Hijack or lien?

Q We are a property broker that booked a load with a small carrier from Atlanta to Florida. The carrier’s truck broke down and missed a job site delivery appointment. To make matters worse, the carrier then asserted his possessory lien and refused to deliver the shipment unless he got paid. The carrier insisted that money be wired to him before delivery, but by then we did not trust him with the money and the load. What should we have done in this situation?

A The situation you describe occurs all too frequently. Because of late-discovered credit problems or fear of contested setoffs, small carriers are increasingly asserting their possessory lien right to demand payment upon delivery.

Although broader liens may be available to the carrier by contract or under state lien laws, under the Bill of Lading Act and the Uniform Commercial Code (Section 7-307) the carrier has the lien on goods covered by a bill of lading for freight charges. The usual language in the accepted bills of lading confirms the carrier’s lien rights with language noting that “nothing herein shall limit the right of the carrier to require at time of shipment the prepayment or guarantee of the charges.”

A carrier has the right to demand payment of freight charges, or at least a guarantee of payment prior to delivery. But it loses its lien on goods that it unjustifiably refuses to deliver and can even become liable for the resulting harm it causes.

The actions of a carrier in asserting its lien may appear to the shipper or broker to be “holding freight hostage.” But in the eyes of the carrier, the specter of nonpayment or unjustified setoff often appears to be “freight charges held hostage.” Unless cool heads prevail, the resulting standoff can quickly turn a bad situation into one that’s much worse.

If the carrier has lawful possession of the shipment under a bill of lading and asserts its lien rights, the carrier’s retention of the goods is a civil – not criminal – matter.

Assertions of “hijack” are inflammatory and unrewarding. The carrier often does not trust the shipper or broker enough to deliver the load without insisting upon payment. And the shipper or broker does not trust the trucking company enough to wire it money and then hope delivery is made.

To keep situations of this sort from mushrooming into cargo claims for the full value of shipments, the shipper or broker should offer – and the carrier should accept – a reasonable guarantee of payment. Simultaneous exchange of freight charges for freight at point of delivery should be acceptable to both parties. Likewise, a simple escrow where an attorney or trusted third party holds the shipper or broker’s payment that it is authorized to release once delivery is complete, can be easily arranged.

If you are a carrier asserting your possessory lien, demand in writing payment at time of delivery or through a simple escrow. If you are a shipper or carrier on the receiving end of a carrier’s demands, offer in writing to satisfy the lien in one of these two ways.

Unfortunately, one side or the other – and possibly both – often will not listen to reason. The flow of commerce is interrupted. The carrier is left with a shipment it cannot easily salvage. And the broker is left with a cargo claim and a dispute that results in a lawsuit.

Remember, a carrier may have a lien for payment of freight charges, but it cannot require a waiver of the right to file a claim as a precondition of delivery. Documentary proof that the shipper or broker offered to satisfy the lien by escrow or payment upon delivery should be sufficient to hold the carrier liable for wrongful refusal to make delivery.