U.S. Freight Forwarder & Customs Broker Trading Terms,, ocean cargo claims, ocean freight claims, ocean cargo damage limitations. freight forwarder claims, customs broker claims, customs claims, freight claims, U.S. Trading Conditions, shipper's-agent, agent-forwarder

Index To Understanding & Using "Terms & Conditions of Service"

- Standard Trading Conditions of the Uninted States

1. The Shipper's Agent - why there is no liability

2. Documents Where "Terms & Conditions of Service" Are Used - documents & their use

3. U.S. Circuit Court Of Appeals Cases Upholding "Terms & Conditions of Service"

Study Guide >> U.S. Case Holds That Shipper's Agent Forwarder Is Not Liable For Cargo Damage Under U.S. Law - Prima Vs. Panalpina

Study Guide >> U.S. Case example of "Travel Agent" connection to cargo- a pictorial

4. Article Explains Purpose of "Terms & Conditions of Service" - from The Cargo Letter

5. The Text of "Terms & Conditions of Service."

1.The Shipper's Agent - why there is no carrier liability

It is factually undisputed that the activities of a freight forwarder which only makes arrangements -- but does not issue a bill of lading -- are at all times limited to those of a classic shipper's-agent (also known as a "Type #1 Forwarder) which makes arrangements for shipping contracts to be entered upon with the actual carriers whose responsibility it is to move the goods and the actual custom's broker whose responsibility is to arrange for the importation.

• When making transportation arrangements for, or implementing instructions on behalf of a shipper or consigneee, the role of the freight forwarder is legally defined as that of a "shipper's-agent". As a matter of law, the freight forwarder is responsible only for its own direct negligence and cannot be held vicariously liable for the errors and omissions of others, to include custodial carriers, down line agents, draymen, etc. This reality is fundamental in the law, as was made clear 50 years ago by the United States Supreme Court in Chicago, Milwaukee, St. Paul & Pacific Railroad v. Acme Fast Freight (1948) 336 U.S. 465. [The Restatement of Agency is in accord.]

  A shipper's-agent relates to commercial cargo in exactly the same manner as a travel agent relates to an airline passenger. Once travel arrangements have been made, the airline issues a ticket to the passenger and becomes responsible for all aspects of carriage to destination. Likewise for the shipper's-agent, the responsible carrier agrees to issue a bill of lading, takes possession of the commercial cargo, and becomes responsible for all aspects of carriage to destination. It is well settled in both law and logic that the direct relationships involved are those between the shipper and the ocean or air carrier. The authorities remove from discussion any notion that a shipper's-agent has the responsibility, much less the liability, for care, custody, and/or control of freight moving under the aegis of a regulated ocean or air carrier. The same principles apply for a customs broker who arranges on-carriage for goods to the consignee following the customs entry process.

  TERMS & CONDITIONS OF SERVICE: As previously reviewed, the freight forwarder arranges prior freight movements for a shipper or a consigneee. These services are provided pursuant to the forwarders "Terms & Conditions of Service", as promulgated by the National Customs Brokers and Forwarders Association of America, as founded 102 years ago. These "Terms & Conditions of Service" were originally formulated in keeping with the statutory scheme of such laws and treaties as the Warsaw Convention and Carriage of Goods By Sea Act (46 USC § 1300, et seq.), which variously limit ocean and air carrier responsibility for cargo loss, delay, and damage. As developed over the past couple of hundred years, these modern "Terms & Conditions of Service" are designed to reflect the uncertainties of international and domestic transportation and otherwise clarify where the lines of legal responsibility run as among multiple foreign and domestic carriers, agents, and vendors who may be involved with any given international move.

  Indeed, the "Terms & Conditions" are the very contract existing between the shipper & the freight forwarrder. Among other things, "Terms & Conditions of Service" provide as follows:

  • "1. SERVICES BY THIRD PARTIES. Unless the Company carries, stores or otherwise physically handles this shipment, and loss, damage, expense or delay occurs during such activity, the Company assumes no liability as a carrier and is not to be held responsible for any loss, damage, expense or delay to the goods to be forwarded or imported except as provided in ¶ 10 and subject to the limitations of ¶ 8 below, but undertakes only to use reasonable care in the selection of carriers, truckmen, lightermen, forwarders, customs brokers, agents, warehousemen and others to whom it may entrust the goods for transportation, cartage, handling and door deliverage and/or storage or otherwise.

    "2. LIABILITY LIMITATIONS OF THIRD PARTIES. The Company is authorized to select and engage carriers, truckmen, lightermen, forwarders, customs brokers, agents, warehousemen and others as required to transport, store, deal with and deliver the goods, all whom shall be considered as the agents of the customer, and the goods may be entrusted to such agencies subject to all conditions as to limitation of liability for loss, damage, expense or delay and to all rules, regulations, requirements and conditions, whether printed, written or stamped appearing in bills of lading, receipts or tariffs issued by such carriers, truckmen, lightermen, forwarders, customs brokers, agents, warehousemen and others. The Company shall under no circumstances be liable for any loss, damage, expense or delay to the goods for any reason whatsoever when such goods are in the custody, possession or control of third party selected by the Company to forward, enter and clear, transport or render other services with respect to such goods."

  These above cited provisions make clear further reasons why, as a matter of the contract, the agent-forwarder is not responsible for any alleged errors or omissions on the part of the responsible ocean carriers. While these "Terms & Conditions of Service" are highly instructive, they are otherwise a mere reflection of the international shipping industry and redundant to the laws which define legal responsibility, or lack thereof.

  LIMITATION OF LIABILITY: As a reflection of the fact that U.S. law does not hold a shipper's-agent liable for the errors of others, the entire forwarding industry adopted what has become a uniform damage limitation. The limitation is provided as follows:

  "8. Limitation of Liability for Loss, etc. (a) The Customer agrees that the Company shall only be liable for any loss, damage expense or delay to the goods resulting from the negligence or other fault of the Company; such liability shall be limited to an amount equal to the lesser of fifty dollars ($50.00) per entry or shipment or the fee(s) charged for the services, provided that, in the case of partial loss, such amount will be adjusted pro rata;

  • (b) Where the Company issues its own bill of lading and receives freight charges as its compensation, Customer has the option of paying a special compensation and increasing the limit of Company's liability up to the shipment's actual value; however, such option must be exercised by written agreement, entered into prior to any covered transaction(s), setting forth the limit of the Company's liability and the compensation received;

    (c) In instances other than in (b) above, unless the Customer makes specific written arrangements with the Company to pay special compensation and declare a higher value and Company agrees in writing, liability is limited to the amount set forth in (a) above;

    (d) Customer agrees that the Company shall, in no event, be liable for consequential, punitive, statutory or special damages in excess of the monetary limit provided for above.

    "10. LIABILITY OF COMPANY. It is agreed that any claim or demand for loss, damage, expense or delay shall be only against the carriers, truckmen, lightermen, forwarders, customs brokers, agents, warehousemen or others in whose actual custody or control the goods may be at the time of such loss, damage, expense or delay and that the Company shall not be liable or responsible for any claim or demand from any cause whatsoever, unless in each case the goods were in actual custody or control of the Company and the damages alleged to have been suffered to be proven to be caused by the negligence or other fault of the Company, its officers or employees, in which event the limitation of liability set forth in ¶ 8 herein shall apply."

  It should be specifically appreciated that these "Terms & Conditions of Service" are not unique to one particular group of freight forwarders ir customs brokers. Instead, these trading conditions are followed by essentially every freight forwarder & custom's broker in United States.

  LEGAL ENFORCEMENT OF "TERMS & CONDITIONS OF SERVICE": The industry standard "Terms & Conditions of Service" as outlined in this presentation are routinely upheld by virtually all of the American Courts. It does not matter how damage occurred or to what theory the claim has been stated, except in a proper case of fraud.

  Examples of court rulings in support of these exact "Terms & Conditions of Service" are numerous, but one recent case which explains the legal relationship between the freight forwarder and the shipper is Capitol Converting v. LEP Transport (1992) 752 F.Supp 862. See, also, General Electric v. Harper Robins (1993) 818 F.Supp. 31 and Her Majesty's Ministry of Defense v. Northstar 1 F.Supp. 2d 521 (1998). Insurance Company of North America v. NNR Air Cargo Service, 2000 U.S. App. Lexis 1420 (9th Cir. 2000).

  CONCLUSION: A substantial effort has been made to review the facts and law applicable to this case so that shippers can be in a position to truly understand the multiple reasons which compel application of "Terms & Conditions of Service".

2. Documents Where "Terms & Conditions of Service" Are Used - documents & their use

"Terms & Conditions of Service" are the standard contractural trading conditions for freight forwarders and customs brokers in the United States. Similar rules are followd by other major trading nations of the world. These Terms & Conditions of Service define a proper understanding of our industry and responsibility for use of selected carriers & handlers. These Terms & Conditions of Service encourage customer involvement and use of marine cargo insurance.

Terms & Conditions of Service define the contract with shippers, importers and other customers as has been valiated by numerous published opinions of the U.S. Circuit Courts of Appeals.

Shippers are required to take notice of Terms & Conditions of Service by various standard contract methods. Each method is valid.

Freight Forwarders & Customs Brokers and their customers should note the following approved methods of communicating the binding nature of Terms & Conditions of Service:

1. CREDIT APPLICATION

This traditional business form should be signed by all of your prospective clients. Sales persons should have no objection to getting a signed a credit application as part of the normal course of business. The following language should be included above the signature line.

"All services and transactions are subject to our Terms and Conditions of Service (NCBFAA 6/94) which are printed on the reverse side of this application and our invoices. Applicant expressly acknowledges receiving a written copy our Terms and Conditions of Service (NCBFAA 6/94). Our liability is limited to the extent provided by law our bills of lading, if issued, or $50.00, whichever is less."

Of course all credit applications should be printed with your Terms and Conditions of Service (NCBFAA 6/94) on the reverse and the reverse side should be sent to the applicant when faxing the application.

2. CUSTOMS BROKER POWER OF ATTORNEY

U.S. Customs requires that a broker have a signed power of attorney prior to conducting customs business on behalf of an importer. 19 CFR §141.31-.32. The following language should be included above the signature line.

"All services and transactions are subject to our Terms and Conditions of Service (NCBFAA 6/94) which are printed on the reverse side of this power of attorney. Grantor expressly acknowledges receiving a written copy our Terms and Conditions of Service (NCBFAA 6/94). To the extent provided by law, our liability as a customs broker is limited to $50.00 pursuant to19 USC §1641 (f)."

3. SHIPPERS LETTER OF INSTRUCTION - "SLI"

This traditional international forwarder form eines the contract with shippers, importers & other customers. It should be signed by all of your clients when tendering a shipment. The following language should be included above the signature line.

"All services and transactions are subject to our Terms and Conditions of Service (NCBFAA 6/94). Our liability is limited to the extent provided by law our bills of lading, if issued, or $50.00, whichever is less."

Of course all credit applications should be printed with your Terms & Conditions of Service (NCBFAA 6/94) on the reverse and the reverse side should be sent to the applicant when faxing the application.

4. INVOICESOF THE FORWARDER-BROKER

Please make sure Terms and Conditions of Service are printed on the reverse side. Also make certain that the front of the invoice clearly states your limit on liability and directs the recipient to refer to the reverse Terms & Conditions of Service. This is best done in at least 10 point font and preferably in bold lettering. This use of Terms & Conditions of Service to define the contract with shippers, importers and other customers has been valiated by numerous published opinions of the U.S. Circuit Courts of Appeal.

5. OTHER DOCUMENTS

In order to further reduce the risk of litigation, we suggest that you also incorporate the same Terms & Conditions language into footers of fax cover sheets, quotations and proposals sent to your customers. A discrete footer should not interfere with your sales efforts. Frankly, this language is no different than those of other carriers similarly situated.

3. U.S. Circuit Court Of Appeals Cases Upholding Terms & Conditions of Service

Insurance Company of North America, v. NNR Aircargo Service (USA), Inc., 201 F.3d 1111; 2000 U.S. App. LEXIS 1420;

Calvin v. Trylon, 892 F.2d 191 (1989);

Independent Machinery v. Kuehne & Nagel, 867 F. Supp 752 (1994);

Capital v. LEP 965 F.2d 391 (7th Cir 1992);

Government of UK v. Panalpina, 1 F. Supp. 2d 521 (Cir. 1985);

Expeditors v. Wang Lab., 1995 WL 791935 (Mass. 1995);

Byrton Dairy v. Harborside (Robbins Fleisig), 991 F. Supp 977 (7th 1997);

K.K.D. Imports v. Karl Hienz, 36 F.Supp.2d 200 (2nd 1999);

General Electric v. Harper Robinson, 818 F.Supp. 31 (2nd 1997);

Qualmetrics, Inc. v. LEP Profit International, Inc., 1996 U.S. Dist. LEXIS 15087;

Prima US Inc. vs. Panalpina, Inc. (<< Full Text) 2000 U.S. App. LEXIS 21434 (2000)

Hoogwent US, Inc. v. Schenker International Inc., 121 F. Supp. 2d 1228; 2000 U.S. Dist. LEXIS 18784,

Hurco Companies, Inc. vs. Kuenhne & Nagel, 2001 U.S. Dist. LEXIS 18168, ABM AMRO v. Geologisitics, 2003 U.S. Dist. Lexis 5007.

Insurance Company of North America v. NNR Aircargo Service, LEXSEE 2000 U.S. App. LEXIS 1420.

The court stated that:

"Liability is a term inherent to shipping contracts. See In re CFLC, Inc., 166 F.3d 1012, 1018 (9th Cir. 1999). We have thus tacitly approved the use of a course of dealing analysis in interpreting such contracts where the agreement is silent with respect to liability. See id. Today we rule that invoice terms and conditions may supplement shipping agreements if there has been a sufficient course of dealing, and thereby find that INA is subject to the terms and conditions of the invoice for the stolen golf balls. In enforcing the $50.00 liability limit, we are in consonance with our sister circuits. See e.g. Capitol Converting Equip. Inc. v. LEP Trans., Inc., 965 F.2d 391, 395-96 (7th Cir. 1992) (upholding a liability limit contained in an invoice); Calvin Klein Ltd. v. Trylon Trucking Corp., 892 F.2d 191, 195-96 (2d Cir. 1989) (enforcing the liability terms of an invoice); Transamerica Oil Corp. v. Lynes, Inc., 723 F.2d 758, 764-65 (10th Cir. 1983) (ruling that invoice provisions are relevant in defining a contract); Alcoa Steamship Co. v. Charles Ferran & Co., 383 F.2d 46, 54-55 (5th Cir. 1967), cert. denied, 393 U. S. 836, 21 L. Ed. 2d 107, 89 S. Ct. 111 (1968) (upholding a limitation of liability clause in an invoice delivered upon completion of the contract)."

From The Cargo Letter [355] of August 2000

Forwarder Not Responsible As Agent _________

**The Travel Agent Mode**

Los Angeles - 30 August -- A federal appeals court ruled on Aug. 24 2000 that just because a forwarder promises close door-to-door care & supervision of a shipment doesn't mean it's liable when the cargo is damaged en route. The 2nd U.S. Circuit Court of Appeals in New York reversed a lower-court ruling against forwarder Panalpina, which arranged a shipment of an electrical transformer from Italy to Iowa.

Study Guide >> U.S. Case Holds That Shipper's Agent Forwarder Is Not Liable For Cargo Damage Under U.S. Law - Prima Vs. Panalpina

The transformer broke loose from the flat rack on which it was stowed, & damaged other cargo belonging to Prima (U.S.A.) Inc. After Prima sued, the lower court said Panalpina was liable because it had stated to Westinghouse: "Rest assured your shipment will receive door to door our close care & supervision."

The appeals court quite properly said Panalpina was not liable, because it acted as a forwarder instead of a carrier (NVOCC), & because it exercised "reasonable care" in selection of the stevedore & carrier.

As to Panalpina's promise to provide door-to-door care & supervision, the appeals court said: "Because of the well-settled legal distinction between forwarders & carriers, that statement -- mere puffing -- cannot transform Panalpina into a carrier, & bestow liability upon it."

The case was defended by leading Int'l transport underwriter XL Specialty Insurance Company & argued to the high court by our dear friend -- the great transport lawyer Andrew Spector, Esq. of the MIA firm of Hyman & Kaplan.

This case reconfirms a 1949 proposition of the U.S. Supreme Court (See Chicago, Milwaukee, St. Paul & Pacific R.R. Co. v. Acme Fast Freight, Inc., 336 U.S. 465, 467-68, 93 L. Ed. 817, 69 S. Ct. 692 (1949) that a forwarder, not issuing a B/L, is just an agent, with no responsibility for the physical state of the cargo.

In it's opinion the high court quite properly defined a non-carrier freight forwarder as a "travel agent" for freight.

The public commonly accepts the imperative that a "travel agent" which books your passenger flight is not responsible for your lost luggage. The federal court now restates the old, but sometimes forgotten, rule that this same basic principle applies to cargo.

This same standard applies, as a matter of basic transport defenition to the acts of Customs Brokers in their arranging for cargo disposition after Entry. Once the Customs Broker knows when Entry will be granted, a Delviery Order ("D.O.") is issued. The D.O. notifies the next carrier as to cargo availability & location of the cargo from custody of the present carrier. The D.O. is just a notice, not a bill of lading. The Customs Broker has merly made arrangements as a "travel agent" for the next step in cargo movement. The staff of Cargo Law first coined the term "travel agent for freight" roughly 15 year ago. We're quite happy that a simple term now explains the reality of our industry.

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