A bill of lading is a document accompanying freight that states the agreement between the shipper and the carrier and governs their relationship when goods are transported. It details the cargo in the shipment and gives title or ownership of that shipment to the receiving part specified on the document.
Section 7 on a bill of lading, also known as the "special conditions" section, outlines any specific terms or conditions that must be met during the shipment of goods. This can include things like hazardous materials, refrigeration requirements, or special handling instructions. It is important for both the shipper and carrier to thoroughly review and understand the special conditions outlined in section 7 in order to ensure that the shipment is transported safely and according to the terms and conditions of the contract
However, when it comes to payment for the shipment, it is important to note that the inclusion of special conditions in section 7 does not necessarily absolve the shipper of responsibility for payment to the carrier. In most cases, the shipper is still responsible for payment to the carrier, regardless of any special conditions outlined in section 7
There is a twist in this scenario if a freight broker is involved. A freight broker is a third-party company that acts as a middleman between the shipper and carrier. They negotiate the details of the shipment, including the price, and then connect the shipper with the carrier. In this case, the shipper may not be responsible for paying the carrier directly. Instead, the freight broker is typically responsible for paying the carrier on behalf of the shipper.
If the freight broker does not pay the carrier, it can lead to a number of problems. Firstly, the carrier may be unable to pay their own bills, which can lead to financial difficulties. Secondly, if the carrier is not paid, they certainly will refuse to transport goods for the freight broker in the future, which can lead to delays and disruptions in the supply chain.
A shipper may also be held liable for any unpaid charges if they have agreed to pay the freight broker for the services in the bill of lading. It is important for the shipper to be aware of the terms of the contract with the freight broker and to take steps to ensure that the broker is reputable and financially stable. This can be done by checking the broker's credit rating and financial history, as well as by reading reviews and testimonials from other customers. It is also worth noting that if the freight broker does not pay the carrier, the carrier may take legal action against the freight broker AND the shipper listed on the Bill of Lading. Even if a shipper has already paid a broker for freight charges, if that broker does not pay the carrier who actually transported the freight legal action can be taken which may require the shipper to pay for the freight charges twice.
Generally, the bill of lading determines who is liable for payment. “Prepaid” means the shipper or consignor is obligated to pay the carrier. “Collect” means the consignee is obligated to pay the carrier. “Nonrecourse” (also referred to as Section 7 language) means a shipper must sign the nonrecourse box on a bill of lading to be free of liability for freight charges. Under the uniform bill of lading terms, a shipper is liable for freight charges unless Section 7 of a bill of lading is signed. The general rule is “the carrier gets paid” as cited in multiple court cases such as Excel Transportation Services Inc v. CSX Lines LLC and Jones Motor Co v. Teledyne.
In conclusion, while section 7 on a bill of lading outlines any special conditions that must be met during the shipment of goods, it does not necessarily absolve the shipper of their responsibility for payment to the carrier. It is important for the shipper to be aware of the terms of the contract with the freight broker and to take steps to ensure that the broker is reputable and financially stable.
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FAQs
This means that unless the motor carrier did something wrong, they are entitled to be paid for their services. Additionally, the law allows for double payment of freight charges in certain circ*mstances, and courts will often enforce shipper and consignee liability for unpaid freight charges.
Are shippers liable for unpaid freight charges? ›
“Nonrecourse” (also referred to as Section 7 language) means a shipper must sign the nonrecourse box on a bill of lading to be free of liability for freight charges. Under the uniform bill of lading terms, a shipper is liable for freight charges unless Section 7 of a bill of lading is signed.
What if a freight broker doesn't pay you? ›
Consider filing a complaint.
If they refuse, you are within your rights to file a complaint against them with the FMCSA. At this point, you can communicate to the broker what you've decided to do and they may decide to pay you what you are owed to avoid any problems with the FMCSA.
Who is responsible for paying freight charges? ›
FOB Destination, Freight Prepaid, & Charged Back: The seller takes responsibility for freight until delivery of the goods, and the buyer deducts the charges from the invoice. The original invoice includes the freight charges initially paid by the seller.
Can a freight company hold your freight for non-payment? ›
If the freight is already loaded, this can become a hostage situation. Unpaid debts. Some providers will hold a load hostage when the shipper or receiver has not paid previous invoices. They will hold the load until all past due amounts are paid.
Who is liable to pay freight? ›
The person from whom the carrier ordinarily receives the goods is the person who employs the carrier and the one who is therefore liable to pay the freight charges.
What can a common carrier do if someone fails to pay the shipping charges? ›
Importantly, motor carriers can also collect freight charges from the shipper and consignee, even if the shipper or consignee already paid the broker. By law, the shipper and consignee can be required to pay the freight charges twice if the motor carrier is not paid.
Who is responsible for paying the shipper? ›
The buyer is responsible for paying any associated shipping costs when an item is shipped. However, until the shipment arrives at the buyer's location, the buyer has neither ownership nor responsibility for the products.
Who bears freight charges? ›
If the terms include the phrase "FOB origin, freight collect," the buyer is responsible for freight charges. If the terms include "FOB origin, freight prepaid," the buyer assumes the responsibility for goods at the point of origin, but the seller pays the cost of shipping.
When the purchaser is responsible for paying freight charges? ›
Such freight terms are called FOB Shipping Point. In FOB shipping point terms, once the goods are dispatched, the seller company will record the sale and receivable, but will not include the goods in transit in its inventory. The buyer is the owner of the goods in transit and is responsible for paying freight charges.
"Dead Freight" refers to the compensation that a shipper or charterer must pay to the carrier or shipowner when they fail to fully utilize the agreed-upon cargo space on a vessel or aircraft.
Is holding freight hostage illegal? ›
Whoever is found holding a household goods shipment hostage is liable to the United States for a civil penalty of not less than $10,000 for each violation. The United States may assign all or a portion of the civil penalty to an aggrieved shipper.
What happens to unclaimed freight? ›
Unclaimed freight is often sold at auction by the carrier or warehouse that is holding the merchandise. These auctions may be conducted online or in person, and may be open to the public or restricted to licensed resellers.
What are shippers responsible for? ›
A shipper looks for a professional logistics company to transport their goods from one location to another. The shipper is responsible for preparing their load for transport, and they also bear the shipping cost.
What is the obligation of the shipper? ›
Obligation between shippers in road transport and carriers
Information: The shipper must provide the carrier with all the information necessary for the proper execution of the transport, in particular concerning the nature, weight, dimensions or specific features of the goods.
Who is responsible for freight claims? ›
Every freight shipment is covered by limited liability, meaning the carrier is responsible for loss and damage under the Carmack Amendment. The amount of coverage is a set dollar amount per pound of freight determined by the carrier and based on the commodity.
