Dealing with rejection

Henry Seaton is a lawyer who represents carriers in contract disputes, collection matters, cargo claims and insurance questions. E-mail [email protected].

Q What should a motor carrier do when a partial load is rejected? We recently handled a brokered load that involved five stops in the Chicago area. One consignee refused delivery through no fault of the carrier. Our broker says we are required by Interstate Commerce Commission regulations to return the rejected shipment to the shipper at point of origin without compensation. Can this be correct?

A The ICC has not existed for six or seven years, and I am aware of no rule or regulation that requires you to return all or part of a rejected shipment without compensation. Your rules tariff and the bill of lading should make provision for disposition of rejected loads and the sale of salvage, including detention pay for shipments not included within the free time allowed.

Under the Bill of Lading Act, you have the possessory lien, which allows you to demand payment for the freight charges on that particular load prior to delivery. You are not required to provide service for free if the rejection was not your fault.

The best practice, I believe, is to issue an on-hand notice to the shipper, consignee and broker advising them that the shipment is in your possession at the point of destination and asking for immediate disposition. You cannot be expected to tie up your truck and trailer indefinitely. The shipper, consignee and broker all should work with you to mitigate the cost and expense involved.

The consignee is in the best position to accept the shipment under protest and to ship it back from his dock as directed by the shipper. If you have a terminal in the area, you can place the product on your dock, propose that the beneficial owner pay you for reasonable handling and storage, and reship it pursuant to his order. Under the terms and conditions of the standard truckload bill of lading or NMFTA’s uniform bill, you become a warehouseman with lesser liability for any subsequent cargo damage when this occurs.

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Finally, if the shipper wants you to take the shipment back to point of origin or to reconsign the shipment to another location, you are entitled to charge your standard rates for the services rendered. You should cover this rate in your tariff or rate matrix. If not, and the contract or other written agreement makes no provision for it, propose a reasonable rate that you can live with. Cooperate with the beneficial owner to get the shipment redelivered and your freight charges paid without making the problem worse.

Given that parties to spot market shipments never contemplate wrongful rejection, one hothead in these situations can result in a load being held hostage – a situation that ultimately benefits no one. In one recent case, the shipper would not provide disposition so the carrier has tried to charge $400 a day in storage. The shipper now cries hijack, but the police say it is a civil matter. The goods have no real sales value to anyone other than the consignee, and the shipper has shipped a replacement shipment in the meantime. Now it will take a lawsuit to sort all of this out.

The best advice I can offer is to anticipate the possibility of rejected loads that aren’t your fault. Provide in your rules tariffs and bills of lading for reconsigned, storage, detention, and compensatory rate to defray your costs when these types of situations occur.