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Legal Briefs: Tariffs: Do they mean anything?

Dec. 8, 2005
Does the shipper have to pay simply because a charge for a specified service is designated in a motor carrier's tariff? The answer in most situations

Does the shipper have to pay simply because a charge for a specified service is designated in a motor carrier's tariff? The answer in most situations is "no."

Many in the logistics industry use the term "tariff" without really being sure of its meaning.

"Tariffs" ruled surface transportation for practically a century. Carriers could only charge amounts stated in their tariffs. Tariffs had to be filed with the Interstate Commerce Commission (ICC) and were subject to review and modification by that agency. This often happened as proposed rate increases could result in lengthy proceedings in the ICC with shippers and truckers dueling it out with economic studies, cost justifications and traffic diversion graphs.

Shippers often wondered why a motor carrier willing to give them a lower rate would be prevented from doing so by the government. If a motor carrier charged less than its filed tariff (sometimes through rebate schemes), they could end up in jail. ICC investigators would prowl the transportation industry looking for tariff miscreants.

These ICC-filed and --approved tariffs were often very complicated to understand and were filled with exemptions and modifications. Some people spent their entire working careers interpreting and defining tariff provisions. A good rate clerk who could spot tariff loopholes might have saved a shipper a small fortune.

Today the legal situation relating to the word "tariff" has greatly changed. This is why the shipper probably may not have to pay the motor carrier for a special tariff charge. For most motor carrier charges today the word "tariff" has no legal meaning or enforceable impact. With the statutory changes over the years, the only motor carrier tariff requirements existing now are for household goods movements and something called " noncontiguous domestic trade," meaning shipments that go between the mainland and places such as Hawaii or Puerto Rico. The Shipping Act still requires certain ocean carrier consolidators ( nonvessel operating common carriers) and ocean carriers to have tariffs, but these entities may also contract with shippers outside the tariff system.

So, why even discuss tariffs in a motor carrier context? The reason is because the word "tariff" is so engrained in transportation that it is often used to refer to charges for shipments. Many logistics professionals still think that "tariffs" are filed with and approved by some government agency and therefore have to be obeyed.

A good example comes from a recent federal court decision in Michigan. Central Transport International Inc. (www.centraltransportint.com), a lessthantruckload carrier, brought an action against a shipper, Sterling Seating Inc. (www.sterlingseatinginc.com), for allegedly not paying the full amount of the charges billed by Central Transport.

Central Transport brought the case in a Michigan state court. Sterling moved it into the federal court on the basis of an allegation by Central Transport that pursuant to a section of the ICC Termination Act, Central had a tariff item stating that shippers were liable for all collection expenses, including attorneys fees.

The court examined the issue and concluded that the so-called tariff was more a term of art than a legal requirement. It found that federal law no longer mandated motor carrier tariffs in this area of transportation, and such things are not filed with any agency. Therefore, the court reasoned, there was no federally required tariff in issue.

So then what governs the terms of the motor carrier-shipper deal? According to the court, it is state contract law, which means that Central Transport and Sterling have to look to their contract to see what payments are required.

This could be a real problem in a number of carrier-shipper arrangements. The "contract" may consist of only a bare bones bill of lading (and they are no longer standard) or merely a routing document. Some motor carriers attempt to incorporate their "tariff" into a bill of lading, meaning that the shipper accepts all the terms of the motor carrier's standard statement of carriage even though the shipper has never seen it. Assuming that the shipper has access to these standard terms for review, such as via the Internet, they may well be considered a part of the contract of carriage. However, there is at least one recent federal court decision that places some doubt on that.

The best way to avoid this mess (and litigation) is to have a written contract between the motor carrier and the shipper indicating all of the essential terms. Unless you deal with household goods or offshore domestic commerce, there simply are no longer any enforceable motor carrier tariffs.

James Calderwood is a partner with the law firm of Zuckert, Scoutt & Rasenberger L.L.P., in Washington, D.C., where he concentrates on transportation matters. He can be reached at [email protected].

LT 50 Index: October, 2005

This LT 50 is Logistics Today's exclusive index of the top 50 publicly traded carriers, thirdparty logistics providers (3PLs) and solution vendors. The complete list of LT 50 companies, as well as their current share price (on a 20-minute delay) is available at www.logisticstoday.com

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