART STUDY RESULTS

In early March, 2017 the Department of Transportation (“DOT”) Inspector General’s (“IG”) office released the results of its audit of the Federal Motor Carrier Safety Administration’s (“FMCSA”) hours of service (“HOS”) restart provisions. In a nutshell, the FMCSA concluded that drivers using the HOS restart rule in effect through June 30, 2013, experienced safety outcomes no different from those using the restart in effect on and after July 1, 2013.

More specifically, the FMCSA’s study did not find that the requirement for at least two nighttime periods of rest and the prohibition on taking more than one restart per week provided a greater net safety benefit than the previous restart regulation, which did not include those requirements. According to the Conclusion of the report to Congress:

The study was not able to demonstrate conclusively that the restart rule that went into operational effect on July 1, 2013, provided “a greater net benefit for the operational, safety, health and fatigue impacts” [section 133(e) of The Act] compared to the restart rule in operational effect on June 30, 2013. Because the study did not demonstrate that the revised restart rule satisfied even the initial outcome requirements in section 133 of The Act, FMCSA has elected not to re-open the study to assess the additional outcome requirements of the Further Continuing and Security Assistance Appropriations Act, 2017.

The net result is that the FMCSA’s conclusion means that the HOS restart as currently enforced has now been made permanent.

For FMCSA’s frequently asked questions on the study, go to http://bit.ly/HOSRestartFAQs. For the full report to Congress, go to http://bit.ly/RestartCongress.

To view the full final report, visit https://www.fmcsa.dot.gov/sites/fmcsa.dot.gov/files/docs/RRR-15-011-CMV%20Driver%20Restart%20Study-Final-Report-508C.pdf. For the DOT letter to Congress, visit https://www.oig.dot.gov/sites/default/files/OIG%20Correspondence%20on%20HOS%20Restart%20Study%5E3-2-17.pdf.

FMCSA ISSUES ELD FAQ

The Federal Motor Carrier Safety Administration (“FMCSA”) has issued an update to its “Frequently Asked Questions” (“FAQ”) regarding the use of electronic logging devices (“ELDs”). In a Note, the FMCSA states:

The ELD FAQs are intended to provide plain language information regarding the ELD rule. They do not modify or replace applicable Federal Motor Carrier Safety Administration (FMCSA) regulations or substantive standards.


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FMCSA’s ELD FAQ document is available at https://www.fmcsa.dot.gov/hours-service/elds/faqs.

FMCSA SUSPENDS SFD RULE

On March 23, 2017 the Federal Motor Carrier Safety Administration (“FMCSA”) withdrew its rule proposed in January 2016 that would have created a new safety fitness determination (“SFD”) system to assign safety ratings to motor carriers. Last month (TRANSDIGEST #228) we reported on the Transportation & Logistics Council, Inc.’s (“TLC”) involvement in a coalition of over 60 associations and industry groups in asking the new Secretary of Transportation, Elaine L. Chao, to terminate the FMCSA’s SFD rulemaking pending a mandated review.

The coalition sought to halt the rulemaking pending a Congressionally mandated review of the SFD program by the National Academy of Sciences (“NAS”) regarding its methodology and data. According to the FMCSA announcement:

The Agency must receive the Correlation Study from the National Academies of Science, as required by the Fixing America's Surface Transportation (FAST) Act, assess whether and, if so, what corrective actions are advisable, and complete additional analysis before determining whether further rulemaking action is necessary to revise the safety fitness determination process.

The NAS report is expected later this year.

Visit https://www.federalregister.gov/documents/2017/03/23/2017-05777/carrier-safety-fitness-determination to view the Federal Register notice.

OCEAN

FMC VOTES TO EASE REGULATORY BURDENS

On March 6, 2017 the Federal Maritime Commission (“FMC”) voted to unanimously approve a new rule reducing the regulatory burden on non-vessel owning common carriers (“NVOCCs”) and other shippers by giving them more flexibility in filing Service Contracts and NVOCC Service Arrangements (“NSAs”) with the FMC.

Prior to the rulemaking, all contracts and amendments between shippers (and NVOCCs) and ocean carriers had to be filed with the FMC prior to going into effect. The new rule allows such changes to be effective immediately as long as they are filed with the FMC within 30 days of the effective date.

According to the FMC press release, the rulemaking as approved (Docket No. 16-05) makes the following key changes to the FMC’s regulations:

• It allows the filing of sequential service contract amendments with the FMC within 30 days of the effective date of an agreement between shipper and carrier.

• It allows up to 30 days for filing NVOCC Service Arrangement Agreements with the FMC after their effective date.

• It allows additional time to correct technical data transmission errors from 48 hours to 30 days; and,

• It extends the period in which one can file a service contract correction request from 45 days to 180 days.


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Later that week, on 3/10/17 the FMC clarified that this rulemaking did not apply to general rate increases (“GRIs”). There had been some initial confusion as to whether the new rule impacted GRIs and would allow carriers to unilaterally and arbitrarily alter service contracts without notifying the FMC or their contract partners, or changed how NVOCCs report rate changes to their customers. The FMC told concerned parties that GRIs were not impacted and that all changes to service contracts must be agreed upon by both parties, carrier and shipper, before they can go into effect and before they can be filed with the FMC.

Visit http://www.fmc.gov/NR17_03/?F_All=y to view the FMC 3/6/17 press release.

SOMALI PIRACY UPDATE

After some years of quiet, pirates reportedly hijacked an oil tanker of the coast of Somalia. This was the first hijacking of a large commercial vessel there since 2012. On Monday, March 13, 2017 the Aris 13 was approached by two skiffs with armed men and boarded. It was then taken to an anchorage near shore. However, by Thursday, March 16 the vessel had been released after a brief gun battle without any ransom being paid.

It is believed the pirates agreed to forego a ransom after learning that it was Somali businessmen that had hired the Aris 13 to bring oil from Djibouti to the Somali capital Mogadishu. Pirates have traditionally been wary of tangling with Somalia’s powerful businessmen.

It is not clear whether these were professional pirates or just opportunistic fishermen.

PARCEL EXPRESS

UPS TO MAKE SATURDAY GROUND SERVICE DELIVERIES

According to a recent Wall Street Journal article, United Parcel Service, Inc. (“UPS”) will start making ground deliveries on Saturdays in April as part of an effort to accommodate demands of online shoppers.

UPS, which already makes Saturday deliveries on some express and air package services, aims to have Saturday delivery to half the U.S. population by the end of 2017 for ground services.

The U.S. Postal Service and FedEx both offer ground delivery on Saturday, but UPS will now also pick up and sort packages on Saturday. Once UPS begins its new ground delivery this spring, customers will be able to receive packages on Monday that were picked up and sorted over the weekend.

QUESTIONS & ANSWERS

By George Carl Pezold

CARRIERS – LEASING AND INTERCHANGE OF VEHICLES

Question: Can common carrier A contract their own trucks and employee drivers to common carrier B to run under the authority of common carrier B?

Answer: The answer is “yes”, provided that you comply with the Federal Motor Carrier Safety Administration (“FMCSA”) regulations that are published at 49 CFR Part 376 - Lease and Interchange of


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Vehicles. These require a written lease and the operator of the vehicle must identify the vehicle with its USDOT number, etc.

Rather than explain all of the requirements, visit https://www.gpo.gov/fdsys/pkg/CFR-2007-title49-vol5/pdf/CFR-2007-title49-vol5-part376.pdf for a copy of the regulations.

FREIGHT CLAIMS – SALVAGE OF FOOD PRODUCTS

Question: Our product (cheese) has a specific temperature range at which it needs to be maintained. If a carrier transports the product at the wrong temperature, the product is deemed as non-salvageable and must be destroyed.

We use a third party logistics provider (“3PL”) to store and transport our product. The 3PL is insisting that we have a “salvage allowance” in our contract, however, due to our written quality procedures, the product is not salvageable in any way. How does the law stand on this subject?

Answer: Transportation of food and food-related products is subject to a very high standard of care. Products requiring refrigeration can be damaged in many ways - quality, flavor, consistency, shelf life, etc. - if transported at the wrong temperature.

It is quite common for shippers of food products to prohibit salvage or sale of goods that have been exposed to “temperature abuse” because of concerns about quality degradation, product liability claims, warranty problems, or potential injury to their trademark or brand name. Shippers often take the position that it would be an unacceptable risk to allow the product to enter the market for human consumption, or that it would be impossible to adequately sample and test all of the product to ensure that the quality had not been compromised, and they consider failure to maintain proper temperatures as a material breach of the contract of carriage.

Carriers typically will argue that the claimant did not prove that there was any actual damage to the shipment at the time of delivery, and that the claimant failed to mitigate the loss by salvaging the goods.

Courts tend to side with the shipper in cases involving perishables and food products if there is any doubt at all, and particularly if the shipper provides a reasonable justification as to the perishable nature of the product, shortened shelf life, texture or flavor change, etc.

As to a request for a “salvage allowance” in your contract, while this is subject to negotiation between the parties, I do not think it is unreasonable to insist that there will be no salvage, and no salvage allowance, if there is a clear case of temperature abuse.

FREIGHT CLAIMS – REFRIGERATED LOAD NOT SEALED FOR 45 MINUTES

Question: I am a motor carrier. We took a load of refrigerated turkey from a broker. Upon loading, the loaders and our driver got in a heated conversation, which resulted in the loaders threatening to call the cops if my driver doesn’t leave the facility ASAP. So my driver got in his truck and left the premises.

When our dispatch found this out, they got hold of the broker and the broker asked if we got loaded with the whole load, and if the seal was on? The driver stopped and checked if the loaders who kicked him out of the facility with threats of calling the cops had put on the seal. But in the heat of an argument and threats, the loaders didn’t put the seal on. So the broker says to return to the facility and get the seal on ASAP.

Our driver turned around and went back. He came back 45 minutes after he left. The shipper refused to put on the seal, called the customer told them the situation. The customer refused the load because the shipper can no longer guarantee the load since it left the facility for 45 minutes without the seal.


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We asked the broker what he wanted us to do and he just started to blame us while avoiding telling us what to do with the load. I called, wrote emails and filed an insurance claim, which got rejected.

We ran the reefer for more than a week to save the load. We told the broker that they needed to salvage the product and get a federal inspection to prove that the load was good. They ignored us and then told us to dump the turkey. We did that, it cost us around $2000.

Broker never paid us for the freight and is now claiming we should pay them around $8000 for the load or they will put us on collection or sue us. What can we do? The broker said that this was not the first time they had this kind of problem with this shipper. To us it looked and felt like they abandoned the load on us, and now want us to pay them. Please give me advice.

Answer: Unfortunately you can expect a claim and very likely a lawsuit, and will need to retain a good transportation attorney. In the meantime, you should have the driver prepare a detailed written statement of what happened, and retain copies of all communications and relevant documents.

RECENT COURT CASE

DOWNSTREAM PARTY BOUND BY LIABILITY LIMITATION

In a case before the U.S. District Court for the Eastern District of California the court ruled on summary judgment that a broker was not a party entitled to recover under the Carmack Amendment for damages when a train derailed.

This case involves a shipment of wine that was destroyed when the train carrying the shipment derailed. The plaintiff, Celtic International, LLC (“Celtic”) (a broker) brought a suit against BNSF Railway Company (“BNSF”) for damages.

Celtic contracted with J.B. Hunt to secure arrangements with a rail carrier for the rail transport of the three container shipment. J.B. Hunt made arrangements with BNSF pursuant to its custom rate authority, which incorporated by reference BNSF’s Intermodal Rules and Policy Guide (“Guide”). The Guide included a Direct Suit Prohibition (“DSP”), which provided:

Only the Shipper (the party indicated on the BNSF price authority and paying BNSF for the rail transportation) may initiate and maintain a claim for cargo loss and damage or a suit against BNSF. A person who is not party to the price authority with BNSF will have no claim or cause of action against BNSF for loss or damage to cargo, nor will such party's claim to BNSF or to any other entity be recognized as the Shipper's claim to BNSF without an assignment of rights to that entity by the Shipper.

While the decision indicates that Celtic sued BNSF after a series of assignments of rights, apparently there was no assignment from J.B. Hunt so as to comply with the DSP.

BNSF argued that as Celtic was not the shipper, it could not bring the suit, and the court ruled in BNSF’s favor.

There is ample case law holding that downstream parties will be bound by liability limitations agreed to by intermediaries, and this court considered the DSP to be a limitation on liability. As a result, Celtic was precluded from bringing a suit for damages against BNSF. The court pointed out that Celtic’s remedy was against J.B. Hunt, and in fact noted that during the pendency of this action Celtic in fact brought a separate action against J.B. Hunt for the damages.

Celtic International, LLC v. BNSF Railway Company, 14-cv-02158 E.D. CA (Feb. 22, 2017).


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CCPAC NEWS

CCPAC

Established in 1981, the Certified Claims Professional Accreditation Council (“CCPAC”) is a transportation cargo claim accrediting organization with a global membership and is comprised of shippers, manufacturers, freight forwarders, brokers, logistics companies, insurance companies, law firms and transportation carriers including air, ocean, truck and rail and various related transportation organizations. CCPAC seeks to raise the professional standards of individuals who specialize in the administration and negotiation of cargo claims. Specifically, it seeks to give recognition to those who have acquired the necessary degree of experience, education, expertise and who have successfully passed the CCP Certification Exam covering domestic and international cargo liability, warranting acknowledgment of their professional stature.

Information can be obtained by contacting John O’Dell, Executive Director of CCPAC, by phone: 904-322-0383 or email: [email protected] or visit http://www.ccpac.com/.

CONDOLENCES

We have received the news that John Betz, CCP and Director of Transportation for Coors, Inc. passed away December 26, 2016. John was a long-standing member and educator with the Transportation & Logistics Council, Inc. and CCPAC, dating back to the days of the Shippers National Freight Claims Council (formed in 1974).

ADVERTISE IN THE TRANSDIGEST

TRANSDIGEST ADVERTISING

Full page and one-half page ads are now being accepted for the TRANSDIGEST. Reach a highly selective audience with information on your products and/or services at a reasonable cost. Rates are available for 3, 6 or 12 monthly issues, and include both print and electronic issues. For information contact Diane Smid or Stephen Beyer at (631) 549-8984.


18

To Save Money with Online Freight Claim Management, please call 480-473-2453 or visit http://www.transolutionsinc.com/moneytoday for more details.


19

Freight Claims in Plain English, Fourth Ed. by George Carl Pezold and William J. Augello

"Freight Claims in Plain English" is now available again in this completely revised

and updated Fourth Edition. The text has been expanded to cover many new subjects, recent developments and court decisions affecting transportation in general and claims for loss and damage to cargo in particular, including developments in international ocean and air transportation, intermodal, and cross-border trade with Canada and Mexico.

This Fourth Edition contains extensively revised sections on all aspects of the law

and citations to hundreds of new court decisions. The page numbering has been simplified in order to facilitate finding answers to your questions. As with prior editions, a well organized and detailed table of contents, topical index, and table of authorities

are included, as well as extensive appendices containing valuable resource materials. Major topics include: • SURFACE CARRIER LIABILITY ● COMMON CARRIER LIABILITY

• BURDENS OF PROOF ● CARRIER DEFENSES TO LIABILITY

• LIMITATIONS OF LIABILITY ● DAMAGES

• TIME LIMITS (SURFACE MODES) ● SPECIFIC CLAIM PROBLEMS

• AIDS TO CLAIM RECOVERY ● WAREHOUSEMAN'S LIABILITY

• THE IMPACT OF DEREGULATION ● AIR CARRIER LIABILITY

• WATER CARRIER LIABILITY ● CANADIAN ANNOTATIONS

• INTERMODAL AND MULTIMODAL LIABILITY ● MEXICAN ANNOTATIONS

• BEGINNING AND ENDING OF CARRIER LIABILITY

• CONTRACTS OF CARRIAGE AND BILLS OF LADING

• CLAIMS PROCEDURES & ADMINISTRATION

• LIABILITY OF SURFACE FREIGHT FORWARDERS AND INTERMEDIARIES

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