In theory, the payment of freight charges is a simple matter: A transportation provider sends its invoice and the shipper-customer pays it. In reality, the process is so complicated that an entire industry has arisen devoted to auditing carrier invoices.
What is the rate? The first element is “What is the rate?” As used here, the term “rate” means the basis for calculating the carrier’s total charges invoiced to its customer (for instance, the dollar amount of the rate per mile where the charges are based on mileage).
This leads to two further questions. First, “How was the rate determined?” Was it set by the carrier in its tariffs or negotiated between the carrier and its customer? Second, “Where can the rate be found?” If set by the carrier, it presumably would be in its tariff or service guide. If set through a negotiation, it would be part of an individually negotiated contract. The answers to these three questions are critical for a shipper to know in order to examine the invoices received to see if they accurately reflect the proper rate.
49 CFR 378. Another essential element for a parcel shipper to know is that there is a Federal Regulation, 49 CFR 378, setting forth the procedures to be followed by motor carriers relating to freight charges. The Regulation’s title, albeit a bit wordy, accurately describes its contents: “Procedures Governing the Processing, Investigation, and Disposition of Overcharge, Duplicate Payment, or Overcollection Claims.”
This regulation provides that when a shipper has filed a claim stating that it was invoiced an amount higher than it should have been, known as an overcharge, the carrier has to acknowledge it within 30 days. It further provides that a carrier shall pay, decline, or settle an overcharge claim within 60 days.
It is very important to note that this regulation only applies to motor carriers, not air carriers. While this is simple to state, it becomes complicated when a parcel shipper uses FedEx or UPS as both of these two large corporate groups act as both motor carriers and air carriers. See “The Legal Characteristics of UPS and FedEx” (PARCELindustry.com/LegalCharacteristicsUPSFedEx)
Since air carriers are free of the economic regulation of their rates, routes or services, their procedures and time limits are addressed in the provider’s own tariffs, service guide, or terms and conditions.
Federal Statutes. There are also two very important Federal Statutes setting forth time limits relating to the collection of overcharges from a motor carrier. 49 USC 13710 provides a 180-day time limit for either a carrier to submit an invoice for charges in addition to those on the original invoice OR for a shipper to contest the amount charged.
49 USC 14705 sets forth an 18-month statute of limitations (the deadline to start a lawsuit). This means that a shipper must start a lawsuit within 18 months of the date of delivery if the claim is not settled. Similarly, a carrier must start a lawsuit to collect its charges within 18 months of the date of delivery.
Late payment penalties. Late payment penalties are financial penalties set by a carrier in its tariff or service guide that would be applied when an invoice is paid past the established credit term. These penalties can be very substantial, including the loss of any discounts, and can come into play even when an invoice is paid one day late.
All for now!
Brent Wm. Primus, JD
This article originally appeared in the July/August, 2020 issue of PARCEL.