Brokers, Forwarders and Motor Carriers


Reproduced with the Permission of Miles L. Kavaller

Recently I represented a client which had arranged for the transportation of a series of shipments to and from Alaska. It contacted a company which obtained the carriers for, and coordinated these shipments. A truck transporting airline pallets which had been used to transport a portion of the cargo and was to meet a ship in Vancouver, B.C. broke down on the Alcan Highway which runs between Alaska and Canada. As a result, the airline pallets were not available and replacements had to be obtained. The cargo was not loaded onto the replacement pallets exactly as it had been loaded for the shipment to Alaska causing significant delays at the U.S.-Canada border and beyond. The trucking companies transporting the cargo this cargo charged for the additional time at the border.

My client refused to pay the charges billed by the company arranging the transit asserting that it was responsible for the increased charges at the border resulting from the delay, as well as the cost of renting airline pallets and other equipment necessary for the beyond truck transportation of the cargo being off-loaded from the ship in Vancouver. These costs were substantial and had been borne by the shipper. The company refused to agree to any off-set against the charges and threatened to file suit in Seattle, relying on a provision in the credit application which it claimed contained my client’s consent to this choice of venue. The parties thereafter agreed to arbitrate the dispute rather than go to court. The arbitration took place in Seattle.

The company’s principal position was that it was a broker and not a freight forwarder and therefore not responsible for any damage as a result of transit delay. It contended that the trucking company it had arranged for was the carrier and was the only party with potential liability.

Whether a company is a broker, motor carrier or a forwarder carrier is determined by their activities and conduct and not what labels they wear or event their FHWA operating authority. These terms are defined in the ICC Termination Act. See 49 U.S.C. §13102(1) (Broker) and (8) (Forwarder). Basically, a broker arranges for motor carrier transportation; a forwarder, in the usual and ordinary course of its activities arranges or provides for assembly and consolidation at origin, line-haul transit by rail or truck, and break-bulk and distribution at destination and assumes responsibility for the transportation from the place of receipt to the place of destination. While a broker is not liable for cargo loss or damage under the Carmack Amendment, 49 U.S.C. §14706(a) a freight forwarder is. A broker, however, may be liable to a shipper or customer for breach of contract, depending on the terms of either a written or oral agreement, or even for negligence, although the damages would not involve cargo loss.

We conducted the arbitration in Seattle and settled the case on terms which were acceptable to the parties. Because of the settlement, the arbitrator was not required to rule on the issue of whether the company was liable as a freight forwarder or not liable as a broker. But, I must confess, that while I thought the evidence established the company was a freight forwarder, I questioned whether it had liability for consequential damages in the absence of a notation on the bill of Lading stating that the airline pallets had to arrive in Vancouver on a date certain.