Clarifying Wording for Prepaid Shipments

Q:Your article from July 21, 2008 (“Choice Words for Bills of
Lading,” pg. 38) deals with a subject in which I have had
considerable involvement.
The reader asked, when “the bill of lading is marked as prepaid
by mistake but section 7 is signed, does that make the shipment
collect?” The reader (apparently a shipper) submitted two alter-
native bill of lading forms.
You responded that the shipment will be deemed prepaid be-
cause the consignor’s execution of section 7 (the non-recourse
provision) could not transform a shipment designated prepaid
into a collect shipment. I agree.
Further, I would add that this result is unaffected by post-
deregulation changes to the uniform straight bill of lading, in-
cluding those embodied in the revised version of the UBOL that
was published in the National Motor Freight Classification and
became effective in 1997.
The 1997 version of the UBOL reflects agreements reached in a
series of meetings between delegations representing the National
Motor Freight Traffic Association and the National Small Ship-
ments Traffic Conference. As legal counsel to the motor carriers’
delegation who has also advised the motor carriers with respect
to virtually all of the changes to the UBOL in recent years, I have
some clarification to offer.
First, as you recognize, under the 1997 version of the UBOL,
the non-recourse provision of section 7 is available only for col-
lect shipments. Traditionally the shipper’s signature on section 7
admonished the carrier not to deliver the shipment without col-
lecting the correct freight charges from the consignee and, failing
to heed that warning, the carrier could not look back to shipper
for its charges (including both accessorial and line haul charges;
see C-G-F Grain Co. v. A. T. & S. F. Ry. Co., 351 I.C.C. 710).
You contend that the 1997 version of the UBOL disallows ex-
ecution of section 7 on prepaid shipments, but that this prohibi-
tion can be disregarded with impunity because it is not enforced
by the UBOL terms. In fact, under language of the UBOL, the
shipper’s execution of section 7 on a collect shipment would be an
act that, while meaningless, is not prohibited.
Citing so-called “old” cases such as Illinois Steel v. B. & O. R.
Co., 320 U.S. 508 (1944), and C-G-F Grain, you question whether
this old case law could still apply to make the non-recourse provi-
sions of section 7 applicable to prepaid shipments.
It should be recognized that these decisions were based on
UBOL language that has since been revised. For example, in ad-
dition to and well before the revisions that comprise the 1997
version of the UBOL, section 7 had been modified specifically to
prevent application of C-G-F Grain. That decision held the non-
recourse provisions applicable to shield the shipper from under-
charge claims —even though the undercharges were based on
misinformation supplied by the shipper.

ing contain language restricting application of section 7 to col-
lect shipments, you contend that this “makes construction a
little murkier.” I would note that Item 362 of the National Motor
Freight Classification was enacted for the purpose of resolving
such issues. It provides:
“Unless the shipper and carrier have an effective prior written
agreement to use another bill of lading. . . all motor carriage per-
formed 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.,
presently the 1997 version of the UBOL.
If the involved carrier is a participant in the NMFC, item 362
would (at least arguably) apply and the shipment would be gov-
erned by the terms and conditions of the UBOL, including those
limiting application of section 7 to collect shipments.

A:I should note that the writer is William W. Pugh, who’s asked that I identify him as former executive director and general counsel of the NMFTA who is now a consultant.

Bill and I have corresponded often over the years, and while we’ve had occasion to disagree in the past this is not one such. I concur with everything he’s written here subject, however, to one caveat.

While I agree with Bill’s comments as they relate to the UBOL, the problem is that my original correspondent was clearly not using the UBOL but rather a variant proprietary form (actually two such forms with slightly different wording).

Which leaves matters, as I said originally, a bit murky in some regards.

I’m also not persuaded that the language of NMFC Item 362 quoted by Bill is necessarily controlling. I’m not sure, that is, that Item 362 can override terms of a contract containing other terms that’s executed between a carrier and a shipper.

As Bill acknowledged in a separate e-mail, there’s room for legal dispute about “the authority and applicability of the NMFC in a variety of circumstances,” especially with the classification no longer covered by antitrust immunity.

Ultimately the courts will have to decide whether Item 362 — not to mention similar language in many carriers’ individual tariffs — “corrects” the terms of alternative B/L forms that are actually used. As Bill suggested to me, in this as in other areas of NMFC application it wouldn’t be surprising to see different courts divided on such questions.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, (843) 559-1277; e-mail, Barrett Trn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping. Additional compilations on request.