Paul Stewart Logistics Law

Shippers, Brokers and 3PLs Should Not Rely Upon Use of the Shipper Bill of Lading to Overcome Terms and Conditions of NMFTA’s “New” USBOL

I have recently written here about some of the perils associated with NMFTA’s “New” Uniform Standard Bill of Lading (“USBOL”) [https://www.linkedin.com/pulse/just-say-nmftas-new-uniform-straight-bill-lading-paul-stewart…AND…www.linkedin.com/pulse/shippers-3pls-brokers-lets-face-some-ugly-facts-nmftas-paul-stewart?trk=hp-feed-article-title]. Among many new provisions of the USBOL, major concerns include changes in well established statutory and case law with regard to the motor carrier’s duty of care; burden of proof for loss and damage claims; liability of interline carriers; timeliness of transit; limitations periods for filing and litigating loss or damage claims; and, appropriate procedures within which a carrier is to limit its liability for less than the full value of lost or damaged loads (“released rate valuation”).

Since the approval of the USBOL by the Surface Transportation Board, shippers, brokers and 3PLs should be developing their strategy for effectively disclaiming the USBOL as controlling terms and conditions applying to any load they ship, except for the purpose of receipt and notation of lading condition. The alternative of doing nothing, or taking ineffective steps, will allow limitations of motor carrier liability for cargo loss and damage which will drastically affect risk management procedures, cost and potential insurance coverage.

Recently, a client (broker) suggested that the remedy they had in mind was to simply use the shipper’s bill of lading to apply to all loads. When asked if they intended to do a contract with all carriers, having them expressly agree to the application of the shipper’s bill of lading, rather than the USBOL, they replied that they did not consider such a contract necessary. In effect, they believed the use of the shipper’s bill of lading would be sufficient to avoid the terms and conditions of the USBOL. My client is probably not alone in this initial belief, but such a procedure is a Catch 22 and clearly not sufficient to avoid application of the terms and conditions of the USBOL, for the following reasons:

  1. All motor carriers that are participants in the NMFC are required to use the new USBOL, and the USBOL incorporates the provisions of the Classification, which include the following at NMFC Item 362-B:

Unless the shipper and carrier have an effective prior written agreement to use another bill of lading, all motor carriage performed by carriers participating in this tariff shall be subject to the bill of lading terms and conditions of the Uniform Straight Bill of Lading shown in NMF 100-X and successive issues.” (i.e., the USBOL)

2. Clearly, the operative language within 362-B is, “Unless the shipper and carrier have an effective prior written agreement to use another bill of lading…”

So, it would seem that any shipper/broker/3PL employing a motor carrier who is a participant in the NMFC Classification will be faced with the imposition of radically different liability standards now included within the USBOL, unless they have expressly contracted with such carriers to use the shipper’s bill of lading. Or, possibly in the alternative, have prior written agreements with carriers whereby all terms of liability, standard of care, cargo valuation, and claims procedure are agreed to be only those expressed within the agreement, and not by operation of ANYbill of lading.

At least until we get court interpretation of USBOL changes, absent such “an effective prior written agreement”, the use of the shippers bill of lading will not prevail over the USBOL.

A more complex question is raised with regard to whether prior express contracts will obviate the terms and conditions of the USBOL, where such prior contracts (i.e., broker/carrier and shipper/carrier agreements) provide that nobill of lading will prevail over the terms and conditions of the contract between the shipper/broker/3PL and the motor carrier.

All of these issues are new, complex and potentially extremely costly for those who ignore them, or proceed without advice of both counsel and risk management professionals. But a word to the wise is sufficient, and allowing unfettered application of the USBOL is a risk management nightmare just waiting to happen. No shipper, broker or 3PL should allow a load to travel under the terms and conditions of the NMFTA “New” USBOL, without factoring in the potential considerable increase in the cost of risk management.

While the intent of NMFTA was to quietly change more than 50 years of liability standards for participating motor carriers, shippers and their agents should respond with an even more diligent contracting process by savvy shippers, brokers and 3PLs, with the end result of more, rather than less, imposition of those historical liability standards. Such a result can only be achieved by a fail safe effort to avoid application of the USBOL terms and conditions. The best practice appears to be to eliminate use of the USBOL on all loads transported by participating motor carriers. If not; know, understand and be prepared for the risk taken with allowing USBOL to apply.

 

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