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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