Transportation Law

Freight

freightThe word “freight” is commonly used to mean both the carried goods and the charges for carrying the goods. A claim for freight means only the charges for the carriage of goods, and is frequently referred to as “rates”. Lost, damaged, or delayed delivery of goods are referred to as lost, damaged, or delayed freight.

Consignor, Consignee & Broker

The party that sends the goods is the “consignor”. The party that ultimately receives the goods is the “consignee”. A “broker” is a party that arranges the transportation of goods between the consignor and consignee. Even though the broker may receive goods from the consignor and give the goods to the carrier, a broker is neither a consignor nor a consignee. The party or parties that carry the goods is/are the “carrier”.

Who is responsible?

Under federal law, both the consignor and consignee are liable for the payment of rates to the carrier where the goods are carried in interstate shipment.  Equitable estoppel may get a consignee off the hook if the Bill of Lading is marked “prepaid”.

State law controls in intrastate shipments. In intrastate shipment within Texas, under Texas case law, only the consignor is liable for payment of rates.

Note that the Statute of Limitations for a suit for unpaid freight is 18 months (see 49 USCA 14705(a)). It is not governed by state law limitations on suits for debt.

Methods of Transport include:

  • Vessel
  • Truck
  • Rail
  • Intermodal

Claims for Cargo include:

  • Loss
  • Damage
  • Delay
  • Destruction
  • Spoilage

Freight Claims include claims:

  • Against Consignor/Shipper
  • Against Consignee/Receiver
  • Against Freight Forwarder/Broker

See a discussion of FOB terms below.

Freight Terms

The word “freight” is commonly used to mean both the carried goods and the charges for carrying the goods. A claim for freight means only the charges for the carriage of goods, and is frequently referred to as “rates”. Lost, damaged, or delayed delivery of goods are referred to as lost, damaged, or delayed freight.

The party that sends the goods is the “consignor”. The party that ultimately receives the goods is the “consignee”. A “broker” is a party that arranges the transportation of goods between the consignor and consignee. Even though the broker may receive goods from the consignor and give the goods to the carrier, a broker is neither a consignor nor a consignee. The party or parties that carry the goods is/are the “carrier”.

Under federal law, both the consignor and consignee are liable for the payment of rates to the carrier where the goods are carried in interstate shipment. Equitable estoppel may get a consignee off the hook if the Bill of Lading is marked “prepaid”.

State law controls in intrastate shipments. In intrastate shipment within Texas, under Texas case law, only the consignor is liable for payment of rates.

Note that the Statute of Limitations for a suit for unpaid freight is 18 months (see 49 USCA 14705(a)). It is not governed by state law limitations on suits for debt.

FOB (Free On Board) Terms

The FOB term is an acronym for Free On Board (at a named place), and actually determines where title to shipped goods passes. It is a term of delivery, as well as a price term allocating responsibility for payment as between the buyer and seller of goods. FOB and FAS terms are specifically covered under Section 2.319 of the Business and Commerce Code, (Uniform Commercial Code, Chapter 2).

If the FOB term is “Shipper’s Dock” or similar words, that means title to the goods passes when the goods move from the shipper’s shipping dock and into the custody of the carrier. Since the goods are now the buyer’s goods, the buyer has the choice of carrier, and also bears the risk of damage or loss. Buyer is also responsible for the freight bill since it’s the buyer’s goods being carried. It is common for the buyer to let the shipper choose the carrier and pay for the freight (freight pre-paid) with freight charges being integrated with the cost of the goods.

When the FOB term is “Buyers Dock” or similar words, the title to the goods remains with the shipper until the carrier delivers it to the buyer’s facility. The shipper bears all expenses, and the risk of loss or damage, until the goods are tendered for delivery at the buyer’s facility. That also means the shipper has complete control over which carrier will be used. The shipper will usually prepay the freight, although goods shipped COD (Cash On Delivery) may have the freight costs as part of the total charges.

When the term is “FOB Vessel”, the buyer must name the vessel, and the seller must load the goods on board that vessel at the sellers own risk and expense. If the terms are F.A.S. vessel, meaning “free alongside”, at a named port, the seller must deliver the goods alongside the vessel, or on the dock designated and provided by the buyer, at seller’s risk and expense in the manner usual to that port.