Jan. 30 2008 09:58 AM

Q: What do you mean by an unsophisticated shipper, and how can I tell if I am one?

A: Readers frequently see a reference to an unsophisticated shipper when discussing disputes between a shipper and a carrier, or when reading court decisions. When we refer to a sophisticated shipper, we mean one who is trained in reading bills of lading, contracts, tariffs, claims, insurance and regulation of carriers by the federal government. Formerly, employees with such training or background were certified as I.C.C. Practitioners, but these sophisticated practitioners faded with the demise of the I.C.C. in 1996.


In contrast, an unsophisticated shipper is one who merely negotiates rates and leaves the rest up to his carrier salesperson, assuming that the salesperson will take care of us. Unfortunately, the decision often results in disputes which are resolved against the best interest of the shipper. The reason is that all transportation arrangements are made through a contract of carriage, which is a legally binding contract. It binds not only the shipper, but also the consignee if and when the shipment is accepted at the delivery point. Shippers rarely understand or even read the contracts that they enter into today. This spells trouble because the courts construe all contracts strictly. They only construe them against the drafter of the contract if it finds that the contract was ambiguous. Shippers are deemed by the courts to be astute commercial enterprises that should understand the terms of contracts in which they participate, including all of the terms and conditions in the carriers tariffs, as tariffs are always incorporated by reference into the contract.


A sophisticated shipper would never use a carrier unless it had a copy of all governing tariffs in its possession and read them before shipping. It is too late to be informed by a carrier after the loss of a shipment that the carrier has limited its liability in its tariff to 10 per pound, or 50 per pound, or $500 per 40 foot ocean container.
Sophisticated shippers would also insist on reviewing a carrier's cargo policy before using that carrier so they could look for exclusions, deductibles and endorsements. How many exclusions can one find in all risk cargo policies? Unfortunately, there are at least 93 exclusions used regularly by cargo insurers.
Too many unsophisticated shippers are misinformed as to the difference between a carrier's legal liability for the goods entrusted to its care and the carrier's cargo insurance policy. The carrier's liability limit is stated in its tariffs or bill of lading, or both. The cargo policy merely covers the carrier's legal liability for that cargo. If the tariff provides that the limit of liability is 50 per pound, but the cargo policy is for a maximum of $1 million, the carrier does not have coverage for any more than 50 per pound.
If the shipper is shipping electronics, but the carrier's cargo policy excludes electronics, the carrier has no coverage for that shipment, even though the shipper holds a Certificate of Insurance for that carrier. Those certificates are largely worthless because they do not list the exclusions in the policy. But unsophisticated shippers accept them daily and believe they are covered for everything they ship.
The lack of sophistication among parcel express shippers is particularly notorious and widespread. How many parcel shippers obtain a copy of UPS, FedEx and DHL's tariff every time it is reissued? How many actually read those tariffs even if they ask for copies? How many compare the terms and conditions with the last issue to determine what changes have been made? (Tariffs are no longer required to print a flag next to each change explaining whether it is an increase, reduction or no change, as formerly required by the I.C.C.) Or do you rely on the carrier's reps to tell you what's new? The next time an express company's salesperson visits your office, it is suggested that you ask for a copy of its tariff, not the Service Guide, which may be different, but equally binding. You might also ask why it is necessary to issue both documents if they are supposed to contain the same provisions.
The lack of sophistication in shipping can cost shippers and receivers unnecessary expense, much of which can be avoided by becoming as sophisticated and as knowledgeable as are carriers in the legal implications of shipping.